RNS Number:2566K
Verizon Communications
22 April 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: April 22, 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 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 7. Financial Statements and Exhibits.
The following information is being provided under Item 12 "Disclosure of Results
of Operations and Financial Condition" and is being furnished under Item 9 in
accordance with SEC release No. 33-8216. Such information, including the
exhibits attached hereto under Item 7, shall not be deemed "filed" for purposes
of Section 18 of the Securities Exchange Act of 1934.
(c) Exhibits.
99 Press release and financial tables dated April 22, 2003, issued by Verizon
Communications Inc. and contained in its Investor Relations Bulletin.
Item 9. Regulation FD Disclosure
On April 22, 2003, Verizon Communications Inc. issued a press release announcing
earnings for the first quarter of 2003.
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: April 22, 2003 /s/ John F. Killian
---------------- -----------------------------------------
John F. Killian
Senior Vice President and Controller
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
99 Press release and financial tables, dated April 22, 2003, issued by
Verizon Communications Inc. and contained in its Investor Relations
Bulletin.
EXHIBIT 99
NEWS RELEASE (VERIZON LOGO)
FOR IMMEDIATE RELEASE MEDIA CONTACTS:
APRIL 22, 2003 PETER THONIS
212-395-2355
peter.thonis@verizon.com
BOB VARETTONI
212-395-7726
robert.a.varettoni@verizon.com
VERIZON COMMUNICATIONS REPORTS SOLID QUARTERLY RESULTS
BOLSTERED BY DEMAND FOR WIRELESS, LD, DSL AND BUNDLES
FIRST-QUARTER HIGHLIGHTS
o $1.41 in fully diluted earnings per share (EPS), compared with a loss of 18
cents per share in the first quarter 2002
o 833,000 Verizon Wireless net customer additions; total customers now exceed
33.3 million
o 14.8 percent total revenue growth for Verizon Wireless, compared with first
quarter 2002
o 710,000 net additional long-distance lines in the quarter
o 160,000 net additional digital subscriber lines (DSL) in the quarter
o Net debt (total debt less cash and cash equivalents) reduced by $2.7 billion
since year-end 2002 to $49.9 billion -- a 5.1 percent decrease since year-end
and a 19.3 percent decrease since first quarter 2002
o $2.3 billion in free cash flow (cash from operating activities less capital
expenditures and dividends)
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced first-quarter
2003 fully diluted EPS of $1.41, or 63 cents before special and non-recurring
items, as the corporation reported continued strong demand for wireless, long-
distance and DSL services, as well as for bundled product offerings.
For the first quarter 2003, reported revenues were $16.3 billion, a 0.9 percent
decrease from the first quarter 2002. However, the prior year's quarterly
revenues included $241 million generated by 1.27 million switched access lines
that Verizon has since sold. On a comparable basis, revenues increased 0.6
percent to $16.3 billion in the first quarter 2003, from $16.2 billion in the
first quarter 2002.
Consolidated operating revenues included a double-digit, year-over-year increase
for the third consecutive quarter in Verizon Wireless revenues, which grew 14.8
percent to $5.1 billion, from $4.4 billion in the first quarter of 2002.
Reported operating expenses decreased 1.1 percent to $12.8 billion in the first
quarter 2003, compared with $12.9 billion in the first quarter 2002. However,
the prior year's quarterly expenses included $413 million in special and non-
recurring items.
On a comparable basis, operating expenses were $12.8 billion in the first
quarter 2003, up 2.2 percent from $12.5 billion in the first quarter 2002. This
increase was driven by significantly lower net pension and other post-retirement
benefit income. The prior year's quarterly expenses included a $330 million net
expense credit associated with pensions and post-retirement benefits, compared
with only an $80 million net expense credit for first quarter 2003.
Verizon's operational earnings -- which in addition to the special and non-
recurring items exclude pension and other post-retirement income, and income
from the access lines Verizon sold in 2002 -- were 62 cents per share in the
first quarter 2003, compared with 61 cents per share in the first quarter 2002.
The schedules accompanying this news release provide reconciliations to
generally accepted accounting principles (GAAP) for all non-GAAP financial
measures mentioned in this announcement.
IMPROVING COMPETITIVE POSITION
Chief Executive Officer Ivan Seidenberg said, "In a struggling industry, Verizon
is continuously improving its competitive position. We continue to generate
strong cash flows, improve our balance sheet and create value from our advanced
networks. This steady progress is the result of our diversified revenue base,
our discipline in controlling costs, our service improvements, Wireless'
continued solid revenue and customer growth, and the introduction of innovative
product bundles that have retained and grown our customer base."
FUTURE GROWTH PROSPECTS
"Looking ahead we see new opportunities, especially in the large business
market, from our newly acquired capability to provide long-distance services
nationwide and from new wireless data offerings targeting this segment,"
Seidenberg said. "We also see a next phase of industry growth fueled by the
combination of Verizon's broadband network services with attractive new product
offerings, such as those being developed through our partnership with
Microsoft's MSN service and which we expect to introduce shortly."
INCREASED CASH FLOW
Verizon's first-quarter free cash flow was $2.3 billion, compared with $0.8
billion in the first quarter 2002. Capital expenditures in the first quarter
2003 were $2.5 billion, a 4.7 percent decrease from $2.6 billion in first
quarter 2002. Cash flow from operations was $5.8 billion in the first quarter
2003, a 29.8 percent increase from $4.5 billion in first quarter 2002.
In first quarter 2003, net debt was reduced 19.3 percent to $49.9 billion, from
$61.9 billion in first quarter 2002.
GROWTH IN KEY MARKETS
Building on the momentum of last year, Verizon continued to grow its customer
base in key markets. In the first quarter 2003, Verizon Wireless added 833,000
customers on a net basis, fueled by strong new-customer growth and industry-
leading customer retention. The nation's leading wireless carrier now has more
than 33.3 million customers.
In long distance and DSL, Verizon saw growth rates similar to recent past
quarters. Beginning this year, in order to better match other disclosed per-line
metrics and reported
volumes to revenues, the company has changed the methodology for reporting
operational results in these categories. DSL results are now reported on the
basis of lines billed, rather than lines provisioned, and long-distance results
are now reported on the basis of lines, rather than customers. This decreases
previously reported overall DSL totals and increases previously reported overall
long-distance totals.
The company added a net of 710,000 long-distance lines and 160,000 DSL lines in
the first quarter 2003. Overall, Verizon had 13.2 million long-distance lines in
service and 1.83 million DSL lines in service as of the end of the first
quarter.
In addition, Verizon Freedom plans continue to retain customers, bolster long-
distance and DSL sales, and win back customers from competitors. Verizon Freedom
plans introduced last summer offer local services with various combinations of
long distance, wireless and Internet access in a discounted bundle available on
one bill.
Newer Verizon Freedom plans, available since late January, offer a flat rate for
unlimited local and long-distance calling. Unlimited calling plans are currently
available in seven states and the District of Columbia and will be introduced in
all other markets later this year.
REPORTED RESULTS COMPARISON
As noted above, reported earnings were $3.9 billion, or $1.41 per share, for the
first quarter 2003, including a $2.1 billion after-tax gain from the adoption of
SFAS No. 143. This compares with a reported loss of $0.5 billion, or 18 cents
per share, in the first quarter 2002. Special and non-recurring items impacting
the 2002 period primarily included investment-related charges, the cumulative
effect of an accounting change related to intangible assets (SFAS No. 142) and
merger transition costs -- partially offset by net gains on sales of assets.
Beginning this reporting period, Verizon's consolidated and segment operating
expenses now include separate line items for selling, general and administrative
expenses, and for cost of services and sales.
GUIDANCE REITERATED
Verizon reiterated its 2003 guidance of 0 to 2 percent comparable revenue
growth, capital expenditures of $12.5 to $13.5 billion, and year-end net debt of
$49 to $51 billion. Full-year earnings guidance is $2.70 to $2.80 per share.
BUSINESS SEGMENT HIGHLIGHTS
Following are first-quarter 2003 highlights from Verizon's four business segments.
DOMESTIC TELECOM:
Current and prior periods exclude the effects of access lines sold in 2002.
o In the first quarter, Verizon received final Federal Communications Commission
approval to offer long-distance services throughout the U.S., capping a seven-
year effort. The company launched service offerings last week in Maryland and
Washington, D.C. Verizon has surpassed Sprint as the nation's third largest
long-distance carrier for consumers, and earlier this month Verizon announced
that more than 1 million small and medium-sized businesses now use Verizon long-
distance service.
o More than 55 percent of Verizon's 13.2 million long-distance lines are in
states in the former Bell Atlantic territory. Verizon's nationwide base of long-
distance lines has increased nearly 37 percent year-over-year.
o Approximately 63 percent of Verizon's 57.5 million access lines are qualified
to receive DSL service. As previously announced, the company expects to qualify
80 percent of access lines by year-end through the continued deployment of DSL
technology.
o Since late last year, Verizon has won 194 contracts for Enterprise Advance
services, as the company's Enterprise Solutions Group has geared up sales
efforts and has a growing sales funnel following the last of Verizon's long-
distance approvals. New regional data services are now available to the
enterprise market of Fortune 1000 corporations, governments, and finance,
education and healthcare entities.
o Access line equivalents increased 3.9 percent to 136.6 million, compared with
the first quarter 2002, driven by 10.4 percent growth in digital capacity
equivalents.
VERIZON WIRELESS:
o In the first quarter, Verizon Wireless continued its record of strong
profitability and strong customer growth, while reaching a new low in customer
churn.
o Total customers grew 12.6 percent year-over-year to 33.3 million. Of the
company's 833,000 net additions in the quarter, 755,000 were from retail
operations, up 97 percent over the first quarter 2002; 6,000 were from property
acquisitions; and 72,000 were from reseller operations. The company's retail
customer base grew 15.6 percent year-over-year to 32.1 million of the company's
33.3 million total customers.
o Churn continued to decrease to the lowest levels in the company's history.
Total churn, including retail and reseller, was 2.1 percent. Churn in the retail
post-pay segment, which is more than 90 percent of the company's base, was 1.65
percent for the first quarter.
o Monthly service revenue per subscriber increased to more than $47 for the
quarter, up 3 percent over the prior year's quarter.
o The company's low cost structure continued to lead the industry, as cash
expense per subscriber increased only 3.4 percent during the quarter even with
acquisition costs associated with the high volume of new subscribers. EBITDA
margin remained strong at 38.2 percent. (EBITDA is determined by adding
depreciation and amortization to operating income; EBITDA margin is calculated
by dividing EBITDA by Verizon Wireless' service revenues.)
o Quarterly EBITDA increased 14.5 percent over the prior-year quarter to $1.8
billion. Service revenues for the quarter grew 15.0 percent to $4.7 billion,
with total revenues up 14.8 percent to $5.1 billion.
o More than 85 percent of the company's national network, the most extensive in
the country, is now equipped with 1XRTT technology, providing higher data speeds
and improved spectrum efficiency to accommodate growth in overall usage as well
as in popular data services. Complementing this deployment, the majority of
devices the company sells are 1X-ready.
o Demand for the company's data and text services continued to build in the
quarter. Text messaging leads the pack, reaching more than 200 million billed
text messages a month, as the company launched enhanced text services including
TXT International and TXT Communities chat groups. Get It Now(SM), the company's
BREW-based downloadable services -- including ringtones, games and content from
leading providers, such as Sony Pictures and Paramount Pictures -- grew to about
2 million downloads a month.
o The company announced plans to launch, during the third quarter, a wireless
broadband service called 1xEV-DO in Washington, D.C., and San Diego, as well as
its own branded wireless Wi-Fi service for high-speed data connections between
the Verizon Wireless wide area network and hundreds of hotels, airports and
other "hot spots" nationwide.
o For business customers, the company launched Wireless Office, a suite of
services for mobile professionals that encompasses voice tools,
Internet/intranet access, personal information management, e-mail and customized
solutions for the latest devices, from PDAs (personal digital assistants) to
laptops to the Blackberry, on the company's national 1XRTT Express Network.
INFORMATION SERVICES:
o In the first quarter, revenues of $700 million from Verizon's directory
publishing and electronic commerce operations decreased 12.8 percent from the
prior year's quarter, primarily due to the impact of changes in timing of
publication dates.
o Verizon Information Services' electronic products, including
SuperPages.com(TM), continue to achieve strong growth as demonstrated by a 51.4
percent increase in revenue and a 39 percent increase in searches over first
quarter 2002.
INTERNATIONAL:
o In the first quarter, revenues were $621 million, compared with $708 million
in the first quarter 2002. The revenue decline was largely the result of
declining foreign exchange rates, particularly in the Dominican Republic and
Mexico.
o First-quarter income from unconsolidated businesses grew $38 million to $214
million, compared with first quarter 2002. The increase reflects continued
operational growth in Verizon's equity investments.
o Verizon International business units continued to leverage relationships with
Verizon Wireless by implementing innovative pricing plans, such as one-rate
roaming; deploying high-speed 1XRTT wireless data services; and continuing
procurement efficiencies.
o Verizon continued to benefit from strong International wireless subscriber
growth, as the total number of wireless subscribers served by Verizon's
International investments increased by more than 3 million compared with first
quarter 2002, reaching 33.4 million subscribers, a 10.2 percent growth rate.
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
136.6 million access line equivalents and 33.3 million Verizon Wireless
customers. Verizon is the third largest long-distance carrier for U.S.
consumers, with 13.2 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 227,000
employees, Verizon's global presence extends to the Americas, Europe, Asia and
the Pacific. For more information on Verizon, visit www.verizon.com.
####
VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches and
biographies, media contacts and other information are available at Verizon's
News Center on the World Wide Web at www.verizon.com/news. To receive news
releases by e-mail, visit the News Center and register for customized automatic
delivery of Verizon news releases.
NOTE: This press release contains statements about expected future events and
financial results that are forward-looking and subject to risks and
uncertainties. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The following important factors could affect future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: the duration and extent of the current economic
downturn; materially adverse changes in economic or labor conditions in the
markets served by us or by companies in which we have substantial investments;
material changes in available technology; technology substitution; an adverse
change in the ratings afforded our debt securities by nationally accredited
ratings organizations; the final results of federal and state regulatory
proceedings concerning our provision of retail and wholesale services and
judicial review of those results; the effects of competition in our markets; our
ability to satisfy regulatory merger conditions; 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.
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 % Change
--------- ------------ ------------ ------------
OPERATING REVENUES $ 16,279 $ 16,430 (.9)
OPERATING EXPENSES
Cost of services and sales 5,141 4,874 5.5
Selling, general & administrative expense 4,253 4,945 (14.0)
Depreciation and amortization expense 3,385 3,320 2.0
Sales of assets, net -- (220) (100.0)
------------ ------------
TOTAL OPERATING EXPENSES 12,779 12,919 (1.1)
OPERATING INCOME 3,500 3,511 (.3)
Income (loss) from unconsolidated businesses 166 (1,543) *
Other income and (expense), net 34 47 (27.7)
Interest expense (778) (814) (4.4)
Minority interest (326) (243) 34.2
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 2,596 958 171.0
Provision for income taxes (838) (963) (13.0)
------------ ------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 1,758 (5) *
Cumulative effect of accounting change, net of tax 2,150 (496) *
------------ ------------
NET INCOME (LOSS) $ 3,908 $ (501) *
============ ============
BASIC EARNINGS (LOSS) PER COMMON SHARE $ 1.42 $ (.18) *
Weighted average number of common
shares (in millions) 2,748 2,719
DILUTED EARNINGS (LOSS) PER COMMON SHARE(1) $ 1.41 $ (.18) *
Weighted average number of common
shares-assuming dilution (in millions) 2,780 2,719
FOOTNOTES:
(1) Diluted Earnings (Loss) per Share include the dilutive effect of shares
issuable under our stock-based compensation plans and exchangeable equity
interests, which represent the only potential dilution. There is no impact of
diluted securities in the first quarter 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.
* Not meaningful
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME BEFORE NON-RECURRING ITEMS
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 % Change
--------- ------------ ------------ ------------
OPERATING REVENUES(1)
Domestic Telecom $ 9,941 $ 10,251 (3.0)
Domestic Wireless 5,086 4,430 14.8
Information Services 700 803 (12.8)
International 621 708 (12.3)
Other (69) (3) *
------------ ------------
TOTAL OPERATING REVENUES 16,279 16,189 .6
------------ ------------
OPERATING EXPENSES(1)
Cost of services and sales 5,141 4,813 6.8
Selling, general & administrative expense 4,253 4,373 (2.7)
Depreciation and amortization expense 3,385 3,320 2.0
------------ ------------
TOTAL OPERATING EXPENSES 12,779 12,506 2.2
------------ ------------
OPERATING INCOME 3,500 3,683 (5.0)
Operating income impact of operations sold(1) -- 162 (100.0)
Income from unconsolidated businesses 166 146 13.7
Other income and (expense), net 34 65 (47.7)
Interest expense (778) (814) (4.4)
Minority interest (326) (255) 27.8
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,596 2,987 (13.1)
Provision for income taxes (838) (1,018) (17.7)
------------ ------------
NET INCOME BEFORE NON-RECURRING ITEMS $ 1,758 $ 1,969 (10.7)
============ ============
DILUTED ADJUSTED EARNINGS PER SHARE(1) $ .63 $ .72 (12.5)
Weighted average number of common
shares-assuming dilution (in millions) 2,780 2,719
FOOTNOTES:
Management believes the presentation above 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 compensation.
Therefore, management also provides this information externally. For a
reconciliation of the above amounts to their comparable GAAP amounts see the
following page.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
(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
3/31/03 3/31/02
------------ ------------
Revenues $ -- $ 241
Expenses $ -- $ 79
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME - RECONCILIATIONS
(dollars in millions, except per share amounts)
SPECIAL AND NON-
RECURRING ITEMS
----------------
3 Mos. Ended Cumulative 3 Mos. Ended
3/31/03 Effect of 3/31/03
Reported Accounting Before Non-
Unaudited (GAAP) Change Recurring Items
--------- ------------ ------------ ---------------
OPERATING REVENUES $ 16,279 $ -- $ 16,279
OPERATING EXPENSES
Cost of services and sales 5,141 -- 5,141
Selling, general & administrative expense 4,253 -- 4,253
Depreciation and amortization expense 3,385 -- 3,385
Sales of assets, net -- -- --
------------ ------------ ------------
TOTAL OPERATING EXPENSES 12,779 -- 12,779
------------ ------------ ------------
OPERATING INCOME 3,500 -- 3,500
Operating income impact of operations sold -- -- --
Income from unconsolidated businesses 166 -- 166
Other income and (expense), net 34 -- 34
Interest expense (778) -- (778)
Minority interest (326) -- (326)
------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 2,596 -- 2,596
Provision for income taxes (838) -- (838)
------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 1,758 -- 1,758
Cumulative effect of accounting change, net of tax 2,150 (2,150) --
------------ ------------ ------------
NET INCOME $ 3,908 $ (2,150) $ 1,758
============ ============ ============
BASIC EARNINGS PER COMMON SHARE(1) $ 1.42 $ (.78) $ .64
DILUTED EARNINGS PER COMMON SHARE(1) $ 1.41 $ (.77) $ .63
(dollars in millions, except per share amounts)
SPECIAL AND NON-RECURRING ITEMS
--------------------------------------------------------
3 Mos. Ended Mark-to-Market
3/31/02 Impact of Adjustment -
Reported Sales of Transition Operations Financial
Unaudited (GAAP) Assets, Net Costs Sold Instruments
--------- ------------ ----------- --------- ---------- --------------
OPERATING REVENUES $ 16,430 $ -- $ -- $ (241) $ --
OPERATING EXPENSES
Cost of services and sales 4,874 -- (10) (51) --
Selling, general & administrative expense 4,945 -- (86) (28) --
Depreciation and amortization expense 3,320 -- -- -- --
Sales of assets, net (220) 220 -- -- --
------------ ----------- --------- ---------- --------------
TOTAL OPERATING EXPENSES 12,919 220 (96) (79) --
------------ ----------- --------- ---------- --------------
OPERATING INCOME 3,511 (220) 96 (162) --
Operating income impact of operations sold -- -- -- 162 --
Income from unconsolidated businesses (1,543) -- -- -- --
Other income and (expense), net 47 -- -- -- 3
Interest expense (814) -- -- -- --
Minority interest (243) -- (12) -- --
------------ ----------- --------- ---------- --------------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 958 (220) 84 -- 3
Provision for income taxes (963) 104 (32) -- --
------------ ----------- --------- ---------- --------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (5) (116) 52 -- 3
Cumulative effect of accounting change, net of tax (496) -- -- -- --
------------ ----------- --------- ---------- --------------
NET INCOME (LOSS) $ (501) $ (116) $ 52 $ -- $ 3
============ =========== ========= ============ ==============
BASIC EARNINGS (LOSS) PER COMMON SHARE(1) $ (.18) $ (.04) $ .02 $ -- $ --
DILUTED EARNINGS (LOSS) PER COMMON SHARE(1) $ (.18) $ (.04) $ .02 $ -- $ --
(dollars in millions, except per share amounts)
SPECIAL AND NON-RECURRING ITEMS
-------------------------------------------
Cumulative 3 Mos. Ended
Investment - Early Effect of 3/31/2002
Related Extinguishment Accounting Before Non-
Unaudited Charges of Debt Change Recurring Items
--------- ------------ -------------- ---------- ---------------
OPERATING REVENUES $ -- $ -- $ -- $ 16,189
OPERATING EXPENSES
Cost of services and sales -- -- -- 4,813
Selling, general & administrative expense (458) -- -- 4,373
Depreciation and amortization expense -- -- -- 3,320
Sales of assets, net -- -- -- --
------------ ------------- ---------- --------------
TOTAL OPERATING EXPENSES (458) -- -- 12,506
------------ ------------- ---------- --------------
OPERATING INCOME 458 -- -- 3,683
Operating income impact of operations sold -- -- -- 162
Income from unconsolidated businesses 1,689 -- -- 146
Other income and (expense), net -- 15 -- 65
Interest expense -- -- -- (814)
Minority interest -- -- -- (255)
------------ ------------- ---------- --------------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 2,147 15 -- 2,987
Provision for income taxes (121) (6) -- (1,018)
------------ ------------- ---------- --------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 2,026 9 -- 1,969
Cumulative effect of accounting change, net of tax -- -- 496 --
------------ ------------- ---------- --------------
NET INCOME (LOSS) $ 2,026 $ 9 $ 496 $ 1,969
============ ============= ========== ==============
BASIC EARNINGS (LOSS) PER COMMON SHARE(1) $ .75 $ -- $ .18 $ .72
DILUTED EARNINGS (LOSS) PER COMMON SHARE(1) $ .75 $ -- $ .18 $ .72
Footnote:
(1) EPS totals may not add across due to rounding.
VERIZON COMMUNICATIONS INC.
OTHER RECONCILIATIONS
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02
--------- ------------ ------------
FREE CASH FLOW
Cash from operating activities $ 5,812 $ 4,478
Less: Capital expenditures (including network and non-network software) (2,467) (2,590)
Dividends paid (1,056) (1,051)
------------ ------------
$ 2,289 $ 837
============ ============
Unaudited 3/31/03 12/31/02
--------- ------------ ------------
NET DEBT
Short-term debt $ 10,619 $ 9,288
Long-term debt 43,462 44,791
Less: Cash and cash equivalents (4,135) (1,438)
------------ ------------
$ 49,946 $ 52,641
============ ============
3 Mos. Ended 3 Mos. Ended 3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 3/31/03 3/31/02
--------- ------------ ------------ ------------ ------------
Amount Per diluted share
------------------------------ ------------------------------
OPERATIONAL EARNINGS(1)
Income before non-recurring items $ 1,758 $ 1,969 $ .63 $ .72
Pension and OPEB, net credit (48) (201) (.02) (.07)
Operating results of access lines sold -- (100) -- (.04)
------------ ------------ ------------ ------------
Operational earnings $ 1,710 $ 1,668 $ .62 $ .61
============ ============ ============ ============
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02
--------- ------------ ------------
WIRELESS CASH EXPENSE PER SUBSCRIBER PER MONTH
Cost of services and sales $ 1,439 $ 1,246
Selling, general and administrative expense 1,866 1,629
Less: Equipment and other revenue (426) (378)
------------ ------------
Cash expense 2,879 2,497
Cumulative average subscribers (millions) 98.7 88.4
------------ ------------
Cash expense per subscriber $ 29.17 $ 28.22
============ ============
Unaudited Year Ended 12/31/03
--------- ------------------------------
2003 REVENUES
2002 revenues - GAAP $ 67,625
Impact of access lines sold 623
------------
$ 67,002
============
2003 estimated revenues - GAAP $ 67,002 to $ 68,342
============ =============
Growth 0% to 2%
------------ -------------
2003 DILUTED EARNINGS PER SHARE(1)
2003 estimated EPS - GAAP $ 3.47 to $ 3.57
Impact of adopting SFAS No. 143 (0.77) to (0.77)
------------ -------------
2003 estimated EPS - before non-recurring items $ 2.70 to $ 2.80
============ =============
FOOTNOTES:
Management believes free cash flow, net debt, operational earnings and cash
expense per subscriber, non-GAAP financial measures, are useful measures in
evaluating financial performance and are also commonly used by readers of
financial information in assessing performance.
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.
--------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
SELECTED FINANCIAL AND OPERATING STATISTICS
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02
--------- ------------ ------------
Debt to debt and shareowners' equity ratio-end of period 60.2% 67.0%
Book value per common share $ 13.01 $ 11.39
Cash dividends declared per common share $ 0.385 $ 0.385
Common shares outstanding (in millions)
End of period 2,750 2,723
Capital expenditures (including capitalized network and non-network software)
Domestic Telecom $ 1,286 $ 1,657
Domestic Wireless 1,107 819
Information Services 18 42
International 49 63
Other 7 9
------------ ------------
Total $ 2,467 $ 2,590
============ ============
Total employees(1) 227,277 245,990
FOOTNOTE:
(1) Prior period adjusted to reflect a comparable figure.
VERIZON COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
Unaudited 3/31/03 12/31/02 $ Change
--------- --------- ---------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 4,135 $ 1,438 $ 2,697
Short-term investments 1,479 2,042 (563)
Accounts receivable, net 11,462 12,598 (1,136)
Inventories 1,536 1,502 34
Prepaid expenses and other 3,679 3,341 338
--------- ---------- ----------
Total current assets 22,291 20,921 1,370
--------- ---------- ----------
Plant, property and equipment 179,147 178,028 1,119
Less accumulated depreciation 102,027 103,532 (1,505)
--------- ---------- ----------
77,120 74,496 2,624
--------- ---------- ----------
Investments in unconsolidated businesses 5,242 4,988 254
Intangible assets 46,661 46,739 (78)
Other assets 20,739 20,324 415
--------- ---------- ----------
TOTAL ASSETS $ 172,053 $ 167,468 $ 4,585
========= ========== ==========
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current liabilities
Debt maturing within one year $ 10,619 $ 9,288 $ 1,331
Accounts payable and accrued liabilities 12,767 12,745 22
Other 5,046 5,014 32
--------- ---------- ----------
Total current liabilities 28,432 27,047 1,385
--------- ---------- ----------
Long-term debt 43,462 44,791 (1,329)
Employee benefit obligations 15,291 15,390 (99)
Deferred income taxes 21,333 19,468 1,865
Other liabilities 3,959 4,015 (56)
Minority interest 23,803 24,141 (338)
Shareowners' investment
Common stock 276 275 1
Contributed capital 24,804 24,685 119
Reinvested earnings 13,424 10,536 2,888
Accumulated other comprehensive loss (2,138) (2,110) (28)
--------- ---------- ----------
36,366 33,386 2,980
Less common stock in treasury, at cost 115 218 (103)
Less deferred compensation -
employee stock ownership plans and other 478 552 (74)
--------- ---------- ----------
Total shareowners' investment 35,773 32,616 3,157
--------- ---------- ----------
TOTAL LIABILITIES AND SHAREOWNERS' INVESTMENT $ 172,053 $ 167,468 $ 4,585
========= ========== ==========
VERIZON COMMUNICATIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 $ Change
--------- ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before cumulative effect of
accounting change $ 1,758 $ (5) $ 1,763
Adjustments to reconcile income (loss) before cumulative
effect of accounting change to net cash provided by
operating activities:
Depreciation and amortization 3,385 3,320 65
Sales of assets, net -- (220) 220
Employee retirement benefits (78) (405) 327
Deferred income taxes 310 369 (59)
Provision for uncollectible accounts 425 602 (177)
(Income) loss from unconsolidated businesses (166) 1,543 (1,709)
Changes in current assets and liabilities, net of
effects from acquisition/disposition of businesses 625 (886) 1,511
Other, net (447) 160 (607)
------------ ------------ ------------
Net cash provided by operating activities 5,812 4,478 1,334
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (including capitalized network and
non-network software) (2,467) (2,590) 123
Acquisitions, net of cash acquired, and investments (169) (930) 761
Proceeds from disposition of businesses -- 728 (728)
Net change in short-term and other current investments 518 532 (14)
Other, net 24 240 (216)
------------ ------------ ------------
Net cash used in investing activities (2,094) (2,020) (74)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 1,946 2,980 (1,034)
Repayments of long-term borrowings and capital lease obligations (3,588) (2,224) (1,364)
Increase (decrease) in short-term obligations, excluding
current maturities 1,576 (2,385) 3,961
Dividends paid (1,056) (1,051) (5)
Proceeds from sale of common stock 256 222 34
Other, net (155) 36 (191)
------------ ------------ ------------
Net cash used in financing activities (1,021) (2,422) 1,401
------------ ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 2,697 36 2,661
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,438 979 459
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,135 $ 1,015 $ 3,120
============ ============ ============
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED FINANCIAL RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 % Change
--------- ------------ ------------ ------------
OPERATING REVENUES
Local services $ 4,900 $ 5,116 (4.2)
Network access services 3,324 3,379 (1.6)
Long distance services 881 771 14.3
Other services 836 985 (15.1)
------------ ------------
TOTAL OPERATING REVENUES 9,941 10,251 (3.0)
------------ ------------
OPERATING EXPENSES
Cost of services and sales 3,523 3,352 5.1
Selling, general & administrative expense 2,000 2,172 (7.9)
Depreciation and amortization expense 2,331 2,371 (1.7)
------------ ------------
TOTAL OPERATING EXPENSES 7,854 7,895 (.5)
------------ ------------
OPERATING INCOME $ 2,087 $ 2,356 (11.4)
OPERATING INCOME MARGIN 21.0% 23.0%
EBITDA $ 4,418 $ 4,727 (6.5)
EBITDA MARGIN 44.4% 46.1%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of 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.
EBITDA is determined by adding depreciation and amortization expense to
operating income. EBITDA margin is calculated by dividing EBITDA by total
operating revenues.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED OPERATING STATISTICS
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 % Change
--------- ------------ ------------ ------------
Switched access lines in service (000)
Residence 37,272 38,440 (3.0)
Business 19,713 20,745 (5.0)
Public 497 576 (13.7)
------------ ------------
Total 57,482 59,761 (3.8)
Special DS0 equivalents 79,088 71,641 10.4
------------ ------------
Total voice grade equivalents (000) 136,570 131,402 3.9
------------ ------------
Resale & UNE-P lines (000) 4,571 3,637 25.7
Minutes of use from Carriers and CLECs (in millions) 60,877 65,761 (7.4)
Long distance lines (000) 13,191 9,663 36.5
High capacity and digital data revenues ($ in millions)
Data transport $ 1,671 $ 1,651 1.2
Data solutions 135 163 (17.2)
------------ ------------
Total revenues $ 1,806 $ 1,814 (.4)
------------ ------------
FOOTNOTE:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
VERIZON COMMUNICATIONS INC.
VERIZON WIRELESS - SELECTED OPERATING RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 % Change
--------- ------------ ------------ ------------
REVENUES
Service revenues $ 4,660 $ 4,052 15.0
Equipment and other 426 378 12.7
------------ ------------
TOTAL REVENUES 5,086 4,430 14.8
------------ ------------
OPERATING EXPENSES
Cost of services and sales 1,439 1,246 15.5
Selling, general & administrative expense 1,866 1,629 14.5
Depreciation and amortization expense 907 781 16.1
------------ ------------
TOTAL OPERATING EXPENSES 4,212 3,656 15.2
------------ ------------
OPERATING INCOME $ 874 $ 774 12.9
EBITDA $ 1,781 $ 1,555 14.5
EBITDA MARGIN 38.2% 38.4%
SELECTED OPERATING STATISTICS
Subscribers (000) 33,324 29,584 12.6
Penetration 14.3% 13.3%
Subscriber net adds in period(1) (000) 833 186 *
Total churn rate, including prepaid 2.1% 2.6%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of 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.
EBITDA is determined by adding depreciation and amortization expense to
operating income. EBITDA margin is calculated by dividing EBITDA by service
revenues.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results.
(1) Includes acquisition of 68,000 subscribers in first quarter 2002 and 6,000
subscribers in first quarter 2003.
* Not meaningful
VERIZON COMMUNICATIONS INC.
INFORMATION SERVICES - SELECTED FINANCIAL RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 % Change
--------- ------------ ------------ ------------
OPERATING REVENUES $ 700 $ 803 (12.8)
OPERATING EXPENSES
Cost of services and sales 121 137 (11.7)
Selling, general & administrative expense 288 297 (3.0)
Depreciation and amortization expense 21 15 40.0
------------ ------------
TOTAL OPERATING EXPENSES 430 449 (4.2)
------------ ------------
OPERATING INCOME $ 270 $ 354 (23.7)
EBITDA $ 291 $ 369 (21.1)
EBITDA MARGIN 41.6% 46.0%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of 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.
EBITDA is determined by adding depreciation and amortization expense to
operating income. EBITDA margin is calculated by dividing EBITDA by operating
revenues.
VERIZON COMMUNICATIONS INC.
INTERNATIONAL - SELECTED FINANCIAL RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/03 3/31/02 % Change
--------- ------------ ------------ ------------
OPERATING REVENUES $ 621 $ 708 (12.3)
OPERATING EXPENSES
Cost of services and sales 185 215 (14.0)
Selling, general & administrative expense 168 233 (27.9)
Depreciation and amortization expense 105 130 (19.2)
------------ ------------
TOTAL OPERATING EXPENSES 458 578 (20.8)
------------ ------------
OPERATING INCOME $ 163 $ 130 25.4
EBITDA $ 268 $ 260 3.1
EBITDA MARGIN 43.2% 36.7%
INCOME FROM UNCONSOLIDATED BUSINESSES $ 214 $ 176 21.6
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of 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.
EBITDA is determined by adding depreciation and amortization expense to
operating income. EBITDA margin is calculated by dividing EBITDA by operating
revenues.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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