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SMALL BUSINESS
Verizon Reports Continued Growth in 3Q
PR Newswire
Posted: 2008-10-27 07:25:00
Strong Sales of Verizon Wireless Services, FiOS Internet and TV, and Strategic Business Services; Continued Solid Revenue and Cash Flow Growth
3Q 2008 HIGHLIGHTS
Consolidated Results
59 cents in diluted EPS and66 cents in adjusted EPS (non-GAAP), compared with 3Q 2007 diluted EPS of44 cents reported and63 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 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
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
On an adjusted basis (non-GAAP), third-quarter 2008 earnings were
Continued Growth in 3Q
"Verizon again reported solid revenue, earnings and cash flow growth this quarter," said Chairman and CEO
"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
Cash flows from continuing operations were
Details of 3Q Adjustments
Adjusted earnings in the third quarter 2008 excluded
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 onJan. 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 andNew 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 andTaiwan is ready for service. The company also began a significant expansion of its operations inIndia , 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 toTaiwan ,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
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: 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 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 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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