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Continued Strong Wireless Performance and Improvements in the Wireline
Consumer and Large-Business Markets
Operating Income Increases as Wireless, Broadband, Video and Strategic
Services Growth Accelerates
1Q 2007 HIGHLIGHTS
Consolidated Results - 51 cents in diluted EPS, or 56 cents per share
before special items (non-GAAP measure).
- 54 cents in diluted EPS before discontinued operations and special items
(non-GAAP), up 17.4 percent from 46 cents per share in 1Q 2006.
- $22.6 billion in revenues, up 6.4 percent from 1Q 2006.
- $3.8 billion in operating income, up 19.6 percent from 1Q 2006.
Wireless - 1.7 million total net customer additions; 60.7 million total
customers, an increase of 14.5 percent year-over-year.
- 1.6 million retail net customer additions, an increase of 1.4 percent
from 1Q 2006; 58.5 million total retail customers, more than any other U.S.
wireless carrier, an increase of 15.4 percent year-over-year.
- 1.08 percent retail churn and 0.89 percent retail post-paid churn -
continued industry-leading results.
- Largest U.S. wireless company, based on total revenues, up 17.0 percent
from 1Q 2006; total data revenues up 80 percent year-over-year; EBITDA
margin (non-GAAP) of 44.3 percent; retail service ARPU up nearly 3 percent
year-over-year.
Wireline - 141,000 net new FiOS TV customers in quarter; 348,000 total FiOS
TV customers; approaching 1 million video customers, including satellite
TV.
- 416,000 net new broadband connections, sixth consecutive quarter of more
than 400,000; 7.4 million total broadband connections, up 30.1 percent from
1Q 2006.
- 1.6 percent revenue growth in legacy Verizon consumer markets.
- Accelerating year-over-year revenue growth at Verizon Business, with
sales of strategic services up 22.8 percent from 1Q 2006.
Note: Prior-period amounts have been reclassified to reflect comparable
results. See the schedules accompanying this news release and
http://www.verizon.com/investor for reconciliations to generally accepted
accounting principles (GAAP) for the non-GAAP financial measures included
in this announcement. Discontinued operations include Verizon Information
Services, as well as interests in Verizon Dominicana and Telecomunicaciones
de Puerto Rico. The dispositions of these non-strategic businesses were
completed on Nov. 17, 2006; Dec. 1, 2006; and March 30, 2007, respectively.
NEW YORK, April 30 /PRNewswire/ -- Verizon Communications Inc. (NYSE:
VZ) today reported strong, profitable first-quarter 2007 revenue growth,
supported by industry-leading retail customer growth at Verizon Wireless
and strong sales of broadband services, including video.
Verizon reported first-quarter 2007 earnings of $1.5 billion, or 51
cents in fully diluted earnings per share (EPS). This compares with EPS of
56 cents in the first quarter 2006 - which includes operations that Verizon
has since divested.
Verizon's first-quarter 2007 diluted EPS before discontinued operations
was 51 cents, or 54 cents per share on an adjusted basis (before special
items, non-GAAP), a 17.4 percent increase from 46 cents per share in the
first quarter 2006.
In total, on an adjusted basis (non-GAAP), Verizon's first-quarter 2007
earnings were $1.6 billion, or 56 cents in EPS, compared with 60 cents in
EPS in the first quarter 2006, which included operations that Verizon has
since divested. Special item adjustments in the first quarter 2007 included
an extraordinary loss of 5 cents in EPS due to the impact of the Venezuelan
government's nationalization of telecommunications services.
Accelerating Growth in Key Markets
"Verizon is off to a strong start in 2007," said Chairman and CEO Ivan
Seidenberg. "Our results show that across-the-board we have accelerated
organic growth in key markets: retail wireless, broadband, data, video and
global IP [Internet protocol]."
Seidenberg added, "Verizon is focused on growing revenue, capturing
market share, improving margins, increasing productivity, and providing the
best customer experience. Throughout the first quarter, we built positive
momentum on all these fronts, and this reinforces our confident outlook.
"We continue to drive value for shareholders. Our investment in
advanced network platforms has been a foundation for product innovations
and operating efficiencies, and we have divested non-strategic assets while
maintaining our strong balance sheet and returning capital to shareholders
through dividends and share repurchases."
Profitable Revenue Growth
Verizon's total operating revenues grew 6.4 percent, to $22.6 billion,
comparing first quarter 2007 with first quarter 2006. On an adjusted basis
(non-GAAP), which reflects comparable results for the sale of selected non-
strategic assets in the first quarter 2007, year-over-year operating
revenue growth was 6.5 percent.
Total operating expenses increased 4.1 percent, to $18.8 billion, and
to $18.7 billion on an adjusted basis, which also represented a 4.1 percent
increase. Operating income grew 19.6 percent, to $3.8 billion, and 19.5
percent on an adjusted basis, to $3.9 billion, over the same periods.
Because Verizon completed its merger with MCI, Inc. on Jan. 6, 2006,
GAAP comparisons of the first quarters in 2006 and 2007 do not include five
days of the former MCI's 2006 results. Comparing results on a pro-forma
basis (non- GAAP) - as if Verizon and MCI had merged on Jan. 1, 2006 -
Verizon's adjusted operating revenues increased 5.4 percent and adjusted
operating expenses increased 2.8 percent in the first quarter 2007.
Verizon's operating income margin rose to 16.8 percent in the first
quarter 2007, compared with 15.0 percent in the first quarter 2006. On an
adjusted basis and on a pro-forma basis, Verizon's operating income margin
rose to 17.3 percent in the first quarter 2007, compared with 15.4 percent
(adjusted) and 15.2 percent (pro-forma) in the first quarter 2006.
Verizon Wireless Continues to Stand Out From Industry
Verizon Wireless continued its record of strong, industry-leading
retail net customer additions, revenue growth, profitability and low churn
in the first quarter 2007.
Verizon Wireless remains the largest U.S. wireless company in terms of
retail (non-wholesale) customers, total revenues and data revenues. In the
first quarter:
- Nearly all of the 1.6 million retail net customer additions (including
acquisitions and adjustments) were post-paid customers. Based on
publicly available information, the company has the most retail
customers in the industry: 58.5 million.
- Total customers (which include retail and wholesale) were 60.7 million.
The company added 1.7 million total net customers.
- Verizon Wireless continued its industry-leading low churn, with retail
churn at 1.08 percent for the quarter, indicating remarkable customer
loyalty. Churn among retail post-paid customers was even lower, at
0.89 percent.
- Revenues totaled $10.3 billion, up 17.0 percent. Service revenues were
$9.0 billion, up 18.2 percent, driven by strong customer growth and
demand for data services.
- Retail service ARPU (average monthly revenue per customer) was $50.73,
up 2.8 percent year-over-year, delivering the fourth consecutive
quarter of year-over-year growth.
- Wireless operating income margin was 26.5 percent, the highest ever.
EBITDA margin was 44.3 percent. Margins remained strong even as the
company added a significant number of net retail customers. (EBITDA -
earnings before interest, taxes, depreciation and amortization - is
non-GAAP, and wireless EBITDA margin is EBITDA divided by wireless
service revenues.)
Verizon Wireline Highlighted by Broadband and Data Growth
Verizon's Wireline operations reported continued strong growth from
broadband, video and strategic services. This segment includes Verizon
Telecom, which serves residential and small-business customers, and Verizon
Business, which provides advanced communications and information technology
solutions to large-business and government customers globally. In the first
quarter 2007:
- Data revenues across all market segments increased 12.2 percent, to
$4.2 billion, compared with the first quarter 2006. On pro-forma basis
(non-GAAP), data revenue growth was 9.5 percent compared with the
first quarter 2006.
- Data growth reflected increasing revenues from consumer broadband -
such as DSL and Verizon's all-digital, fiber-optic FiOS services - as
well as from wholesale data transport and sales of Verizon Business
data services.
- Verizon added 416,000 net new broadband connections. This is the sixth
consecutive quarter that Verizon has added more than 400,000 net
broadband connections, a measure that combines the number of DSL and
FiOS Internet connections.
- Wireline broadband connections totaled 7.4 million, a 30.1 percent
increase compared with the first quarter 2006. This total includes
864,000 FiOS Internet connections, an increase of 177,000 in the first
quarter 2007.
Strong Demand for FiOS TV
Verizon Telecom added a net of 141,000 new FiOS TV customers in the
first quarter 2007. Verizon served 348,000 FiOS TV customers as of the end
of the quarter, and this growth is accelerating. The company averaged
approximately 2,200 FiOS TV net customer additions per business day in the
first quarter 2007, about 750 more net additions per business day than the
fourth-quarter 2006 average.
Complementing the FiOS TV rollout, Verizon now serves 618,000 satellite
TV customers in partnership with DIRECTV, for a total approaching 1 million
video customers nationwide.
Revenues for Verizon Telecom's consumer market decreased by 3.5
percent, to $4.2 billion, comparing first quarter 2007 with first quarter
2006. However, in legacy Verizon markets, consumer revenues reversed recent
year-over-year declines. (Legacy Verizon consumer markets exclude former
MCI consumer markets - where Verizon's strategic focus has led to expected
declines.) With an increasing shift to broadband and video sales, FiOS
sales contributed to revenue growth in legacy Verizon markets of 1.6
percent, to $3.8 billion, comparing first quarter 2007 with first quarter
2006.
ARPU in this consumer market increased 8.5 percent, to $55.66,
comparing first quarter 2007 with first quarter 2006.
Verizon Business Continues Momentum of Revenue Growth
Verizon Business reported first-quarter 2007 revenues of $5.2 billion,
or growth of 2.3 percent compared with the first quarter 2006 on a
pro-forma adjusted basis (non-GAAP, including MCI revenues from Jan. 1,
2006). This is the second consecutive quarter of positive year-over-year
revenue growth.
Overall revenue growth at Verizon Business was driven by the continued
momentum of strong sales of key strategic services, such as IP and managed
services. In the first quarter 2007, strategic services generated $1.2
billion in revenue, up 22.8 percent from the first quarter 2006 on a
pro-forma basis.
This resulted in year-over-year growth of more than $200 million in
revenues from strategic services, and it exceeded declines in revenues from
core services, such as traditional voice and data services. Sales of
strategic services were also up sequentially, increasing 2.0 percent from
the fourth quarter 2006.
Also during the quarter, Verizon Business rolled out significant
enhancements to its global networking and managed services offerings. These
rollouts focused on expanding strategic service offerings and enhancing
global consistency among products.
Capex, Share Repurchases, Debt Levels as Planned
At the consolidated level, Verizon reported $5.0 billion in cash flows
from continuing operations for the first quarter 2007, compared with $5.6
billion in the first quarter 2006. First quarter 2007 included payments of
about $500 million related to funding qualified pension plans.
Capital expenditures were in line with the company's previously
announced plans. Expenditures totaled $4.2 billion in the first quarter
2007, compared with $4.0 billion in the first quarter 2006.
Verizon repurchased approximately $425 million in shares during the
first quarter 2007, as part of a previously announced plan to repurchase $2
billion in shares over the course of the year.
Total debt at the end of the first quarter 2007 was $34.7 billion, down
from $36.4 billion at year-end 2006. Verizon reduced its total debt by $7.7
billion year-over-year, largely as a result of the effect of last year's
spin-off of the directories business.
Detail of Special Items
Special items in the first quarter 2007 consisted primarily of a $131
million after-tax extraordinary loss, or 5 cents per share, related to the
tender offer implementing the nationalization of Compania Anonima Nacional
Telefonos de Venezuela (CANTV).
Other special items were less than 1 cent per share: $9 million in
after- tax charges for MCI merger integration costs and a $5 million net
gain related to the sale of Telecomunicaciones de Puerto Rico. This sale
closed on March 30, 2007, and Verizon received gross proceeds of
approximately $980 million - $100 million of which was contributed to the
Verizon Foundation.
Special items in the first quarter 2006 reflected costs of 4 cents per
share, or 1 cent per share each for the early extinguishment of debt,
employee relocations, merger integration costs and the cumulative effect of
an accounting change.
Business Segment Highlights
Following are first-quarter 2007 highlights for Verizon's Wireless and
Wireline business segments.
Wireless
- Once again, Verizon Wireless added the most retail customers in the
industry.
- Verizon Wireless continued to lead the industry in cost efficiency.
Cash expense per customer (non-GAAP) was $27.87, an increase of 3.3
percent over the similar period in 2006 and a decrease of 2.1 percent
sequentially.
- Total data revenues continued to climb during the first quarter,
contributing $1.6 billion, up 80 percent over the prior year. Data
revenues were 17.4 percent of all service revenues in the first
quarter, up from 11.5 percent in the first quarter 2006. Retail data
service ARPU increased 54 percent over the year-ago quarter to $8.95.
The company had 36.0 million retail data customers in March - a 37.5
percent increase from first quarter 2006.
- In February, Verizon Wireless continued to expand its high-speed
wireless broadband network in cities throughout the country, giving
customers access to e-mail, corporate data and the Internet at faster
speeds. Based on CDMA 1x Evolution-Data Optimized (EV-DO) Revision A
(Rev. A) technology, the enhanced broadband network is now available
to more than 145 million people in the United States. At the end of
the first quarter, more than 39 percent of the company's retail
customers - 23.1 million - had broadband-capable devices.
- Since the beginning of the year, the company continued to add more
broadband-capable products for business connectivity, including three
EV-DO Rev. A-capable devices: the V740 ExpressCard, the USB720
wireless modem and the PC5750 PC Card, and two broadband-capable
smartphones: the Treo 700wx and the Verizon Wireless PN 820. In
addition, Verizon Wireless last week announced the first Global
CDMA/GSM BlackBerry. The BlackBerry 8830 World Edition smartphone will
be available in May.
- For consumers, the company launched new handsets, including the LG
VX8700 and the Samsung u740, as well as new America's Choice plans that
include unlimited text, picture and video messages.
- Verizon Wireless launched V CAST Mobile TV in select markets and two V
CAST Mobile TV handsets: the Samsung SCH u620 and the LG VX9400.
- During the first quarter, Verizon Wireless customers sent or received
nearly 22.3 billion text messages and more than 450 million
picture/video messages. Customers also completed 106 million downloads
of music, videos, games, ringtones, ringback tones and exclusive
content.
- In March, Verizon Wireless introduced its 30-day Test Drive initiative
and became the only major carrier to let customers experience its
network virtually risk-free for 30 days and to absorb the cost of calls
if customers are not satisfied and take their number to another
carrier.
Wireline
- Wireline total operating revenues, which include both Verizon Telecom
and Verizon Business, increased 0.1 percent to $12.5 billion in the
first quarter 2007, compared with the first quarter 2006.
- On a pro-forma basis, Wireline operating revenues decreased 1.7
percent, comparing first quarter 2007 with first quarter 2006, driven
in part by a continuation of the expected declines in former MCI
operations serving mass market (residential and small business)
customers. This is a sequential improvement from the 3.5 percent
decrease when comparing fourth quarter 2006 with fourth quarter 2005.
- Operating income margin increased to 9.1 percent in the first quarter
2007, compared with 8.6 percent in the first quarter 2006.
- Verizon's net addition of 416,000 broadband connections in the quarter
outpaced a 408,000 decline in primary residential access lines.
Broadband connections are not included in Verizon's total of
traditional wireline access lines. As of the end of the quarter,
Verizon served 44.2 million traditional access lines, a 7.9 percent
decrease from a year ago.
- Verizon's broadband fiber-to-the-premises network - over which
customers receive FiOS Internet and FiOS TV services - passed a total
of nearly 6.8 million premises by the end of the first quarter 2007,
toward a year-end target of 9 million. With accelerated FiOS customer
growth, EPS dilution from FiOS deployment was 11 cents in the quarter -
in line with previously announced expectations.
Verizon Telecom
- FiOS Internet and FiOS TV services continue to gain market share.
- FiOS Internet was available for sale to 5.3 million premises by the end
of the first quarter. Penetration for the service is 16 percent across
all markets, compared with 14 percent against a 4.8 million potential
customer base at year-end 2006.
- FiOS TV was available for sale to 3.1 million premises by the end of
the first quarter. Penetration for the service is 11 percent across
all markets, compared with 9 percent penetration among a 2.4 million
potential customer base at year-end 2006.
- FiOS TV is now offered in more than 400 communities in 10 states. By
the end of the quarter, Verizon had obtained 769 cable TV franchises
covering about 10 million households.
- Consumer RGUs (revenue generating units) totaled 32.3 million,
essentially flat year-over-year but up 65,000 since year-end 2006.
RGUs are a measure of retail consumer primary and non-primary
residential access lines, consumer broadband connections and video
subscribers. In the first quarter 2007, the broadband and video
component of this measure increased to 23.2 percent of the total, or
7.5 million, from 16.6 percent of the total in the first quarter 2006.
Verizon Business
- Verizon Business received recognition from leading industry authorities
during the quarter. Forrester Research ranked Verizon Business first
in overall voice-over-Internet-protocol (VoIP) strategy. Frost &
Sullivan awarded the company its Product Line Strategy Award for
Enterprise wide area networking services and its Market Leadership
Award for Hosted Interactive Voice Response services. Gartner Inc.
placed Verizon Business in the Leaders Quadrant among Asia-Pacific
network service providers.
- Verizon Business was named during the quarter as a prime contractor for
the U.S. General Services Administration's multibillion-dollar Networx
Universal program.
- Among product and services rollouts in the first quarter: an expansion
of the company's Private IP global footprint; expanded availability of
Ethernet Private Line service to an additional six European countries;
the introduction of Ethernet Virtual Private LAN Service (E-VPLS); and
enhancements to industry-leading security offerings.
- Among global network enhancements: the deployment of 32 additional
routers to enhance the company's global MPLS leadership position; the
improvement of Public IP network capabilities through a new regional
peering agreement in the Asia-Pacific region; and a network expansion
to enable 67 percent of the U.S. population to use local and long-
distance VoIP services - a 36 percent increase in the company's U.S.
VoIP footprint.
- Verizon Business completed significant agreements during the quarter
with enterprise customers, including Rent-A-Center and Harleysville
Insurance, for a wide range of advanced communications services.
Internationally, the company completed important agreements with Akzo
Nobel, Getronics, Philippine Airlines and Daiichi Sankyo.
- Verizon Business continues to win significant business with government
customers. In addition to being named a Networx Universal prime
contractor, the company also completed a new agreement with the state
of California during the quarter to provide services under the CALNET 2
program, and the Danish Foreign Ministry extended its existing global
Verizon Private IP network.
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 60.7 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 has a diverse workforce of
more than 238,000 and last year generated consolidated operating revenues
of more than $88 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 and services; 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; the timing, scope and financial impacts 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; the timing of the
completion of the sale of our Latin American property; and the extent and
timing of our ability to obtain revenue enhancements and cost savings
following our business combination with MCI, Inc.
Verizon Communications Inc.
Consolidated Statements of Income
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/07 3/31/06 % Change
Operating Revenues $22,584 $21,231 6.4
Operating Expenses
Cost of services and sales 8,912 8,516 4.7
Selling, general & administrative
expense 6,343 5,873 8.0
Depreciation and amortization expense 3,533 3,667 (3.7)
Total Operating Expenses 18,788 18,056 4.1
Operating Income 3,796 3,175 19.6
Equity in earnings of unconsolidated
businesses 160 157 1.9
Other income and (expense), net 48 103 (53.4)
Interest expense (485) (636) (23.7)
Minority interest (1,154) (866) 33.3
Income Before Provision for Income
Taxes, Discontinued Operations,
Extraordinary Item and Cumulative
Effect of Accounting Change 2,365 1,933 22.3
Provision for income taxes (881) (651) 35.3
Income Before Discontinued
Operations, Extraordinary Item and
Cumulative Effect of Accounting
Change 1,484 1,282 15.8
Income from discontinued operations,
net of tax (1) 142 392 (63.8)
Extraordinary item, net of tax (131) - *
Cumulative effect of accounting
change, net of tax - (42) (100.0)
Net Income $1,495 $1,632 (8.4)
Basic Earnings per Common Share (2)
Income before discontinued
operations, extraordinary item and
cumulative effect of accounting change $.51 $.44 15.9
Income from discontinued operations,
net of tax .05 .13 (61.5)
Extraordinary item, net of tax (.05) - *
Cumulative effect of accounting
change, net of tax - (.01) (100.0)
Net Income $.51 $.56 (8.9)
Weighted average number of common
shares (in millions) 2,909 2,915
Diluted Earnings per Common Share (2)(3)
Income before discontinued
operations, extraordinary item and
cumulative effect of accounting change $.51 $.44 15.9
Income from discontinued operations,
net of tax .05 .13 (61.5)
Extraordinary item, net of tax (.05) - *
Cumulative effect of accounting
change, net of tax - (.01) (100.0)
Net Income $.51 $.56 (8.9)
Weighted average number of common
shares-assuming dilution
(in millions) 2,911 2,963
Footnotes:
(1) Discontinued Operations includes Verizon Information Services, as
well as our interests in Verizon Dominicana, C. por A, and
Telecomunicaciones de Puerto Rico, Inc. The dispositions of these
non-strategic businesses were completed on November 17, 2006,
December 1, 2006 and March 30, 2007, respectively.
(2) EPS totals may not add due to rounding.
(3) Diluted Earnings per Share includes (i) income related to share
dilution (exchangeable equity interests and zero coupon convertible
debt) of $15 million for the first quarter of 2006, and (ii) the
dilutive effect of shares issuable under our stock-based compensation
plans, exchangeable equity interests and zero coupon convertible
debt, which represent the only potential dilution. The zero coupon
debt was retired on May 15, 2006. The exchangeable equity interest
was converted on August 15, 2006 by issuing 29.5 million Verizon
shares.
* Not meaningful
Verizon Communications Inc.
Consolidated Statements of Income Before Special Items
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/07 3/31/06 % Change
Operating Revenues (1)
Wireline $12,476 $12,465 0.1
Domestic Wireless 10,307 8,813 17.0
Other (199) (76) *
Total Operating Revenues 22,584 21,202 6.5
Operating Expenses (1)
Cost of services and sales 8,910 8,495 4.9
Selling, general & administrative
expense 6,231 5,768 8.0
Depreciation and amortization
expense 3,533 3,667 (3.7)
Total Operating Expenses 18,674 17,930 4.1
Operating Income 3,910 3,272 19.5
Operating income impact of operations
sold (1) - 4 (100.0)
Equity in earnings of unconsolidated
businesses 160 157 1.9
Other income and (expense), net 48 103 (53.4)
Interest expense (485) (610) (20.5)
Minority interest (1,154) (866) 33.3
Income Before Provision for Income
Taxes and Discontinued Operations 2,479 2,060 20.3
Provision for income taxes (921) (699) 31.8
Income Before Discontinued Operations 1,558 1,361 14.5
Income from discontinued operations,
net of tax (2) 72 392 (81.6)
Net Income Before Special Items $1,630 $1,753 (7.0)
Basic Adjusted Earnings per Common
Share (3)
Income before discontinued operations $.54 $.47 14.9
Income from discontinued operations,
net of tax .02 .13 (84.6)
Net Income Before Special Items $.56 $.60 (6.7)
Weighted average number of common
shares (in millions) 2,909 2,915
Diluted Adjusted Earnings per Common
Share (3)(4)
Income before discontinued operations $.54 $.46 17.4
Income from discontinued operations,
net of tax .02 .13 (84.6)
Net Income Before Special Items $.56 $.60 (6.7)
Weighted average number of common
shares-assuming dilution
(in millions) 2,911 2,963
Footnotes:
(1) Reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results, including for
the sale of selected non-strategic assets of the Wireline segment
during the first quarter of 2007, as follows:
Revenues $- $29
Expenses $- $25
(2) Discontinued Operations includes Verizon Information Services, as
well as our interests in Verizon Dominicana, C. por A, and
Telecomunicaciones de Puerto Rico, Inc. The dispositions of these
non-strategic businesses were completed on November 17, 2006,
December 1, 2006 and March 30, 2007, respectively.
(3) EPS totals may not add due to rounding.
(4) Diluted Adjusted Earnings per Share includes (i) income related to
share dilution (exchangeable equity interests and zero coupon
convertible debt) of $15 million for the first quarter of 2006, and
(ii) the dilutive effect of shares issuable under our stock-based
compensation plans, exchangeable equity interests and zero coupon
convertible debt, which represent the only potential dilution. The
zero coupon debt was retired on May 15, 2006. The exchangeable
equity interest was converted on August 15, 2006 by issuing
29.5 million Verizon shares.
* Not meaningful
Verizon Communications Inc.
Consolidated Statements of Income - Reconciliations
(dollars in millions, except per share amounts)
Special and Non-Recurring Items
3 Mos. Merger Sale Loss 3 Mos.
Ended Integr- of on Ended
3/31/07 ation Puerto CANTV 3/31/07
Reported Costs Rico, Before
(GAAP) Net Special
Items
Unaudited
Operating Revenues $22,584 $- $- $- $22,584
Operating Expenses
Cost of services and sales 8,912 (2) - - 8,910
Selling, general &
administrative expense 6,343 (12) (100) - 6,231
Depreciation and amortization
expense 3,533 - - - 3,533
Total Operating Expenses 18,788 (14) (100) - 18,674
Operating Income 3,796 14 100 - 3,910
Equity in earnings of
unconsolidated businesses 160 - - - 160
Other income and (expense), net 48 - - - 48
Interest expense (485) - - - (485)
Minority interest (1,154) - - - (1,154)
Income Before Provision for
Income Taxes, Discontinued
Operations and Extraordinary
Item 2,365 14 100 - 2,479
Provision for income taxes (881) (5) (35) - (921)
Income Before Discontinued
Operations and Extraordinary
Item 1,484 9 65 - 1,558
Income from discontinued
operations, net of tax 142 - (70) - 72
Extraordinary item, net of tax (131) - - 131 -
Net Income $1,495 $9 $(5) $131 $1,630
Basic Earnings per
Common Share (1)
Income before discontinued
operations and extraordinary
item $.51 $- $.02 $- $.54
Income from discontinued
operations, net of tax .05 - (.02) - .02
Extraordinary item, net of tax (.05) - - .05 -
Net Income $.51 $- $- $.05 $.56
Diluted Earnings per
Common Share (1)
Income before discontinued
operations and extraordinary
item $.51 $- $.02 $- $.54
Income from discontinued
operations, net of tax .05 - (.02) - $.02
Extraordinary item, net of tax (.05) - - .05 -
Net Income $.51 $- $- $.05 $.56
Special and Non-Recurring Items
3 Mos. Extinguishment Verizon Impact of
Ended of Center Accounting
3/31/06 Debt Relocation, for Share
Reported Net Based
(GAAP) Payments
Unaudited
Operating Revenues $21,231 $- $- $-
Operating Expenses
Cost of services and
sales 8,516 - - -
Selling, general &
administrative expense 5,873 - (46) -
Depreciation and
amortization expense 3,667 - - -
Total Operating
Expenses 18,056 - (46) -
Operating Income 3,175 - 46 -
Operating income impact
of operations sold - - - -
Equity in earnings of
unconsolidated
businesses 157 - - -
Other income and
(expense), net 103 - - -
Interest expense (636) 26 - -
Minority interest (866) - - -
Income Before Provision
for Income Taxes,
Discontinued
Operations, and
Cumulative Effect of
Accounting Change 1,933 26 46 -
Provision for income
taxes (651) (10) (18) -
Income Before
Discontinued
Operations and
Cumulative Effect of
Accounting Change 1,282 16 28 -
Income from
discontinued
operations, net of tax 392 - - -
Cumulative effect of
accounting change, net
of tax (42) - - 42
Net Income $1,632 $16 $28 $42
Basic Earnings per
Common Share (1)
Income before
discontinued
operations, and
cumulative
effect of accounting
change $.44 $.01 $.01 -
Income from
discontinued
operations, net of tax .13 - - -
Cumulative effect of
accounting change, net
of tax (.01) - - .01
Net Income $.56 $.01 $.01 $.01
Diluted Earnings per
Common Share (1)
Income before
discontinued
operations, and
cumulative effect
of accounting
change $.44 $.01 $.01 $-
Income from
discontinued
operations, net of tax .13 - - -
Cumulative effect of
accounting change, net
of tax (.01) - - .01
Net Income $.56 $.01 $.01 $.01
Special and Non-Recurring Items
Merger Impact of 3 Mos. Ended
Integration Operations 3/31/06 Before
Costs Sold Special Items
Unaudited
Operating Revenues $- $(29) $21,202
Operating Expenses
Cost of services and
sales - (21) 8,495
Selling, general &
administrative expense (55) (4) 5,768
Depreciation and
amortization expense - - 3,667
Total Operating
Expenses (55) (25) 17,930
Operating Income 55 (4) 3,272
Operating income impact
of operations sold - 4 4
Equity in earnings of
unconsolidated
businesses - - 157
Other income and
(expense), net - - 103
Interest expense - - (610)
Minority interest - - (866)
Income Before Provision
for Income Taxes,
Discontinued
Operations, and
Cumulative Effect of
Accounting Change 55 - 2,060
Provision for income
taxes (20) - (699)
Income Before
Discontinued
Operations and
Cumulative Effect of
Accounting Change 35 - 1,361
Income from
discontinued
operations, net of tax - - 392
Cumulative effect of
accounting change, net
of tax - - -
Net Income $35 $- $1,753
Basic Earnings per
Common Share (1)
Income before
discontinued
operations, and
cumulative effect
of accounting
change $.01 $- $.47
Income from
discontinued
operations, net of tax - - .13
Cumulative effect of
accounting change, net
of tax - - -
Net Income $.01 $- $.60
Diluted Earnings per
Common Share (1)
Income before
discontinued
operations, and
cumulative
effect of accounting
change $.01 $- $.46
Income from
discontinued
operations, net of tax - - .13
Cumulative effect of
accounting change, net
of tax - - -
Net Income $.01 $- $.60
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)
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/07 3/31/06
Debt to debt and shareowners' equity
ratio-end of period 41.5% 48.6%
Book value per common share $16.80 $15.35
Common shares outstanding
(in millions)
End of period 2,903 2,917
Total employees (1) 238,766 236,408
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/07 3/31/06
Capital expenditures
(including capitalized software)
Wireline $2,439 $2,418
Domestic Wireless 1,721 1,581
Other 3 22
Total $4,163 $4,021
Cash dividends declared per
common share $.405 $.405
Footnote:
(1) Prior period has been reclassified to reflect comparable amount.
Verizon Communications Inc.
Consolidated Balance Sheets
(dollars in millions)
Unaudited 3/31/07 12/31/06 $ Change
Assets
Current assets
Cash and cash equivalents $1,301 $3,219 $(1,918)
Short-term investments 2,149 2,434 (285)
Accounts receivable, net 10,177 10,891 (714)
Inventories 1,780 1,514 266
Assets held for sale - 2,592 (2,592)
Prepaid expenses and other 2,487 1,888 599
Total current assets 17,894 22,538 (4,644)
Plant, property and equipment 206,585 204,109 2,476
Less accumulated depreciation 123,607 121,753 1,854
82,978 82,356 622
Investments in unconsolidated
businesses 4,898 4,868 30
Wireless licenses 50,566 50,959 (393)
Goodwill 5,247 5,655 (408)
Other intangible assets, net 5,195 5,140 55
Other assets 17,506 17,288 218
Total Assets $184,284 $188,804 $(4,520)
Liabilities and Shareowners' Investment
Current liabilities
Debt maturing within one year $6,604 $7,715 $(1,111)
Accounts payable and accrued
liabilities 13,309 14,320 (1,011)
Liabilities related to assets held
for sale - 2,154 (2,154)
Other 7,993 8,091 (98)
Total current liabilities 27,906 32,280 (4,374)
Long-term debt 28,073 28,646 (573)
Employee benefit obligations 29,743 30,779 (1,036)
Deferred income taxes 13,518 16,270 (2,752)
Other liabilities 7,025 3,957 3,068
Minority interest 29,237 28,337 900
Shareowners' investment
Common stock 297 297 -
Contributed capital 40,122 40,124 (2)
Reinvested earnings 17,485 17,324 161
Accumulated other comprehensive loss (7,136) (7,530) 394
Common stock in treasury, at cost (2,185) (1,871) (314)
Deferred compensation - employee
stock ownership plans and other 199 191 8
Total shareowners' investment 48,782 48,535 247
Total Liabilities and Shareowners'
Investment $184,284 $188,804 $(4,520)
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
3 Mos. 3 Mos.
Ended Ended
Unaudited 3/31/07 3/31/06 $ Change
Cash Flows From Operating Activities
Net Income $1,495 $1,632 $(137)
Adjustments to reconcile net income
to net cash provided by operating
activities - continuing operations:
Depreciation and amortization expense 3,533 3,667 (134)
Employee retirement benefits 430 481 (51)
Deferred income taxes 222 (149) 371
Provision for uncollectible accounts 281 294 (13)
Equity in earnings of unconsolidated
businesses (160) (157) (3)
Extraordinary item, net of tax 131 - 131
Cumulative effect of accounting
change, net of tax - 42 (42)
Changes in current assets and
liabilities, net of effects
from acquisition/disposition
of businesses (1,116) (382) (734)
Other, net 228 185 43
Net cash provided by operating
activities - continuing operations 5,044 5,613 (569)
Net cash provided by (used in)
operating activities - discontinued
operations (527) 453 (980)
Net cash provided by operating
activities 4,517 6,066 (1,549)
Cash Flows From Investing Activities
Capital expenditures (including
capitalized software) (4,163) (4,021) (142)
Acquisitions, net of cash acquired,
and investments (124) 1,526 (1,650)
Net change in short-term investments 282 433 (151)
Other, net 61 313 (252)
Net cash used in investing activities
- continuing operations (3,944) (1,749) (2,195)
Net cash provided by investing
activities - discontinued operations 757 1 756
Net cash used in investing activities (3,187) (1,748) (1,439)
Cash Flows From Financing Activities
Proceeds from long-term borrowings 1,424 3,971 (2,547)
Repayments of long-term borrowings
and capital lease obligations (3,314) (6,129) 2,815
Increase in short-term obligations,
excluding current maturities 141 14 127
Dividends paid (1,179) (1,185) 6
Proceeds from sale of common stock 110 64 46
Purchase of common stock for treasury (427) (398) (29)
Other, net (3) (117) 114
Net cash used in financing activities
- continuing operations (3,248) (3,780) 532
Net cash used in financing activities
- discontinued operations - (50) 50
Net cash used in financing activities (3,248) (3,830) 582
Increase (decrease) in cash and cash
equivalents (1,918) 488 (2,406)
Cash and cash equivalents, beginning
of period 3,219 760 2,459
Cash and cash equivalents, end of
period $1,301 $1,248 $53
Verizon Communications Inc.
Wireline - Selected Financial Results
(dollars in millions)
3 Mos. 3 Mos.
Ended Ended
Unaudited 3/31/2007 3/31/2006 % Change
Wireline Operating Revenues
Verizon Telecom
Mass Markets $5,506 $5,584 (1.4)
Wholesale 1,997 2,064 (3.2)
Other 481 617 (22.0)
Verizon Business
Enterprise Business 3,571 3,383 5.6
Wholesale 850 804 5.7
International and Other 798 737 8.3
Eliminations (727) (724) 0.4
Total Operating Revenues 12,476 12,465 0.1
Operating Expenses
Cost of services and sales 6,173 6,055 1.9
Selling, general & administrative
expense 2,901 2,953 (1.8)
Depreciation and amortization
expense 2,267 2,381 (4.8)
Total Operating Expenses 11,341 11,389 (0.4)
Operating Income $1,135 $1,076 5.5
Operating Income Margin 9.1% 8.6%
Segment Income $365 $318 14.8
Verizon Communications Inc.
Wireline - Selected Operating Statistics
Preliminary
Unaudited 3/31/2007 3/31/2006 % Change
Switched access lines in service (000)
Residence 27,063 30,224 (10.5)
Business 16,755 17,356 (3.5)
Public 336 386 (13.0)
Total 44,154 47,966 (7.9)
Wholesale voice connections* (000) 3,334 3,994 (16.5)
Broadband connections (000) 7,398 5,685 30.1
3 Mos. 3 Mos.
Ended Ended
Unaudited 3/31/2007 3/31/2006 % Change
High capacity and digital data
revenues ($ in millions)
Data transport $3,978 $3,554 11.9
Data solutions 265 226 17.3
Total revenues $4,243 $3,780 12.2
Footnotes:
* Resale and UNE-P lines, including lines covered under commercial
agreements.
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.
Verizon Communications Inc.
Verizon Wireless - Selected Financial Results
(dollars in millions)
3 Mos. 3 Mos.
Ended Ended
Unaudited 3/31/2007 3/31/2006 % Change
Revenues
Service revenues $8,991 $7,609 18.2
Equipment and other 1,316 1,204 9.3
Total Revenues 10,307 8,813 17.0
Operating Expenses
Cost of services and sales 3,022 2,665 13.4
Selling, general & administrative
expense 3,300 2,759 19.6
Depreciation and amortization
expense 1,256 1,274 (1.4)
Total Operating Expenses 7,578 6,698 13.1
Operating Income $2,729 $2,115 29.0
Operating Income Margin 26.5% 24.0%
Segment Income $874 $631 38.5
Verizon Communications Inc.
Verizon Wireless - Selected Operating Statistics
Unaudited 3/31/2007 3/31/2006 % Change
Total Customers (000) 60,716 53,020 14.5
Retail Customers (000) 58,458 50,660 15.4
3 Mos. Ended 3 Mos. Ended
Unaudited 3/31/2007 3/31/2006 % Change
Total Customer net
adds in period (1) (000) 1,664 1,683 (1.1)
Retail Customer net
adds in period (1) (000) 1,646 1,624 1.4
Total churn rate 1.1% 1.2%
Retail churn rate 1.1% 1.1%
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 customers in the first
quarter of 2007 and 17,000 customers in the first quarter of 2006.
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