RNS Number:0408D
Verizon Communications
28 October 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: October 25, 2002
(Date of earliest event reported)
VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8606 23-2259884
(State of other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
1095 Avenue of the Americas, 10036
New York, New York (Zip Code)
(Address of principal executive offices
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
October 25, 2002 announcing earnings for the third quarter of 2002 and updated
its guidance for the full year. In a conference call with analysts and investors
following the release. Verizon discussed its quarterly results and guidance,
indicating that:
* Based upon year-to-date performance, 2002 diluted earnings per share is
expected to be at the low end of the previously announced range of $3.05 to
$3.09.
* Revenue guidance remains at minus 1 to 0 percent growth for the year as
previously indicated.
* The capital expenditure range for the year is reduced to $12.3 billion - $12.7
billion.
* Verizon is targeting net debt (total debt less cash on hand) at year-end to be
$55 - $56 billion.
Media contacts:
Peter Thonis
212-395-2355
peter.thonis@verizon.com
Bob Varettoni
212-395-7726
robert.a.varettoni@verizon.com
Verizon Communications Reports Continued Strong
Operational and Cash Management Performance in 3Q
THIRD-QUARTER HIGHLIGHTS
* 1.1 million Verizon Wireless net retail customer additions, a 52 percent
increase year-over-year; 803,000 total net additions, excluding acquisitions;
31.5 million total customers, including acquisitions
* 804,000 net long-distance customer additions, a 44 percent increase year-
over-year, for a total of 9.8 million customers
* 155,000 new net digital subscriber lines (DSL), a 70 percent increase year-
over-year, for a total of 1.64 million lines
* Continued strong profitability in wireless -- more than 10 percent increase
in revenues compared with third quarter 2001; EBITDA (operating income before
depreciation and amortization) margin of 39 percent
* 3.3 percent reduction in Domestic Telecom cash expenses -- the seventh
consecutive quarterly decrease from the comparable quarter in the prior
year -- for a $0.9 billion year-to-date total decrease
* $6.8 billion reduction in net debt, including $5 billion reduction in
commercial paper, compared with the prior quarter
2002 GUIDANCE
* Reiterated guidance of revenues of 0 to minus 1 percent and diluted EPS
(earnings per share) of $3.05 to $3.09
* Capital expenditures, $12.3 to $12.7 billion, revised from $13 to $13.5
billion
* Year-end net debt (total debt less cash on hand), $55 to $56 billion
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced earnings of
$2.1 billion, or diluted EPS of 77 cents, before non-recurring items for the
third quarter of 2002. As in the second quarter, the company added more than 2
million retail accounts in three growth businesses with the addition of 1.1
million Verizon Wireless net retail customers, and the net addition of 804,000
long-distance customers and 155,000 DSL lines.
Reported earnings were $4.4 billion, or $1.60 in diluted EPS, and included non-
recurring gains from previously announced asset and investment sales that closed
in the third quarter.
Excluding non-recurring items, total third-quarter operating revenues increased
0.6 percent to $17.1 billion from $17.0 billion, including a double-digit
increase in Verizon Wireless revenues, which grew 10.2 percent to $5.0 billion
from $4.5 billion.
Third-quarter cash expenses, excluding non-recurring items, declined slightly to
just below $9.7 billion. Total revenues, operating expenses and statistics
reflect Verizon operations on a comparable basis, excluding the 1.27 million
switched access lines sold during the quarter, and including the consolidation
of Telecomunicaciones de Puerto Rico, Inc. (PRTC) and the deconsolidation of CTI
Holdings S.A. beginning this year.
'Long-Term Value for Shareowners'
"Taking into account the external factors that continue to weigh on our
industry, these results show that Verizon is executing effectively as we pull
away from the pack in the telecom sector," said Chief Executive Officer Ivan
Seidenberg. "Verizon is a national company with a more diversified portfolio,
and we have demonstrated the ability to add customers and gain market share
during troubled economic times.
"At the same time, we are doing more than simply adding customers. We continue
to distinguish ourselves in cash management and in cost control over the long
term, and with an emphasis on product innovation and customer service."
Seidenberg added, "We have a sustainable model for creating long-term value for
shareowners. Our world-class networks will drive further innovation and
productivity improvements -- the types of improvements that have allowed us to
maximize the efficiency of our capital spending this year. We also see further
opportunities that will enable us to continue to gain share in key markets in
the future. For example, we look forward to offering business customers an
expanded product portfolio when we gain our few remaining long-distance
approvals in the coming months."
Seidenberg reiterated the company's 2002 guidance of revenues of 0 to minus 1
percent and diluted EPS of $3.05 to $3.09. Guidance for capital expenditures has
been lowered to $12.3 to $12.7 billion, from $13 to $13.5 billion, and guidance
for year-end net debt has been set at $55 to $56 billion.
Capital expenditures totaled $2.6 billion in the third quarter and have been
reduced by $4.4 billion, to $8.1 billion, through the first nine months of the
year, compared with the same period in 2001.
Free cash flow (cash from operating activities less capital expenditures and
dividends) improved by $7.3 billion for the first nine months this year,
compared with the same period last year.
In the third quarter, Verizon reduced net debt by $6.8 billion, to $51.8 billion
from $58.6 billion at the end of the second quarter. This is an $11.5 billion
reduction since year-end 2001. Verizon reduced commercial paper by $5.0 billion
in the quarter, to $3.5 billion -- a $9.3 billion reduction since year-end 2001.
At the end of the third quarter, the company held $5.7 billion in cash and total
debt of $57.5 billion -- a $6.8 billion reduction since year-end 2001.
Profitable Wireless Growth
Verizon Wireless, the largest U.S. wireless company, added a net of 803,000
customers in the third quarter, a 6.8 percent improvement since third quarter
2001. Total customers grew by 1.2 million in the third quarter, to 31.5 million,
when including the additional 411,000 customers acquired from Price
Communications Corp.
While Verizon Wireless added 1.1 million net retail customers in the quarter, it
experienced a loss of the remaining 308,000 WorldCom Inc. resale customers.
Verizon Wireless no longer has any WorldCom resale subscribers in its customer
base.
Verizon Wireless increased total revenues in the quarter by 10.2 percent to $5.0
billion from $4.5 billion in the third quarter last year. Strong customer growth
was coupled with increased service revenue per subscriber per month, which was
up slightly to almost $50, compared with third quarter 2001. The company's
EBITDA margin was 39 percent in the quarter, equivalent to the same margin in
third quarter 2001.
Long Distance Ahead of Target
Verizon equaled its most successful quarter to date in adding new long-distance
customers. The net addition of 804,000 customers in the third quarter brings the
total customer base to 9.8 million, a 44 percent year-over-year increase and
close to the company's previously announced year-end 2002 target of 10 million
or more long-distance customers.
Also in the third quarter, Verizon added 155,000 DSL lines for a total of 1.64
million, a 70 percent year-over-year increase, as the company continues on
course to its year-end target of 1.8 to 2 million lines. Total DSL lines include
a downward adjustment of approximately 15,000 to account for customers in three
states included in the third-quarter access line sales.
Cash expenses for Verizon's largest business unit, Domestic Telecom, have
decreased over the prior-year period for seven consecutive quarters and by $880
million for the first nine months of 2002, compared with the 2001 period. In the
third quarter 2002, the unit's cash expenses on a comparable basis were down 3.3
percent to $5.8 billion from $6.0 billion in the third quarter 2001.
While overall Domestic Telecom revenues decreased 1.8 percent to $10.2 billion,
long-distance revenues, which include revenues from the competitive local toll
market, were $0.9 billion, an 8.8 percent increase over the same period last
year.
Reported Results
For the third quarter 2002, Verizon reported consolidated earnings of $4.4
billion, or $1.60 per diluted share, compared with earnings of $1.9 billion, or
69 cents per share, in the third quarter last year.
Approximately $2.3 billion in quarterly after-tax earnings, or 83 cents per
share, are for non-recurring items, including $1.8 billion in gains from asset
and investment sales and nearly $1.0 billion in tax benefits. These gains were
offset by after-tax charges totaling $465 million, including $185 million
related to severance costs for prior force reductions and $280 million for
merger transition costs, losses related to Verizon's investment in Cable &
Wireless plc, asset impairments and other items.
Reported third-quarter operating revenues increased 1.2 percent to $17.2 billion
from $17.0 billion in the third quarter 2001.
Third-Quarter Highlights
Following are third-quarter 2002 highlights from Verizon's four business
segments.
Domestic Telecom:
Current and prior periods exclude the 1.27 million switched access lines sold
during the third quarter of 2002.
* Nearly 50 percent of Verizon's 9.8 million long-distance customers come from
states in the former Bell Atlantic territory. Market share is approximately
30 percent in New York and Massachusetts. Verizon now has 2.6 million long-
distance customers in New York, 910,000 in Massachusetts and 854,000 in
Pennsylvania.
* In New Jersey and Maine, Verizon has gained a 9 percent share of the consumer
market within the first three months of launching the company's long-distance
offerings in July. Verizon has 290,000 long-distance customers in New Jersey
and more than 40,000 in Maine.
* The Federal Communications Commission (FCC) approved Verizon's long-distance
applications in Delaware and New Hampshire last month, and sales began this
month in both states.
* An FCC decision on Verizon's long-distance application for Virginia is
pending. Verizon is targeting the completion of FCC filings for the three
remaining former Bell Atlantic jurisdictions -- Maryland, West Virginia and
Washington, D.C. -- by year-end.
* More than 250,000 "Variations" service bundles have been sold through the end
of the quarter, exceeding expectations. Variations bundles are local services
with various combinations of long distance, wireless and Internet access in a
discounted package on one bill.
* Vertical service penetration continued to grow, as the number of packages
combining Caller ID, Home Voice Mail and other features with basic services
increased more than 25 percent. More than 19 percent of Verizon's consumer
customers subscribe to a package.
* For the fifth consecutive quarter, Verizon saw a net win-back in customers
for short-haul long-distance services in the former Bell Atlantic territory.
* The do-it-yourself installation rate for high-speed DSL Internet access
continues to be nearly 100 percent, and the average order-to-installation
interval for DSL remains less than a week.
* Domestic access line equivalents increased nearly 7 percent to 135.0 million,
compared with the third quarter 2001.
* Data Services revenues grew to $1.8 billion in the quarter, driven by 6.7
percent quarterly growth for Data Transport Services over the same period
last year.
* ONE-BILL service, which includes Verizon local, long-distance and wireless
charges on a single monthly bill, is now available throughout the former Bell
Atlantic territory and the rollout is continuing nationwide.
* In the Enterprise (large business) market, Verizon's Enterprise Solutions
Group (ESG) was part of the winning $1.7 billion bid for the Federal Aviation
Administration Telecommunications Infrastructure program by prime contractor,
Harris Corp. ESG estimates its value of the program to be $250 million over
15 years.
Verizon Wireless:
* Verizon Wireless continued its strong performance in customer growth and
profitability in the quarter, as the result of low churn and high demand for
its products and services.
* The company's retail customer base grew 15 percent year-over-year to 30.4
million, representing 97 percent of the company's 31.5 million customers.
Total net additions were 1.2 million, including 411,000 customers from the
Price Communications property acquisition and the decrease of 328,000
reseller customers.
* Strong customer growth was coupled with increased service revenue per
subscriber per month, which was up slightly to almost $50.
* The company continued to lead the industry in low-cost structure as cash
expense per subscriber remained virtually flat and EBITDA margin was 39.0
percent.
* Retail churn, including contract and pre-pay, was 2.0 percent, down from 2.2
percent in the third quarter of 2001. Churn in the retail contract segment,
comprising most of the company's base, was even lower -- at 1.7 percent, down
from 2.0 percent last year. Total churn, including retail and reseller, was
2.3 percent, up only slightly despite the high volume of disconnects in the
reseller segment.
* Quarterly EBITDA increased more than 10 percent to $1.8 billion. Service
revenues and total revenues each grew more than 10 percent to $4.6 billion
and $5.0 billion, respectively.
* The company's 26.8 million customers using CDMA digital technology comprise
more than 85 percent of its customer base.
* Demand for Verizon's 1X Express Network, the company's nationwide high-speed
wireless data network, continued to build with the introduction of new 1X
handsets. Two-way text messaging continued to grow dramatically, with the
number of billed messages increasing by more than 40 percent over the second
quarter.
* The company launched a national campaign for its expanded Get It Now(sm)
downloadable services. Get it Now is a virtual shopping spree of applications
that easily download to handsets, delivering games, entertainment, ring
tones, navigation, pictures and songs for a per-use or monthly subscription
fee.
* For its MobileWeb customers, the company added access to AOL's Instant
Messenger, e-mail and other content. Contributing to the popularity of all
Verizon Wireless data and text services is the growing array of color, 1X and
Get It Now-capable devices the company introduced in the third quarter.
International:
Reflects deconsolidation of CTI to the equity method and consolidation of PRTC
in both the current and prior periods.
* Third-quarter revenues were $726 million, compared with $804 million in third
quarter 2001 -- primarily driven by results from PRTC, Grupo Iusacell (Mexico)
and CODETEL (Dominican Republic), and impacted by weak economic conditions.
* The number of proportionate access lines in Verizon's core Americas
properties grew by 1.0 percent in the third quarter, to 3.2 million.
* The number of proportionate wireless customers in Verizon's core Americas
properties grew by 28.2 percent to 3.1 million, compared with the prior year.
Total proportionate international wireless customers served by Verizon
investments increased 2.3 percent over the prior year to 8.5 million.
* During the third quarter, Verizon sold 370 million shares of Telecom
Corporation of New Zealand stock. The transaction, which is part of the
company's continuing efforts to sell non-strategic assets, resulted in
proceeds of approximately $770 million and an after-tax gain of $229 million.
That gain has been removed from Verizon's International segment results and
from Verizon's income before non-recurring items.
Information Services:
* Revenues from Verizon's directory publishing and electronic commerce
operations of $1.2 billion increased 5.6 percent over third quarter 2001,
primarily due to the impact of changes in publication dates. On a directory-
to-directory basis, U.S. print and electronic revenues were 1.3 percent
lower than third quarter 2001 -- the result of the slowing economy that
particularly affected Manhattan directories published in the third quarter.
* Revenues from SuperPages.com, Verizon's Internet directory service, grew 59.4
percent over third quarter 2001 as Information Services continues to be the
leader in online directory services. SuperPages.com Yellow Pages searches grew
64.0 percent over third quarter 2001.
* Revenues from Hispanic directories grew 16 times over the third quarter of
2001. Information Services is the largest provider of print and online
Spanish-language directory information in the U.S. Information Services has
also signed an agreement to provide online directory services to users of
Univision Online's Spanish-language Internet site. Univision Online is a
leading destination for U.S. Hispanic Internet users, offering news, sports,
entertainment and services.
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 135.0 million access line
equivalents and 31.5 million Verizon Wireless customers. Verizon is also the
largest directory publisher in the world. With more than $67 billion in annual
revenues and more than 236,000 employees, Verizon's global presence extends to
more than 35 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 customized automatic
delivery of Verizon news releases.
NOTE: This press release contains statements about expected future events and
financial results that are forward-looking and subject to risks and
uncertainties. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The following important factors could affect future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: the duration and extent of the current economic
downturn; materially adverse changes in economic 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.
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change
9/30/02 9/30/01 9/30/02 9/30/01
Operating Revenues $ 17,201 $ 17,004 1.2 $ 50,411 $ 50,179 .5
Operations and support expense 10,391 9,925 4.7 30,951 28,937 7.0
Depreciation and amortization expense 3,320 3,402 (2.4) 9,996 10,162 (1.6)
Sales of assets, net (2,527) - - (2,747) (5) -
Operating income 6,017 3,677 63.6 12,211 11,085 10.2
Income (loss) from businesses 478 142 236.6 (4,426) (3,306) 33.9
Other income and (expense), net 37 84 (56.0) 106 268 (60.4)
Interest expense (803) (797) .8 (2,415) (2,627) (8.1)
Minority interest (372) (226) 64.6 (928) (533) 74.1
Mark-to-market adjustment - financial
instruments (17) (13) 30.8 (28) (166) (83.1)
Provision for income taxes (932) (984) (5.3) (2,226) (2,105) 5.7
Income from Continuing Operations 4,408 1,883 134.1 2,294 2,616 (12.3)
Extraordinary item, net of tax (3) (8) (62.5) (9) (8) 12.5
Cumulative effect of accounting change - - - (496) (182) 172.5
Net Income $ 4,405 $ 1,875 134.9 $ 1,789 $ 2,426 (26.3)
Diluted Earnings per Share(1) $ 1.60 $ .69 131.9 $ .65 $ .89 (27.0)
Weighted average number of
common shares-assuming 2,749 2,735 2,737 2,729
dilution (in millions)
Footnote:
(1) Diluted Earnings per Share include the dilutive effect of shares issuable under our stock-based compensation
plans and exchangeable equity Interests, which represent the only potential dilution.
* Not meaningful
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME BEFORE NON-RECURRING ITEMS
(dollars in millions, except per share amounts)
Unaudited 3 Mos. Ended 3 Mos. Ended % Change 9 Mos. Ended 9 Mos. Ended % Change
9/30/02 9/30/01 9/30/02 9/30/01
Operating Revenues(1)
Domestic Telecom $ 10,230 $ 10,422 (1.8) $ 30,685 $ 31,785 (3.5)
Domestic Wireless 4,982 4,521 10.2 14,094 12,950 8.8
International 726 804 (9.7) 2,231 2,359 (5.4)
Information Services 1,174 1,112 5.6 2,913 2,885 1.0
Other (47) 108 (143.5) (135) 83 *
Total Operating Revenues 17,065 16,967 .6 49,788 50,062 (.5)
Operating Expenses(1)
Operations and support expense 9,696 9,701 (.1) 28,179 28,266 (.3)
Depreciation and amortization expense 3,320 3,427 (3.1) 9,996 10,167 (1.7)
Total Operating Expenses 13,016 13,128 (.5) 38,175 38,433 (.7)
Operating Income 4,049 3,839 5.5 11,613 11,629 (.1)
Operating income impact of
operations sold(1) 55 162 (66.0) 382 419 (8.8)
Income from unconsolidated
businesses 195 110 77.3 581 477 21.8
Other income and (expense),net 37 82 (54.9) 106 265 (60.0)
Interest expense (803) (787) 2.0 (2,415) (2,577) (6.3)
Minority interest (383) (279) 37.3 (975) (729) 33.7
Provision for income taxes (1,042) (1,087) (4.1) (3,120) (3,387) (7.9)
Adjusted Net Income $ 2,108 $ 2,040 3.3 $ 6,172 $ 6,097 1.2
Diluted Adjusted
Earnings per Share(2) $ .77 $ .75 2.7 $ 2.26 $ 2.23 1.3
Weighted average number of
common shares-assuming
dilution (in millions) 2,749 2,735 2,737 2,729
Footnotes:
(1) Certain reclassifications of prior period amounts have been made, where appropriate, to reflect comparable
operating results excluding significant operations sold, the previously announced Domestic Telecom access lines, as
follows:
Revenues Expenses $ 136 $ 244 $ 623 $ 754
Expenses $ 81 $ 82 $ 241 $ 335
Also, reflects the deconsolidation of CT to the equity method and the consolidation Of PRTC in both current and
prior years.
(2) Prior year depreciation and amortization includes amortization of $.03 per diluted share for the quarter and #.10
per diluted share year-to-date related to intangible assets that are no longer being amortized, as required by SFAS
142.
* Not meaningful
EARNINGS RECONCILIATIONS
3 Mos. Ended 9/30/02 3 Mos. Ended 9/30/01 9 Mos. Ended 9/30/02 9 Mos. Ended 9/30/02
Unaudited Net income Diluted EPS Net income Diluted EPS Net income Diluted EPS Net income Diluted EPS
Reported Earnings $ 4,405 $ 1.60 $ 1,875 $ .69 $ 1,789 # .65 $ 2,426 $ .89
Non-recurring items:
Mark-to-market adjustment -
financial instruments 17 .01 13 - 28 .01 164 .06
Sales of assets and
investments, net(1) (1,779) (.65) - - (1,895) (.69) (3) -
Transition costs 50 .02 144 .05 159 .06 394 .14
Severance and related
pension settlement benefits 185 .07 - - 660 .24 - -
Cumulative effect of
accounting change - - - - 496 .18 182 .07
Investment-related charges
CANTV - - - - 1,400 .51 - -
MFN - - - - 436 .16 1,136 .42
CTI - - - - 190 .07 - -
Genuity - - - - 2,443 .89 - -
Telus - - - - 430 .16 - -
C&W 74 .03 - - 275 .10 862 .32
Other - - - - 231 .08 928 .34
NorthPoint settlement - - - - 114 .04 - -
Tax benefits (983) (.36) - - (983) (.36) - -
Other special items (2) 139 .05 8 - 399 .15 8 -
Earnings before
Non-Recurring (3) $ 2,108 $ .77 $ 2,040 $ .75 $ 6,172 $ 2.26 $ 6,097 $ 2.23
Footnotes:
(1) Includes $229 million related to the third-quarter 2002 sale of TCNZ securities.
(2) Year-to-date 2002 includes $183 million related to WorldCom financial exposure.
(3) Totals for Diluted EPS do not add for all periods due to rounding in EPS calculations
VERIZON COMMUNICATIONS INC.
Selected Financial and Operating Statistics
(dollars in millions, except
per share amounts)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/02 9/30/01 9/30/02 9/30/01
Debt ratio-end of period 64.3% 64.7% 64.3% 64.7%
Book value per common share $11.64 $12.84 $11.64 $12.84
Cash dividends declared per common $0.385 $0.385 $1.155 $1.155
share
Common shares outstanding (in
millions)
End of period 2,736 2,714 2,736 2,714
Capital expenditures
Domestic Telecom $1,548 $ 2,064 $4,723 $8,470
Domestic Wireless 921 970 2,981 3,342
International 107 232 323 524
Information Services 13 31 54 69
Other 9 17 27 72
Total $2,598 $3,314 $8,108 $12,477
Total employees (1) 236,408 258,973 236,408 258,973
Footnote:
(1) Prior period adjusted to reflect comparable results.
VERIZON COMMUNICATIONS INC.
Consolidated Balance Sheets
(dollars in millions)
Unaudited 9/30/02 12/31/01 $ Change
Assets
Current assets
Cash and cash equivalents $5,651 $979 $4,672
Short-term investments 246 1,991 (1,745)
Accounts receivable, net 12,956 14,254 (1,298)
Inventories 1,612 1,968 (356)
Net assets held for sale - 1,199 (1,199)
Prepaid expenses and other 3,001 2,796 205
Total current assets 23,466 23,187 279
Plant, property and equipment 176,779 169,586 7,193
Less accumulated depreciation 102,642 95,167 7,475
74,137 74,419 (282)
Investments in unconsolidated businesses 4,950 10,202 (5,252)
Intangible assets 46,761 44,262 2,499
Other assets 19,785 18,725 1,060
Total Assets $169,099 $170,795 $ (1,696)
Liabilities and Shareowners' Investment
Current liabilities
Debt maturing within one year $11,422 $18,669 $ (7,247)
Accounts payable and accrued liabilities 14,242 13,947 295
Other 5,320 5,404 (84)
Total current liabilities 30,984 38,020 (7,036)
Long-term debt 46,029 45,657 372
Employee benefit obligations 13,648 11,898 1,750
Deferred income taxes 18,802 16,543 2,259
Other liabilities 3,951 3,989 (38)
Minority interest 23,840 22,149 1,691
Shareowners' investment
Common stock 275 275 -
Contributed capital 24,671 24,676 (5)
Reinvested earnings 9,223 10,704 (1,481)
Accumulated other comprehensive loss (1,336) (1,187) (149)
32,833 34,468 (1,635)
Less common stock in treasury, at cost 402 1,182 (780)
Less deferred compensation -
employee stock ownership plans and other 586 747 (161)
Total shareowners' investment 31,845 32,539 (694)
Total Liabilities and Shareowners' Investment $169,099 $170,795 $ (1,696)
VERIZON COMMUNICATIONS INC.
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/02 9/30/01 $ Change
Cash Flows From Operating Activities
Income before extraordinary item and cumulative effect
of accounting change $2,294 $2,616 $(322)
Adjustments to reconcile income before extraordinary
item and cumulative effect of accounting change to net cash
provided by operating activities:
Depreciation and amortization 9,996 10,162 (166)
Sales of assets, net (2,747) (5) (2,742)
Mark-to-market adjustment - financial instruments 28 166 138)
Employee retirement benefits (963) (1,610) 647
Deferred income taxes 869 552 317
Provision for uncollectible accounts 2,191 1,374 817
Loss from unconsolidated businesses 4,426 3,306 1,120
Changes in current assets and liabilities, net of
effects from acquisition/disposition of businesses 17 (3,469) 3,486
Other, net (33) 4 (37)
Net cash provided by operating activities 16,078 13,096 2,982
Cash Flows From Investing Activities
Capital expenditures (8,108) (12,477) 4,369
Acquisitions, net of cash acquired, and investments (1,017) (3,005) 1,988
Proceeds from disposition of businesses 4,638 200 4,438
Proceeds from spectrum payment refund 1,479 - 1,479
Net change in short-term investments 1,648 1,338 310
Other, net 383 (1,213) 1,596
Net cash used in investing activities (977) (15,157) 14,180
Cash Flows From Financing Activities
Proceeds from long-term borrowings 7,533 9,204 (1,671)
Repayments of long-term borrowings and capital lease obligations (5,919) (2,003) (3,916)
Decrease in short-term obligations,
excluding current maturities (9,632) (1,436) (8,196)
Dividends paid (3,147) (3,119) (28)
Proceeds from sale of common stock 653 436 217
Other, net 83 (413) 496
Net cash provided by (used in) financing activities (10,429) 2,669 (13,098)
Increase in cash and cash equivalents 4,672 608 4,064
Cash and cash equivalents, beginning of period 979 757 222
Cash and cash equivalents, end of period $5,651 1,365 $4,286
VERIZON COMMUNICATIONS INC.
Domestic Telecom - Selected Financial Results
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/02 9/30/01 % Change 9/30/02 9/30/01 % Change
Operating Revenues
Local services $5,138 $5,238 (1.9) $15,365 $16,161 (4.9)
Network access 3,278 3,281 (.1) 9,954 9,758 2.0
services
Long distance 853 784 8.8 2,393 2,286 4.7
services
Other services 961 1,119 (14.1) 2,973 3,580 (17.0)
Total Operating 10,230 10,422 (1.8) 30,685 31,785 (3.5)
Revenues
Operating Expenses
Operations and 5,782 5,979 (3.3) 16,791 17,671 (5.0)
support
Depreciation and 2,316 2,332 (.7) 7,074 6,875 2.9
amortization
Total Operating 8,098 8,311 (2.6) 23,865 24,546 (2.8)
Expenses
Operating Income $2,132 $2,111 1.0 $6,820 $7,239 (5.8)
Operating Income 20.8% 20.3% 22.2% 22.8%
Margin
EBITDA $4,448 $4,443 .1 $13,894 $14,114 (1.6)
EBITDA Margin 43.5% 42.6% 45.3% 44.4%
Footnotes:
The segment financial results above are adjusted to exclude the effects of non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
EBITDA is determined by adding depreciation and amortization to operating income. EBITDA margin is calculated by
dividing EBITDA by total operating revenues.
Certain reclassifications of prior period amounts have been made, where appropriate, to reflect comparable
operating results.
Domestic Telecom - Selected Operating Statistics
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/02 9/30/01 % Change 9/30/02 9/30/01 % Change
Switched access lines in
service (000)
Residence 37,810 38,741 (2.4) 37,810 38,741 (2.4)
Business 20,258 21,422 (5.4) 20,258 21,422 (5.4)
Public 530 607 (12.7) 530 607 (12.7)
Total 58,598 60,770 (3.6) 58,598 60,770 (3.6)
Special DS0 equivalents 76,419 65,778 16.2 76,419 65,778 16.2
Total voice grade 135,017 126,548 6.7 135,017 126,548 6.7
equivalents (000)
Resale & UNE-P lines (000) 3,865 3,670 5.3 3,865 3,670 5.3
Minutes of use from 63,767 69,423 (8.1) 194,695 211,174 (7.8)
Carriers and CLECs (in
millions)
Long distance subscribers 9,838 6,851 43.6 9,838 6,851 43.6
(excl. Verizon CLEC) (000)
High capacity and digital
data revenues ($ in
millions)
Data transport $1,644 $1,541 6.7 4,951 $4,501 10.0
Data solutions 159 173 (8.1) 492 522 (5.7)
Total revenues $1,803 $1,714 5.2 5,443 $5,023 8.4
Footnote:
Certain reclassifications of prior period amounts have been made, where appropriate, to reflect comparable
operating results.
VERIZON COMMUNICATIONS INC.
Verizon Wireless - Selected Operating Results
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/02 9/30/01 % Change 9/30/02 9/30/01 % Change
Revenues
Service revenues $4,613 $4,183 10.3 $13,034 $11,980 8.8
Equipment and other 369 338 9.2 1,060 970 9.3
Total Revenues 4,982 4,521 10.2 14,094 12,950 8.8
Operating Expenses
Operations and 3,184 2,890 10.2 9,049 8,344 8.4
support
Depreciation and 828 943 (12.2) 2,394 2,749 (12.9)
amortization
Total Operating 4,012 3,833 4.7 11,443 11,093 3.2
Expenses
Operating Income $970 $688 41.0 $2,651 $1,857 42.8
EBITDA $1,798 $1,631 10.2 $5,045 $4,606 9.5
EBITDA Margin 39.0% 39.0% 38.7% 38.4%
Selected Operating
Statistics
Subscribers (000) 31,521 28,682 9.9 31,521 28,682 9.9
Penetration 13.9% 13.0% 13.9% 13.0%
Subscriber net adds 1,214 752 61.4 2,123 2,078 2.2
in period* (000)
Total churn rate, 2.3% 2.2% 2.4% 2.5%
including prepaid
Footnotes:
The segment financial results above are adjusted to exclude the effects of non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
EBITDA is determined by adding depreciation and amortization to operating income. EBITDA margin is calculated by
dividing EBITDA by service revenues.
* Includes acquisition of 411,000 subscribers in the third quarter of 2002 and 68,000 subscribers in the first
quarter of 2002.
VERIZON COMMUNICATIONS INC.
Selected Financial Results
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/02 9/30/01 % Change 9/30/02 9/30/01 % Change
Operating Revenues $726 $804 (9.7) $2,231 $2,359 (5.4)
Operating Expenses
Operations and 393 497 (20.9) 1,365 1,477 (7.6)
support
Depreciation and 132 112 17.9 405 395 2.5
amortization
Total Operating 525 609 (13.8) 1,770 1,872 (5.4)
Expenses
Operating Income $201 $195 3.1 $461 $487 (5.3)
EBITDA $333 $307 8.5 $866 $882 (1.8)
EBITDA Margin 45.9% 38.2% 38.8% 37.4%
Income from $226 $167 35.3 $677 $552 22.6
Unconsolidated
Businesses
Proportionate
Information
Revenues $1,344 $1,385 (3.0) $4,149 $4,076 1.8
Operating income $362 $354 2.3 $980 $1,016 (3.5)
Operating cash flow $580 $593 (2.2) $1,682 $1,701 (1.1)
Access lines (000) 3,245 3,220 8 3,245 3,220 .8
Wireless subscribers 8,489 8,300 2.3 8,489 8,300 2.3
(000)
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.
EBITDA is determined by adding depreciation and amortization to operating income. EBITDA margin is calculated by
dividing EBITDA by operating revenues.
Information Services - Selected Financial Results
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 9 Mos. Ended 9 Mos. Ended
Unaudited 9/30/02 9/30/01 % Change 9/30/02 9/30/01 % Change
Operating Revenues $1,174 1,112 5.6 $2,913 $2,885 1.0
Operating Expenses
Operations and 581 485 19.8 1,492 1,354 10.2
support
Depreciation and 21 21 - 52 62 (16.1)
amortization
Total Operating 602 506 19.0 1,544 1,416 9.0
Expenses
Operating Income $572 $606 (5.6) $1,369 $1,469 (6.8)
EBITDA $593 $627 (5.4) $1,421 $1,531 (7.2)
EBITDA Margin 50.5% 56.4% 48.8% 53.1%
Footnotes:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
EBITDA is determined by adding depreciation and amortization to operating
income. EBITDA margin is calculated by dividing EBITDA by operating revenues.
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 authorised.
Verizon Communications Inc
(Registrant)
Date: October 25, 2002 John F. Killian
Senior Vice President and Controller
This information is provided by RNS
The company news service from the London Stock Exchange
END
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