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Verizon Wireless and FiOS Growth Fuels Continued Strong Cash Flow at Verizon in 3Q
NEW YORK, Oct. 26 /PRNewswire/ --
3Q 2009 HIGHLIGHTS
Consolidated Earnings
-- 41 cents in EPS and 60 cents in adjusted EPS (non-GAAP), compared with
3Q 2008 EPS of 59 cents and 66 cents, respectively.
-- $23.1 billion in cash flow from operations through the first nine months
of 2009, up $3.2 billion, or 16.0 percent.
Wireless
-- 89.0 million total customers, up 25.7 percent; 86.3 million retail
customers, up 25.4 percent; 1.2 million net customer additions,
excluding acquisitions and adjustments.
-- 24.4 percent increase in total revenues compared with 3Q 2008; continued
low retail postpaid churn, 1.13 percent; data revenues up 48.1 percent;
28.3 percent operating income margin and 46.1 percent EBITDA margin on
service revenues (non-GAAP).
Wireline
-- 198,000 net new FiOS Internet customers and 191,000 net new FiOS TV
customers, with increased sales penetration for both services; 3.3
million total FiOS Internet customers and 2.7 million total FiOS TV
customers.
-- 12.6 percent increase in consumer ARPU.
Verizon Communications Inc.
Verizon today reported diluted earnings per share (EPS) of 41 cents in the third quarter, compared with 59 cents per share in the third quarter 2008. On an adjusted basis (non-GAAP), Verizon posted EPS of 60 cents in the third quarter 2009, compared with 66 cents in the third quarter 2008.
Verizon's total operating revenues grew 10.2 percent to $27.3 billion, compared with the third quarter 2008. This includes revenues from Alltel Corporation, which Verizon acquired in January 2009. On a pro forma basis (consolidating the operating results of Verizon and the former Alltel as though the acquisition had occurred on Jan. 1, 2008), operating revenue growth was 0.6 percent.
Cash flow from operations totaled $23.1 billion for the first nine months of 2009, up 16.0 percent, or $3.2 billion, over the same period last year. Free cash flow (cash flow from operations minus capital expenditures) totaled $10.7 billion, up $3.3 billion over the same period last year. Verizon paid shareowners $3.9 billion in dividends during the first three quarters of 2009, and its Board of Directors approved a 3.3 percent quarterly dividend increase last month.
Long-Term Shareowner Value
"Verizon continues to generate strong cash flow, which we have used in building the foundation for sustainable, long-term shareowner value," said Verizon Chairman and CEO Ivan Seidenberg. "Even through the worst of the recession, we have continued to raise our dividend and to add new customers, expand markets and grow revenues based on the power and innovation of Verizon's wireless, broadband and global networks."
He added, "The Verizon network is now an engine for next-generation communications services that will create new short- and long-term opportunities for us. As the U.S. economic and employment picture improves, and as we accelerate reductions in our own cost structure, we are well-positioned to quickly and significantly improve our growth profile."
Seidenberg also noted that a simplified organizational structure announced earlier this month will enable Verizon to achieve improved levels of productivity. The realignment has combined two former Wireline business groups, Verizon Telecom and Verizon Business, into one organization.
Wireless Delivers Industry-Leading Profitability, Strong Customer Growth
Verizon Wireless continued to lead the industry with the highest profit margins. In the third quarter 2009:
-- Wireless retail (non-wholesale) gross customer additions were up 15.0
percent over the prior year. On a pro forma basis, retail gross
customer additions decreased by 8.3 percent.
-- Verizon Wireless had 89.0 million customers at the end of the quarter,
an increase of 25.7 percent year over year, and 6.3 percent on a pro
forma basis. Verizon Wireless is the largest wireless company in the
U.S. in terms of total customers and revenues.
-- The company also has the most retail customers of any U.S. wireless
provider and continued to grow its high-quality base, adding 1.0 million
net retail customers in the quarter, excluding acquisitions and
adjustments, for a total of 86.3 million retail customers.
-- Total churn and retail postpaid churn were 1.49 percent and 1.13
percent, respectively.
-- Revenues totaled $15.8 billion, up 24.4 percent year over year and up
4.9 percent on a pro forma basis. Service revenues were $13.5 billion,
up 23.7 percent year over year and up 6.1 percent on a pro forma basis
as demand continued to grow for data services. Data revenue grew to
$4.1 billion, up 48.1 percent and up 28.9 percent on a pro forma basis.
-- Total service ARPU (average monthly service revenue per user) decreased
2.2 percent year over year and 0.8 percent on a pro forma basis to
$51.04. Total data ARPU increased to $15.59, up 17.2 percent year over
year and 20.7 percent on a pro forma basis.
-- Wireless operating income margin, adjusted for merger integration and
acquisition costs, was 28.3 percent, up 1.0 percentage point year over
year and up 1.4 percentage points pro forma. Adjusted on the same
basis, EBITDA (earnings before interest, taxes, depreciation and
amortization) margin on service revenues (non-GAAP) was 46.1 percent, an
increase of 1.9 percentage points year over year and 1.3 percentage
points on a pro forma basis.
Continued Growth in Consumer Broadband and Video
In addition to strong Wireless results, Verizon posted another quarter of gains in the number of customers using fiber-optic-based FiOS Internet and FiOS TV services. In consumer markets served by Verizon's wireline network, increased revenues from broadband and video services helped produce overall revenue growth, as well as ARPU growth. In the third quarter:
-- Verizon added 198,000 net new FiOS Internet customers. The company
served 3.3 million FiOS Internet customers by the end of the quarter, a
49.2 percent year-over-year increase.
-- FiOS Internet penetration (customers as a percentage of potential
customers) increased to 28.5 percent by the end of the third quarter,
with the product available for sale to 11.5 million premises. This
compares with a 24.2 percent penetration at the end of the third quarter
2008.
-- Verizon also added 191,000 net new FiOS TV customers. The company
served 2.7 million FiOS TV customers by the end of the quarter, a 67.7
percent year-over-year increase.
-- FiOS TV penetration increased to 24.9 percent by the end of the third
quarter, with the product available for sale to 10.9 million premises.
This compares with a 19.7 percent penetration at the end of the third
quarter 2008.
-- Consumer broadband and video revenues in wireline mass markets (which
include consumer and small-business customers) represented growth of
30.7 percent compared with the third quarter 2008. This increase
contributed to 1.2 percent revenue growth in consumer markets served by
Verizon's wireline network.
-- Revenue growth from broadband and video services boosted consumer ARPU
to $75.04 in the third quarter 2009, a 12.6 percent year-over-year
increase. FiOS ARPU is more than $137, driven primarily by
"triple-play" bundles of voice, Internet and TV services.
-- Worldwide sales of strategic business services -- such as IP (Internet
protocol), managed services, Ethernet and security solutions --
generated $1.6 billion in revenue in the quarter, up 1.0 percent from
the third quarter 2008.
Details of Earnings Adjustments
Adjusted earnings in the third quarter 2009 excluded 19 cents per share in special items: 13 cents for severance, pension and benefit charges in connection with pension settlements related to previously announced force reductions; 4 cents for merger integration and acquisition costs primarily in connection with the Alltel transaction; and 2 cents for costs related to the pending spinoff of non-strategic Wireline access lines. Third-quarter 2008 adjusted earnings excluded 7 cents per share in special items: 6 cents for severance, pension and benefit charges; and 1 cent for merger integration costs in connection with Verizon's acquisition of MCI in 2006.
Additional Highlights
Wireless
-- At the end of the third quarter 2009, retail customers (postpaid and
prepaid) represented nearly 97 percent of the company's customer base.
-- Verizon Wireless continued to lead the industry in cost efficiency.
Monthly cash expense per customer (non-GAAP) decreased in the third
quarter 2009 to $27.52, from $28.42 in the comparable period in 2008 on
a pro forma basis.
-- In the third quarter, data revenues grew to 30.5 percent of all service
revenues, up from 25.1 percent in the third quarter 2008 on a pro forma
basis.
-- Verizon Wireless continued to extend the reach of its broadband network,
the nation's largest and most reliable 3G (third-generation) network.
Verizon's 3G network provides more coverage than any U.S. carrier and is
available to approximately 284 million people.
-- Verizon Wireless marked a significant milestone in its LTE network
deployment plans in August with the successful completion of the first
LTE 4G (Long Term Evolution, fourth generation) test data calls over its
700 MHz spectrum in Boston and Seattle. The company also released
updated specifications for wireless devices that will run on the LTE
network. Verizon Wireless plans to offer commercial LTE-based service
in the U.S. in 2010 in up to 30 markets.
-- Verizon Wireless and Google have announced a strategic partnership that
will leverage the Verizon Wireless network and the best of the Android
open platform to deliver leading-edge mobile applications, services and
devices. As a result of this agreement, consumers will have access to
an array of products that combine the speed of the nation's largest and
most reliable 3G network with the flexibility of the Android mobile
platform. Verizon Wireless expects to launch two Android-based devices
before the end of the year.
-- The company continued to roll out new devices, including the HTC Touch
Pro2, a 3G global smartphone; the Samsung Rogue, with a full-touch
display, QWERTY keyboard and one-touch access to popular social
networking widgets; and the Nokia 7705 Twist, featuring a unique,
swivel-open square shape.
-- During the third quarter, Verizon Wireless customers sent or received
more than 153 billion text messages. Customers also sent more than 2.8
billion picture/video messages and completed nearly 38 million music and
video downloads.
Wireline
-- Third-quarter operating revenues in the Wireline segment were $11.6
billion, a decline of 4.8 percent compared with the third quarter 2008.
This is an improvement of 0.4 percentage points compared with the
year-over-year revenue declines reported in the second quarter 2009.
-- Broadband connections totaled 9.2 million at the end of the third
quarter, an 8.5 percent year-over-year increase. This is a net increase
of 63,000 from the second quarter 2009, as the increase in FiOS Internet
connections more than offset a decrease in DSL-based High Speed Internet
connections.
-- Over the past year, Verizon has added 1.1 million FiOS TV customers and
expanded the availability of FiOS triple-play bundles. Of the
approximately 32 million total households in areas covered by Verizon's
wireline network, FiOS triple-play bundles were available to 10.9
million premises at the end of the third quarter 2009, compared with 8.2
million premises at the end of the third quarter 2008.
-- As of the end of the quarter, the FiOS network passed 14.5 million
premises, or approximately more than 45 percent of total households in
areas covered by Verizon's wireline network. This is on track to the
end-of-year target of 15 million.
-- For global and other large-business customers, Verizon unveiled a suite
of managed solutions to help enterprises manage mobile devices, usage
plans and applications across multiple carriers globally, along with new
IT consulting services to support enterprise-wide mobility programs.
The company also rolled out a next-generation managed security services
platform for enterprises and a program to prevent hacker attacks on
business applications.
-- Continuing to widen and deepen its global scope and capabilities,
Verizon extended availability of its on-demand, "cloud-based" Computing
as a Service (CaaS) solution to the company's Amsterdam data center. It
also rolled out both its Managed Services portfolio and Remote IP
Application Management service in India.
-- New agreements with multinational customers included ING, Manulife, NYSE
Euronext and Sandvik. Verizon also signed new contracts with several
U.S. government agencies, including the U.S. Citizenship and Immigration
Service.
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. Reclassifications of prior-period amounts have been made in accordance with the adoption of the accounting standard on noncontrolling interests in consolidated financial statements and, 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. Unless stated otherwise, segment results shown are adjusted for special items.
Verizon Communications Inc.
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 document contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: the effects of adverse conditions in the U.S. and international economies; the effects of competition in our markets; materially adverse changes in labor matters, including workforce levels and labor negotiations, and any resulting financial and/or operational impact, in the markets served by us or by companies in which we have substantial investments; the effect of material changes in available technology; any disruption of our suppliers' provisioning of critical products or services; significant increases in benefit plan costs or lower investment returns on plan assets; the impact of natural or man-made disasters or existing or future litigation and any resulting financial impact not covered by insurance; technology substitution; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing; any changes in the regulatory environments in which we operate, including any loss of or inability to renew wireless licenses, and the final results of federal and state regulatory proceedings and judicial review of those results; the timing, scope and financial impact of our deployment of fiber-to-the-premises broadband technology; changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; our ability to complete acquisitions and dispositions; our ability to successfully integrate Alltel Corporation into Verizon Wireless' business and achieve anticipated benefits of the acquisition; and the inability to implement our business strategies.
Verizon Communications Inc. Condensed Consolidated Statements of Income ------------------------------------------- (dollars in millions, except per share amounts) 3 Mos. Ended 3 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ------------ ------------ -------- Operating Revenues $27,265 $24,752 10.2 Operating Expenses Cost of services and sales 10,996 10,048 9.4 Selling, general & administrative expense 8,111 6,879 17.9 Depreciation and amortization expense 4,172 3,652 14.2 ----- ----- Total Operating Expenses 23,279 20,579 13.1 ------ ------ Operating Income 3,986 4,173 (4.5) Equity in earnings of unconsolidated businesses 166 211 (21.3) Other income and (expense), net 13 105 (87.6) Interest expense (704) (440) 60.0 ---- ---- Income Before Provision for Income Taxes 3,461 4,049 (14.5) Provision for income taxes (574) (850) (32.5) ---- ---- Net income $2,887 $3,199 (9.8) ====== ====== Net income attributable to noncontrolling interest 1,711 1,530 11.8 Net income attributable to Verizon 1,176 1,669 (29.5) ----- ----- Net Income $2,887 $3,199 (9.8) ====== ====== Basic Earnings per Common Share Net income attributable to Verizon $.41 $.59 (30.5) Weighted average number of common shares (in millions) 2,841 2,844 Diluted Earnings per Common Share (1) Net income attributable to Verizon $.41 $.59 (30.5) Weighted average number of common shares-assuming dilution (in millions) 2,841 2,845 9 Mos. Ended 9 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ------------ ------------ -------- Operating Revenues $80,717 $72,709 11.0 Operating Expenses Cost of services and sales 31,785 29,031 9.5 Selling, general & administrative expense 23,543 19,808 18.9 Depreciation and amortization expense 12,291 10,818 13.6 ------ ------ Total Operating Expenses 67,619 59,657 13.3 ------ ------ Operating Income 13,098 13,052 0.4 Equity in earnings of unconsolidated businesses 422 458 (7.9) Other income and (expense), net 77 220 (65.0) Interest expense (2,416) (1,302) 85.6 ------ ------ Income Before Provision for Income Taxes 11,181 12,428 (10.0) Provision for income taxes (1,924) (2,776) (30.7) ------ ------ Net income $9,257 $9,652 (4.1) ====== ====== Net income attributable to noncontrolling interest 4,953 4,459 11.1 Net income attributable to Verizon 4,304 5,193 (17.1) ----- ----- Net Income $9,257 $9,652 (4.1) ====== ====== Basic Earnings per Common Share Net income attributable to Verizon $1.51 $1.82 (17.0) Weighted average number of common shares (in millions) 2,841 2,852 Diluted Earnings per Common Share (1) Net income attributable to Verizon $1.51 $1.82 (17.0) Weighted average number of common shares-assuming dilution (in millions) 2,841 2,854 Footnotes: (1) Diluted Earnings per Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution. Verizon Communications Inc. Condensed Consolidated Statements of Income Before Special Items ---------------------------------------------------------------- (dollars in millions, except per share amounts) 3 Mos. Ended 3 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ----------- ------------ -------- Operating Revenues (1) Domestic Wireless $15,797 $12,699 24.4 Wireline 11,569 12,158 (4.8) Other (101) (105) (3.8) ---- ---- Total Operating Revenues 27,265 24,752 10.2 ------ ------ Operating Expenses (1) Cost of services and sales 10,914 10,043 8.7 Selling, general & administrative expense 7,340 6,569 11.7 Depreciation and amortization expense 4,076 3,652 11.6 ----- ----- Total Operating Expenses 22,330 20,264 10.2 ------ ------ Operating Income 4,935 4,488 10.0 Operating income impact of divested operations (1) - - - Equity in earnings of unconsolidated businesses 166 211 (21.3) Other income and (expense), net 13 105 (87.6) Interest expense (704) (440) 60.0 ---- ---- Income Before Provision for Income Taxes 4,410 4,364 1.1 Provision for income taxes (833) (969) (14.0) ---- ---- Net Income Before Special Items $3,577 $3,395 5.4 ====== ====== Net income attributable to noncontrolling interest 1,885 1,530 23.2 Net income attributable to Verizon 1,692 1,865 (9.3) ----- ----- Net Income Before Special Items $3,577 $3,395 5.4 ====== ====== Basic Adjusted Earnings per Common Share Net income attributable to Verizon $.60 $.66 (9.1) Weighted average number of common shares (in millions) 2,841 2,844 Diluted Adjusted Earnings per Common Share (2) Net income attributable to Verizon $.60 $.66 (9.1) Weighted average number of common shares-assuming dilution (in millions) 2,841 2,845 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 $ - $ - Expenses $ - $ - (2) Diluted Earnings per Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution. 9 Mos. Ended 9 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ----------- ------------ -------- Operating Revenues (1) Domestic Wireless $46,399 $36,486 27.2 Wireline 34,624 36,297 (4.6) Other (306) (332) (7.8) ---- ---- Total Operating Revenues 80,717 72,451 11.4 ------ ------ Operating Expenses (1) Cost of services and sales 31,618 28,896 9.4 Selling, general & administrative expense 22,150 19,306 14.7 Depreciation and amortization expense 12,059 10,758 12.1 ------ ------ Total Operating Expenses 65,827 58,960 11.6 ------ ------ Operating Income 14,890 13,491 10.4 Operating income impact of divested operations (1) - 44 (100.0) Equity in earnings of unconsolidated businesses 422 458 (7.9) Other income and (expense), net 79 220 (64.1) Interest expense (2,161) (1,302) 66.0 ------ ------ Income Before Provision for Income Taxes 13,230 12,911 2.5 Provision for income taxes (2,655) (2,942) (9.8) ------ ------ Net Income Before Special Items $10,575 $9,969 6.1 ======= ====== Net income attributable to noncontrolling interest 5,296 4,459 18.8 Net income attributable to Verizon 5,279 5,510 (4.2) ----- ----- Net Income Before Special Items $10,575 $9,969 6.1 ======= ====== Basic Adjusted Earnings per Common Share Net income attributable to Verizon $1.86 $1.93 (3.6) Weighted average number of common shares (in millions) 2,841 2,852 Diluted Adjusted Earnings per Common Share (2) Net income attributable to Verizon $1.86 $1.93 (3.6) Weighted average number of common shares-assuming dilution (in millions) 2,841 2,854 Footnotes: (1) Reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results for the spin-off of the wireline segment's non-strategic local exchange and related business assets in Maine, New Hampshire and Vermont in the first quarter of 2008. Reclassifications were determined using specific information where available and allocations where data is not maintained on a state-specific basis within the Company's books and records as follows: Revenues $ - $258 Expenses $ - $214 (2) Diluted Earnings per Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution. Verizon Communications Inc. Condensed Consolidated Statements of Income - Reconciliations ------------------------------------------------------------- (dollars in millions, except per share amounts) Special and Non-Recurring Items ----------------------------- 3 Mos. Merger Severance, Access 3 Mos. Ended Ended Integration Pension Line 9/30/09 9/30/09 and and Spin-Off Before Reported Acquisition Benefit Related Special Unaudited (GAAP) Costs Charges Charges Items --------- -------- --------- ------- ------- -------- Operating Revenues $27,265 $- $- $- $27,265 Operating Expenses Cost of services and sales 10,996 (79) - (3) 10,914 Selling, general & administrative expense 8,111 (102) (610) (59) 7,340 Depreciation and amortization expense 4,172 (96) - - 4,076 ----- --- --- --- ----- Total Operating Expenses 23,279 (277) (610) (62) 22,330 ------ ---- ---- --- ------ Operating Income 3,986 277 610 62 4,935 Equity in earnings of unconsolidated businesses 166 - - - 166 Other income and (expense), net 13 - - - 13 Interest expense (704) - - - (704) ---- --- --- --- ---- Income Before Provision for Income Taxes 3,461 277 610 62 4,410 Provision for income taxes (574) - (238) (21) (833) ---- --- ---- --- ---- Net income $2,887 $277 $372 $41 $3,577 ====== ==== ==== === ====== Net income attributable to noncontrolling interest 1,711 174 - - 1,885 Net income attributable to Verizon 1,176 103 372 41 1,692 ----- --- --- -- ----- Net income $2,887 $277 $372 $41 $3,577 ====== ==== ==== === ====== Basic Earnings per Common Share (1) Net income attributable to Verizon $.41 $.04 $.13 $.02 $.60 Diluted Earnings per Common Share (1) Net income attributable to Verizon $.41 $.04 $.13 $.02 $.60 (dollars in millions, except per share amounts) Special and Non-Recurring Items -------------------------- 3 Mos. Ended 3 Mos. Ended Severance, 9/30/08 9/30/08 Merger Pension and Before Reported Integration Benefit Special Unaudited (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) ---- --- --- ---- Income Before Provision for Income Taxes 4,049 50 265 4,364 Provision for income taxes (850) (18) (101) (969) ---- --- ---- ---- Net income $3,199 $32 $164 $3,395 ====== === ==== ====== Net income attributable to noncontrolling interest 1,530 - - 1,530 Net income attributable to Verizon 1,669 32 164 1,865 ----- -- --- ----- Net income $3,199 $32 $164 $3,395 ====== === ==== ====== Basic Earnings per Common Share (1) Net income attributable to Verizon $.59 $.01 $.06 $.66 Diluted Earnings per Common Share (1) Net income attributable to Verizon $.59 $.01 $.06 $.66 Footnote: (1) EPS totals may not add due to rounding. Note: See www.verizon.com/investor for a reconciliation of other non-GAAP measures. Verizon Communications Inc. Condensed Consolidated Statements of Income - Reconciliations ------------------------------------------------------------- (dollars in millions, except per share amounts) Special and Non-Recurring Items ------------------------------- 9 Mos. Merger Severance, Access 9 Mos. Ended Ended Integration Pension Line 9/30/09 9/30/09 and and Spin-Off Before Reported Acquisition Benefit Related Special Unaudited (GAAP) Costs Charges Charges Items --------- -------- --------- ------- ------- --------- Operating Revenues $80,717 $- $- $- $80,717 Operating Expenses Cost of services and sales 31,785 (164) - (3) 31,618 Selling, general & administrative expense 23,543 (308) (1,026) (59) 22,150 Depreciation and amortization expense 12,291 (232) - - 12,059 ------ ---- --- --- ------ Total Operating Expenses 67,619 (704) (1,026) (62) 65,827 ------ ---- ------ --- ------ Operating Income 13,098 704 1,026 62 14,890 Equity in earnings of unconsolidated businesses 422 - - - 422 Other income and (expense), net 77 2 - - 79 Interest expense (2,416) 255 - - (2,161) ------ --- --- --- ------ Income Before Provision for Income Taxes 11,181 961 1,026 62 13,230 Provision for income taxes (1,924) (309) (401) (21) (2,655) ------ ---- ---- --- ------ Net income $9,257 $652 $625 $41 $10,575 ====== ==== ==== === ======= Net income attributable to noncontrolling interest 4,953 343 - - 5,296 Net income attributable to Verizon 4,304 309 625 41 5,279 ----- --- --- -- ----- Net income $9,257 $652 $625 $41 $10,575 ====== ==== ==== === ======= Basic Earnings per Common Share (1) Net income attributable to Verizon $1.51 $.11 $.22 $.02 $1.86 Diluted Earnings per Common Share (1) Net income attributable to Verizon $1.51 $.11 $.22 $.02 $1.86 (dollars in millions, except per share amounts) Special and Non-Recurring Items ------------------------------- 9 Mos. Ended Access Line 9/30/08 Merger Spin- Reported Integration Off Related Unaudited (GAAP) Costs Charges --------- -------- --------- ----------- Operating Revenues $72,709 $- $- Operating Expenses Cost of services and sales 29,031 (18) (16) Selling, general & administrative expense 19,808 (97) (87) Depreciation and amortization expense 10,818 - - ------ --- --- Total Operating Expenses 59,657 (115) (103) ------ ---- ---- Operating Income 13,052 115 103 Operating income impact of divested operations - - - Equity in earnings of unconsolidated businesses 458 - - Other income and (expense), net 220 - - Interest expense (1,302) - - ------ --- --- Income Before Provision for Income Taxes 12,428 115 103 Provision for income taxes (2,776) (43) (22) ------ --- --- Net income $9,652 $72 $81 ====== === === Net income attributable to noncontrolling interest 4,459 - - Net income attributable to Verizon 5,193 72 81 ----- -- -- Net income $9,652 $72 $81 ====== === === Basic Earnings per Common Share (1) Net income attributable to Verizon $1.82 $.02 $.03 Diluted Earnings per Common Share (1) Net income attributable to Verizon $1.82 $.02 $.03 Special and Non-Recurring Items ------------------------------- 9 Mos. Ended Severance, 9/30/08 Impact of Pension and Before Divested Benefit Special Unaudited Operations Charges Items --------- ---------- ---------- -------- Operating Revenues $(258) $- $72,451 Operating Expenses Cost of services and sales (101) - 28,896 Selling, general & administrative expense (53) (265) 19,306 Depreciation and amortization expense (60) - 10,758 --- --- ------ Total Operating Expenses (214) (265) 58,960 ---- ---- ------ Operating Income (44) 265 13,491 Operating income impact of divested operations 44 - 44 Equity in earnings of unconsolidated businesses - - 458 Other income and (expense), net - - 220 Interest expense - - (1,302) --- --- ------ Income Before Provision for Income Taxes - 265 12,911 Provision for income taxes - (101) (2,942) --- ---- ------ Net income $- $164 $9,969 == ==== ====== Net income attributable to noncontrolling interest - - 4,459 Net income attributable to Verizon - 164 5,510 --- --- ----- Net income $- $164 $9,969 == ==== ====== Basic Earnings per Common Share (1) Net income attributable to Verizon $- $.06 $1.93 Diluted Earnings per Common Share (1) Net income attributable to Verizon $- $.06 $1.93 Footnote: (1) EPS totals may not add due to rounding. Note: See www.verizon.com/investor for a reconciliation of other non-GAAP measures. Verizon Communications Inc. Selected Financial and Operating Statistics ------------------------------------------- (dollars in millions, except per share amounts) Unaudited 9/30/09 9/30/08 --------- ------- ------- Debt to debt and Verizon's equity ratio-end of period (1) 59.3% 46.8% Book value per common share (1) $15.20 $17.95 Common shares outstanding (in millions) End of period 2,841 2,840 Total employees 230,340 228,315 3 Mos. 3 Mos. 9 Mos. 9 Mos. Ended Ended Ended Ended Unaudited 9/30/09 9/30/08 9/30/09 9/30/08 --------- ------- ------- ------- ------- Capital expenditures (including capitalized software) Domestic Wireless $1,800 $1,473 $5,134 $4,723 Wireline 2,273 2,483 6,614 7,318 Other 283 222 702 534 --- --- --- --- Total $4,356 $4,178 $12,450 $12,575 ------ ------ ------- ------- Cash dividends declared per common share $0.475 $0.460 $1.395 $1.320 Footnote: (1) Calculations are based on the equity position attributable to Verizon, which excludes noncontrolling interests. Verizon Communications Inc. Condensed Consolidated Balance Sheets ------------------------------------- (dollars in millions) Unaudited 9/30/09 12/31/08 $ Change --------- ------- ---------- ---------- Assets Current assets Cash and cash equivalents $1,216 $9,782 $(8,566) Short-term investments 474 509 (35) Accounts receivable, net 12,489 11,703 786 Inventories 2,554 2,092 462 Prepaid expenses and other 5,290 1,989 3,301 ----- ----- ----- Total current assets 22,023 26,075 (4,052) ------ ------ ------ Plant, property and equipment 226,470 215,605 10,865 Less accumulated depreciation 135,636 129,059 6,577 ------- ------- ----- 90,834 86,546 4,288 ------ ------ ----- Investments in unconsolidated businesses 3,808 3,393 415 Wireless licenses 71,899 61,974 9,925 Goodwill 22,190 6,035 16,155 Other intangible assets, net 6,948 5,199 1,749 Other investments - 4,781 (4,781) Other assets 8,702 8,349 353 ----- ----- --- Total Assets $226,404 $202,352 $24,052 -------- -------- ------- Liabilities and Equity Current liabilities Debt maturing within one year $5,443 $4,993 $450 Accounts payable and accrued liabilities 14,643 13,814 829 Other 7,219 7,099 120 ----- ----- --- Total current liabilities 27,305 25,906 1,399 ------ ------ ----- Long-term debt 57,374 46,959 10,415 Employee benefit obligations 31,881 32,512 (631) Deferred income taxes 18,652 11,769 6,883 Other liabilities 6,610 6,301 309 Equity Common stock 297 297 - Contributed capital 40,100 40,291 (191) Reinvested earnings 19,591 19,250 341 Accumulated other comprehensive loss (12,058) (13,372) 1,314 Common stock in treasury, at cost (4,834) (4,839) 5 Deferred compensation - employee stock ownership plans and other 90 79 11 Noncontrolling interest 41,396 37,199 4,197 ------ ------ ----- Total equity 84,582 78,905 5,677 ------ ------ ----- Total Liabilities and Equity $226,404 $202,352 $24,052 -------- -------- ------- 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 9/30/09 9/30/08 $ Change --------- ------- ------- ------- Cash Flows From Operating Activities Net income $9,257 $9,652 $(395) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 12,291 10,818 1,473 Employee retirement benefits 2,533 1,232 1,301 Deferred income taxes 2,672 2,240 432 Provision for uncollectible accounts 917 724 193 Equity in earnings of unconsolidated businesses, net of dividends received 21 303 (282) Changes in current assets and liabilities, net of effects from acquisition/ disposition of businesses (2,337) (2,458) 121 Other, net (2,236) (2,577) 341 ------ ------ --- Net cash provided by operating activities 23,118 19,934 3,184 ------ ------ ----- Cash Flows From Investing Activities Capital expenditures (including capitalized software) (12,450) (12,575) 125 Acquisitions of licenses, investments and businesses, net of cash acquired (5,627) (15,978) 10,351 Net change in short- term investments 78 1,238 (1,160) Other, net 51 (567) 618 -- ---- --- Net cash used in investing activities (17,948) (27,882) 9,934 ------- ------- ----- Cash Flows From Financing Activities Proceeds from long- term borrowings 12,040 12,552 (512) Repayments of long- term borrowings and capital lease obligations (18,966) (3,398) (15,568) Increase (decrease) in short-term obligations, excluding current maturities (1,454) 4,132 (5,586) Dividends paid (3,920) (3,687) (233) Proceeds from sale of common stock - 16 (16) Purchase of common stock for treasury - (1,369) 1,369 Other, net (1,436) (755) (681) ------ ---- ---- Net cash provided by (used in) financing activities (13,736) 7,491 (21,227) ------- ----- ------- Decrease in cash and cash equivalents (8,566) (457) (8,109) Cash and cash equivalents, of period 9,782 1,153 8,629 ----- ----- ----- Cash and cash equivalents, end of period $1,216 $696 $520 ------ ---- ---- Verizon Communications Inc. Verizon Wireless - Selected Financial Results --------------------------------------------- (dollars in millions) 3 Mos. Ended 3 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ------------ ------------ -------- Revenues Service revenues $13,525 $10,935 23.7 Equipment and other 2,272 1,764 28.8 ----- ----- Total Revenues 15,797 12,699 24.4 ------ ------ Operating Expenses Cost of services and sales 5,025 4,178 20.3 Selling, general & administrative expense 4,540 3,689 23.1 Depreciation and amortization expense 1,758 1,366 28.7 ----- ----- Total Operating Expenses 11,323 9,233 22.6 ------ ----- Operating Income $4,474 $3,466 29.1 Operating Income Margin 28.3% 27.3% 9 Mos. Ended 9 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ------------ ------------ -------- Revenues Service revenues $39,949 $31,572 26.5 Equipment and other 6,450 4,914 31.3 ----- ----- Total Revenues 46,399 36,486 27.2 ------ ------ Operating Expenses Cost of services and sales 14,510 11,507 26.1 Selling, general & administrative expense 13,451 10,806 24.5 Depreciation and amortization expense 5,234 3,989 31.2 ----- ----- Total Operating Expenses 33,195 26,302 26.2 ------ ------ Operating Income $13,204 $10,184 29.7 Operating Income Margin 28.5% 27.9% Verizon Communications Inc. Verizon Wireless - Selected Operating Statistics ------------------------------------------------ (numbers in thousands) 3 Mos. Ended 3 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ------------ ------------ -------- Total Customer net adds in period (1) 1,319 2,127 (38.0) Retail Customer net adds in period (2) 1,051 2,127 (50.6) Total churn rate 1.49% 1.33% Retail churn rate 1.49% 1.32% Unaudited 9/30/09 9/30/08 % Change --------- ----------- ----------- -------- Total Customers 89,013 70,808 25.7 Retail Customers 86,291 68,807 25.4 9 Mos. Ended 9 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ----------- ------------ -------- Total Customer net adds in period (1) 16,957 5,101 * Retail Customer net adds in period (2) 16,270 5,072 * Total churn rate 1.44% 1.21% Retail churn rate 1.44% 1.20% Footnotes: (1) Includes acquisitions and adjustments of 46 and 646 customers in the second and third quarter of 2008, respectively; and 13,219, 1, and 79 customers in the first, second and third quarter of 2009, respectively. (2) Includes acquisitions and adjustments of 46 and 627 customers in the second and third quarter of 2008, respectively; and 12,813, 1, and 81 customers in the first, second and third quarter of 2009, respectively. The segment financial results above are adjusted to exclude the effects of special and non-recurring items. The company's chief decision maker excludes 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. * Not meaningful Verizon Communications Inc. Wireline - Selected Financial Results ------------------------------------- (dollars in millions) 3 Mos. Ended 3 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ----------- ------------ --------- Wireline Operating Revenues Mass Markets $4,947 $4,991 (0.9) Global Enterprise 3,797 4,010 (5.3) Global Wholesale 2,426 2,595 (6.5) Other 399 562 (29.0) --- --- Total Operating Revenues 11,569 12,158 (4.8) ------ ------ Operating Expenses Cost of services and sales 6,208 6,155 0.9 Selling, general & administrative expense 2,615 2,689 (2.8) Depreciation and amortization expense 2,302 2,268 1.5 ----- ----- Total Operating Expenses 11,125 11,112 0.1 ------ ------ Operating Income $444 $1,046 (57.6) Operating Income Margin 3.8% 8.6% 9 Mos. Ended 9 Mos. Ended Unaudited 9/30/09 9/30/08 % Change --------- ----------- ------------ -------- Wireline Operating Revenues Mass Markets $14,830 $14,830 - Global Enterprise 11,244 11,858 (5.2) Global Wholesale 7,224 7,832 (7.8) Other 1,326 1,777 (25.4) ----- ----- Total Operating Revenues 34,624 36,297 (4.6) ------ ------ Operating Expenses Cost of services and sales 18,050 18,233 (1.0) Selling, general & administrative expense 8,107 8,193 (1.0) Depreciation and amortization expense 6,777 6,722 0.8 ----- ----- Total Operating Expenses 32,934 33,148 (0.6) ------ ------ Operating Income $1,690 $3,149 (46.3) Operating Income Margin 4.9% 8.7% Verizon Communications Inc. Wireline - Selected Operating Statistics ---------------------------------------- (numbers in thousands) Unaudited 9/30/09 9/30/08 % Change --------- ------- ------- -------- Switched access lines in service Total Residence (includes Primary residence) 18,960 21,626 (12.3) Primary residence 16,692 18,543 (10.0) Business 14,213 15,192 (6.4) Public 196 254 (22.8) --- --- Total 33,369 37,072 (10.0) ------ ------ Broadband connections 9,174 8,459 8.5 FIOS Internet Subscribers 3,280 2,199 49.2 FIOS TV Subscribers 2,708 1,615 67.7 Footnotes: The segment financial results above are adjusted to exclude the effects of special and non-recurring items. The company's chief decision maker excludes 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.
CONTACT: Peter Thonis, +1-212-395-2355,
Varettoni, +1-908-559-6388,
Web site: http://www.verizon.com/
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