RNS Number:1700O
Verizon Communications
30 July 2003
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 29, 2003
(Date of earliest event reported)
VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8606 23-2259884
(State or other jurisdiction (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)
================================================================================
Item. 12. Disclosure of Results of Operations and Financial Condition
Attached as an exhibit hereto is a press release and financial tables dated July
29, 2003 issued by Verizon Communications Inc. and included in its Investor
Relations Bulletin. The information contained in this report, including the
exhibit attached hereto, is also intended to be furnished under Item 9
"Regulation FD Disclosure" and shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934.
Non-GAAP Measures
Verizon's press release and financial tables include non-GAAP financial
information. The consolidated statements of income before special items
eliminates 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 assists readers in better
understanding our results of operations and trends from period to period,
consistent with how management evaluates Verizon's consolidated and segment
results of operations for a variety of internal measures including strategic
business planning, capital allocation and compensation. Furthermore, while some
of these items have been periodically reported in Verizon's consolidated results
of operations, including significant severance and impairment charges, their
occurrence in future periods is dependent upon future business and economic
factors, among other evaluation criteria, and may frequently be beyond the
control of management. As a result of these factors, management also provides
this information externally, along with a complete reconciliation to their
comparable GAAP amounts so readers have access to the detail and general nature
of adjustments made to GAAP results.
Management believes that adjusted operating income before depreciation and
amortization margin, free cash flow, net debt and wireless cash expense per
subscriber per month, non-GAAP financial measures, are useful in evaluating
financial performance. Margins, free cash flow and net debt are also commonly
used by readers of financial information in assessing performance. Cash expense
per subscriber is a non-GAAP measure used internally to evaluate expense
efficiency.
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 29, 2003 /s/ David H. Benson
------------- ----------------------------------------
David H. Benson
Senior Vice President and Controller
EXHIBIT INDEX
Exhibit
Number Description
-------- -----------
99 Press release and financial tables, dated July 29, 2003, issued
by Verizon Communications Inc. and contained in its Investor
Relations Bulletin.
EXHIBIT 99
NEWS RELEASE
FOR IMMEDIATE RELEASE MEDIA CONTACTS:
JULY 29, 2003 PETER THONIS
212-395-2355
peter.thonis@verizon.com
BOB VARETTONI
212-395-7726
robert.a.varettoni@verizon.com
VERIZON'S SECOND-QUARTER RESULTS MARKED BY SECTOR-LEADING
REVENUE GROWTH AND SOLID CASH FLOW
SUSTAINED GROWTH IN WIRELESS, LONG-DISTANCE, BROADBAND AND BUNDLED SERVICES
COMPLEMENTS STRONG OPERATIONAL EXECUTION AND DISCIPLINED
CASH MANAGEMENT
SECOND-QUARTER HIGHLIGHTS
o Verizon Wireless: 1.2 million net retail customer additions, up 10 percent
from last year's quarter (1.3 million total net customer additions);
record-low churn; strong margins; service revenue up 14.7 percent from last
year's quarter; customer total at 34.6 million
o Long Distance: 1.4 million net additional long-distance lines in the
quarter; total long-distance lines, 14.6 million, a 36.1 percent
year-over-year increase
o DSL (digital subscriber lines): 1.9 million billed lines, up 101,000 since
last quarter
o Diluted earnings per share (EPS): 12 cents in fully diluted EPS, compared
with a loss of 78 cents per share in second quarter 2002
o EPS before special items: 69 cents, compared with 77 cents in EPS before
special items in second quarter 2002
o Debt Reduction: Net debt (total debt less cash and cash equivalents)
reduced by $3.7 billion since year-end 2002 to $48.1 billion
o Free Cash Flow (cash from operating activities less capital expenditures
and dividends): $3.6 billion in first half of year
GUIDANCE
o Reiterated 2003 guidance, with additional net debt reduction; new Verizon
Wireless guidance of net retail customer additions for 2003 of more than 4
million
Note: The schedules accompanying this news release provide reconciliations to
generally accepted accounting principles (GAAP) for all non-GAAP financial
measures mentioned in this announcement.
Verizon News Release, page 2
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced
second quarter 2003 fully diluted EPS of 12 cents, or 69 cents before special
items. The results reflect growth from the net addition of 1.3 million Verizon
Wireless customers and 1.4 million long-distance lines, and continued strong
operational and cash-management results.
Verizon's reported earnings were $0.3 billion in the quarter, compared
with a reported loss of $2.1 billion in the second quarter 2002.
SPECIAL ITEMS
Second quarter 2003 special items totaled $1.6 billion, or 56 cents per
share. The components were charges of: $0.9 billion, or 33 cents per share, as a
result of Verizon's decision to sell its consolidated interest in Grupo
Iusacell; $0.4 billion, or 16 cents per share, for severance, pension and other
benefits, including costs associated with a July 10 labor arbitration ruling;
and $0.2 billion, or 7 cents per share, related to other special items, such as
the early redemption of debt.
Excluding these items, Verizon's second-quarter earnings were $1.9
billion, or 69 cents per share.
Verizon's second-quarter results reflect the reclassification of
Iusacell to discontinued operations in the current and prior periods, as a
result of the decision to sell Iusacell. As announced July 1, the results for
Verizon's directory publishing unit since the beginning of the year are being
reported using the amortization method of accounting.
REVENUE GROWTH
Verizon reported operating revenues of $16.8 billion for the quarter, a
0.5 percent increase from the second quarter 2002. However, last year's second
quarter included $246 million in revenue generated by 1.27 million switched
access lines that Verizon has since sold. Excluding the effect of these access
line sales, revenues increased 2.0 percent in the second quarter 2003. Growth
rates of both reported revenues and revenues excluding the effects of the access
line sales include $101 million attributable to the change in directory
accounting, since the amortization method more evenly distributes revenues and
expenses for Verizon's directory unit this year compared with last year.
Verizon News Release, page 3
Verizon Wireless' second-quarter consolidated operating revenues
include a double-digit, year-over-year increase for the fourth consecutive
quarter. Verizon Wireless total revenues grew 14.3 percent to $5.5 billion, from
$4.8 billion in the second quarter of 2002. Service revenues grew 14.7 percent,
to $5.0 billion, compared with the second quarter of 2002.
Domestic Telecom reported quarterly revenues for all long-distance
services of $0.9 billion, a growth rate of 17.2 percent, compared with the
second quarter 2002. A significant component of this total, interLATA
long-distance revenue, grew at a 27 percent rate. Domestic Telecom's overall
total operating revenues declined 3.4 percent compared with second quarter 2002,
to $9.9 billion in the second quarter 2003.
While the mix of Verizon's consolidated revenues has shifted, the
company continued to maintain margins (as defined in the accompanying financial
schedules) in the second quarter 2003. Margins were 41.2 percent in this year's
second quarter, compared with 41.4 percent in last year's second quarter.
EXPENSES AND CASH FLOW
Verizon reported operating expenses of $14.1 billion in the second
quarter 2003, virtually flat compared with the second quarter 2002. On a
comparable basis, operating expenses increased 4.6 percent in the second quarter
2003, driven by significantly lower pension income net of other post-retirement
benefit costs. The expenses for the comparable quarter of the prior year
included a $374 million net expense credit associated with pensions and
post-retirement benefits, compared with a $72 million net expense credit for the
second quarter 2003.
Verizon's free cash flow was $3.6 billion for the first six months of
2003, compared with $2.0 billion in the same period last year. Cash from
operations was $11.0 billion through the first six months of 2003, compared with
$10.1 billion through the first six months of 2002.
SUSTAINABLE RESULTS
Verizon CEO Ivan Seidenberg said, "Our second-quarter results are
strong and sustainable. This is underscored by Verizon Wireless' continued
industry-leading financial and operational results, and Verizon's continued
strong growth in selling bundled packages of local, long-distance and broadband
services.
Verizon News Release, page 4
"We have demonstrated our ability to retain share in traditional
markets and capture share in new markets," Seidenberg added. "We are making
efficient use of our advanced network capabilities, and combining that with a
focus on customer service, innovation and operational excellence. Our cash flow
continues to be excellent, and we have made the necessary investments to
maintain margins and to retain and capture market share in the future."
2003 GUIDANCE
Seidenberg reiterated Verizon's 2003 guidance of $2.70 to $2.80 in
adjusted EPS, 0 to 2 percent comparable revenue growth, and $12.5 billion to
$13.5 billion in capital expenditures. Also, Verizon is now targeting a further
$3 billion to $4 billion reduction in net debt -- from a range of $49 billion to
$51 billion, to $46 billion to $47 billion -- based on continued strong
operational performance, the use of proceeds from non-strategic asset sales and
the deconsolidation of Iusacell's $0.8 billion debt.
In second quarter 2003, net debt was reduced to $48.1 billion, from
$51.8 billion at year-end 2002. Total debt was $48.9 billion at the end of the
second quarter 2003, reduced from $53.3 billion at year-end 2002.
Verizon also announced that Verizon Wireless expects a total of more
than 4 million net retail customer additions in 2003.
BUSINESS SEGMENT HIGHLIGHTS
DOMESTIC TELECOM
(Note: Current and prior periods exclude the effects of access lines
sold in 2002.)
The company indicated that bargaining to renew the labor contracts that
expire at midnight on Aug. 2 continues. These labor contracts affect more than
78,000 Domestic Telecom employees in Northeast and mid-Atlantic states. While
the range of issues in these negotiations reflects complex marketplace
realities, the company is hopeful that new contracts can be negotiated by the
contract deadline. In the event an agreement is not reached on time, Verizon
said it has contingency plans in place to provide the necessary customer service
and operational support.
Regarding second quarter 2003 highlights, Domestic Telecom reported a
36.1 percent year-over-year increase in long-distance lines served. Verizon, the
nation's third largest long-
Verizon News Release, page 5
distance carrier for consumers, served 14.6 million long-distance lines at the
end of the second quarter 2003, an increase of 1.4 million lines in the quarter.
More than 58 percent of these lines are in states where Verizon has obtained
long-distance authorization over the past three and a half years.
During the second quarter 2003, Verizon Freedom plans were launched for
consumers in Maryland, West Virginia, California, Texas and Washington, D.C. --
and similar plans for businesses were launched in Massachusetts and New York.
Verizon Freedom plans, introduced last summer, continue to retain and win back
customers by offering local services with various combinations of long distance,
wireless and Internet access in a discounted bundle available on one bill.
Nearly 24 percent of Verizon consumers now subscribe to a package of
Verizon services, including either local service plus enhanced calling features
or local service plus broadband, long distance or wireless services.
Other Domestic Telecom second-quarter highlights include:
o Billed DSL service grew to a total of 1.9 million lines, up 101,000 since
last quarter. Approximately 67 percent of Verizon's 56.8 million access
lines are qualified to receive DSL service. As previously announced, the
company expects to qualify 80 percent of its access lines by year-end
through the continued deployment of DSL technology.
o Voice-grade access line equivalents (access lines plus equivalent data
circuits) grew to 137.6 million, up 3.6 percent compared with the second
quarter 2002.
o Total revenues for high-capacity and digital-data services were $1.8
billion in the second quarter, down slightly from the year-earlier period,
with increased demand for high-speed services such as ATM, Frame Relay,
SONET and DSL, offset by a lessened demand for low-speed services.
o Building on the company's presence in two-thirds of the nation's top 100
markets, Verizon has signed approximately 500 contracts with large-business
customers as part of its Enterprise Advance initiative launched in the
fourth quarter 2002. Offerings include advanced data networking, such as
Gigabit Ethernet and Dense Wave Division Multiplexing, which Verizon now
provides on a nationwide basis since gaining all necessary long-distance
approvals earlier this year.
VERIZON WIRELESS
In the second quarter 2003, Verizon Wireless continued its
consistent, industry-leading performance, delivering strong profitability,
strong ARPU (average revenue per user) and strong
Verizon News Release, page 6
customer growth in the quarter. Retail gross additions were up 3.5 percent over
the prior year. The total number of customers grew 14.2 percent, while churn
levels were the lowest in the company's history.
The retail customer base grew 15 percent year over year, and
represented more than 96 percent of the base, or 33.4 million of the company's
34.6 million total customers, at the end of the quarter. Retail net customer
additions in the quarter -- up more than 10 percent over the second quarter 2002
- -- were 1.2 million of the company's approximately 1.3 million net additions.
Retail churn, as well as total churn for both retail and reseller, was
1.7 percent. The retail post-pay segment -- which is more than 90 percent of the
company's base -- had a churn rate of 1.4 percent for the second quarter.
Other Verizon Wireless highlights include:
o Average monthly service revenue per subscriber was more than $49, up 1.2
percent over the prior-year quarter and up more than $2 over the first
quarter 2003.
o The company's low-cost structure continued to lead the industry, as cash
expense per subscriber increased only 1.2 percent over the prior-year
quarter, even with the record volume of new subscribers. The percentage of
operating income before depreciation and amortization, divided by service
revenues, remained strong at 38.7 percent.
o Quarterly operating income before depreciation and amortization increased
14.5 percent year over year to $1.9 billion.
o Virtually all of the company's national network, the most extensive in the
country, is now equipped with Express Network 1XRTT service, providing
higher data speeds and improved efficiency of spectrum use to accommodate
growth in overall usage as well as in popular data services. The network
now is poised for the company's launch of EVDO, which will enable the next
generation of higher data speeds, in two cities this fall.
o Demand for the company's data and text services continued to build in the
quarter. Text messaging grew to more than 300 million billed text messages
a month, and 1.4 billion in the first half of this year. Usage on the
company's Express Network has significantly increased over the preceding
quarter. And the company's Get It Now(SM) BREW-based downloadable
ringtones, games and exclusive content grew to 2.5 million
revenue-generating downloads a month and 170 unique applications.
o The company continued to strengthen its position in the business market
segment and now serves 70 percent of Fortune 100 companies and half of the
Fortune 500, with nearly 25 percent of the wireless business market share.
Driving this growth is the expanding suite of Wireless Office services
launched earlier this year for voice tools, data access and
Verizon News Release, page 7
customized solutions for the latest PDA, laptop and Blackberry devices on
the company's national 1XRTT Express Network.
o The company launched its easy-to-use picture messaging service for sending
photos, with text and voice recordings added, to other Verizon Wireless
handsets, or to any e-mail address. The service is available on the
company's LG VX 6000 handset, one of the only camera phones in the market
with a zoom control feature.
o Leading the industry on the issue of Wireless Local Number Portability
(WLNP), the company announced plans for consumer-friendly porting of phone
numbers when WLNP takes effect in November. The company called on the rest
of the industry to adopt its plan and the Federal Communications Commission
to issue its stamp of approval.
INFORMATION SERVICES
(Note: Effective Jan. 1, 2003, Verizon changed its accounting for
recognizing directory revenues and direct expenses from the publication-date
method to the amortization method. The publication-date method recognizes
revenues and expenses when directories are distributed. Under the amortization
method, which is increasingly becoming the industry standard, revenues and
expenses are recognized over the life of the directory, which is usually 12
months. This change results in a more even distribution of revenue and expenses
throughout the year, and does not impact cash flow. As required by GAAP, the
previous year's results have not been adjusted for this change.)
o Verizon Information Services (VIS) revenues for the second quarter 2003
increased 12.1 percent compared with the same period last year, and
operating income before depreciation and amortization for the second
quarter 2003 increased 15 percent over 2002. These growth rates primarily
reflect the accounting change mentioned above, as well as VIS' commitment
to cost containment through process improvement and system consolidation.
o VIS' electronic product, SuperPages.com(TM), continues to achieve strong
domestic growth, as demonstrated by a 37 percent increase in revenue and a
25 percent increase in searches, when comparing the second quarter 2003
with the second quarter 2002.
INTERNATIONAL
o Second-quarter revenues were $509 million, compared with $570 million in
the second quarter 2002. The revenue decline was largely the result of
declining foreign exchange rates in the Dominican Republic.
o Verizon continued to see strong International wireless subscriber growth,
as the total number of wireless subscribers served by Verizon's
International investments increased nearly 3 million compared with second
quarter 2002, representing a 10.1 percent growth rate.
Verizon News Release, page 8
A Fortune 10 company, 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 137.6 million access line equivalents and 34.6 million Verizon Wireless
customers. Verizon is the third largest long-distance carrier for U.S.
consumers, with 14.6 million long-distance lines, and the company is also the
largest directory publisher in the world, as measured by directory titles and
circulation. With approximately $67 billion in annual revenues and 221,000
employees, Verizon's global presence extends to the Americas, Europe and Asia.
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 or labor conditions, including
labor negotiations and any resulting financial and/or operational impact, in the
markets served by us or by companies in which we have substantial investments;
material changes in available technology; technology substitution; an adverse
change in the ratings afforded our debt securities by nationally accredited
ratings organizations; the final results of federal and state regulatory
proceedings concerning our provision of retail and wholesale services and
judicial review of those results; the effects of competition in our markets; our
ability to satisfy regulatory merger conditions; the ability of Verizon Wireless
to continue to obtain sufficient spectrum resources; our ability to recover
insurance proceeds relating to equipment losses and other adverse financial
impacts resulting from the terrorist attacks on Sept. 11, 2001; and changes in
our accounting assumptions that regulatory agencies, including the SEC, may
require or that result from changes in the accounting rules or their
application, which could result in an impact on earnings.
9
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VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change
--------------------------------- ------------ ------------ -------- ------------ ------------ ----------
OPERATING REVENUES $ 16,829 $ 16,752 .5 $ 33,319 $ 33,037 .9
OPERATING EXPENSES
Cost of services and sales 5,042 4,951 1.8 10,166 9,760 4.2
Selling, general & administrative
expense 5,673 5,793 (2.1) 9,965 10,691 (6.8)
Depreciation and amortization expense 3,384 3,322 1.9 6,751 6,608 2.2
Sales of assets, net -- -- -- -- (220) (100.0)
----------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES 14,099 14,066 .2 26,882 26,839 .2
----------- ---------- ---------- -----------
OPERATING INCOME 2,730 2,686 1.6 6,437 6,198 3.9
Income (loss) from unconsolidated
businesses 227 (3,359) * 394 (4,903) *
Other income and (expense), net (46) 60 * 11 105 (89.5)
Interest expense (692) (769) (10.0) (1,447) (1,556) (7.0)
Minority interest (380) (372) 2.2 (722) (633) 14.1
----------- ---------- ---------- -----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND
CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,839 (1,754) * 4,673 (789) *
Provision for income taxes (573) (323) 77.4 (1,497) (1,282) 16.8
----------- ---------- ---------- -----------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE
EFFECT OF
ACCOUNTING CHANGE 1,266 (2,077) * 3,176 (2,071) *
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (952) (35) * (957) (42) *
Income tax benefit (provision) 24 (3) * 22 (7) *
----------- ---------- ---------- -----------
Loss on discontinued
operations (928) (38) * (935) (49) *
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX -- -- -- 503 (496) *
----------- ---------- ---------- -----------
NET INCOME (LOSS) $ 338 $ (2,115) * $ 2,744 $ (2,616) *
=========== ========== ========== ===========
BASIC EARNINGS (LOSS) PER SHARE $ .12 $ (.78) * $ 1.00 $ (.96) *
Weighted average number of common
shares (in millions) 2,754 2,726 2,751 2,723
DILUTED EARNINGS (LOSS)
PER SHARE(1) $ .12 $ (.78) * $ .99 $ (.96) *
Weighted average number of common
shares-assuming dilution
(in millions) 2,786 2,726 2,783 2,723
FOOTNOTES:
(1) Diluted Earnings (Loss) per Share include income related to share dilution
(exchangeable equity interests) of $4 million and $9 million for the second
quarter and year-to-date 2003 respectively, and the dilutive effect of
shares issuable under our stock-based compensation plans and exchangeable
equity interests, which represent the only potential dilution. There is no
impact of diluted securities in the second quarter and year-to-date of 2002
since a net loss from continuing operations was reported.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. However, prior year
results have not been adjusted for the change in accounting, effective January
1, 2003, related to recognition of directory revenues and direct costs from the
publication date method to the amortization method.
* Not meaningful
10
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VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME BEFORE SPECIAL ITEMS
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. 3 Mos. 6 Mos. 6 Mos.
Ended Ended Ended Ended
Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change
------------------------------------------- ---------- -------- -------- -------- -------- --------
OPERATING REVENUES(1)
Domestic Telecom $ 9,905 $ 10,254 (3.4) $ 19,846 $ 20,505 (3.2)
Domestic Wireless 5,477 4,791 14.3 10,563 9,221 14.6
Information Services 1,049 936 12.1 2,070 1,739 19.0
International 509 570 (10.7) 1,026 1,132 (9.4)
Other (111) (45) 146.7 (186) (47) *
-------- -------- -------- --------
TOTAL OPERATING REVENUES 16,829 16,506 2.0 33,319 32,550 2.4
-------- -------- -------- --------
OPERATING EXPENSES(1)
Cost of services and sales 5,042 4,873 3.5 10,166 9,621 5.7
Selling, general & administrative expense 4,779 4,427 8.0 9,071 8,753 3.6
Depreciation and amortization expense 3,384 3,322 1.9 6,751 6,608 2.2
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 13,205 12,622 4.6 25,988 24,982 4.0
-------- -------- -------- --------
OPERATING INCOME 3,624 3,884 (6.7) 7,331 7,568 (3.1)
Operating income impact of operations sold (1) -- 165 (100.0) -- 327 (100.0)
Income from unconsolidated businesses 227 241 (5.8) 394 386 2.1
Other income and (expense), net 15 64 (76.6) 72 127 (43.3)
Interest expense (692) (769) (10.0) (1,447) (1,556) (7.0)
Minority interest (380) (396) (4.0) (722) (669) 7.9
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND DISCONTINUED OPERATIONS 2,794 3,189 (12.4) 5,628 6,183 (9.0)
Provision for income taxes (889) (1,056) (15.8) (1,813) (2,070) (12.4)
-------- -------- -------- --------
INCOME BEFORE DISCONTINUED OPERATIONS 1,905 2,133 (10.7) 3,815 4,113 (7.2)
DISCONTINUED OPERATIONS
Income (loss) from operations of Iusacell 6 (35) * 1 (42) *
Provision for income taxes (2) (3) (33.3) (4) (7) (42.9)
-------- -------- -------- --------
Income (loss) on discontinued operations 4 (38) * (3) (49) (93.9)
-------- -------- -------- --------
NET INCOME BEFORE SPECIAL ITEMS $ 1,909 $ 2,095 (8.9) $ 3,812 $ 4,064 (6.2)
======== ======== ======== ========
BASIC EARNINGS PER SHARE $ .69 $ .77 (10.4) $ 1.39 $ 1.49 (6.7)
Weighted average number of common shares
(in millions) 2,754 2,726 2,751 2,723
DILUTED ADJUSTED EARNINGS PER SHARE $ .69 $ .77 (10.4) $ 1.37 $ 1.49 (8.1)
Weighted average number of common
shares-assuming dilution (in millions) 2,786 2,726 2,783 2,723
FOOTNOTES:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. However, prior year
results have not been adjusted for the change in accounting, effective January
1, 2003, related to recognition of directory revenues and direct costs from the
publication date method to the amortization method.
(1) Reclassifications of prior period amounts have also been made to reflect
comparable operating results excluding significant operations sold, the
previously announced Domestic Telecom access lines, as follows:
3 Mos. 3 Mos. 6 Mos. 6 Mos.
Ended Ended Ended Ended
6/30/03 6/30/02 6/30/03 6/30/02
------- ------- ------- -------
Revenues $ -- $ 246 $ -- $ 487
Expenses $ -- $ 81 $ -- $ 160
* Not meaningful
11
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VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
---------------------------------------------
3 Mos. Ended Severance, Lease 3 Mos. Ended
6/30/03 Pension and Impairment 6/30/03
Reported Iusacell Benefit and Other Before
Unaudited (GAAP) Charge Charges Special Charges Special Items
--------------------------------------- ----------- ------------ -------------- --------------- ---------------
OPERATING REVENUES $ 16,829 $ -- $ -- $ -- $ 16,829
OPERATING EXPENSES
Cost of services and sales 5,042 -- -- -- 5,042
Selling, general & administrative
expense 5,673 -- (697) (197) 4,779
Depreciation and amortization expense 3,384 -- -- -- 3,384
Sales of assets, net -- -- -- -- --
------------ ------------ -------------- --------------- ---------------
TOTAL OPERATING EXPENSES 14,099 -- (697) (197) 13,205
------------ ------------ -------------- --------------- ---------------
OPERATING INCOME 2,730 -- 697 197 3,624
Operating income impact of
operations sold -- -- -- -- --
Income from unconsolidated businesses 227 -- -- -- 227
Other income and (expense), net (46) -- -- 61 15
Interest expense (692) -- -- -- (692)
Minority interest (380) -- -- -- (380)
------------ ------------ -------------- --------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,839 -- 697 258 2,794
Provision for income taxes (573) -- (262) (54) (889)
------------ ------------ -------------- --------------- ---------------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 1,266 -- 435 204 1,905
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (952) 957 1 -- 6
Income tax benefit (provision) 24 (26) -- -- (2)
------------ ------------ -------------- --------------- ---------------
Loss on discontinued
operations (928) 931 1 -- 4
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX -- -- -- -- --
------------ ------------ -------------- --------------- ---------------
NET INCOME $ 338 $ 931 $ 436 $ 204 $ 1,909
============ ============ ============== =============== ===============
BASIC EARNINGS PER COMMON SHARE(1) $ .12 $ .34 $ .16 $ .07 $ .69
DILUTED EARNINGS PER COMMON SHARE(1) $ .12 $ .33 $ .16 $ .07 $ .69
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-----------------------------------------
3 Mos. Ended
6/30/02 Impact of Investment -
Reported Transition Operations Related
Unaudited (GAAP) Costs Sold Charges
---------------------------------------------------- ------------- ----------- ----------- -------------
OPERATING REVENUES $ 16,752 $ -- $ (246) $ --
OPERATING EXPENSES
Cost of services and sales 4,951 (41) (37) --
Selling, general & administrative expense 5,793 (61) (44) --
Depreciation and amortization expense 3,322 -- -- --
Sales of assets, net -- -- -- --
------------- ----------- ----------- -------------
TOTAL OPERATING EXPENSES 14,066 (102) (81) --
------------- ----------- ----------- -------------
OPERATING INCOME 2,686 102 (165) --
Operating income impact of operations sold -- -- 165 --
Income from unconsolidated businesses (3,359) -- -- 3,558
Other income and (expense), net 60 -- -- --
Interest expense (769) -- -- --
Minority interest (372) (10) -- --
------------- ----------- ----------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (1,754) 92 -- 3,558
Provision for income taxes (323) (35) -- (253)
------------- ----------- ----------- -------------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,077) 57 -- 3,305
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (35) -- -- --
Income tax provision (3) -- -- --
------------- ----------- ----------- -------------
Loss on discontinued operations (38) -- -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- -- --
------------- ----------- ----------- -------------
NET INCOME (LOSS) $ (2,115) $ 57 $ -- $ 3,305
============= =========== =========== =============
BASIC EARNINGS (LOSS) PER COMMON SHARE (1) $ (.78) $ .02 $ -- $ 1.21
DILUTED EARNINGS (LOSS) PER COMMON SHARE (1) $ (.78) $ .02 $ -- $ 1.21
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
------------------------------------------
Severance, WorldCom 3 Mos. Ended
Pension and Exposure and 6/30/02
Benefit NorthPoint Other Special Before
Unaudited Charges Settlement Items Special Items
---------------------------------------------------- ------------ ----------- ------------- -------------
OPERATING REVENUES $ -- $ -- $ -- $ 16,506
OPERATING EXPENSES
Cost of services and sales -- -- -- 4,873
Selling, general & administrative expense (692) (175) (394) 4,427
Depreciation and amortization expense -- -- -- 3,322
Sales of assets, net -- -- -- --
------------ ----------- ------------- -------------
TOTAL OPERATING EXPENSES (692) (175) (394) 12,622
------------ ----------- ------------- -------------
OPERATING INCOME 692 175 394 3,884
Operating income impact of operations sold -- -- -- 165
Income from unconsolidated businesses 42 -- -- 241
Other income and (expense), net -- -- 4 64
Interest expense -- -- -- (769)
Minority interest (14) -- -- (396)
------------ ----------- ------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 720 175 398 3,189
Provision for income taxes (245) (61) (139) (1,056)
------------ ----------- ------------- -------------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 475 114 259 2,133
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- -- -- (35)
Income tax provision -- -- -- (3)
------------ ----------- ------------- -------------
Loss on discontinued operations -- -- -- (38)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX -- -- -- --
------------ ----------- ------------- -------------
NET INCOME (LOSS) $ 475 $ 114 $ 259 $ 2,095
============ =========== ============= =============
BASIC EARNINGS (LOSS) PER COMMON SHARE (1) $ .17 $ .04 $ .10 $ .77
DILUTED EARNINGS (LOSS) PER COMMON SHARE (1) $ .17 $ .04 $ .10 $ .77
FOOTNOTE:
(1) EPS totals may not add across due to rounding.
12
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
------------------------------------------------------------
6 Mos. Ended Severance, Lease Cumulative 6 Mos. Ended
6/30/03 Pension and Impairment and Effect of 6/30/03
Reported Benefit Other Special Accounting Before Special
Unaudited (GAAP) Iusacell Charge Charges Charges Change Items
--------------------------- ------------ --------------- ----------- -------------- ---------- ---------------
OPERATING REVENUES $ 33,319 $ -- $ -- $ -- $ -- $ 33,319
OPERATING EXPENSES
Cost of services and sales 10,166 -- -- -- -- 10,166
Selling, general &
administrative expense 9,965 -- (697) (197) -- 9,071
Depreciation and amortization
expense 6,751 -- -- -- -- 6,751
Sales of assets, net -- -- -- -- -- --
--------- ------- --------- --------- --------- ---------
TOTAL OPERATING EXPENSES 26,882 -- (697) (197) -- 25,988
--------- ------- --------- --------- --------- ---------
OPERATING INCOME 6,437 -- 697 197 -- 7,331
Operating income impact of
operations sold -- -- -- -- -- --
Income from unconsolidated
businesses 394 -- -- -- -- 394
Other income and (expense),
net 11 -- -- 61 -- 72
Interest expense (1,447) -- -- -- -- (1,447)
Minority interest (722) -- -- -- -- (722)
--------- ------- --------- --------- --------- ---------
INCOME BEFORE PROVISION FOR
INCOME TAXES, DISCONTINUED
OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 4,673 -- 697 258 -- 5,628
Provision for income taxes (1,497) -- (262) (54) -- (1,813)
--------- ------- --------- --------- --------- ---------
INCOME BEFORE DISCONTINUED
OPERATIONS
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 3,176 -- 435 204 -- 3,815
DISCONTINUED OPERATIONS
Loss from operations of
Iusacell (957) 957 1 -- -- 1
Income tax benefit
(provision) 22 (26) -- -- -- (4)
--------- ------- --------- --------- --------- ---------
Loss on discontinued
operations (935) 931 1 -- -- (3)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX 503 -- -- -- (503) --
--------- ------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 2,744 $ 931 $ 436 $ 204 $ (503) $ 3,812
========= ======= ========= ========= ========= =========
BASIC EARNINGS PER COMMON
SHARE(1) $ 1.00 $ .34 $ .16 $ .07 $ (.18) $ 1.39
DILUTED EARNINGS PER COMMON
SHARE(1) $ .99 $ .33 $ .16 $ .07 $ (.18) $ 1.37
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
--------------------------------------------------------------------------
6 Mos. Ended
6/30/03 Sales Impact of Investment-
Reported of Assets, Transition Operations Related
Unaudited (GAAP) Net Costs Sold Charges
----------------------- ------------ ---------- ---------- ---------- ------------
OPERATING REVENUES $ 33,037 $ -- $ -- $ (487) $ --
OPERATING EXPENSES
Cost of services and
sales 9,760 -- (51) (88) --
Selling, general &
administrative expense 10,691 -- (147) (72) (458)
Depreciation and
amortization expense 6,608 -- -- -- --
Sales of assets, net (220) 220 -- -- --
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 26,839 220 (198) (160) (458)
---------- ---------- ---------- ---------- ----------
OPERATING INCOME 6,198 (220) 198 (327) 458
Operating income impact
of operations sold -- -- -- 327 --
Income from
unconsolidated
businesses (4,903) -- -- -- 5,247
Other income and
(expense), net 105 -- -- -- --
Interest expense (1,556) -- -- -- --
Minority interest (633) -- (22) -- --
---------- ---------- ---------- ---------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES,
DISCONTINUED OPERATIONS
AND CUMULATIVE
EFFECT OF ACCOUNTING
CHANGE (789) (220) 176 -- 5,705
Provision for income
taxes (1,282) 104 (67) -- (374)
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (2,071) (116) 109 -- 5,331
DISCONTINUED OPERATIONS
Loss from operations of
Iusacell (42) -- -- -- --
Income tax provision (7) -- -- -- --
---------- ---------- ---------- ---------- ----------
Loss on discontinued
operations (49) -- -- -- --
CUMULATIVE EFFECT OF
ACCOUNTING
CHANGE, NET OF TAX (496) -- -- -- --
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (2,616) $ (116) $ 109 $ -- $ 5,331
========== ========== ========== ========== ==========
BASIC EARNINGS (LOSS)
PER COMMON SHARE(1) $ (.96) $ (.04) $ .04 $ -- $ 1.96
DILUTED EARNINGS (LOSS)
PER COMMON SHARE(1) $ (.96) $ (.04) $ .04 $ -- $ 1.96
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-----------------------------------------------------------------------------
Severance, WorldCom Cumulative 6 Mos. Ended
Pension and Exposure and Effect 6/30/02
Benefit NorthPoint Other Special of Accounting Before
Unaudited Charges Settlement Items Change Special Items
------------------------- ----------- ------------ ------------- ------------- -------------
OPERATING REVENUES $ -- $ -- $ -- $ -- $ 32,550
OPERATING EXPENSES
Cost of services and sales -- -- -- -- 9,621
Selling, general &
administrative expense (692) (175) (394) -- 8,753
Depreciation and
amortization expense -- -- -- -- 6,608
Sales of assets, net -- -- -- -- --
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES (692) (175) (394) -- 24,982
---------- ---------- ---------- ---------- ----------
OPERATING INCOME 692 175 394 -- 7,568
Operating income impact
of operations sold -- -- -- -- 327
Income from
unconsolidated businesses 42 -- -- -- 386
Other income and (expense), net -- -- 22 -- 127
Interest expense -- -- -- -- (1,556)
Minority interest (14) -- -- -- (669)
---------- ---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES, DISCONTINUED
OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 720 175 416 -- 6,183
Provision for income taxes (245) (61) (145) -- (2,070)
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 475 114 271 -- 4,113
DISCONTINUED OPERATIONS
Loss from operations of
Iusacell -- -- -- -- (42)
Income tax provision -- -- -- -- (7)
---------- ---------- ---------- ---------- ----------
Loss on discontinued
operations -- -- -- -- (49)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX -- -- -- 496 --
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 475 $ 114 $ 271 $ 496 $ 4,064
========== ========== ========== ========== ==========
BASIC EARNINGS (LOSS) PER
COMMON SHARE(1) $ .17 $ .04 $ .10 $ .18 $ 1.49
DILUTED EARNINGS (LOSS) PER
COMMON SHARE(1) $ .17 $ .04 $ .10 $ .18 $ 1.49
FOOTNOTE:
(1) EPS totals may not add across due to rounding.
13
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
OTHER RECONCILIATIONS
---------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 6/30/03 6/30/02
----------------------------------------------------------------------- ------------ ------------
ADJUSTED OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION MARGIN
Net income before special items $ 1,909 $ 2,095
Discontinued operations (4) 38
Plus: Income taxes 889 1,056
Minority interest 380 396
Interest expense 692 769
Other income and (expense), net (15) (64)
Income from unconsolidated businesses (227) (241)
Operating income impact of operations sold -- (165)
---------- ----------
Operating income before special items 3,624 3,884
Depreciation and amortization 3,384 3,322
---------- ----------
Adjusted operating income before depreciation and amortization 7,008 7,206
Less: Net pension and OPEB credit 72 374
---------- ----------
Adjusted operating income before depreciation and
amortization excluding pension and OPEB $ 6,936 $ 6,832
Revenues before special items $ 16,829 $ 16,506
Adjusted operating income before depreciation and amortization margin 41.2% 41.4%
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02
---------------------------------------------------------------------- ------------ ------------
FREE CASH FLOW
Cash from operating activities $ 10,969 $ 10,095
Less: Capital expenditures (including network and non-network
software) (5,294) (5,980)
Dividends paid (2,115) (2,096)
---------- ----------
$ 3,560 $ 2,019
========== ==========
Unaudited 6/30/03 12/31/02
---------------------------------------------------------------------- ------------ ------------
NET DEBT
Short-term debt $ 10,083 $ 9,267
Long-term debt 38,846 44,003
Less: Cash and cash equivalents (820) (1,422)
---------- ----------
$ 48,109 $ 51,848
========== ==========
3 Mos. Ended 3 Mos. Ended
Unaudited 6/30/03 6/30/02
- --------------------------------------------------------------------- ------------ ------------
WIRELESS CASH EXPENSE PER SUBSCRIBER PER MONTH
Cost of services and sales $ 1,567 $ 1,328
Selling, general and administrative expense 1,973 1,771
Less: Equipment and other revenue (466) (422)
---------- ----------
Cash expense 3,074 2,677
Cumulative average subscribers (millions) 101.8 89.8
---------- ----------
Cash expense per subscriber $ 30.19 $ 29.82
========== ==========
Unaudited Year Ended 12/31/03
---------------------------------------------------------------------- ----------------------------------
2003 REVENUES
2002 Revenues - GAAP $ 67,304
Impact of access lines sold 623
----------
$ 66,681
==========
2003 Estimated Revenues - GAAP $ 66,681 to $ 68,014
========== ==========
Growth 0% to 2%
========== ==========
2003 DILUTED EARNINGS PER SHARE
2003 Estimated EPS - GAAP $ 2.32 to $ 2.42
Iusacell charge .33 to .33
Severance, pension and benefit charges .16 to .16
Lease impairment and other special charges .07 to .07
Cumulative effect of accounting change (.18) to (.18)
---------- ----------
2003 Estimated EPS - Before Special Items $ 2.70 to $ 2.80
========== ==========
FOOTNOTES:
A reconciliation of net debt at year-end 2003 is not available as there is no
current estimate of year-end cash and cash equivalents or components of debt.
(1) EPS totals may not add due to rounding.
14
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
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 6/30/03 6/30/02 6/30/03 6/30/02
-------------------------------------------- ------------ ------------ ------------ ------------
Debt to debt and shareowners' equity
ratio-end of period 58.8% 68.0% 58.8% 68.0%
Book value per common share $ 12.42 $ 10.50 $ 12.42 $ 10.50
Cash dividends declared per common share $ .385 $ .385 $ .770 $ .770
Common shares outstanding (in millions)
End of period 2,756 2,728 2,756 2,728
Capital expenditures (including capitalized
network and non-network software)
Domestic Telecom $ 1,733 $ 1,962 $ 3,019 $ 3,619
Domestic Wireless 989 1,269 2,096 2,088
Information Services 24 60 42 102
International 75 98 123 151
Other 7 11 14 20
--------- --------- --------- ---------
Total $ 2,828 $ 3,400 $ 5,294 $ 5,980
========= ========= ========= =========
Total employees(1) 221,139 237,140 221,139 237,140
FOOTNOTE:
(1) Prior period adjusted to reflect a comparable figure.
15
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------
(dollars in millions)
Unaudited 6/30/03 12/31/02 $ Change
----------------------------------------- --------- --------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 820 $ 1,422 $ (602)
Short-term investments 906 2,042 (1,136)
Accounts receivable, net 10,077 12,496 (2,419)
Inventories 1,245 1,497 (252)
Assets of discontinued operations 986 1,305 (319)
Prepaid expenses and other 4,497 3,331 1,166
--------- --------- ---------
Total current assets 18,531 22,093 (3,562)
--------- --------- ---------
Plant, property and equipment 179,184 176,838 2,346
Less accumulated depreciation 103,413 103,080 333
--------- --------- ---------
75,771 73,758 2,013
--------- --------- ---------
Investments in unconsolidated businesses 5,404 4,986 418
Intangible assets 47,026 46,339 687
Other assets 20,894 20,292 602
--------- --------- ---------
TOTAL ASSETS $ 167,626 $ 167,468 $ 158
========= ========= =========
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current liabilities
Debt maturing within one year $ 10,083 $ 9,267 $ 816
Accounts payable and accrued liabilities 12,573 12,642 (69)
Liabilities of discontinued operations 1,036 1,007 29
Other 5,640 5,013 627
--------- --------- ---------
Total current liabilities 29,332 27,929 1,403
--------- --------- ---------
Long-term debt 38,846 44,003 (5,157)
Employee benefit obligations 15,543 15,389 154
Deferred income taxes 21,821 19,467 2,354
Other liabilities 3,804 4,007 (203)
Minority interest 24,055 24,057 (2)
Shareowners' investment
Common stock 276 275 1
Contributed capital 25,023 24,685 338
Reinvested earnings 11,200 10,536 664
Accumulated other comprehensive loss (1,757) (2,110) 353
--------- --------- ---------
34,742 33,386 1,356
Less common stock in treasury, at cost 115 218 (103)
Less deferred compensation -
employee stock ownership plans and other 402 552 (150)
--------- --------- ---------
Total shareowners' investment 34,225 32,616 1,609
--------- --------- ---------
TOTAL LIABILITIES AND SHAREOWNERS' INVESTMENT $ 167,626 $ 167,468 $ 158
========= ========= =========
16
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------
(dollars in millions)
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02 $ Change
---------------------------------------------------------------- ------------ ------------ -------
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before discontinued operations and
cumulative effect of accounting change $ 3,176 $ (2,071) $ 5,247
Adjustments to reconcile income (loss) before
discontinued operations and
cumulative effect of accounting
change to net cash provided by
operating activities:
Depreciation and amortization expense 6,751 6,608 143
Sales of assets, net -- (220) 220
Employee retirement benefits 170 (726) 896
Deferred income taxes 752 784 (32)
Provision for uncollectible accounts 904 1,462 (558)
(Income) loss from unconsolidated businesses (394) 4,903 (5,297)
Changes in current assets and liabilities, net of
effects from acquisition/disposition of businesses (134) (801) 667
Other, net (256) 156 (412)
-------- -------- --------
Net cash provided by operating activities 10,969 10,095 874
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (including capitalized network
and non-network software) (5,294) (5,980) 686
Acquisitions, net of cash acquired, and investments (1,033) (993) (40)
Proceeds from disposition of businesses -- 770 (770)
Proceeds from spectrum payment refund -- 1,479 (1,479)
Net change in short-term investments 1,145 1,104 41
Other, net 98 129 (31)
-------- -------- --------
Net cash used in investing activities (5,084) (3,491) (1,593)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 2,815 5,554 (2,739)
Repayments of long-term borrowings and capital lease obligations (8,573) (3,920) (4,653)
Increase (decrease) in short-term obligations,
excluding current maturities 1,109 (4,623) 5,732
Dividends paid (2,115) (2,096) (19)
Proceeds from sale of common stock 471 424 47
Other, net (194) 66 (260)
-------- -------- --------
Net cash used in financing activities (6,487) (4,595) (1,892)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (602) 2,009 (2,611)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,422 932 490
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 820 $ 2,941 $ (2,121)
======== ======== ========
17
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED FINANCIAL RESULTS
---------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change
-------------------------------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES
Local services $ 4,903 $ 5,111 (4.1) $ 9,803 $10,227 (4.1)
Network access services 3,229 3,347 (3.5) 6,553 6,726 (2.6)
Long distance services 901 769 17.2 1,782 1,540 15.7
Other services 872 1,027 (15.1) 1,708 2,012 (15.1)
------- ------- ------- -------
TOTAL OPERATING REVENUES 9,905 10,254 (3.4) 19,846 20,505 (3.2)
------- ------- ------- -------
OPERATING EXPENSES
Cost of services and sales 3,413 3,340 2.2 6,936 6,692 3.6
Selling, general &
administrative expense 2,253 2,204 2.2 4,253 4,376 (2.8)
Depreciation and amortization
expense 2,300 2,400 (4.2) 4,631 4,771 (2.9)
------- ------- ------- -------
TOTAL OPERATING EXPENSES 7,966 7,944 .3 15,820 15,839 (.1)
------- ------- ------- -------
OPERATING INCOME $ 1,939 $ 2,310 (16.1) $ 4,026 $ 4,666 (13.7)
OPERATING INCOME MARGIN 19.6% 22.5% 20.3% 22.8%
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION $ 4,239 $ 4,710 (10.0) $ 8,657 $ 9,437 (8.3)
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION MARGIN 42.8% 45.9% 43.6% 46.0%
SEGMENT INCOME $ 915 $ 1,124 (18.6) $ 1,922 $ 2,281 (15.7)
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature. Also see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Operating income before depreciation and amortization margin is calculated by
dividing operating income before depreciation and amortization by total
operating revenues.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED OPERATING STATISTICS
---------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change
------------------------------ ------------ ------------ -------- ------------ ------------ --------
Switched access lines in
service (000)
Residence 36,885 38,065 (3.1) 36,885 38,065 (3.1)
Business 19,389 20,330 (4.6) 19,389 20,330 (4.6)
Public 487 557 (12.6) 487 557 (12.6)
------- ------- ------- --------
Total 56,761 58,952 (3.7) 56,761 58,952 (3.7)
Special DS0 equivalents 80,855 73,840 9.5 80,855 73,840 9.5
------- ------- ------- --------
Total voice grade equivalents (000) 137,616 132,792 3.6 137,616 132,792 3.6
------- ------- ------- --------
Resale & UNE-P lines (000) 4,999 3,678 35.9 4,999 3,678 35.9
Minutes of use from Carriers and CLECs
(in millions) 59,966 65,167 (8.0) 120,843 130,928 (7.7)
Long distance lines (000) 14,606 10,735 36.1 14,606 10,735 36.1
High capacity and digital data revenues
($ in millions)
Data transport $ 1,647 $ 1,656 (.5) $ 3,318 $ 3,307 .3
Data solutions 164 170 (3.5) 299 333 (10.2)
------- ------- ------- --------
Total revenues $ 1,811 $ 1,826 (.8) $ 3,617 $ 3,640 (.6)
------- ------- ------- --------
FOOTNOTE:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
18
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
VERIZON WIRELESS - SELECTED FINANCIAL RESULTS
---------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change
------------------------------ ------------ ------------ -------- ------------ ------------ --------
REVENUES
Service revenues $ 5,011 $ 4,369 14.7 $ 9,671 $ 8,421 14.8
Equipment and other 466 422 10.4 892 800 11.5
------ ------ ------ ------
TOTAL REVENUES 5,477 4,791 14.3 10,563 9,221 14.6
------ ------ ------ ------
OPERATING EXPENSES
Cost of services and sales 1,567 1,328 18.0 3,006 2,574 16.8
Selling, general & administrative
expense 1,973 1,771 11.4 3,839 3,400 12.9
Depreciation and amortization
expense 956 785 21.8 1,863 1,566 19.0
------ ------ ------ ------
TOTAL OPERATING EXPENSES 4,496 3,884 15.8 8,708 7,540 15.5
------ ------ ------ ------
OPERATING INCOME $ 981 $ 907 8.2 $ 1,855 $ 1,681 10.4
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION $ 1,937 $ 1,692 14.5 $ 3,718 $ 3,247 14.5
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION MARGIN 38.7% 38.7% 38.4% 38.6%
SEGMENT INCOME $ 257 $ 240 7.1 $ 475 $ 437 8.7
SELECTED OPERATING STATISTICS
Subscribers(000) 34,619 30,307 14.2 34,619 30,307 14.2
Penetration 14.8% 13.6% 14.8% 13.6%
Subscriber net adds in period(1)(000) 1,295 723 79.1 2,128 909 134.1
Total churn rate, including prepaid 1.7% 2.3% 1.9% 2.4%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature. Also see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Operating income before depreciation and amortization margin is calculated by
dividing operating income before depreciation and amortization by service
revenues.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
(1) Includes acquisitions of 68,000 subscribers in first quarter 2002 and 6,000
subscribers in first quarter 2003.
19
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
INFORMATION SERVICES - SELECTED FINANCIAL RESULTS
---------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change
--------------------------------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES $1,049 $ 936 12.1 $2,070 $1,739 19.0
OPERATING EXPENSES
Cost of services and sales 160 152 5.3 314 289 8.7
Selling, general & administrative expense 361 325 11.1 705 622 13.3
Depreciation and amortization expense 23 16 43.8 44 31 41.9
------ ------ ------ ------
TOTAL OPERATING EXPENSES 544 493 10.3 1,063 942 12.8
------ ------ ------ ------
OPERATING INCOME $ 505 $ 443 14.0 $1,007 $ 797 26.3
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION $ 528 $ 459 15.0 $1,051 $ 828 26.9
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION MARGIN 50.3% 49.0% 50.8% 47.6%
SEGMENT INCOME $ 299 $ 260 15.0 $ 599 $ 473 26.6
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. Also see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. However, prior year
results have not been adjusted for the change in accounting, effective January
1, 2003, related to recognition of directory revenues and direct costs from the
publication date method to the amortization method.
Operating income before depreciation and amortization margin is calculated by
dividing operating income before depreciation and amortization by operating
revenues.
---------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
INTERNATIONAL - SELECTED FINANCIAL RESULTS
---------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/03 6/30/02 % Change 6/30/03 6/30/02 % Change
--------------------------------------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES $ 509 $ 570 (10.7) $1,026 $1,132 (9.4)
OPERATING EXPENSES
Cost of services and sales 140 149 (6.0) 278 299 (7.0)
Selling, general & administrative expense 195 170 14.7 351 356 (1.4)
Depreciation and amortization expense 85 96 (11.5) 172 191 (9.9)
------ ------ ------ ------
TOTAL OPERATING EXPENSES 420 415 1.2 801 846 (5.3)
------ ------ ------ ------
OPERATING INCOME $ 89 $ 155 (42.6) $ 225 $ 286 (21.3)
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION $ 174 $ 251 (30.7) $ 397 $ 477 (16.8)
OPERATING INCOME BEFORE DEPRECIATION
AND AMORTIZATION MARGIN 34.2% 44.0% 38.7% 42.1%
INCOME FROM UNCONSOLIDATED BUSINESSES $ 265 $ 275 (3.6) $ 481 $ 451 6.7
SEGMENT INCOME $ 314 $ 302 4.0 $ 580 $ 533 8.8
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. Also see footnotes to the consolidated statements of
income before special items for additional discussion of these items.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
Operating income before depreciation and amortization margin is calculated by
dividing operating income before depreciation and amortization by operating
revenues.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BBLLXXDBLBBK