================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: July 31, 2002
(Date of earliest event reported)
VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8606 23-2259884
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
1095 Avenue of the Americas,
New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 395-2121
Not applicable
(Former name or former address, if changed since last report)
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Item 9. Regulation FD Disclosure.
Set forth below is a press release issued by Verizon Communications Inc.
on July 31, 2002 announcing earnings for the second quarter of 2002.
NEWS RELEASE
[VERIZON LOGO]
FOR IMMEDIATE RELEASE MEDIA CONTACTS:
JULY 31, 2002 PETER THONIS
212-395-2355
peter.thonis@verizon.com
BOB VARETTONI
212-395-7726
robert.a.varettoni@verizon.com
STRONG OPERATIONAL RESULTS HIGHLIGHT SECOND-QUARTER
FINANCIAL PERFORMANCE AT VERIZON COMMUNICATIONS
QUARTERLY EPS OF 77 CENTS, BEFORE NON-RECURRING CHARGES OF $4.2B;
EXPENSES CONTINUE DECLINE; YEAR-END GUIDANCE UPDATED
SECOND-QUARTER HIGHLIGHTS
o 1.1 million Verizon Wireless net retail customer additions; 723,000 overall
net additions for a total of 30.3 million customers, an 8.5 percent
increase year-over-year
o 800,000 net long-distance customer additions, a 51 percent increase
year-over-year, for a total of 9.0 million customers
o 150,000 new net digital subscriber lines (DSL), a nearly 80 percent
increase year-over-year, for a total of 1.5 million customers
o Continued strong profitability in wireless -- operating cash flow margin at
nearly 39 percent
o 5.3 percent reduction in Domestic Telecom cash expenses -- sixth
consecutive quarterly decrease
o $3.3 billion reduction in net debt, including $2.1 billion reduction in
commercial paper, compared to prior quarter
o $6.0 billion improvement in free cash flow in first half, compared to prior
year
UPDATED 2002 GUIDANCE
o Revenues of 0 to minus 1 percent; Earnings Per Share (EPS), $3.05 to $3.09;
capital expenditures, $13 to $13.5 billion
Verizon News Release, page 2
NEW YORK -- Verizon Communications Inc. (NYSE:VZ) today announced
diluted EPS of 77 cents, before non-recurring charges, for the second quarter of
2002. The addition of 1.1 million Verizon Wireless net retail customers, and the
net addition of 800,000 long-distance customers and 150,000 DSL lines
highlighted quarterly operational results.
Reported earnings, detailed below, include $4.2 billion in
non-recurring after-tax charges for the second quarter, primarily for
investment-related write-downs and severance charges. More than $2.4 billion
relates to Verizon's interest in Genuity Inc. Last week Verizon announced that
it will not reintegrate Genuity into the company.
Excluding non-recurring charges, total second-quarter operating
expenses declined 1.3 percent, to $12.8 billion from $13.0 billion.
Second-quarter operating revenues declined 1.8 percent, to $16.8 billion from
$17.1 billion, bolstered by an 8.1 percent increase in Verizon Wireless revenue
to $4.7 billion from $4.4 billion. Total revenues and operating expenses reflect
Verizon operations on a comparable basis, including the consolidation of
Telecomunicaciones de Puerto Rico, Inc. (PRTC) and the deconsolidation of CTI
Holdings S.A. beginning this year.
'OPERATIONAL EXCELLENCE AND EXECUTION'
"The solid foundation that Verizon has built on operational excellence
and execution continues to withstand these turbulent times," said Chief
Executive Officer Ivan Seidenberg. "Our focus on fundamentals has led to the
addition of two million new retail accounts in three key growth businesses in
the second quarter alone.
"Despite the persistent effects of the economic downturn, which are
reflected in our non-recurring charges and revised guidance, we once again
improved metrics for customer retention, cost control and customer service. This
past quarter we also delivered product innovations to our customers, such as the
wireless services we now offer through the marketing alliances we have formed
with Microsoft."
Seidenberg added, "In the quarter, we continued to successfully
strengthen our cash flow and improve our debt position. Both operationally and
financially, we are deriving extraordinary value from our mergers. Innovative
operational and marketing approaches have become institutionalized across
Verizon, enabling us to offer customers more products in more ways."
Free cash flow (cash from operating activities less capital
expenditures and dividends) improved by $6.0 billion for the first half of 2002
compared to the first half of 2001.
Verizon News Release, page 3
In the second quarter, Verizon reduced net debt (total debt less cash
on hand) by $3.3 billion, to $58.6 billion from $61.9 billion at the end of the
first quarter. This is a $4.7 billion reduction from year-end 2001. Verizon also
reduced commercial paper by $2.1 billion in the quarter, to $8.5 billion. This
is a $4.3 billion reduction from year-end 2001. At the end of the second quarter
the company held $2.2 billion in cash investments, which is being used to repay
commercial paper as it comes due.
TWO YEARS OF CUSTOMER GROWTH
Verizon's second-quarter results mark the second anniversary of the
company formed by the merger of Bell Atlantic and GTE. In two years, the company
has more than doubled its long-distance customer base, from nearly 4.1 million
to 9.0 million at the end of the second quarter. Verizon is currently the
fourth-largest long-distance company in the U.S., and its 800,000 net customer
additions in the second quarter is a 51 percent year-over-year increase.
As announced earlier this week, Verizon Wireless, the largest U.S.
wireless company, added a net of 723,000 customers in the second quarter,
growing its customer total to 30.3 million, an 8.5 percent year-over-year
increase.
While Verizon Wireless added 1.1 million net retail customers in the
quarter, it experienced a net loss of 378,000 wholesale subscribers. The company
closed the quarter with 1.4 million wholesale customers, including 310,000
WorldCom Inc. resale customers. On July 21, Verizon Wireless and WorldCom
entered into a referral agreement to facilitate some of these customers
contracting directly with Verizon Wireless.
Quarterly operating cash flow for Verizon Wireless increased 8 percent
to $1.7 billion. The company's operating cash flow margin was 38.7 percent in
the quarter.
Also in the second quarter, Verizon added 150,000 DSL lines for a total
of 1.5 million, a nearly 80 percent year-over-year increase, as the company
continues on course to its end-of-year target of 1.8 to 2 million lines.
Cash expenses for Verizon's largest business unit, Domestic Telecom,
have decreased over the prior-year period for six consecutive quarters. In the
second quarter 2002, the unit's cash expenses on a comparable basis were down
5.3 percent to $5.6 billion from $5.9 billion in the second quarter 2001.
Revenues decreased 4.4 percent, to $10.5 billion, in the same period.
Verizon News Release, page 4
UPDATED 2002 GUIDANCE
Verizon has updated 2002 guidance as follows:
o Comparable revenues of 0 to minus 1 percent, revised from 0 to 1
percent growth.
o EPS before non-recurring charges of $3.05 to $3.09, revised from
$3.12 to $3.17.
o Capital expenditures of $13 to $13.5 billion, revised from $14 to
$15 billion.
REPORTED RESULTS
For the second quarter 2002, Verizon reported a consolidated loss of
$2.1 billion, or 78 cents per diluted share, compared to a consolidated loss of
$1.0 billion, or 38 cents per share, in the second quarter 2001.
The $4.2 billion in after-tax charges total $1.55 per diluted share. In
addition to Genuity, after-tax charges include $862 million to reflect the
current market value of Verizon's investments in Telus Corp., Cable & Wireless
plc and others; $475 million related to severance activities; and other one-time
charges, including $183 million related to WorldCom exposure and $114 million
for settlement of the NorthPoint lawsuit.
Reported second-quarter operating revenues declined 0.4 percent to
$16.8 billion, from $16.9 billion in the second quarter 2001.
SECOND-QUARTER HIGHLIGHTS
Following are second-quarter highlights from Verizon's four business
segments.
DOMESTIC TELECOM:
o More than 45 percent of Verizon's 9.0 million long-distance customers come
from states where the service was most recently introduced -- New York,
Massachusetts, Pennsylvania, Connecticut, Rhode Island and Vermont. Market
share is approximately 30 percent in New York and Massachusetts. Verizon
now has 2.5 million customers in New York, 830,000 in Massachusetts and
710,000 in Pennsylvania.
o In June, Verizon received Federal Communications Commission (FCC) approval
to sell long distance in Maine and New Jersey, and sales in both states
began earlier this month. Verizon now offers long-distance service in 44
states and to more than 80 percent of its local phone customers across the
country.
Verizon News Release, page 5
o The FCC is currently reviewing Verizon long-distance applications in New
Hampshire and Delaware. Verizon is targeting the completion of the FCC
filings in all former Bell Atlantic jurisdictions by year-end.
o In results released this month, Verizon Long Distance ranked highest in
customer satisfaction among consumers who spend more than $50 per month on
long distance, according to the annual J.D. Power and Associates
Residential Long Distance Customer Satisfaction Study.
o For the third consecutive quarter, Verizon saw a net "win back" in
customers for intraLATA (short-haul) long-distance services in the former
Bell Atlantic territory, as the company won back a net of 477,000 customers
from competitors in the second quarter.
o The do-it-yourself installation rate for high-speed DSL Internet access is
nearly 100 percent, as a sales campaign during the quarter offered
consumers new do-it-yourself installation kits. The average
order-to-installation interval for DSL is down to five days and continues
to decrease, down from more than 15 days a year ago.
o Verizon continued market trials of service bundles, which combine local,
long-distance, wireless and DSL services at a discounted rate. Successful
second-quarter rollouts of DSL bundles began in New York, Massachusetts and
Pennsylvania.
o Domestic access line equivalents increased nearly 8 percent to 135.1
million, compared to the second quarter 2001.
o Data Services revenues grew to $1.9 billion in the quarter, driven by 7.5
percent quarterly growth for Data Transport Services over the same period
last year.
o In the enterprise (large-business) market, Verizon's Enterprise Solutions
Group (ESG) expanded its network coverage into downtown Los Angeles. Also
in the quarter, ESG introduced several services, including Global
SiteWatch, enhancements to Managed Voice Services and a service package
tailored to the hotel industry.
VERIZON WIRELESS:
o Continuing the high-quality profile of its base, the company added 1.1
million net new retail customers during the quarter, up 34 percent from the
second quarter 2001. Total retail customers grew to 28.9 million of the
company's total 30.3 million customers, up 12 percent year-over-year.
Retail customers represent more than 95 percent of total customers and 98
percent of total revenue.
o Demand was strong, with retail gross additions of 2.8 million, up 12
percent over the second quarter 2001. Gross additions from company-owned
distribution channels were up 15 percent over the second quarter 2001.
Verizon News Release, page 6
o Retail churn was 2.0 percent, down from 2.2 percent the prior year, and
down from 2.3 percent in the first quarter. Retail contract churn was 1.7
percent, down from 2.0 percent. Total churn, including retail and
wholesale, was 2.3 percent, flat compared to the prior year.
o Service revenue for the quarter grew more than 7 percent to $4.4 billion,
while total revenue increased 8 percent to $4.7 billion. The company
continued to lead the industry in low-cost structure, with
cash-expense-per-subscriber decreasing 2 percent to under $30. Service
revenue-per-subscriber decreased by 1 percent to just under $49.
o The company's 25 million digital customers now comprise more than 83
percent of its customer base, and account for more than 95 percent of
busy-hour usage.
o Verizon Wireless' previously announced acquisition of Price Communications'
wireless properties, including approximately 500,000 customers, has been
approved by Price's shareholders and is expected to close early in August.
o During the quarter, the company continued the momentum of its pricing,
messaging and data innovations deployed earlier this year. In June, the
company added groundbreaking flat-rate pricing options for its national 1X
Express Network, the first and only coast-to-coast next-generation wireless
data network in the country. Demand for Express Network's high-speed access
is building, with new 1X devices introduced in the second quarter.
o The company also launched a strategic alliance with Microsoft for
co-developed and jointly marketed wireless data offerings, by the leading
wireless carrier and the leading portal destination, aimed at the
enterprise and consumer markets.
o In June, the company became the first carrier to offer downloadable
services to consumers nationwide using QUALCOMM Inc.'s BREW* (Binary
Runtime Environment for Wireless) platform. Customers can download
applications for games, entertainment, ring tones, navigation, productivity
and operating systems to BREW-capable devices. Two-way text messaging also
continued to grow dramatically in the quarter, doubling first-quarter
volume.
INTERNATIONAL:
Reflects deconsolidation of CTI to the equity method and consolidation
of PRTC in both the current and prior periods.
o Second-quarter revenue was $754 million and operating income was $143
million, with operating cash flow margins of over 37 percent and operating
cash flow of $280 million.
o The number of proportionate international wireless customers served by
Verizon investments increased by 780,000 to 8.7 million, a nearly 10
percent increase over second quarter 2001.
o Total proportionate revenues were $1.4 billion in the second quarter 2002,
an increase of $51 million, or nearly 4 percent, compared to prior year.
Verizon News Release, page 7
INFORMATION SERVICES:
o Revenues from Verizon's directory publishing and electronic commerce
operations of $936 million for the second quarter decreased 4.9 percent
primarily due to the impact of changes in publication dates. If the effect
of the timing of publications were excluded, the revenue growth would have
been 3.5 percent over the second quarter of 2001.
o Revenues from SuperPages.com, Verizon's Internet directory service, grew
81.6 percent over the second quarter of 2001 as Information Services
continues to strengthen its leadership position in online directory
services. SuperPages.com achieved 1 billion searches in May 2002, just six
years after the site was launched.
o Information Services continued to increase its global electronic reach with
the launching of the French-language SuperPages.ca electronic directory
service in Canada and Spanish-language SuperPagesDR.com in the Dominican
Republic in the second quarter.
Verizon Communications (NYSE:VZ) is one of the world's leading
providers of communications services. Verizon companies are the largest
providers of wireline and wireless communications in the United States, with
135.1 million access line equivalents and 30.3 million Verizon Wireless
customers. Verizon is also the largest directory publisher in the world. With
more than $67 billion in annual revenues and approximately 241,000 employees,
Verizon's global presence extends to more than 40 countries in the Americas,
Europe, Asia and the Pacific. For more information on Verizon, visit
www.verizon.com.
####
VERIZON'S ONLINE NEWS CENTER: Verizon news releases, executive speeches and
biographies, media contacts 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.
* BREW is a trademark of QUALCOMM Inc.
NOTE: This press release contains statements about expected future events and
financial results that are forward-looking and subject to risks and
uncertainties. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. The following important factors could affect future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: the duration and extent of the current economic
downturn; materially adverse changes in economic conditions in the markets
served by us or by companies in which we have substantial investments; material
changes in available technology; technology substitution; an adverse change in
the ratings afforded our debt securities by nationally accredited ratings
organizations; the final results of federal and state regulatory proceedings
concerning our provision of retail and wholesale services and judicial review of
those results; the effects of competition in our markets; our ability to satisfy
regulatory merger conditions and obtain combined company revenue enhancements
and cost savings; the ability of Verizon Wireless to achieve revenue
enhancements and cost savings, and obtain sufficient spectrum resources; the
outcome of litigation concerning the FCC NextWave spectrum auction; our ability
to recover insurance proceeds relating to equipment losses and other adverse
financial impacts resulting from the terrorist attacks on Sept. 11, 2001; and
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.
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change 6/30/02 6/30/01 % Change
--------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES $ 16,835 $ 16,909 (.4) $ 33,210 $ 33,175 .1
Operations and support expense 10,796 9,713 11.2 20,560 19,012 8.1
Depreciation and amortization expense 3,356 3,400 (1.3) 6,676 6,760 (1.2)
Sales of assets, net -- (5) (100.0) (220) (5) *
-------- -------- -------- --------
OPERATING INCOME 2,683 3,801 (29.4) 6,194 7,408 (16.4)
Loss from unconsolidated businesses (3,361) (3,664) (8.3) (4,904) (3,448) 42.2
Other income and (expense), net 4 114 (96.5) 69 184 (62.5)
Interest expense (798) (909) (12.2) (1,612) (1,830) (11.9)
Minority interest (313) (209) 49.8 (556) (307) 81.1
Mark-to-market adjustment - financial instruments (8) (37) (78.4) (11) (153) (92.8)
Provision for income taxes (325) (117) 177.8 (1,294) (1,121) 15.4
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS (2,118) (1,021) 107.4 (2,114) 733 *
Extraordinary item, net of tax 3 -- -- (6) -- --
Cumulative effect of accounting change -- -- -- (496) (182) 172.5
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,115) $ (1,021) 107.1 $ (2,616) $ 551 *
======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER SHARE (1) $ (.78) $ (.38) 105.3 $ (.96) $ .20 *
Weighted average number of common
shares-assuming dilution (in millions) 2,726 2,707 2,723 2,728
FOOTNOTE:
(1) Diluted Earnings (Loss) per Share include the dilutive effect of shares
issuable under our stock-based compensation plans, which represent the only
potential dilutive common shares. There is no impact of dilutive securities
in the second quarter and year-to-date 2002 and the second quarter 2001,
since a net loss from continuing operations was reported.
* Not meaningful
VERIZON COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF INCOME BEFORE NON-RECURRING ITEMS
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change 6/30/02 6/30/01 % Change
--------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES
Domestic Telecom $ 10,468 $ 10,953 (4.4) $ 20,942 $ 21,873 (4.3)
Domestic Wireless 4,738 4,383 8.1 9,112 8,429 8.1
International 754 828 (8.9) 1,505 1,555 (3.2)
Information Services 936 984 (4.9) 1,739 1,773 (1.9)
Other (61) (9) * (88) (25) *
-------- -------- -------- --------
TOTAL OPERATING REVENUES 16,835 17,139 (1.8) 33,210 33,605 (1.2)
-------- -------- -------- --------
OPERATING EXPENSES
Operations and support expense 9,433 9,528 (1.0) 18,643 18,734 (.5)
Depreciation and amortization expense 3,356 3,430 (2.2) 6,676 6,824 (2.2)
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 12,789 12,958 (1.3) 25,319 25,558 (.9)
-------- -------- -------- --------
OPERATING INCOME 4,046 4,181 (3.2) 7,891 8,047 (1.9)
Income from unconsolidated businesses 240 200 20.0 386 367 5.2
Other income and (expense), net 4 114 (96.5) 69 183 (62.3)
Interest expense (798) (891) (10.4) (1,612) (1,790) (9.9)
Minority interest (337) (281) 19.9 (592) (450) 31.6
Provision for income taxes (1,060) (1,222) (13.3) (2,078) (2,300) (9.7)
-------- -------- -------- --------
ADJUSTED NET INCOME $ 2,095 $ 2,101 (.3) $ 4,064 $ 4,057 .2
======== ======== ======== ========
DILUTED ADJUSTED EARNINGS PER SHARE (1) $ .77 $ .77 -- $ 1.49 $ 1.49 --
Weighted average number of common
shares-assuming dilution (in millions) 2,733 2,731 2,731 2,728
FOOTNOTES:
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. Also, reflects the
deconsolidation of CTI to the equity method and the consolidation of PRTC in
both current and prior years.
(1) Prior year depreciation and amortization includes amortization of $.04 per
diluted share for the quarter and $.07 per diluted share year-to-date
related to intangible assets that are no longer being amortized, as
required by FAS 142.
* Not meaningful
VERIZON COMMUNICATIONS INC.
EARNINGS RECONCILIATIONS
(dollars in millions, except per share amounts)
3 Mos. Ended 6/30/02 3 Mos. Ended 6/30/01 6 Mos. Ended 6/30/02 6 Mos. Ended 6/30/01
Unaudited Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted EPS Net Income Diluted EPS
--------- ---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
REPORTED EARNINGS (LOSS) $ (2,115) $ (.78) $ (1,021) $ (.38) $ (2,616) $ (.96) $ 551 $ .20
Non-recurring items:
Mark-to-market adjustment
- financial instruments 8 -- 37 .01 11 -- 151 .06
Sales of assets, net -- -- (3) -- (116) (.04) (3) --
Transition costs 57 .02 162 .06 109 .04 250 .09
Severance benefits 475 .17 -- -- 475 .17 -- --
Cumulative effect of
accounting change -- -- -- -- 496 .18 182 .07
Investment-related charges
CANTV -- -- -- -- 1,400 .51 -- --
MFN -- -- 1,136 .42 436 .16 1,136 .42
CTI -- -- -- -- 190 .07 -- --
Genuity 2,443 .89 -- -- 2,443 .89 -- --
Telus 430 .16 -- -- 430 .16 -- --
C&W 201 .07 862 .32 201 .07 862 .32
Other 231 .08 928 .34 231 .08 928 .34
NorthPoint settlement 114 .04 -- -- 114 .04 -- --
WorldCom exposure and other
special items(1) 251 .09 -- -- 260 .10 -- --
--------- --------- --------- --------- --------- --------- --------- ---------
EARNINGS BEFORE NON-RECURRING
ITEMS(2) $ 2,095 $ .77 $ 2,101 $ .77 $ 4,064 $ 1.49 $ 4,057 $ 1.49
========= ========= ========= ========= ========= ========= ========= =========
FOOTNOTES:
(1) Includes $183 million related to WorldCom financial exposure.
(2) Totals for Diluted EPS do not add for all periods due to rounding in EPS
calculations.
VERIZON COMMUNICATIONS INC.
SELECTED FINANCIAL AND OPERATING STATISTICS
(dollars in millions, except per share amounts)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 6/30/02 6/30/01
--------- ------------ ------------ ------------ ------------
Debt ratio-end of period 68.3% 65.0% 68.3% 65.0%
Book value per common share $ 10.50 $ 12.89 $ 10.50 $ 12.89
Cash dividends declared per common share $ 0.385 $ 0.385 $ 0.77 $ 0.77
Common shares outstanding (in millions)
End of period 2,728 2,709 2,728 2,709
Capital expenditures
Domestic Telecom $ 1,696 $ 3,067 $ 3,175 $ 6,406
Domestic Wireless 1,248 1,384 2,060 2,372
International 154 181 216 292
Information Services 28 29 41 38
Other 10 24 18 55
--------- --------- --------- ---------
Total $ 3,136 $ 4,685 $ 5,510 $ 9,163
--------- --------- --------- ---------
Total employees(1) 241,129 264,180 241,129 264,180
========= ========= ========= =========
FOOTNOTE:
(1) Prior period adjusted to reflect comparable results.
VERIZON COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
Unaudited 6/30/02 12/31/01 $ Change
--------- ----------- ----------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 2,962 $ 979 $ 1,983
Short-term investments 769 1,991 (1,222)
Accounts receivable, net 13,068 14,254 (1,186)
Inventories 1,843 1,968 (125)
Net assets held for sale 1,323 1,199 124
Prepaid expenses and other 3,176 2,796 380
----------- ----------- -----------
Total current assets 23,141 23,187 (46)
----------- ----------- -----------
Plant, property and equipment 175,802 169,586 6,216
Less accumulated depreciation 101,418 95,167 6,251
----------- ----------- -----------
74,384 74,419 (35)
----------- ----------- -----------
Investments in unconsolidated businesses 5,881 10,202 (4,321)
Intangible assets 45,231 44,262 969
Other assets 19,656 18,725 931
----------- ----------- -----------
TOTAL ASSETS $ 168,293 $ 170,795 $ (2,502)
=========== =========== ===========
LIABILITIES AND SHAREOWNERS' INVESTMENT
Current liabilities
Debt maturing within one year $ 16,969 $ 18,669 $ (1,700)
Accounts payable and accrued liabilities 13,130 13,947 (817)
Other 5,581 5,404 177
----------- ----------- -----------
Total current liabilities 35,680 38,020 (2,340)
----------- ----------- -----------
Long-term debt 44,639 45,657 (1,018)
Employee benefit obligations 13,628 11,898 1,730
Deferred income taxes 18,824 16,543 2,281
Other liabilities 4,056 3,989 67
Minority interest 22,824 22,149 675
Shareowners' investment
Common stock 275 275 --
Contributed capital 24,713 24,676 37
Reinvested earnings 5,842 10,704 (4,862)
Accumulated other comprehensive loss (924) (1,187) 263
----------- ----------- -----------
29,906 34,468 (4,562)
Less common stock in treasury, at cost 606 1,182 (576)
Less deferred compensation -
employee stock ownership plans and other 658 747 (89)
----------- ----------- -----------
Total shareowners' investment 28,642 32,539 (3,897)
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREOWNERS' INVESTMENT $ 168,293 $ 170,795 $ (2,502)
=========== =========== ===========
VERIZON COMMUNICATIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 $ Change
--------- ------------ ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) before extraordinary item and cumulative effect
of accounting change $ (2,114) $ 733 $ (2,847)
Adjustments to reconcile income (loss) before extraordinary
item and cumulative effect of accounting change to net cash
provided by operating activities:
Depreciation and amortization 6,676 6,760 (84)
Sales of assets, net (220) (5) (215)
Mark-to-market adjustment - financial instruments 11 153 (142)
Employee retirement benefits (726) (1,118) 392
Deferred income taxes 784 (349) 1,133
Provision for uncollectible accounts 1,465 782 683
Loss from unconsolidated businesses 4,904 3,448 1,456
Changes in current assets and liabilities, net of
effects from acquisition/disposition of businesses (927) (2,961) 2,034
Other, net 189 215 (26)
----------- ----------- -----------
Net cash provided by operating activities 10,042 7,658 2,384
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (5,510) (9,163) 3,653
Acquisitions, net of cash acquired, and investments (998) (2,212) 1,214
Proceeds from disposition of businesses 770 -- 770
Proceeds from spectrum payment refund 1,479 -- 1,479
Net change in short-term investments 1,126 1,010 116
Other, net (380) (510) 130
----------- ----------- -----------
Net cash used in investing activities (3,513) (10,875) 7,362
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 5,583 8,253 (2,670)
Repayments of long-term borrowings and capital lease obligations (3,938) (1,604) (2,334)
Increase (decrease) in short-term obligations,
excluding current maturities (4,623) 620 (5,243)
Dividends paid (2,096) (2,079) (17)
Proceeds from sale of common stock 424 242 182
Other, net 104 (356) 460
----------- ----------- -----------
Net cash provided by (used in) financing activities (4,546) 5,076 (9,622)
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 1,983 1,859 124
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 979 757 222
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,962 $ 2,616 $ 346
=========== =========== ===========
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED FINANCIAL RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change 6/30/02 6/30/01 % Change
--------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES
Local services $ 5,230 $ 5,545 (5.7) $ 10,465 $ 11,165 (6.3)
Network access services 3,418 3,399 .6 6,875 6,691 2.7
Long distance services 777 758 2.5 1,556 1,520 2.4
Other services 1,043 1,251 (16.6) 2,046 2,497 (18.1)
-------- -------- -------- --------
TOTAL OPERATING REVENUES 10,468 10,953 (4.4) 20,942 21,873 (4.3)
-------- -------- -------- --------
OPERATING EXPENSES
Operations and support 5,592 5,904 (5.3) 11,170 11,861 (5.8)
Depreciation and amortization 2,393 2,344 2.1 4,758 4,627 2.8
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 7,985 8,248 (3.2) 15,928 16,488 (3.4)
-------- -------- -------- --------
OPERATING INCOME $ 2,483 $ 2,705 (8.2) $ 5,014 $ 5,385 (6.9)
OPERATING INCOME MARGIN 23.7% 24.7% 23.9% 24.6%
OPERATING CASH FLOW $ 4,876 $ 5,049 (3.4) $ 9,772 $ 10,012 (2.4)
OPERATING CASH FLOW MARGIN 46.6% 46.1% 46.7% 45.8%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
VERIZON COMMUNICATIONS INC.
DOMESTIC TELECOM - SELECTED OPERATING STATISTICS
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change 6/30/02 6/30/01 % Change
--------- ------------ ------------ -------- ------------ ------------ --------
Switched access lines in service (000)
Residence 38,992 39,841 (2.1) 38,992 39,841 (2.1)
Business 20,817 21,989 (5.3) 20,817 21,989 (5.3)
Public 564 635 (11.2) 564 635 (11.2)
-------- -------- -------- --------
Total 60,373 62,465 (3.3) 60,373 62,465 (3.3)
Special DS0 equivalents 74,759 62,729 19.2 74,759 62,729 19.2
-------- -------- -------- --------
Total voice grade equivalents (000) 135,132 125,194 7.9 135,132 125,194 7.9
-------- -------- -------- --------
Resale & UNE-P lines (000) 3,698 3,726 (.8) 3,698 3,726 (.8)
Minutes of use from Carriers and CLECs
(in millions) 66,552 71,883 (7.4) 133,662 144,455 (7.5)
Long distance subscribers (excl. Verizon
CLEC) (000) 9,034 5,998 50.6 9,034 5,998 50.6
High capacity and digital data revenues
($ in millions)
Data transport $ 1,693 $ 1,575 7.5 $ 3,374 $ 3,097 8.9
Data solutions 172 171 .6 336 350 (4.0)
-------- -------- -------- --------
Total revenues $ 1,865 $ 1,746 6.8 $ 3,710 $ 3,447 7.6
-------- -------- -------- --------
VERIZON COMMUNICATIONS INC.
VERIZON WIRELESS - SELECTED OPERATING RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change 6/30/02 6/30/01 % Change
--------- ------------ ------------ -------- ------------ ------------ --------
REVENUES
Service revenues $ 4,369 $ 4,066 7.5 $ 8,421 $ 7,797 8.0
Equipment and other 369 317 16.4 691 632 9.3
-------- -------- -------- --------
TOTAL REVENUES 4,738 4,383 8.1 9,112 8,429 8.1
-------- -------- -------- --------
OPERATING EXPENSES
Operations and support 3,046 2,817 8.1 5,865 5,454 7.5
Depreciation and amortization 785 887 (11.5) 1,566 1,806 (13.3)
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 3,831 3,704 3.4 7,431 7,260 2.4
-------- -------- -------- --------
OPERATING INCOME $ 907 $ 679 33.6 $ 1,681 $ 1,169 43.8
OPERATING CASH FLOW $ 1,692 $ 1,566 8.0 $ 3,247 $ 2,975 9.1
OPERATING CASH FLOW MARGIN 38.7% 38.5% 38.6% 38.2%
SELECTED OPERATING STATISTICS
Subscribers (000) 30,307 27,930 8.5 30,307 27,930 8.5
Penetration 13.6% 12.6% 13.6% 12.6%
Subscriber net adds in period* (000) 723 808 (10.5) 909 1,326 (31.4)
Total churn rate, including prepaid 2.3% 2.3% 2.4% 2.6%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
Prior period penetration rates have been adjusted to reflect updated census and
network coverage data.
* Includes acquisition of 68,000 subscribers in first quarter of 2002.
VERIZON COMMUNICATIONS INC.
INTERNATIONAL - SELECTED FINANCIAL RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change 6/30/02 6/30/01 % Change
--------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES $ 754 $ 828 (8.9) $ 1,505 $ 1,555 (3.2)
OPERATING EXPENSES
Operations and support 474 525 (9.7) 972 980 (.8)
Depreciation and amortization 137 144 (4.9) 273 283 (3.5)
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 611 669 (8.7) 1,245 1,263 (1.4)
-------- -------- -------- --------
OPERATING INCOME $ 143 $ 159 (10.1) $ 260 $ 292 (11.0)
OPERATING CASH FLOW $ 280 $ 303 (7.6) $ 533 $ 575 (7.3)
OPERATING CASH FLOW MARGIN 37.1% 36.6% 35.4% 37.0%
INCOME FROM UNCONSOLIDATED BUSINESSES $ 275 $ 217 26.7 $ 451 $ 385 17.1
PROPORTIONATE INFORMATION
Revenues $ 1,430 $ 1,379 3.7 $ 2,805 $ 2,691 4.2
Operating income $ 330 $ 338 (2.4) $ 618 $ 662 (6.6)
Operating cash flow $ 572 $ 553 3.4 $ 1,102 $ 1,108 (.5)
Access lines (000) 3,360 3,187 5.4 3,360 3,187 5.4
Wireless subscribers (000) 8,741 7,960 9.8 8,741 7,960 9.8
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
Certain reclassifications of prior period amounts have been made, where
appropriate, to reflect comparable operating results. Also, reflects the
deconsolidation of CTI to the equity method and the consolidation of PRTC in
both current and prior years.
VERIZON COMMUNICATIONS INC.
INFORMATION SERVICES - SELECTED FINANCIAL RESULTS
(dollars in millions)
3 Mos. Ended 3 Mos. Ended 6 Mos. Ended 6 Mos. Ended
Unaudited 6/30/02 6/30/01 % Change 6/30/02 6/30/01 % Change
--------- ------------ ------------ -------- ------------ ------------ --------
OPERATING REVENUES $ 936 $ 984 (4.9) $ 1,739 $ 1,773 (1.9)
OPERATING EXPENSES
Operations and support 477 453 5.3 911 869 4.8
Depreciation and amortization 16 20 (20.0) 31 41 (24.4)
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 493 473 4.2 942 910 3.5
-------- -------- -------- --------
OPERATING INCOME $ 443 $ 511 (13.3) $ 797 $ 863 (7.6)
OPERATING CASH FLOW $ 459 $ 531 (13.6) $ 828 $ 904 (8.4)
OPERATING CASH FLOW MARGIN 49.0% 54.0% 47.6% 51.0%
FOOTNOTES:
The segment financial results above are adjusted to exclude the effects of
non-recurring items.
Intercompany and intersegment transactions have not been eliminated.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Verizon Communications Inc.
------------------------------------
(Registrant)
Date: July 31, 2002 /s/ John F. Killian
---------------------------- ------------------------------------
John F. Killian
Senior Vice President and Controller