EX-99 2 dex99.htm PRESS RELEASE Press release

Exhibit 99

 

NEWS RELEASE   LOGO

 

 

FOR IMMEDIATE RELEASE   Media contacts:
July 26, 2005   Peter Thonis
    212-395-2355
    peter.thonis@verizon.com
    Bob Varettoni
    212-395-7726
    robert.a.varettoni@verizon.com

 

Verizon Communications Reports Second-Quarter Earnings

of $2.1 Billion, With $18.6 Billion in Revenues

 

Wireless Nets Record 1.9 Million New Customers, Maintains Margins, Yields

Record-Low Churn; Wireline Broadband, LD, Data Revenues Continue Growth

 

SECOND-QUARTER HIGHLIGHTS

 

Consolidated Results

 

•   75 cents in diluted earnings per share; 63 cents per share before special items (non-GAAP measure)

 

Wireless

 

•   Industry-record 1.9 million net customer additions, up 25.1 percent; 47.4 million total customers, up 17.1 percent; record-low churn (customer turnover) of 1.2 percent

 

•   Total quarterly revenues of $7.8 billion, up $1.0 billion, or 14.6 percent — the 12th consecutive quarter of double-digit year-over-year revenue growth increases

 

•   Continued strong operating income margin of 22.7 percent

 

Wireline

 

•   4.1 million total broadband connections (DSL and Verizon Fios data lines), including 278,000 net new broadband connections

 

•   Improving revenue trends: Total quarterly revenues of $9.4 billion include a year-over-year gain in the consumer business, and gains from first quarter 2005 in all major lines of business

Verizon News Release, page 2

 

•   Data revenues up 10.9 percent; long-distance (LD) revenues up 6.7 percent

 

Notes: Reclassifications of prior-period amounts have been made to reflect comparable results excluding Verizon’s Hawaii wireline and directory operations, which were sold in the second quarter 2005. Growth percentages cited above compare second quarter 2005 with second quarter 2004. See the schedules accompanying this news release and www.verizon.com/investor for reconciliations to generally accepted accounting principles (GAAP) for the non-GAAP financial measures included in this announcement. Discontinued operations in the prior-year periods presented include the operations of Verizon Information Services Canada.

 

NEW YORK – Verizon Communications Inc. (NYSE:VZ) today reported second-quarter 2005 earnings of $2.1 billion, or 75 cents per diluted share, highlighted by another record-breaking quarter at Verizon Wireless and continued strong consolidated cash flows and revenue growth.

 

Second-quarter earnings included $336 million, or 12 cents per share, from the sale of wireline and directory operations in Hawaii, as well as tax benefits of $242 million recognized on prior-year investment losses, partially offset by net tax expense of $232 million for the repatriation of foreign earnings. Earnings before these special items (non-GAAP measure) were $1.8 billion, or 63 cents per share. This compares with $1.8 billion, or 64 cents per share, in earnings before special items in the second quarter 2004.

 

The tax on repatriated foreign earnings relates primarily to the more than $2 billion that Verizon expects to receive in 2005 from share buybacks initiated by Italian wireless provider Vodafone Omnitel. Verizon received $1.2 billion in proceeds in the second quarter 2005 and anticipates receiving the final amount in the second half of 2005.

 

Record Quarterly Revenues

 

Consolidated operating revenues of $18.6 billion in the second quarter 2005 set a company record, increasing 4.6 percent compared with the second quarter 2004. Consolidated operating revenues on a comparable basis (non-GAAP measure, excluding revenues from Verizon’s Hawaii operations in both periods) were $18.5 billion in the second quarter 2005. This is an increase of 5.1 percent, or $0.9 billion, compared with the second quarter 2004.

 

Second-quarter total revenues at Verizon Wireless increased 14.6 percent, or $1.0 billion, to $7.8 billion when compared with the second quarter 2004, marking the 12th consecutive quarter of more than 10 percent year-over-year increases.

Verizon News Release, page 3

 

Operating revenues on a comparable basis at Domestic Telecom were $9.4 billion in the second quarter 2005. This 0.5 percent decrease, compared with the second quarter 2004, was the segment’s lowest rate of revenue decline in four years. Domestic Telecom revenues in the second quarter 2005 increased $78 million over the first quarter 2005 on a comparable basis.

 

In the second quarter 2005, consolidated operating expenses increased 3.0 percent to $14.5 billion, compared with second-quarter 2004 operating expenses of $14.1 billion.

 

‘Winning Formula’

 

“These are strong first-half results, with contributions from all segments of our diverse revenue base,” said Ivan Seidenberg, Verizon chairman and chief executive officer. “Wireless in particular remains in high gear. Because of the healthy margins in our wireless business, we are able to take the steps to increase our market share, which we did effectively this quarter. We continue to make the technology and infrastructure investments that allow us to unleash the full potential of the best wireless network in the country. As is evident by our market-share gains and our industry-leading customer-loyalty results, customers are responding.

 

“This same winning formula of putting customers first and building profitable growth on a foundation of investment and innovation is also evident in wireline, where we continue to see steady improvement in revenue trends. Customers — whether they choose wireless, wireline or both — are seeing the value of our superior, next-generation broadband services.”

 

Verizon Wireless Continues to Gain

 

Verizon Wireless added 1.9 million net new customers. Excluding acquisitions, this is the largest quarterly customer increase in the history of the wireless industry. Wireless has added 6.9 million net new customers over the past 12 months and now has a total of 47.4 million customers nationwide.

 

Customer turnover reached record-low levels for the third consecutive quarter. The total churn rate, a key measure of customer loyalty, was 1.2 percent for the second quarter 2005, down from 1.4 percent in the second quarter 2004. Churn in the retail post-paid segment — a base of 44 million customers — was 1.0 percent in the second quarter 2005.

 

Strict cost-management contributed to strong operating income margin of 22.7 percent in the second quarter 2005. This was the second-highest margin in the company’s history, driven

Verizon News Release, page 4

 

by industry-leading lows for cash expense-per-customer, even as the company added an extraordinary volume of customers in the quarter. EBITDA margin at Verizon Wireless was 43.0 percent in the quarter. (EBITDA — or earnings before interest, taxes, depreciation and amortization — is a non-GAAP measure that adds depreciation and amortization to operating income; EBITDA margin is calculated by dividing EBITDA by wireless service revenues.)

 

Wireline Broadband, LD and Data Growth

 

In wireline, quarterly operating revenues were supported by 0.7 percent year-over-year revenue growth in the consumer business, reversing a trend that had been negative since the company began reporting wireline revenue by line of business in 2002. The consumer business generated $3.8 billion in second-quarter 2005 revenues, driven by continued solid growth from sales of broadband and long-distance services.

 

Revenues from wireline broadband services contributed to $2.1 billion in total data revenues in the second quarter 2005, a 10.9 percent increase from $1.9 billion in comparable revenues in the second quarter 2004.

 

Revenues from wireline long-distance services, including regional toll services, were $1.1 billion in the second quarter 2005, a 6.7 percent increase from $1.0 billion in comparable revenues in the second quarter 2004. Long-distance lines totaled 18.0 million at the end of the second quarter 2005, an 8.8 percent increase from a comparable total of 16.5 million lines at the end of the second quarter 2004.

 

In the second quarter 2005, Verizon added a net of 278,000 wireline broadband connections, which represents the total number of DSL and Fios lines put in service. Fios is Verizon’s recently introduced next-generation, fiber-optic-based service. Verizon has a total of 4.1 million wireline broadband connections — a growth rate of 43.7 percent from the second quarter 2004 on a comparable basis.

 

Strong Cash Flow, Revised Capital Spending Guidance

 

Cash Flows From Operating Activities (CFFO) were $9.9 billion in the first six months of 2005, a slight increase compared with the first six months of 2004.

 

In the first six months of 2005, net cash used in investing activities was $10.9 billion, and net cash provided by financing activities was $125 million. Investing activities included $7.7 billion in capital expenditures, predominantly focused on growth markets.

Verizon News Release, page 5

 

Verizon anticipates that 2005 capital spending will increase approximately 15 percent over 2004 expenditures of $13.3 billion. This revises its previous guidance of an increase of approximately 10 percent. The increase is attributable to the strong growth at Verizon Wireless and increased spending for the deployment of Fios video services.

 

Verizon’s total debt at the end of the second quarter 2005 was $41.8 billion, compared with $41.9 billion at the end of the second quarter 2004. Short-term debt in the second quarter 2005 increased as a result of Verizon’s investing activities, including the NextWave Telecom wireless spectrum purchase.

 

Earnings Comparisons and Special Items

 

As noted above, reported earnings were 75 cents per share in the second quarter 2005 and 64 cents per share in the second quarter 2004.

 

Second-quarter 2005 earnings were 63 cents per share before the gain on the sale of Verizon’s Hawaii wireline and directory operations, and net tax benefits. These net tax benefits include $242 million related to prior-year investment losses that became recognizable as a result of capital gains on the Hawaii operations sale, net of tax expense of $232 million related to the repatriation of prior-year foreign earnings.

 

Second-quarter 2004 earnings were 64 cents per share as charges of 4 cents per share related to operating asset losses, pension settlements and the early retirement of debt offset an expense credit of 4 cents per share resulting from the favorable resolution of pre-bankruptcy amounts due from MCI.

 

Business Segment Highlights

 

Following are second-quarter 2005 highlights from Verizon’s four business segments.

 

Wireline:

 

•   The average revenue per month per Verizon residential wireline customer rose to $50.92 in the second quarter 2005, a 6.4 percent increase compared with the second quarter 2004, as more customers continue to choose high-value communications services.

 

•   Approximately 60 percent of Verizon residential customers have purchased local services in combination with either Verizon long-distance or a Verizon broadband connection, or both. This compares with 49 percent in the second quarter 2004.

Verizon News Release, page 6

 

•   Approximately 4.9 million Verizon Freedom packages were in service to residential and business customers by the end of the second quarter 2005, an increase of 1.1 million since the end of the second quarter 2004. Verizon Freedom plans help retain and win back customers by offering local services with various combinations of long-distance, wireless and Internet access, available on one bill.

 

•   By the end of the second quarter, the company was deploying or selling Fios fiber-to-the-premises (FTTP) broadband services in 15 states. Verizon plans to introduce Fios TV services in the second half of the year and is currently pursuing cable TV franchises in about 200 communities.

 

•   Consumer revenues of $3.8 billion increased 0.7 percent compared with last year’s second quarter, while business revenues of $2.8 billion decreased 0.8 percent and wholesale revenues of $2.1 billion were essentially flat. Comparing the second quarter 2005 with the first quarter 2005, revenues increased in all major wireline lines of business — consumer revenues increased $32 million, business revenues increased $32 million and wholesale revenues increased $26 million.

 

•   Wireline total operating expenses were $8.2 billion in the second quarter 2005, a 1.6 percent increase compared with last year’s second quarter. Additional expenses in 2005 relate to the strategic buildout of FTTP.

 

•   Wholesale voice connections — which includes resale, Unbundled Network Element-Platform (UNE-P) and end-to-end wholesale voice services provided under commercial agreements — totaled 6.2 million at the end of the second quarter 2005, down 6.4 percent from the end of the second quarter 2004. Verizon had 50.7 million switched wireline access lines in service as of the end of the second quarter 2005, down 5.5 percent on a comparable basis from last year.

 

•   Verizon’s Enterprise Solutions Group had another solid quarter of Enterprise Advance sales with more than 600 in the quarter. Sales included multi-year, multi-million-dollar contracts with DirecTV in California and the Tulalip Tribes in the state of Washington. The business unit also rolled out iobi Enterprise, a new service offering Internet Protocol (IP) options for Centrex users.

 

Wireless:

 

•   Retail customers constitute 96 percent of the company’s total. Retail gross additions increased 11.4 percent over the second quarter 2004. Retail net additions increased 30.7 percent and accounted for 99.5 percent of all net additions in the quarter. (Retail and total net additions include 4,000 customers from an acquisition.)

 

•   Service revenues (which do not include taxes and regulatory fees) were $6.9 billion in the second quarter 2005, up 13.8 percent compared with the second quarter 2004. Average monthly service revenue per customer increased nearly 1 percent from the first quarter 2005 and decreased 2.7 percent from the second quarter 2004 to $49.42.

Verizon News Release, page 7

 

•   Data services revenue for the second quarter 2005 climbed to 7.0 percent of service revenues, contributing $483 million, as sales of high-speed and broadband 3G (third-generation) data services to businesses and consumers exceed company expectations. The company now has more than 19 million data customers — a 50 percent increase compared with a year ago.

 

•   As the industry leader in wireless broadband deployment, the company is ahead of plan with the $1 billion national buildout by year-end of its 3G EV-DO (Evolution-Data Optimized) wireless broadband network. During the second quarter, the company expanded broadband to now include more than 50 major metropolitan markets and surrounding areas, as well as 57 airports nationwide. This network, the largest wireless broadband network in the U.S., currently reaches one-third of the population and is expected to be available to nearly half the population by year-end.

 

•   Contributing to the company’s data revenue growth, a new BroadbandAccess PC Card and a new Pocket PC were introduced, giving business customers additional choices for accessing the Verizon Wireless broadband network. The company launched new pricing that combines unlimited data use from a PDA, BlackBerry or Smartphone bundled with voice calling minutes. The company also launched behind-the-corporate-firewall software for use with NationalAccess and BroadbandAccess services, allowing access to business-critical data and applications when out of the office.

 

•   For consumers, the company continued to add handsets and video from leading content providers for its exclusive broadband service V CAST, the nation’s first 3G consumer multimedia service, which delivers high-quality video, movies, 3D games and music clips to 3G handsets. Popularity of the company’s Get It Now continued to soar with 4.6 billion text messages and 62 million picture and video messages exchanged during the second quarter 2005, and 36 million downloads of games, exclusive content, ringtones and ringback tones, which replace the standard ring callers hear while waiting for their call to be answered.

 

•   For the second consecutive year, the company ranked highest among U.S. wireless service providers for customer satisfaction in the latest American Customer Satisfaction Index. Verizon Wireless also was recognized by IDG’s Computerworld magazine for the third consecutive year as one of the top workplaces for information technology professionals.

 

Information Services:

 

•   Verizon Information Services (VIS) revenues of $870 million decreased 2.1 percent for the second quarter 2005 compared with the second quarter 2004, primarily due to reduced domestic print advertising revenue. However, reductions in total operating expenses have resulted in an improved operating income margin.

Verizon News Release, page 8

 

•   VIS’ domestic online directory and search service, SuperPages.com, continues to achieve strong growth, as demonstrated by a 29 percent increase in gross revenue.

 

International:

 

•   Second-quarter revenues of $537 million represented an increase of 6.1 percent from the second quarter 2004. The increase reflects the effect of favorable foreign exchange rates and operational growth in the Dominican Republic, partially offset by a favorable adjustment in 2004 to carrier access revenues in Puerto Rico.

 

•   Second-quarter segment income was $271 million, compared with $287 million in the second quarter 2004. The decrease of $16 million includes the impact from the sale of Verizon’s interest in TELUS in fourth quarter 2004.

 

•   During the quarter, the board of directors and shareowners of Vodafone Omnitel approved a share buyback in two tranches. The first tranche was completed in June with Verizon receiving approximately $1.2 billion in proceeds before taxes. The second tranche is scheduled to be completed later this year with similar expected proceeds before taxes.

 

With more than $71 billion in annual revenues, Verizon Communications Inc. (NYSE:VZ) is one of the world’s leading providers of communications services. Verizon has a diverse work force of more than 214,000 in four business units: Domestic Telecom provides customers based in 28 states with wireline and other telecommunications services, including broadband. Verizon Wireless owns and operates the nation’s most reliable wireless network, serving 47.4 million voice and data customers across the United States. Information Services operates directory publishing businesses and provides electronic commerce services. International includes wireline and wireless operations and investments, primarily in the Americas and Europe. For more information, visit www.verizon.com.

 

####

 

VERIZON’S ONLINE NEWS CENTER: Verizon news releases, executive speeches and biographies, media contacts, high quality video and images, and other information are available at Verizon’s News Center on the World Wide Web at www.verizon.com/news. To receive news releases by e-mail, visit the News Center and register for customized automatic delivery of Verizon news releases.

 

NOTE: This press 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; 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; a significant change in the timing of, or the imposition of any government conditions to, the closing of our business combination transaction with MCI, Inc., if consummated; actual and contingent liabilities in connection with the MCI transaction; and the extent and timing of our ability to obtain revenue enhancements and cost savings following the MCI transaction.

Verizon Communications Inc.

Consolidated Statements of Income

 

(dollars in millions, except per share amounts)

 

Unaudited

    3 Mos. Ended
6/30/05
     3 Mos. Ended
6/30/04
     % Change
     6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
     % Change
  

Operating Revenues

    $ 18,569     $ 17,758     4.6     $ 36,748     $ 34,814     5.6  

Operating Expenses

                                             

Cost of services and sales

      6,258       5,620     11.4       12,381       11,110     11.4  

Selling, general & administrative expense

      5,253       5,000     5.1       10,467       10,675     (1.9 )

Depreciation and amortization expense

      3,496       3,437     1.7       6,956       6,862     1.4  

Sales of businesses, net

      (530 )     —       *       (530 )     —       *  
    
 
       
 
     

Total Operating Expenses

      14,477       14,057     3.0       29,274       28,647     2.2  

Operating Income

      4,092       3,701     10.6       7,474       6,167     21.2  

Equity in earnings of unconsolidated businesses

      179       212     (15.6 )     372       411     (9.5 )

Income from other unconsolidated businesses

      —         —       —         56       72     (22.2 )

Other income and (expense), net

      81       (2 )   *       160       (36 )   *  

Interest expense

      (540 )     (594 )   (9.1 )     (1,101 )     (1,232 )   (10.6 )

Minority interest

      (717 )     (676 )   6.1       (1,330 )     (1,153 )   15.4  
    
 
       
 
     

Income Before Provision for Income Taxes and Discontinued Operations

      3,095       2,641     17.2       5,631       4,229     33.2  

Provision for income taxes

      (982 )     (859 )   14.3       (1,761 )     (1,264 )   39.3  
    
 
       
 
     

Income Before Discontinued Operations

      2,113       1,782     18.6       3,870       2,965     30.5  

Discontinued Operations(1)

                                             

Income from operations

      —         27     (100.0 )     —         56     (100.0 )

Provision for income taxes

      —         (12 )   (100.0 )     —         (25 )   (100.0 )
    
 
       
 
     

Income on discontinued operations

      —         15     (100.0 )     —         31     (100.0 )
    
 
       
 
     

Net Income

    $ 2,113     $ 1,797     17.6     $ 3,870     $ 2,996     29.2  
    
 
       
 
     

Basic Earnings per Share

    $ .76     $ .65     16.9     $ 1.40     $ 1.08     29.6  

Weighted average number of common shares (in millions)

      2,766       2,770             2,768       2,770        

Diluted Earnings per Share(2)

    $ .75     $ .64     17.2     $ 1.38     $ 1.07     29.0  

Weighted average number of common shares-assuming dilution (in millions)

      2,818       2,834             2,819       2,840        

Footnotes:

 

(1) Discontinued Operations includes the operations of Verizon Information Services Canada as a result of an agreement to sell the business reached in the third quarter of 2004.

 

(2) Diluted Earnings per Share include (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $14 million and $28 million for the second quarter and year-to-date 2005, respectively, and $18 million and $40 million for the second quarter and year-to-date 2004, respectively, 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.

 

* Not meaningful

Verizon Communications Inc.

Consolidated Statements of Income Before Special Items

 

(dollars in millions, except per share amounts)

 

Unaudited

    3 Mos. Ended
6/30/05
     3 Mos. Ended
6/30/04
     % Change
     6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
     % Change
  

Operating Revenues(1)

                                             

Domestic Telecom

    $ 9,445     $ 9,492     (.5 )   $ 18,812     $ 18,973     (.8 )

Domestic Wireless

      7,846       6,847     14.6       15,264       13,009     17.3  

Information Services

      870       889     (2.1 )     1,751       1,792     (2.3 )

International

      537       506     6.1       1,054       974     8.2  

Other

      (182 )     (122 )   49.2       (335 )     (229 )   46.3  
    
 
       
 
     

Total Operating Revenues

      18,516       17,612     5.1       36,546       34,519     5.9  
    
 
       
 
     

Operating Expenses(1)

                                             

Cost of services and sales

      6,238       5,581     11.8       12,308       11,021     11.7  

Selling, general & administrative expense

      5,240       5,017     4.4       10,416       9,925     4.9  

Depreciation and amortization expense

      3,496       3,437     1.7       6,956       6,833     1.8  
    
 
       
 
     

Total Operating Expenses

      14,974       14,035     6.7       29,680       27,779     6.8  
    
 
       
 
     

Operating Income

      3,542       3,577     (1.0 )     6,866       6,740     1.9  

Operating income impact of operations sold(1)

      20       64     (68.8 )     78       95     (17.9 )

Equity in earnings of unconsolidated businesses

      179       212     (15.6 )     372       411     (9.5 )

Income from other unconsolidated businesses

      —         —       —         56       29     93.1  

Other income and (expense), net

      81       10     *       160       19     *  

Interest expense

      (540 )     (594 )   (9.1 )     (1,101 )     (1,232 )   (10.6 )

Minority interest

      (717 )     (676 )   6.1       (1,330 )     (1,153 )   15.4  
    
 
       
 
     

Income Before Provision for Income Taxes and Discontinued Operations

      2,565       2,593     (1.1 )     5,101       4,909     3.9  

Provision for income taxes

      (798 )     (821 )   (2.8 )     (1,577 )     (1,524 )   3.5  
    
 
       
 
     

Income Before Discontinued Operations

      1,767       1,772     (.3 )     3,524       3,385     4.1  

Discontinued Operations(2)

                                             

Income from operations

      —         27     (100.0 )     —         56     (100.0 )

Provision for income taxes

      —         (12 )   (100.0 )     —         (25 )   (100.0 )
    
 
       
 
     

Income on discontinued operations

      —         15     (100.0 )     —         31     (100.0 )
    
 
       
 
     

Net Income Before Special Items

    $ 1,767     $ 1,787     (1.1 )   $ 3,524     $ 3,416     3.2  
    
 
       
 
     

Basic Earnings per Share

    $ .64     $ .65     (1.5 )   $ 1.27     $ 1.23     3.3  

Weighted average number of common shares (in millions)

      2,766       2,770             2,768       2,770        

Diluted Adjusted Earnings per Share(3)

    $ .63     $ .64     (1.6 )   $ 1.26     $ 1.22     3.3  

Weighted average number of common shares-assuming dilution (in millions)

      2,818       2,834             2,819       2,840        

Footnotes:

 

(1)     Reclassifications of prior period amounts have also been made, where appropriate, to reflect comparable operating results excluding significant operations sold, principally the previously announced Domestic Telecom access lines, as follows:

 

        

      

Revenues

    $ 53     $ 146           $ 202     $ 295        

Expenses

    $ 33     $ 82           $ 124     $ 200        

 

(2)     Discontinued Operations includes the operations of Verizon Information Services Canada as a result of an agreement to sell the business reached in the third quarter of 2004.

 

(3)     Diluted Earnings per Share include (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $14 million and $28 million for the second quarter and year-to-date 2005, respectively, and $18 million and $40 million for the second quarter and year-to-date 2004, respectively, 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.

 

*        Not meaningful

       

          

         

      

Verizon Communications Inc.

Consolidated Statements of Income - Reconciliations

(dollars in millions, except per share amounts)

 

          Special and Non-Recurring Items
      

Unaudited

   3 Mos. Ended
6/30/05
Reported
(GAAP)
     Sales of
Businesses,
Net
     Impact of
Operations Sold
     Tax Benefits
     Tax on
Repatriated
Earnings
   3 Mos. Ended
6/30/05
Before Special
Items
  
Operating Revenues   $ 18,569     $ —       $ (53 )   $ —       $ —     $ 18,516  
Operating Expenses                                              

Cost of services and sales

     6,258       —         (20 )     —         —       6,238  

Selling, general & administrative expense

     5,253       —         (13 )     —         —       5,240  

Depreciation and amortization expense

     3,496       —         —         —         —       3,496  

Sales of businesses, net

     (530 )     530       —         —         —       —    
   
 
 
 
 
 
Total Operating Expenses     14,477       530       (33 )     —         —       14,974  
   
 
 
 
 
 
Operating Income     4,092       (530 )     (20 )     —         —       3,542  

Operating income impact of operations sold

     —         —         20       —         —       20  

Equity in earnings of unconsolidated businesses

     179       —         —         —         —       179  

Income from other unconsolidated businesses

     —         —         —         —         —       —    

Other income and (expense), net

     81       —         —         —         —       81  

Interest expense

     (540 )     —         —         —         —       (540 )

Minority interest

     (717 )     —         —         —         —       (717 )
   
 
 
 
 
 

Income Before Provision for Income Taxes and Discontinued Operations

     3,095       (530 )     —         —         —       2,565  

Provision for income taxes

     (982 )     194       —         (242 )     232     (798 )
   
 
 
 
 
 

Income Before Discontinued Operations

     2,113       (336 )     —         (242 )     232     1,767  
Discontinued Operations                                              

Income from operations

     —         —         —         —         —       —    

Provision for income taxes

     —         —         —         —         —       —    
   
 
 
 
 
 

Income on discontinued operations

     —         —         —         —         —       —    
   
 
 
 
 
 
Net Income   $ 2,113     $ (336 )   $ —       $ (242 )   $ 232   $ 1,767  
   
 
 
 
 
 
Basic Earnings per Common Share(1)   $ .76     $ (.12 )   $ —       $ (.09 )   $ .08   $ .64  
Diluted Earnings per Common Share(1)   $ .75     $ (.12 )   $ —       $ (.09 )   $ .08   $ .63  

 

 

           Special and Non-Recurring Items
        

Unaudited

    3 Mos. Ended
6/30/04
Reported
(GAAP)
     Severance,
Pension and
Benefit
Charges
     Impact of
Operations Sold
     Other Special
Items
     3 Mos. Ended
6/30/04
Before Special
Items
  
Operating Revenues    $ 17,758     $ —       $ (146 )   $ —       $ 17,612  
Operating Expenses                                         

Cost of services and sales

      5,620       —         (39 )     —         5,581  

Selling, general & administrative expense

      5,000       (31 )     (43 )     91       5,017  

Depreciation and amortization expense

      3,437       —         —         —         3,437  
    
 
 
 
 
Total Operating Expenses      14,057       (31 )     (82 )     91       14,035  
    
 
 
 
 
Operating Income      3,701       31       (64 )     (91 )     3,577  

Operating income impact of operations sold

      —         —         64       —         64  

Equity in earnings of unconsolidated businesses

      212       —         —         —         212  

Income from other unconsolidated businesses

      —         —         —         —         —    

Other income and (expense), net

      (2 )     —         —         12       10  

Interest expense

      (594 )     —         —         —         (594 )

Minority interest

      (676 )     —         —         —         (676 )
    
 
 
 
 

Income Before Provision for Income Taxes and Discontinued Operations

      2,641       31       —         (79 )     2,593  

Provision for income taxes

      (859 )     (12 )     —         50       (821 )
    
 
 
 
 
Income Before Discontinued Operations      1,782       19       —         (29 )     1,772  
Discontinued Operations                                         

Income from operations

      27       —         —         —         27  

Provision for income taxes

      (12 )     —         —         —         (12 )
    
 
 
 
 

Income on discontinued operations

      15       —         —         —         15  
    
 
 
 
 
Net Income    $ 1,797     $ 19     $ —       $ (29 )   $ 1,787  
    
 
 
 
 
Basic Earnings per Common Share(1)    $ .65     $ .01     $ —       $ (.01 )   $ .65  
Diluted Earnings per Common Share(1)    $ .64     $ .01     $ —       $ (.01 )   $ .64  

Footnote:

 

(1) EPS totals may not add across 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.

Consolidated Statements of Income - Reconciliations

 

(dollars in millions, except per share amounts)

 

           Special and Non-Recurring Items
        

Unaudited

    6 Mos. Ended
6/30/05
Reported
(GAAP)
     Sales of
Businesses,
Net
     Impact of
Operations Sold
     Tax Benefits
     Tax on
Repatriated
Earnings
     6 Mos. Ended
6/30/05
Before Special
Items
  

Operating Revenues

    $ 36,748     $ —       $ (202 )   $ —       $ —       $ 36,546  

Operating Expenses

                                                 

Cost of services and sales

      12,381       —         (73 )     —         —         12,308  

Selling, general & administrative expense

      10,467       —         (51 )     —         —         10,416  

Depreciation and amortization expense

      6,956       —         —         —         —         6,956  

Sales of businesses, net

      (530 )     530       —         —         —         —    
    
 
 
 
 
 

Total Operating Expenses

      29,274       530       (124 )     —         —         29,680  
    
 
 
 
 
 

Operating Income

      7,474       (530 )     (78 )     —         —         6,866  

Operating income impact of operations sold

      —         —         78       —         —         78  

Equity in earnings of unconsolidated businesses

      372       —         —         —         —         372  

Income from other unconsolidated businesses

      56       —         —         —         —         56  

Other income and (expense), net

      160       —         —         —         —         160  

Interest expense

      (1,101 )     —         —         —         —         (1,101 )

Minority interest

      (1,330 )     —         —         —         —         (1,330 )
    
 
 
 
 
 

Income Before Provision for Income Taxes and Discontinued Operations

      5,631       (530 )     —         —         —         5,101  

Provision for income taxes

      (1,761 )     194       —         (242 )     232       (1,577 )
    
 
 
 
 
 

Income Before Discontinued Operations

      3,870       (336 )     —         (242 )     232       3,524  

Discontinued Operations

                                                 

Income from operations

      —         —         —         —         —         —    

Provision for income taxes

      —         —         —         —         —         —    
    
 
 
 
 
 

Income on discontinued operations

      —         —         —         —         —         —    
    
 
 
 
 
 

Net Income

    $ 3,870     $ (336 )   $ —       $ (242 )   $ 232     $ 3,524  
    
 
 
 
 
 

Basic Earnings per Common Share(1)

    $ 1.40     $ (.12 )   $ —       $ (.09 )   $ .08     $ 1.27  

Diluted Earnings per Common Share(1)

    $ 1.38     $ (.12 )   $ —       $ (.09 )   $ .08     $ 1.26  
           Special and Non-Recurring Items
        

Unaudited

    6 Mos. Ended
6/30/04
Reported
(GAAP)
     Severance,
Pension and
Benefit
Charges
     Impact of
Operations Sold
     Sales of
Investments, Net
     Other Special
Items
    

6 Mos. Ended
6/30/04

Before Special
Items

  

Operating Revenues

    $ 34,814     $ —       $ (295 )   $ —       $  —       $ 34,519  

Operating Expenses

                                                 

Cost of services and sales

      11,110       —         (89 )     —         —         11,021  

Selling, general & administrative expense

      10,675       (759 )     (82 )     —         91       9,925  

Depreciation and amortization expense

      6,862       —         (29 )     —         —         6,833  
    
 
 
 
 
 

Total Operating Expenses

      28,647       (759 )     (200 )     —         91       27,779  
    
 
 
 
 
 

Operating Income

      6,167       759       (95 )     —         (91 )     6,740  

Operating income impact of operations sold

      —         —         95       —         —         95  

Equity in earnings of unconsolidated businesses

      411       —         —         —         —         411  

Income from other unconsolidated businesses

      72       —         —         (43 )     —         29  

Other income and (expense), net

      (36 )     —         —         —         55       19  

Interest expense

      (1,232 )     —         —         —         —         (1,232 )

Minority interest

      (1,153 )     —         —         —         —         (1,153 )
    
 
 
 
 
 

Income Before Provision for Income Taxes and Discontinued Operations

      4,229       759       —         (43 )     (36 )     4,909  

Provision for income taxes

      (1,264 )     (294 )     —         —         34       (1,524 )
    
 
 
 
 
 

Income Before Discontinued Operations

      2,965       465       —         (43 )     (2 )     3,385  

Discontinued Operations

                                                 

Income from operations

      56       —         —         —         —         56  

Provision for income taxes

      (25 )     —         —         —         —         (25 )
    
 
 
 
 
 

Income on discontinued operations

      31       —         —         —         —         31  
    
 
 
 
 
 

Net Income

    $ 2,996     $ 465     $ —       $ (43 )   $ (2 )   $ 3,416  
    
 
 
 
 
 

Basic Earnings per Common Share(1)

    $ 1.08     $ .17     $ —       $ (.02 )   $ —       $ 1.23  

Diluted Earnings per Common Share(1)

    $ 1.07     $ .16     $ —       $ (.02 )   $ —       $ 1.22  

Footnote:

 

(1) EPS totals may not add across 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

    3 Mos. Ended
6/30/05
     3 Mos. Ended
6/30/04
     6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
  

Debt to debt and shareowners’ equity ratio-end of period

      52.0 %     55.1 %     52.0 %     55.1 %

Book value per common share

    $ 13.94     $ 12.32     $ 13.94     $ 12.32  

Cash dividends declared per common share

    $ .405     $ .385     $ .81     $ .77  

Common shares outstanding (in millions)

                                 

End of period

      2,765       2,768       2,765       2,768  

Capital expenditures (including capitalized software)

                                 

Domestic Telecom

    $ 2,152     $ 1,660     $ 4,044     $ 2,942  

Domestic Wireless

      1,698       1,433       3,339       2,747  

Information Services

      20       18       33       31  

International

      76       69       122       97  

Other

      115       3       117       7  
    
 
 
 

Total

    $ 4,061     $ 3,183     $ 7,655     $ 5,824  
    
 
 
 

Total employees (1)

      214,490       204,828       214,490       204,828  

Footnote:

 

(1) Prior period adjusted to reflect comparable figure.

Verizon Communications Inc.

Consolidated Balance Sheets

 

(dollars in millions)

 

Unaudited

    6/30/05
     12/31/04
     $ Change
  
Assets                         

Current assets

                         

Cash and cash equivalents

    $ 1,405     $ 2,290     $ (885 )

Short-term investments

      1,596       2,257       (661 )

Accounts receivable, net

      9,566       9,801       (235 )

Inventories

      1,373       1,535       (162 )

Assets held for sale

      —         950       (950 )

Prepaid expenses and other

      2,729       2,646       83  
    
 
 

Total current assets

      16,669       19,479       (2,810 )
    
 
 

Plant, property and equipment

      190,232       185,522       4,710  

Less accumulated depreciation

      115,099       111,398       3,701  
    
 
 
       75,133       74,124       1,009  
    
 
 

Investments in unconsolidated businesses

      5,609       5,855       (246 )

Wireless licenses

      47,568       42,090       5,478  

Goodwill

      837       837       —    

Other intangible assets, net

      4,433       4,521       (88 )

Other assets

      19,128       19,052       76  
    
 
 
Total Assets    $ 169,377     $ 165,958     $ 3,419  
    
 
 
Liabilities and Shareowners’ Investment                         

Current liabilities

                         

Debt maturing within one year

    $ 8,687     $ 3,593     $ 5,094  

Accounts payable and accrued liabilities

      12,767       13,177       (410 )

Liabilities related to assets held for sale

      —         525       (525 )

Other

      5,988       5,834       154  
    
 
 

Total current liabilities

      27,442       23,129       4,313  
    
 
 

Long-term debt

      33,070       35,674       (2,604 )

Employee benefit obligations

      18,110       17,941       169  

Deferred income taxes

      22,896       22,532       364  

Other liabilities

      3,952       4,069       (117 )

Minority interest

      25,353       25,053       300  

Shareowners’ investment

                         

Common stock

      277       277       —    

Contributed capital

      25,385       25,404       (19 )

Reinvested earnings

      14,615       12,984       1,631  

Accumulated other comprehensive loss

      (1,613 )     (1,053 )     (560 )

Common stock in treasury, at cost

      (298 )     (142 )     (156 )

Deferred compensation - employee stock ownership plans and other

      188       90       98  
    
 
 

Total shareowners’ investment

      38,554       37,560       994  
    
 
 
Total Liabilities and Shareowners’ Investment    $ 169,377     $ 165,958     $ 3,419  
    
 
 

 

 

Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

 

(dollars in millions)

 

Unaudited

   6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
     $ Change
  

Cash Flows From Operating Activities

                        

Income before discontinued operations

   $ 3,870     $ 2,965     $ 905  

Adjustments to reconcile income before discontinued operations to net cash provided by operating activities:

                        

Depreciation and amortization expense

     6,956       6,862       94  

Sales of businesses, net

     (530 )     —         (530 )

Employee retirement benefits

     861       1,410       (549 )

Deferred income taxes

     (735 )     472       (1,207 )

Provision for uncollectible accounts

     590       505       85  

Income from unconsolidated businesses

     (428 )     (483 )     55  

Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses

     (1,252 )     (2,309 )     1,057  

Other, net

     580       471       109  
   
 
 

Net cash provided by operating activities

     9,912       9,893       19  
   
 
 

Cash Flows From Investing Activities

                        

Capital expenditures (including capitalized software)

     (7,655 )     (5,824 )     (1,831 )

Acquisitions, net of cash acquired, and investments

     (4,438 )     (55 )     (4,383 )

Proceeds from disposition of businesses

     1,326       117       1,209  

Net change in short-term investments

     534       759       (225 )

Other, net

     (689 )     247       (936 )
   
 
 

Net cash used in investing activities

     (10,922 )     (4,756 )     (6,166 )
   
 
 

Cash Flows From Financing Activities

                        

Proceeds from long-term borrowings

     8       500       (492 )

Repayments of long-term borrowings and capital lease obligations

     (1,947 )     (4,765 )     2,818  

Increase in short-term obligations, excluding current maturities

     4,374       1,254       3,120  

Dividends paid

     (2,188 )     (2,131 )     (57 )

Proceeds from sale of common stock

     32       91       (59 )

Purchase of common stock for treasury

     (193 )     (86 )     (107 )

Other, net

     39       (86 )     125  
   
 
 

Net cash provided by (used in) financing activities

     125       (5,223 )     5,348  
   
 
 

Decrease in cash and cash equivalents

     (885 )     (86 )     (799 )

Cash and cash equivalents, beginning of period

     2,290       669       1,621  
   
 
 

Cash and cash equivalents, end of period

   $ 1,405     $ 583     $ 822  
   
 
 

Verizon Communications Inc.

Domestic Telecom – Selected Financial Results

 

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/05
     3 Mos. Ended
6/30/04
     % Change
     6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
     % Change
  

Operating Revenues

                                            

Local services

   $ 4,427     $ 4,592     (3.6 )   $ 8,846     $ 9,208     (3.9 )

Network access services

     3,017       3,003     .5       6,077       6,058     .3  

Long distance services

     1,092       1,023     6.7       2,163       2,010     7.6  

Other services

     909       874     4.0       1,726       1,697     1.7  
   
 
       
 
     

Total Operating Revenues

     9,445       9,492     (.5 )     18,812       18,973     (.8 )
   
 
       
 
     

Operating Expenses

                                            

Cost of services and sales

     3,855       3,604     7.0       7,701       7,274     5.9  

Selling, general & administrative expense

     2,192       2,303     (4.8 )     4,272       4,415     (3.2 )

Depreciation and amortization expense

     2,198       2,209     (.5 )     4,385       4,437     (1.2 )
   
 
       
 
     

Total Operating Expenses

     8,245       8,116     1.6       16,358       16,126     1.4  
   
 
       
 
     

Operating Income

   $ 1,200     $ 1,376     (12.8 )   $ 2,454     $ 2,847     (13.8 )

Operating Income Margin

     12.7 %     14.5 %           13.0 %     15.0 %      

Segment Income

   $ 459     $ 636     (27.8 )   $ 963     $ 1,326     (27.4 )

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.

 

Verizon Communications Inc.

Domestic Telecom – Selected Operating Statistics

 

Unaudited

   3 Mos. Ended
6/30/05
   3 Mos. Ended
6/30/04
   % Change
     6 Mos. Ended
6/30/05
   6 Mos. Ended
6/30/04
   % Change
  

Switched access lines in service (000)

                                    

Residence

     32,441     34,815   (6.8 )     32,441     34,815   (6.8 )

Business

     17,842     18,399   (3.0 )     17,842     18,399   (3.0 )

Public

     408     437   (6.6 )     408     437   (6.6 )
   
 
       
 
     

Total

     50,691     53,651   (5.5 )     50,691     53,651   (5.5 )
   
 
       
 
     

Wholesale voice connections* (000)

     6,172     6,597   (6.4 )     6,172     6,597   (6.4 )

Minutes of use from Carriers and CLECs (in millions)

     52,180     56,071   (6.9 )     104,714     113,961   (8.1 )

Long distance lines (000)

     17,964     16,506   8.8       17,964     16,506   8.8  

Broadband connections (000)

     4,142     2,883   43.7       4,142     2,883   43.7  

High capacity and digital data revenues ($ in millions)

                                    

Data transport

   $ 1,882   $ 1,707   10.3     $ 3,747   $ 3,376   11.0  

Data solutions

     211     180   17.2       389     343   13.4  
   
 
       
 
     

Total revenues

   $ 2,093   $ 1,887   10.9     $ 4,136   $ 3,719   11.2  
   
 
       
 
     

Footnotes:

 

* Resale and UNE-P lines, including lines covered under commercial agreements.

 

Certain reclassifications have been made, where appropriate, to reflect comparable operating results.

Verizon Communications Inc.

Verizon Wireless – Selected Financial Results

 

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/05
     3 Mos. Ended
6/30/04
     % Change
   6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
     % Change

Revenues

                                        

Service revenues

   $ 6,874     $ 6,043     13.8   $ 13,431     $ 11,544     16.3

Equipment and other

     972       804     20.9     1,833       1,465     25.1
   
 
     
 
   

Total Revenues

     7,846       6,847     14.6     15,264       13,009     17.3
   
 
     
 
   

Operating Expenses

                                        

Cost of services and sales

     2,282       1,854     23.1     4,380       3,512     24.7

Selling, general & administrative expense

     2,607       2,275     14.6     5,237       4,522     15.8

Depreciation and amortization expense

     1,175       1,103     6.5     2,325       2,158     7.7
   
 
     
 
   

Total Operating Expenses

     6,064       5,232     15.9     11,942       10,192     17.2
   
 
     
 
   

Operating Income

   $ 1,782     $ 1,615     10.3   $ 3,322     $ 2,817     17.9

Operating Income Margin

     22.7 %     23.6 %         21.8 %     21.7 %    

Segment Income

   $ 517     $ 453     14.1   $ 950     $ 771     23.2

Selected Operating Statistics

                                        

Subscribers (000)

     47,373       40,444     17.1     47,373       40,444     17.1

Penetration

     19.2 %     16.8 %         19.2 %     16.8 %    

Subscriber net adds in period(1) (000)

     1,921       1,535     25.1     3,557       2,922     21.7

Total churn rate, including prepaid

     1.2 %     1.4 %         1.3 %     1.5 %    

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) Includes acquisition of 32,000 subscribers in the first quarter of 2005 and 4,000 subscribers in the second quarter of 2005.

Verizon Communications Inc.

Information Services – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/05
     3 Mos. Ended
6/30/04
     % Change
     6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
    

% Change

  
Operating Revenues   $ 870     $ 889     (2.1 )   $ 1,751     $ 1,792     (2.3 )
Operating Expenses                                            

Cost of services and sales

     148       135     9.6       303       268     13.1  

Selling, general & administrative expense

     293       341     (14.1 )     574       659     (12.9 )

Depreciation and amortization expense

     23       21     9.5       46       42     9.5  
   
 
       
 
     
Total Operating Expenses     464       497     (6.6 )     923       969     (4.7 )
   
 
       
 
     
Operating Income   $ 406     $ 392     3.6     $ 828     $ 823     .6  
Operating Income Margin     46.7 %     44.1 %           47.3 %     45.9 %      
Segment Income   $ 255     $ 236     8.1     $ 519     $ 499     4.0  

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.

 

Information Services results for the prior year exclude the operations of Verizon Information Services Canada as a result of an agreement to sell the business reached in the third quarter of 2004. The sale was completed in the fourth quarter of 2004.

 

Certain reclassifications have been made, where appropriate, to reflect comparable operating results.

 

Verizon Communications Inc.

International – Selected Financial Results

 

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/05
     3 Mos. Ended
6/30/04
     % Change
     6 Mos. Ended
6/30/05
     6 Mos. Ended
6/30/04
    

% Change

  
Operating Revenues   $ 537     $ 506     6.1     $ 1,054     $ 974     8.2  
Operating Expenses                                            

Cost of services and sales

     186       156     19.2       363       303     19.8  

Selling, general & administrative expense

     161       87     85.1       318       215     47.9  

Depreciation and amortization expense

     86       80     7.5       170       157     8.3  
   
 
       
 
     
Total Operating Expenses     433       323     34.1       851       675     26.1  
   
 
       
 
     
Operating Income   $ 104     $ 183     (43.2 )   $ 203     $ 299     (32.1 )
Operating Income Margin     19.4 %     36.2 %           19.3 %     30.7 %      
Equity in Earnings of Unconsolidated Businesses   $ 208     $ 249     (16.5 )   $ 433     $ 488     (11.3 )
Income from Other Unconsolidated Businesses   $ —       $ —       —       $ 56     $ 29     93.1  
Segment Income   $ 271     $ 287     (5.6 )   $ 622     $ 568     9.5  

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.

Verizon Communications Inc.

Other Reconciliations

 

(dollars in millions)

 

Unaudited

   

3 Mos. Ended

6/30/05

  

EBITDA - Verizon Wireless

         

Segment income:

         

Domestic Telecom

    $ 459  

Verizon Wireless

      517  

Information Services

      255  

International

      271  
    

Total segments

      1,502  

Corporate and other

      611  
    

Consolidated net income

    $ 2,113  
    

Verizon Wireless EBITDA

         

Segment income

    $ 517  

Add/subtract non-operating items:

         

Provision for income taxes

      403  

Minority interest

      708  

Interest expense

      163  

Other income/(expense), net

      (3 )

Equity in earnings of unconsolidated businesses

      (6 )
    

Operating income

      1,782  

Add depreciation and amortization expense

      1,175  
    

Verizon Wireless EBITDA

    $ 2,957  
    

Verizon Wireless total revenues

    $ 7,846  
    

Verizon Wireless service revenues

    $ 6,874  
    

Verizon Wireless operating income margin

      22.7 %
    

Verizon Wireless EBITDA margin

      43.0 %