Investor Quarterly
Q4 2008




                     VZ Fourth Quarter 2008
                     January 27, 2009
Verizon Communications Investor Quarterly 4Q 2008

                                                           Earnings Rel...
Verizon Communications Investor Quarterly 4Q 2008




   Q4                  4th Quarter 2008 Highlights


  Consolidated ...
Verizon Communications Investor Quarterly 4Q 2008



NEW YoRk — Verizon Communications Inc. (NYSE:VZ) today reported that
...
Verizon Communications Investor Quarterly 4Q 2008




Details of 4Q Adjustments
Adjusted earnings in the fourth quarter 20...
Verizon Communications Investor Quarterly 4Q 2008




> This revenue growth was driven by accretion in ARPU (average month...
Verizon Communications Investor Quarterly 4Q 2008




                                        Additional Highlights


    ...
Verizon Communications Investor Quarterly 4Q 2008




                                                                    ...
Verizon Communications Investor Quarterly 4Q 2008




> Broadband and TV products now                countries. Additional...
Verizon Communications Investor Quarterly 4Q 2008

condensed consolidated statements of income


                         ...
Verizon Communications Investor Quarterly 4Q 2008

condensed consolidated statements of income before special items


    ...
Verizon Communications Investor Quarterly 4Q 2008

condensed consolidated statements of income – reconciliations
Fourth Qu...
Verizon Communications Investor Quarterly 4Q 2008

condensed consolidated statements of income – reconciliations
Fourth Qu...
 	Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008
 	Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008
 	Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008
 	Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008
 	Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008
 	Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008
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Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008

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Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008

  1. 1. Investor Quarterly Q4 2008 VZ Fourth Quarter 2008 January 27, 2009
  2. 2. Verizon Communications Investor Quarterly 4Q 2008 Earnings Release 3–9 Financial Statements Condensed Consolidated Statements of Income 10 – 11 Reconciliations 12 – 13 Selected Financial and Operating Statistics 14 Condensed Consolidated Balance Sheets 15 Condensed Consolidated Statements of Cash Flows 16 Wireline Results 17 Verizon Wireless Results 18 News Items 19 verizon.com/investor 20 Verizon Reports Sustained Revenue Growth and Continued Strong Cash Flows for 4Q and Full-Year 2008 4Q Results Fueled by Record Growth in FiOS Internet and TV Customers, Continued Strong Sales of Verizon Wireless and Strategic Business Services 2
  3. 3. Verizon Communications Investor Quarterly 4Q 2008 Q4 4th Quarter 2008 Highlights Consolidated Results > 43 cents in diluted EPS and 61 cents in adjusted EPS (non-GAAP), compared with 4Q 2007 diluted EPS of 37 cents reported and 62 cents adjusted. > $24.6 billion in 4Q revenues, up 3.4 percent, or adjusted growth (non-GAAP) of 4.6 percent. Wireless Wireline Year-End 2008 Highlights > 1.4 million organic (non- > 303,000 net new FiOS TV > $2.26 in 2008 diluted EPS from acquisition-related) net customers and 282,000 net continuing operations and customer additions, almost new FiOS Internet customers, $2.54 in adjusted EPS, compared all retail; 1.2 million total net the highest ever for the with 2007 earnings of $1.90 customer additions, including company. per share and $2.36 per share, a net customer loss under respectively. > 14.3 percent increase in a previously announced > $97.4 billion in 2008 revenues, consumer ARPU in legacy exchange agreement related telecom markets. up 4.2 percent, or adjusted to the 3Q 2008 acquisition of growth of 5.1 percent. > 8.4 percent increase in Rural Cellular. > $26.6 billion in cash flows from revenues from strategic > 72.1 million total customers; business services. operating activities; $17.2 billion 70.0 million retail customers, in capital expenditures. up 9.9 percent, not including customers added with the Jan. 9, 2009, acquisition of Alltel. > 12.3 percent increase in total revenues; data revenues up 41.4 percent; ARPU growth for 11th consecutive quarter; strong 47.2 percent EBITDA margin on service revenues (non-GAAP). 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. Discontinued operations relate to the disposition of Telecomunicaciones de Puerto Rico, Inc. that was completed on March 30, 2007. Reclassifications of prior-period amounts have been made, where appropriate, to reflect comparable operating results for the spinoff of the Wireline segment’s non-strategic local exchange and related business assets in Maine, New Hampshire and Vermont in the first quarter of 2008. 3
  4. 4. Verizon Communications Investor Quarterly 4Q 2008 NEW YoRk — Verizon Communications Inc. (NYSE:VZ) today reported that it continued to grow sales of broadband, wireless and strategic business services in the fourth quarter 2008. Strong customer and revenue growth contributed to 43 cents in diluted earnings per share (EPS) in the quarter, compared with 37 cents per share in the fourth quarter 2007. Consolidated Revenue On an adjusted basis (non-GAAP), fourth-quarter 2008 EPS was 61 cents, compared Growth with 62 cents in the fourth quarter 2007. 5.7% 5.6% On an annual basis, Verizon reported $2.26 in 2008 EPS from continuing opera- 5.4% 4.9% 4.6% tions, compared with $1.90 in 2007. On an adjusted annual basis, 2008 EPS from continuing operations was $2.54, a 7.6 percent increase, compared with 2007 EPS 19.0% 18.8% 18.6% Operating 18.2% 18.1% of $2.36. Income Margin ‘Able to Compete Effectively in This Economic Environment’ 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 “Verizon has shown that it is able to compete effectively in this economic environ- ment,” said Chairman and CEO Ivan Seidenberg. “We grew profits and maintained strong cash flows throughout 2008. In the fourth quarter, we continued to pro- Cash Flow from Continuing duce top-line growth, fueled by strong sales volumes for broadband, wireless and Operations strategic business services. $ in billions “The Verizon story in 2008 was one of customer growth and product innovation, $8.3 $7.5 7.0 $6.7 based on the strategic technology and broadband infrastructure investments we $5.4 have made year after year,” Seidenberg said. “We have built a solid foundation to $4.7 $4.7 CapEx $4.2 $4.2 $4.2 continue to create value for our customers and shareholders in 2009 and beyond.” ($ in billions) Consolidated Revenue Growth 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 Verizon’s total operating revenues grew 3.4 percent in the fourth quarter 2008, increasing to $24.6 billion from $23.8 billion in the fourth quarter 2007. After adjusting for the spinoff of non-strategic local exchange and related Wireline business assets early in 2008 (non-GAAP), this represents an increase of 4.6 per- Earnings Per Share cent. Total operating expenses in the fourth quarter 2008 increased 1.9 percent to $20.8 billion, or 4.1 percent on an adjusted basis, compared with the fourth $0.67 $0.66 $0.62 $0.61 $0.61 quarter 2007. For 2008, annual operating revenues were $97.4 billion, an increase of 4.2 per- cent from 2007 on a reported basis and 5.1 percent on an adjusted basis. Operating expenses totaled $80.5 billion in 2008, an increase of 3.3 percent from 2007 on a reported basis and 4.2 percent on an adjusted basis. 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 Continued Strong Cash Flows Cash flows from operations totaled $26.6 billion in 2008, compared with $25.7 bil- lion in 2007. Dividends and share repurchases totaled $6.4 billion in 2008. Capital expenditures totaled $17.2 billion in 2008, compared with $17.5 billion in 2007. For 2009, Verizon is targeting capital spending, excluding amounts related to the acquisition of Alltel Corporation, to be less than the 2008 total. At year-end 2008, total debt was $52.0 billion, compared with $44.8 billion at the end of the third quarter 2008. Verizon ended 2008 with $9.8 billion in cash and cash equivalents, most of which was held for use in completing the acquisi- tion of Alltel in January 2009. 4
  5. 5. Verizon Communications Investor Quarterly 4Q 2008 Details of 4Q Adjustments Adjusted earnings in the fourth quarter 2008 excluded the following after-tax Wireless Total Revenue amounts: $424 million, or 15 cents per share, for severance, pension and bene- $ in billions fit charges related to pension settlements from previously announced workforce reductions and severance charges associated with workforce reductions that $12.7 $12.8 $11.4 $11.7 $12.1 began in the fourth quarter and will continue in 2009; $35 million, or 1 cent per share, for merger integration costs; and $31 million, or 1 cent per share, for an 13.3% 13.2% 12.5% 12.3% Y/Y % 11.8% other-than-temporary decline in the fair value of investments in certain market- Growth able securities. Adjusted earnings in the fourth quarter 2007 excluded the following after-tax 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 amounts: 16 cents per share for severance and other related expenses; 5 cents per share for taxes and expenses associated with an increase in the distributable earn- ings from the company’s Vodafone Omnitel N.V. investment; 2 cents per share for Wireless Retail Post-Paid merger integration costs; and 1 cent per share for costs related to the spinoff of Customers non-strategic local exchange and related Wireline business assets. millions 67.0 65.8 63.8 Wireless Delivers Another Strong Performance 62.3 61.0 In the fourth quarter 2008, Verizon Wireless continued to deliver service ARPU growth, strong customer loyalty, and sustained high margins: > Organic growth totaled 1.4 million net customer additions, essentially all of 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 which were retail. > Retail net customer additions totaled 1.2 million. This included a net loss of 122,000 retail customers, resulting primarily from the closing of a previously announced exchange agreement with another carrier. Verizon Wireless had Wireless Total Churn entered into this agreement to comply with conditions imposed in connec- tion with regulatory approval of the company’s acquisition of Rural Cellular Corporation, which closed in August 2008. 1.33% 1.35% 1.20% 1.19% 1.12% > Verizon Wireless added 5.8 million organic net new retail customers in 1.05% Retail 2008 — expected to be the most of any U.S. wireless carrier. 0.94% 0.93% Post-Paid 1.03% 0.83% Churn > At the end of the quarter, Verizon Wireless had 72.1 million total customers. > Verizon Wireless continued to have a high-quality customer base, with 70.0 mil- 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 lion retail customers (not including Alltel) — the most of any U.S. wireless brand. Following the recently completed Alltel acquisition, Verizon Wireless now serves more than 80 million customers, excluding markets to be divested. > Verizon Wireless continued to have low churn — 1.35 percent churn among all customers, and 1.05 percent among the company’s retail post-paid customers. > Verizon Wireless continued its double-digit revenue growth, with total quar- terly revenues of $12.8 billion, up 12.3 percent year over year. Full-year revenues were $49.3 billion, up 12.4 percent. Service revenues in the fourth quarter were $11.1 billion, up 12.0 percent year over year, and $42.6 billion for the full year, up 12.2 percent. 5
  6. 6. Verizon Communications Investor Quarterly 4Q 2008 > This revenue growth was driven by accretion in ARPU (average monthly revenue per customer), which increased year over year for the 11th consecutive quarter. Consumer Broadband/Video Revenue Total service ARPU of $51.72 was up 1.4 percent year over year, reflecting strong $ in billions growth in total data ARPU, which was up 27.9 percent over the same period. $1.2 > Wireless operating income margin reached 29.7 percent, up 350 basis points on $1.1 $1.0 $0.9 $0.8 a year- over-year basis. EBITDA (earnings before interest, taxes, depreciation and % of amortization) margin on service revenues reached 47.2 percent. Consumer 31% Revenue* 29% 28% 25% 23% Record FioS Customer Growth at Wireline Verizon Wireline reported record growth in the number of new customers of FiOS 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 TV and FiOS Internet, and it continued to increase sales of enterprise strategic ser- *Legacy Verizon vices year over year. In the fourth quarter (with prior-period comparisons adjusted to reflect the impact of the spinoff of non-strategic Wireline assets): FiOS Customers > Verizon added 303,000 net new FiOS TV customers, compared with 226,000 in millions the fourth quarter 2007. The company had 1.9 million FiOS TV customers at year- 2.5 end 2008, adding nearly 1 million FiOS TV customers since year-end 2007. 1.9 > FiOS TV sales penetration (sales as a percentage of potential customers) increased 1.5 to 20.8 percent, compared with 16.0 percent in the fourth quarter 2007. FiOS TV 0.9 service was available for sale to 9.2 million premises by year-end 2008. This repre- sented a 57 percent increase in the availability of FiOS TV — and, by extension, of 2007 2008 2007 2008 “triple play” bundles of FiOS TV, Internet and voice services — since year-end 2007. TV Internet > Verizon added 282,000 net new FiOS Internet customers, compared with 244,000 in the fourth quarter 2007. The company had nearly 2.5 million FiOS Internet cus- tomers at year-end 2008, adding nearly 1 million FiOS Internet customers since year-end 2007. > FiOS Internet sales penetration increased to 24.9 percent, compared with 20.7 percent in the fourth quarter 2007. FiOS Internet was available for sale to nearly 10 million premises by year-end 2008. > Broadband and video revenues from consumer customers totaled nearly $1.2 billion in the fourth quarter 2008 — representing year-over-year quarterly growth of 42.0 percent. > Growing revenue from broadband and video services drove consumer ARPU in legacy Verizon wireline markets (which excludes consumer markets served by the former MCI) to $68.46 for the fourth quarter 2008, a 14.3 percent increase com- pared with the fourth quarter 2007. > Sales of strategic business services — such as IP (Internet protocol), managed ser- vices, Ethernet and optical ring services — generated $1.5 billion in revenue in the quarter, up 8.4 percent from the fourth quarter 2007. 6
  7. 7. Verizon Communications Investor Quarterly 4Q 2008 Additional Highlights Wireless Wireless > The Alltel acquisition expanded the > More than 65 percent of the Total Service Revenue Verizon Wireless network to cover company’s retail customers — 45.5 $ in billions nearly the entire U.S. population million — had 3G broadband-capable $11.1 $10.1 $10.5 $10.9 and made Verizon Wireless the devices by year-end. The company $9.9 nation’s largest carrier in terms of continued to extend the reach of the $52.18 total customers — in addition to its nation's largest and most reliable 3G $51.72 Total $51.53 Service $51.00 $50.91 traditional position of being the (third generation) network, which now ARPU leading carrier in terms of retail covers more than 274 million people 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 customers, revenues and margins. after the Alltel acquisition. > At the end of 2008, retail customers > Customers across the country lined (postpaid and prepaid) represented 97 up to purchase the new BlackBerry percent of the company’s base. Storm, available exclusively in the U.S. Total Data Revenue > Verizon Wireless continued to from Verizon Wireless and launched $ in billions lead the industry in cost efficiency. in November. Designed for both $3.0 $2.8 Monthly cash expense per customer consumers and business customers, $2.6 $2.3 $2.1 (non-GAAP) decreased in the fourth the BlackBerry Storm offers customers $13.86 Total $12.58 $13.30 Data $11.72 $10.84 quarter and for the full year to $27.29 the reliability of the Verizon Wireless ARPU and $28.12 in 2008 from $28.75 and 3G network and the full power $28.24 in 2007, respectively. of a revolutionary touch-screen, 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 > Data revenues of $10.7 billion for the multimedia smartphone with global full year were up 44 percent over 2007. connectivity. > Verizon Wireless, with the most In the fourth quarter, data revenues were 26.8 percent of all service global data coverage of any U.S. EBITDA revenues, up from 21.3 percent in the wireless carrier, received top honors $ in billions fourth quarter 2007. Verizon Wireless during the quarter for its global $5.2 $4.8 $4.8 $4.6 had 55.1 million retail data customers services and international solutions $4.3 at year-end — 79 percent of the retail that help travelers stay connected EBITDA 47.2% Margin 45.6% customer base and a 16.8 percent around the globe. Readers of Global 44.9% 44.2% 43.6% increase over year-end 2007. Traveler magazine selected Verizon Wireless as the world’s best wireless 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 service provider for the second 7
  8. 8. Verizon Communications Investor Quarterly 4Q 2008 Wireline Wireline > Wireline total operating revenues consecutive year. Business Traveler Total Revenue $ in billions were $11.9 billion. Verizon Telecom, magazine readers chose Verizon which serves domestic consumer and Wireless as the world’s best wireless $12.2 $12.0 $12.1 $12.2 $11.9 small-business customers, and Verizon data service provider in the 2008 “Best Business, which serves large-business in Business Travel” awards. > During the quarter, Verizon Wireless and government customers worldwide, -1.2% -1.4% -1.7% -1.8% Y/Y % each had 2.3 percent year-over-year customers sent or received more than -2.7% Growth quarterly revenue declines. At Verizon 90 billion text messages — more than 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 Telecom, this was the smallest decrease double the number of text messages in 12 quarters. Wireline total operat- sent in the same period a year ago. ing expenses were $11.2 billion, a 1.3 Customers also sent 1.8 billion picture/ Consumer Revenue* percent increase compared with the video messages and completed 50 $ in billions fourth quarter 2007. million music and video downloads > By the end of 2008, Verizon’s FiOS during the quarter. $3.8 $3.8 $3.7 $3.7 $3.7 fiber-to-the-premises network passed $68.46 Consumer $66.67 Retail $63.84 12.7 million premises throughout ARPU $61.53 $59.88 the company’s wireline service ter- ritory — greater than the company’s target of 12 million by year-end 2008. 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 Fiber-to-the-home now passes approxi- *Legacy Verizon mately 40 percent of the total house- holds in Verizon’s landline footprint. > Total broadband connections were 8.7 million, a net increase of 214,000 over the third quarter 2008. This includes a decrease of 68,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers. The 8.7 million is an increase of 8.2 per- cent year over year. 8
  9. 9. Verizon Communications Investor Quarterly 4Q 2008 > Broadband and TV products now countries. Additional network enhance- Global Enterprise Revenue* $ in billions account for more than 31 percent of ments included installation of eight consumer ARPU in legacy markets, Converged Packet Access nodes and fur- 4.0 $4.0 $4.0 $3.9 $3.9 compared with 22.7 percent in the ther mesh network expansion in Asia- fourth quarter 2007. The ARPU among Pacific and North America, including FiOS customers continues to grow and the deployment of nodes in Singapore, is more than $133 per month. Toronto, Montreal and several U.S. cit- > Wireline data revenues — which rep- ies. In an additional seven U.S. markets, 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 resented 43.6 percent of total Wireline the company deployed multiplexers * Retail domestic and retail international revenues — were $5.2 billion in the that enable remote provisioning and fourth quarter 2008, an increase of trouble isolation while providing Strategic Services Revenue 10.9 percent compared with the fourth reduced latency. $ in billions > New agreements with multinational quarter 2007. This includes revenues from consumer broadband services, customers included Nikon Corporation, $1.6 $1.5 $1.5 $1.4 $1.4 wholesale data transport and Verizon NSG Group, Ingenico and Johnson % of Total 30% VZB 29% 28% 27% Business data services. Controls. Verizon Business also signed 27% Revenue > Verizon Business continued to new contracts with several U.S. gov- announce significant new capabilities: ernment agencies, including the U.S. enhancements to its voice-over-Internet- Department of Veterans Affairs. 4Q 07 1Q 08 2Q 08 3Q 08 4Q 08 protocol portfolio; a new managed telepresence (video-meeting) solution; a service that enables managed hosting customers to easily and securely change 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 online content; a solution for more protection of the safe harbor for forward-looking statements contained in the Private Securities efficiently providing essential applica- Litigation Reform Act of 1995. The following important factors could affect future results and could tions to employees worldwide; and a cause those results to differ materially from those expressed in the forward-looking statements: the managed unified communications and effects of adverse conditions in the U.S. and international economies; the effects of competition in collaboration (UC&C) solution aimed at 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 helping employees of global enterprises by companies in which we have substantial investments; the effect of material changes in available work more closely with one another. technology; any disruption of our suppliers’ provisioning of critical products or services; significant > Verizon Business also continued to increases in benefit plan costs or lower investment returns on plan assets; the impact of natural or expand its global network reach and man-made disasters or existing or future litigation and any resulting financial impact not covered by capabilities, announcing the installa- 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 tion of 26 Private IP (PIP) edge switches, the cost, including interest rates, and/or availability of financing; any changes in the regulatory including new nodes in Morocco and environments in which we operate, including any loss of or inability to renew wireless licenses, and Pakistan. The company now has edge the final results of federal and state regulatory proceedings and judicial review of those results; the switches deployed in 59 countries and timing, scope and financial impact of our deployment of fiber-to-the-premises broadband supports PIP services in more than 120 technology; changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; our ability to successfully integrate Alltel Corporation into Verizon Wireless’s business and achieve anticipated benefits of the acquisition; and the inability to implement our business strategies. 9
  10. 10. Verizon Communications Investor Quarterly 4Q 2008 condensed consolidated statements of income (dollars in millions, except per share amounts) 3 Mos. Ended 12 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12/31/08 12/31/08 Unaudited 12/31/07 % Change 12/31/07 % Change Operating Revenues $ 24,645 $ 97,354 $ 23,840 3.4 $ 93,469 4.2 Operating Expenses 9,976 39,007 Cost of services and sales 9,796 1.8 37,547 3.9 7,090 26,898 Selling, general & administrative expense 6,955 1.9 25,967 3.6 3,747 14,565 Depreciation and amortization expense 3,666 2.2 14,377 1.3 Total Operating Expenses 20,813 80,470 20,417 1.9 77,891 3.3 Operating Income 3,832 16,884 3,423 11.9 15,578 8.4 109 567 Equity in earnings of unconsolidated businesses 93 17.2 585 (3.1) 62 282 Other income and (expense), net 87 (28.7) 211 33.6 (517) (1,819) Interest expense (439) 17.8 (1,829) (0.5) (1,696) (6,155) Minority interest (1,333) 27.2 (5,053) 21.8 Income Before Provision for Income Taxes, Discontinued Operations and Extraordinary Item 1,790 9,759 1,831 (2.2) 9,492 2.8 (555) (3,331) Provision for income taxes (759) (26.9) (3,982) (16.3) Income Before Discontinued Operations and Extraordinary Item 1,235 6,428 1,072 15.2 5,510 16.7 Income from discontinued operations, net of tax(1) — — — * 142 (100.0) — — Extraordinary item, net of tax — * (131) (100.0) Net Income $ 1,235 $ 6,428 $ 1,072 15.2 $ 5,521 16.4 Basic Earnings per Common Share(2) Income before discontinued operations $ .43 $ 2.26 and extraordinary item $ .37 16.2 $ 1.90 18.9 — — Income from discontinued operations, net of tax — * .05 (100.0) — — Extraordinary item, net of tax — * (.05) (100.0) $ .43 $ 2.26 Net income $ .37 16.2 $ 1.91 18.3 2,841 2,849 Weighted average number of common shares (in millions) 2,886 2,898 Diluted Earnings per Common Share(2)(3) Income before discontinued operations $ .43 $ 2.26 and extraordinary item $ .37 16.2 $ 1.90 18.9 — — Income from discontinued operations, net of tax — * .05 (100.0) — — Extraordinary item, net of tax — * (.05) (100.0) $ .43 $ 2.26 Net income $ .37 16.2 $ 1.90 18.9 Weighted average number of common shares — 2,841 2,850 assuming dilution (in millions) 2,891 2,902 Footnotes: (1) Discontinued operations includes a gain on the sale of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) of $70 million, net of tax. The disposition of this non-strategic business was completed on March 30, 2007. (2) EPS totals may not add due to rounding. (3) Diluted Earnings per Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represent the only potential dilution. * Not meaningful 10
  11. 11. Verizon Communications Investor Quarterly 4Q 2008 condensed consolidated statements of income before special items (dollars in millions, except per share amounts) 3 Mos. Ended 12 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12/31/08 12/31/08 Unaudited 12/31/07 % Change 12/31/07 % Change Operating Revenues(1) $ 11,917 $ 48,214 Wireline $ 12,249 (2.7) $ 49,129 (1.9) 12,846 49,332 Domestic Wireless 11,443 12.3 43,882 12.4 (118) (450) Other (121) (2.5) (636) (29.2) Total Operating Revenues 24,645 97,096 23,571 4.6 92,375 5.1 Operating Expenses(1) 9,905 38,801 Cost of services and sales 9,676 2.4 37,090 4.6 6,417 25,723 Selling, general & administrative expense 5,999 7.0 24,620 4.5 3,747 14,505 Depreciation and amortization expense 3,602 4.0 14,120 2.7 Total Operating Expenses 20,069 79,029 19,277 4.1 75,830 4.2 Operating Income 4,576 18,067 4,294 6.6 16,545 9.2 Operating income impact of divested operations(1) — 44 33 (100.0) 182 (75.8) 109 567 Equity in earnings of unconsolidated businesses 93 17.2 585 (3.1) 110 330 Other income and (expense), net 87 26.4 211 56.4 (517) (1,819) Interest expense (439) 17.8 (1,829) (0.5) (1,698) (6,157) Minority interest (1,333) 27.4 (5,053) 21.8 Income Before Provision for Income Taxes and Discontinued Operations 2,580 11,032 2,735 (5.7) 10,641 3.7 (855) (3,797) Provision for income taxes (953) (10.3) (3,787) 0.3 Income Before Discontinued Operations 1,725 7,235 1,782 (3.2) 6,854 5.6 — — Income from discontinued operations, net of tax — * 72 (100.0) Net Income Before Special Items $ 1,725 $ 7,235 $ 1,782 (3.2) $ 6,926 4.5 Basic Adjusted Earnings per Common Share(2) $ .61 $ 2.54 Income before discontinued operations $ .62 (1.6) $ 2.37 7.2 — — Income from discontinued operations, net of tax — * .02 (100.0) $ .61 $ 2.54 Net income $ .62 (1.6) $ 2.39 6.3 2,841 2,849 Weighted average number of common shares (in millions) 2,886 2,898 Diluted Adjusted Earnings per Common Share(2)(3) $ .61 $ 2.54 Income before discontinued operations $ .62 (1.6) $ 2.36 7.6 — — Income from discontinued operations, net of tax — * .02 (100.0) $ .61 $ 2.54 Net income $ .62 (1.6) $ 2.39 6.3 Weighted average number of common shares-assuming 2,841 2,850 dilution (in millions) 2,891 2,902 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: $ — $ 258 $ 269 $ 1,094 Revenues $ — $ 214 $ 236 $ 912 Expenses (2) EPS totals may not add due to rounding. (3) Diluted Earnings per Share includes the dilutive effect of shares issuable under our stock-based compensation plans, which represent the only potential dilution. * Not meaningful 11
  12. 12. Verizon Communications Investor Quarterly 4Q 2008 condensed consolidated statements of income – reconciliations Fourth Quarter 2008 and 2007 (dollars in millions, except per share amounts) Special and Non-Recurring Items 3 Mos. Ended 3 Mos. Ended Severance, 12/31/08 12/31/08 Merger Pension and Investment- Reported Before Special Integration Benefit Related (GAAP) Items Unaudited Costs Charges Charges Operating Revenues $ 24,645 $ 24,645 $ — $ — $ — Operating Expenses 9,976 9,905 Cost of services and sales (6) (65) — 7,090 6,417 Selling, general & administrative expense (53) (620) — 3,747 3,747 Depreciation and amortization expense — — — Total Operating Expenses 20,813 20,069 (59) (685) — Operating Income 3,832 4,576 59 685 — 109 109 Equity in earnings of unconsolidated businesses — — — 62 110 Other income and (expense), net — — 48 (517) (517) Interest expense — — — (1,696) (1,698) Minority interest (2) — — Income Before Provision for Income Taxes 1,790 2,580 57 685 48 (555) (855) Provision for income taxes (22) (261) (17) Net Income $ $1,235 $ 1,725 $ $35 $ 424 $ 31 Basic Earnings per Common Share(1) $ .43 $ .61 Net income $ .01 $ .15 $ .01 Diluted Earnings per Common Share(1) $ .43 $ .61 Net income $ .01 $ .15 $ .01 (dollars in millions, except per share amounts) Special and Non-Recurring Items 3 Mos. Ended 3 Mos. Ended Access Line Severance, 12/31/07 12/31/07 Merger Spin-Off Pension Impact Reported of Divested Before Special Integration Related International and Benefit (GAAP) Items Unaudited Costs Charges Taxes Charges Operations Operating Revenues $ 23,840 $ 23,571 $ — $ — $ — $ — $ (269) Operating Expenses 9,796 9,676 Cost of services and sales (16) — — — (104) 6,955 5,999 Selling, general & administrative expense (76) (38) (2) (772) (68) 3,666 3,602 Depreciation and amortization expense — — — — (64) Total Operating Expenses 20,417 19,277 (92) (38) (2) (772) (236) Operating Income 3,423 4,294 92 38 2 772 (33) — 33 Operating income impact of divested operations — — — — 33 93 93 Equity in earnings of unconsolidated businesses — — — — — 87 87 Other income and (expense), net — — — — — (439) (439) Interest expense — — — — — (1,333) (1,333) Minority interest — — — — — Income Before Provision for Income Taxes 1,831 2,735 92 38 2 772 — (759) (953) Provision for income taxes (34) (2) 137 (295) — Net Income $ 1,072 $ 1,782 $ 58 $ 36 $ 139 $ 477 $ — Basic Earnings per Common Share(1) $ .37 $ .62 Net income $ .02 $ .01 $ .05 $ .17 $ — Diluted Earnings per Common Share(1) $ .37 $ .62 Net income $ .02 $ .01 $ .05 $ .16 $ — Footnote: (1) EPS totals may not add due to rounding. Note: See www.verizon.com/investor for a reconciliation of other non-GAAP measures included in this Quarterly Bulletin. 12
  13. 13. Verizon Communications Investor Quarterly 4Q 2008 condensed consolidated statements of income – reconciliations Fourth Quarter Year-to-Date 2008 and 2007 (dollars in millions, except per share amounts) Special and Non-Recurring Items 12 Mos. Ended 12 Mos. Ended Access Line Severance, 12/31/08 12/31/08 Merger Spin-Off Investment- Pension Impact Reported of Divested Before Special Integration Related Related and Benefit (GAAP) Items Unaudited Costs Charges Charges Charges Operations Operating Revenues $ 97,354 $ 97,096 $ — $ — $ — $ — $ (258) Operating Expenses 39,007 38,801 Cost of services and sales (24) (16) — (65) (101) 26,898 25,723 Selling, general & administrative expense (150) (87) — (885) (53) 14,565 14,505 Depreciation and amortization expense — — — — (60) Total Operating Expenses 80,470 79,029 (174) (103) — (950) (214) Operating Income 16,884 18,067 174 103 — 950 (44) — 44 Operating income impact of divested operations — — — — 44 567 567 Equity in earnings of unconsolidated businesses — — — — — 282 330 Other income and (expense), net — — 48 — — (1,819) (1,819) Interest expense — — — — — (6,155) (6,157) Minority interest (2) — — — — Income Before Provision for Income Taxes 9,759 11,032 172 103 48 950 — (3,331) (3,797) Provision for income taxes (65) (22) (17) (362) — Net Income $ 6,428 $ 7,235 $ 107 $ 81 $ 31 $ 588 $ — Basic Earnings per Common Share(1) $ 2.26 $ 2.54 Net income $ .03 $ .03 $ .01 $ .21 $ — Diluted Earnings per Common Share(1) $ 2.26 $ 2.54 Net income $ .03 $ .03 $ .01 $ .21 $ — (dollars in millions, except per share amounts) Special and Non-Recurring Items 12 Mos. Ended 12 Mos. Ended Access Line Severance, 12/31/07 12/31/07 Impact of Merger Sale of Spin-Off Pension Divested Before Special Reported Related International and Benefit Integration Puerto Rico, Loss on Items (GAAP) Unaudited Charges Operations Costs Net CANTV Charges Taxes Operating Revenues $ 93,469 $ (1,094) $ 92,375 $ — $ — $ — $ — $ — $ — Operating Expenses 37,547 37,090 Cost of services and sales (32) — — — — — (425) 25,967 24,620 Selling, general & administrative expense (146) (100) — (84) (15) (772) (230) 14,377 14,120 Depreciation and amortization expense — — — — — — (257) Total Operating Expenses 77,891 75,830 (178) (100) — (84) (15) (772) (912) Operating Income 15,578 16,545 178 100 — 84 15 772 (182) — 182 Operating income impact of divested operations — — — — — — 182 585 585 Equity in earnings of unconsolidated businesses — — — — — — — 211 211 Other income and (expense), net — — — — — — — (1,829) (1,829) Interest expense — — — — — — — (5,053) (5,053) Minority interest — — — — — — — Income Before Provision for Income Taxes, Discontinued Operations and Extraordinary Item 9,492 10,641 178 100 — 84 15 772 — (3,982) (3,787) Provision for income taxes (66) (35) — (4) 595 (295) — Income Before Discontinued Operations and Extraordinary Item 5,510 6,854 112 65 — 80 610 477 — 142 72 Income from discontinued operations, net of tax — (70) — — — — — (131) — Extraordinary item, net of tax — — 131 — — — — Net Income $ 5,521 $ 6,926 $ 112 $ (5) $ 131 $ 80 $ 610 $ 477 $ — Basic Earnings per Common Share(1) $ 1.90 $ 2.37 Income before discontinued operations and extraordinary item $ .04 $ .02 $ — $ .03 $ .21 $ .17 $ — .05 .02 Income from discontinued operations, net of tax — (.02) — — — — — (.05) — Extraordinary item, net of tax — — .05 — — — — $ 1.91 $ 2.39 Net income $ .04 $ — $ .05 $ .03 $ .21 $ .17 $ — Diluted Earnings per Common Share(1) $ 1.90 $ 2.36 Income before discontinued operations and extraordinary item $ .04 $ .02 $ — $ .03 $ .21 $ .16 $ — .05 .02 Income from discontinued operations, net of tax — (.02) — — — — — (.05) — Extraordinary item, net of tax — — .05 — — — — $ 1.90 $ 2.39 Net income $ .04 $ — $ .05 $ .03 $ .21 $ .16 $ — Footnote: (1) EPS totals may not add due to rounding. Note: See www.verizon.com/investor for a reconciliation of other non-GAAP measures included in this Quarterly Bulletin. 13

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