RNS Number:8129U
Verizon Communications
29 January 2004
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: January 29, 2004
(Date of earliest event reported)
VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8606 23-2259884
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
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
January 29, 2004 issued by Verizon Communications Inc. 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
eliminate special items and non-recurring items of revenues, expenses, gains and
losses primarily as a result of their non-operational and/or non-recurring
nature. Management believes this presentation of operating performance assists
readers in better understanding our results of operations and trends from period
to period, consistent with management's evaluation of Verizon's consolidated and
segment results of operations for a variety of internal measures including
strategic business planning, capital allocation and compensation. Management
believes that the consolidated statements of income before special items provide
current and prior period results of operations on a comparable basis as well as
provide trends that are more indicative of future operating results than GAAP
results of operations, given the non-operational and/or non-recurring nature of
the special items removed for purposes of reporting results of operations before
special items. While some of these items have been periodically reported in
Verizon's consolidated results of operations, 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. Complete
descriptions of the special items are provided in the schedules accompanying the
news release.
Management believes that free cash flow, segment free cash flow and net debt,
additional non-GAAP financial measures, are also useful to investors and other
users of our financial information in evaluating liquidity and operating
financial performance. Free cash flow, segment free cash flow and net debt are
financial measures that are commonly used by readers of financial information in
assessing financial performance, including liquidity and the company's ability
to meet obligations with available cash flows and cash balances. Management uses
free cash flow and segment free cash flow information for allocating resources
to debt repayment and for other cash investing and financing activities. The
definition of free cash flow, cash from operating activities less capital
expenditures and dividends paid to Verizon's shareowners, is readily
determinable from amounts provided in Verizon's consolidated statements of cash
flows. Segment free cash flow is defined as cash from operating activities less
capital expenditures. Details of segment cash flow are provided in the exhibit.
Total Verizon and Verizon Information Services revenues - conforming basis
provide the prior year impact of sales of 1.27 million switched access lines in
2002 (total Verizon only) and a change in directory accounting, described fully
in the exhibit, if the accounting change had occurred in the prior year. This
presentation is useful to investors and other users of our financial information
in evaluating operating financial performance consistent with the pro forma
disclosures required in the year of an accounting change, as required by GAAP.
It is management's intent to provide Non-GAAP financial information to enhance
understanding of Verizon's GAAP consolidated financial statements and should be
considered by the reader in addition to, but not instead of, the financial
statements prepared in accordance with GAAP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Verizon Communications Inc.
----------------------------------------
(Registrant)
Date: January 29, 2004 /s/ David H. Benson
-------------------- ----------------------------------------
David H. Benson
Senior Vice President and Controller
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
99 Press release and financial tables, dated January 29, 2004, issued
by Verizon Communications Inc. and contained in its Investor
Relations Bulletin.
Exhibit 99
FOR IMMEDIATE RELEASE MEDIA CONTACTS:
JAN. 29, 2004 PETER THONIS
212-395-2355
peter.thonis@verizon.com
BOB VARETTONI
212-395-7726
robert.a.varettoni@verizon.com
VERIZON REPORTS SOLID OVERALL FOURTH-QUARTER
AND YEAR-END RESULTS, BASED ON STRONG FUNDAMENTALS
MARKET-SHARE GAINS IN WIRELESS, LONG-DISTANCE AND BROADBAND
BOLSTER REVENUES AND CASH FLOW
2003 HIGHLIGHTS
Earnings Per Share:
o Fourth quarter: 53 cent fully diluted per share loss, or 58
cent fully diluted earnings per share (EPS) before special
items (non-GAAP measure)
o Year-end: $1.11 in EPS, or $2.62 EPS before special items
(non-GAAP)
Revenues:
o Fourth quarter: up 0.7 percent, or 2.6 percent with consistent
directory accounting treatment (non-GAAP)
o Year-end: up 0.7 percent, or 1.7 percent in comparable growth
as well as consistent directory accounting treatment
(non-GAAP)
Wireless:
o Fourth quarter: a record 1.5 million total net customer
additions (1.4 million retail net additions), up 54.2 percent
from last year's quarter; revenue growth of 14.6 percent;
record-low retail and total churn; strong operating income
margins
o Year-end: a record 5.0 million total net customer additions,
(4.6 million retail net additions); 37.5 million total
customers; total revenues of $22.5 billion, up 15.5 percent
over 2002
Domestic Telecom:
o More than $2 billion in annual long-distance revenues, with
in-region retail market penetration of 41 percent; 16.6
million total long-distance lines
Verizon News Release, page 2
o 2.3 million total DSL (digital subscriber lines); 203,000
fourth-quarter net additions
o Nearly 1,200 contracts with large businesses for Enterprise
Advance services
Cash Management:
o Capital expenditures of $11.9 billion, compared with $13.1
billion in 2002
o Free cash flow (non-GAAP, cash from operating activities less
capital expenditures and dividends) of $6.4 billion, up 31.4
percent compared with $4.8 billion in 2002
o Total debt of $45.4 billion, compared with $53.3 billion at
year-end 2002; Net debt (non-GAAP, gross debt less cash and
cash equivalents) of $44.7 billion, compared with $51.8
billion at year-end 2002.
Note: See the schedules accompanying this news release and
www.verizon.com/investor for reconciliations to generally accepted accounting
principles (GAAP) for the non-GAAP financial measures mentioned in this
announcement.
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced
fourth-quarter and year-end 2003 results highlighted by customer gains in
wireless, long-distance and broadband, continued solid cash flow, and overall
revenue growth.
For the fourth quarter 2003, Verizon reported a loss of $1.5 billion
(53 cents in fully diluted EPS) that includes $3.1 billion in special items,
primarily $2.9 billion in previously announced costs associated with a voluntary
separation plan under which more than 21,000 employees left the payroll in the
quarter. Excluding special items, Verizon earned $1.6 billion in the quarter, or
58 cents per share.
For the year, Verizon reported earnings of $3.1 billion ($1.11 per
share), or $7.3 billion ($2.62 per share) before special items.
STRENGTH OF BUSINESS MODEL
"In 2003, Verizon once again demonstrated the strength of its business
model," said Chairman and CEO Ivan Seidenberg. "We have been successful at
increasing our revenues, our customer base and our cash flow at the same time we
have been transforming our cost structure, our operational efficiency, and our
mix of products and services.
"We are winning customers in markets new to Verizon, such as nationwide
long-distance and sophisticated data services to large businesses. In wireless,
we are widening our industry lead. In broadband, we have aggressively added
customers in DSL while setting a stake in the ground for new growth in 2004.
Verizon has a unique leadership role to play in the new broadband and wireless
era of communications."
Verizon News Release, page 3
FOURTH-QUARTER FINANCIAL RESULTS
Verizon's fourth-quarter 2003 operating revenues were $17.3 billion, up
0.7 percent from the prior year's quarter, driven by Verizon Wireless' sixth
consecutive quarter of double-digit, year-over-year revenue increases. Wireless
service revenue grew 13.9 percent, to $5.4 billion, from $4.7 billion in the
fourth quarter 2002. Total Verizon Wireless revenue, which includes equipment
and other revenue, grew 14.6 percent to $6.0 billion, from $5.2 billion in the
fourth quarter 2002.
Beginning in 2003, results from Verizon's directory publishing unit
have been reported using the amortization method of accounting (see Information
Services section below). Applying consistent accounting treatment to directory
revenues, Verizon's consolidated revenues increased 2.6 percent in the fourth
quarter 2003, compared with the fourth quarter 2002.
Total operating expenses were $19.4 billion in the fourth quarter 2003
and include special items as well as costs, such as a 3 percent lump-sum
payment, associated with contract agreements covering most of Verizon's
unionized workforce.
Fourth-quarter special items included a $2.9 billion severance, pension
and benefit charge for the voluntary separation plan, and $0.2 billion for other
charges associated with environmental remediation programs and leasing
operations partially offset by net gains from sales of investments.
YEAR-END FINANCIAL RESULTS
For the year, operating revenues totaled $67.8 billion in 2003, a 0.7
percent increase from 2002 on a reported basis and a 1.6 percent increase on a
comparable basis. Revenues, operating expenses and statistics described on a
comparable basis exclude the effects of 1.27 million switched access lines that
were sold during 2002. Applying consistent accounting treatment to directory
revenues, Verizon's comparable revenues increased 1.7 percent in 2003, compared
with 2002.
Reported 2003 earnings of $3.1 billion included net charges of $4.2
billion. These net charges include special gains of $0.5 billion related to
accounting changes and the net proceeds from sales of investments. These gains
were more than offset by charges, including $3.4 billion related to severance,
pension and benefit costs; $0.9 billion related to Verizon's decision to sell
Verizon News Release, page 4
its consolidated interest in Mexican wireless carrier Grupo Iusacell; and $0.4
billion in other special items.
Reported operating expenses were $60.3 billion in 2003.
DEBT REDUCTION AND CASH FLOW GAINS
Total debt decreased 14.8 percent to $45.4 billion at year-end 2003,
compared with $53.3 billion at year-end 2002. Net debt was $44.7 billion at
year-end 2003, compared with $51.8 billion at year-end 2002.
Net cash provided by operating activities was $22.5 billion in 2003,
compared with $22.1 billion in 2002, and capital expenditures totaled $11.9
billion in 2003, compared with $13.1 billion in 2002. With $4.2 billion in
dividends paid in both years, free cash flow was $6.4 billion in 2003, compared
with $4.8 billion in 2002.
OPERATIONAL GROWTH
Verizon Wireless added nearly 1.5 million net subscribers in the fourth
quarter and 5.0 million net subscribers for the year, the highest quarterly and
annual net adds in the company's history. Customers totaled 37.5 million at
year-end, up 15.5 percent over year-end 2002. In addition to its record net
subscribers, Verizon Wireless sustained all-around strong performance for the
quarter and for the year in revenue growth, profitability, record low churn and
efficiency gains.
Verizon's revenue from interLATA long-distance services totaled more
than $2 billion in 2003, as the company added a net of 736,000 long-distance
lines in the fourth quarter 2003. Verizon ended the year with more than 16.6
million long-distance lines -- a net gain of about 4.2 million lines, or 33.3
percent, compared with the 12.5 million lines in service at year-end 2002.
Verizon also added a net of 203,000 DSL lines in the fourth quarter
2003, the company's largest quarterly gain in DSL lines in two years. Verizon
ended the year with more than 2.3 million DSL lines, representing a net of
649,000 additional DSL lines since year-end 2002, a growth rate of 38.9 percent.
In the fourth quarter, Verizon continued to roll out Verizon Freedom
plans, which help retain and win back customers by offering local services with
various combinations of long-
Verizon News Release, page 5
distance, wireless and Internet access in a discounted bundle available on one
bill. In 2003, the company launched Verizon Freedom plans in 17 consumer
markets, covering more than 85 percent of the company's consumer access-line
base, and in eight business markets, covering more than 69 percent of the
company's business access-line base.
As of year-end, Verizon had entered into nearly 1,200 contracts with
large business customers for Enterprise Advance services.
Further details about Verizon's 2004 financial and operational outlook
will be announced in a news release later today.
BUSINESS SEGMENT HIGHLIGHTS
Following are fourth-quarter and year-end 2003 highlights from
Verizon's four business segments.
DOMESTIC TELECOM
(Note: Current and prior periods exclude the effects of access lines
sold in 2002.)
o Operating revenues for all long-distance services increased 29.5
percent to $1.0 billion in the fourth quarter 2003, compared with $0.8
billion in the fourth quarter 2002. For the year, these revenues
increased 19.5 percent to $3.8 billion in 2003, compared with $3.2
billion in 2002. Revenues in this category include intraLATA toll as
well as interLATA long-distance.
o Approximately 41 percent of Verizon's local wireline customers have
chosen Verizon as their long-distance carrier.
o As of year-end, approximately 48 percent of Verizon residential
customers have purchased local services in combination with either
Verizon long-distance or Verizon DSL, or both.
o The average revenue per month per Verizon wireline customer increased
nearly 7 percent in the fourth quarter 2003, compared with the fourth
quarter 2002.
o Total revenues for high-capacity and data services were $1.9 billion in
the fourth quarter, slightly higher than fourth quarter 2002 and driven
by growth in revenues from DSL.
o By year-end, approximately 80 percent of Verizon's 55.5 million access
lines qualified for DSL service -- meeting the company's target.
o Continuing a focus on cash management and financial controls, Domestic
Telecom's expenses for uncollectible accounts decreased 51 percent and
days sales outstanding decreased from 68 to 61, comparing the fourth
quarter 2003 with the fourth quarter 2002. For the year, cash from
operating activities, net of capital expenditures (non-GAAP, segment
free cash flow) increased by 55 percent to $5.5 billion, comparing 2003
with 2002.
Verizon News Release, page 6
o Primarily as a result of the voluntary separation plan in the fourth
quarter, the number of employees in the Domestic Telecom business unit
was reduced by more than 22,500 in 2003.
o In 2003, Verizon's Enterprise Solutions Group built out its fiber-optic
network to serve 34 major business markets nationwide, offering
advanced data services to local and long-distance Enterprise customers.
o In the fourth quarter 2003, Verizon took another step forward in its
plan to begin deploying fiber-to-the-premises systems this year by
completing the selection of equipment manufacturers and suppliers for
the project. The company has also unveiled plans for leadership in the
emerging broadband industry, announcing that it will accelerate the
evolution of its nationwide wireline network to packet-switching
technology.
VERIZON WIRELESS
o Verizon Wireless' retail customer base grew nearly 15 percent
year-over-year and represented 36.0 million of the company's 37.5
million total customers at the end of the fourth quarter. Retail gross
additions were up 10 percent over the fourth quarter 2002, while retail
net additions were up 48.5 percent -- totaling approximately 1.4
million of the company's 1.5 million net additions.
o Record-low churn for the quarter and the year drove record net-add
performance. The quarter's churn performance was even more impressive
given the introduction of local number portability in November. Retail
churn and total churn, which includes wholesale, were 1.7 percent for
the quarter. Churn in the retail post-pay segment, which is 91 percent
of the company's base, was 1.3 percent for the quarter. The company
sustained these customer loyalty levels throughout 2003, with total
churn of 1.8 percent for the year.
o Average monthly service revenue per subscriber was $49 for the fourth
quarter and for the year. Service revenue for the quarter was $5.4
billion, up 13.9 percent. Service revenue for the year was $20.3
billion, up 14.6 percent.
o The company continued its industry-leading low-cost structure, as cash
expense per subscriber decreased slightly over the prior-year quarter
and over the prior sequential quarter. For the year, cash expense per
subscriber increased less than 1 percent, a particularly significant
achievement given the record volume of new subscribers.
o Quarterly operating income margin remained strong at 18.5 percent.
Quarterly operating income increased 11.7 percent year-over-year to
$1.1 billion. Similarly strong, operating income margin for the year
was 18.2 percent, on annual operating income of $4.1 billion. Segment
free cash flow was $2.9 billion in 2003, a 39 percent increase compared
with 2002.
Verizon News Release, page 7
o Demand for the company's growing family of data services continued to
build during the fourth quarter, with data services accounting for more
than 3 percent of the fourth quarter's total service revenue. Data
services delivered more than 2 percent of total service revenue in
2003, up from 1 percent in 2002.
o Text messaging grew to more than 550 million text messages a month; Get
It Now(SM) BREW-based downloadable ringtones, games and exclusive
content grew to 5 million downloads a month; and picture messaging grew
to 3 million picture messages a month. Driving this growth,
approximately one-fifth of all customers now have color handsets, and
more than 50 percent have 1X-enabled phones. New devices and
applications launched during the quarter included the Microsoft(R)
Windows Mobile(TM)- based Samsung i600 Smartphone, and Mobile IM
service with access to MSN Messenger, AOL IM and, soon, Yahoo!
Messenger.
o In a major announcement earlier this month, the company said it will
immediately begin expanding its BroadbandAccess third-generation EV-DO
network nationally, with service expected to be available in many
cities this summer. BroadbandAccess, the fastest wireless wide-area
data connection available with average user speeds of 300-500 kbps, is
already offered in San Diego and Washington, D.C. The company plans to
spend $1 billion over the next two years, in addition to its ongoing
annual capital program, to deploy EV-DO nationally.
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) revenue decreased 26 percent and 4
percent over the fourth quarter and the year, respectively, primarily
due to the change from the publication-date method to the amortization
method of accounting and the elimination of revenue related to sales of
businesses. Excluding the effects of these items, revenues were
essentially flat for both presented periods.
o VIS' domestic Internet directory, SuperPages.com(TM), continues to
achieve strong growth as demonstrated by a 33 percent increase in
revenue and a 36 percent increase in searches over 2002.
o Segment free cash flow was $1.1 billion in 2003, a 10 percent increase
compared with 2002.
Verizon News Release, page 8
INTERNATIONAL
o Equity in earnings of unconsolidated businesses increased to $302
million in the fourth quarter, bringing full-year equity in earnings of
unconsolidated businesses to $1.1 billion, compared with $179 million
and $644 million in the fourth quarter and full-year 2002,
respectively. A large portion of these increases were driven by Italian
tax benefits from a reorganization and other non-operational income at
Vodafone Omnitel, favorable foreign exchange rates, and improving
operational performance on a year-to-date basis, partially offset by
lower year-to-date gains on sales of investments.
o Fourth-quarter revenues were $477 million, bringing full-year revenues
to $1.9 billion, compared with $549 million and $2.2 billion in the
fourth quarter and full-year 2002, respectively. The revenue decline
was primarily the result of deteriorating foreign exchange rates in the
Dominican Republic.
A Fortune 10 company, Verizon Communications (NYSE:VZ) is one of the
world's leading providers of communications services, with approximately $68
billion in annual revenues. Verizon companies are the largest providers of
wireline and wireless communications in the United States. Verizon is also the
largest directory publisher in the world, as measured by directory titles and
circulation. Verizon's international presence includes wireline and wireless
communications operations and investments, primarily in the Americas and Europe.
For more information, visit www.verizon.com.
####
VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches and
biographies, media contacts 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 and industry conditions and
labor matters, including workforce levels and labor negotiations, and any
resulting financial and/or operational impact, in the markets served by us or by
companies in which we have substantial investments; material changes in
available technology; technology substitution; an adverse change in the ratings
afforded our debt securities by nationally accredited ratings organizations; the
final results of federal and state regulatory proceedings concerning our
provision of retail and wholesale services and judicial review of those results;
the effects of competition in our markets; our ability to satisfy regulatory
merger conditions; the ability of Verizon Wireless to continue to obtain
sufficient spectrum resources; and changes in our accounting assumptions that
regulatory agencies, including the SEC, may require or that result from changes
in the accounting rules or their application, which could result in an impact on
earnings.
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VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 % Change 12/31/03 12/31/02 % Change
------------ ------------ --------- ------------- ------------- ---------
OPERATING REVENUES $ 17,278 $ 17,154 .7 $ 67,752 $ 67,304 .7
OPERATING EXPENSES
Cost of services and sales 5,877 5,016 17.2 21,783 19,911 9.4
Selling, general & administrative
expense 10,102 5,951 69.8 24,999 21,846 14.4
Depreciation and amortization
expense 3,447 3,395 1.5 13,617 13,290 2.5
Sales of businesses, net -- -- * (141) (2,747) (94.9)
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 19,426 14,362 35.3 60,258 52,300 15.2
OPERATING INCOME (LOSS) (2,148) 2,792 * 7,494 15,004 (50.1)
Equity in earnings (loss) of
unconsolidated businesses 605 129 * 1,278 (1,547) *
Income (loss) from other unconsolidated
businesses 172 (116) * 331 (2,857) *
Other income and (expense), net 15 82 (81.7) 38 192 (80.2)
Interest expense (665) (798) (16.7) (2,797) (3,130) (10.6)
Minority interest (451) (382) 18.1 (1,583) (1,404) 12.7
--------- --------- --------- ---------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME
TAXES, DISCONTINUED
OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE (2,472) 1,707 * 4,761 6,258 (23.9)
Income tax benefit (provision) 1,014 610 66.2 (1,252) (1,597) (21.6)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (1,458) 2,317 * 3,509 4,661 (24.7)
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- (24) (100.0) (957) (74) *
Income tax benefit (provision) -- (3) (100.0) 22 (12) *
--------- --------- --------- ---------
Loss on discontinued operations -- (27) (100.0) (935) (86) *
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX -- -- * 503 (496) *
--------- --------- --------- ---------
NET INCOME (LOSS) $ (1,458) $ 2,290 * $ 3,077 $ 4,079 (24.6)
========= ========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE $ (.53) $ .84 * $ 1.12 $ 1.49 (24.8)
Weighted average number of common
shares (in millions) 2,765 2,740 2,756 2,729
DILUTED EARNINGS (LOSS) PER SHARE(1) $ (.53) $ .83 * $ 1.11 $ 1.49 (25.5)
Weighted average number of common
shares-assuming dilution
(in millions) 2,765 2,772 2,789 2,745
FOOTNOTES:
(1) Diluted Earnings (Loss) per Share include income related to share
dilution (exchangeable equity interests) of $6 million and $21 million
for the fourth quarter and year-to-date 2003, respectively, $4 million
and $7 million for the fourth quarter and year-to-date 2002,
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 dilutive
securities in the fourth quarter of 2003, 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
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VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME BEFORE SPECIAL ITEMS
--------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 % Change 12/31/03 12/31/02 % Change
------------ ------------ --------- ------------- ------------- ---------
OPERATING REVENUES(1)
Domestic Telecom $ 9,905 $ 10,066 (1.6) $ 39,602 $ 40,839 (3.0)
Domestic Wireless 5,984 5,223 14.6 22,489 19,473 15.5
Information Services 1,013 1,374 (26.3) 4,114 4,287 (4.0)
International 477 549 (13.1) 1,949 2,219 (12.2)
Other (101) (58) 74.1 (402) (137) 193.4
--------- --------- --------- ---------
TOTAL OPERATING REVENUES 17,278 17,154 .7 67,752 66,681 1.6
--------- --------- --------- ---------
OPERATING EXPENSES(1)
Cost of services and sales 5,776 4,956 16.5 21,682 19,632 10.4
Selling, general & administrative expense 4,909 4,581 7.2 18,781 17,925 4.8
Depreciation and amortization expense 3,447 3,395 1.5 13,617 13,290 2.5
Sales of businesses, net -- -- * (141) -- *
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 14,132 12,932 9.3 53,939 50,847 6.1
--------- --------- --------- ---------
OPERATING INCOME 3,146 4,222 (25.5) 13,813 15,834 (12.8)
Operating income impact of operations sold(1) -- -- * -- 382 (100.0)
Equity in earnings of unconsolidated businesses 257 146 76.0 930 515 80.6
Income (loss) from other unconsolidated
businesses (4) 6 * 155 218 (28.9)
Other income and (expense), net 15 68 (77.9) 99 234 (57.7)
Interest expense (665) (798) (16.7) (2,797) (3,130) (10.6)
Minority interest (451) (398) 13.3 (1,583) (1,467) 7.9
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND DISCONTINUED OPERATIONS 2,298 3,246 (29.2) 10,617 12,586 (15.6)
Provision for income taxes (703) (1,030) (31.7) (3,335) (4,140) (19.4)
--------- --------- --------- ---------
INCOME BEFORE DISCONTINUED OPERATIONS 1,595 2,216 (28.0) 7,282 8,446 (13.8)
DISCONTINUED OPERATIONS
Income (loss) from operations of Iusacell -- (22) (100.0) 1 (71) *
Income tax benefit (provision) -- (3) (100.0) (4) (12) (66.7)
--------- --------- --------- ---------
Loss on discontinued operations -- (25) (100.0) (3) (83) (96.4)
--------- --------- --------- ---------
NET INCOME BEFORE SPECIAL ITEMS $ 1,595 $ 2,191 (27.2) $ 7,279 $ 8,363 (13.0)
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ .58 $ .80 (27.5) $ 2.64 $ 3.06 (13.7)
Weighted average number of common
shares (in millions) 2,765 2,740 2,756 2,729
DILUTED ADJUSTED EARNINGS PER SHARE $ .58 $ .79 (26.6) $ 2.62 $ 3.05 (14.1)
Weighted average number of common
shares-assuming dilution (in millions) 2,765 2,772 2,789 2,745
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. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
12/31/03 12/31/02 12/31/03 12/31/02
------------ ------------ ------------- -------------
Revenues $ -- $ -- $ -- $ 623
Expenses $ -- $ -- $ -- $ 241
* Not meaningful
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS
--------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
SPECIAL AND NON-RECURRING ITEMS
--------------------------------------------
3 Mos. Ended 3 Mos. Ended
12/31/03 Severance, Sales of 12/31/03
Reported Pension and Other Special Investments, Before Special
Unaudited (GAAP) Benefit Charges Items Net Items
OPERATING REVENUES $ 17,278 $ -- $ -- $ -- $ 17,278
OPERATING EXPENSES
Cost of services and sales 5,877 (101) -- -- 5,776
Selling, general & administrative expense 10,102 (4,594) (299) (300) 4,909
Depreciation and amortization expense 3,447 -- -- -- 3,447
Sales of businesses, net -- -- -- -- --
--------- --------- --------- --------- ---------
TOTAL OPERATING EXPENSES 19,426 (4,695) (299) (300) 14,132
--------- --------- --------- --------- ---------
OPERATING INCOME (LOSS) (2,148) 4,695 299 300 3,146
Equity in earnings of unconsolidated
businesses 605 -- -- (348) 257
Income (loss) from other unconsolidated
businesses 172 -- -- (176) (4)
Other income and (expense), net 15 -- -- -- 15
Interest expense (665) -- -- -- (665)
Minority interest (451) -- -- -- (451)
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES, DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,472) 4,695 299 (224) 2,298
Income tax benefit (provision) 1,014 (1,813) (84) 180 (703)
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,458) 2,882 215 (44) 1,595
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- -- -- -- --
Income tax benefit (provision) -- -- -- -- --
--------- --------- --------- --------- ---------
Loss on discontinued operations -- -- -- -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX -- -- -- -- --
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ (1,458) $ 2,882 $ 215 $ (44) $ 1,595
========= ========= ========= ========= =========
BASIC EARNINGS (LOSS) PER COMMON SHARE(1) $ (.53) $ 1.04 $ .08 $ (.02) $ .58
DILUTED EARNINGS (LOSS) PER COMMON SHARE(1) $ (.53) $ 1.04 $ .08 $ (.02) $ .58
SPECIAL AND NON-RECURRING ITEMS
-------------------------------------------------------
3 Mos. Ended
12/31/02 Investment- Severance,
Reported Transition Related Pension and Other Special Tax
Unaudited (GAAP) Costs Charges Benefit Charges Items Benefits
------------ ---------- ----------- --------------- ------------- ---------
OPERATING REVENUES $ 17,154 $ -- $ -- $ -- $ -- $ --
OPERATING EXPENSES
Cost of services and sales 5,016 (66) -- (1) 7 --
Selling, general & administrative expense 5,951 (152) (274) (962) 18 --
Depreciation and amortization expense 3,395 -- -- -- -- --
Sales of businesses, net -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
TOTAL OPERATING EXPENSES 14,362 (218) (274) (963) 25 --
-------- -------- -------- -------- -------- --------
OPERATING INCOME 2,792 218 274 963 (25) --
Operating income impact of operations sold -- -- -- -- -- --
Equity in earnings of unconsolidated
businesses 129 -- -- 17 -- --
Income (loss) from other unconsolidated
businesses (116) -- 122 -- -- --
Other income and (expense), net 82 -- -- -- (14) --
Interest expense (798) -- -- -- -- --
Minority interest (382) (10) -- (6) -- --
-------- -------- -------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,707 208 396 974 (39) --
Income tax benefit (provision) 610 (79) (149) (372) 81 (1,121)
-------- -------- -------- -------- -------- --------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 2,317 129 247 602 42 (1,121)
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (24) -- -- 2 -- --
Income tax provision (3) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Loss on discontinued operations (27) -- -- 2 -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET INCOME $ 2,290 $ 129 $ 247 $ 604 $ 42 $ (1,121)
======== ======== ======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE(1) $ .84 $ .05 $ .09 $ .22 $ .02 $ (.41)
DILUTED EARNINGS PER COMMON SHARE(1) $ .83 $ .05 $ .09 $ .22 $ .02 $ (.40)
3 Mos. Ended
12/31/02
Before Special
Unaudited Items
-------------
OPERATING REVENUES $ 17,154
OPERATING EXPENSES
Cost of services and sales 4,956
Selling, general & administrative expense 4,581
Depreciation and amortization expense 3,395
Sales of businesses, net --
--------
TOTAL OPERATING EXPENSES 12,932
--------
OPERATING INCOME 4,222
Operating income impact of operations sold --
Equity in earnings of unconsolidated businesses 146
Income (loss) from other unconsolidated businesses 6
Other income and (expense), net 68
Interest expense (798)
Minority interest (398)
--------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 3,246
Income tax benefit (provision) (1,030)
--------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 2,216
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (22)
Income tax provision (3)
--------
Loss on discontinued operations (25)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX --
--------
NET INCOME $ 2,191
========
BASIC EARNINGS PER COMMON SHARE(1) $ .80
DILUTED EARNINGS PER COMMON SHARE(1) $ .79
FOOTNOTE:
(1) EPS totals may not add across due to rounding.
NOTE: See www.verizon.com/investor for a reconciliation of other non-GAAP
measures included in this Quarterly Bulletin.
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS
--------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-----------------------------------------------
12 Mos. Ended Severance,
12/31/03 Pension and
Reported Iusacell Benefit Other Special
Unaudited (GAAP) Charge Charges Items
--------- ------------- ---------- ----------- -------------
OPERATING REVENUES $ 67,752 $ -- $ -- $ --
OPERATING EXPENSES
Cost of services and sales 21,783 -- (101) --
Selling, general & administrative expense 24,999 -- (5,422) (496)
Depreciation and amortization expense 13,617 -- -- --
Sales of businesses, net (141) -- -- --
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 60,258 -- (5,523) (496)
--------- --------- --------- ---------
OPERATING INCOME 7,494 -- 5,523 496
Equity in earnings of unconsolidated businesses 1,278 -- -- --
Income from other unconsolidated businesses 331 -- -- --
Other income and (expense), net 38 -- -- 61
Interest expense (2,797) -- -- --
Minority interest (1,583) -- -- --
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES, DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,761 -- 5,523 557
Provision for income taxes (1,252) -- (2,125) (138)
--------- --------- --------- ---------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,509 -- 3,398 419
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (957) 957 1 --
Income tax benefit (provision) 22 (26) -- --
--------- --------- --------- ---------
Loss on discontinued operations (935) 931 1 --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX 503 -- -- --
--------- --------- --------- ---------
NET INCOME $ 3,077 $ 931 $ 3,399 $ 419
========= ========= ========= =========
BASIC EARNINGS PER COMMON SHARE(1) $ 1.12 $ .34 $ 1.23 $ .15
DILUTED EARNINGS PER COMMON SHARE(1) $ 1.11 $ .33 $ 1.22 $ .15
Special and Non-Recurring Items
----------------------------------
12 Mos. Ended
Cumulative Effect Sales of 12/31/03
of Accounting Investments, Before Special
Unaudited Change Net Items
--------- ----------------- ------------ -------------
OPERATING REVENUES $ -- $ -- $ 67,752
OPERATING EXPENSES
Cost of services and sales -- -- 21,682
Selling, general & administrative expense -- (300) 18,781
Depreciation and amortization expense -- -- 13,617
Sales of businesses, net -- -- (141)
--------- --------- ---------
TOTAL OPERATING EXPENSES -- (300) 53,939
--------- --------- ---------
OPERATING INCOME -- 300 13,813
Equity in earnings of unconsolidated businesses -- (348) 930
Income from other unconsolidated businesses -- (176) 155
Other income and (expense), net -- -- 99
Interest expense -- -- (2,797)
Minority interest -- -- (1,583)
--------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES, DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- (224) 10,617
Provision for income taxes -- 180 (3,335)
--------- --------- ---------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- (44) 7,282
DISCONTINUED OPERATIONS
Loss from operations of Iusacell -- -- 1
Income tax benefit (provision) -- -- (4)
--------- --------- ---------
Loss on discontinued operations -- -- (3)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX (503) -- --
--------- --------- ---------
NET INCOME $ (503) $ (44) $ 7,279
========= ========= =========
BASIC EARNINGS PER COMMON SHARE(1) $ (.18) $ (.02) $ 2.64
DILUTED EARNINGS PER COMMON SHARE(1) $ (.18) $ (.02) $ 2.62
Special and Non-Recurring Items
---------------------------------------------------
12 Mos. Ended
12/31/02 Sales of Impact of Investment-
Reported Businesses and Transition Operations Related
Unaudited (GAAP) Investments, Net Costs Sold Charges
--------- ------------- ---------------- ------------ ------------ ------------
OPERATING REVENUES $ 67,304 $ -- $ -- $ (623) $ --
OPERATING EXPENSES
Cost of services and sales 19,911 -- (143) (142) --
Selling, general & administrative expense 21,846 -- (367) (99) (732)
Depreciation and amortization expense 13,290 -- -- -- --
Sales of businesses, net (2,747) 2,747 -- -- --
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 52,300 2,747 (510) (241) (732)
------------ ------------ ------------ ------------ ------------
OPERATING INCOME 15,004 (2,747) 510 (382) 732
Operating income impact of operations sold -- -- -- 382 --
Equity in earnings (loss) of unconsolidated
businesses (1,547) -- -- -- 2,012
Income (loss) from other unconsolidated
businesses (2,857) (383) -- -- 3,458
Other income and (expense), net 192 -- -- -- --
Interest expense (3,130) -- -- -- --
Minority interest (1,404) -- (43) -- --
------------ ------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 6,258 (3,130) 467 -- 6,202
Income tax provision (1,597) 1,235 (179) -- (550)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 4,661 (1,895) 288 -- 5,652
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (74) -- -- -- --
Income tax provision (12) -- -- -- --
------------ ------------ ------------ ------------ ------------
Loss on discontinued operations (86) -- -- -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX (496) -- -- -- --
------------ ------------ ------------ ------------ ------------
NET INCOME $ 4,079 $ (1,895) $ 288 $ -- $ 5,652
============ ============ ============ ============ ============
BASIC EARNINGS PER COMMON SHARE(1) $ 1.49 $ (.69) $ .11 $ -- $ 2.07
DILUTED EARNINGS PER COMMON SHARE(1) $ 1.49 $ (.69) $ .10 $ -- $ 2.06
Special and Non-Recurring Items
------------------------------------------------------------------
Cumulative
Severance, Effect of
Pension and NorthPoint Other Special Tax Accounting
Unaudited Benefit Charges Settlement Items Benefits Change
--------- --------------- ------------ ------------- ------------ ------------
OPERATING REVENUES $ -- $ -- $ -- $ -- $ --
OPERATING EXPENSES
Cost of services and sales (1) -- 7 -- --
Selling, general & administrative expense (1,948) (175) (600) -- --
Depreciation and amortization expense -- -- -- -- --
Sales of businesses, net -- -- -- -- --
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES (1,949) (175) (593) -- --
------------ ------------ ------------ ------------ ------------
OPERATING INCOME 1,949 175 593 -- --
Operating income impact of operations sold -- -- -- -- --
Equity in earnings (loss) of unconsolidated
businesses 59 -- (9) -- --
Income (loss) from other unconsolidated
businesses -- -- -- -- --
Other income and (expense), net -- -- 42 -- --
Interest expense -- -- -- -- --
Minority interest (20) -- -- -- --
------------ ------------ ------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,988 175 626 -- --
Income tax provision (727) (61) (157) (2,104) --
------------ ------------ ------------ ------------ ------------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 1,261 114 469 (2,104) --
DISCONTINUED OPERATIONS
Loss from operations of Iusacell 3 -- -- -- --
Income tax provision -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Loss on discontinued operations 3 -- -- -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX -- -- -- -- 496
------------ ------------ ------------ ------------ ------------
NET INCOME $ 1,264 $ 114 $ 469 $ (2,104) $ 496
============ ============ ============ ============ ============
BASIC EARNINGS PER COMMON SHARE(1) $ .46 $ .04 $ .17 $ (.77) $ .18
DILUTED EARNINGS PER COMMON SHARE(1) $ .46 $ .04 $ .17 $ (.77) $ .18
12 Mos. Ended
12/31/02
Before Special
Unaudited Items
--------- --------------
OPERATING REVENUES $ 66,681
OPERATING EXPENSES
Cost of services and sales 19,632
Selling, general & administrative expense 17,925
Depreciation and amortization expense 13,290
Sales of businesses, net --
------------
TOTAL OPERATING EXPENSES 50,847
------------
OPERATING INCOME 15,834
Operating income impact of operations sold 382
Equity in earnings (loss) of unconsolidated businesses 515
Income (loss) from other unconsolidated businesses 218
Other income and (expense), net 234
Interest expense (3,130)
Minority interest (1,467)
------------
INCOME BEFORE PROVISION FOR INCOME TAXES,
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 12,586
Income tax provision (4,140)
------------
INCOME BEFORE DISCONTINUED OPERATIONS
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 8,446
DISCONTINUED OPERATIONS
Loss from operations of Iusacell (71)
Income tax provision (12)
------------
Loss on discontinued operations (83)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF TAX --
------------
NET INCOME $ 8,363
============
BASIC EARNINGS PER COMMON SHARE(1) $ 3.06
DILUTED EARNINGS PER COMMON SHARE(1) $ 3.05
FOOTNOTE:
(1) EPS totals may not add across due to rounding.
NOTE: See www.verizon.com/investor for a reconciliation of other non-GAAP
measures included in this Quarterly Bulletin.
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
SELECTED FINANCIAL AND OPERATING STATISTICS
--------------------------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 12/31/03 12/31/02
--------- ------------ ------------ ------------- -------------
Debt to debt and shareowners' equity ratio-end of period 57.6% 62.0% 57.6% 62.0%
Book value per common share $ 12.09 $ 11.89 $ 12.09 $ 11.89
Cash dividends declared per common share $ .385 $ .385 $ 1.54 $ 1.54
Common shares outstanding (in millions)
End of period 2,768 2,743 2,768 2,743
Capital expenditures (including capitalized
network and non-network software)
Domestic Telecom $ 2,055 $ 2,670 $ 6,820 $ 8,004
Domestic Wireless 1,511 1,388 4,590 4,414
Information Services 29 32 84 167
International 136 152 358 421
Other 11 25 32 55
---------- ---------- ---------- ----------
Total $ 3,742 $ 4,267 $ 11,884 $ 13,061
========== ========== ========== ==========
Total employees(1) 203,065 227,813 203,065 227,813
FOOTNOTE:
(1) Prior period adjusted to reflect a comparable figure.
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
(dollars in millions)
Unaudited 12/31/03 12/31/02 $ Change
--------- ---------- ---------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 699 $ 1,422 $ (723)
Short-term investments 2,172 2,042 130
Accounts receivable, net 9,905 12,496 (2,591)
Inventories 1,283 1,497 (214)
Assets of discontinued operations -- 1,305 (1,305)
Prepaid expenses and other 4,234 3,331 903
---------- ---------- ----------
Total current assets 18,293 22,093 (3,800)
---------- ---------- ----------
Plant, property and equipment 180,975 176,838 4,137
Less accumulated depreciation 105,659 103,080 2,579
---------- ---------- ----------
75,316 73,758 1,558
---------- ---------- ----------
Investments in unconsolidated businesses 5,789 4,986 803
Wireless licenses 40,907 40,038 869
Goodwill 1,389 1,339 50
Other intangible assets, net 4,733 4,962 (229)
Other assets 19,541 20,292 (751)
---------- ---------- ----------
TOTAL ASSETS $ 165,968 $ 167,468 $ (1,500)
========== ========== ==========
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current liabilities
Debt maturing within one year $ 5,967 $ 9,267 $ (3,300)
Accounts payable and accrued liabilities 14,699 12,642 2,057
Liabilities of discontinued operations -- 1,007 (1,007)
Other 5,904 5,013 891
---------- ---------- ----------
Total current liabilities 26,570 27,929 (1,359)
---------- ---------- ----------
Long-term debt 39,413 44,003 (4,590)
Employee benefit obligations 16,759 15,389 1,370
Deferred income taxes 21,708 19,467 2,241
Other liabilities 3,704 4,007 (303)
Minority interest 24,348 24,057 291
Shareowners' investment
Common stock 277 275 2
Contributed capital 25,363 24,685 678
Reinvested earnings 9,409 10,536 (1,127)
Accumulated other comprehensive loss (1,250) (2,110) 860
---------- ---------- ----------
33,799 33,386 413
Less common stock in treasury, at cost 115 218 (103)
Less deferred compensation -
employee stock ownership plans and other 218 552 (334)
---------- ---------- ----------
Total shareowners' investment 33,466 32,616 850
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREOWNERS' INVESTMENT $ 165,968 $ 167,468 $ (1,500)
========== ========== ==========
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
(dollars in millions)
12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 $ Change
--------- ------------- ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Income before discontinued operations and
cumulative effect of accounting change $ 3,509 $ 4,661 $ (1,152)
Adjustments to reconcile income before discontinued operations and
cumulative effect of accounting change to net cash provided by
operating activities:
Depreciation and amortization expense 13,617 13,290 327
Sales of businesses, net (141) (2,747) 2,606
Employee retirement benefits 3,048 (501) 3,549
Deferred income taxes 826 1,704 (878)
Provision for uncollectible accounts 1,803 2,899 (1,096)
(Income) loss from unconsolidated businesses (1,609) 4,404 (6,013)
Changes in current assets and liabilities, net of
effects from acquisition/disposition of businesses 1,726 (1,581) 3,307
Other, net (297) (30) (267)
------------ ------------ ------------
Net cash provided by operating activities 22,482 22,099 383
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (including capitalized network
and non-network software) (11,884) (13,061) 1,177
Acquisitions, net of cash acquired, and investments (1,162) (1,088) (74)
Proceeds from disposition of businesses 229 4,638 (4,409)
Proceeds from spectrum payment refund -- 1,740 (1,740)
Net change in short-term and other current investments (120) (216) 96
Other, net 691 1,187 (496)
------------ ------------ ------------
Net cash used in investing activities (12,246) (6,800) (5,446)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 4,653 7,820 (3,167)
Repayments of long-term borrowings and capital lease obligations (10,759) (8,391) (2,368)
Decrease in short-term obligations, excluding current maturities (1,330) (11,024) 9,694
Dividends paid (4,239) (4,200) (39)
Proceeds from sale of common stock 839 915 (76)
Other, net (123) 71 (194)
------------ ------------ ------------
Net cash used in financing activities (10,959) (14,809) 3,850
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (723) 490 (1,213)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,422 932 490
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 699 $ 1,422 $ (723)
============ ============ ============
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED FINANCIAL RESULTS
--------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 % Change 12/31/03 12/31/02 % Change
--------- ------------ ------------- -------- ------------- --------- --------
OPERATING REVENUES
Local services $ 4,825 $ 4,906 (1.7) $ 19,454 $ 20,271 (4.0)
Network access services 3,073 3,383 (9.2) 12,719 13,427 (5.3)
Long distance services 1,006 777 29.5 3,788 3,170 19.5
Other services 1,001 1,000 .1 3,641 3,971 (8.3)
--------- --------- --------- ---------
TOTAL OPERATING REVENUES 9,905 10,066 (1.6) 39,602 40,839 (3.0)
--------- --------- --------- ---------
OPERATING EXPENSES
Cost of services and sales 3,893 3,199 21.7 14,708 13,390 9.8
Selling, general &
administrative
expense 2,195 2,349 (6.6) 8,517 9,048 (5.9)
Depreciation and
amortization expense 2,290 2,366 (3.2) 9,217 9,456 (2.5)
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 8,378 7,914 5.9 32,442 31,894 1.7
--------- --------- --------- ---------
OPERATING INCOME $ 1,527 $ 2,152 (29.0) $ 7,160 $ 8,945 (20.0)
OPERATING INCOME MARGIN 15.4% 21.4% 18.1% 21.9%
SEGMENT INCOME $ 710 $ 1,052 (32.5) $ 3,335 $ 4,364 (23.6)
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED OPERATING STATISTICS
--------------------------------------------------------------------------------
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 % Change 12/31/03 12/31/02 % Change
--------- ------------ ------------- -------- ------------- -------------- --------------
Switched access lines in
service (000)
Residence 36,089 37,458 (3.7) 36,089 37,458 (3.7)
Business 18,990 19,994 (5.0) 18,990 19,994 (5.0)
Public 462 522 (11.5) 462 522 (11.5)
---------- ---------- ---------- ----------
Total 55,541 57,974 (4.2) 55,541 57,974 (4.2)
Special DS0 equivalents 84,806 77,823 9.0 84,806 77,823 9.0
---------- ---------- ---------- ----------
Total voice grade
equivalents (000) 140,347 135,797 3.4 140,347 135,797 3.4
---------- ---------- ---------- ----------
Resale & UNE-P lines (000) 5,762 4,235 36.1 5,762 4,235 36.1
Minutes of use from Carriers
and CLECs
(in millions) 58,357 62,111 (6.0) 238,365 256,806 (7.2)
Long distance lines (000) 16,636 12,481 33.3 16,636 12,481 33.3
High capacity and digital data
revenues ($ in millions)
Data transport $ 1,632 $ 1,665 (2.0) $ 6,546 $ 6,616 (1.1)
Data solutions 238 188 26.6 716 680 5.3
---------- ---------- ---------- ----------
Total revenues $ 1,870 $ 1,853 .9 $ 7,262 $ 7,296 (.5)
---------- ---------- ---------- ----------
FOOTNOTE:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
VERIZON WIRELESS - SELECTED FINANCIAL RESULTS
--------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 % Change 12/31/03 12/31/02 % Change
--------- ------------ ------------- -------- ------------- ------------- --------
REVENUES
Service revenues $ 5,366 $ 4,713 13.9 $ 20,336 $ 17,747 14.6
Equipment and other 618 510 21.2 2,153 1,726 24.7
--------- --------- --------- ---------
TOTAL REVENUES 5,984 5,223 14.6 22,489 19,473 15.5
--------- --------- --------- ---------
OPERATING EXPENSES
Cost of services and sales 1,739 1,490 16.7 6,460 5,456 18.4
Selling, general &
administrative expense 2,115 1,845 14.6 8,057 7,084 13.7
Depreciation and
amortization expense 1,025 899 14.0 3,888 3,293 18.1
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 4,879 4,234 15.2 18,405 15,833 16.2
--------- --------- --------- ---------
OPERATING INCOME $ 1,105 $ 989 11.7 $ 4,084 $ 3,640 12.2
OPERATING INCOME MARGIN 18.5% 18.9% 18.2% 18.7%
SEGMENT INCOME $ 307 $ 261 17.6 $ 1,083 $ 966 12.1
SELECTED OPERATING STATISTICS
Subscribers (000) 37,522 32,491 15.5 37,522 32,491 15.5
Penetration 16.0% 14.3% 16.0% 14.3%
Subscriber net adds in
period(1) (000) 1,496 970 54.2 5,031 3,093 62.7
Total churn rate, including
prepaid 1.7% 2.1% 1.8% 2.3%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
(1) Includes acquisition of 68,000 subscribers, 411,000 subscribers and 6,000
subscribers in the first, third and fourth quarters of 2002, respectively,
and 6,000 subscribers in the first quarter of 2003.
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
INFORMATION SERVICES - SELECTED FINANCIAL RESULTS
--------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 % Change 12/31/03 12/31/02 % Change
--------- ------------ ------------ -------- ------------- -------------- --------
OPERATING REVENUES $ 1,013 $ 1,374 (26.3) $ 4,114 $ 4,287 (4.0)
OPERATING EXPENSES
Cost of services
and sales 146 229 (36.2) 641 688 (6.8)
Selling, general &
administrative
expense 429 378 13.5 1,505 1,411 6.7
Depreciation and amortization
expense 23 22 4.5 89 74 20.3
Sales of businesses, net -- -- * (141) -- *
--------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 598 629 (4.9) 2,094 2,173 (3.6)
---------- ---------- ---------- ----------
OPERATING INCOME $ 415 $ 745 (44.3) $ 2,020 $ 2,114 (4.4)
OPERATING INCOME MARGIN 41.0% 54.2% 49.1% 49.3%
SEGMENT INCOME $ 247 $ 461 (46.4) $ 1,206 $ 1,281 (5.9)
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature.
Intersegment transactions have not been eliminated.
Certain reclassifications 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
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
INTERNATIONAL - SELECTED FINANCIAL RESULTS
--------------------------------------------------------------------------------
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 % Change 12/31/03 12/31/02 % Change
--------- ------------ ------------ -------- ------------- -------------- --------
OPERATING REVENUES $ 477 $ 549 (13.1) $ 1,949 $ 2,219 (12.2)
OPERATING EXPENSES
Cost of services and sales 152 163 (6.7) 574 586 (2.0)
Selling, general &
administrative
expense 118 138 (14.5) 691 610 13.3
Depreciation and amortization
expense 94 88 6.8 346 376 (8.0)
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 364 389 (6.4) 1,611 1,572 2.5
---------- ---------- ---------- ----------
OPERATING INCOME $ 113 $ 160 (29.4) $ 338 $ 647 (47.8)
OPERATING INCOME MARGIN 23.7% 29.1% 17.3% 29.2%
EQUITY IN EARNINGS OF
UNCONSOLIDATED BUSINESSES $ 302 $ 179 68.7 $ 1,091 $ 644 69.4
INCOME FROM OTHER
UNCONSOLIDATED BUSINESSES $ -- $ 6 (100.0) $ 169 $ 218 (22.5)
SEGMENT INCOME $ 341 $ 294 16.0 $ 1,392 $ 1,152 20.8
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
special and non-recurring items. The company's chief decision makers exclude
these items in assessing business unit performance, primarily due to their
non-operational nature.
Intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
* Not meaningful
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
OTHER RECONCILIATIONS
--------------------------------------------------------------------------------
(dollars in millions)
12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02
--------- ------------- -------------
FREE CASH FLOW - TOTAL VERIZON
Cash from operating activities $ 22,482 $ 22,099
Less: Capital expenditures (including network
and non-network software) (11,884) (13,061)
Dividends paid (4,239) (4,200)
---------- ----------
Free Cash Flow $ 6,359 $ 4,838
========== ==========
CASH FLOW SUMMARY - TOTAL VERIZON
Cash from operating activities $ 22,482 $ 22,099
Cash used in investing activities (12,246) (6,800)
Cash used in financing activities (10,959) (14,809)
---------- ----------
Increase (decrease) in cash and cash equivalents (723) 490
Cash and cash equivalents, beginning of period 1,422 932
---------- ----------
Cash and cash equivalents, end of period $ 699 $ 1,422
========== ==========
12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02
--------- ------------- -------------
SEGMENT FREE CASH FLOW - DOMESTIC TELECOM
Cash from operating activities $ 12,325 $ 11,546
Less: Capital expenditures (including
network and non-network software) (6,820) (8,004)
---------- ----------
Segment Free Cash Flow $ 5,505 $ 3,542
========== ==========
CASH FLOW SUMMARY - DOMESTIC TELECOM
Cash from operating activities $ 12,325 $ 11,546
Cash used in investing activities (6,790) (4,057)
Cash used in financing activities (5,532) (7,612)
---------- ----------
Increase (decrease) in cash and cash equivalents 3 (123)
Cash and cash equivalents, beginning of period 160 283
---------- ----------
Cash and cash equivalents, end of period $ 163 $ 160
========== ==========
SEGMENT FREE CASH FLOW - VERIZON WIRELESS
Cash from operating activities $ 7,513 $ 6,511
Less: Capital expenditures (including
network and non-network software) (4,590) (4,414)
---------- ----------
Segment Free Cash Flow $ 2,923 $ 2,097
========== ==========
CASH FLOW SUMMARY - VERIZON WIRELESS
Cash from operating activities $ 7,513 $ 6,511
Cash used in investing activities (5,492) (3,363)
Cash used in financing activities (2,008) (3,222)
---------- ----------
Increase (decrease) in cash and cash equivalents 13 (74)
Cash and cash equivalents, beginning of period 124 198
---------- ----------
Cash and cash equivalents, end of period $ 137 $ 124
========== ==========
SEGMENT FREE CASH FLOW - INFORMATION SERVICES
Cash from operating activities $ 1,179 $ 1,163
Less: Capital expenditures (including
network and non-network software) (84) (167)
---------- ----------
Segment Free Cash Flow $ 1,095 $ 996
========== ==========
CASH FLOW SUMMARY - INFORMATION SERVICES
Cash from operating activities $ 1,179 $ 1,163
Cash provided by (used in) investing activities 141 (166)
Cash used in financing activities (1,340) (1,004)
---------- ----------
Decrease in cash and cash equivalents (20) (7)
Cash and cash equivalents, beginning of period 79 86
---------- ----------
Cash and cash equivalents, end of period $ 59 $ 79
========== ==========
Unaudited 12/31/03 12/31/02
--------- ---------- ----------
NET DEBT
Short-term debt $ 5,967 $ 9,267
Long-term debt 39,413 44,003
Less: Cash and cash equivalents (699) (1,422)
---------- ----------
$ 44,681 $ 51,848
========== ==========
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/03 12/31/02 12/31/03 12/31/02
--------- ------------ ------------ ------------- -------------
TOTAL VERIZON REVENUES - CONFORMING BASIS
Operating revenues - reported $ 17,278 $ 17,154 $ 67,752 $ 67,304
Domestic Telecom property sales -- -- -- (623)
---------- ---------- ---------- ----------
Operating revenues - adjusted 17,278 17,154 67,752 66,681
Directory accounting change -- (315) -- (78)
---------- ---------- ---------- ----------
Conforming basis revenues $ 17,278 $ 16,839 $ 67,752 $ 66,603
========== ========== ========== ==========
VERIZON INFORMATION SERVICES REVENUES
- CONFORMING BASIS
Operating revenues $ 1,013 $ 1,374 $ 4,114 $ 4,287
Directory accounting change -- (315) -- (78)
---------- ---------- ---------- ----------
Conforming basis revenues $ 1,013 $ 1,059 $ 4,114 $ 4,209
========== ========== ========== ==========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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