RNS Number:8888H
Verizon Communications
27 January 2005
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report: January 27, 2005
(Date of earliest event reported)
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VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
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Delaware 1-8606 23-2259884
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1095 Avenue of the Americas
New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 395-2121
Not applicable
(Former name or former address, if changed since last report)
-----------------------------------------
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
( ) Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
( ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition.
Attached as an exhibit hereto is a press release and financial tables dated
January 27, 2005 issued by Verizon Communications Inc.
Non-GAAP Measures
Verizon's press release and financial tables include financial information
prepared in conformity with generally accepted accounting principles (GAAP) as
well as non-GAAP financial information. The non-GAAP financial information may
be determined or calculated differently by other companies.
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, such as 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. Descriptions of the special items
are provided in the schedules accompanying the news release.
Management believes that Verizon's operating income margins adjusted to exclude
net pension and other postretirement (OPEB) expenses, Domestic Telecom's
operating income margins and cash expenses excluding pension/OPEB and Verizon
Wireless's operating income before depreciation and amortization (EBITDA) and
EBITDA margin, additional non-GAAP financial measures, are also useful to
investors and other users of our financial information in evaluating operating
financial performance. Operating income margins and cash expenses excluding net
pension/OPEB expenses are non-GAAP operating performance measures used
internally to evaluate current and prior operating expense efficiency, as well
as assist management in evaluating the financial results of Verizon and its
largest operating segment with and without a significant expense driver compared
to prior periods. Management believes this presentation assists readers in
better understanding the impact of this significant expense driver on our
results of operations and trends from period to period. In addition, Verizon
Wireless's EBITDA is determined by adding-back depreciation and amortization to
operating income and the Verizon Wireless EBITDA margin is calculated by
dividing Verizon Wireless's EBITDA by Verizon Wireless's service revenues.
Verizon Wireless's EBITDA and EBITDA margin are non-GAAP operating performance
measures that are used internally to evaluate current operating expense
efficiency and operating profitability on a more variable cost basis by
excluding the depreciation and amortization expenses related primarily to
capital expenditures and acquisitions (particularly customer base amortization)
that occurred in prior years. In addition, Verizon management uses this
information to evaluate operating performance in relation to Verizon Wireless's
competitors. The Verizon Wireless EBITDA margin utilizes service revenues rather
than total revenues. Service revenues exclude primarily equipment revenues (as
well as other non-service revenues) in order to capture the impact of providing
service to the wireless customer base on an ongoing basis. Verizon Wireless's
EBITDA margin is presented along with Verizon Wireless's operating income margin
so as not to imply more emphasis should be placed on it than the corresponding
GAAP measure. Management believes this presentation assists readers in preparing
comparisons of this type of performance measure (operating profitability) using
the GAAP measure as well as the measure segment management evaluates segment
results and performs comparisons to other wireless carriers.
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Free cash flow, a non-GAAP financial measure, is also useful to investors and
other users of our financial information in evaluating liquidity and operating
financial performance. Free cash flow is a financial measure that is 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 flow, 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.
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.
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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: January 27, 2005 /s/ David H. Benson
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David H. Benson
Senior Vice President and Controller
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EXHIBIT INDEX
Exhibit
Number Description
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99 Press release and financial tables, dated January 27, 2005 issued by
Verizon Communications Inc. and contained in its investor relations
bulletin
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Exhibit 99
NEWS RELEASE
FOR IMMEDIATE RELEASE Media contacts:
Jan. 27, 2005 Peter Thonis
212-395-2355
peter.thonis@verizon.com
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Bob Varettoni
212-395-7726
robert.a.varettoni@verizon.com
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Verizon Reports Strong 4Q and 2004 Results, Driven by
Wireless Revenue Growth, Solid Cash Flows and Margins
4Q Revenues Increase 6.2% to Record $18.3 Billion; 2004 Revenues
of $71.3 Billion Include 23% Growth in Wireless
2004 HIGHLIGHTS
Earnings per Share
* Fourth quarter: $1.08 in diluted earnings per share, or 64 cents per share
before special items (non-GAAP measure)
* Full year: $2.79 in earnings per share, or $2.51 per share before special
items (non-GAAP)
Wireless
* Fourth quarter: 1.7 million net customer additions, up 13.5 percent from
last year's quarter and the highest quarterly increase for the third
consecutive quarter; total revenues up 22.7 percent; record-low churn
(customer turnover) of 1.43 percent; average monthly revenue per customer
up 3 percent to $50.32
* Full year: Record 6.3 million total net customer additions, up 25.1 percent
from 2003; total revenues up 23.0 percent; cash flows from operating
activities (CFFO) increased $2.0 billion from 2003; data services revenues
more than double 2003's total; record operating income margin of 21.1
percent
Wireline
* Fourth quarter: 306,000 net additions of broadband DSL (digital subscriber
lines); total data revenues up 9.2 percent from last year's quarter; stable
revenues and margins; average monthly revenue per residential customer up 4
percent to nearly $50; total Enterprise (large business) revenues up 4.9
percent
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Verizon News Release, page 2
* Full year: 3.6 million total DSL lines, up 53.5 percent year-over-year;
$4.2 billion in revenues from all long-distance services, up 10.4 percent;
Enterprise revenues of approximately $6 billion, up 1.9 percent; data
revenues of $7.8 billion, up 7.4 percent
Other Highlights
* Total debt: $39.3 billion at year-end 2004, a $6.1 billion decrease from
year-end 2003
* Capital expenditures: $13.3 billion in 2004, compared with $11.9 billion in
2003; 2005 capital spending expected to increase approximately 10 percent
over 2004; increases driven by investments for wireless and fiber-optic
broadband growth initiatives
Notes: 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
included in this announcement. Discontinued operations in the
quarterly periods presented include the operations of Verizon
Information Services Canada, following a third-quarter 2004 agreement
to sell this business. Fourth quarter and year-to-date 2004 also
include the gain on the sale.
NEW YORK - Verizon Communications Inc. (NYSE:VZ) today reported strong fourth-
quarter and year-end 2004 results as quarterly revenues increased 6.2 percent,
driven by a 10th consecutive quarter of double-digit, year-over-year revenue
increases for wireless services. Wireless contributed $27.7 billion to the
corporation's $71.3 billion total revenues in 2004.
For the fourth quarter 2004, Verizon reported earnings of $3.0 billion, or $1.08
per diluted share, compared with a loss of $1.5 billion, or 53 cents per share,
in the fourth quarter 2003. Reported earnings in the fourth quarter 2004
included non-recurring gains from sales of non-strategic assets and tax
benefits, while the fourth quarter 2003 loss included non-recurring expenses
from a voluntary separation plan and environmental remediation costs.
Before special items, earnings were 64 cents per share in the fourth quarter
2004 and 58 cents per share in the fourth quarter 2003.
For the year, Verizon reported earnings of $7.8 billion, or $2.79 per share,
compared with $3.1 billion, or $1.12 per share, in 2003. Before special items,
earnings were $7.0 billion ($2.51 per share) in 2004, and $7.3 billion ($2.60
per share) in 2003.
Quarterly consolidated operating revenues reached a company-record $18.3 billion
in the fourth quarter 2004, increasing 6.2 percent compared with $17.2 billion
in the fourth quarter 2003. Annual consolidated operating revenues were $71.3
billion in 2004, increasing 5.7 percent compared with $67.5 billion in 2003 -
Verizon's strongest annual revenue growth in three years.
Verizon Wireless contributed more than 40 percent of Verizon's total revenues in
the fourth quarter 2004, compared with less than 35 percent in the fourth
quarter 2003. Wireless
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Verizon News Release, page 3
revenues were $7.3 billion in the fourth quarter 2004, a 22.7 percent increase
compared with $6.0 billion in the fourth quarter 2003. Full-year 2004 wireless
revenues were $27.7 billion, an increase of $5.2 billion, or 23.0 percent,
compared with 2003.
Overall, Verizon's growth businesses - wireless, long-distance, broadband, data
and Enterprise services - accounted for 55.2 percent of fourth-quarter 2004
revenues, compared with 49.3 percent of fourth-quarter 2003 revenues. Over the
past year, revenues from these businesses have grown by 19.0 percent.
Operating revenues for Domestic Telecom, the company's U.S. wireline business
segment, were $9.7 billion in the fourth quarter 2004, a 2.4 percent decrease
compared with the fourth quarter 2003. For the year, wireline operating revenues
were $38.6 billion, a 2.7 percent decrease compared with 2003.
'Strong Fundamentals'
"Building on our excellent fourth-quarter and full-year results, our business
fundamentals as we enter 2005 are the strongest they've been in years," said
Ivan Seidenberg, Verizon chairman and CEO.
"In 2004, we changed our growth profile by divesting non-strategic assets, by
extending our industry leadership in wireless, and by gaining momentum in
broadband, long-distance and Enterprise markets. Our wireline business has
maintained stable margins, and Verizon Information Services and International
have continued to contribute significant revenue, income and cash flow. As we
move forward, we are realizing value from our diversified asset base, and we are
investing in growth areas as we build tomorrow's networks to provide customers
with continuous service enhancements and product innovations."
Sustained Wireless Growth
Verizon Wireless added 1.7 million net new customers, the largest quarterly
customer increase in the history of the company, which was formed in April 2000.
For the year, Verizon Wireless added 6.3 million net new customers, as its total
number of customers grew 16.8 percent year-over-year to 43.8 million, including
41.8 million retail customers.
Total churn reached record-low levels for the quarter and the year. Total churn
was 1.43 percent for the fourth quarter and 1.50 percent for the year. Churn
among retail post-pay customers - or 92 percent of the company's customers - was
1.2 percent for the quarter and 1.3 percent for the year.
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Verizon News Release, page 4
Continued Solid Margins
On a consolidated basis, Verizon's operating income margin was 18.4 percent in
the fourth quarter 2004, compared with negative margins due to the reported loss
in the fourth quarter 2003. When adjusted to exclude the special and non-
recurring items described later in this release as well as net pension and OPEB
(other post-retirement benefit) impact, Verizon's consolidated operating income
margin would have been 20.3 percent in the fourth quarter 2004 and 18.3 percent
in the fourth quarter 2003 (non-GAAP measures).
Operating income margin for the wireline segment was 15.2 percent in the fourth
quarter 2004, compared with 15.4 percent in the fourth quarter 2003. When
adjusted to exclude the items listed above, wireline's operating income margin
would have been 17.3 percent in the fourth quarter 2004 and 15.4 percent in the
fourth quarter 2003 (non-GAAP measures).
Consistent with past practice, Verizon believes that excluding the impact of
special and non-recurring items and net pension and OPEB expenses or credits
enhances comparability, providing a better picture of operating cost management.
Verizon Wireless' operating income margin was 18.7 percent in the fourth quarter
2004, compared with 18.5 percent in the fourth quarter 2003, and a record 21.1
percent for full-year 2004, compared with 18.2 percent for 2003.
Wireless' EBITDA margin was 39.5 percent in the fourth quarter 2004, compared
with 39.7 percent in the fourth quarter 2003. (EBITDA - or earnings before
interest, taxes, depreciation and amortization - is a non-GAAP measure that adds
depreciation and amortization to operating income; EBITDA margin is calculated
by dividing EBITDA by Wireless' service revenues.) Fourth-quarter 2004 EBITDA
margin was impacted by expenses attributable to Verizon Wireless' long-term
employee incentive plan, which have increased as the value of Verizon Wireless
has increased.
Verizon Wireless' 2004 EBITDA margin of 42.3 percent was its highest-ever margin
for a full year.
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Verizon News Release, page 5
Wireline Broadband and Data Growth
Verizon added a net of 306,000 broadband DSL lines in the fourth quarter 2004
for a total of 3.6 million DSL lines in service, representing 1.2 million net
additions over the past year - a growth rate of 53.5 percent.
Revenues from DSL contributed to total wireline data revenues of $2.0 billion in
the fourth quarter 2004, a 9.2 percent increase compared with $1.9 billion in
data revenues in the fourth quarter 2003. For the year, data revenues of $7.8
billion grew 7.4 percent compared with 2003 and now represent more than 20
percent of total wireline revenues.
Even as strong DSL customer and revenue growth continue, Verizon has begun
deploying FiOS next-generation, fiber-optic-based broadband services. FiOS
services currently have more than 20 percent market penetration in Keller,
Texas, Verizon's first market, after the first four and a half months of sales.
In another wireline growth area, revenues from long-distance services, including
regional toll services, were $1.1 billion in the fourth quarter 2004, a 5.8
percent increase compared with $1.0 billion in the fourth quarter 2003. On an
annual basis, these revenues totaled $4.2 billion in 2004, a 10.4 percent
increase compared with 2003.
Debt Reduction and Cash Management
Verizon's total debt decreased $6.1 billion last year, to $39.3 billion at year-
end 2004 from $45.4 billion at year-end 2003 - reaching a previously announced
target of debt levels in relation to corporate earnings before interest, taxes,
depreciation and amortization.
CFFO was $21.8 billion in 2004, compared with $22.5 billion in 2003. The change
is primarily due to 2004 severance payments related to the 21,000-employee
voluntary separation plan in the fourth quarter 2003, offset by strong cash
flow. In 2004, net cash used in investing activities was $10.3 billion, and net
cash used in financing activities was $9.9 billion.
On a segment level, wireline's CFFO was $11.8 billion in 2004, compared with
$12.3 billion in 2003. Verizon Wireless' CFFO was $9.5 billion in 2004, compared
with $7.5 billion in 2003.
Free cash flow (non-GAAP, cash from operating activities less capital
expenditures and dividends) was $4.3 billion in 2004, compared with $6.4 billion
in 2003. Impacts on cash flow in 2004 included severance payments associated
with the voluntary separation plan, as well as increased capital investments
compared with 2003 to fund wireless and fiber-optic broadband growth
initiatives.
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Verizon News Release, page 6
Capital expenditures in 2004 totaled $13.3 billion, compared with $11.9 billion
in 2003. In 2005, overall capital spending is expected to increase approximately
10 percent over 2004, driven by focused investments in growth markets.
Expense Items
In the fourth quarter 2004, reported operating expenses decreased 23.0 percent
compared with the fourth quarter 2003, to $14.9 billion. When adjusted for
special and non-recurring items, operating expenses were $14.8 billion in the
fourth quarter 2004, an increase of 5.1 percent from comparable expenses in the
fourth quarter 2003 (non-GAAP measure). Expenses for the fourth quarter 2003
included special items associated with the voluntary separation plan,
environmental remediation costs and leasing operations costs, partially offset
by net gains on sales of investments.
Special Items
Verizon's reported fourth-quarter 2004 earnings of $3.0 billion, or $1.08 per
share, principally included these special items: net gains of $1.0 billion, or
36 cents per share, from the sales of Verizon Information Services Canada and
Verizon's investment stake in TELUS Corp.; and tax benefits of $0.2 billion, or
8 cents per share, from previous investment-related losses. Verizon's reported
year-end 2004 earnings of $7.8 billion, or $2.79 per share, also included $0.5
billion, or 18 cents per share, in previously reported severance-related
charges, partially offset by a $43 million, or 2 cents per share, gain on the
sale of an investment.
Verizon's reported year-end 2003 earnings of $3.1 billion, or $1.12 per share,
included net charges of $4.2 billion. These net charges included gains of $0.5
billion related to accounting changes and to the net proceeds from sales of
investments. These gains were more than offset by charges, including $3.4
billion related to severance, pension and benefit costs; $0.9 billion related to
Verizon's decision to sell its interest in Grupo Iusacell, a Mexican wireless
business; and $0.4 billion related to environmental remediation, leasing
operations and other charges.
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Verizon News Release, page 7
Earnings per share calculations in all periods are impacted by a recent
accounting change that increases the net income and number of shares in the
diluted earnings per share calculations. This accounting change decreased 2004
diluted earnings per share by 1 cent and 2003 diluted earnings per share by 2
cents.
Business Segment Highlights
Following are fourth-quarter 2004 and full-year highlights from Verizon's four
business segments.
Wireline:
* Wireline operating revenues of $9.7 billion in the fourth quarter 2004 were
up slightly compared with the third quarter 2004, marking the third
consecutive quarter of sequential operating revenue increases. This was
supported by a 2.5 percent increase in business revenues, to $3.0 billion,
comparing fourth quarter 2004 with third quarter 2004. For the year,
wholesale revenues were up 1.4 percent - including growth in key areas such
as SONET services - contributing $8.9 billion to total revenues of $38.6
billion. Business revenues were flat at $11.7 billion, and consumer
revenues declined 2.5 percent to $15.5 billion.
* Wireline cash expenses, excluding net pension and OPEB expenses (non-GAAP),
were $5.7 billion in the fourth quarter 2004, a 5.7 percent decrease from
the fourth quarter 2003. Fourth-quarter 2004 wage and salary expenses
decreased by more than $200 million year-over-year due to the voluntary
separation program and a fourth-quarter 2003 lump-sum labor contract
payment. Savings helped fund increases in sales and marketing expenses and
other operating costs in wireline growth areas.
* Approximately 56 percent of Verizon residential customers have purchased
local services in combination with either Verizon long-distance or Verizon
DSL, or both. This compares with 43 percent in the fourth quarter 2003.
* The average revenue per month per Verizon residential wireline customer
rose to nearly $50 in the fourth quarter 2004, a 4 percent increase
compared with the fourth quarter 2003.
* Approximately 4.4 million Verizon Freedom packages were in service to
residential and business customers by year-end 2004. Verizon Freedom plans
help retain and win back customers by offering local services with various
combinations of long-distance, wireless and Internet access, available on
one bill.
* The company had 17.7 million long-distance lines in service as of year-end
2004, an increase of 342,000 lines from end of the third quarter 2004.
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Verizon News Release, page 8
* Resale and Unbundled Network Element-Platform (UNE-P) lines totaled 6.6
million at the end of the fourth quarter 2004, up from 5.8 million at the
end of the fourth quarter 2003 and down from 6.7 million at the end of the
third quarter 2004. UNE-P lines decreased by 93,000 from the third to the
fourth quarter in 2004. The company had 53.0 million switched wireline
access lines in service as of year-end 2004.
* Enterprise revenues totaled approximately $6 billion in 2004, increasing
4.9 percent in the fourth quarter 2004 and 1.9 percent in the full year,
compared with the same periods in 2003.
* Verizon's Enterprise Solutions Group ended 2004 with more than 750
Enterprise Advance sales, meeting its year-end target of $250 million in
Enterprise Advance revenues. Year-over-year trends were positive, and sales
in the fourth quarter 2004 included a multi-year $138 million contract
extension with Virginia Tech for NetworkVirginia broadband services
connecting approximately 1,500 schools, libraries, clinics, research
institutions and public service organizations throughout the commonwealth.
Wireless:
* Retail gross additions increased 5.7 percent over the fourth quarter 2003.
Retail net additions increased 14.7 percent, to 1.6 million of the
company's 1.7 million total net additions.
* Service revenues for the quarter were $6.5 billion, up 20.5 percent. For
the year, service revenues were $24.4 billion, up 20.0 percent. The company
does not include taxes and regulatory fees in service revenues. Average
service revenue per customer increased 3 percent in the quarter and nearly
3 percent for the full year, to $50.32 and $50.22, respectively.
* Verizon Wireless continued its industry-leading cost management. In 2004,
cash expense per customer declined 2.5 percent to its lowest-ever expense
level for a full year, which is especially noteworthy given the record-high
volume of new customers.
* Data services usage continued to climb, contributing $1.1 billion in
revenues in 2004, more than double the data revenues in 2003. In the fourth
quarter, $359 million, or 5.6 percent, of all service revenues came from
data services, continuing the upward trend from 3.2 percent in the prior
year's quarter. The company has 16.6 million data customers - more than
one-third of all its customers.
* Contributing to wireless data revenues, 3 billion text messages were
exchanged during the quarter. Additionally, there were 32.6 million picture
messages and 30.2 million downloads of Get It Now's more than 500 games,
exclusive content and other applications.
* As previously announced, the company next week will launch V CAST, the
nation's first 3G (third-generation) consumer multimedia services,
delivering high-quality video, 3D games and music to 3G handsets. At the
same time, the company also will introduce three cutting-edge 3G handsets.
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Verizon News Release, page 9
* 3G services are made possible by the company's significantly-expanded (3G)
EV-DO network, the largest and fastest wide-area broadband network in the
nation, reaching 75 million Americans and growing. Already riding on this
3G network is the company's BroadbandAccess service for business customers,
giving them broadband-speed remote access from laptops and PDAs when out of
the office.
Information Services:
* Verizon Information Services (VIS) revenues of $890 million decreased 4.6
percent for the fourth quarter 2004 compared with the fourth quarter 2003,
primarily due to reduced domestic print advertising revenues. For the year,
VIS' revenues of $3.6 billion decreased 5.6 percent in 2004 from 2003,
primarily due to reduced domestic print advertising revenues and the
elimination of revenues from the 2003 sale of European operations.
* VIS' domestic online directory and search service, SuperPages.com,
continued to achieve strong growth in 2004, as demonstrated by a 22 percent
increase in revenues and a 49 percent increase in searches over 2003.
* Verizon sold the Verizon Information Services Canada directory operations
to an affiliate of Bain Capital, a private investment firm, for $1.6
billion. The sale closed in the fourth quarter 2004, generating an
after-tax gain of $516 million. As noted earlier, this gain and
prior-period results for this unit are excluded from Information Services
segment results.
International:
* Fourth-quarter revenues were $544 million, bringing full-year revenues to
$2.0 billion, compared with $477 million and $1.9 billion in the fourth
quarter and full-year 2003, respectively. The fourth-quarter increase of
14.0 percent was primarily driven by Verizon's 100 percent-owned affiliate
in the Dominican Republic and reflects operational growth as well as
foreign exchange rate improvement. The full-year increase of 3.3 percent
reflects operational growth at Verizon Dominicana, as well as a prior-year
revenue adjustment in Puerto Rico, partially offset by unfavorable foreign
exchange rates in the Dominican Republic.
* Fourth-quarter segment income was $338 million, bringing full-year segment
income to $1.2 billion, compared with $341 million and $1.4 billion in the
fourth quarter and full-year 2003, respectively. The decrease for the
full-year primarily resulted from additional Italian tax benefits in 2003
from a reorganization at Vodafone Omnitel, lower asset sales and
unfavorable foreign exchange rates, partially offset by operational growth
at Verizon Dominicana and the prior-year revenue and expense adjustments in
Puerto Rico.
* During the fourth quarter, Verizon sold its 20.5 percent interest in TELUS
and 24.5 percent interest in EuroTel Bratislava, a Slovak wireless
provider. These transactions reflect
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Verizon News Release, page 10
International's continuing efforts to realign its portfolio and focus primarily
on the Caribbean and Latin American region, as well as on Verizon's 23.1 percent
investment in Vodafone Omnitel.
With more than $71 billion in annual revenues, Verizon Communications Inc.
(NYSE:VZ) is one of the world's leading providers of communications services.
Verizon has a diverse work force of more than 210,000 in four business units:
Domestic Telecom serves customers based in 29 states with wireline
telecommunications services, including broadband, nationwide long-distance and
other services. Verizon Wireless owns and operates the nation's most reliable
wireless network, serving 43.8 million voice and data customers across the
United States. Information Services operates directory publishing businesses and
provides electronic commerce services. International includes wireline and
wireless 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, 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.
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: 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; 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;
and changes in our accounting assumptions that regulatory agencies, including
the SEC, may require or that result from changes in the accounting rules or
their application, which could result in an impact on earnings.
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Verizon Communications Inc.
Consolidated Statements of Income
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/04 12/31/03 % Change 12/31/04 12/31/03 % Change
--------- ------------ ------------ ------------- ------------- --------
Operating Revenues $ 18,263 $ 17,198 6.2 $ 71,283 $ 67,468 5.7
Operating Expenses
Cost of services and sales 6,064 5,852 3.6 23,168 21,701 6.8
Selling, general & administrative expense 5,281 10,071 (47.6) 21,088 24,894 (15.3)
Depreciation and amortization expense 3,565 3,445 3.5 13,910 13,607 2.2
Sales of businesses, net - - - - (141) (100.0)
------------ ------------ ------------- -------------
Total Operating Expenses 14,910 19,368 (23.0) 58,166 60,061 (3.2)
Operating Income (Loss) 3,353 (2,170) * 13,117 7,407 77.1
Equity in earnings of unconsolidated
businesses 1,056 605 74.5 1,691 1,278 32.3
Income from other unconsolidated businesses 1 172 (99.4) 75 331 (77.3)
Other income and (expense), net 42 15 180.0 22 37 (40.5)
Interest expense (575) (665) (13.5) (2,384) (2,797) (14.8)
Minority interest (574) (451) 27.3 (2,409) (1,583) 52.2
------------ ------------ ------------- -------------
Income (Loss) Before Provision for
Income Taxes, Discontinued Operations
and Cumulative Effect of Accounting Change 3,303 (2,494) * 10,112 4,673 116.4
Income tax benefit (provision) (786) 1,023 * (2,851) (1,213) 135.0
------------ ------------ ------------- -------------
Income (Loss) Before Discontinued
Operations and Cumulative Effect
of Accounting Change 2,517 (1,471) * 7,261 3,460 109.9
Discontinued Operations (1)
Income (loss) from operations 1,027 22 * 1,116 (869) *
Provision for income taxes (505) (9) * (546) (17) *
------------ ------------ ------------- -------------
Income (loss) on discontinued operations 522 13 * 570 (886) *
Cumulative Effect of Accounting Change,
Net of Tax - - - - 503 (100.0)
------------ ------------ ------------- -------------
Net Income (Loss) $ 3,039 $ (1,458) * $ 7,831 $ 3,077 154.5
------------ ------------ ------------- -------------
Basic Earnings (Loss) per Share $ 1.10 $ (.53) * $ 2.83 $ 1.12 152.7
Weighted average number of common
shares (in millions) 2,770 2,765 2,770 2,756
Diluted Earnings (Loss) per Share (2) $ 1.08 $ (.53) * $ 2.79 $ 1.12 149.1
Weighted average number of common
shares-assuming dilution (in millions) 2,823 2,765 2,831 2,832
----------
Footnotes:
(1) Discontinued Operations in all periods includes the operations of Verizon
Information Services Canada as a result of an agreement to sell the
business reached in the third quarter of 2004. The fourth quarter and
year-to-date 2004 also include the gain on the sale of Verizon Information
Services Canada of $516 million, net of tax. The year-to-date 2003 period
also includes Iusacell losses.
(2) Diluted Earnings per Share include (i) income related to share dilution
(exchangeable equity interests and zero coupon convertible debt) of $14
million and $68 million for the fourth quarter and year-to-date 2004,
respectively, and $82 million for the year-to-date 2003, 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. There is no impact of dilutive
securities in the fourth quarter of 2003, since a net loss from continuing
operations was reported.
* 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 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/04 12/31/03 % Change 12/31/04 12/31/03 % Change
--------- ------------ ------------ ------------- ------------- --------
Operating Revenues
Domestic Telecom $ 9,668 $ 9,905 (2.4) $ 38,551 $ 39,602 (2.7)
Domestic Wireless 7,342 5,984 22.7 27,662 22,489 23.0
Information Services 890 933 (4.6) 3,615 3,830 (5.6)
International 544 477 14.0 2,014 1,949 3.3
Other (181) (101) 79.2 (559) (402) 39.1
------------ ------------ ------------- -------------
Total Operating Revenues 18,263 17,198 6.2 71,283 67,468 5.7
------------ ------------ ------------- -------------
Operating Expenses
Cost of services and sales 6,064 5,751 5.4 23,168 21,600 7.3
Selling, general & administrative expense 5,158 4,878 5.7 20,264 18,676 8.5
Depreciation and amortization expense 3,565 3,445 3.5 13,910 13,607 2.2
Sales of businesses, net - - - - (141) (100.0)
------------ ------------ ------------- -------------
Total Operating Expenses 14,787 14,074 5.1 57,342 53,742 6.7
------------ ------------ ------------- -------------
Operating Income 3,476 3,124 11.3 13,941 13,726 1.6
Equity in earnings of unconsolidated businesses 269 257 4.7 904 930 (2.8)
Income (loss) from other unconsolidated
businesses 1 (4) (125.0) 32 155 (79.4)
Other income and (expense), net 42 15 180.0 77 98 (21.4)
Interest expense (575) (665) (13.5) (2,384) (2,797) (14.8)
Minority interest (574) (451) 27.3 (2,409) (1,583) 52.2
------------ ------------ ------------- -------------
Income Before Provision for Income
Taxes and Discontinued Operations 2,639 2,276 15.9 10,161 10,529 (3.5)
Provision for income taxes (842) (694) 21.3 (3,180) (3,296) (3.5)
------------ ------------ ------------- -------------
Income Before Discontinued Operations 1,797 1,582 13.6 6,981 7,233 (3.5)
Discontinued Operations (1)
Income from operations 10 22 (54.5) 99 89 11.2
Provision for income taxes (4) (9) (55.6) (45) (43) 4.7
------------ ------------ ------------- -------------
Income on discontinued operations 6 13 (53.8) 54 46 17.4
------------ ------------ ------------- -------------
Net Income Before Special Items $ 1,803 $ 1,595 13.0 $ 7,035 $ 7,279 (3.4)
------------ ------------ ------------- -------------
Basic Earnings per Share $ .65 $ .58 12.1 $ 2.54 $ 2.64 (3.8)
Weighted average number of common
shares (in millions) 2,770 2,765 2,770 2,756
Diluted Adjusted Earnings per Share (2) $ .64 $ .58 10.3 $ 2.51 $ 2.60 (3.5)
Weighted average number of common
shares-assuming dilution (in millions) 2,823 2,765 2,831 2,832
----------
Footnotes:
(1) Discontinued Operations in all periods includes the operations of Verizon
Information Services Canada as a result of an agreement to sell the
business reached in the third quarter of 2004. The year-to-date 2003 period
also includes Iusacell losses.
(2) Diluted Earnings per Share include (i) income related to share dilution
(exchangeable equity interests and zero coupon convertible debt) of $14
million and $68 million for the fourth quarter and year-to-date 2004,
respectively, and $82 million for the year-to-date 2003, 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. There is no impact of dilutive
securities in the fourth quarter of 2003, since a net loss from continuing
operations was reported.
--------------------------------------------------------------------------------
Verizon Communications Inc.
Consolidated Statements of Income - Reconciliations
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
----------------------------------------
3 Mos. Ended Severance, Sales of 3 Mos. Ended
12/31/04 Pension and Businesses and 12/31/04
Reported Benefit Investments, Before Special
Unaudited (GAAP) Charges Net Tax Benefits Items
--------- ------------ ----------- -------------- ------------ --------------
Operating Revenues $ 18,263 $ - $ - $ - $ 18,263
Operating Expenses
Cost of services and sales 6,064 - - - 6,064
Selling, general & administrative
expense 5,281 (23) (100) - 5,158
Depreciation and amortization expense 3,565 - - - 3,565
------------ ----------- -------------- ------------ --------------
Total Operating Expenses 14,910 (23) (100) - 14,787
------------ ----------- -------------- ------------ --------------
Operating Income 3,353 23 100 - 3,476
Equity in earnings of
unconsolidated businesses 1,056 - (787) - 269
Income from other unconsolidated
businesses 1 - - - 1
Other income and (expense), net 42 - - - 42
Interest expense (575) - - - (575)
Minority interest (574) - - - (574)
------------ ----------- -------------- ------------ --------------
Income Before Provision for
Income Taxes and Discontinued
Operations 3,303 23 (687) - 2,639
Provision for income taxes (786) (9) 187 (234) (842)
------------ ----------- -------------- ------------ --------------
Income Before Discontinued Operations 2,517 14 (500) (234) 1,797
Discontinued Operations
Income from operations 1,027 - (1,017) - 10
Provision for income taxes (505) - 501 - (4)
------------ ----------- -------------- ------------ --------------
Income on discontinued operations 522 - (516) - 6
------------ ----------- -------------- ------------ --------------
Income $ 3,039 $ 14 $ (1,016) $ (234) $ 1,803
------------ ----------- -------------- ------------ --------------
Earnings per Common Share (1) $ 1.10 $ .01 $ (.37) $ (.08) $ .65
Diluted Earnings per Common Share (1) $ 1.08 $ - $ (.36) $ (.08) $ .64
Special and Non-Recurring Items
----------------------------------------
3 Mos. Ended Severance, Sales of 3 Mos. Ended
12/31/04 Pension and Businesses and 12/31/04
Reported Benefit Other Special Sales of Before Special
Unaudited (GAAP) Charges Items Investments, Net Items
--------- ------------ ----------- -------------- ---------------- --------------
Operating Revenues $ 17,198 $ - $ - $ - $ 17,198
Operating Expenses
Cost of services and sales 5,852 (101) - - 5,751
Selling, general & administrative
expense 10,071 (4,594) (299) (300) 4,878
Depreciation and amortization expense 3,445 - - - 3,445
Sales of businesses, net - - - - -
------------ ----------- -------------- ---------------- --------------
Total Operating Expenses 19,368 (4,695) (299) (300) 14,074
------------ ----------- -------------- ---------------- --------------
Operating Income (Loss) (2,170) 4,695 299 300 3,124
Equity in earnings of unconsolidated
businesses 605 - - (348) 257
Income (loss) from other
unconsolidated businesses 172 - - (176) (4)
Other income and (expense), net 15 - - - 15
Interest expense (665) - - - (665)
Minority interest (451) - - - (451)
------------ ----------- -------------- ---------------- --------------
Income (Loss) Before Provision
for Income Taxes and
Discontinued Operations (2,494) 4,695 299 (224) 2,276
Income tax benefit (provision) 1,023 (1,813) (84) 180 (694)
------------ ----------- -------------- ---------------- --------------
Income (Loss) Before Discontinued
Operations (1,471) 2,882 215 (44) 1,582
Discontinued Operations
Income from operations 22 - - - 22
Provision for income taxes (9) - - - (9)
------------ ----------- -------------- ---------------- --------------
Income on discontinued
operations 13 - - - 13
------------ ----------- -------------- ---------------- --------------
Net Income (Loss) $ (1,458) $ 2,882 $ 215 $ (44) $ 1,595
------------ ----------- -------------- ---------------- --------------
Basic Earnings (Loss) per
Common Share (1) $ (.53) $ 1.04 $ .08 $ (.02) $ .58
Diluted Earnings (Loss) per
Common Share (1) $ (.53) $ 1.04 $ .08 $ (.02) $ .58
---------
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
----------------------------------------
12 Mos.
12 Mos. Sales of Ended
Ended Severance, Businesses 12/31/04
12/31/04 Pension and and Other Before
Reported Benefit Investments, Special Special
Unaudited (GAAP) Charges Net Tax Benefits Items Items
--------- ------------ ----------- ------------ ------------ ----------- -----------
Operating Revenues $ 71,283 $ - $ - $ - $ - $ 71,283
Operating Expenses
Cost of services and sales 23,168 - - - - 23,168
Selling, general &
administrative expense 21,088 (815) (100) - 91 20,264
Depreciation and
amortization expense 13,910 - - - - 13,910
------------ ----------- ------------ ------------ ----------- -----------
Total Operating Expenses 58,166 (815) (100) - 91 57,342
------------ ----------- ------------ ------------ ----------- -----------
Operating Income 13,117 815 100 - (91) 13,941
Equity in earnings of
unconsolidated businesses 1,691 - (787) - - 904
Income from other
unconsolidated businesses 75 - (43) - - 32
Other income and (expense), net 22 - - - 55 77
Interest expense (2,384) - - - - (2,384)
Minority interest (2,409) - - - - (2,409)
------------ ----------- ------------ ------------ ----------- -----------
Income Before Provision for
Income Taxes and
Discontinued Operations 10,112 815 (730) - (36) 10,161
Provision for income taxes (2,851) (316) 187 (234) 34 (3,180)
------------ ----------- ------------ ------------ ----------- -----------
Income Before Discontinued
Operations 7,261 499 (543) (234) (2) 6,981
Discontinued Operations
Income from operations 1,116 - (1,017) - - 99
Provision for income taxes (546) - 501 - - (45)
------------ ----------- ------------ ------------ ----------- -----------
Income on discontinued
operations 570 - (516) - - 54
------------ ----------- ------------ ------------ ----------- -----------
Net Income $ 7,831 $ 499 $ (1,059) $ (234) $ (2) $ 7,035
------------ ----------- ------------ ------------ ----------- -----------
Basic Earnings per Common
Share (1) $ 2.83 $ .18 $ (.38) $ (.08) $ - $ 2.54
Diluted Earnings per Common
Share (1) $ 2.79 $ .18 $ (.37) $ (.08) $ - $ 2.51
Special and Non-Recurring Items
----------------------------------------
12 Mos.
Ended
12 Mos. Ended Lease Cumulative 12/31/03
12/31/03 Severance, Impairment and Effect of Sales of Before
Reported Iusacell Pension and Other Special Accounting Investments, Special
Unaudited (GAAP) Charge Benefit Charges Charges Change Net Items
--------- ------------ ---------- --------------- -------------- ---------- ------------ ---------
Operating Revenues $ 67,468 $ - $ - $ - $ - $ - $ 67,468
Operating Expenses
Cost of services and sales 21,701 - (101) - - - 21,600
Selling, general &
administrative expense 24,894 - (5,422) (496) - (300) 18,676
Depreciation and
amortization expense 13,607 - - - - - 13,607
Sales of businesses, net (141) - - - - - (141)
------------ ---------- --------------- -------------- ---------- ------------ ---------
Total Operating Expenses 60,061 - (5,523) (496) - (300) 53,742
------------ ---------- --------------- -------------- ---------- ------------ ---------
Operating Income 7,407 - 5,523 496 - 300 13,726
Equity in earnings of
unconsolidated businesses 1,278 - - - - (348) 930
Income from other
unconsolidated businesses 331 - - - - (176) 155
Other income and
(expense), net 37 - - 61 - - 98
Interest expense (2,797) - - - - - (2,797)
Minority interest (1,583) - - - - - (1,583)
------------ ---------- --------------- -------------- ---------- ------------ ---------
Income Before Provision
for Income Taxes,
Discontinued Operations
and Cumulative Effect
of Accounting Change 4,673 - 5,523 557 - (224) 10,529
Provision for income taxes (1,213) - (2,125) (138) - 180 (3,296)
------------ ---------- --------------- -------------- ---------- ------------ ---------
Income Before
Discontinued Operations
and Cumulative Effect
of Accounting Change 3,460 - 3,398 419 - (44) 7,233
Discontinued Operations
Income (loss) from
operations (869) 957 1 - - - 89
Provision for income
taxes (17) (26) - - - - (43)
------------ ---------- --------------- -------------- ---------- ------------ ---------
Income (loss) on
discontinued
operations (886) 931 1 - - - 46
Cumulative Effect of
Accounting Change,
Net of Tax 503 - - - (503) - -
------------ ---------- --------------- -------------- ---------- ------------ ---------
Net Income $ 3,077 $ 931 $ 3,399 $ 419 $ (503) $ (44) $ 7,279
------------ ---------- --------------- -------------- ---------- ------------ ---------
Basic Earnings per
Common Share (1) $ 1.12 $ .34 $ 1.23 $ .15 $ (.18) $ (.02) $ 2.64
Diluted Earnings per
Common Share (1) $ 1.12 $ .33 $ 1.20 $ .15 $ (.18) $ (.02) $ 2.60
---------
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)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/04 12/31/03 12/31/04 12/31/03
--------- ------------ ------------ ------------- -------------
Debt to debt and shareowners'
equity ratio-end of period 51.1 % 57.6 % 51.1 % 57.6 %
Book value per common share $ 13.56 $ 12.09 $ 13.56 $ 12.09
Cash dividends declared per
common share $ .385 $ .385 $ 1.54 $ 1.54
Common shares outstanding (in millions)
End of period 2,770 2,768 2,770 2,768
Capital expenditures (including
capitalized software)
Domestic Telecom $ 2,415 $ 2,055 $ 7,118 $ 6,820
Domestic Wireless 1,512 1,511 5,633 4,590
Information Services 38 27 87 74
International 187 136 382 358
Other 30 11 39 32
------------ ------------ ------------- -------------
Total $ 4,182 $ 3,740 $ 13,259 $ 11,874
------------ ------------ ------------- -------------
Total employees (1) 210,396 201,779 210,396 201,779
---------
Footnote:
(1) Prior period adjusted to reflect comparable figure.
--------------------------------------------------------------------------------
Verizon Communications Inc.
Consolidated Balance Sheets
(dollars in millions)
Unaudited 12/31/04 12/31/03 $ Change
--------- -------- -------- --------
Assets
Current assets
Cash and cash equivalents $ 2,290 $ 669 $ 1,621
Short-term investments 2,257 2,172 85
Accounts receivable, net 9,801 9,854 (53)
Inventories 1,535 1,262 273
Assets of discontinued operations - 705 (705)
Assets held for sale 950 - 950
Prepaid expenses and other 2,646 4,233 (1,587)
-------- -------- --------
Total current assets 19,479 18,895 584
-------- -------- --------
Plant, property and equipment 185,522 180,940 4,582
Less accumulated depreciation 111,398 105,638 5,760
-------- -------- --------
74,124 75,302 (1,178)
-------- -------- --------
Investments in unconsolidated
businesses 5,855 5,789 66
Wireless licenses 42,090 40,907 1,183
Goodwill 837 835 2
Other intangible assets, net 4,521 4,702 (181)
Other assets 19,052 19,538 (486)
-------- -------- --------
Total Assets $ 165,958 $ 165,968 $ (10)
-------- -------- --------
Liabilities and Shareowners' Investment
Current liabilities
Debt maturing within one year $ 3,593 $ 5,967 $ (2,374)
Accounts payable and
accrued liabilities 13,177 14,652 (1,475)
Liabilities of discontinued
operations - 76 (76)
Liabilities related to assets
held for sale 525 - 525
Other 5,834 5,885 (51)
-------- -------- --------
Total current liabilities 23,129 26,580 (3,451)
-------- -------- --------
Long-term debt 35,674 39,413 (3,739)
Employee benefit obligations 17,941 16,754 1,187
Deferred income taxes 22,532 21,704 828
Other liabilities 4,069 3,703 366
Minority interest 25,053 24,348 705
Shareowners' investment
Common stock 277 277 -
Contributed capital 25,404 25,363 41
Reinvested earnings 12,984 9,409 3,575
Accumulated other comprehensive loss (1,053) (1,250) 197
Common stock in treasury, at cost (142) (115) (27)
Deferred compensation - employee
stock ownership plans and other 90 (218) 308
-------- -------- --------
Total shareowners' investment 37,560 33,466 4,094
-------- -------- --------
Total Liabilities and Shareowners'
Investment $ 165,958 $ 165,968 $ (10)
--------------------------------------------------------------------------------
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
Unaudited 12 Mos. Ended 12 Mos. Ended $ Change
12/31/04 12/31/03
--------- ---------- ------------- --------
Cash Flows From Operating Activities
Income before discontinued operations
and cumulative effect of accounting
change $ 7,261 $ 3,460 $ 3,801
Adjustments to reconcile income before
discontinued operations and cumulative
effect of accounting change to net cash
provided by operating activities:
Depreciation and amortization expense 13,910 13,607 303
Sales of businesses, net - (141) 141
Employee retirement benefits 1,999 3,048 (1,049)
Deferred income taxes 1,842 826 1,016
Provision for uncollectible accounts 1,181 1,789 (608)
Income from unconsolidated businesses (1,766) (1,609) (157)
Changes in current assets and liabilities,
net of effects from acquisition/disposition
of businesses (3,243) 1,740 (4,983)
Other, net 636 (253) 889
------- ------- -------
Net cash provided by operating activities 21,820 22,467 (647)
------- ------- -------
Cash Flows From Investing Activities
Capital expenditures (including
capitalized software) (13,259) (11,874) (1,385)
Acquisitions, net of cash acquired, and
investments (1,196) (1,162) (34)
Proceeds from disposition of businesses 1,720 229 1,491
Net change in short-term investments (100) (120) 20
Other, net 2,492 691 1,801
------- ------- -------
Net cash used in investing activities (10,343) (12,236) 1,893
------- ------- -------
Cash Flows From Financing Activities
Proceeds from long-term borrowings 514 4,653 (4,139)
Repayments of long-term borrowings
and capital lease obligations (5,198) (10,759) 5,561
Decrease in short-term obligations,
excluding current maturities (783) (1,330) 547
Dividends paid (4,262) (4,239) (23)
Proceeds from sale of common stock 320 839 (519)
Purchase of common stock for treasury (370) - (370)
Other, net (77) (123) 46
------- ------- -------
Net cash used in financing activities (9,856) (10,959) 1,103
------- ------- -------
Increase (decrease) in cash and cash
equivalents 1,621 (728) 2,349
Cash and cash equivalents, beginning of period 669 1,397 (728)
------- ------- -------
Cash and cash equivalents, end of period $ 2,290 $ 669 $ 1,621
------- ------- -------
--------------------------------------------------------------------------------
Verizon Communications Inc.
Domestic Telecom - Selected Financial Results
(dollars in millions)
Unaudited
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
12/31/04 12/31/03 % Change 12/31/04 12/31/03 % Change
--------- ------- ------- ------- ------- ------- -------
Operating Revenues
Local services $ 4,557 $ 4,825 (5.6) $ 18,522 $ 19,454 (4.8)
Network access services 3,064 3,073 (.3) 12,235 12,719 (3.8)
Long distance services 1,064 1,006 5.8 4,182 3,788 10.4
Other services 983 1,001 (1.8) 3,612 3,641 (.8)
------- ------- ------- ------- ------- -------
Total Operating Revenues 9,668 9,905 (2.4) 38,551 39,602 (2.7)
------- ------- ------- ------- ------- -------
Operating Expenses
Cost of services
and sales 3,854 3,893 (1.0) 15,019 14,708 2.1
Selling, general &
administrative expense 2,082 2,195 (5.1) 8,781 8,517 3.1
Depreciation and
amortization expense 2,258 2,290 (1.4) 8,939 9,217 (3.0)
------- ------- ------- ------- ------- -------
Total Operating Expenses 8,194 8,378 (2.2) 32,739 32,442 .9
------- ------- ------- ------- ------- -------
Operating Income $ 1,474 $ 1,527 (3.5) $ 5,812 $ 7,160 (18.8)
Operating Income Margin 15.2% 15.4% 15.1% 18.1%
Segment Income $ 725 $ 710 2.1 $ 2,747 $ 3,335 (17.6)
Footnotes:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their non-
operational nature.
Intersegment transactions have not been eliminated.
Verizon Communications Inc.
Domestic Telecom Selected Operating Statistics
Unaudited
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
12/31/04 12/31/03 % Change 12/31/04 12/31/03 % Change
--------- ------- ------- ------- ------- ------- -------
Switched access lines
in service (000)
Residence 34,160 36,089 (5.3) 34,160 36,089 (5.3)
Business 18,392 18,990 (3.1) 18,392 18,990 (3.1)
Public 427 462 (7.6) 427 462 (7.6)
------- ------- ------- ------- ------- -------
Total 52,979 55,541 (4.6) 52,979 55,541 (4.6)
Special DS0 equivalents 91,688 84,806 8.1 91,688 84,806 8.1
------- ------- ------- ------- ------- -------
Total voice grade
equivalents (000) 144,667 140,347 3.1 144,667 140,347 3.1
------- ------- ------- ------- ------- -------
Resale & UNE-P
lines (000) 6,578 5,762 14.2 6,578 5,762 14.2
Minutes of use from
Carriers and CLECs
(in millions) 53,932 58,357 (7.6) 224,793 238,365 (5.7)
Long distance
lines (1) (000) 17,655 15,318 15.3 17,655 15,318 15.3
DSL lines (000) 3,559 2,319 53.5 3,559 2,319 53.5
High capacity and digital
data revenues
($ in millions)
Data transport $ 1,823 $ 1,632 11.7 $ 7,025 $ 6,546 7.3
Data solutions 219 238 (8.0) 771 716 7.7
------- ------- ------- ------- ------- -------
--------------------------------------------------------------------------------
Total revenues $ 2,042 $ 1,870 9.2 $ 7,796 $ 7,262 7.4
Footnote:
(1) Includes cumulative long distance line adjustments of 1,318,000 lines
in the fourth quarter of 2003. As previously disclosed, these adjustments
pertain to an overstatement of long distance lines discovered in the second
quarter of 2004.
--------------------------------------------------------------------------------
Verizon Communications Inc.
Verizon Wireless - Selected Financial Results
(dollars in millions)
Unaudited
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
12/31/04 12/31/03 % Change 12/31/04 12/31/03 % Change
--------- ------- ------- ------- ------- ------- -------
Revenues
Service revenues $ 6,467 $ 5,366 20.5 $ 24,400 $ 20,336 20.0
Equipment and other 875 618 41.6 3,262 2,153 51.5
------- ------- ------- ------- ------- -------
Total Revenues 7,342 5,984 22.7 27,662 22,489 23.0
------- ------- ------- ------- ------- -------
Operating Expenses
Cost of services and sales 2,128 1,739 22.4 7,747 6,460 19.9
Selling, general &
administrative expense 2,658 2,115 25.7 9,591 8,057 19.0
Depreciation and
amortization expense 1,181 1,025 15.2 4,486 3,888 15.4
------- ------- ------- ------- ------- -------
Total Operating Expenses 5,967 4,879 22.3 21,824 18,405 18.6
------- ------- ------- ------- ------- -------
Operating Income $ 1,375 $ 1,105 24.4 $ 5,838 $ 4,084 42.9
Operating Income Margin 18.7 % 18.5 % 21.1 % 18.2 %
Segment Income $ 396 $ 307 29.0 $ 1,645 $ 1,083 51.9
Selected Operating Statistics
Subscribers (000) 43,816 37,522 16.8 43,816 37,522 16.8
Penetration 18.0 % 16.0 % 18.0 % 16.0 %
Subscriber net adds
in period (1) (000) 1,698 1,496 13.5 6,294 5,031 25.1
Total churn rate,
including prepaid 1.4 % 1.7 % 1.5 % 1.8 %
----------
Footnotes:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their non-
operational nature.
Intersegment transactions have not been eliminated.
(1) Includes acquisition of 6,000 subscribers in the first quarter of 2003
and 4,000 subscribers in the fourth quarter of 2004.
--------------------------------------------------------------------------------
Verizon Communications Inc.
Information Services - Selected Financial Results
(dollars in millions)
Unaudited
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
12/31/04 12/31/03 % Change 12/31/04 12/31/03 % Change
--------- ------- ------- ------- ------- ------- -------
Operating Revenues $ 890 $ 933 (4.6) $ 3,615 $ 3,830 (5.6)
Operating Expenses
Cost of services and sales 149 121 23.1 546 559 (2.3)
Selling, general &
administrative expense 339 398 (14.8) 1,331 1,400 (4.9)
Depreciation and amortization
expense 22 21 4.8 87 79 10.1
Sales of businesses, net - - - - (141) (100.0)
------- ------- ------- -------
Total Operating Expenses 510 540 (5.6) 1,964 1,897 3.5
------- ------- ------- -------
Operating Income $ 380 $ 393 (3.3) $ 1,651 $ 1,933 (14.6)
Operating Income Margin 42.7 % 42.1 % 45.7 % 50.5 %
Segment Income $ 232 $ 234 (.9) $ 998 $ 1,157 (13.7)
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.
Intersegment transactions have not been eliminated.
Information Services results in all periods exclude the operations of Verizon
Information Services Canada as a result of an agreement to sell the business
reached in the third quarter of 2004. The fourth quarter and year-to-date 2004
also exclude the gain on the sale of Verizon Information Services Canada of $516
million, net of tax.
Verizon Communications Inc.
International - Selected Financial Results
(dollars in millions)
Unaudited
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
12/31/04 12/31/03 % Change 12/31/04 12/31/03 % Change
--------- ------- ------- ------- ------- ------- -------
Operating Revenues $ 544 $ 477 14.0 $ 2,014 $ 1,949 3.3
Operating Expenses
Cost of services and sales 170 152 11.8 626 574 9.1
Selling, general &
administrative expense 120 118 1.7 471 691 (31.8)
Depreciation and
amortization expense 87 94 (7.4) 324 346 (6.4)
------- ------- ------- ------- -------
Total Operating Expenses 377 364 3.6 1,421 1,611 (11.8)
------- ------- ------- ------- -------
Operating Income $ 167 $ 113 47.8 $ 593 $ 338 75.4
Operating Income Margin 30.7 % 23.7 % 29.4 % 17.3 %
Equity in Earnings of
Unconsolidated Businesses $ 305 $ 302 1.0 $ 1,031 $ 1,091 (5.5)
Income from Other
Unconsolidated Businesses $ - $ - - $ 31 $ 169 (81.7)
Segment Income $ 338 $ 341 (.9) $ 1,225 $ 1,392 (12.0)
Footnotes:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The companys chief decision makers exclude
these items in assessing business unit performance, primarily due to their non-
operational nature.
Intersegment transactions have not been eliminated.
--------------------------------------------------------------------------------
Verizon Communications Inc.
Other Reconciliations
(dollars in millions)
Unaudited
3 Mos. Ended 3 Mos. Ended
12/31/04 12/31/03
--------- --------- ---------
Operating Income Margin Excluding Special and
Non-recurring Items and Net Pension/OPEB - Total Verizon
Operating revenues $ 18,263 $ 17,198
--------- ---------
Reported operating income (loss) $ 3,353 $ (2,170)
Special and non-recurring items 123 5,294
Net pension/OPEB expense 233 21
--------- ---------
Operating income excluding special and non-recurring
items and net pension/OPEB $ 3,709 $ 3,145
--------- ---------
Reported operating income margin 18.4 % -12.6 %
Operating income margin excluding special and
non-recurring items and net pension/OPEB 20.3 % 18.3 %
Operating Income Margin Excluding Net Pension/OPEB
- Domestic Telecom
Total operating revenues $ 9,668 $ 9,905
--------- ---------
Operating income $ 1,474 $ 1,527
Net pension/OPEB expense 195 1
--------- ---------
Operating income excluding net pension/OPEB $ 1,669 $ 1,528
--------- ---------
Operating income margin 15.2 % 15.4 %
Operating income margin excluding net pension/OPEB 17.3 % 15.4 %
--------- ---------
Unaudited
3 Mos. Ended 3 Mos. Ended
12/31/04 12/31/03
--------- --------- ---------
Domestic Telecom Cash Operating Expense
Excluding Net Pension/OPEB
Domestic Telecom operating expenses $ 8,194 $ 8,378
Less: Domestic Telecom depreciation
and amortization (2,258) (2,290)
Net pension/OPEB expense (195) (1)
--------- ---------
Domestic Telecom cash operating expense
excluding net pension/OPEB $ 5,741 $ 6,087
--------- ---------
Unaudited
3 Mos. Ended 3 Mos. Ended
12/31/04 12/31/03
--------- --------- ---------
Free Cash Flow
Cash from operating activities $ 21,820 $ 22,467
Less: Capital expenditures (including
capitalized software) (13,259) (11,874)
--------- ---------
Dividends paid (4,262) (4,239)
--------- ---------
Free Cash Flow $ 4,299 $ 6,354
--------- ---------
Unaudited
3 Mos. Ended 3 Mos. Ended
12/31/04 12/31/03
--------- --------- ---------
Cash Flow Summary
Cash provided by operating activities $ 21,820 $ 22,467
Cash used in investing activities (10,343) (12,236)
Cash used in financing activities (9,856) (10,959)
--------- ---------
Increase (decrease) in cash and
cash equivalents 1,621 (728)
Cash and cash equivalents,
beginning of period 669 1,397
--------- ---------
Cash and cash equivalents, end of period $ 2,290 $ 669
--------- ---------
--------------------------------------------------------------------------------
Verizon Communications Inc.
Other Reconciliations
(dollars in millions)
Unaudited
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended
12/31/04 12/31/03 12/31/04
--------- -------- -------- --------
EBITDA - Verizon Wireless
Segment income:
Domestic Telecom $ 725 $ 710 $ 2,747
Verizon Wireless 396 307 1,645
Information Services 232 234 998
International 338 341 1,225
------- -------- --------
Total segments 1,691 1,592 6,615
Corporate and other 1,348 (3,050) 1,216
------- -------- --------
Consolidated net income (loss) $ 3,039 $ (1,458) $ 7,831
------- -------- --------
Verizon Wireless EBITDA
Segment income $ 396 $ 307 $ 1,645
Add/subtract non-operating items:
Provision for income taxes 276 230 1,265
Minority interest 556 439 2,323
Interest expense 156 135 661
Other income/(expense), net (4) (2) (11)
Equity in earnings of unconsolidated
businesses (5) (4) (45)
------- -------- --------
Operating income 1,375 1,105 5,838
Add depreciation and amortization
expense 1,181 1,025 4,486
------- -------- --------
Verizon Wireless EBITDA $ 2,556 $ 2,130 $ 10,324
------- -------- --------
Verizon Wireless total revenues $ 7,342 $ 5,984 $ 27,662
------- -------- --------
Verizon Wireless service revenues $ 6,467 $ 5,366 $ 24,400
------- -------- --------
Verizon Wireless operating income margin 18.7 % 18.5 % 21.1 %
------- -------- --------
Verizon Wireless EBITDA margin 39.5 % 39.7 % 42.3 %
------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EALFXASASEFE
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