RNS Number:5741Z
Verizon Communications
5 August 2002
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report July 31, 2002
(Date of earliest event reported)
VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8606 23-2259884
(State or other jurisdiction
of incorporation) (Commission File Number) (IRS Employer
Identification No.)
1095 Avenue of the Americas,
New York, New York 10036
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 395-2121
Not applicable
(Former name or former address, if changed since last report)
Item 9. Regulation FD Disclosure.
Set forth below is a press release issued by Verizon Communications Inc on July
31, 2002 announcing earnings for the second quarter of 2002.
MEDIA CONTACTS:
PETER THONIS
212-395-2355
peter.thonis@verizon.com
BOB VARETTONI
212-395-7726
robert.a.varettoni@verizon.com
STRONG OPERATIONAL RESULTS HIGHLIGHT SECOND-QUARTER
FINANCIAL PERFORMANCE AT VERIZON COMMUNICATIONS
QUARTERLY EPS OF 77 CENTS, BEFORE NON-RECURRING CHARGES OF $4.28;
EXPENSES CONTINUE DECLINE; YEAR-END GUIDANCE UPDATED
SECOND-QUARTER HIGHLIGHTS
SECOND-QUARTER HIGHLIGHTS
* 1.1 million Verizon Wireless net retail customer additions; 723,000 overall
net additions for a total of 30.3 million customers, an 8.5 percent increase
year- over-year
* 800,000 net long-distance customer additions, a 51 percent increase year-
over- year, for a total of 9.0 million customers
* 150,000 new net digital subscriber lines (DSL), a nearly 80 percent increase
year-over-year, for a total of 1.5 million customers
* Continued strong profitability in wireless -- operating cash flow margin at
nearly 39 percent
* 5.3 percent reduction in Domestic Telecom cash expenses -- sixth consecutive
quarterly decrease
* $3.3 billion reduction in net debt, including $2.1 billion reduction in
commercial paper, compared to prior quarter
* $6.0 billion improvement in free cash flow in first half, compared to prior
year
UPDATED 2002 GUIDANCE
* Revenues of 0 to minus 1 percent; Earnings Per Share (EPS), $3.05 to $3.09;
capital expenditures, $13 to $13.5 billion
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced diluted EPS of
77 cents, before non-recurring charges, for the second quarter of 2002. The
addition of 1.1 million Verizon Wireless net retail customers, and the net
addition of 800,000 long-distance customers and 150,000 DSL lines highlighted
quarterly operational results.
Reported earnings, detailed below, include $4.2 billion in non-recurring after-
tax charges for the second quarter, primarily for investment-related write-downs
and severance charges. More than $2.4 billion relates to Verizon's interest in
Genuity Inc. Last week Verizon announced that it will not reintegrate Genuity
into the company.
Excluding non-recurring charges, total second-quarter operating expenses
declined 1.3 percent, to $12.8 billion from $13.0 billion. Second-quarter
operating revenues declined 1.8 percent, to $16.8 billion from $17.1 billion,
bolstered by an 8.1 percent increase in Verizon Wireless revenue to $4.7 billion
from $4.4 billion. Total revenues and operating expenses reflect Verizon
operations on a comparable basis, including the consolidation of
Telecomunicaciones de Puerto Rico, Inc. (PRTC) and the deconsolidation of CTI
Holdings S.A. beginning this year.
'Operational Excellence and Execution'
"The solid foundation that Verizon has built on operational excellence and
execution continues to withstand these turbulent times," said Chief Executive
Officer Ivan Seidenberg. "Our focus on fundamentals has led to the addition of
two million new retail accounts in three key growth businesses in the second
quarter alone.
"Despite the persistent effects of the economic downturn, which are reflected in
our non-recurring charges and revised guidance, we once again improved metrics
for customer retention, cost control and customer service. This past quarter we
also delivered product innovations to our customers, such as the wireless
services we now offer through the marketing alliances we have formed with
Microsoft."
Seidenberg added, "In the quarter, we continued to successfully strengthen our
cash flow and improve our debt position. Both operationally and financially, we
are deriving extraordinary value from our mergers. Innovative operational and
marketing approaches have become institutionalized across Verizon, enabling us
to offer customers more products in more ways."
Free cash flow (cash from operating activities less capital expenditures and
dividends) improved by $6.0 billion for the first half of 2002 compared to the
first half of 2001.
In the second quarter, Verizon reduced net debt (total debt less cash on hand)
by $3.3 billion, to $58.6 billion from $61.9 billion at the end of the first
quarter. This is a $4.7 billion reduction from year-end 2001. Verizon also
reduced commercial paper by $2.1 billion in the quarter, to $8.5 billion. This
is a $4.3 billion reduction from year-end 2001. At the end of the second quarter
the company held $2.2 billion in cash investments, which is being used to repay
commercial paper as it comes due.
Two Years of Customer Growth
Verizon's second-quarter results mark the second anniversary of the company
formed by the merger of Bell Atlantic and GTE. In two years, the company has
more than doubled its long-distance customer base, from nearly 4.1 million to
9.0 million at the end of the second quarter. Verizon is currently the fourth-
largest long-distance company in the U.S., and its 800,000 net customer
additions in the second quarter is a 51 percent year-over-year increase.
As announced earlier this week, Verizon Wireless, the largest U.S. wireless
company, added a net of 723,000 customers in the second quarter, growing its
customer total to 30.3 million, an 8.5 percent year-over-year increase.
While Verizon Wireless added 1.1 million net retail customers in the quarter, it
experienced a net loss of 378,000 wholesale subscribers. The company closed the
quarter with 1.4 million wholesale customers, including 310,000 WorldCom Inc.
resale customers. On July 21, Verizon Wireless and WorldCom entered into a
referral agreement to facilitate some of these customers contracting directly
with Verizon Wireless.
Quarterly operating cash flow for Verizon Wireless increased 8 percent to $1.7
billion. The company's operating cash flow margin was 38.7 percent in the
quarter.
Also in the second quarter, Verizon added 150,000 DSL lines for a total of 1.5
million, a nearly 80 percent year-over-year increase, as the company continues
on course to its end-of-year target of 1.8 to 2 million lines.
Cash expenses for Verizon's largest business unit, Domestic Telecom, have
decreased over the prior-year period for six consecutive quarters. In the second
quarter 2002, the unit's cash expenses on a comparable basis were down 5.3
percent to $5.6 billion from $5.9 billion in the second quarter 2001. Revenues
decreased 4.4 percent, to $10.5 billion, in the same period.
Updated 2002 Guidance
Verizon has updated 2002 guidance as follows:
* Comparable revenues of 0 to minus 1 percent, revised from 0 to 1 percent
growth.
* EPS before non-recurring charges of $3.05 to $3.09, revised from $3.12 to
$3.17.
* Capital expenditures of $13 to $13.5 billion, revised from $14 to $15
billion.
Reported Results
For the second quarter 2002, Verizon reported a consolidated loss of $2.1
billion, or 78 cents per diluted share, compared to a consolidated loss of $1.0
billion, or 38 cents per share, in the second quarter 2001.
The $4.2 billion in after-tax charges total $1.55 per diluted share. In addition
to Genuity, after-tax charges include $862 million to reflect the current market
value of Verizon's investments in Telus Corp., Cable & Wireless plc and others;
$475 million related to severance activities; and other one-time charges,
including $183 million related to WorldCom exposure and $114 million for
settlement of the NorthPoint lawsuit.
Reported second-quarter operating revenues declined 0.4 percent to $16.8
billion, from $16.9 billion in the second quarter 2001.
Second-Quarter Highlights
Following are second-quarter highlights from Verizon's four business segments.
Domestic Telecom:
* More than 45 percent of Verizon's 9.0 million long-distance customers come
from states where the service was most recently introduced -- New York,
Massachusetts, Pennsylvania, Connecticut, Rhode Island and Vermont. Market share
is approximately 30 percent in New York and Massachusetts. Verizon now has 2.5
million customers in New York, 830,000 in Massachusetts and 710,000 in
Pennsylvania.
* In June, Verizon received Federal Communications Commission (FCC) approval to
sell long distance in Maine and New Jersey, and sales in both states began
earlier this month. Verizon now offers long-distance service in 44 states and to
more than 80 percent of its local phone customers across the country.
* The FCC is currently reviewing Verizon long-distance applications in New
Hampshire and Delaware. Verizon is targeting the completion of the FCC filings
in all former Bell Atlantic jurisdictions by year-end.
* In results released this month, Verizon Long Distance ranked highest in
customer satisfaction among consumers who spend more than $50 per month on long
distance, according to the annual J.D. Power and Associates Residential Long
Distance Customer Satisfaction Study.
* For the third consecutive quarter, Verizon saw a net "win back" in customers
for intraLATA (short-haul) long-distance services in the former Bell Atlantic
territory, as the company won back a net of 477,000 customers from competitors
in the second quarter.
* The do-it-yourself installation rate for high-speed DSL Internet access is
nearly 100 percent, as a sales campaign during the quarter offered consumers new
do-it-yourself installation kits. The average order-to-installation interval for
DSL is down to five days and continues to decrease, down from more than 15 days
a year ago.
* Verizon continued market trials of service bundles, which combine local,
long- distance, wireless and DSL services at a discounted rate. Successful
second- quarter rollouts of DSL bundles began in New York, Massachusetts and
Pennsylvania.
* Domestic access line equivalents increased nearly 8 percent to 135.1 million,
compared to the second quarter 2001.
* Data Services revenues grew to $1.9 billion in the quarter, driven by 7.5
percent quarterly growth for Data Transport Services over the same period last
year.
* In the enterprise (large-business) market, Verizon's Enterprise Solutions
Group (ESG) expanded its network coverage into downtown Los Angeles. Also in the
quarter, ESG introduced several services, including Global SiteWatch,
enhancements to Managed Voice Services and a service package tailored to the
hotel industry.
Verizon Wireless:
* Continuing the high-quality profile of its base, the company added 1.1
million net new retail customers during the quarter, up 34 percent from the
second quarter 2001. Total retail customers grew to 28.9 million of the
company's total 30.3 million customers, up 12 percent year-over-year. Retail
customers represent more than 95 percent of total customers and 98 percent of
total revenue.
* Demand was strong, with retail gross additions of 2.8 million, up 12 percent
over the second quarter 2001. Gross additions from company-owned distribution
channels were up 15 percent over the second quarter 2001.
* Retail churn was 2.0 percent, down from 2.2 percent the prior year, and down
from 2.3 percent in the first quarter. Retail contract churn was 1.7 percent,
down from 2.0 percent. Total churn, including retail and wholesale, was 2.3
percent, flat compared to the prior year.
* Service revenue for the quarter grew more than 7 percent to $4.4 billion,
while total revenue increased 8 percent to $4.7 billion. The company continued
to lead the industry in low-cost structure, with cash-expense-per-subscriber
decreasing 2 percent to under $30. Service revenue-per-subscriber decreased by 1
percent to just under $49.
* The company's 25 million digital customers now comprise more than 83 percent
of its customer base, and account for more than 95 percent of busy-hour usage.
* Verizon Wireless' previously announced acquisition of Price Communications'
wireless properties, including approximately 500,000 customers, has been
approved by Price's shareholders and is expected to close early in August.
* During the quarter, the company continued the momentum of its pricing,
messaging and data innovations deployed earlier this year. In June, the company
added groundbreaking flat-rate pricing options for its national 1X Express
Network, the first and only coast-to-coast next-generation wireless data network
in the country. Demand for Express Network's high-speed access is building, with
new 1X devices introduced in the second quarter.
* The company also launched a strategic alliance with Microsoft for co-
developed and jointly marketed wireless data offerings, by the leading wireless
carrier and the leading portal destination, aimed at the enterprise and consumer
markets.
* In June, the company became the first carrier to offer downloadable services
to consumers nationwide using QUALCOMM Inc.'s BREW* (Binary Runtime Environment
for Wireless) platform. Customers can download applications for games,
entertainment, ring tones, navigation, productivity and operating systems to
BREW-capable devices. Two-way text messaging also continued to grow dramatically
in the quarter, doubling first-quarter volume.
International:
Reflects deconsolidation of CTI to the equity method and consolidation of PRTC
in both the current and prior periods.
* Second-quarter revenue was $754 million and operating income was $143
million, with operating cash flow margins of over 37 percent and operating cash
flow of $280 million.
* The number of proportionate international wireless customers served by
Verizon investments increased by 780,000 to 8.7 million, a nearly 10 percent
increase over second quarter 2001.
* Total proportionate revenues were $1.4 billion in the second quarter 2002, an
increase of $51 million, or nearly 4 percent, compared to prior year.
Information Services:
* Revenues from Verizon's directory publishing and electronic commerce
operations of $936 million for the second quarter decreased 4.9 percent
primarily due to the impact of changes in publication dates. If the effect of
the timing of publications were excluded, the revenue growth would have been 3.5
percent over the second quarter of 2001.
* Revenues from SuperPages.com, Verizon's Internet directory service, grew 81.6
percent over the second quarter of 2001 as Information Services continues to
strengthen its leadership position in online directory services. SuperPages.com
achieved 1 billion searches in May 2002, just six years after the site was
launched.
* Information Services continued to increase its global electronic reach with
the launching of the French-language SuperPages.ca electronic directory service
in Canada and Spanish-language SuperPagesDR.com in the Dominican Republic in the
second quarter.
Verizon Communications (NYSE:VZ) is one of the world's leading providers of
communications services. Verizon companies are the largest providers of wireline
and wireless communications in the United States, with 135.1 million access line
equivalents and 30.3 million Verizon Wireless customers. Verizon is also the
largest directory publisher in the world. With more than $67 billion in annual
revenues and approximately 241,000 employees, Verizon's global presence extends
to more than 40 countries in the Americas, Europe, Asia and the Pacific. For
more information on Verizon, visit www.verizon.com.
Verizon's online news center: Verizon news releases, executive speeches and
biographies, media contacts and other information are available at Verizon's
News Center on the World Wide Web at www.verizon.com/news. To receive news
releases by e-mail, visit the News Center and register for customised automatic
delivery of Verizon news releases.
* BREW is a trademark of QUALCOMM Inc.
NOTE: This press release contains statements about expected future events and
financial results that are forward-looking and subject to risks and
uncertainties. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The following important factors could affect future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: the duration and extent of the current economic
downturn; materially adverse changes in economic conditions in the markets
served by us or by companies in which we have substantial investments; material
changes in available technology; technology substitution; an adverse change in
the ratings afforded our debt securities by nationally accredited ratings
organizations; the final results of federal and state regulatory proceedings
concerning our provision of retail and wholesale services and judicial review of
those results; the effects of competition in our markets; our ability to satisfy
regulatory merger conditions and obtain combined company revenue enhancements
and cost savings; the ability of Verizon Wireless to achieve revenue
enhancements and cost savings, and obtain sufficient spectrum resources; the
outcome of litigation concerning the FCC NextWave spectrum auction; our ability
to recover insurance proceeds relating to equipment losses and other adverse
financial impacts resulting from the terrorist attacks on Sept. 11, 2001; and
changes in our accounting assumptions that regulatory agencies, including the
SEC, may require or that result from changes in the accounting rules or their
application, which could result in an impact on earnings.
CONSOLIDATED STATEMENTS OF INCOME
VERIZON COMMUNICATIONS INC. AND SUBSIDIARIES
(dollars in millions, except
per share amounts)
3 Mos. Ended 3 Mos. Ended 6
Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change
6/30/02 6/30/01 % Change
Operating Revenues $ 16,835 $ 16,909 (.4)
$ 33,210 $ 33,175 .1
Operations and support expense 10,796 9,713 11.2
20,560 19,012 8.1
Depreciation and amortization expense 3,356 3,400 (1.3)
6,676 6,760 (1.2)
Sales of assets, net - (5) (100.0)
(220) (5) *
Operating Income 2,683 3,801 (29.4)
6,194 7,408 (16.4)
Loss from unconsolidated businesses (3,361) (3,664) (8.3)
(4,904) (3,448) 42.2
Other income and (expense), net 4 114 (96.5)
69 184 (62.5)
Interest expense (798) (909) (12.2)
(1,612) (1,830) (11.9)
Minority interest (313) (209) 49.8
(556) (307) 81.1
Mark-to-market adjustment - financial
instruments (8) (37) (78.4)
(11) (153) (92.8)
Provision for income taxes (325) (117) 177.8
(1,294) (1,121) 15.4
Income (Loss) from Continuing
Operations (2,118) (1,021) 107.4
(2,114) 733 *
Extraordinary item, net of tax 3 - -
(6) - -
Cumulative effect of accounting change - - -
(496) (182) 172.5
Net Income (Loss) $ (2,115) $ (1,021) 107.1
$ (2,616) $ 551 *
Diluted Earnings (Loss) per Share (1) $ (.78) $ (.38) 105.3
$ (.96) $ .20 *
Weighted average number of common
shares-assuming dilution (in millions) 2,726 2,707
2,723 2,728
Footnote:
(1) Diluted Earnings (Loss) per Share include the dilutive effect of shares
issuable under our stock-based compensation plans, which represent the only
potential dilutive common shares. There is no impact of dilutive securities in
the second quarter and year-to-date 2002 and the second quarter 2001, since a
net loss from continuing operations was reported.
* Not meaningful
CONSOLIDATED STATEMENTS OF INCOME BEFORE NON-RECURRING ITEMS
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 6
Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change
6/30/02 6/30/01 % Change
Operating Revenues
Domestic Telecom $ 10,468 $ 10,953 (4.4)
$ 20,942 $ 21,873 (4.3)
Domestic Wireless 4,738 4,383 8.1
9,112 8,429 8.1
International 754 828 (8.9)
1,505 1,555 (3.2)
Information Services 936 984 (4.9)
1,739 1,773 (1.9)
Other (61) (9) *
(88) (25) *
Total Operating Revenues 16,835 17,139 (1.8)
33,210 33,605 (1.2)
Operating Expenses
Operations and support expense 9,433 9,528 (1.0)
18,643 18,734 (.5)
Depreciation and amortization expense 3,356 3,430 (2.2)
6,676 6,824 (2.2)
Total Operating Expenses 12,789 12,958 (1.3)
25,319 25,558 (.9)
Operating Income 4,046 4,181 (3.2)
7,891 8,047 (1.9)
Income from unconsolidated businesses 240 200 20.0
386 367 5.2
Other income and (expense), net 4 114 (96.5)
69 183 (62.3)
Interest expense (798) (891) (10.4)
(1,612) (1,790) (9.9)
Minority interest (337) (281) 19.9
(592) (450) 31.6
Provision for income taxes (1,060) (1,222) (13.3)
(2,078) (2,300) (9.7)
Adjusted Net Income $ 2,095 $ 2,101 (.3)
$ 4,064 $ 4,057 .2
Diluted Adjusted Earnings per Share (1) $ .77 $ .77 -
$ 1.49 $ 1.49 -
Weighted average number of common
shares-assuming dilution (in millions) 2,733 2,731
2,731 2,728
Footnotes:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. Also, reflects the
deconsolidation of CTI to the equity method and the consolidation of PRTC in
both current and prior years.
(1) Prior year depreciation and amortization includes amortization of $.04 per
diluted share for the quarter and $.07 per diluted share year-to-date related to
intangible assets that are no longer being amortized, as required by FAS 142.
* Not meaningful
EARNINGS RECONCILIATIONS
(dollars in millions,
except per share amounts)
3 Mos. Ended 6/30/02 3 Mos. Ended 6/30/01 6 Mos. Ended
6/30/02 6 Mos. Ended 6/30/01
Unaudited Net Income Diluted EPS Net Income Diluted EPS Net Income
Diluted EPS Net Income Diluted EPS
Reported Earnings (Loss) $ (2,115) $ (.78) $ (1,021) $ (.38) $ (2,616)
$ (.96) $ 551 $ .20
Non-recurring items:
Mark-to-market adjustment -
financial instruments 8 - 37 .01 11
- 151 .06
Sales of assets, net - - (3) - (116)
(.04) (3) -
Transition costs 57 .02 162 .06 109
.04 250 .09
Severance benefits 475 .17 - - 475
.17 - -
Cumulative effect of
accounting change - - - - 496
.18 182 .07
Investment-related charges
CANTV - - - - 1,400
.51 - -
MFN - - 1,136 .42 436
.16 1,136 .42
CTI - - - - 190
.07 - -
Genuity 2,443 .89 - - 2,443
.89 - -
Telus 430 .16 - - 430
.16 - -
C&W 201 .07 862 .32 201
.07 862 .32
Other 231 .08 928 .34 231
.08 928 .34
NorthPoint settlement 114 .04 - - 114
.04 - -
WorldCom exposure and other
special items (1) 251 .09 - - 260
.10 - -
Earnings before
Non-Recurring Items (2) $ 2,095 $ .77 $ 2,101 $ .77 $ 4,064
$ 1.49 $ 4,057 $ 1.49
Footnotes:
(1) Includes $183 million related to WorldCom financial exposure.
(2) Totals for Diluted EPS do not add for all periods due to rounding in EPS
calculations.
SELECTED FINANCIAL AND OPERATING STATISTICS
(dollars in millions,
except per share amounts)
3 Mos. Ended 3 Mos. Ended 6 Mos.
Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01
6/30/02 6/30/01
Debt ratio-end of period 68.3% 65.0%
68.3% 65.0%
Book value per common share $ 10.50 $ 12.89 $
10.50 $ 12.89
Cash dividends declared per common share $ 0.385 $ 0.385 $
0.77 $ 0.77
Common shares outstanding (in millions)
End of period 2,728 2,709
2,728 2,709
Capital expenditures
Domestic Telecom $ 1,696 $ 3,067 $
3,175 $ 6,406
Domestic Wireless 1,248 1,384
2,060 2,372
International 154 181
216 292
Information Services 28 29
41 38
Other 10 24
18 55
Total $ 3,136 $ 4,685 $
5,510 $ 9,163
Total employees (1) 241,129 264,180
241,129 264,180
Footnote:
(1) Prior period adjusted to reflect comparable results.
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
Unaudited 6/30/02 12/31/01 $ Change
Assets
Current assets
Cash and cash equivalents $ 2,962 $ 979 $ 1,983
Short-term investments 769 1,991 (1,222)
Accounts receivable, net 13,068 14,254 (1,186)
Inventories 1,843 1,968 (125)
Net assets held for sale 1,323 1,199 124
Prepaid expenses and other 3,176 2,796 380
Total current assets 23,141 23,187 (46)
Plant, property and equipment 175,802 169,586 6,216
Less accumulated depreciation 101,418 95,167 6,251
74,384 74,419 (35)
Investments in unconsolidated businesses 5,881 10,202 (4,321)
Intangible assets 45,231 44,262 969
Other assets 19,656 18,725 931
Total Assets $ 168,293 $ 170,795 $ (2,502)
Liabilities and Shareowners' Investment
Current liabilities
Debt maturing within one year $ 16,969 $ 18,669 $ (1,700)
Accounts payable and accrued liabilities 13,130 13,947 (817)
Other 5,581 5,404 177
Total current liabilities 35,680 38,020 (2,340)
Long-term debt 44,639 45,657 (1,018)
Employee benefit obligations 13,628 11,898 1,730
Deferred income taxes 18,824 16,543 2,281
Other liabilities 4,056 3,989 67
Minority interest 22,824 22,149 675
Shareowners' investment
Common stock 275 275 -
Contributed capital 24,713 24,676 37
Reinvested earnings 5,842 10,704 (4,862)
Accumulated other comprehensive loss (924) (1,187) 263
29,906 34,468 (4,562)
Less common stock in treasury, at cost 606 1,182 (576)
Less deferred compensation -
employee stock ownership plans and other 658 747 (89)
Total shareowners' investment 28,642 32,539 (3,897)
Total Liabilities and Shareowners'
Investment $ 168,293 $ 170,795 $ (2,502)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 $ Change
Cash Flows From Operating Activities
Income (loss) before extraordinary
item and cumulative effect
of accounting change $ (2,114) $ 733 $ (2,847)
Adjustments to reconcile income (loss)
before extraordinary
item and cumulative effect of accounting
change to net cash
provided by operating activities:
Depreciation and amortization 6,676 6,760 (84)
Sales of assets, net (220) (5) (215)
Mark-to-market adjustment - financial
instruments 11 153 (142)
Employee retirement benefits (726) (1,118) 392
Deferred income taxes 784 (349) 1,133
Provision for uncollectible accounts 1,465 782 683
Loss from unconsolidated businesses 4,904 3,448 1,456
Changes in current assets and liabilities,
net of effects from acquisition/
disposition of businesses (927) (2,961) 2,034
Other, net 189 215 (26)
Net cash provided by operating activities 10,042 7,658 2,384
Cash Flows From Investing Activities
Capital expenditures (5,510) (9,163) 3,653
Acquisitions, net of cash acquired, and
investments (998) (2,212) 1,214
Proceeds from disposition of businesses 770 - 770
Proceeds from spectrum payment refund 1,479 - 1,479
Net change in short-term investments 1,126 1,010 116
Other, net (380) (510) 130
Net cash used in investing activities (3,513) (10,875) 7,362
Cash Flows From Financing Activities
Proceeds from long-term borrowings 5,583 8,253 (2,670)
Repayments of long-term borrowings
and capital lease obligations (3,938) (1,604) (2,334)
Increase (decrease) in short-term
obligations, excluding current
maturities (4,623) 620 (5,243)
Dividends paid (2,096) (2,079) (17)
Proceeds from sale of common stock 424 242 182
Other, net 104 (356) 460
Net cash provided by (used in)
financing activities (4,546) 5,076 (9,622)
Increase in cash and cash equivalents 1,983 1,859 124
Cash and cash equivalents, beginning
of period 979 757 222
Cash and cash equivalents, end of period $ 2,962 $ 2,616 $ 346
DOMESTIC TELECOM - SELECTED FINANCIAL RESULTS
(dollars in
millions)
3 Mos. Ended 3 Mos. Ended
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change
6/30/02 6/30/01 % Change
Operating Revenues
Local services $ 5,230 $ 5,545 (5.7)
$ 10,465 $ 11,165 (6.3)
Network access services 3,418 3,399 .6
6,875 6,691 2.7
Long distance services 777 758 2.5
1,556 1,520 2.4
Other services 1,043 1,251 (16.6)
2,046 2,497 (18.1)
Total Operating Revenues 10,468 10,953 (4.4)
20,942 21,873 (4.3)
Operating Expenses
Operations and support 5,592 5,904 (5.3)
11,170 11,861 (5.8)
Depreciation and amortization 2,393 2,344 2.1
4,758 4,627 2.8
Total Operating Expenses 7,985 8,248 (3.2)
15,928 16,488 (3.4)
Operating Income $ 2,483 $ 2,705 (8.2)
$ 5,014 $ 5,385 (6.9)
Operating Income Margin 23.7% 24.7%
23.9% 24.6%
Operating Cash Flow $ 4,876 $ 5,049 (3.4)
$ 9,772 $ 10,012 (2.4)
Operating Cash Flow Margin 46.6% 46.1%
46.7% 45.8%
Footnotes:
The segment financial results above are adjusted to exclude the effects of non-
recurring items.
Intercompany and intersegment transactions have not been eliminated.
DOMESTIC TELECOM - SELECTED OPERATING STATISTICS
3 Mos. Ended 3 Mos. Ended
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change
6/30/02 6/30/01 % Change
Switched access lines in service (000)
Residence 38,992 39,841 (2.1)
38,992 39,841 (2.1)
Business 20,817 21,989 (5.3)
20,817 21,989 (5.3)
Public 564 635 (11.2)
564 635 (11.2)
Total 60,373 62,465 (3.3)
60,373 62,465 (3.3)
Special DS0 equivalents 74,759 62,729 19.2
74,759 62,729 19.2
Total voice grade equivalents (000) 135,132 125,194 7.9
135,132 125,194 7.9
Resale & UNE-P lines (000) 3,698 3,726 (.8)
3,698 3,726 (.8)
Minutes of use from Carriers and
CLECs (in millions) 66,552 71,883 (7.4)
133,662 144,455 (7.5)
Long distance subscribers
(excl. Verizon CLEC) (000) 9,034 5,998 50.6
9,034 5,998 50.6
High capacity and digital data
revenues ($ in millions)
Data transport $ 1,693 $ 1,575 7.5
$ 3,374 $ 3,097 8.9
Data solutions 172 171 .6
336 350 (4.0)
Total revenues $ 1,865 $ 1,746 6.8
$ 3,710 $ 3,447 7.6
VERIZON WIRELESS - SELECTED OPERATING RESULTS
(dollars in
millions)
3 Mos. Ended 3 Mos. Ended
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change
6/30/02 6/30/01 % Change
Revenues
Service revenues $ 4,369 $ 4,066 7.5
$ 8,421 $ 7,797 8.0
Equipment and other 369 317 16.4
691 632 9.3
Total Revenues 4,738 4,383 8.1
9,112 8,429 8.1
Operating Expenses
Operations and support 3,046 2,817 8.1
5,865 5,454 7.5
Depreciation and amortization 785 887 (11.5)
1,566 1,806 (13.3)
Total Operating Expenses 3,831 3,704 3.4
7,431 7,260 2.4
Operating Income $ 907 $ 679 33.6
$ 1,681 $ 1,169 43.8
Operating Cash Flow $ 1,692 $ 1,566 8.0
$ 3,247 $ 2,975 9.1
Operating Cash Flow Margin 38.7% 38.5%
38.6% 38.2%
Selected Operating Statistics
Subscribers (000) 30,307 27,930 8.5
30,307 27,930 8.5
Penetration 13.6% 12.6%
13.6% 12.6%
Subscriber net adds in period* (000) 723 808 (10.5)
909 1,326 (31.4)
Total churn rate, including prepaid 2.3% 2.3%
2.4% 2.6%
Footnotes:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
Prior period penetration rates have been adjusted to reflect updated census and
network coverage data.
* Includes acquisition of 68,000 subscribers in first quarter of 2002.
INTERNATIONAL - SELECTED FINANCIAL RESULTS
(dollars in
millions)
3 Mos. Ended 3 Mos. Ended
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change
6/30/02 6/30/01 % Change
Operating Revenues $ 754 $ 828 (8.9)
$ 1,505 $ 1,555 (3.2)
Operating Expenses
Operations and support 474 525 (9.7)
972 980 (.8)
Depreciation and amortization 137 144 (4.9)
273 283 (3.5)
Total Operating Expenses 611 669 (8.7)
1,245 1,263 (1.4)
Operating Income $ 143 $ 159 (10.1)
$ 260 $ 292 (11.0)
Operating Cash Flow $ 280 $ 303 (7.6)
$ 533 $ 575 (7.3)
Operating Cash Flow Margin 37.1% 36.6%
35.4% 37.0%
Income from Unconsolidated Businesses $ 275 $ 217 26.7
$ 451 $ 385 17.1
Proportionate Information
Revenues $ 1,430 $ 1,379 3.7
$ 2,805 $ 2,691 4.2
Operating income $ 330 $ 338 (2.4)
$ 618 $ 662 (6.6)
Operating cash flow $ 572 $ 553 3.4
$ 1,102 $ 1,108 (.5)
Access lines (000) 3,360 3,187 5.4
3,360 3,187 5.4
Wireless subscribers (000) 8,741 7,960 9.8
8,741 7,960 9.8
Footnotes:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. Also, reflects the
deconsolidation of CTI to the equity method and the consolidation of PRTC in
both current and prior years.
INFORMATION SERVICES - SELECTED FINANCIAL RESULTS
(dollars in
millions)
3 Mos. Ended 3 Mos. Ended
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change
6/30/02 6/30/01 % Change
Operating Revenues $ 936 $ 984 (4.9)
$ 1,739 $ 1,773 (1.9)
Operating Expenses
Operations and support 477 453 5.3
911 869 4.8
Depreciation and amortization 16 20 (20.0)
31 41 (24.4)
Total Operating Expenses 493 473 4.2
942 910 3.5
Operating Income $ 443 $ 511 (13.3)
$ 797 $ 863 (7.6)
Operating Cash Flow $ 459 $ 531 (13.6)
$ 828 $ 904 (8.4)
Operating Cash Flow Margin 49.0% 54.0%
47.6% 51.0%
Footnotes:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Verizon Communications Inc.
(Registrant)
Date: July 31, 2002 /s/ John F. Killian
John F. Killian
Senior Vice President and Controller
This information is provided by RNS
The company news service from the London Stock Exchange END
END
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