EX-99 2 dex99.htm PRESS RELEASE AND FINANCIAL TABLES, DATED JULY 27, 2009 Press Release and financial tables, dated July 27, 2009

Exhibit 99

NEWS RELEASE

LOGO

 

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

Verizon Reports Revenue Growth and Continued

Improvement in Cash Flow in 2Q

Consumer Sales Remain Strong as Verizon Adds High Volumes of New FiOS

TV and Internet Customers, and More Than 1.1 Million Wireless Customers

2Q 2009 HIGHLIGHTS

Consolidated Earnings

 

•  

52 cents in EPS and 63 cents in adjusted EPS (non-GAAP), compared with 2Q 2008 EPS of 66 cents and 67 cents, respectively.

Wireless

 

•  

87.7 million total customers, up 27.7 percent; 85.2 million retail customers, up 27.8 percent; 1.1 million net customer additions, excluding acquisitions and adjustments, all retail.

 

•  

27.7 percent increase in total revenues; industry-leading retail postpaid churn, 1.01 percent; data revenues up 52.6 percent; 28.8 percent operating income margin and 46.3 percent EBITDA margin on service revenues (non-GAAP).

 

•  

Integration of Alltel operations on schedule.

Wireline

 

•  

300,000 net new FiOS TV customers and a record 303,000 net new FiOS Internet customers, for a total of 2.5 million FiOS TV customers and 3.1 million FiOS Internet customers.

 

•  

13.7 percent increase in consumer ARPU.

 

•  

3.0 percent increase in strategic business services revenues.

Verizon News Release, page 2

 

NEW YORK — Verizon Communications Inc. (NYSE:VZ) reported today that consumer demand for the company’s wireless, broadband and video products in the second quarter 2009 showed resilience despite the U.S. recession, as the company added a high number of new FiOS customers and posted another strong quarter of wireless growth. Verizon continued to generate improved cash flow and, in the midst of a challenging environment for business sales, the company continued to grow consolidated revenues.

Verizon reported diluted earnings per share (EPS) of 52 cents in the second quarter 2009, compared with 66 cents per share in the second quarter 2008. On an adjusted basis (non-GAAP), second-quarter 2009 earnings were 63 cents per share, compared with second-quarter 2008 earnings of 67 cents per share.

Verizon’s total operating revenues grew 11.3 percent to $26.9 billion, compared with the second quarter 2008, including revenues from Alltel Corporation, which was acquired in 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), operating revenue growth was 1.9 percent.

Cash flows from operations totaled $14.1 billion for the first six months of 2009, up 11.9 percent, or $1.5 billion, over the same period last year. With capital expenditures totaling $8.1 billion in the first half of 2009, free cash flow (cash flows from operations minus capital expenditures) totaled $6.0 billion, up $1.8 billion from the first half of 2008.

New Levels of FiOS Success

“Verizon posted continued strong wireless revenue growth and new levels of sales success with FiOS in the second quarter,” said Verizon Chairman and CEO Ivan Seidenberg.

Verizon News Release, page 3

 

“This resilience in consumer demand for our wireless, broadband and video products has again produced overall revenue growth despite cyclical impacts, especially in business markets. Verizon’s continued strong cash flow reflects the exceptional focus and disciplined execution across our business.”

Continued Strong, Profitable Wireless Growth

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

 

  •  

Wireless retail (non-wholesale) gross customer additions were up 26.0 percent over the second quarter of 2008. On a pro forma basis, retail gross customer additions were down slightly, by 0.6 percent, due in part to fewer additions in the business market.

 

  •  

Verizon Wireless had 87.7 million customers at the end of the quarter, an increase of 27.7 percent year over year and 7.9 percent on a pro forma basis. Verizon Wireless is the largest wireless company in the U.S. in terms of total customers and revenues.

 

  •  

The company also has the most retail customers of any U.S. wireless provider and continued to grow its high-quality base, adding a net of 1.1 million retail customers in the quarter, for a total of 85.2 million retail customers.

 

  •  

Verizon Wireless continued to lead the industry in customer loyalty, as measured by total churn and retail post-paid churn. Both improved over the first quarter 2009, to 1.37 percent and 1.01 percent, respectively.

 

  •  

Revenues totaled $15.5 billion, up 27.7 percent year over year and up 7.6 percent on a pro forma basis. Service revenues were $13.3 billion, up 27.2 percent year over year and up 9.0 percent on a pro forma basis, as demand continued to grow for data services. Data revenue grew to $3.9 billion, up 52.6 percent and up 33.2 percent on a pro forma basis.

Verizon News Release, page 4

 

  •  

Service ARPU (average monthly service revenue per user) decreased 0.8 percent year over year to $51.10. On a pro forma basis, service ARPU was up 0.6 percent. Total data ARPU was $14.96, up 18.9 percent year over year and up 22.8 percent on a pro forma basis.

 

  •  

Wireless operating income margin, adjusted for acquisition-related charges and integration costs, was 28.8 percent, up 20 basis points year over year and up 70 basis points on a pro forma basis. Adjusted on the same basis, EBITDA (earnings before interest, taxes, depreciation and amortization) margin on service revenues was 46.3 percent, an increase of 70 basis points year over year and 10 basis points on a pro forma basis.

 

  •  

The integration of Alltel operations remains on schedule, with nearly half of the customers acquired in the Alltel merger converted to the Verizon Wireless billing system as of mid-July.

Wireline Highlighted by Growth in Consumer Markets

Verizon’s Wireline segment reported continued strong growth in the number of new customers of fiber-optic-based FiOS Internet and FiOS TV services, and continued increased revenues from enterprise strategic services. In the second quarter:

 

  •  

Verizon added 303,000 net new FiOS Internet customers, a record number for the second consecutive quarter. By the end of the second quarter, the company had 3.1 million FiOS Internet customers, an increase of 56.1 percent compared with June 30, 2008.

 

  •  

FiOS Internet sales penetration (sales as a percentage of potential customers) increased to 28.1 percent, compared with 23.5 percent at June 30, 2008. FiOS Internet was available for sale to 11.0 million premises by the end of the quarter.

Verizon News Release, page 5

 

  •  

Verizon added 300,000 net new FiOS TV customers. The company had 2.5 million FiOS TV customers by the end of the quarter, an increase of 82.1 percent compared with June 30, 2008.

 

  •  

FiOS TV sales penetration increased to 24.6 percent, compared with 19.7 percent as of June 30, 2008. FiOS TV service was available for sale to 10.3 million premises by the end of the quarter.

 

  •  

Consumer broadband and video revenues in wireline mass markets (which include both consumer and small-business customers) totaled more than $1.3 billion in the second quarter 2009 -- representing growth of 31.5 percent compared with the second quarter 2008. This increase contributed to 2.0 percent revenue growth in consumer markets served by Verizon’s wireline network.

 

  •  

Revenue growth from broadband and video services boosted consumer ARPU to $72.59 in the second quarter 2009, a 13.7 percent increase year over year. FiOS ARPU remained strong at more than $135.

 

  •  

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 3.0 percent from the second quarter 2008.

Details of Earnings Adjustments

Adjusted earnings in the second quarter 2009 excluded 11 cents per share in special items: 9 cents in severance, pension and benefit charges in connection with pension settlements related to previously announced force reductions, and 2 cents for merger integration costs and acquisition-related charges primarily in connection with the Alltel acquisition. Second-quarter

Verizon News Release, page 6

 

2008 adjusted earnings excluded 1 cent in merger integration costs in connection with the acquisition of MCI in 2006.

Additional Highlights

Wireless

 

•  

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

 

•  

Verizon Wireless continued to lead the industry in cost efficiency. Monthly cash expense per customer (non-GAAP) increased slightly in the second quarter 2009 to $27.42, from $27.35 in the comparable period in 2008 on a pro forma basis.

 

•  

In the second quarter, data revenues grew to 29.3 percent of all service revenues, up from 24.0 percent in the second quarter 2008 on a pro forma basis.

 

•  

Verizon Wireless continued to extend the reach of its broadband network, the nation’s largest and most reliable 3G (third generation) network, which now covers approximately 284 million people.

 

•  

Verizon Wireless is on schedule to offer the first commercial LTE-based service in the U.S. in 2010, having released an initial set of technical specifications for devices to run on its LTE 4G (Long Term Evolution, fourth generation) network in April and hosted a Web conference for device developers in May. On Tuesday, July 28, Verizon Wireless will host a Verizon Developer Community conference and webcast to facilitate application development for use on the Verizon Wireless 3G and 4G networks.

 

•  

Verizon Wireless introduced the MiFi 2200 Intelligent Mobile Hotspot and the HP Mini 1151NR Netbook during the second quarter. The MiFi 2200 lets customers create a personal Wi-Fi cloud to share access to the Verizon Wireless high-speed 3G network with up to five Wi-Fi enabled devices, such as notebooks, netbooks and gaming devices. With the HP Mini Netbook, customers can access the Internet, use e-mail and browse the Web in the U.S. and more than 175 destinations worldwide. Earlier this month, Verizon Wireless launched the highly anticipated global BlackBerry Tour, the latest in the company’s portfolio of 3G smartphones.

 

•  

During the second quarter, Verizon Wireless customers sent or received nearly 146 billion text messages. Customers also sent more than 2.5 billion picture/video messages and completed 40 million music and video downloads during the quarter.

Wireline

 

•  

Wireline’s total second-quarter operating revenues were $11.5 billion, a decline of 5.2 percent compared with the second quarter 2008. A 0.2 percent increase in mass market revenues was offset by declines in global enterprise, global wholesale and other services.

Verizon News Release, page 7

 

•  

Broadband connections totaled 9.1 million in the second quarter, a 9.4 percent increase year over year and a net increase of 186,000 from the first quarter 2009. This includes a decrease of 117,000 DSL-based Verizon High Speed Internet connections from the first quarter, which was more than offset by the 303,000 increase in FiOS Internet customers.

 

•  

Over the past year, Verizon has added more than 1.1 million FiOS TV customers and expanded the availability of FiOS “triple-play” bundles of voice, Internet and TV services by approximately 46 percent. By the end of the second quarter, FiOS triple-play bundles were available to 10.3 million premises of the approximately 32 million households in Verizon’s wireline network footprint, compared with 7.0 million premises at the end of the second quarter 2008.

 

•  

Verizon’s FiOS network passed an additional 650,000 premises in the second quarter. As of the end of the quarter, the FiOS network passed 13.8 million premises, or approximately 43 percent of households in Verizon’s wireline network footprint.

 

•  

Verizon Business, which serves large-business and government customers worldwide, enhanced its IP-based strategic services, rolling out a “cloud-based” Computing as a Service solution and managed remote backup and restore services, as well as cloud-based network-management, monitoring and reporting tools. The company also added new global professional consulting services aimed at optimizing application performance and securing corporate data, and unveiled integrated IP service packages designed specifically for mid-market customers.

 

•  

During the quarter, Verizon installed 26 Private IP edge switches for a total of 705 across 59 countries. It also expanded its global mesh networks, completed 1,488 miles of ultra-long-haul network in Europe, expanded remote access services to India and had suppliers begin laying cable for the 15,000-kilometer (9,000-mile) Europe India Gateway submarine cable.

 

•  

New agreements with multinational customers included The Bank of New York Mellon and Siemens Enterprise Communications. Verizon Business also signed new contracts with several U.S. government agencies, including an agreement with the U.S. Department of Health and Human Services valued at up to $245 million.

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 in accordance with the adoption of the accounting standard on noncontrolling interests in consolidated financial statements and, where appropriate, to reflect comparable operating results for the spinoff of the Wireline segment’s non-strategic local exchange and related business assets in Maine, New Hampshire and Vermont in the first quarter of 2008. Unless stated otherwise, segment results shown are adjusted for special items.

Verizon News Release, page 8

 

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 87 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 235,000 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 complete acquisitions and dispositions; our ability to successfully integrate Alltel Corporation into Verizon Wireless’ business and achieve anticipated benefits of the acquisition; and the inability to implement our business strategies.

Verizon Communications Inc.

Condensed Consolidated Statements of Income

(dollars in millions, except per share amounts)

 

Unaudited

   3 Mos. Ended
6/30/09		     3 Mos. Ended
6/30/08		     % Change     6 Mos. Ended
6/30/09		     6 Mos. Ended
6/30/08		     % Change  

Operating Revenues

   $ 26,861      $ 24,124      11.3      $ 53,452      $ 47,957      11.5   

Operating Expenses

            

Cost of services and sales

     10,481        9,466      10.7        20,789        18,983      9.5   

Selling, general & administrative expense

     7,871        6,528      20.6        15,432        12,929      19.4   

Depreciation and amortization expense

     4,091        3,584      14.1        8,119        7,166      13.3   
                                   

Total Operating Expenses

     22,443        19,578      14.6        44,340        39,078      13.5   

Operating Income

     4,418        4,546      (2.8 )      9,112        8,879      2.6   

Equity in earnings of unconsolidated businesses

     128        150      (14.7 )      256        247      3.6   

Other income and (expense), net

     11        92      (88.0 )      64        115      (44.3 ) 

Interest expense

     (787 )      (403 )    95.3        (1,712 )      (862 )    98.6   
                                   

Income Before Provision for Income Taxes

     3,770        4,385      (14.0 )      7,720        8,379      (7.9 ) 

Provision for income taxes

     (610 )      (981 )    (37.8 )      (1,350 )      (1,926 )    (29.9 ) 
                                   

Net income

   $ 3,160      $ 3,404      (7.2 )    $ 6,370      $ 6,453      (1.3 ) 
                                   

Net income attributable to noncontrolling interest

     1,677        1,522      10.2        3,242        2,929      10.7   

Net income attributable to Verizon

     1,483        1,882      (21.2 )      3,128        3,524      (11.2 ) 
                                   

Net Income

   $ 3,160      $ 3,404      (7.2 )    $ 6,370      $ 6,453      (1.3 ) 
                                   

Basic Earnings per Common Share

            

Net income attributable to Verizon

   $ .52      $ .66      (21.2 )    $ 1.10      $ 1.23      (10.6 ) 

Weighted average number of common shares (in millions)

     2,841        2,850          2,841        2,856     

Diluted Earnings per Common Share (1)

            

Net income attributable to Verizon

   $ .52      $ .66      (21.2 )    $ 1.10      $ 1.23      (10.6 ) 

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

     2,841        2,851          2,841        2,858     

Footnotes:

 

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

Verizon Communications Inc.

Condensed Consolidated Statements of Income Before Special Items

(dollars in millions, except per share amounts)

 

Unaudited

   3 Mos. Ended
6/30/09		     3 Mos. Ended
6/30/08		     % Change     6 Mos. Ended
6/30/09		     6 Mos. Ended
6/30/08		     % Change  

Operating Revenues (1)

            

Domestic Wireless

   $ 15,480      $ 12,118      27.7      $ 30,602      $ 23,787      28.7   

Wireline

     11,488        12,113      (5.2 )      23,055        24,139      (4.5 )  

Other

     (107 )      (107 )    *        (205 )      (227 )    (9.7 )  
                                   

Total Operating Revenues

     26,861        24,124      11.3        53,452        47,699      12.1   
                                   

Operating Expenses (1)

            

Cost of services and sales

     10,457        9,458      10.6        20,704        18,853      9.8   

Selling, general & administrative expense

     7,389        6,500      13.7        14,810        12,737      16.3   

Depreciation and amortization expense

     4,000        3,584      11.6        7,983        7,106      12.3   
                                   

Total Operating Expenses

     21,846        19,542      11.8        43,497        38,696      12.4   
                                   

Operating Income

     5,015        4,582      9.5        9,955        9,003      10.6   

Operating income impact of divested operations (1)

     —          —        —          —          44      (100.0 ) 

Equity in earnings of unconsolidated businesses

     128        150      (14.7 )      256        247      3.6   

Other income and (expense), net

     11        92      (88.0 )      66        115      (42.6 ) 

Interest expense

     (740 )      (403 )    83.6        (1,457 )      (862 )    69.0   
                                   

Income Before Provision for Income Taxes

     4,414        4,421      (0.2 )      8,820        8,547      3.2   

Provision for income taxes

     (905 )      (995 )    (9.0 )      (1,822 )      (1,973 )    (7.7 )  
                                   

Net Income Before Special Items

   $ 3,509      $ 3,426      2.4      $ 6,998      $ 6,574      6.4   
                                   

Net income attributable to noncontrolling interest

     1,713        1,522      12.5        3,411        2,929      16.5   

Net income attributable to Verizon

     1,796        1,904      (5.7 )      3,587        3,645      (1.6 ) 
                                   

Net Income Before Special Items

   $ 3,509      $ 3,426      2.4      $ 6,998      $ 6,574      6.4   
                                   

Basic Adjusted Earnings per Common Share

            

Net income attributable to Verizon

   $ .63      $ .67      (6.0 )    $ 1.26      $ 1.28      (1.6 ) 

Weighted average number of common shares (in millions)

     2,841        2,850          2,841        2,856     

Diluted Adjusted Earnings per Common Share (2)

            

Net income attributable to Verizon

   $ .63      $ .67      (6.0 )    $ 1.26      $ 1.28      (1.6 )  

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

     2,841        2,851          2,841        2,858     

 

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
6/30/09
Reported
(GAAP)		     Merger
Integration
Costs		     Acquisition
Related Charges		     Severance,
Pension and
Benefit Charges		     3 Mos. Ended
6/30/09
Before Special
Items		  

Operating Revenues

   $ 26,861      $ —        $ —        $ —        $ 26,861   

Operating Expenses

          

Cost of services and sales

     10,481        (24 )      —          —          10,457   

Selling, general & administrative expense

     7,871        (66 )      —          (416 )      7,389   

Depreciation and amortization expense

     4,091        (91 )      —          —          4,000   
                                       

Total Operating Expenses

     22,443        (181 )      —          (416 )      21,846   
                                       

Operating Income

     4,418        181        —          416        5,015   

Equity in earnings of unconsolidated businesses

     128        —          —          —          128   

Other income and (expense), net

     11        —          —          —          11   

Interest expense

     (787 )      —          47        —          (740 ) 
                                       

Income Before Provision for Income Taxes

     3,770        181        47        416        4,414   

Provision for income taxes

     (610 )      (91 )      (41 )      (163 )      (905 ) 
                                       

Net income

   $ 3,160      $ 90      $ 6      $ 253      $ 3,509   
                                       

Net income attributable to noncontrolling interest

     1,677        38        (2 )      —          1,713   

Net income attributable to Verizon

     1,483        52        8        253        1,796   
                                       

Net income

   $ 3,160      $ 90      $ 6      $ 253      $ 3,509   
                                       
Basic Earnings per Common Share (1)          
Net income attributable to Verizon   $ .52      $ .02      $ —        $ .09      $ .63   
Diluted Earnings per Common Share (1)          
Net income attributable to Verizon   $ .52      $ .02      $ —        $ .09      $ .63   

(dollars in millions, except per share amounts)

 

           Special and
Non- Recurring
Items		        

Unaudited

    3 Mos. Ended
6/30/08
Reported
(GAAP)		     Merger
Integration
Costs		     3 Mos. Ended
6/30/08
Before
Special Items		  

Operating Revenues

    $ 24,124      $ —        $ 24,124   

Operating Expenses

       

Cost of services and sales

      9,466        (8 )      9,458   

Selling, general & administrative expense

      6,528        (28 )      6,500   

Depreciation and amortization expense

      3,584        —          3,584   
                        

Total Operating Expenses

      19,578        (36 )      19,542   
                        

Operating Income

      4,546        36        4,582   

Equity in earnings of unconsolidated businesses

      150        —          150   

Other income and (expense), net

      92        —          92   

Interest expense

      (403 )      —          (403 ) 
                        

Income Before Provision for Income Taxes

      4,385        36        4,421   

Provision for income taxes

      (981 )      (14 )      (995 ) 
                        

Net income

    $ 3,404      $ 22      $ 3,426   
                        

Net income attributable to noncontrolling interest

      1,522        —          1,522   

Net income attributable to Verizon

      1,882        22        1,904   
                        

Net income

    $ 3,404      $ 22      $ 3,426   
                        

Basic Earnings per Common Share (1)

       

Net income attributable to Verizon

    $ .66      $ .01      $ .67   

Diluted Earnings per Common Share (1)

       

Net income attributable to Verizon

    $ .66      $ .01      $ .67   

Footnote:

 

(1) EPS totals may not add due to rounding.

Note: See www.verizon.com/investor for a reconciliation of other non-GAAP measures.

Verizon Communications Inc.

Condensed Consolidated Statements of Income – Reconciliations

(dollars in millions, except per share amounts)

 

          Special and Non-Recurring Items        

Unaudited

   6 Mos. Ended
6/30/09
Reported
(GAAP)		     Merger
Integration
Costs		     Acquisition
Related Charges		     Severance,
Pension and
Benefit
Charges		     6 Mos. Ended
6/30/09
Before Special
Items		  

Operating Revenues

   $ 53,452      $ —        $ —        $ —        $ 53,452   

Operating Expenses

          

Cost of services and sales

     20,789        (85 )      —          —          20,704   

Selling, general & administrative expense

     15,432        (118 )      (88 )      (416 )      14,810   

Depreciation and amortization expense

     8,119        (136 )      —          —          7,983   
                                       

Total Operating Expenses

     44,340        (339 )      (88 )      (416 )      43,497   
                                       

Operating Income

     9,112        339        88        416        9,955   

Equity in earnings of unconsolidated businesses

     256        —          —          —          256   

Other income and (expense), net

     64        —          2        —          66   

Interest expense

     (1,712 )      —          255        —          (1,457 ) 
                                       

Income Before Provision for Income Taxes

     7,720        339        345        416        8,820   

Provision for income taxes

     (1,350 )      (155 )      (154 )      (163 )      (1,822 ) 
                                       

Net income

   $ 6,370      $ 184      $ 191      $ 253      $ 6,998   
                                       

Net income attributable to noncontrolling interest

     3,242        82        87        —          3,411   

Net income attributable to Verizon

     3,128        102        104        253        3,587   
                                       

Net income

   $ 6,370      $ 184      $ 191      $ 253      $ 6,998   
                                       
Basic Earnings per Common Share (1)   $ 1.10      $ .03      $ .04      $ .09      $ 1.26   
Net income attributable to Verizon          
Diluted Earnings per Common Share (1)          
Net income attributable to Verizon   $ 1.10      $ .03      $ .04      $ .09      $ 1.26   

(dollars in millions, except per share amounts)

 

           Special and Non-Recurring Items        

Unaudited

    6 Mos. Ended
6/30/08
Reported
(GAAP)		     Merger
Integration
Costs		     Access Line
Spin-Off
Related
Charges		     Impact of
Divested
Operations		     6 Mos. Ended
6/30/08
Before
Special Items		  

Operating Revenues

    $ 47,957      $ —        $ —        $ (258 )    $ 47,699   

Operating Expenses

           

Cost of services and sales

      18,983        (13 )      (16 )      (101 )      18,853   

Selling, general & administrative expense

      12,929        (52 )      (87 )      (53 )      12,737   

Depreciation and amortization expense

      7,166        —          —          (60 )      7,106   
                                        

Total Operating Expenses

      39,078        (65 )      (103 )      (214 )      38,696   
                                        

Operating Income

      8,879        65        103        (44 )      9,003   

Operating income impact of divested operations

      —          —          —          44        44   

Equity in earnings of unconsolidated businesses

      247        —          —          —          247   

Other income and (expense), net

      115        —          —          —          115   

Interest expense

      (862 )      —          —          —          (862 ) 
                                        

Income Before Provision for Income Taxes

      8,379        65        103        —          8,547   

Provision for income taxes

      (1,926 )      (25 )      (22 )      —          (1,973 ) 
                                        

Net income

    $ 6,453      $ 40      $ 81      $ —        $ 6,574   
                                        

Net income attributable to noncontrolling interest

      2,929        —          —          —          2,929   

Net income attributable to Verizon

      3,524        40        81        —          3,645   
                                        

Net income

    $ 6,453      $ 40      $ 81      $ —        $ 6,574   
                                        

Basic Earnings per Common Share (1)

           

Net income attributable to Verizon

    $ 1.23      $ .01      $ .03      $ —        $ 1.28   

Diluted Earnings per Common Share (1)

           

Net income attributable to Verizon

    $ 1.23      $ .01      $ .03      $ —        $ 1.28   

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

   6/30/09     6/30/08  

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

         60.3 %      45.9 %  
       

Book value per common share (1)

       $ 15.02      $ 17.87   

Common shares outstanding (in millions)

        

End of period

         2,841        2,848   

Total employees

        235,326        228,633   

Unaudited

   3 Mos. Ended
6/30/09		   3 Mos. Ended
6/30/08		   6 Mos. Ended
6/30/09		     6 Mos. Ended
6/30/08		  

Capital expenditures (including capitalized software)

        

Domestic Wireless

   $ 1,783   $ 1,528   $ 3,334      $ 3,250   

Wireline

     2,338     2,456     4,341        4,835   

Other

     266     193     419        312   
                           

Total

   $ 4,387   $ 4,177   $ 8,094      $ 8,397   
                           

Cash dividends declared per common share

   $ .46   $ .43   $ .92      $ .86   

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

    6/30/09     12/31/08     $ Change  

Assets

       

Current assets

       

Cash and cash equivalents

    $ 820      $ 9,782      $ (8,962 ) 

Short-term investments

      360        509        (149 )  

Accounts receivable, net

      12,170        11,703        467   

Inventories

      2,775        2,092        683   

Prepaid expenses and other

      5,339        1,989        3,350   
                        

Total current assets

      21,464        26,075        (4,611 )  
                        

Plant, property and equipment

      224,150        215,605        8,545   

Less accumulated depreciation

      133,848        129,059        4,789   
                        
     90,302        86,546        3,756   
                        

Investments in unconsolidated businesses

      3,513        3,393        120   

Wireless licenses

      71,708        61,974        9,734   

Goodwill

      22,189        6,035        16,154   

Other intangible assets, net

      7,232        5,199        2,033   

Other investments

      —          4,781        (4,781 )  

Other assets

      8,591        8,349        242   
                        

Total Assets

    $ 224,999      $ 202,352      $ 22,647   
                        

Liabilities and Equity

       

Current liabilities

       

Debt maturing within one year

    $ 5,440      $ 4,993      $ 447   

Accounts payable and accrued liabilities

      14,685        13,814        871   

Other

      6,243        7,099        (856 )  
                        

Total current liabilities

      26,368        25,906        462   
                        

Long-term debt

      59,469        46,959        12,510   

Employee benefit obligations

      32,162        32,512        (350 )  

Deferred income taxes

      17,737        11,769        5,968   

Other liabilities

      6,442        6,301        141   

Equity

       

Common stock

      297        297        —     

Contributed capital

      40,102        40,291        (189 )  

Reinvested earnings

      19,765        19,250        515   

Accumulated other comprehensive loss

      (12,742 )      (13,372 )      630   

Common stock in treasury, at cost

      (4,836 )      (4,839 )      3   

Deferred compensation - employee stock ownership plans and other

      86        79        7   

Noncontrolling interest

      40,149        37,199        2,950   
                        

Total equity

      82,821        78,905        3,916   
                        

Total Liabilities and Equity

    $ 224,999      $ 202,352      $ 22,647   
                        

The unaudited consolidated balance sheets are based on preliminary information.

Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

 

Unaudited

   

6 Mos. Ended
6/30/09

    

6 Mos. Ended
6/30/08

    

$ Change

  

Cash Flows From Operating Activities

      

Net income

    $ 6,370      $ 6,453      $ (83 ) 

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

       

Depreciation and amortization expense

      8,119        7,166        953   

Employee retirement benefits

      1,420        808        612   

Deferred income taxes

      1,296        1,774        (478 ) 

Provision for uncollectible accounts

      643        494        149   

Equity in earnings of unconsolidated businesses, net of dividends received

      173        507        (334 ) 

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

      (2,070 )      (2,309 )      239   

Other, net

      (1,814 )      (2,258 )      444   
                        

Net cash provided by operating activities

      14,137        12,635        1,502   
                        

Cash Flows From Investing Activities

       

Capital expenditures (including capitalized software)

      (8,094 )      (8,397 )      303   

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

      (5,367 )      (14,493 )      9,126   

Net change in short-term investments

      119        736        (617 ) 

Other, net

      64        (114 )      178   
                        

Net cash used in investing activities

      (13,278 )      (22,268 )      8,990   
                        

Cash Flows From Financing Activities

       

Proceeds from long-term borrowings

      12,040        8,144        3,896   

Repayments of long-term borrowings and capital lease obligations

      (18,173 )      (1,849 )      (16,324 ) 

Increase (decrease) in short-term obligations, excluding current maturities

      (103 )      6,929        (7,032 ) 

Dividends paid

      (2,614 )      (2,464 )      (150 ) 

Proceeds from sale of common stock

      —          15        (15 ) 

Purchase of common stock for treasury

      —          (1,117 )      1,117   

Other, net

      (971 )      (596 )      (375 ) 
                        

Net cash provided by (used in) financing activities

      (9,821 )      9,062        (18,883 ) 
                        

Decrease in cash and cash equivalents

      (8,962 )      (571 )      (8,391 ) 

Cash and cash equivalents, beginning of period

      9,782        1,153        8,629   
                        

Cash and cash equivalents, end of period

    $ 820      $ 582      $ 238   
                        

Verizon Communications Inc.

Verizon Wireless – Selected Financial Results

(dollars in millions)

 

Unaudited

   3 Mos. Ended
6/30/09		   3 Mos. Ended
6/30/08		   % Change   6 Mos. Ended
6/30/09		   6 Mos. Ended
6/30/08		   % Change

Revenues

            

Service revenues

   $ 13,349   $ 10,492   27.2   $ 26,424   $ 20,637   28.0

Equipment and other

     2,131     1,626   31.1     4,178     3,150   32.6
                           

Total Revenues

     15,480     12,118   27.7     30,602     23,787   28.7
                           

Operating Expenses

            

Cost of services and sales

     4,825     3,744   28.9     9,485     7,329   29.4

Selling, general & administrative expense

     4,469     3,588   24.6     8,911     7,117   25.2

Depreciation and amortization expense

     1,727     1,323   30.5     3,476     2,623   32.5
                           

Total Operating Expenses

     11,021     8,655   27.3     21,872     17,069   28.1
                           

Operating Income

   $ 4,459   $ 3,463   28.8   $ 8,730   $ 6,718   29.9

Operating Income Margin

     28.8%     28.6%       28.5%     28.2%  

 

Verizon Communications Inc.

Verizon Wireless – Selected Operating Statistics

(numbers in thousands)

 

Unaudited

     6/30/09    6/30/08    % Change

Total Customers

            87,694    68,681    27.7

Retail Customers

            85,240    66,680    27.8

Unaudited

    3 Mos. Ended
6/30/09		    3 Mos. Ended
6/30/08		    % Change     6 Mos. Ended
6/30/09		    6 Mos. Ended
6/30/08		    % Change

Total Customer net adds in period (1)

    1,142    1,503    (24.0 )    15,638    2,974    *

Retail Customer net adds in period (2)

    1,145    1,494    (23.4 )    15,219    2,945    *

Total churn rate

    1.37%    1.12%      1.42%    1.16%   

Retail churn rate

    1.36%    1.11%      1.41%    1.15%   

Footnotes:

 

(1) Includes acquisitions and adjustments of 46 customers in second quarter of 2008; and 13,219 customers in the first quarter of 2009.

 

(2) Includes acquisitions and adjustments of 46 customers in second quarter of 2008; and 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 maker excludes these items in assessing business unit performance, primarily due to their non-operational nature.

Intersegment transactions have not been eliminated.

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

 

* Not meaningful

Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)

 

Unaudited

   

3 Mos. Ended
6/30/09

   

3 Mos. Ended
6/30/08

   

% Change

    

6 Mos. Ended
6/30/09

   

6 Mos. Ended
6/30/08

   

% Change

  

Wireline Operating Revenues (1)

                

Mass Markets

    $ 4,959    $ 4,947    0.2      $ 9,883    $ 9,839    0.4   

Global Enterprise

      3,704      3,972    (6.7 )      7,447      7,848    (5.1 ) 

Global Wholesale

      2,409      2,605    (7.5 )      4,798      5,237    (8.4 ) 

Other

      416      589    (29.4 )      927      1,215    (23.7 ) 
                                

Total Operating Revenues

      11,488      12,113    (5.2 )      23,055      24,139    (4.5 ) 
                                

Operating Expenses (1)

                

Cost of services and sales

      5,947      5,997    (0.8 )      11,842      12,078    (2.0 ) 

Selling, general & administrative expense

      2,726      2,808    (2.9 )      5,492      5,504    (0.2 ) 

Depreciation and amortization expense

      2,260      2,245    0.7        4,475      4,454    0.5   
                                

Total Operating Expenses

      10,933      11,050    (1.1 )      21,809      22,036    (1.0 ) 
                                

Operating Income

    $ 555    $ 1,063    (47.8 )    $ 1,246    $ 2,103    (40.8 ) 

Operating Income Margin

      4.8%      8.8%        5.4%      8.7%   

 

Verizon Communications Inc.

Wireline – Selected Operating Statistics

     (numbers in thousands)  

Unaudited

   

6/30/09

   

6/30/08

  

% Change

  

Switched access lines in service

        

Total Residence (includes Primary residence)

    19,655    22,416   (12.3 ) 

Primary residence

    17,165    19,113   (10.2 ) 

Business

    14,444    15,395   (6.2 ) 

Public

    214    273   (21.6 ) 
           

Total

    34,313    38,084   (9.9 ) 
           

Broadband connections

    9,111    8,330   9.4   

FIOS Internet Subscribers

    3,082    1,974   56.1   

FIOS TV Subscribers

    2,517    1,382   82.1   

Footnotes:

The segment financial results above are adjusted to exclude the effects of special and non-recurring items. The company's chief decision maker excludes these items in assessing business unit performance, primarily due to their non-operational nature.

Intersegment transactions have not been eliminated.

 

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

Verizon Communications Inc.

Other Reconciliations – Free Cash Flow

 

     (dollars in millions)     

Unaudited

    6 Mos. Ended
6/30/09		     6 Mos. Ended
6/30/08		        

Verizon Free Cash Flow

       

Net cash provided by operating activities

    $ 14,137      $ 12,635     

Less: Capital expenditures

      8,094        8,397     
                  

Free Cash Flow

    $ 6,043      $ 4,238     
                  
Other Reconciliations – Verizon Wireless     
     (dollars in millions)   

Unaudited

    3 Mos. Ended
6/30/09		     3 Mos. Ended
6/30/08 		     3 Mos. Ended
6/30/08 (1)		  

Segment operating income:

       

Verizon Wireless

    $ 4,459      $ 3,463      $ 4,041   

Wireline

      555        1,063        1,063   
                        

Total segments

      5,014        4,526        5,104   

Corporate and other

      1        56        57   
                        

Consolidated operating income

    $ 5,015      $ 4,582      $ 5,161   
                        

Verizon Wireless EBITDA

       

Operating income

    $ 4,459      $ 3,463      $ 4,041   

Add depreciation and amortization expense

      1,727        1,323        1,612   
                        

Verizon Wireless EBITDA

    $ 6,186      $ 4,786      $ 5,653   
                        

Verizon Wireless total revenues

    $ 15,480      $ 12,118      $ 14,382   
                        

Verizon Wireless service revenues

    $ 13,349      $ 10,492      $ 12,242   
                        

Verizon Wireless operating income margin

      28.8 %      28.6 %      28.1 % 
                        

Verizon Wireless EBITDA service revenues margin

      46.3 %      45.6 %      46.2 % 
                        
(dollars in millions, except Cash Expense per Customer)     

Unaudited

    3 Mos. Ended
6/30/09		     3 Mos. Ended
6/30/08 (1)		        

Verizon Wireless Cash Expense Per Customer

       

Domestic Wireless cost of services and sales

    $ 4,825      $ 4,375     

Domestic Wireless selling, general & administrative expense

      4,469        4,354     

Less: Equipment and other revenue

      2,131        2,140     
                  

Cash expense

    $ 7,163      $ 6,589     

Cumulative average customer (millions)

      261.24        240.90     

Cash expense per customer

    $ 27.42      $ 27.35     
                  

 

(1) 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 –

Combined Pro Forma 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. 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.