Strong Sales of Verizon Wireless Services, FiOS Internet and TV, and
Strategic Business Services; Continued Solid Revenue and Cash Flow Growth
NEW YORK, Oct. 27 /PRNewswire/ --
3Q 2008 HIGHLIGHTS
Consolidated Results
-- 59 cents in diluted EPS and 66 cents in adjusted EPS (non-GAAP),
compared with 3Q 2007 diluted EPS of 44 cents reported and 63 cents
adjusted.
-- $24.8 billion in quarterly revenues -- adjusted growth of 5.4 percent
(non-GAAP).
Wireless
-- 1.5 million organic net customer additions, all retail (non-wholesale);
2.1 million total retail net additions including customers from
acquisitions.
-- 70.8 million total customers; 68.8 million retail customers, up 11.3
percent.
-- Industry-leading low churn -- 1.33 percent total churn and 1.03 percent
retail post-paid churn.
-- 12.5 percent increase in total revenues; data revenues up 42.5 percent;
44.2 percent EBITDA margin on service revenues (non-GAAP).
Wireline
-- 233,000 net new FiOS TV customers and 225,000 net new FiOS Internet
customers.
-- 12.8 percent increase in consumer ARPU in legacy telecom markets; 45.3
percent growth in consumer broadband and video revenues.
-- 15.4 percent increase in Verizon Business strategic services revenues.
-- 8th consecutive quarter of year-over-year pro-forma Verizon Business
revenue growth.
Note: Comparisons are year over year unless otherwise noted. See the
accompanying schedules and http://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 strong results in
the third quarter 2008, supported by Verizon Wireless' continued strong
performance, accelerating numbers of new FiOS customers, and continued
increased sales of strategic business services.
Verizon reported 59 cents in diluted earnings per share (EPS) in the
third quarter 2008, compared with 44 cents per share in the third quarter
2007.
On an adjusted basis (non-GAAP), third-quarter 2008 earnings were 66
cents per share, compared with 63 cents per share in the third quarter
2007.
Continued Growth in 3Q
"Verizon again reported solid revenue, earnings and cash flow growth
this quarter," said Chairman and CEO Ivan Seidenberg. "The strategic
investments we made over the past few years continue to drive growth in
wireless, enterprise, broadband and video.
"Although the capital markets and economy may present challenges, we
will continue to execute on our business plan and invest for future
growth," he said. "We increased the dividend 7 percent this quarter,
reflecting confidence in continued growth opportunities. Verizon has a
great set of assets and an employee team focused on creating value for our
customers and shareholders."
Strong Revenues and Cash Flows
Verizon's total operating revenues grew 4.1 percent to $24.8 billion in
the third quarter 2008, from $23.8 billion in the third quarter 2007. This
is an increase of 5.4 percent when adjusted for the spinoff of
non-strategic local exchange and related Wireline business assets earlier
this year (non-GAAP). Total operating expenses increased 5.2 percent to
$20.6 billion, or 5.4 percent on an adjusted basis, comparing third-quarter
2008 with third-quarter 2007.
Cash flows from continuing operations were $19.1 billion through the
first nine months of 2008, up 5.9 percent compared with the same period
last year. Capital expenditures were $12.6 billion through the first nine
months of 2008, down more than $200 million over the same period last year.
Verizon is on track to deliver lower overall capital spending in 2008,
compared with 2007. Total debt was $44.8 billion, compared with $43.1
billion at the end of the second quarter 2008.
Details of 3Q Adjustments
Adjusted earnings in the third quarter 2008 excluded $164 million
after-tax, or 6 cents per share, for severance, pension and benefit charges
recognized primarily as a result of workforce reductions; and $32 million
after-tax, or 1 cent per share, for merger integration costs. Adjusted
earnings in the third quarter 2007 excluded charges of 19 cents per share
in special items: 16 cents per share for international taxes, 2 cents per
share for costs related to the spinoff of non-strategic Wireline assets and
1 cent per share for merger integration costs.
Wireless Continues Strong and Steady Growth
Verizon Wireless continued its uninterrupted record of industry-leading
customer loyalty and profitability. In the third quarter:
-- Wireless retail gross customer additions were strong, up 5.3 percent
over the prior year.
-- Organic growth (growth from sources other than acquisitions) was 1.5
million retail net customer additions, essentially all post-paid.
-- Total growth was 2.1 million retail net additions. This included
630,000 retail customers from the Rural Cellular Corp. acquisition, and
Verizon expects to have a net loss of approximately 120,000 of these
customers under an exchange agreement with another carrier. Verizon
Wireless had 70.8 million total customers at the end of the quarter.
-- The company continues to have a high-quality customer base, with 68.8
million retail wireless customers -- the most of any wireless brand in
the U.S.
-- Verizon Wireless had industry-leading (lowest) total churn for the 16th
consecutive quarter, at 1.33 percent. Among the company's retail
post-paid customers, churn was even lower at 1.03 percent.
-- Verizon Wireless continued its double-digit revenue growth, with total
revenues of $12.7 billion, up 12.5 percent year over year. Service
revenues were $10.9 billion, up 12.2 percent year over year, driven by
customer growth and demand for data services.
-- This revenue growth was driven by ARPU (average monthly revenue per
customer), which increased year over year for the 10th consecutive
quarter. Total service ARPU of $52.18 was up 0.9 percent year over
year, reflecting strong growth in total data ARPU, which was up 28.3
percent.
-- Wireless operating income margin was 27.3 percent, up 20 basis points
year over year.
-- EBITDA margin on service revenues (non-GAAP) was 44.2 percent. (EBITDA
is earnings before interest, taxes, depreciation and amortization.)
FiOS Customer Growth Accelerates
Verizon Wireline reported accelerated growth of FiOS sales and
continued increased sales of enterprise strategic services. In the third
quarter (with prior-period comparisons adjusted to reflect the impact of
the spinoff of non-strategic Wireline assets):
-- Verizon added 233,000 net new FiOS TV customers, compared with 176,000
in the second quarter 2008. The company has 1.6 million FiOS TV
customers, compared with more than 700,000 FiOS TV customers at the end
of third-quarter 2007.
-- Verizon added 225,000 net new FiOS Internet customers, compared with
187,000 in the second quarter 2008. The company has 2.2 million FiOS
Internet customers, compared with 1.3 million FiOS Internet customers at
the end of third-quarter 2007.
-- FiOS Internet sales penetration (sales as a percentage of potential
customers) increased to 24.2 percent, compared with 20.0 percent in last
year's third quarter. FiOS Internet is available for sale to
nearly 9.1 million premises.
-- FiOS TV sales penetration increased to 19.7 percent, compared with 15.2
percent in last year's third quarter. Verizon made FiOS TV service
available for sale to a record 1.2 million additional premises in the
quarter, bringing the total to 8.2 million.
-- Broadband and video revenues from consumer customers totaled $1.1
billion in the third quarter, representing year-over-year growth of 45.3
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 $66.67, a 12.8 percent increase compared with last
year's third quarter.
-- Verizon Business had total revenues of $5.4 billion, or growth of 1.2
percent compared with last year's third quarter. This was Verizon
Business' eighth consecutive quarter of year-over-year pro-forma
revenue growth (non-GAAP, calculated as if Verizon and MCI had merged on
Jan. 1, 2005).
-- Sales of strategic services -- such as IP (Internet protocol), managed
services, Ethernet and optical ring services -- continued to drive
growth at Verizon Business. These services generated $1.6 billion in
revenue, up 15.4 percent from third-quarter 2007.
Additional Highlights
Wireless
-- Verizon Wireless completed its purchase of Rural Cellular on Aug. 7,
2008. The acquisition will expand the company's network coverage
to many rural markets around the country.
-- At the end of the third quarter, 97 percent of the company's base
was retail (post-pay and pre-pay) and 93 percent was retail post-pay.
-- Verizon Wireless continued to lead the industry in cost efficiency.
Cash expense per customer per month (non-GAAP) was $29.12 in the third
quarter 2008, an increase of 1.7 percent over the third quarter 2007 and
3.9 percent from the second quarter 2008.
-- Data revenues grew 42.5 percent over the prior year, to $2.8 billion.
The company had 52.6 million retail data customers in September
(approximately three-quarters of its retail base), a 25.3 percent
increase over the prior year.
-- The company continued to extend the reach of its nationwide wireless
broadband network to make the nation's largest and most reliable 3G
(third-generation) network available to a greater number of Americans --
more than 260 million at the end of the third quarter. More than 60
percent of the company's retail customers -- 43.2 million -- had 3G
broadband-capable devices at the end of the quarter.
-- To offer customers both the reliability of Verizon Wireless' 3G
network and the full power of a revolutionary touch-screen, multimedia
smartphone, Verizon Wireless announced the BlackBerry Storm will be
available later this fall. Designed for both consumers and business
customers, the BlackBerry Storm offers the dependability of the
BlackBerry platform; global connectivity; and premium services and
features, such as Web browsing, music and video, turn-by-turn satellite
navigation, messaging, and social networking. The Blackberry Storm will
be sold exclusively by Verizon Wireless in the U.S. and by Vodafone in
Europe, India, Australia and New Zealand.
-- Since the end of the second quarter, the company introduced two new
rugged phones -- the G'zOne Boulder and the Motorola Adventure
V750. These are designed to withstand extreme conditions and provide
access to Verizon Wireless' Push to Talk service -- a fast, two-way
communication that instantly connects customers to co-workers and
leverages the high speeds of the company's EV-DO (Rev.A) network.
Other devices included new multimedia handsets by LG -- the Dare and the
Chocolate 3 -- and the Samsung Knack for customers who want simple
features and functionality.
-- During the quarter, Verizon Wireless customers sent or received more
than 80 billion text messages and nearly 1.5 billion picture/video
messages. Customers also completed 43 million music and video
downloads.
-- Through a five-year agreement announced earlier this year, Qwest
Communications began selling Verizon Wireless products and services to
residential and business customers in its residential service area.
Wireline
-- Wireline total operating revenues were $12.2 billion, a 1.7 percent
decrease compared with the third quarter 2007. Wireline total operating
expenses decreased 1.1 percent over the same period.
-- Verizon's broadband fiber-to-the-premises network passed 11.9
million premises throughout the company's wireline service
territory by the end of the quarter.
-- Total broadband connections were 8.5 million, a net increase of 129,000
over the second quarter 2008. This includes a decrease of 96,000
DSL-based Verizon High Speed Internet connections, which was more than
offset by the increase in FiOS Internet customers. The 8.5 million is a
9.1 percent year-over-year increase.
-- Broadband and TV products now account for 29.1 percent of consumer ARPU
in legacy markets, compared with 27.6 percent in the second quarter
2008. The ARPU among FiOS customers continues to be more than $130 per
month.
-- Wireline data revenues -- which now represent 42.9 percent of total
Wireline revenues -- were $5.2 billion, an increase of 14.6 percent
compared with the third quarter 2007. This includes revenues from
consumer broadband services, wholesale data transport and Verizon
Business data services.
-- Verizon Business, which delivers integrated global communications and IT
solutions to large-business and government customers, announced
significant capability enhancements. These included professional
services aimed at gaining flexibility, cost control and savings from
virtualized environments; an expanded suite of unified communications
tools in conjunction with Cisco; a new managed wireless local area
network-access offering; a new Network Access Control security service;
a consolidated Global Billing Report; an enhanced interface for
connecting with more than 70,000 Verizon Wi-Fi hot spots worldwide; and
an extension of the company's enterprise mobility access services
to Latin America.
-- Verizon Business continued to expand its global network reach and
capabilities, announcing during the quarter that the first phase of the
Trans-Pacific Express submarine cable system directly connecting
Mainland China, the U.S., South Korea and Taiwan is ready for service.
The company also began a significant expansion of its operations in
India, activating Private IP nodes in five major business centers
following receipt of international and national long-distance licenses
earlier this year.
-- Additional global network enhancements included installing 27 additional
Private IP edge switches globally for a total of 621 edge switches in
158 markets; completing the first phase of the company's U.S.
optical mesh network; expanding its mesh network in the Asia-Pacific
region to Taiwan, Hong Kong and Korea; and deploying an additional 1,348
ultra long haul route-miles in the U.S.
-- New commercial customer agreements included CA Inc., First Data, H&R
Block, Husqvarna and Kuwait Petroleum International Ltd. Verizon
Business also signed new contracts with several U.S. government
agencies.
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 nearly 71 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 more than 228,000 and last year generated consolidated operating
revenues of $93.5 billion. For more information, visit http://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
http://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:
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, including disruption of our suppliers'
provisioning of critical products or services; the impact of natural or
man-made disasters or 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; 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; the timing, scope and
financial impact of our deployment of fiber-to-the-premises broadband
technology; the ability of Verizon Wireless to continue to obtain
sufficient spectrum resources; 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; and the ability to complete acquisitions and
dispositions.
Verizon Communications Inc.
Condensed Consolidated Statements of Income
(dollars in millions, except per share amounts)
3 Mos. 3 Mos. 9 Mos. 9 Mos.
Ended Ended % Ended Ended %
Unaudited 9/30/08 9/30/07 Change 9/30/08 9/30/07 Change
Operating Revenues $24,752 $23,772 4.1 $72,709 $69,629 4.4
Operating Expenses
Cost of services and
sales 10,048 9,608 4.6 29,031 27,751 4.6
Selling, general &
administrative
expense 6,879 6,349 8.3 19,808 19,012 4.2
Depreciation and
amortization expense 3,652 3,605 1.3 10,818 10,711 1.0
Total Operating
Expenses 20,579 19,562 5.2 59,657 57,474 3.8
Operating Income 4,173 4,210 (0.9) 13,052 12,155 7.4
Equity in earnings of
unconsolidated
businesses 211 147 43.5 458 492 (6.9)
Other income and
(expense), net 105 49 * 220 124 77.4
Interest expense (440) (450) (2.2) (1,302) (1,390) (6.3)
Minority interest (1,530) (1,298) 17.9 (4,459) (3,720) 19.9
Income Before
Provision for Income
Taxes, Discontinued
Operations and
Extraordinary Item 2,519 2,658 (5.2) 7,969 7,661 4.0
Provision for income
taxes (850) (1,387) (38.7) (2,776) (3,223) (13.9)
Income Before
Discontinued
Operations and
Extraordinary Item 1,669 1,271 31.3 5,193 4,438 17.0
Income from
discontinued
operations, net of
tax (1) - - * - 142 (100.0)
Extraordinary item,
net of tax - - * - (131) (100.0)
Net Income $1,669 $1,271 31.3 $5,193 $4,449 16.7
Basic Earnings per
Common Share (2)
Income before
discontinued
operations and
extraordinary item $.59 $.44 34.1 $1.82 $1.53 19.0
Income from
discontinued
operations, net of
tax - - * - .05 (100.0)
Extraordinary item,
net of tax - - * - (.05) (100.0)
Net income $.59 $.44 34.1 $1.82 $1.53 19.0
Weighted average
number of common
shares (in millions) 2,844 2,896 2,852 2,902
Diluted Earnings per
Common Share (2) (3)
Income before
discontinued
operations and
extraordinary item $.59 $.44 34.1 $1.82 $1.53 19.0
Income from
discontinued
operations, net of
tax - - * - .05 (100.0)
Extraordinary item,
net of tax - - * - (.05) (100.0)
Net income $.59 $.44 34.1 $1.82 $1.53 19.0
Weighted average
number of common
shares-assuming
dilution (in
millions) 2,845 2,900 2,854 2,906
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. 3 Mos. 9 Mos. 9 Mos.
Ended Ended % Ended Ended %
Unaudited 9/30/08 9/30/07 Change 9/30/08 9/30/07 Change
Operating
Revenues (1)
Wireline $12,158 $12,372 (1.7) $36,297 $36,880 (1.6)
Domestic Wireless 12,699 11,289 12.5 36,486 32,439 12.5
Other (105) (168) (37.5) (332) (515) (35.5)
Total Operating
Revenues 24,752 23,493 5.4 72,451 68,804 5.3
Operating
Expenses (1)
Cost of services
and sales 10,043 9,489 5.8 28,896 27,414 5.4
Selling, general
& administrative
expense 6,569 6,201 5.9 19,306 18,621 3.7
Depreciation and
amortization expense 3,652 3,540 3.2 10,758 10,518 2.3
Total Operating
Expenses 20,264 19,230 5.4 58,960 56,553 4.3
Operating Income 4,488 4,263 5.3 13,491 12,251 10.1
Operating income
impact of divested
operations (1) - 51 (100.0) 44 149 (70.5)
Equity in earnings
of unconsolidated
businesses 211 147 43.5 458 492 (6.9)
Other income and
(expense), net 105 49 * 220 124 77.4
Interest expense (440) (450) (2.2) (1,302) (1,390) (6.3)
Minority interest (1,530) (1,298) 17.9 (4,459) (3,720) 19.9
Income Before
Provision for Income
Taxes and
Discontinued
Operations 2,834 2,762 2.6 8,452 7,906 6.9
Provision for income
taxes (969) (948) 2.2 (2,942) (2,834) 3.8
Income Before
Discontinued
Operations 1,865 1,814 2.8 5,510 5,072 8.6
Income from
discontinued
operations,
net of tax - - * - 72 (100.0)
Net Income Before
Special Items $1,865 $1,814 2.8 $5,510 $5,144 7.1
Basic Adjusted
Earnings per Common
Share (2)
Income before
discontinued
operations $.66 $.63 4.8 $1.93 $1.75 10.3
Income from
discontinued
operations,
net of tax - - * - .02 (100.0)
Net income $.66 $.63 4.8 $1.93 $1.77 9.0
Weighted average
number of common
shares (in millions) 2,844 2,896 2,852 2,902
Diluted Adjusted
Earnings per Common
Share (2) (3)
Income before
discontinued
operations $.66 $.63 4.8 $1.93 $1.75 10.3
Income from
discontinued
operations,
net of tax - - * - .02 (100.0)
Net income $.66 $.63 4.8 $1.93 $1.77 9.0
Weighted average
number of common
shares-assuming
dilution (in millions) 2,845 2,900 2,854 2,906
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 $- $279 $258 $825
Expenses $- $228 $214 $676
(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 9/30/08
9/30/08 Integ- and Before
Unaudited Reported ration Benefit Special
(GAAP) Costs Charges Items
Operating Revenues $24,752 $- $- $24,752
Operating Expenses
Cost of services and sales 10,048 (5) - 10,043
Selling, general & administrative
expense 6,879 (45) (265) 6,569
Depreciation and amortization expense 3,652 - - 3,652
Total Operating Expenses 20,579 (50) (265) 20,264
Operating Income 4,173 50 265 4,488
Equity in earnings of unconsolidated
businesses 211 - - 211
Other income and (expense), net 105 - - 105
Interest expense (440) - - (440)
Minority interest (1,530) - - (1,530)
Income Before Provision for Income
Taxes 2,519 50 265 2,834
Provision for income taxes (850) (18) (101) (969)
Net Income $1,669 $32 $164 $1,865
Basic Earnings per Common Share (1)
Net income $.59 $.01 $.06 $.66
Diluted Earnings per Common Share (1)
Net income $.59 $.01 $.06 $.66
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
-------------------------------
3 Mos.
3 Mos. Access Impact Ended
Ended Merger Line of 9/30/07
9/30/07 Integ- Spin-Off Divested Before
Unaudited Reported ration Related Intl. Oper- Special
(GAAP) Costs Charges Taxes ations Items
Operating Revenues $23,772 $- $- $- $(279) $23,493
Operating Expenses
Cost of services and sales 9,608 (12) - - (107) 9,489
Selling, general &
administrative expense 6,349 (33) (46) (13) (56) 6,201
Depreciation and
amortization expense 3,605 - - - (65) 3,540
Total Operating Expenses 19,562 (45) (46) (13) (228) 19,230
Operating Income 4,210 45 46 13 (51) 4,263
Operating income impact of
divested operations - - - - 51 51
Equity in earnings of
unconsolidated businesses 147 - - - - 147
Other income and (expense),
net 49 - - - - 49
Interest expense (450) - - - - (450)
Minority interest (1,298) - - - - (1,298)
Income Before Provision for
Income Taxes 2,658 45 46 13 - 2,762
Provision for income taxes (1,387) (17) (2) 458 - (948)
Net Income $1,271 $28 $44 $471 $- $1,814
Basic Earnings per Common
Share (1)
Net income $.44 $.01 $.02 $.16 - $.63
Diluted Earnings per Common
Share (1)
Net income $.44 $.01 $.02 $.16 - $.63
Footnote:
(1) EPS totals may not add due to rounding.
Note: See http://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
--------------------------------
9 Mos.
9 Mos. Access Impact Severance, Ended
Ended Merger Line of Pension 9/30/08
9/30/08 Integ- Spin-Off Divested and Before
Reported ration Related Oper- Benefit Special
Unaudited (GAAP) Costs Charges ations Charges Items
Operating Revenues $72,709 $- $- $(258) $- $72,451
Operating Expenses
Cost of services
and sales 29,031 (18) (16) (101) - 28,896
Selling, general &
administrative
expense 19,808 (97) (87) (53) (265) 19,306
Depreciation and
amortization
expense 10,818 - - (60) - 10,758
Total Operating
Expenses 59,657 (115) (103) (214) (265) 58,960
Operating Income 13,052 115 103 (44) 265 13,491
Operating income
impact of divested
operations - - - 44 - 44
Equity in earnings of
unconsolidated
businesses 458 - - - - 458
Other income and
(expense), net 220 - - - - 220
Interest expense (1,302) - - - - (1,302)
Minority interest (4,459) - - - - (4,459)
Income Before
Provision for
Income Taxes 7,969 115 103 - 265 8,452
Provision for
income taxes (2,776) (43) (22) - (101) (2,942)
Net Income $5,193 $72 $81 $- $164 $5,510
Basic Earnings per
Common Share (1)
Net income $1.82 $.02 $.03 $- $.06 $1.93
Diluted Earnings
per Common
Share (1)
Net income $1.82 $.02 $.03 $- $.06 $1.93
(dollars in millions, except per share amounts)
Special and Non-Recurring
Items
-------------------------
9 Mos.
Ended Merger Sale of
9/30/07 Integ- Puerto
Reported ration Rico, Loss on
Unaudited (GAAP) Costs Net CANTV
Operating Revenues $69,629 $- $- $-
Operating Expenses
Cost of services and sales 27,751 (16) - -
Selling, general & administrative
expense 19,012 (70) (100) -
Depreciation and amortization expense 10,711 - - -
Total Operating Expenses 57,474 (86) (100) -
Operating Income 12,155 86 100 -
Operating income impact of divested
operations - - - -
Equity in earnings of unconsolidated
businesses 492 - - -
Other income and (expense), net 124 - - -
Interest expense (1,390) - - -
Minority interest (3,720) - - -
Income Before Provision for Income
Taxes, Discontinued Operations
and Extraordinary Item 7,661 86 100 -
Provision for income taxes (3,223) (32) (35) -
Income Before Discontinued Operations
and Extraordinary Item 4,438 54 65 -
Income from discontinued operations,
net of tax 142 - (70) -
Extraordinary item, net of tax (131) - - 131
Net Income $4,449 $54 $(5) $131
Basic Earnings per Common Share (1)
Income before discontinued operations
and extraordinary item $1.53 $.02 $.02 $-
Income from discontinued operations,
net of tax .05 - (.02) -
Extraordinary item, net of tax (.05) - - .05
Net income $1.53 $.02 $- $.05
Diluted Earnings per Common Share (1)
Income before discontinued operations
and extraordinary item $1.53 $.02 $.02 $-
Income from discontinued operations,
net of tax $.05 - (.02) -
Extraordinary item, net of tax (.05) - - .05
Net income $1.53 $.02 $- $.05
Special and Non-Recurring
Items
-------------------------
9 Mos.
Access Impact Ended
Line of 9/30/07
Spin-Off Divested Before
Related Intl. Oper- Special
Unaudited Charges Taxes ations Items
Operating Revenues $- $- $(825) $68,804
Operating Expenses
Cost of services and sales - - (321) 27,414
Selling, general & administrative
expense (46) (13) (162) 18,621
Depreciation and amortization expense - - (193) 10,518
Total Operating Expenses (46) (13) (676) 56,553
Operating Income 46 13 (149) 12,251
Operating income impact of divested
operations - - 149 149
Equity in earnings of unconsolidated
businesses - - - 492
Other income and (expense), net - - - 124
Interest expense - - - (1,390)
Minority interest - - - (3,720)
Income Before Provision for Income
Taxes, Discontinued Operations
and Extraordinary Item 46 13 - 7,906
Provision for income taxes (2) 458 - (2,834)
Income Before Discontinued Operations
and Extraordinary Item 44 471 - 5,072
Income from discontinued operations,
net of tax - - - 72
Extraordinary item, net of tax - - - -
Net Income $44 $471 $- $5,144
Basic Earnings per Common Share (1)
Income before discontinued operations
and extraordinary item $.02 $.16 $- $1.75
Income from discontinued operations,
net of tax - - - .02
Extraordinary item, net of tax - - - -
Net income $.02 $.16 $- $1.77
Diluted Earnings per Common Share (1)
Income before discontinued operations
and extraordinary item $.02 $.16 $- $1.75
Income from discontinued operations,
net of tax - - - .02
Extraordinary item, net of tax - - - -
Net income $.02 $.16 $- $1.77
Footnote:
(1) EPS totals may not add due to rounding.
Note: See http://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 9/30/08 9/30/07
Debt to debt and shareowners' equity
ratio-end of period 46.8% 38.8%
Book value per common share $17.94 $17.19
Common shares outstanding (in
millions)
End of period 2,840 2,890
Total employees (1) 228,315 235,252
3 Mos. 3 Mos. 9 Mos. 9 Mos.
Ended Ended Ended Ended
Unaudited 9/30/08 9/30/07 9/30/08 9/30/07
Capital expenditures (including
capitalized software)
Wireline $2,483 $2,753 $7,318 $7,873
Domestic Wireless 1,473 1,515 4,723 4,903
Other 222 9 534 16
Total $4,178 $4,277 $12,575 $12,792
Cash dividends declared per common
share $0.460 $0.430 $1.320 $1.240
Footnote:
(1) Prior period has been reclassified to reflect comparable amounts.
Verizon Communications Inc.
Condensed Consolidated Balance Sheets
(dollars in millions)
Unaudited 9/30/08 12/31/07 $ Change
Assets
Current assets
Cash and cash equivalents $696 $1,153 $(457)
Short-term investments 978 2,244 (1,266)
Accounts receivable, net 11,724 11,736 (12)
Inventories 2,485 1,729 756
Prepaid expenses and other 3,248 1,836 1,412
Total current assets 19,131 18,698 433
Plant, property and equipment 214,376 213,994 382
Less accumulated depreciation 128,687 128,700 (13)
85,689 85,294 395
Investments in unconsolidated
businesses 3,198 3,372 (174)
Wireless licenses 61,595 50,796 10,799
Goodwill 6,124 5,245 879
Other intangible assets, net 5,093 4,988 105
Other investments 4,759 - 4,759
Other assets 19,272 18,566 706
Total Assets $204,861 $186,959 $17,902
Liabilities and Shareowners'
Investment
Current liabilities
Debt maturing within one year $7,297 $2,954 $4,343
Accounts payable and accrued
liabilities 13,715 14,462 (747)
Other 7,263 7,325 (62)
Total current liabilities 28,275 24,741 3,534
Long-term debt 37,478 28,203 9,275
Employee benefit obligations 28,800 29,960 (1,160)
Deferred income taxes 17,409 14,784 2,625
Other liabilities 6,053 6,402 (349)
Minority interest 35,892 32,288 3,604
Shareowners' investment
Common stock 297 297 -
Contributed capital 40,290 40,316 (26)
Reinvested earnings 19,322 17,884 1,438
Accumulated other comprehensive loss (4,199) (4,506) 307
Common stock in treasury, at cost (4,841) (3,489) (1,352)
Deferred compensation - employee
stock ownership plans and other 85 79 6
Total shareowners' investment 50,954 50,581 373
Total Liabilities and Shareowners'
Investment $204,861 $186,959 $17,902
The unaudited consolidated balance sheets are based on preliminary
information.
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
9 Mos. 9 Mos.
Ended Ended
Unaudited 9/30/08 9/30/07 $ Change
Cash Flows From Operating Activities
Net income $5,193 $4,449 $744
Adjustments to reconcile net income
to net cash provided by
operating activities - continuing
operations:
Depreciation and amortization expense 10,818 10,711 107
Employee retirement benefits 1,232 1,290 (58)
Deferred income taxes 2,240 708 1,532
Provision for uncollectible accounts 724 741 (17)
Equity in earnings of unconsolidated
businesses, net of dividends
received 303 (268) 571
Extraordinary item, net of tax - 131 (131)
Changes in current assets and
liabilities, net of effects
from acquisition/disposition of
businesses (2,458) (2,296) (162)
Other, net 1,026 2,553 (1,527)
Net cash provided by operating
activities - continuing operations 19,078 18,019 1,059
Net cash used in operating activities
- discontinued operations - (570) 570
Net cash provided by operating
activities 19,078 17,449 1,629
Cash Flows From Investing Activities
Capital expenditures (including
capitalized software) (12,575) (12,792) 217
Acquisitions of licenses, investments
and businesses, net of cash acquired (15,978) (697) (15,281)
Net change in short-term investments 1,238 1,267 (29)
Other, net (567) 981 (1,548)
Net cash used in investing activities
- continuing operations (27,882) (11,241) (16,641)
Net cash provided by investing
activities - discontinued operations - 757 (757)
Net cash used in investing activities (27,882) (10,484) (17,398)
Cash Flows From Financing Activities
Proceeds from long-term borrowings 12,552 3,402 9,150
Repayments of long-term borrowings
and capital lease obligations (3,398) (4,994) 1,596
Increase (decrease) in short-term
obligations, excluding current
maturities 4,132 (3,438) 7,570
Dividends paid (3,687) (3,529) (158)
Proceeds from sale of common stock 16 794 (778)
Purchase of common stock for treasury (1,369) (1,734) 365
Other, net 101 30 71
Net cash provided by (used in)
financing activities - continuing
operations 8,347 (9,469) 17,816
Net cash provided by (used in)
financing activities - discontinued
operations - - -
Net cash provided by (used in)
financing activities 8,347 (9,469) 17,816
Decrease in cash and cash equivalents (457) (2,504) 2,047
Cash and cash equivalents, beginning
of period 1,153 3,219 (2,066)
Cash and cash equivalents, end of
period $696 $715 $(19)
Verizon Communications Inc.
Wireline - Selected Financial Results
(dollars in millions)
3 Mos. 3 Mos. 9 Mos. 9 Mos.
Ended Ended % Ended Ended %
Unaudited 9/30/08 9/30/07 Change 9/30/08 9/30/07 Change
Wireline Operating
Revenues (1)
Verizon Telecom
Mass Markets $5,277 $5,329 (1.0) $15,748 $16,032 (1.8)
Wholesale 1,882 1,967 (4.3) 5,689 5,842 (2.6)
Other 338 447 (24.4) 1,067 1,320 (19.2)
Verizon Business
Enterprise Business 3,655 3,686 (0.8) 10,804 10,862 (0.5)
Wholesale 851 836 1.8 2,531 2,530 *
International and
Other 871 789 10.4 2,574 2,376 8.3
Eliminations (716) (682) 5.0 (2,116) (2,082) 1.6
Total Operating Revenues 12,158 12,372 (1.7) 36,297 36,880 (1.6)
Operating Expenses (1)
Cost of services and
sales 6,155 6,085 1.2 18,233 17,993 1.3
Selling, general &
administrative
expense 2,689 2,922 (8.0) 8,193 8,943 (8.4)
Depreciation and
amortization expense 2,268 2,230 1.7 6,722 6,639 1.3
Total Operating Expenses 11,112 11,237 (1.1) 33,148 33,575 (1.3)
Operating Income $1,046 $1,135 (7.8) $3,149 $3,305 (4.7)
Operating Income Margin 8.6% 9.2% 8.7% 9.0%
Verizon Communications Inc.
Wireline - Selected Operating Statistics
Unaudited 9/30/08 9/30/07 % Change
Switched access lines in service (000) (2)
Residence 21,626 24,567 (12.0)
Business 15,192 15,850 (4.2)
Public 254 302 (15.9)
Total 37,072 40,719 (9.0)
Wholesale voice connections (000) 2,466 2,938 (16.1)
Broadband connections (000) 8,459 7,751 9.1
(dollars in millions)
3 Mos. 3 Mos. 9 Mos. 9 Mos.
Ended Ended % Ended Ended %
Unaudited 9/30/08 9/30/07 Change 9/30/08 9/30/07 Change
High capacity and
digital data
revenues (1) $5,218 $4,554 14.6 $15,080 $13,088 15.2
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.
(1) Certain reclassifications have been made, where appropriate, to
reflect comparable operating results.
(2) Prior period amounts adjusted to reflect current period reporting
methodologies.
* Not meaningful
Verizon Communications Inc.
Verizon Wireless - Selected Financial Results
(dollars in millions)
3 Mos. 3 Mos. 9 Mos. 9 Mos.
Ended Ended % Ended Ended %
Unaudited 9/30/08 9/30/07 Change 9/30/08 9/30/07 Change
Revenues
Service revenues $10,935 $9,749 12.2 $31,572 $28,142 12.2
Equipment and other 1,764 1,540 14.5 4,914 4,297 14.4
Total Revenues 12,699 11,289 12.5 36,486 32,439 12.5
Operating Expenses
Cost of services and
sales 4,178 3,551 17.7 11,507 9,843 16.9
Selling, general &
administrative expense 3,689 3,385 9.0 10,806 9,956 8.5
Depreciation and
amortization expense 1,366 1,299 5.2 3,989 3,848 3.7
Total Operating Expenses 9,233 8,235 12.1 26,302 23,647 11.2
Operating Income $3,466 $3,054 13.5 $10,184 $8,792 15.8
Operating Income Margin 27.3% 27.1% 27.9% 27.1%
Verizon Communications Inc.
Verizon Wireless - Selected Operating Statistics
%
Unaudited 9/30/08 9/30/07 Change
Total Customers (000) 70,808 63,699 11.2
Retail Customers (000) 68,807 61,840 11.3
3 Mos. 3 Mos. 9 Mos. 9 Mos.
Ended Ended % Ended Ended %
Unaudited 9/30/08 9/30/07 Change 9/30/08 9/30/07 Change
Total Customer net adds in
period (1) (000) 2,127 1,645 29.3 5,101 4,647 9.8
Retail Customer net adds in
period (2) (000) 2,127 1,760 20.9 5,072 5,028 0.9
Total churn rate 1.33% 1.27% 1.21% 1.22%
Retail churn rate 1.32% 1.21% 1.20% 1.12%
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 have been made, where appropriate, to reflect
comparable operating results.
(1)Includes acquisitions and adjustments of 7,000 and 2,000 customers in
the first and third quarter of 2007, respectively; and 46,000 and 646,000
in the second and third quarter of 2008, respectively.
(2)Includes acquisitions and adjustments of 7,000 and 2,000 customers in
the first and third quarter of 2007, respectively; and 46,000 and 627,000
in the second and third quarter of 2008, respectively.
SOURCE Verizon Communications Inc.
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Related links:
http://www.verizon.com
http://www.verizon.com/investor
http://www.prnewswire.com/comp/094251.html
CONTACT:
Peter Thonis, +1-212-395-2355,
peter.thonis@verizon.com, or Bob Varettoni, +1-908-559-6388,
robert.a.varettoni@verizon.com, both of Verizon Communications
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