EX-99 2 dex99.htm PRESS RELEASE AND FINANCIAL TABLES Press release and financial tables

Exhibit 99

 

NEWS RELEASE    LOGO

 

FOR IMMEDIATE RELEASE   
April 27, 2009    Media contacts:
   Peter Thonis
   212-395-2355
   peter.thonis@verizon.com
   Bob Varettoni
   908-559-6388
   robert.a.varettoni@verizon.com

Verizon Communications Reports Revenue, Earnings

and Cash Flow Growth in 1Q 2009

Sales of Verizon Wireless, FiOS Internet and TV, and Strategic Business Services Show Continued Strength

1Q 2009 HIGHLIGHTS

Consolidated Results

 

•  

58 cents in EPS and 63 cents in adjusted EPS (non-GAAP), compared with 1Q 2008 EPS of 57 cents and 61 cents, respectively.

 

•  

$6.4 billion in cash flows from operations, up $1.0 billion, or 19.1 percent, year over year.

 

•  

Capital expenditures totaled $3.7 billion; free cash flow totaled $2.7 billion, up $1.5 billion.

Wireless

 

•  

86.6 million total customers, up 28.8 percent; 84.1 million retail customers, up 29.0 percent; 1.3 million net customer additions, excluding acquisitions and adjustments, almost all retail.

 

•  

29.6 percent increase in total revenues; industry-leading retail postpaid churn, 1.14 percent; data revenues up 56.2 percent; 28.2 percent operating income margin and 46.0 percent EBITDA margin on service revenues (non-GAAP).

 

•  

Integration of Alltel operations on schedule.

Wireline

 

•  

299,000 net new FiOS TV customers and a record 298,000 net new FiOS Internet customers, for a total of 2.2 million FiOS TV customers and 2.8 million FiOS Internet customers.

 

•  

13.7 percent increase in consumer ARPU.

 

•  

7.5 percent increase in strategic business services revenues.

Verizon News Release, page 2

 

NEW YORK — Verizon Communications Inc. (NYSE:VZ) today reported that its revenue and earnings continued to grow in the first quarter 2009 and that it continued to generate strong cash flows. Despite the general economic climate, sales remained strong for wireless, FiOS and strategic business services.

Verizon reported diluted earnings per share (EPS) of 58 cents in the first quarter 2009, up 1.8 percent from 57 cents per share in the first quarter 2008. On an adjusted basis (non-GAAP), first-quarter 2009 earnings were 63 cents per share, up 3.3 percent from first-quarter 2008 earnings of 61 cents per share.

Verizon’s total operating revenues grew 11.6 percent to $26.6 billion, compared with the first quarter 2008, as the company added revenues from its acquisition of Alltel Corporation in early January 2009. On a pro forma basis (determined by consolidating the operating results of Verizon and the former Alltel as though the acquisition had occurred on Jan. 1, 2008), revenue growth was 3.3 percent.

Cash flows from operations totaled $6.4 billion for the first three months of 2009, up $1.0 billion, or 19.1 percent, over the same period last year. Capital expenditures totaled $3.7 billion in the first quarter 2009, and free cash flow (cash flows from operations minus capital expenditures) totaled $2.7 billion, up $1.5 billion from the first quarter 2008.

Disciplined Approach in Challenging Environment

“Our business groups executed with excellence in the first quarter,” said Verizon Chairman and CEO Ivan Seidenberg. “Our operational and financial discipline produced continued revenue and earnings growth, as well as an expansion of our already strong operating

Verizon News Release, page 3

 

cash flows. A highlight of the quarter was our successful completion of the Alltel acquisition. We quickly began integration efforts, and we are aggressively pursuing synergies.”

Seidenberg added: “In this challenging economic environment, we remain focused on delivering value to customers and on returning cash to our shareowners, with an attractive dividend. Verizon is in a unique position. We are tapping into new market opportunities in wireless, broadband, video and global enterprise, and we already have the assets and capabilities to sustain our cash flows and grow total shareholder returns.”

Wireless Again Delivers on Growth and Profitability Model

Verizon Wireless delivered strong net customer additions and sustained high margins. In the first quarter 2009:

 

  •  

Wireless retail (non-wholesale) gross customer additions (excluding customers acquired in the Alltel acquisition) were strong, up 32.5 percent over the prior year. On a pro forma basis, retail gross customer additions were up 4.3 percent.

 

  •  

Verizon Wireless had 86.6 million customers at the end of the quarter, an increase of 28.8 percent year over year. This includes 13.2 million net total customer additions, after conforming adjustments, from the Alltel acquisition. 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 company and continued to grow its high-quality base, adding 1.3 million net retail customers (excluding customers acquired in the Alltel acquisition) for a total of 84.1 million retail customers.

 

  •  

Verizon Wireless had industry-leading retail post-paid churn of 1.14 percent; total churn was an industry-leading 1.47 percent.

Verizon News Release, page 4

 

  •  

Revenues totaled $15.1 billion, up 29.6 percent year over year and up 9.0 percent on a pro forma basis. Service revenues were $13.1 billion, up 28.9 percent year over year and up 10.5 percent on a pro forma basis, with continued growing demand for data services. Data revenue was $3.6 billion in the first quarter 2009, up 56.2 percent, or 36.8 percent on a pro forma basis, from the first quarter 2008.

 

  •  

Service ARPU (average monthly service revenue per user) decreased 0.3 percent from the similar period a year ago, to $50.74. Total data ARPU grew by 20.8 percent to $14.16. On a pro forma basis, service ARPU increased 1.1 percent, and total data ARPU increased 25.2 percent.

 

  •  

Wireless operating income margin, adjusted for acquisition-related charges and integration costs, was 28.2 percent, up 30 basis points year over year. Adjusted on the same basis, EBITDA (earnings before interest, taxes, depreciation and amortization) margin on service revenues (non-GAAP) was 46.0 percent, an increase of 110 basis points year over year and 60 basis points on a pro forma basis.

Wireline Again Delivers on Growth of FiOS, Strategic Services

Verizon’s Wireline segment reported continued strong growth in the number of new customers of fiber-optic-based FiOS TV and FiOS Internet services, and continued increased revenues from enterprise strategic services. In the first quarter (with prior-period comparisons adjusted to reflect the impact of the spinoff of non-strategic Wireline assets):

 

  •  

Verizon added 299,000 net new FiOS TV customers. The company had 2.2 million FiOS TV customers, an increase of 83.8 percent compared with the first quarter 2008.

Verizon News Release, page 5

 

  •  

FiOS TV sales penetration (sales as a percentage of potential customers) increased to 22.9 percent, compared with 18.7 percent in the first quarter 2008. FiOS TV service was available for sale to 9.7 million premises by end of the quarter.

 

  •  

Verizon added a record 298,000 net new FiOS Internet customers. The company had nearly 2.8 million FiOS Internet customers, an increase of 55.5 percent compared with the first quarter 2008.

 

  •  

FiOS Internet sales penetration increased to 26.8 percent, compared with 23.0 percent in the first quarter 2008. FiOS Internet was available for sale to 10.4 million premises by the end of the quarter.

 

  •  

Broadband and video revenues from consumer customers in wireline mass markets totaled $1.3 billion in the first quarter 2009 — representing year-over-year quarterly growth of 36.3 percent.

 

  •  

Revenue growth from broadband and video services drove consumer ARPU to $69.97 in the first quarter 2009, a 13.7 percent increase compared with the first quarter 2008.

 

  •  

Sales of strategic business services — such as IP (Internet protocol), managed services, Ethernet and security solutions — generated $1.5 billion in revenue in the quarter, up 7.5 percent from the first quarter 2008.

Details of Earnings Adjustments

Adjusted earnings in the first quarter 2009 excluded 5 cents per share in special items: 3 cents for acquisition-related charges and 2 cents for merger integration costs, both primarily in connection with the Alltel acquisition. First-quarter 2008 adjusted earnings excluded 4 cents per share in special items: 3 cents for costs related to the spinoff of wireline access lines and 1 cent in merger integration costs in connection with the acquisition of MCI in 2006.

Verizon News Release, page 6

 

Additional Highlights

Wireless

 

•  

At the end of the first quarter 2009, retail customers (postpaid and prepaid) represented 97 percent of the company’s base.

 

•  

Verizon Wireless continued to lead the industry in cost efficiency. Monthly cash expense per customer (non-GAAP) decreased in the first quarter 2009 to $27.38, from $28.05 in the comparable period in 2008.

 

•  

In the first quarter, data revenues were nearly 28.0 percent of all service revenues, up from 23.0 percent in the first quarter 2008.

 

•  

Verizon Wireless continued to extend the reach of its broadband network, which is the nation’s largest and most reliable 3G (third generation) network, now covering approximately 281 million people.

 

•  

In February, Verizon Wireless selected Ericsson and Alcatel-Lucent as vendors to supply the infrastructure that will enable the company to become the first wireless company to offer commercial LTE-based service in the U.S., starting in 2010. Field trials are under way.

 

•  

In a move that gives consumer and business customers greater value and more control over how they use their plan minutes, the company introduced Friends & Family, which lets customers identify any five or 10 wireless or landline numbers as a calling group. Minutes used when placing or receiving calls to anyone in the Friends & Family calling group will not count against customers’ plan minutes.

 

•  

During the quarter, Verizon Wireless customers sent or received an average of 1.4 billion text messages each day, totaling more than 127 billion text messages in the first quarter. Customers also sent nearly 2.1 billion picture/video messages and completed 48.6 million music and video downloads during the quarter.

Wireline

 

•  

Wireline’s total first-quarter operating revenues were $11.6 billion, a decline of 3.8 percent compared with the first quarter 2008. A 0.7 percent increase in mass market revenues was offset by declines in global enterprise, global wholesale and other services. Wireline total operating expenses were $10.9 billion, a decline of 1.0 percent compared with the first quarter 2008.

 

•  

There were 8.9 million total broadband connections in the first quarter, a net increase of 252,000 over the fourth quarter 2008 and 7.8 percent year over year. This includes a decrease of 46,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers.

Verizon News Release, page 7

 

•  

Over the past year, Verizon has added 1 million FiOS TV customers and expanded the availability of FiOS “triple-play” bundles of voice, Internet and TV services by nearly 50 percent. By the end of the first quarter, FiOS triple-play bundles were available to 9.7 million premises, or about 30 percent of the households in Verizon’s wireline network footprint, compared with 6.5 million premises at the end of the first quarter 2008.

 

•  

Verizon’s FiOS network passed an additional 500,000 premises in the first quarter. As of the end of the quarter, the FiOS network passed 13.2 million premises.

 

•  

Verizon Business, which serves large-business and government customers worldwide, continued its global managed security leadership, introducing a new portfolio of converged solutions that address security and performance challenges; the extension of its suite of in-the-cloud Denial of Service (DOS) Defense services; and a new Risk-Correlation service that helps prioritize current and emerging security threats within an enterprise.

 

•  

Verizon continued to deliver on the promise of voice over IP (VoIP) and unified communications and collaboration, unveiling a new managed service enabling corporate users worldwide to more simply control their unified communications; the ability for organizations to immediately initiate conference calls from some of the most popular instant messaging applications; and enhancements to its VoIP portfolio for European customers.

 

•  

Verizon pushed further into key global markets while increasing the resiliency and reliability of its global IP network, including receiving approval from the government of India to operate two international gateways in Mumbai and Chennai; a cooperative agreement with Telekom Malaysia Berhad to jointly develop a new Malaysian IP node and a new Internet node in Cyberjaya; and deployment of a technologically advanced “mesh architecture” network configuration in Singapore, one of the largest financial centers in Southeast Asia.

 

•  

New agreements with multinational customers included The Agfa-Gevaert Group and Cigna Life Insurance, SA. Verizon Business also signed new contracts with several U.S. government agencies, including a prime contract under the U.S. General Service Administration’s (GSA) Alliant program and the Defense Information Systems Network Transmission Services - Pacific II (DTS-P II) contract award by the Defense Information Systems Agency (DISA). The company also continued to generate sales under GSA’s Networx program.

Notes: 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, 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.

Beginning in 2009, Verizon changed the manner in which its Wireline segment reports operating revenues to align management and product offerings to the continued evolution of the wireline business. Accordingly, there are four marketing units within the Wireline segment: Mass Markets, Global Enterprise, Global Wholesale and Other. Mass Markets includes consumer and small business revenues; Global Enterprise includes all retail revenue from enterprise customers, both domestic and international; Global Wholesale includes all wholesale revenues, both domestic and international; and Other primarily includes operator services, payphone services and revenues from the former MCI mass markets customer base.

Verizon News Release, page 8

 

Also starting in 2009, Verizon’s financial statements were adjusted for the adoption of Statement of Financial Accounting Standards (SFAS) No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin (ARB) No. 51, which requires that net income be reported on a consolidated basis and then attributed to controlling and noncontrolling interests.

Verizon Communications Inc. (NYSE:VZ), headquartered in New York, is a global leader in delivering broadband and other wireless and wireline communications services to mass market, business, government and wholesale customers. Verizon Wireless operates America’s most reliable wireless network, serving more than 86 million customers nationwide. Verizon’s Wireline operations provide converged communications, information and entertainment services over the nation’s most advanced fiber-optic network. Wireline also includes Verizon Business, which delivers innovative and seamless business solutions to customers around the world. A Dow 30 company, Verizon employs a diverse workforce of more than 237,000 and last year generated consolidated operating revenues of more than $97 billion. 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 news release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: 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 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)

 

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		     % Change  

Operating Revenues

    $ 26,591     $ 23,833     11.6  

Operating Expenses

       

Cost of services and sales

      10,308       9,517     8.3  

Selling, general & administrative expense

      7,561       6,401     18.1  

Depreciation and amortization expense

      4,028       3,582     12.5  
                  

Total Operating Expenses

      21,897       19,500     12.3  

Operating Income

      4,694       4,333     8.3  

Equity in earnings of unconsolidated businesses

      128       97     32.0  

Other income and (expense), net

      53       23     *  

Interest expense

      (925 )     (459 )   *  
                  

Income Before Provision for Income Taxes

      3,950       3,994     (1.1 )

Provision for income taxes

      (740 )     (945 )   (21.7 )
                  

Net income

    $ 3,210     $ 3,049     5.3  
                  

Net income attributable to noncontrolling interest

      1,565       1,407     11.2  

Net income attributable to Verizon

      1,645       1,642     0.2  
                  

Net Income

    $ 3,210     $ 3,049     5.3  
                  

Basic Earnings per Common Share

       

Net income attributable to Verizon

    $ .58     $ .57     1.8  

Weighted average number of common shares (in millions)

      2,841       2,863    

Diluted Earnings per Common Share (1)

       

Net income attributable to Verizon

    $ .58     $ .57     1.8  

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

      2,841       2,865    

Footnote:

 

(1) Diluted Earnings per Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represents the only potential dilution.

 

* Not meaningful

Verizon Communications Inc.

Condensed Consolidated Statements of Income Before Special Items

(dollars in millions, except per share amounts)

 

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		     % Change  

Operating Revenues (1)

       

Domestic Wireless

    $ 15,122     $ 11,669     29.6  

Wireline

      11,567       12,026     (3.8 )

Other

      (98 )     (120 )   (18.3 )
                  

Total Operating Revenues

      26,591       23,575     12.8  
                  

Operating Expenses (1)

       

Cost of services and sales

      10,247       9,395     9.1  

Selling, general & administrative expense

      7,421       6,237     19.0  

Depreciation and amortization expense

      3,983       3,522     13.1  
                  

Total Operating Expenses

      21,651       19,154     13.0  
                  

Operating Income

      4,940       4,421     11.7  

Operating income impact of divested operations (1)

      —         44     (100.0 )

Equity in earnings of unconsolidated businesses

      128       97     32.0  

Other income and (expense), net

      55       23     *  

Interest expense

      (717 )     (459 )   56.2  
                  

Income Before Provision for Income Taxes

      4,406       4,126     6.8  

Provision for income taxes

      (917 )     (978 )   (6.2 )
                  

Net Income Before Special Items

    $ 3,489     $ 3,148     10.8  
                  

Net income attributable to noncontrolling interest

      1,698       1,407     20.7  

Net income attributable to Verizon

      1,791       1,741     2.9  
                  

Net Income Before Special Items

    $ 3,489     $ 3,148     10.8  
                  

Basic Adjusted Earnings per Common Share

       

Net income attributable to Verizon

    $ .63     $ .61     3.3  

Weighted average number of common shares (in millions)

      2,841       2,863    

Diluted Adjusted Earnings per Common Share (2)

      

Net income attributable to Verizon

    $ .63     $ .61     3.3  

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

      2,841       2,865    

 

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.

 

* Not meaningful

Verizon Communications Inc.

Condensed Consolidated Statements of Income – Reconciliations

(dollars in millions, except per share amounts)

 

           Special and Non-Recurring Items        

Unaudited

    3 Mos. Ended
3/31/09
Reported
(GAAP)		     Merger
Integration
Costs		     Acquisition
Related Charges		     3 Mos. Ended
3/31/09
Before Special
Items		  

Operating Revenues

    $ 26,591     $ —       $ —       $ 26,591  

Operating Expenses

         

Cost of services and sales

      10,308       (61 )     —         10,247  

Selling, general & administrative expense

      7,561       (52 )     (88 )     7,421  

Depreciation and amortization expense

      4,028       (45 )     —         3,983  
                                

Total Operating Expenses

      21,897       (158 )     (88 )     21,651  
                                

Operating Income

      4,694       158       88       4,940  

Equity in earnings of unconsolidated businesses

      128       —         —         128  

Other income and (expense), net

      53       —         2       55  

Interest expense

      (925 )     —         208       (717 )
                                

Income Before Provision for Income Taxes

      3,950       158       298       4,406  

Provision for income taxes

      (740 )     (64 )     (113 )     (917 )
                                

Net income

    $ 3,210     $ 94     $ 185     $ 3,489  
                                

Net income attributable to noncontrolling interest

      1,565       44       89       1,698  

Net income attributable to Verizon

      1,645       50       96       1,791  
                                

Net income

    $ 3,210     $ 94     $ 185     $ 3,489  
                                

Basic Earnings per Common Share (1)

         

Net income attributable to Verizon

    $ .58     $ .02     $ .03     $ .63  

Diluted Earnings per Common Share (1)

    $ .58     $ .02     $ .03     $ .63  

Net income attributable to Verizon

         

(dollars in millions, except per share amounts)

 

           Special and Non-Recurring Items        

Unaudited

    3 Mos. Ended
3/31/08
Reported
(GAAP)		     Merger
Integration
Costs		     Access Line
Spin-Off
Related
Charges		     Impact of
Divested
Operations		     3 Mos. Ended
3/31/08
Before
Special Items		  

Operating Revenues

    $ 23,833     $ —       $ —       $ (258 )   $ 23,575  

Operating Expenses

           

Cost of services and sales

      9,517       (5 )     (16 )     (101 )     9,395  

Selling, general & administrative expense

      6,401       (24 )     (87 )     (53 )     6,237  

Depreciation and amortization expense

      3,582       —         —         (60 )     3,522  
                                        

Total Operating Expenses

      19,500       (29 )     (103 )     (214 )     19,154  
                                        

Operating Income

      4,333       29       103       (44 )     4,421  

Operating income impact of divested operations

      —         —         —         44       44  

Equity in earnings of unconsolidated businesses

      97       —         —         —         97  

Other income and (expense), net

      23       —         —         —         23  

Interest expense

      (459 )     —         —         —         (459 )
                                        

Income Before Provision for Income Taxes

      3,994       29       103       —         4,126  

Provision for income taxes

      (945 )     (11 )     (22 )     —         (978 )
                                        

Net income

    $ 3,049     $ 18     $ 81     $ —       $ 3,148  
                                        

Net income attributable to noncontrolling interest

      1,407       —         —         —         1,407  

Net income attributable to Verizon

      1,642       18       81       —         1,741  
                                        

Net income

    $ 3,049     $ 18     $ 81     $ —       $ 3,148  
                                        

Basic Earnings per Common Share (1)

           

Net income attributable to Verizon

    $ .57     $ .01     $ .03     $ —       $ .61  

Diluted Earnings per Common Share (1)

           

Net income attributable to Verizon

    $ .57     $ .01     $ .03     $ —       $ .61  

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

    3/31/09     3/31/08  

Debt to debt and Verizon’s equity ratio-end of period (1)

      62.3 %     41.6 %
    

Book value per common share (1)

    $ 14.73     $ 17.64  

Common shares outstanding (in millions)

     

End of period

      2,841       2,851  

Total employees

      237,255       230,228  

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		  

Capital expenditures (including capitalized software)

     

Domestic Wireless

    $ 1,551     $ 1,722  

Wireline

      2,003       2,379  

Other

      153       119  
                

Total

    $ 3,707     $ 4,220  
                

Cash dividends declared per common share

    $ .460     $ .430  

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

    3/31/09     12/31/08     $ Change  

Assets

       

Current assets

       

Cash and cash equivalents

    $ 3,979     $ 9,782     $ (5,803 )

Short-term investments

      372       509       (137 )

Accounts receivable, net

      11,989       11,703       286  

Inventories

      2,195       2,092       103  

Prepaid expenses and other

      3,343       1,989       1,354  
                        

Total current assets

      21,878       26,075       (4,197 )
                        

Plant, property and equipment

      221,500       215,605       5,895  

Less accumulated depreciation

      131,645       129,059       2,586  
                        
     89,855       86,546       3,309  
                        

Investments in unconsolidated businesses

      3,574       3,393       181  

Wireless licenses

      70,873       61,974       8,899  

Goodwill

      22,531       6,035       16,496  

Other intangible assets, net

      7,299       5,199       2,100  

Other investments

      —         4,781       (4,781 )

Other assets

      10,841       8,349       2,492  
                        

Total Assets

    $ 226,851     $ 202,352     $ 24,499  
                        

Liabilities and Equity

       

Current liabilities

       

Debt maturing within one year

    $ 13,459     $ 4,993     $ 8,466  

Accounts payable and accrued liabilities

      14,403       13,814       589  

Other

      7,207       7,099       108  
                        

Total current liabilities

      35,069       25,906       9,163  
                        

Long-term debt

      55,674       46,959       8,715  

Employee benefit obligations

      32,149       32,512       (363 )

Deferred income taxes

      16,998       11,769       5,229  

Other liabilities

      6,407       6,301       106  

Equity

       

Common stock

      297       297       —    

Contributed capital

      40,108       40,291       (183 )

Reinvested earnings

      19,588       19,250       338  

Accumulated other comprehensive loss

      (13,387 )     (13,372 )     (15 )

Common stock in treasury, at cost

      (4,837 )     (4,839 )     2  

Deferred compensation - employee stock ownership plans and other

      82       79       3  

Noncontrolling interest

      38,703       37,199       1,504  
                        

Total equity

      80,554       78,905       1,649  
                        

Total Liabilities and Equity

    $ 226,851     $ 202,352     $ 24,499  
                        

The unaudited consolidated balance sheets are based on preliminary information.

Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

 

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		     $ Change  

Cash Flows From Operating Activities

      

Net income

    $ 3,210     $ 3,049     $ 161  

Adjustments to reconcile net income to net cash provided by operating activities:

       

Depreciation and amortization expense

      4,028       3,582       446  

Employee retirement benefits

      502       407       95  

Deferred income taxes

      604       682       (78 )

Provision for uncollectible accounts

      358       298       60  

Equity in earnings of unconsolidated businesses, net of dividends received

      (117 )     (90 )     (27 )

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

      (393 )     (564 )     171  

Other, net

      (1,772 )     (1,974 )     202  
                        

Net cash provided by operating activities

      6,420       5,390       1,030  
                        

Cash Flows From Investing Activities

       

Capital expenditures (including capitalized software)

      (3,707 )     (4,220 )     513  

Acquisitions of licenses, investments and businesses, net of cash acquired

      (5,118 )     (931 )     (4,187 )

Net change in short-term investments

      80       241       (161 )

Other, net

      (14 )     92       (106 )
                        

Net cash used in investing activities

      (8,759 )     (4,818 )     (3,941 )
                        

Cash Flows From Financing Activities

       

Proceeds from long-term borrowings

      7,052       4,194       2,858  

Repayments of long-term borrowings and capital lease obligations

      (16,865 )     (1,182 )     (15,683 )

Increase in short-term obligations, excluding current maturities

      7,908       2,929       4,979  

Dividends paid

      (1,307 )     (1,237 )     (70 )

Proceeds from sale of common stock

      —         9       (9 )

Purchase of common stock for treasury

      —         (1,001 )     1,001  

Other, net

      (252 )     48       (300 )
                        

Net cash provided by (used in) financing activities

      (3,464 )     3,760       (7,224 )
                        

Increase (decrease) in cash and cash equivalents

      (5,803 )     4,332       (10,135 )

Cash and cash equivalents, beginning of period

      9,782       1,153       8,629  
                        

Cash and cash equivalents, end of period

    $ 3,979     $ 5,485     $ (1,506 )
                        

Verizon Communications Inc.

Verizon Wireless – Selected Financial Results

(dollars in millions)

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		     % Change

Revenues

       

Service revenues

    $ 13,075     $ 10,145     28.9

Equipment and other

      2,047       1,524     34.3
                  

Total Revenues

      15,122       11,669     29.6
                  

Operating Expenses

       

Cost of services and sales

      4,660       3,585     30.0

Selling, general & administrative expense

      4,442       3,529     25.9

Depreciation and amortization expense

      1,749       1,300     34.5
                  

Total Operating Expenses

      10,851       8,414     29.0
                  

Operating Income

    $ 4,271     $ 3,255     31.2

Operating Income Margin

      28.2 %     27.9 %  

 

Verizon Communications Inc.

Verizon Wireless – Selected Operating Statistics

 

    (numbers in thousands)

Unaudited

    3/31/09     3/31/08     % Change

Total Customers

    86,552     67,178     28.8

Retail Customers

    84,095     65,186     29.0

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		     % Change

Total Customer net adds in period (1)

   14,496     1,471     *

Retail Customer net adds in period (2)

   14,074     1,451     *

Total churn rate

    1.47 %   1.19 %  

Retail churn rate

    1.47 %   1.18 %  

Footnotes:

 

(1) Includes acquisitions and adjustments of 13,219 customers in the first quarter of 2009.

 

(2) Includes acquisitions and adjustments of 12,813 customers in the first quarter of 2009.

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.

 

* Not meaningful

Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		     % Change  

Wireline Operating Revenues (1)

       

Mass Markets

    $ 4,924     $ 4,892     0.7  

Global Enterprise

      3,743       3,876     (3.4 )

Global Wholesale Services

      2,389       2,632     (9.2 )

Other

      511       626     (18.4 )
                  

Total Operating Revenues

      11,567       12,026     (3.8 )
                  

Operating Expenses (1)

       

Cost of services and sales

      5,895       6,081     (3.1 )

Selling, general & administrative expense

      2,766       2,696     2.6  

Depreciation and amortization expense

      2,215       2,209     0.3  
                  

Total Operating Expenses

      10,876       10,986     (1.0 )
                  

Operating Income

    $ 691     $ 1,040     (33.6 )

Operating Income Margin

      6.0 %     8.6 %  

 

Verizon Communications Inc.

Wireline – Selected Operating Statistics

 

    (numbers in thousands)  

Unaudited

    3/31/09    3/31/08    % Change  

Switched access lines in service

         

Total Residence (includes Primary residence)

    20,285    23,189    (12.5 )

Primary residence

    17,621    19,669    (10.4 )

Business

    14,685    15,532    (5.5 )

Public

    227    283    (19.8 )
            

Total

    35,197    39,004    (9.8 )
            

Broadband connections

    8,925    8,276    7.8  

FIOS Internet Subscribers

    2,779    1,787    55.5  

FIOS TV Subscribers

    2,217    1,206    83.8  

Footnotes:

 

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

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 - Free Cash Flow

 

    

 

 (dollars in millions)

 

  

 

Unaudited

    3/31/2009     3/31/2008  

Verizon Free Cash Flow

    

Net cash provided by operating activities

    $ 6,420     $ 5,390  

Less: Capital expenditures

      3,707       4,220  
                

Free Cash Flow

    $ 2,713     $ 1,170  
                

 

Other Reconciliations –

Verizon Wireless

     
     (dollars in millions)  

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		  

Segment operating income:

     

Verizon Wireless

    $ 4,271     $ 3,255  

Wireline

      691       1,040  
                

Total segments

      4,962       4,295  

Corporate and other

      (22 )     126  
                

Consolidated operating income

    $ 4,940     $ 4,421  
                

Verizon Wireless EBITDA

     

Operating income

    $ 4,271     $ 3,255  

Add depreciation and amortization expense

      1,749       1,300  
                

Verizon Wireless EBITDA

    $ 6,020     $ 4,555  
                

Verizon Wireless total revenues

    $ 15,122     $ 11,669  
                

Verizon Wireless service revenues

    $ 13,075     $ 10,145  
                

Verizon Wireless operating income margin

      28.2 %     27.9 %
                

Verizon Wireless EBITDA service revenues margin

      46.0 %     44.9 %
                

 

(dollars in millions, except Cash Expense per Customer)

Unaudited

    3 Mos. Ended
3/31/09		     3 Mos. Ended
3/31/08		  

Verizon Wireless Cash Expense Per Customer

     

Domestic Wireless cost of services and sales

    $ 4,660     $ 3,585  

Domestic Wireless selling, general & administrative expense

      4,442       3,529  

Less equipment and other revenue

      (2,047 )     (1,524 )
                

Cash expense

    $ 7,055     $ 5,590  

Cumulative average customer (millions)

      257.70       199.29  

Cash expense per customer

    $ 27.38     $ 28.05  
                

Verizon Communications Inc.

Other Reconciliations –

Pro Forma Combined Selected Financial Results

For the Year Ended December 31, 2008

(dollars in millions)

     Historical    Pro Forma

Unaudited

    Verizon (1)    Adjustments (2)    Combined

Operating Revenues

    $ 97,096    $ 9,156    $ 106,252
                    

Operating Expenses

         

Cost of services and sales

    $ 38,801    $ 2,497    $ 41,298

Selling, general & administrative expense

      25,723      3,210      28,933

Depreciation and amortization expense

      14,505      1,155      15,660
                    

Total Operating Expenses

      79,029      6,862      85,891
                    

Operating Income

    $ 18,067    $ 2,294    $ 20,361

 

For the Year Ended December 31, 2008 by Quarter

(dollars in millions)

     2008 (2)

Unaudited

    1st Quarter    2nd Quarter    3rd Quarter    4th Quarter    Annual

Operating Revenues

    $ 25,752    $ 26,366    $ 27,099    $ 27,035    $ 106,252
                                  

Y/Y % Change

      6.1      5.3      5.8      5.2      5.6

Operating Expenses

               

Cost of services and sales

    $ 10,006    $ 10,068    $ 10,676    $ 10,548    $ 41,298

Selling, general & administrative expense

      6,992      7,265      7,409      7,267      28,933

Depreciation and amortization expense

      3,811      3,872      3,941      4,036      15,660
                                  

Total Operating Expenses

      20,809      21,205      22,026      21,851      85,891
                                  

Operating Income

    $ 4,943    $ 5,161    $ 5,073    $ 5,184    $ 20,361

Y/Y % Change

      15.8      12.1      6.8      10.5      11.2

 

(1) Selected financial results before special items adjusted for the adoption of SFAS No. 160, which requires that net income be reported on a consolidated basis and then attributed to controlling and noncontrolling interests. See www.verizon.com/investor for a reconciliation of these non-GAAP measures.

 

(2) The unaudited pro forma information contains the actual combined operating results of Verizon and Alltel Corporation (Alltel), with the results as of January 1, 2008 adjusted to include the pro forma impact of the elimination of transactions between Verizon and Alltel; conforming adjustments consisting primarily of reclassifications between service revenue and equipment and other revenue, as well as between cost of service and selling, general and administrative expenses to conform with Verizon's classification of these items in its statement of income; the elimination of management fees paid by Alltel to its former owners for ongoing consulting and management advisory services; and the adjustment of amortization of acquired intangible assets and depreciation of fixed assets based on the preliminary purchase price allocation.

Verizon Communications Inc.

Other Reconciliations –

Wireless Pro Forma Selected Financial Results

For the Year Ended December 31, 2008

(dollars in millions)

     Historical    Pro Forma

Unaudited

    Verizon
Wireless		    Adjustments (1)    Combined

Revenues

         

Service revenues

    $   42,635    $   7,082    $   49,717

Equipment and other

      6,697      2,158      8,855
                    

Total Revenues

      49,332      9,240      58,572
                    

Operating Expenses

         

Cost of services and sales

    $ 15,660    $ 2,581    $ 18,241

Selling, general & administrative expense

      14,273      3,210      17,483

Depreciation and amortization expense

      5,405      1,155      6,560
                    

Total Operating Expenses

      35,338      6,946      42,284
                    

Operating Income

    $ 13,994    $ 2,294    $ 16,288

For the Year Ended December 31, 2008 by Quarter

     (dollars in millions)
     2008 (1)

Unaudited

    1st Quarter    2nd Quarter    3rd Quarter    4th Quarter    Annual

Revenues

               

Service revenues

    $   11,828    $   12,242    $   12,750    $   12,897    $   49,717

Equipment and other

      2,043      2,140      2,316      2,356      8,855
                                  

Total Revenues

      13,871      14,382      15,066      15,253      58,572
                                  

Y/Y % Change

      12.9      11.4      12.1      12.3      12.2

Operating Expenses

               

Cost of services and sales

    $ 4,221    $ 4,375    $ 4,832    $ 4,813    $ 18,241

Selling, general & administrative expense

      4,284      4,354      4,528      4,317      17,483

Depreciation and amortization expense

      1,588      1,612      1,655      1,705      6,560
                                  

Total Operating Expenses

      10,093      10,341      11,015      10,835      42,284
                                  

Operating Income

    $ 3,778    $ 4,041    $ 4,051    $ 4,418    $ 16,288

Y/Y % Change

      20.3      16.1      14.3      29.9      20.1

 

(1) The unaudited pro forma information contains the actual combined operating results of Verizon Wireless and Alltel Corporation (Alltel), with the results as of January 1, 2008 adjusted to include the pro forma impact of the elimination of transactions between Verizon Wireless and Alltel; conforming adjustments consisting primarily of reclassifications between service revenue and equipment and other revenue, as well as between cost of service and selling, general and administrative expenses to conform with Verizon Wireless' classification of these items in its statement of income; the elimination of management fees paid by Alltel to its former owners for ongoing consulting and management advisory services; and the adjustment of amortization of acquired intangible assets and depreciation of fixed assets based on the preliminary purchase price allocation.

 

 

 

 

Verizon Communications Inc.

Other Reconciliations – Verizon Wireless Pro Forma

(dollars in millions)

Unaudited

    3 Mos. Ended
3/31/08		  

Segment operating income:

   

Verizon Wireless

    $ 3,778  

Wireline

      1,040  
        

Total segments

      4,818  

Corporate and other

      125  
        

Consolidated operating income

    $ 4,943  
        

Verizon Wireless EBITDA

   

Operating income

    $ 3,778  

Add: depreciation and amortization expense

      1,588  
        

Verizon Wireless EBITDA

    $ 5,366  
        

Verizon Wireless total revenues

    $ 13,871  
        

Verizon Wireless service revenues

    $ 11,828  
        

Verizon Wireless operating income margin

      27.2 %
        

Verizon Wireless EBITDA service revenues margin

      45.4 %