Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008
4Q Results Fueled by Record Growth in FiOS Internet and TV Customers, Continued Strong Sales of Verizon Wireless and Strategic Business Services
NEW YORK, Jan. 27 -- 4Q 2008 HIGHLIGHTS
Consolidated Results
-- 43 cents in diluted EPS and 61 cents in adjusted EPS (non-GAAP),
compared with 4Q 2007 diluted EPS of 37 cents reported and 62 cents
adjusted.
-- $24.6 billion in 4Q revenues, up 3.4 percent, or adjusted growth
(non-GAAP) of 4.6 percent.
Wireless
-- 1.4 million organic (non-acquisition-related) net customer additions,
almost all retail; 1.2 million total net customer additions, including
a net customer loss under a previously announced exchange agreement
related to the 3Q 2008 acquisition of Rural Cellular.
-- 72.1 million total customers; 70.0 million retail customers, up 9.9
percent, not including customers added with the Jan. 9, 2009,
acquisition of Alltel.
-- 12.3 percent increase in total revenues; data revenues up 41.4
percent; ARPU growth for 11th consecutive quarter; strong 47.2 percent
EBITDA margin on service revenues (non-GAAP).
Wireline
-- 303,000 net new FiOS TV customers and 282,000 net new FiOS Internet
customers, the highest ever for the company.
-- 14.3 percent increase in consumer ARPU in legacy telecom markets.
-- 8.4 percent increase in revenues from strategic business services.
YEAR-END 2008 HIGHLIGHTS
-- $2.26 in 2008 diluted EPS from continuing operations and $2.54 in
adjusted EPS, compared with 2007 earnings of $1.90 per share and $2.36
per share, respectively.
-- $97.4 billion in 2008 revenues, up 4.2 percent, or adjusted growth of
5.1 percent.
-- $26.6 billion in cash flows from operating activities; $17.2 billion
in capital expenditures.
Note: Comparisons are year over year unless otherwise noted. See the accompanying schedules and www.verizon.com/investor for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this news release. Discontinued operations relate to the disposition of Telecomunicaciones de Puerto Rico, Inc. that was completed on March 30, 2007. Reclassifications of prior-period amounts have been made, where appropriate, to reflect comparable operating results for the spinoff of the Wireline segment's non-strategic local exchange and related business assets in Maine, New Hampshire and Vermont in the first quarter of 2008.
Verizon Communications Inc. (NYSE:VZ)
today reported that it continued to grow sales of broadband, wireless and strategic business services in the fourth quarter 2008. Strong customer and revenue growth contributed to 43 cents in diluted earnings per share (EPS) in the quarter, compared with 37 cents per share in the fourth quarter 2007.
On an adjusted basis (non-GAAP), fourth-quarter 2008 EPS was 61 cents, compared with 62 cents in the fourth quarter 2007.
On an annual basis, Verizon reported $2.26 in 2008 EPS from continuing operations, compared with $1.90 in 2007. On an adjusted annual basis, 2008 EPS from continuing operations was $2.54, a 7.6 percent increase, compared with 2007 EPS of $2.36.
'Able to Compete Effectively in This Economic Environment'
"Verizon has shown that it is able to compete effectively in this economic environment," said Chairman and CEO Ivan Seidenberg. "We grew profits and maintained strong cash flows throughout 2008. In the fourth quarter, we continued to produce top-line growth, fueled by strong sales volumes for broadband, wireless and strategic business services.
"The Verizon story in 2008 was one of customer growth and product innovation, based on the strategic technology and broadband infrastructure investments we have made year after year," Seidenberg said. "We have built a solid foundation to continue to create value for our customers and shareholders in 2009 and beyond."
Consolidated Revenue Growth
Verizon's total operating revenues grew 3.4 percent in the fourth quarter 2008, increasing to $24.6 billion from $23.8 billion in the fourth quarter 2007. After adjusting for the spinoff of non-strategic local exchange and related Wireline business assets early in 2008 (non-GAAP), this represents an increase of 4.6 percent. Total operating expenses in the fourth quarter 2008 increased 1.9 percent to $20.8 billion, or 4.1 percent on an adjusted basis, compared with the fourth quarter 2007.
For 2008, annual operating revenues were $97.4 billion, an increase of 4.2 percent from 2007 on a reported basis and 5.1 percent on an adjusted basis. Operating expenses totaled $80.5 billion in 2008, an increase of 3.3 percent from 2007 on a reported basis and 4.2 percent on an adjusted basis.
Continued Strong Cash Flows
Cash flows from operations totaled $26.6 billion in 2008, compared with $25.7 billion in 2007. Dividends and share repurchases totaled $6.4 billion in 2008. Capital expenditures totaled $17.2 billion in 2008, compared with $17.5 billion in 2007. For 2009, Verizon is targeting capital spending, excluding amounts related to the acquisition of Alltel Corporation, to be less than the 2008 total.
At year-end 2008, total debt was $52.0 billion, compared with $44.8 billion at the end of the third quarter 2008. Verizon ended 2008 with $9.8 billion in cash and cash equivalents, most of which was held for use in completing the acquisition of Alltel in January 2009.
Details of 4Q Adjustments
Adjusted earnings in the fourth quarter 2008 excluded the following after-tax amounts: $424 million, or 15 cents per share, for severance, pension and benefit charges related to pension settlements from previously announced workforce reductions and severance charges associated with workforce reductions that began in the fourth quarter and will continue in 2009; $35 million, or 1 cent per share, for merger integration costs; and $31 million, or 1 cent per share, for an other-than-temporary decline in the fair value of investments in certain marketable securities.
Adjusted earnings in the fourth quarter 2007 excluded the following after-tax amounts: 16 cents per share for severance and other related expenses; 5 cents per share for taxes and expenses associated with an increase in the distributable earnings from the company's Vodafone Omnitel N.V. investment; 2 cents per share for merger integration costs; and 1 cent per share for costs related to the spinoff of non-strategic local exchange and related Wireline business assets.
Wireless Delivers Another Strong Performance
In the fourth quarter 2008, Verizon Wireless continued to deliver service ARPU growth, strong customer loyalty, and sustained high margins:
-- Organic growth totaled 1.4 million net customer additions, essentially
all of which were retail.
-- Retail net customer additions totaled 1.2 million. This included a
net loss of 122,000 retail customers, resulting primarily from the
closing of a previously announced exchange agreement with another
carrier. Verizon Wireless had entered into this agreement to comply
with conditions imposed in connection with regulatory approval of the
company's acquisition of Rural Cellular Corporation, which closed in
August 2008.
-- Verizon Wireless added 5.8 million organic net new retail customers in
2008 -- expected to be the most of any U.S. wireless carrier.
-- At the end of the quarter, Verizon Wireless had 72.1 million total
customers.
-- Verizon Wireless continued to have a high-quality customer base, with
70.0 million retail customers (not including Alltel) -- the most of
any U.S. wireless brand. Following the recently completed Alltel
acquisition, Verizon Wireless now serves more than 80 million
customers, excluding markets to be divested.
-- Verizon Wireless continued to have low churn -- 1.35 percent churn
among all customers, and 1.05 percent among the company's retail
post-paid customers.
-- Verizon Wireless continued its double-digit revenue growth, with total
quarterly revenues of $12.8 billion, up 12.3 percent year over year.
Full-year revenues were $49.3 billion, up 12.4 percent. Service
revenues in the fourth quarter were $11.1 billion, up 12.0 percent
year over year, and $42.6 billion for the full year, up 12.2 percent.
-- This revenue growth was driven by accretion in ARPU (average monthly
revenue per customer), which increased year over year for the 11th
consecutive quarter. Total service ARPU of $51.72 was up 1.4 percent
year over year, reflecting strong growth in total data ARPU, which was
up 27.9 percent over the same period.
-- Wireless operating income margin reached 29.7 percent, up 350 basis
points on a year- over-year basis. EBITDA (earnings before interest,
taxes, depreciation and amortization) margin on service revenues
reached 47.2 percent.
Record FiOS Customer Growth at Wireline
Verizon Wireline reported record growth in the number of new customers of FiOS TV and FiOS Internet, and it continued to increase sales of enterprise strategic services year over year. In the fourth quarter (with prior-period comparisons adjusted to reflect the impact of the spinoff of non-strategic Wireline assets):
-- Verizon added 303,000 net new FiOS TV customers, compared with 226,000
in the fourth quarter 2007. The company had 1.9 million FiOS TV
customers at year-end 2008, adding nearly 1 million FiOS TV customers
since year-end 2007.
-- FiOS TV sales penetration (sales as a percentage of potential
customers) increased to 20.8 percent, compared with 16.0 percent in
the fourth quarter 2007. FiOS TV service was available for sale to
9.2 million premises by year-end 2008. This represented a 57 percent
increase in the availability of FiOS TV -- and, by extension, of
"triple play" bundles of FiOS TV, Internet and voice services -- since
year-end 2007.
-- Verizon added 282,000 net new FiOS Internet customers, compared with
244,000 in the fourth quarter 2007. The company had nearly 2.5
million FiOS Internet customers at year-end 2008, adding nearly 1
million FiOS Internet customers since year-end 2007.
-- FiOS Internet sales penetration increased to 24.9 percent, compared
with 20.7 percent in the fourth quarter 2007. FiOS Internet was
available for sale to nearly 10 million premises by year-end 2008.
-- Broadband and video revenues from consumer customers totaled nearly
$1.2 billion in the fourth quarter 2008 -- representing year-over-year
quarterly growth of 42.0 percent.
-- Growing revenue from broadband and video services drove consumer ARPU
in legacy Verizon wireline markets (which excludes consumer markets
served by the former MCI) to $68.46 for the fourth quarter 2008, a
14.3 percent increase compared with the fourth quarter 2007.
-- Sales of strategic business services -- such as IP (Internet
protocol), managed services, Ethernet and optical ring services --
generated $1.5 billion in revenue in the quarter, up 8.4 percent from
the fourth quarter 2007.
Additional Highlights
Wireless
-- The Alltel acquisition expanded the Verizon Wireless network to cover
nearly the entire U.S. population and made Verizon Wireless the
nation's largest carrier in terms of total customers -- in addition to
its traditional position of being the leading carrier in terms of
retail customers, revenues and margins.
-- At the end of 2008, retail customers (postpaid and prepaid)
represented 97 percent of the company's base.
-- Verizon Wireless continued to lead the industry in cost efficiency.
Monthly cash expense per customer (non-GAAP) decreased in the fourth
quarter and for the full year to $27.29 and $28.12 in 2008 from $28.75
and $28.24 in 2007, respectively.
-- Data revenues of $10.7 billion for the full year were up 44 percent
over 2007. In the fourth quarter, data revenues were 26.8 percent of
all service revenues, up from 21.3 percent in the fourth quarter 2007.
Verizon Wireless had 55.1 million retail data customers at year-end --
79 percent of the retail customer base and a 16.8 percent increase
over year-end 2007.
-- More than 65 percent of the company's retail customers -- 45.5 million
-- had 3G broadband-capable devices by year-end. The company
continued to extend the reach of the nation's largest and most
reliable 3G (third generation) network, which now covers more than 274
million people after the Alltel acquisition.
-- Customers across the country lined up to purchase the new BlackBerry
Storm, available exclusively in the U.S. from Verizon Wireless and
launched in November. Designed for both consumers and business
customers, the BlackBerry Storm offers customers the reliability of
the Verizon Wireless 3G network and the full power of a revolutionary
touch-screen, multimedia smartphone with global connectivity.
-- Verizon Wireless, with the most global data coverage of any U.S.
wireless carrier, received top honors during the quarter for its
global services and international solutions that help travelers stay
connected around the globe. Readers of Global Traveler magazine
selected Verizon Wireless as the world's best wireless service
provider for the second consecutive year. Business Traveler magazine
readers chose Verizon Wireless as the world's best wireless data
service provider in the 2008 "Best in Business Travel" awards.
-- During the quarter, Verizon Wireless customers sent or received more
than 90 billion text messages -- more than double the number of text
messages sent in the same period a year ago. Customers also sent 1.8
billion picture/video messages and completed 50 million music and
video downloads during the quarter.
Wireline
-- Wireline total operating revenues were $11.9 billion. Verizon
Telecom, which serves domestic consumer and small-business customers,
and Verizon Business, which serves large-business and government
customers worldwide, each had 2.3 percent year-over-year quarterly
revenue declines. At Verizon Telecom, this was the smallest decrease
in 12 quarters. Wireline total operating expenses were $11.2 billion,
a 1.3 percent increase compared with the fourth quarter 2007.
-- By the end of 2008, Verizon's FiOS fiber-to-the-premises network
passed 12.7 million premises throughout the company's wireline service
territory -- greater than the company's target of 12 million by
year-end 2008. Fiber-to-the-home now passes approximately 40 percent
of the total households in Verizon's landline footprint.
-- Total broadband connections were 8.7 million, a net increase of
214,000 over the third quarter 2008. This includes a decrease of
68,000 DSL-based Verizon High Speed Internet connections, which was
more than offset by the increase in FiOS Internet customers. The 8.7
million is an increase of 8.2 percent year over year.
-- Broadband and TV products now account for more than 31 percent of
consumer ARPU in legacy markets, compared with 22.7 percent in the
fourth quarter 2007. The ARPU among FiOS customers continues to grow
and is more than $133 per month.
-- Wireline data revenues -- which represented 43.6 percent of total
Wireline revenues -- were $5.2 billion in the fourth quarter 2008, an
increase of 10.9 percent compared with the fourth quarter 2007. This
includes revenues from consumer broadband services, wholesale data
transport and Verizon Business data services.
-- Verizon Business continued to announce significant new capabilities:
enhancements to its voice-over-Internet-protocol portfolio; a new
managed telepresence (video-meeting) solution; a service that enables
managed hosting customers to easily and securely change online
content; a solution for more efficiently providing essential
applications to employees worldwide; and a managed unified
communications and collaboration (UC&C) solution aimed at helping
employees of global enterprises work more closely with one another.
-- Verizon Business also continued to expand its global network reach and
capabilities, announcing the installation of 26 Private IP (PIP) edge
switches, including new nodes in Morocco and Pakistan. The company
now has edge switches deployed in 59 countries and supports PIP
services in more than 120 countries. Additional network enhancements
included installation of eight Converged Packet Access nodes and
further mesh network expansion in Asia-Pacific and North America,
including the deployment of nodes in Singapore, Toronto, Montreal and
several U.S. cities. In an additional seven U.S. markets, the company
deployed multiplexers that enable remote provisioning and trouble
isolation while providing reduced latency.
-- New agreements with multinational customers included Nikon
Corporation, NSG Group, Ingenico and Johnson Controls. Verizon
Business also signed new contracts with several U.S. government
agencies, including the U.S. Department of Veterans Affairs.
Verizon Communications Inc. (NYSE:VZ)
, headquartered in New York, is a leader in delivering broadband and other wireline and wireless communication innovations to mass market, business, government and wholesale customers. Verizon Wireless operates America's most reliable wireless network, serving more than 80 million customers nationwide. Verizon's Wireline operations include Verizon Business, which delivers innovative and seamless business solutions to customers around the world, and Verizon Telecom, which brings customers the benefits of converged communications, information and entertainment services over the nation's most advanced fiber-optic network. A Dow 30 company, Verizon employs a diverse workforce of nearly 224,000 and last year generated consolidated operating revenues of more than $97 billion. For more information, visit www.verizon.com.
VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches and biographies, media contacts, high-quality video and images, 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 news 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 effects of adverse conditions in the U.S. and international economies; the effects of competition in our markets; materially adverse changes in 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; the effect of material changes in available technology; any disruption of our suppliers' provisioning of critical products or services; significant increases in benefit plan costs or lower investment returns on plan assets; the impact of natural or man-made disasters or existing or future litigation and any resulting financial impact not covered by insurance; technology substitution; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing; any changes in the regulatory environments in which we operate, including any loss of or inability to renew wireless licenses, and the final results of federal and state regulatory proceedings and judicial review of those results; the timing, scope and financial impact of our deployment of fiber-to-the-premises broadband technology; 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; our ability to successfully integrate Alltel Corporation into Verizon Wireless's business and achieve anticipated benefits of the acquisition; and the inability to implement our business strategies.
Verizon Communications Inc.
Condensed Consolidated Statements of Income
-------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 12/31/08 12/31/07 % Change
--------- ------------ ------------ --------
Operating Revenues $24,645 $23,840 3.4
Operating Expenses
Cost of services and sales 9,976 9,796 1.8
Selling, general &
administrative expense 7,090 6,955 1.9
Depreciation and amortization
expense 3,747 3,666 2.2
----- -----
Total Operating Expenses 20,813 20,417 1.9
Operating Income 3,832 3,423 11.9
Equity in earnings of
unconsolidated businesses 109 93 17.2
Other income and (expense), net 62 87 (28.7)
Interest expense (517) (439) 17.8
Minority interest (1,696) (1,333) 27.2
------ ------
Income Before Provision for
Income Taxes,
Discontinued Operations and
Extraordinary
Item 1,790 1,831 (2.2)
Provision for income taxes (555) (759) (26.9)
---- ----
Income Before Discontinued
Operations and
Extraordinary Item 1,235 1,072 15.2
Income from discontinued
operations, net of
tax (1) - - *
Extraordinary item, net of tax - - *
--- ---
Net Income $1,235 $1,072 15.2
------ ------
Basic Earnings per Common Share (2)
Income before discontinued
operations and
extraordinary item $.43 $.37 16.2
Income from discontinued
operations, net of tax - - *
Extraordinary item, net of tax - - *
--- ---
Net income $.43 $.37 16.2
Weighted average number of
common shares (in millions) 2,841 2,886
Diluted Earnings per Common
Share (2) (3)
Income before discontinued
operations and
extraordinary item $.43 $.37 16.2
Income from discontinued
operations, net of tax - - *
Extraordinary item, net of tax - - *
--- ---
Net income $.43 $.37 16.2
Weighted average number of
common shares-assuming dilution
(in millions) 2,841 2,891
(dollars in millions, except per share amounts)
12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/08 12/31/07 % Change
--------- ------------ ------------ --------
Operating Revenues $97,354 $93,469 4.2
Operating Expenses
Cost of services and sales 39,007 37,547 3.9
Selling, general &
administrative expense 26,898 25,967 3.6
Depreciation and amortization
expense 14,565 14,377 1.3
------ ------
Total Operating Expenses 80,470 77,891 3.3
Operating Income 16,884 15,578 8.4
Equity in earnings of
unconsolidated businesses 567 585 (3.1)
Other income and (expense), net 282 211 33.6
Interest expense (1,819) (1,829) (0.5)
Minority interest (6,155) (5,053) 21.8
------ ------
Income Before Provision for
Income Taxes,
Discontinued Operations and
Extraordinary
Item 9,759 9,492 2.8
Provision for income taxes (3,331) (3,982) (16.3)
------ ------
Income Before Discontinued
Operations and
Extraordinary Item 6,428 5,510 16.7
Income from discontinued
operations, net of
tax (1) - 142 (100.0)
Extraordinary item, net of tax - (131) (100.0)
--- ----
Net Income $6,428 $5,521 16.4
------ ------
Basic Earnings per Common Share (2)
Income before discontinued
operations and
extraordinary item $2.26 $1.90 18.9
Income from discontinued
operations, net of tax - .05 (100.0)
Extraordinary item, net of tax - (.05) (100.0)
--- ----
Net income $2.26 $1.91 18.3
Weighted average number of
common shares (in millions) 2,849 2,898
Diluted Earnings per Common
Share (2) (3)
Income before discontinued
operations and
extraordinary item $2.26 $1.90 18.9
Income from discontinued
operations, net of tax - .05 (100.0)
Extraordinary item, net of tax - (.05) (100.0)
--- ----
Net income $2.26 $1.90 18.9
Weighted average number of
common shares-assuming dilution
(in millions) 2,850 2,902
Footnotes:
(1) Discontinued operations includes a gain on the sale of
Telecomunicaciones de Puerto Rico, Inc. (TELPRI) of $70 million, net
of tax. The disposition of this non-strategic business was completed
on March 30, 2007.
(2) EPS totals may not add due to rounding.
(3) Diluted Earnings per Share includes the dilutive effect of shares
issuable under our stock-based compensation plans, which represent
the only potential dilution.
* Not meaningful
Verizon Communications Inc.
Condensed Consolidated Statements of Income Before Special Items
----------------------------------------------------------------
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 12/31/08 12/31/07 % Change
--------- ------------ ------------ --------
Operating Revenues (1)
Wireline $11,917 $12,249 (2.7)
Domestic Wireless 12,846 11,443 12.3
Other (118) (121) (2.5)
---- ----
Total Operating Revenues 24,645 23,571 4.6
------ ------
Operating Expenses (1)
Cost of services and sales 9,905 9,676 2.4
Selling, general &
administrative expense 6,417 5,999 7.0
Depreciation and
amortization expense 3,747 3,602 4.0
----- -----
Total Operating Expenses 20,069 19,277 4.1
------ ------
Operating Income 4,576 4,294 6.6
Operating income impact of
divested
operations(1) - 33 (100.0)
Equity in earnings of
unconsolidated
businesses 109 93 17.2
Other income and (expense), net 110 87 26.4
Interest expense (517) (439) 17.8
Minority interest (1,698) (1,333) 27.4
------ ------
Income Before Provision for
Income Taxes
and Discontinued Operations 2,580 2,735 (5.7)
Provision for income taxes (855) (953) (10.3)
---- ----
Income Before Discontinued
Operations 1,725 1,782 (3.2)
Income from discontinued
operations,
net of tax - - *
--- ---
Net Income Before Special Items $1,725 $1,782 (3.2)
------ ------
Basic Adjusted Earnings per Common Share(2)
Income before discontinued
operations $.61 $.62 (1.6)
Income from discontinued
operations, net of tax - - *
--- ---
Net income $.61 $.62 (1.6)
Weighted average number of
common shares (in
millions) 2,841 2,886
Diluted Adjusted Earnings per Common
Share(2) (3)
Income before discontinued
operations $.61 $.62 (1.6)
Income from discontinued
operations, net of tax - - *
--- ---
Net income $.61 $.62 (1.6)
Weighted average number of common
shares-assuming dilution (in
millions) 2,841 2,891
Footnotes:
(1) Reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results for the spin-off
of the wireline segment's non-strategic local exchange and related
business assets in Maine, New Hampshire and Vermont in the first
quarter of 2008. Reclassifications were determined using specific
information, where available, and allocations where data is not
maintained on a state-specific basis within the Company's books and
records, as follows:
Revenues $- $269
Expenses $- $236
(2) EPS totals may not add due to rounding.
(3) Diluted Earnings per Share includes the dilutive effect of shares
issuable under our stock-based compensation plans, which represent
the only potential dilution.
* Not meaningful
(dollars in millions, except per share amounts)
12 Mos. Ended 12 Mos. Ended
Unaudited 12/31/08 12/31/07 % Change
--------- -------- ------------ --------
Operating Revenues (1)
Wireline $48,214 $49,129 (1.9)
Domestic Wireless 49,332 43,882 12.4
Other (450) (636) (29.2)
---- ----
Total Operating Revenues 97,096 92,375 5.1
------ ------
Operating Expenses (1)
Cost of services and sales 38,801 37,090 4.6
Selling, general &
administrative expense 25,723 24,620 4.5
Depreciation and
amortization expense 14,505 14,120 2.7
------ ------
Total Operating Expenses 79,029 75,830 4.2
------ ------
Operating Income 18,067 16,545 9.2
Operating income impact of
divested
operations(1) 44 182 (75.8)
Equity in earnings of
unconsolidated
businesses 567 585 (3.1)
Other income and (expense), net 330 211 56.4
Interest expense (1,819) (1,829) (0.5)
Minority interest (6,157) (5,053) 21.8
------ ------
Income Before Provision for
Income Taxes
and Discontinued Operations 11,032 10,641 3.7
Provision for income taxes (3,797) (3,787) 0.3
------ ------
Income Before Discontinued
Operations 7,235 6,854 5.6
Income from discontinued
operations,
net of tax - 72 (100.0)
--- ---
Net Income Before Special Items $7,235 $6,926 4.5
------ ------
Basic Adjusted Earnings per
Common Share(2)
Income before discontinued
operations $2.54 $2.37 7.2
Income from discontinued
operations, net of tax - .02 (100.0)
--- ---
Net income $2.54 $2.39 6.3
Weighted average number of
common shares (in
millions) 2,849 2,898
Diluted Adjusted Earnings per Common
Share(2) (3)
Income before discontinued
operations $2.54 $2.36 7.6
Income from discontinued
operations,
net of tax - .02 (100.0)
--- ---
Net income $2.54 $2.39 6.3
Weighted average number of common
shares-assuming dilution (in
millions) 2,850 2,902
Footnotes:
(1) Reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results for the spin-off
of the wireline segment's non-strategic local exchange and related
business assets in Maine, New Hampshire and Vermont in the first
quarter of 2008. Reclassifications were determined using specific
information, where available, and allocations where data is not
maintained on a state-specific basis within the Company's books and
records, as follows:
Revenues $258 $1,094
Expenses $214 $912
(2) EPS totals may not add due to rounding.
(3) Diluted Earnings per Share includes the dilutive effect of shares
issuable under our stock-based compensation plans, which represent
the only potential dilution.
* Not meaningful
Verizon Communications Inc.
Condensed Consolidated Statements of Income - Reconciliations
-------------------------------------------------------------
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
3 Mos.
3 Mos. Severance, Ended
Ended Merger Pension 12/31/08
12/31/08 Integr- and Investment - Before
Reported ation Benefit Related Special
Unaudited (GAAP) Costs Charges Charges Items
--------- -------- ------ ------- ------- --------
Operating
Revenues $24,645 $- $- $- $24,645
Operating
Expenses
Cost of
services and
sales 9,976 (6) (65) - 9,905
Selling,
general &
administrative
expense 7,090 (53) (620) - 6,417
Depreciation
and
amortization
expense 3,747 - - - 3,747
----- --- --- --- -----
Total Operating
Expenses 20,813 (59) (685) - 20,069
------ --- ---- --- ------
Operating Income 3,832 59 685 - 4,576
Equity in
earnings of
unconsolidated
businesses 109 - - - 109
Other income
and (expense),
net 62 - - 48 110
Interest expense (517) - - - (517)
Minority
interest (1,696) (2) - - (1,698)
------ --- --- --- ------
Income Before
Provision for
Income
Taxes 1,790 57 685 48 2,580
Provision for
income taxes (555) (22) (261) (17) (855)
---- --- ---- --- ----
Net Income $1,235 $35 $424 $31 $1,725
------ --- ---- --- ------
Basic Earnings
per Common
Share (1)
Net income $.43 $.01 $.15 $.01 $.61
Diluted Earnings
per Common
Share (1)
Net income $.43 $.01 $.15 $.01 $.61
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
3 Mos. Access
Ended Line
12/31/07 Merger Spin-Off
Reported Integration Related International
Unaudited (GAAP) Costs Charges Taxes
--------- -------- ----------- ------- -------------
Operating
Revenues $23,840 $- $- $-
Operating Expenses
Cost of
services and
sales 9,796 (16) - -
Selling,
general &
administrative
expense 6,955 (76) (38) (2)
Depreciation
and
amortization
expense 3,666 - - -
----- --- --- ---
Total
Operating
Expenses 20,417 (92) (38) (2)
------ --- --- ---
Operating
Income 3,423 92 38 2
Operating
income impact
of divested
operations - - - -
Equity in
earnings of
unconsolidated
businesses 93 - - -
Other income
and (expense),
net 87 - - -
Interest
expense (439) - - -
Minority
interest (1,333) - - -
------ --- --- ---
Income Before
Provision for
Income Taxes 1,831 92 38 2
Provision for
income taxes (759) (34) (2) 137
---- --- --- ---
Net Income $1,072 $58 $36 $139
------ --- --- ----
Basic Earnings
per Common
Share (1)
Net income $.37 $.02 $.01 $.05
Diluted Earnings
per Common
Share (1)
Net income $.37 $.02 $.01 $.05
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
3 Mos. Ended
Severance, Impact 12/31/07
Pension of Before
and Benefit Divested Special
Unaudited Charges Operations Items
--------- -------- ----------- --------
Operating
Revenues $- $(269) $23,571
Operating Expenses
Cost of
services and
sales - (104) 9,676
Selling,
general &
administrative
expense (772) (68) 5,999
Depreciation
and
amortization
expense - (64) 3,602
--- --- -----
Total
Operating
Expenses (772) (236) 19,277
---- ---- ------
Operating
Income 772 (33) 4,294
Operating
income impact
of divested
operations - 33 33
Equity in
earnings of
unconsolidated
businesses - - 93
Other income
and (expense),
net - - 87
Interest
expense - - (439)
Minority
interest - - (1,333)
--- --- ------
Income Before
Provision for
Income Taxes 772 - 2,735
Provision for
income taxes (295) - (953)
---- --- ----
Net Income $477 $- $1,782
---- --- ------
Basic Earnings per
Common Share (1)
Net income $.17 $- $.62
Diluted Earnings
per Common Share (1)
Net income $.16 $- $.62
Footnote:
(1) EPS totals may not add 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.
Condensed Consolidated Statements of Income - Reconciliations
-------------------------------------------------------------
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
12 Mos. Access
Ended Merger Line
12/31/08 Integr- Spin-Off Investment -
Reported ation Related Related
Unaudited (GAAP) Costs Charges Charges
--------- -------- ------- -------- --------
Operating
Revenues $97,354 $- $- $-
Operating Expenses
Cost of
services and
sales 39,007 (24) (16) -
Selling,
general &
administrative
expense 26,898 (150) (87) -
Depreciation
and
amortization
expense 14,565 - - -
------ --- --- ---
Total Operating
Expenses 80,470 (174) (103) -
------ ---- ---- ---
Operating Income 16,884 174 103 -
Operating
income impact
of divested
operations - - - -
Equity in
earnings of
unconsolidated
businesses 567 - - -
Other income
and (expense),
net 282 - - 48
Interest expense (1,819) - - -
Minority
interest (6,155) (2) - -
------ --- --- ---
Income Before
Provision for
Income Taxes 9,759 172 103 48
Provision for
income taxes (3,331) (65) (22) (17)
------ --- --- ---
Net Income $6,428 $107 $81 $31
------ ---- --- ---
Basic Earnings per
Common
Share (1)
Net income $2.26 $.03 $.03 $.01
Diluted Earnings
per Common
Share (1)
Net income $2.26 $.03 $.03 $.01
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
Severance, 12 Mos. Ended
Pension Impact 12/31/08
and of Before
Benefit Divested Special
Unaudited Charges Operations Items
--------- ---------- ---------- ------------
Operating
Revenues $- $(258) $97,096
Operating Expenses
Cost of
services and
sales (65) (101) 38,801
Selling,
general &
administrative
expense (885) (53) 25,723
Depreciation
and
amortization
expense - (60) 14,505
--- --- ------
Total
Operating
Expenses (950) (214) 79,029
---- ---- ------
Operating
Income 950 (44) 18,067
Operating
income impact
of divested
operations - 44 44
Equity in
earnings of
unconsolidated
businesses - - 567
Other income
and (expense),
net - - 330
Interest
expense - - (1,819)
Minority
interest - - (6,157)
--- --- ------
Income Before
Provision for
Income Taxes 950 - 11,032
Provision for
income taxes (362) - (3,797)
---- --- ------
Net Income $588 $- $7,235
---- --- ------
Basic Earnings per
Common Share (1)
Net income $.21 $- $2.54
Diluted Earnings
per Common
Share (1)
Net income $.21 $- $2.54
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
12 Mos. Access
Ended Merger Sale of Line
12/31/07 Integra- Puerto Spin-Off
Reported tion Rico, Loss on Related
Unaudited (GAAP) Costs Net CANTV Charges
--------- -------- -------- ------- ------- --------
Operating
Revenues $93,469 $- $- $- $-
Operating Expenses
Cost of services
and sales 37,547 (32) - - -
Selling, general
& administrative
expense 25,967 (146) (100) - (84)
Depreciation and
amortization
expense 14,377 - - - -
------ --- --- --- ---
Total Operating
Expenses 77,891 (178) (100) - (84)
------ ---- ---- --- ---
Operating Income 15,578 178 100 - 84
Operating income
impact of
divested
operations - - - - -
Equity in
earnings of
unconsolidated
businesses 585 - - - -
Other income and
(expense), net 211 - - - -
Interest expense (1,829) - - - -
Minority interest (5,053) - - - -
------ --- --- --- ---
Income Before
Provision for
Income Taxes,
Discontinued
Operations and
Extraordinary
Item 9,492 178 100 - 84
Provision for
income taxes (3,982) (66) (35) - (4)
------ --- --- --- ---
Income Before
Discontinued
Operations
and
Extraordinary
Item 5,510 112 65 - 80
Income from
discontinued
operations, net
of tax 142 - (70) - -
Extraordinary
item, net of tax (131) - - 131 -
---- --- --- --- ---
Net Income $5,521 $112 $(5) $131 $80
------ ---- --- ---- ---
Basic Earnings
per Common
Share (1)
Income before
discontinued
operations and
extraordinary
item $1.90 $.04 $.02 $- $.03
Income from
discontinued
operations, net
of tax .05 - (.02) - -
Extraordinary
item, net of tax (.05) - - .05 -
---- --- --- --- ---
Net income $1.91 $.04 $- $.05 $.03
----- ---- --- ---- ----
Diluted Earnings
per Common
Share (1)
Income before
discontinued
operations and
extraordinary
item $1.90 $.04 $.02 $- $.03
Income from
discontinued
operations, net
of tax $.05 - (.02) - -
Extraordinary
item, net of tax (.05) - - .05 -
---- --- --- --- ---
Net income $1.90 $.04 $- $.05 $.03
----- ---- --- ---- ----
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
12 Mos.
Severance, Ended
Pension 12/31/07
and Impact of Before
International Benefit Divested Special
Unaudited Taxes Charges Operations Items
--------- ------------- ---------- ---------- --------
Operating
Revenues $- $- $(1,094) $92,375
Operating Expenses
Cost of services
and sales - - (425) 37,090
Selling, general
& administrative
expense (15) (772) (230) 24,620
Depreciation and
amortization
expense - - (257) 14,120
--- --- ---- ------
Total Operating
Expenses (15) (772) (912) 75,830
--- ---- ---- ------
Operating Income 15 772 (182) 16,545
Operating income
impact of
divested
operations - - 182 182
Equity in
earnings of
unconsolidated
businesses - - - 585
Other income and
(expense), net - - - 211
Interest expense - - - (1,829)
Minority interest - - - (5,053)
--- --- --- ------
Income Before
Provision for
Income Taxes,
Discontinued
Operations and
Extraordinary
Item 15 772 - 10,641
Provision for
income taxes 595 (295) - (3,787)
--- ---- --- ------
Income Before
Discontinued
Operations
and
Extraordinary
Item 610 477 - 6,854
Income from
discontinued
operations, net
of tax - - - 72
Extraordinary
item, net of tax - - - -
--- --- --- ---
Net Income $610 $477 $- $6,926
---- ---- --- ------
Basic Earnings per
Common Share (1)
Income before
discontinued
operations and
extraordinary
item $.21 $.17 $- $2.37
Income from
discontinued
operations, net
of tax - - - .02
Extraordinary
item, net of tax - - - -
--- --- --- ---
Net income $.21 $.17 $- $2.39
---- ---- --- -----
Diluted Earnings per
Common Share (1)
Income before
discontinued
operations and
extraordinary
item $.21 $.16 $- $2.36
Income from
discontinued
operations, net
of tax - - - .02
Extraordinary
item, net of tax - - - -
--- --- --- ---
Net income $.21 $.16 $- $2.39
---- ---- --- -----
Footnote:
(1) EPS totals may not add 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)
Unaudited 12/31/08 12/31/07
--------- -------- --------
Debt to debt and shareowners'
equity ratio-end of period 55.5% 38.1%
Book value per common share $14.68 $17.58
Common shares outstanding (in
millions)
End of period 2,841 2,877
Total employees (1) 223,880 232,417
3 Mos. 3 Mos. 12 Mos. 12 Mos.
Ended Ended Ended Ended
Unaudited 12/31/08 12/31/07 12/31/08 12/31/07
--------- -------- -------- -------- --------
Capital expenditures (including
capitalized software)
Wireline $2,479 $3,083 $9,797 $10,956
Domestic Wireless 1,787 1,600 6,510 6,503
Other 397 63 931 79
--- --- --- --
Total $4,663 $4,746 $17,238 $17,538
------ ------ ------- -------
Cash dividends declared per
common share $0.460 $0.430 $1.780 $1.670
Footnote:
(1) Prior period has been reclassified to reflect comparable amounts.
Verizon Communications Inc.
Condensed Consolidated Balance Sheets
-------------------------------------
(dollars in millions)
Unaudited 12/31/08 12/31/07 $ Change
--------- -------- -------- --------
Assets
Current assets
Cash and cash
equivalents $9,782 $1,153 $8,629
Short-term
investments 509 2,244 (1,735)
Accounts
receivable, net 11,703 11,736 (33)
Inventories 2,092 1,729 363
Prepaid expenses
and other 1,989 1,836 153
----- ----- ---
Total current
assets 26,075 18,698 7,377
------ ------ -----
Plant, property
and equipment 215,605 213,994 1,611
Less accumulated
depreciation 129,059 128,700 359
------- ------- ---
86,546 85,294 1,252
------ ------ -----
Investments in
unconsolidated
businesses 3,393 3,372 21
Wireless licenses 61,974 50,796 11,178
Goodwill 6,035 5,245 790
Other intangible
assets, net 5,199 4,988 211
Other investments 4,781 - 4,781
Other assets 8,349 18,566 (10,217)
----- ------ -------
Total Assets $202,352 $186,959 $15,393
-------- -------- -------
Liabilities and
Shareowners' Investment
Current liabilities
Debt maturing
within one year $4,993 $2,954 $2,039
Accounts payable
and accrued
liabilities 13,814 14,462 (648)
Other 7,099 7,325 (226)
----- ----- ----
Total current
liabilities 25,906 24,741 1,165
------ ------ -----
Long-term debt 46,959 28,203 18,756
Employee benefit
obligations 32,512 29,960 2,552
Deferred income
taxes 11,769 14,784 (3,015)
Other liabilities 6,301 6,402 (101)
Minority
interest 37,199 32,288 4,911
Shareowners'
investment
Common stock 297 297 -
Contributed
capital 40,291 40,316 (25)
Reinvested
earnings 19,250 17,884 1,366
Accumulated
other comprehensive
loss (13,372) (4,506) (8,866)
Common stock
in treasury,
at cost (4,839) (3,489) (1,350)
Deferred
compensation -
employee stock
ownership plans
and other 79 79 -
--- --- ---
Total shareowners'
investment 41,706 50,581 (8,875)
------ ------ ------
Total Liabilities
and Shareowners'
Investment $202,352 $186,959 $15,393
-------- -------- -------
The unaudited consolidated balance sheets are based on
preliminary information.
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
(dollars in millions)
12 Mos. 12 Mos.
Ended Ended
