Verizon Reports Strong Wireless Customer and Data Growth in 4Q; Delivers Higher Operating Cash Flows

Results Include 4Q Costs for Steps to Transform Wireline, Strengthen Business

Jan 26, 2010, 07:25 ET from Verizon

NEW YORK, Jan. 26 /PRNewswire/ --

4Q 2009 HIGHLIGHTS

Consolidated

  • Continued cash flow growth in 4Q 2009: $31.6 billion in cash flow from operations in 2009, up $4.0 billion, or 14.5 percent, from 2008.
  • A loss of 23 cents per share and adjusted earnings (non-GAAP) of 54 cents per share, compared with 4Q 2008 EPS of 43 cents and 61 cents, respectively.

Wireless

  • 2.2 million total net customer additions, excluding acquisitions and adjustments, in 4Q 2009; 1.2 million retail net customer additions in quarter; 87.5 million retail customers, up 25 percent from year-end 2008; 91.2 million total customers, up 26.6 percent from year-end 2008.
  • 22.5 percent increase in total revenues from 4Q 2008; continued low retail postpaid churn, 1.06 percent; data revenues up 45.9 percent; 27.3 percent operating income margin and 45.0 percent EBITDA margin on service revenues (non-GAAP).

Wireline

  • 153,000 each of net FiOS Internet and FiOS TV customer additions in 4Q 2009; 3.4 million total FiOS Internet customers and 2.9 million total FiOS TV customers.
  • 12.6 percent increase in consumer ARPU from 4Q 2008; total broadband and video revenues of $1.7 billion, up 25.5 percent from 4Q 2008.

Verizon Communications Inc. (NYSE: VZ) today reported continued strong cash flow in the fourth quarter 2009, fueled by quarterly growth in strategic areas. Verizon Wireless added a net of 2.2 million total customers, including 1.2 million retail customers, and reported increased data revenue.  Verizon's wireline operations posted customer and revenue gains in FiOS broadband services and increased sales of strategic business services.

In the fourth quarter, Verizon recorded a loss of 23 cents in diluted earnings per share (EPS), compared with EPS of 43 cents per share in the fourth quarter 2008.  Contributing to the loss was a special item of $3.0 billion in pre-tax costs related to workforce reductions.  On an adjusted basis (non-GAAP), fourth-quarter 2009 EPS was 54 cents, compared with 61 cents in the fourth quarter 2008.

On an annual basis, Verizon reported $1.29 in 2009 EPS, compared with $2.26 in 2008.  On an adjusted basis, full-year 2009 EPS was $2.40, compared with 2008 EPS of $2.54.

Positioned to Deliver Long-Term Growth

"In last year's turbulent economy, we took significant steps to strengthen Verizon going forward," said Chairman and CEO Ivan Seidenberg.  "We focused on expanding wireless data and set the stage to deploy a nationwide 4G network later this year.  We also expanded the scale of FiOS and our global IP network.  We saw growth in all these areas in 2009, and we expect continued growth in 2010 and beyond, with a goal of delivering long-term shareowner value."

In the fourth quarter, Verizon continued streamlining its wireline operations.  The company also incurred costs in preparation for the spinoff of wireline access lines to Frontier Communications, a transaction that Seidenberg said was on track to close in the second quarter of 2010.

Seidenberg added:  "Our fourth-quarter earnings reflect costs to re-size and simplify our wireline business.  This transformation is realigning our wireline cost structure, improving productivity, and focusing resources on sales of FiOS and strategic business services.  Verizon Wireless also underwent a successful transformation in 2009.  Our customer base moved more toward data-centric devices and services, and we are successfully integrating Alltel operations and capturing merger synergies."

Revenue and Cash Flow Growth

In the fourth quarter 2009, Verizon's total operating revenues grew 9.9 percent to $27.1 billion, compared with the fourth quarter 2008.  This includes revenues from Alltel, which Verizon acquired in January 2009.  On a pro forma basis (consolidating the operating results of Verizon and the former Alltel as though the acquisition had occurred on Jan. 1, 2008), fourth-quarter 2009 operating revenue growth was 0.2 percent, compared with the fourth quarter 2008.

For 2009, annual operating revenues totaled $107.8 billion, an increase of 10.7 percent from 2008 on a reported basis and 1.5 percent on a pro forma basis.

Cash flow from operations totaled $31.6 billion in 2009, up 14.5 percent, or $4.0 billion, from 2008.  Free cash flow (non-GAAP; cash flow from operations less capital expenditures) totaled $14.5 billion in 2009, up $4.2 billion from 2008.  Verizon's capital expenditures were $17.0 billion in 2009, compared with $17.2 billion in 2008.

Details of 4Q Adjustments

Adjusted earnings in the fourth quarter 2009 excluded 77 cents per share in special items:  66 cents for severance, pension and benefit charges in connection with workforce reductions in the fourth quarter and continuing into 2010; 2 cents for merger integration and acquisition costs primarily in connection with the Alltel transaction; and 9 cents for other charges, including costs related to the pending spinoff of non-strategic wireline access lines.

Adjusted earnings in the fourth quarter 2008 excluded 15 cents per share for severance, pension and benefit related charges; 1 cent per share for merger integration costs; and 1 cent per share for an other-than-temporary decline in investment values.

Verizon announced today that, in future quarterly earnings reports, the company will no longer adjust reported results for non-operational or special items.  However, the company will continue to provide information to help investors understand reported results on a comparable basis with historical periods.

Wireless Customer Growth and Profitability Continue Strong

Verizon Wireless delivered sustained high margins and solid customer growth.  In the fourth quarter 2009:

  • Verizon Wireless continued to grow its high-quality retail (non-wholesale) customer base.  The company added 1.2 million retail net customers in the quarter (almost all postpaid) and 4.6 million retail net customers in the full year, both excluding acquisitions and adjustments.
  • Verizon Wireless has the most retail customers of any U.S. wireless provider.  The company had 87.5 million retail customers at the end of the fourth quarter, an increase of 25.0 percent year over year and 5.7 percent on a pro forma basis.
  • The company also added 1.0 million reseller customers in the fourth quarter, bringing its total number of customers at the end of the quarter to 91.2 million, an increase of 26.6 percent year over year and 7.0 percent on a pro forma basis.
  • Retail postpaid churn and total retail churn remained low, at 1.06 percent and 1.44 percent, respectively.  Total churn was 1.42 percent.
  • Retail service revenues in the quarter totaled $13.2 billion, up 22.5 percent year over year and 5.2 percent on a pro forma basis.  Service revenues in the fourth quarter were $13.5 billion, up 22.5 percent and 5.0 percent on a pro forma basis.  Total revenues were $15.7 billion, up 22.5 percent year over year and 3.1 percent on a pro forma basis.  Full-year revenues were $62.1 billion, up 25.9 percent and 6.1 percent on a pro forma basis.
  • Retail service ARPU (average monthly service revenue per user) decreased 2.2 percent year over year and 0.6 percent on a pro forma basis to $50.75.  Retail data ARPU increased to $16.24, up 16.1 percent year over year and 20.5 percent on a pro forma basis.
  • Wireless operating income margin, adjusted for merger integration and acquisition costs, was 27.3 percent, a decrease of 2.4 percentage points year over year and 1.7 percentage points on a pro forma basis.  Adjusted on the same basis, EBITDA (earnings before interest, taxes, depreciation and amortization) margin on service revenues (non-GAAP) was 45.0 percent, a decrease of 2.2 percentage points year over year and 2.5 percentage points on a pro forma basis.

Continued Growth in Consumer Broadband and Video

In wireline, Verizon posted another consecutive quarter of gains in the number of customers using fiber-optic-based FiOS Internet and FiOS TV services.  In consumer markets served by Verizon's wireline network, increased revenues from broadband and video services again helped produce overall revenue growth, as well as ARPU growth.  In the fourth quarter:

  • Verizon added 153,000 net new FiOS Internet customers.  The company served 3.4 million FiOS Internet customers by the end of the quarter, a 38.4 percent year-over-year increase.
  • FiOS Internet penetration (customers as a percentage of potential customers) was 28.1 percent by the end of the fourth quarter, with the product available for sale to 12.2 million premises.  This compares with a 24.9 percent penetration and 10.0 million premises open for sale at the end of the fourth quarter 2008.
  • Verizon also added 153,000 net new FiOS TV customers and served 2.9 million FiOS TV customers by the end of the quarter, a 49.2 percent year-over-year increase.
  • FiOS TV penetration was 24.5 percent by the end of the fourth quarter, with the product available for sale to 11.7 million premises.  This compares with a 20.8 percent penetration and 9.2 million premises open for sale at the end of the fourth quarter 2008.
  • Total broadband and video revenues were $1.7 billion, a 25.5 percent increase compared with the fourth quarter 2008.  This contributed to an overall 1.2 percent revenue growth in consumer markets served by Verizon's wireline network.
  • Revenue growth from broadband and video services boosted consumer ARPU to $77.06 in the fourth quarter 2009, a 12.6 percent year-over-year increase.  FiOS ARPU is more than $140, driven primarily by triple-play bundles of voice, Internet and TV services.
  • Triple-play customers increased from 1.6 million in fourth-quarter 2008 to 2.4 million in fourth-quarter 2009, a 47 percent increase.
  • Worldwide sales of strategic business services -- such as IP (Internet protocol), managed services, Ethernet and security solutions -- generated $1.6 billion in revenue in the quarter, up 6.0 percent compared with the fourth quarter 2008.  Revenue from IP data services alone increased 8.6 percent year over year.

2010 Expectations

Regarding 2010, Verizon announced the following consolidated expectations:

  • Capital spending targeted in the range of $16.8 billion to $17.2 billion.
  • Incremental pressure of approximately 4 cents to 6 cents on EPS due to non-cash pension and retiree benefit costs.
  • An annual effective tax rate attributable to Verizon in the range of 33 percent to 35 percent.
  • A year-end net debt-to-EBITDA ratio (non-GAAP, total debt less cash and cash equivalents, divided by EBITDA on a comparable basis to 2009) of 1.4 to 1.5.

Additional Highlights

Wireless

  • At the end of 2009, retail customers (postpaid and prepaid) represented 96 percent of the company's base.  Verizon Wireless is the nation's largest wireless provider based on total customers.
  • Verizon Wireless continued to lead the industry in cost efficiency.  Monthly cash expense per customer (non-GAAP) increased in the fourth quarter 2009 to $27.62 from $26.77 in the fourth quarter 2008 on a pro forma basis.  For the full year, cash expense per customer was $27.49, unchanged from 2008 on a pro forma basis.
  • Data revenues of $16.0 billion for the full year were up 31 percent over 2008 on a pro forma basis.  In the fourth quarter, data revenues were 31.9 percent of all service revenues, up from 26.5 percent in the fourth quarter 2008 on a pro forma basis.
  • Verizon Wireless continued to extend the reach of its broadband network, the nation's largest and most reliable 3G (third-generation) network.  Verizon's 3G network provides more coverage than any other U.S. carrier and is available where more than 285 million people reside.
  • In December, the company updated specifications for wireless devices that will run on its LTE 4G (Long Term Evolution, fourth generation) network, which ultimately will connect a full range of electronics and machines, and enable a new class of services, such as online gaming, media sharing and video entertainment.  Verizon Wireless plans to launch its 4G network in 25 to 30 markets in 2010 and cover virtually all of its current nationwide 3G footprint by the end of 2013.
  • As part of its strategic partnership with Google, Verizon Wireless introduced two Android-based devices in November: the DROID by Motorola and the DROID Eris by HTC.  Other 3G smartphones launched during the fourth quarter include the BlackBerry Storm2 and BlackBerry Curve 8530, both with built-in Wi-Fi, and the Samsung Omnia II powered by Windows Mobile 6.5.    
  • During the fourth quarter, Verizon Wireless customers sent or received more than 162 billion text messages.  Customers also sent more than 4 billion picture/video messages and completed more than 38 million music and video downloads.

Wireline

  • Fourth-quarter operating revenues were $11.5 billion, a decline of 3.9 percent compared with the fourth quarter 2008.  This is an improvement of 0.9 percentage points compared with the year-over-year revenue declines reported in the third quarter 2009.
  • Broadband connections totaled 9.2 million at the end of the fourth quarter, a 6.3 percent year-over-year increase.  This is a net increase of 46,000 from the third quarter 2009, as the increase in FiOS Internet connections more than offset a decrease in DSL-based High Speed Internet connections.
  • As of the end of 2009, the FiOS network passed 15.4 million premises, or approximately 48 percent of total households in areas currently covered by Verizon's wireline network.
  • New Verizon offerings for multinational corporate customers and government customers included IT consulting and managed services to help enterprises transition to cloud computing technologies; telehealth collaboration services; consulting services aimed at helping track and protect corporate data; a cloud-based application performance monitoring service; and solutions to prevent hacker threats to corporate applications.  Additionally, Verizon announced a global strategic alliance with McAfee to provide integrated security solutions.
  • Continuing to widen and deepen its global scope and capabilities, Verizon expanded its Virtual Private LAN service to Europe, Asia-Pacific and additional North American locations.  The company also deployed the industry's first commercial 100G (gigabits per second) ultra-long-haul optical system for live traffic on its European optical core network; added a Japan landing to its Trans-Pacific Express submarine cable system; and installed 19 Private IP edge routers for a total of 753 edge routers in 212 sites throughout 59 countries.
  • New agreements with large-business customers included Aon Corp.; Danfoss A/S; Expedia Inc.; and Nissan North America.  Verizon also announced new agreements with U.S. government agencies, including the U.S. Army Reserve Command.

NOTE: Comparisons are year over year unless otherwise noted. See the accompanying schedules and www.verizon.com/investor  for reconciliations to generally accepted accounting principles (GAAP) for non-GAAP financial measures cited in this news release.  Reclassifications of prior-period amounts have been made in accordance with the adoption of the accounting standard on noncontrolling interests in consolidated financial statements and, where appropriate, to reflect comparable operating results for the spinoff of the Wireline segment's non-strategic local exchange and related business assets in Maine, New Hampshire and Vermont in the first quarter of 2008.  Unless stated otherwise, segment results shown are adjusted for special items. Adjusted EPS is calculated based on net income attributable to Verizon before special items, which eliminates items of revenues, expenses, gains and losses primarily as a result of their non-operational or non-recurring nature.

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 91 million customers nationwide.  Verizon also provides converged communications, information and entertainment services over America's most advanced fiber-optic network, and delivers innovative, seamless business solutions to customers around the world.  A Dow 30 company, Verizon employs a diverse workforce of approximately 222,900 and last year generated consolidated revenues of more than $107 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 document contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties.  For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: the effects of adverse conditions in the U.S. and international economies; the effects of competition in our markets; materially adverse changes in labor matters, including workforce levels and labor negotiations, and any resulting financial and/or operational impact, in the markets served by us or by companies in which we have substantial investments; the effect of material changes in available technology; any disruption of our suppliers' provisioning of critical products or services; significant increases in benefit plan costs or lower investment returns on plan assets; the impact of natural or man-made disasters or existing or future litigation and any resulting financial impact not covered by insurance; technology substitution; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing; any changes in the regulatory environments in which we operate, including any loss of or inability to renew wireless licenses, and the final results of federal and state regulatory proceedings and judicial review of those results; the timing, scope and financial impact of our deployment of fiber-to-the-premises broadband technology; changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; our ability to complete acquisitions and dispositions; our ability to successfully integrate Alltel Corporation into Verizon Wireless' business and achieve anticipated benefits of the acquisition; and the inability to implement our business strategies.

Verizon Communications Inc.

Condensed Consolidated Statements of Income

(dollars in millions, except per share amounts)

3 Mos. Ended

3 Mos. Ended

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/09

12/31/08

% Change

12/31/09

12/31/08

% Change

Operating Revenues

$        27,091 

$        24,645 

9.9 

$        107,808 

$          97,354 

10.7 

Operating Expenses

Cost of services and sales

12,514 

9,976 

25.4 

44,299 

39,007 

13.6 

Selling, general & administrative expense

9,407 

7,090 

32.7 

32,950 

26,898 

22.5 

Depreciation and amortization expense

4,241 

3,747 

13.2 

16,532 

14,565 

13.5 

Total Operating Expenses

26,162 

20,813 

25.7 

93,781 

80,470 

16.5 

Operating Income

929 

3,832 

(75.8)

14,027 

16,884 

(16.9)

Equity in earnings of unconsolidated businesses

131 

109 

20.2 

553 

567 

(2.5)

Other income and (expense), net

13 

62 

(79.0)

90 

282 

(68.1)

Interest expense

(686)

(517)

32.7 

(3,102)

(1,819)

70.5 

Income Before Provision for Income Taxes

387 

3,486 

(88.9)

11,568 

15,914 

(27.3)

Income tax (provision)/benefit

714 

(555)

*

(1,210)

(3,331)

(63.7)

Net income

$          1,101 

$          2,931 

(62.4)

$          10,358 

$          12,583 

(17.7)

Net income attributable to noncontrolling interest

1,754 

1,696 

3.4 

6,707 

6,155 

9.0 

Net income (loss) attributable to Verizon

(653)

1,235 

*

3,651 

6,428 

(43.2)

Net Income

$          1,101 

$          2,931 

(62.4)

$          10,358 

$          12,583 

(17.7)

Basic Earnings per Common Share

Net income attributable to Verizon

$            (.23)

$              .43 

*

$              1.29 

$              2.26 

(42.9)

Weighted average number of common shares (in millions)

2,841 

2,841 

2,841 

2,849 

Diluted Earnings per Common Share (1)

Net income attributable to Verizon

$            (.23)

$              .43 

*

$              1.29 

$              2.26 

(42.9)

Weighted average number of common

shares-assuming dilution (in millions)

2,841 

2,841 

2,841 

2,850 

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.

*

Not meaningful

Verizon Communications Inc.

Condensed Consolidated Statements of Income Before Special Items

(dollars in millions, except per share amounts)

3 Mos. Ended

3 Mos. Ended

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/09

12/31/08

% Change

12/31/09

12/31/08

% Change

Operating Revenues (1)

Domestic Wireless

$        15,732 

$        12,846 

22.5 

$          62,131 

$          49,332 

25.9 

Wireline

11,456 

11,917 

(3.9)

46,080 

48,214 

(4.4)

Other

(97)

(118)

(17.8)

(403)

(450)

(10.4)

Total Operating Revenues

27,091 

24,645 

9.9 

107,808 

97,096 

11.0 

Operating Expenses (1)

Cost of services and sales

11,004 

9,905 

11.1 

42,622 

38,801 

9.8 

Selling, general & administrative expense

7,341 

6,417 

14.4 

29,491 

25,723 

14.6 

Depreciation and amortization expense

4,156 

3,747 

10.9 

16,215 

14,505 

11.8 

Total Operating Expenses

22,501 

20,069 

12.1 

88,328 

79,029 

11.8 

Operating Income

4,590 

4,576 

0.3 

19,480 

18,067 

7.8 

Operating income impact of divested operations (1)

44 

(100.0)

Equity in earnings of unconsolidated businesses

131 

109 

20.2 

553 

567 

(2.5)

Other income and (expense), net

13 

110 

(88.2)

92 

330 

(72.1)

Interest expense

(686)

(517)

32.7 

(2,847)

(1,819)

56.5 

Income Before Provision for Income Taxes

4,048 

4,278 

(5.4)

17,278 

17,189 

0.5 

Provision for income taxes

(712)

(855)

(16.7)

(3,367)

(3,797)

(11.3)

Net Income Before Special Items

$          3,336 

$          3,423 

(2.5)

$          13,911 

$          13,392 

3.9 

Net income attributable to noncontrolling interest

1,810 

1,698 

6.6 

7,106 

6,157 

15.4 

Net income attributable to Verizon

1,526 

1,725 

(11.5)

6,805 

7,235 

(5.9)

Net Income Before Special Items

$          3,336 

$          3,423 

(2.5)

$          13,911 

$          13,392 

3.9 

Basic Adjusted Earnings per Common Share

Net income attributable to Verizon

$              .54 

$              .61 

(11.5)

$              2.40 

$              2.54 

(5.5)

Weighted average number of common shares (in millions)

2,841 

2,841 

2,841 

2,849 

Diluted Adjusted Earnings per Common Share (2)

Net income attributable to Verizon

$              .54 

$              .61 

(11.5)

$              2.40 

$              2.54 

(5.5)

Weighted average number of common

shares-assuming dilution (in millions)

2,841 

2,841 

2,841 

2,850 

Footnotes:

(1)

Reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results for the spin-off of the wireline segment's non-strategic local exchange and related business assets in Maine, New Hampshire and Vermont in the first quarter of 2008.  Reclassifications were determined using specific information where available and allocations where data is not maintained on a state-specific basis within the Company's books and records as follows:

Revenues

$                - 

$                - 

$                  - 

$               258 

Expenses

$                - 

$                - 

$                  - 

$               214 

(2)

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

Verizon Communications Inc.

Condensed Consolidated Statements of Income - Reconciliations

(dollars in millions, except per share amounts)

Special and Non-Recurring Items

3 Mos. Ended

3 Mos. Ended

12/31/09

12/31/09

Unaudited

Reported (GAAP)

Merger Integration and Acquisition Costs

Severance, Pension and Benefit Charges

Access Line Spin-Off and Other Charges

Before Special Items

Operating Revenues

$       27,091 

$             - 

$               - 

$                   - 

$          27,091 

Operating Expenses

Cost of services and sales

12,514 

(31)

(1,444)

(35)

11,004 

Selling, general & administrative expense

9,407 

(134)

(1,576)

(356)

7,341 

Depreciation and amortization expense

4,241 

(85)

4,156 

Total Operating Expenses

26,162 

(250)

(3,020)

(391)

22,501 

Operating Income

929 

250 

3,020 

391 

4,590 

Equity in earnings of unconsolidated businesses

131 

131 

Other income and (expense), net

13 

13 

Interest expense

(686)

(686)

Income Before Provision for Income Taxes

387 

250 

3,020 

391 

4,048 

Income tax (provision)/benefit

714 

(123)

(1,158)

(145)

(712)

Net income

$         1,101 

$        127 

$       1,862 

$              246 

$            3,336 

Net income attributable to noncontrolling interest

1,754 

56 

1,810 

Net income (loss) attributable to Verizon

(653)

71 

1,862 

246 

1,526 

Net income

$         1,101 

$        127 

$       1,862 

$              246 

$            3,336 

Basic Earnings per Common Share  (1)

Net income attributable to Verizon

$           (.23)

$         .02 

$           .66 

$               .09 

$                .54 

Diluted Earnings per Common Share  (1)

Net income attributable to Verizon

$           (.23)

$         .02 

$           .66 

$               .09 

$                .54 

(dollars in millions, except per share amounts)

Special and Non-Recurring Items

3 Mos. Ended

3 Mos. Ended

12/31/08

12/31/08

Unaudited

Reported (GAAP)

Merger Integration Costs

Severance, Pension and Benefit Charges

Investment- Related Charges

Before Special Items

Operating Revenues

$       24,645 

$             - 

$               - 

$                   - 

$          24,645 

Operating Expenses

Cost of services and sales

9,976 

(6)

(65)

9,905 

Selling, general & administrative expense

7,090 

(53)

(620)

6,417 

Depreciation and amortization expense

3,747 

3,747 

Total Operating Expenses

20,813 

(59)

(685)

20,069 

Operating Income

3,832 

59 

685 

4,576 

Equity in earnings of unconsolidated businesses

109 

109 

Other income and (expense), net

62 

48 

110 

Interest expense

(517)

(517)

Income Before Provision for Income Taxes

3,486 

59 

685 

48 

4,278 

Provision for income taxes

(555)

(22)

(261)

(17)

(855)

Net income

$         2,931 

$          37 

$          424 

$                31 

$            3,423 

Net income attributable to noncontrolling interest

1,696 

1,698 

Net income attributable to Verizon

1,235 

35 

424 

31 

1,725 

Net income

$         2,931 

$          37 

$          424 

$                31 

$            3,423 

Basic Earnings per Common Share  (1)

Net income attributable to Verizon

$             .43 

$         .01 

$           .15 

$               .01 

$                .61 

Diluted Earnings per Common Share  (1)

Net income attributable to Verizon

$             .43 

$         .01 

$           .15 

$               .01 

$                .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.

Condensed Consolidated Statements of Income - Reconciliations

(dollars in millions, except per share amounts)

Special and Non-Recurring Items

12 Mos. Ended

12 Mos. Ended

12/31/09

12/31/09

Unaudited

Reported (GAAP)

Merger Integration and Acquisition Costs

Severance, Pension and Benefit Charges

Access Line Spin-Off and Other Charges

Before Special Items

Operating Revenues

$       107,808 

$             - 

$                     - 

$                   - 

$          107,808 

Operating Expenses

Cost of services and sales

44,299 

(195)

(1,444)

(38)

42,622 

Selling, general & administrative expense

32,950 

(442)

(2,602)

(415)

29,491 

Depreciation and amortization expense

16,532 

(317)

16,215 

Total Operating Expenses

93,781 

(954)

(4,046)

(453)

88,328 

Operating Income

14,027 

954 

4,046 

453 

19,480 

Equity in earnings of unconsolidated businesses

553 

553 

Other income and (expense), net

90 

92 

Interest expense

(3,102)

255 

(2,847)

Income Before Provision for Income Taxes

11,568 

1,211 

4,046 

453 

17,278 

Provision for income taxes

(1,210)

(432)

(1,559)

(166)

(3,367)

Net income

$         10,358 

$        779 

$             2,487 

$              287 

$            13,911 

Net income attributable to noncontrolling interest

6,707 

399 

7,106 

Net income attributable to Verizon

3,651 

380 

2,487 

287 

6,805 

Net income

$         10,358 

$        779 

$             2,487 

$              287 

$            13,911 

Basic Earnings per Common Share  (1)

Net income attributable to Verizon

$             1.29 

$         .13 

$                 .88 

$               .10 

$                2.40 

Diluted Earnings per Common Share  (1)

Net income attributable to Verizon

$             1.29 

$         .13 

$                 .88 

$               .10 

$                2.40 

(dollars in millions, except per share amounts)

Special and Non-Recurring Items

12 Mos. Ended

12 Mos. Ended

12/31/08

12/31/08

Unaudited

Reported (GAAP)

Merger Integration Costs

Access Line Spin-Off Related Charges

Investment- Related Charges

Severance, Pension and Benefit Charges

Impact of Divested Operations

Before Special Items

Operating Revenues

$         97,354 

$             - 

$                     - 

$                   - 

$                     - 

$      (258)

$            97,096 

Operating Expenses

Cost of services and sales

39,007 

(24)

(16)

(65)

(101)

38,801 

Selling, general & administrative expense

26,898 

(150)

(87)

(885)

(53)

25,723 

Depreciation and amortization expense

14,565 

(60)

14,505 

Total Operating Expenses

80,470 

(174)

(103)

(950)

(214)

79,029 

Operating Income

16,884 

174 

103 

950 

(44)

18,067 

Operating income impact of divested operations

44 

44 

Equity in earnings of unconsolidated businesses

567 

567 

Other income and (expense), net

282 

48 

330 

Interest expense

(1,819)

(1,819)

Income Before Provision for Income Taxes

15,914 

174 

103 

48 

950 

17,189 

Provision for income taxes

(3,331)

(65)

(22)

(17)

(362)

(3,797)

Net income

$         12,583 

$        109 

$                  81 

$                31 

$                 588 

$             - 

$            13,392 

Net income attributable to noncontrolling interest

6,155 

6,157 

Net income attributable to Verizon

6,428 

107 

81 

31 

588 

7,235 

Net income

$         12,583 

$        109 

$                  81 

$                31 

$                 588 

$             - 

$            13,392 

Basic Earnings per Common Share  (1)

Net income attributable to Verizon

$             2.26 

$         .03 

$                 .03 

$               .01 

$                  .21 

$             - 

$                2.54 

Diluted Earnings per Common Share  (1)

Net income attributable to Verizon

$             2.26 

$         .03 

$                 .03 

$               .01 

$                  .21 

$             - 

$                2.54 

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

12/31/09

12/31/08

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

59.9%

55.5%

Book value per common share (1)

$           14.67   

$           14.68   

Common shares outstanding (in millions)

End of period

2,836   

2,841   

Total employees

222,927   

223,880   

3 Mos. Ended

3 Mos. Ended

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/09

12/31/08

12/31/09

12/31/08

Capital expenditures (including capitalized software)

Domestic Wireless

$          2,018

$          1,787

$           7,152

$           6,510

Wireline

2,278

2,479

8,892

9,797

Other

301

397

1,003

931

Total

$          4,597

$          4,663

$         17,047

$         17,238

Cash dividends declared per common share

$          0.475

$          0.460

$           1.870

$           1.780

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

12/31/09

12/31/08

$ Change

Assets

Current assets

Cash and cash equivalents

$     2,009 

$     9,782 

$  (7,773)

Short-term investments

490 

509 

(19)

Accounts receivable, net

12,573 

11,703 

870 

Inventories

2,289 

2,092 

197 

Prepaid expenses and other

5,247 

1,989 

3,258 

Total current assets

22,608 

26,075 

(3,467)

Plant, property and equipment

228,518 

215,605 

12,913 

Less accumulated depreciation

137,052 

129,059 

7,993 

91,466 

86,546 

4,920 

Investments in unconsolidated businesses

3,535 

3,393 

142 

Wireless licenses

72,067 

61,974 

10,093 

Goodwill

22,472 

6,035 

16,437 

Other intangible assets, net

6,764 

5,199 

1,565 

Other investments

4,781 

(4,781)

Other assets

8,339 

8,349 

(10)

Total Assets

$ 227,251 

$ 202,352 

$  24,899 

Liabilities and Equity

Current liabilities

Debt maturing within one year

$     7,205 

$     4,993 

$    2,212 

Accounts payable and accrued liabilities

15,223 

13,814 

1,409 

Other

6,708 

7,099 

(391)

Total current liabilities

29,136 

25,906 

3,230 

Long-term debt

55,051 

46,959 

8,092 

Employee benefit obligations

32,622 

32,512 

110 

Deferred income taxes

19,310 

11,769 

7,541 

Other liabilities

6,765 

6,301 

464 

Equity

Common stock

297 

297 

Contributed capital

40,108 

40,291 

(183)

Reinvested earnings

17,592 

19,250 

(1,658)

Accumulated other comprehensive loss

(11,479)

(13,372)

1,893 

Common stock in treasury, at cost

(5,000)

(4,839)

(161)

Deferred compensation - employee

stock ownership plans and other

88 

79 

Noncontrolling interest

42,761 

37,199 

5,562 

Total equity

84,367 

78,905 

5,462 

Total Liabilities and Equity

$ 227,251 

$ 202,352 

$  24,899 

The unaudited consolidated balance sheets are based on preliminary information.

Verizon Communications Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in millions)

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/09

12/31/08

$ Change

Cash Flows From Operating Activities

Net income

$          10,358 

$          12,583 

$  (2,225)

Adjustments to reconcile net income to net cash provided by

   operating activities:

Depreciation and amortization expense

16,532 

14,565 

1,967 

Employee retirement benefits

5,095 

1,955 

3,140 

Deferred income taxes

1,384 

2,183 

(799)

Provision for uncollectible accounts

1,306 

1,085 

221 

Equity in earnings of unconsolidated businesses, net of dividends received

389 

212 

177 

Changes in current assets and liabilities, net of

   effects from acquisition/disposition of businesses

(2,511)

(3,033)

522 

Other, net

(988)

(1,993)

1,005 

Net cash provided by operating activities

31,565 

27,557 

4,008 

Cash Flows From Investing Activities

Capital expenditures (including capitalized software)

(17,047)

(17,238)

191 

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

(5,958)

(15,904)

9,946 

Net change in short-term investments

84 

1,677 

(1,593)

Other, net

(410)

(114)

(296)

Net cash used in investing activities

(23,331)

(31,579)

8,248 

Cash Flows From Financing Activities

Proceeds from long-term borrowings

12,040 

21,598 

(9,558)

Repayments of long-term borrowings and capital    lease obligations

(19,260)

(4,146)

(15,114)

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

(1,652)

2,389 

(4,041)

Dividends paid

(5,271)

(4,994)

(277)

Proceeds from sale of common stock

16 

(16)

Purchase of common stock for treasury

(1,368)

1,368 

Other, net

(1,864)

(844)

(1,020)

Net cash provided by (used in) financing activities

(16,007)

12,651 

(28,658)

Increase (decrease) in cash and cash equivalents

(7,773)

8,629 

(16,402)

Cash and cash equivalents, beginning of period

9,782 

1,153 

8,629 

Cash and cash equivalents, end of period

$            2,009 

$            9,782 

$  (7,773)

Verizon Communications Inc.

Verizon Wireless – Selected Financial Results

(dollars in millions)

3 Mos. Ended

3 Mos. Ended

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/09

12/31/08

% Change

12/31/09

12/31/08

% Change

Revenues

Service revenues

$        13,548   

$        11,063   

22.5   

$          53,497   

$          42,635   

25.5   

Equipment and other

2,184   

1,783   

22.5   

8,634   

6,697   

28.9   

Total Revenues

15,732   

12,846   

22.5   

62,131   

49,332   

25.9   

Operating Expenses

Cost of services and sales

5,239   

4,153   

26.1   

19,749   

15,660   

26.1   

Selling, general & administrative expense

4,396   

3,467   

26.8   

17,847   

14,273   

25.0   

Depreciation and amortization expense

1,796   

1,416   

26.8   

7,030   

5,405   

30.1   

Total Operating Expenses

11,431   

9,036   

26.5   

44,626   

35,338   

26.3   

Operating Income

$          4,301   

$          3,810   

12.9   

$          17,505   

$          13,994   

25.1   

Operating Income Margin

27.3%

29.7%

28.2%

28.4%

Verizon Communications Inc.

Verizon Wireless – Selected Operating Statistics

(numbers in thousands)

Unaudited

12/31/09

12/31/08

% Change

Total Customers

91,249   

72,056   

26.6   

Retail Customers

87,523   

70,021   

25.0   

3 Mos. Ended

3 Mos. Ended

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/09

12/31/08

% Change

12/31/09

12/31/08

% Change

Total Customer net adds in period (1)

2,236   

1,248   

79.2   

19,193   

6,349   

*

Retail Customer net adds in period (2)

1,232   

1,214   

1.5   

17,502   

6,286   

*

Total churn rate

1.42%

1.35%

1.44%

1.25%

Retail churn rate

1.44%

1.34%

1.44%

1.24%

Footnotes:

(1)

Includes acquisitions and adjustments of 46, 646 and (122) customers in the second, third and fourth quarter of 2008, respectively; and 13,219, 1, 79 and 20 customers in the first, second, third and fourth quarter of 2009, respectively.

(2)

Includes acquisitions and adjustments of 46, 627 and (139) customers in the second, third and fourth quarter of 2008, respectively; and 12,813, 1, 81 and 20 customers in the first, second, third and fourth quarter of 2009, respectively.

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

Intersegment transactions have not been eliminated.

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

*

Not meaningful

Verizon Communications Inc.

Wireline – Selected Financial Results

(dollars in millions)

3 Mos. Ended

3 Mos. Ended

12 Mos. Ended

12 Mos. Ended

Unaudited

12/31/09

12/31/08

% Change

12/31/09

12/31/08

% Change

Wireline Operating Revenues

Mass Markets

$          4,925   

$          4,969   

(0.9)  

$          19,755   

$          19,799   

(0.2)  

Global Enterprise

3,744   

3,921   

(4.5)  

14,988   

15,779   

(5.0)  

Global Wholesale

2,413   

2,528   

(4.5)  

9,637   

10,360   

(7.0)  

Other

374   

499   

(25.1)  

1,700   

2,276   

(25.3)  

Total Operating Revenues

11,456   

11,917   

(3.9)  

46,080   

48,214   

(4.4)  

Operating Expenses

Cost of services and sales

6,094   

6,041   

0.9   

24,144   

24,274   

(0.5)  

Selling, general & administrative expense

2,726   

2,854   

(4.5)  

10,833   

11,047   

(1.9)  

Depreciation and amortization expense

2,345   

2,309   

1.6   

9,122   

9,031   

1.0   

Total Operating Expenses

11,165   

11,204   

(0.3)  

44,099   

44,352   

(0.6)  

Operating Income

$             291   

$             713   

(59.2)  

$            1,981   

$            3,862   

(48.7)  

Operating Income Margin

2.5%

6.0%

4.3%

8.0%

Verizon Communications Inc.

Wireline – Selected Operating Statistics

(numbers in thousands)

Unaudited

12/31/09

12/31/08

% Change

Switched access lines in service

Total Residence (includes Primary residence)

18,373 

20,956 

(12.3)

Primary residence

16,231 

18,083 

(10.2)

Business

14,008 

14,966 

(6.4)

Public

180 

239 

(24.7)

Total

32,561 

36,161 

(10.0)

Broadband connections

9,220 

8,673 

6.3 

FiOS Internet Subscribers

3,433 

2,481 

38.4 

FiOS TV Subscribers

2,861 

1,918 

49.2 

Footnotes:

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

Intersegment transactions have not been eliminated.

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

SOURCE Verizon



RELATED LINKS

http://www.verizon.com