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Verizon's 4Q 2006 Results Cap Strong Year of Organic Growth in Wireless, Broadband and Business MarketsVerizon Wireless Continues to Lead Its Industry; Verizon Business Again Posts Revenue Growth; Verizon Telecom Maintains Broadband Growth Momentum
NEW YORK, Jan. 29 /PRNewswire-FirstCall/ -- Verizon Communications Inc. (NYSE: VZ) today reported strong fourth-quarter and full-year 2006 financial and operational results, capping a year in which the company's organic growth initiatives gained momentum in wireless, consumer broadband and global enterprise markets. For the fourth quarter 2006, Verizon reported earnings of $1.0 billion, or 35 cents per share, compared with $1.7 billion, or 59 cents per share, in the fourth quarter 2005. Fourth-quarter 2006 earnings include non-recurring charges for the recognition of taxes related to the sale of Verizon's Dominican Republic assets and for costs related to the spin-off of Verizon's directories publishing business. Before these and other special items (non-GAAP), Verizon's fourth-quarter 2006 earnings were 62 cents per share, compared with 64 cents per share before special items in the fourth quarter 2005. For the year, Verizon reported earnings of $6.2 billion, or $2.12 per share, compared with $7.4 billion, or $2.65 per share, in 2005. Before special items, 2006 earnings were $7.4 billion, or $2.54 per share, compared with $7.2 billion, or $2.56 per share, in 2005. 'Long-Term Organic Growth' "We had a strong 2006 both operationally and financially," said Ivan Seidenberg, Verizon chairman and CEO. "We have become a leaner, more competitive and global company, with a greater percentage of our revenues from broadband and other growth initiatives. "We enter 2007 well-positioned to continue to gain momentum. We have strengthened our balance sheet, in part through strategic transactions that have created shareholder value, and we have assembled the right team to deliver the communications, data and entertainment services that customers want. "We are focused on execution and continued innovation in 2007. Our superior wireless, consumer broadband and global enterprise networks will differentiate us from competitors and provide Verizon with a platform for long-term, high-margin organic growth." Consolidated Revenue Gains Consolidated fourth-quarter 2006 operating revenues were $22.6 billion, a 26.1 percent increase compared with the fourth quarter 2005. Full-year 2006 operating revenues were $88.1 billion, a 26.8 percent increase compared with 2005. Consolidated fourth-quarter 2006 total operating expenses were $19.2 billion, a 29.6 percent increase compared with the fourth quarter 2005. Full- year 2006 total operating expenses were $74.8 billion, a 31.3 percent increase compared with 2005. For 2006, Verizon's reported results include revenues and expenses from the former MCI, subsequent to the close of the merger on Jan. 6, 2006. Comparing fourth quarter 2006 with fourth quarter 2005 on a pro-forma (non-GAAP) basis, which presents the combined operating results of Verizon and the former MCI on a comparable basis, adjusted operating revenues increased 3.9 percent and adjusted cash expenses increased 5.4 percent. Comparing full- year 2006 with 2005 on the same basis, adjusted operating revenues increased 3.3 percent and adjusted cash expenses increased 3.0 percent. Verizon Wireless Continues Industry-Leading Performance Verizon Wireless remains significantly ahead of the industry with record retail net customer additions, and strong revenue growth, profitability and low churn in the fourth quarter 2006. Verizon Wireless remains the largest U.S. wireless company in terms of total revenues and the largest wireless data provider based on revenues, and has the most retail customers (businesses and consumers directly served by Verizon Wireless and who buy Verizon Wireless-branded service, rather than customers of the company's resellers). Verizon Wireless added 2.3 million net customers in the fourth quarter 2006 for a total of 59.1 million customers nationwide, a 15 percent increase in total customers from the end of the fourth quarter 2005. This was the second time in the company's history that quarterly net customer additions exceeded the 2 million mark. Of the company's net customer additions in the fourth quarter, a record 2.2 million were retail, a 23.6 percent increase over the fourth quarter 2005 and almost all post-paid customers. Based on publicly available information, the company has the largest retail customer base in the industry -- 56.8 million retail customers of its 59.1 million total customers (which include retail and wholesale) -- and the company added 7.8 million to its retail customer base in 2006. The company continued to set industry records for low churn. Total churn was 1.14 percent for the quarter and 1.17 percent for the year. Churn among the company's retail post-paid customers -- almost 93 percent of total customers -- was even lower, at 0.89 percent for the fourth quarter and 0.91 percent for the year. Verizon Wireless quarterly revenues topped $10 billion for the first time. Total revenues were $10.1 billion in the fourth quarter 2006, a 16.3 percent increase compared with $8.7 billion in the fourth quarter 2005 -- driven by strong customer growth and demand for data services. Full-year 2006 Wireless revenues were $38.0 billion, an increase of 17.8 percent compared with 2005. Wireless operating income margins were 25.0 percent for the fourth quarter and 25.2 percent for the year, the result of the company's continued focus on efficiencies, even as it added record net retail customers. Wireless EBITDA margins were 43.2 percent for the fourth quarter and 44.3 percent for the full year, an improvement of 1.1 percentage points from full- year 2005. (EBITDA -- or earnings before interest, taxes, depreciation and amortization -- is a non-GAAP measure that adds depreciation and amortization to operating income; EBITDA margin is calculated by dividing EBITDA by wireless service revenues.) Strong Year of Wireline Broadband Growth Fourth-quarter results at Wireline highlighted a year of strong customer growth in broadband markets, including video. Verizon's broadband fiber-to-the-premises (FTTP) network -- over which customers receive FiOS Internet and FiOS TV services -- passed a total of more than 6 million premises by the end of 2006. This exceeds the company's year- end target and more than doubles the number of premises passed by year-end 2005. Availability of FiOS TV service significantly ramped up in the fourth quarter 2006. FiOS TV was available for sale to 2.4 million premises as of year-end -- nearly double the number of premises as at the end of the third quarter 2006. Verizon Telecom, which serves wireline residential and small- business customers, had 207,000 FiOS TV customers at the end of its first full year of offering the service, adding 89,000 in the fourth quarter. As of year-end 2006, Verizon Telecom provided 7.0 million total broadband connections -- which include customers of both DSL and FiOS Internet services -- an increase of 35.7 percent compared with year-end 2005. In 2006, Verizon Telecom added more than 1.8 million net new broadband connections, 517,000 of which serve FiOS Internet customers. In the fourth quarter 2006, Verizon Telecom added 409,000 net broadband connections. FiOS Internet customers accounted for 165,000 of the net broadband connection additions in the fourth quarter and totaled 687,000 at year-end. In the consumer market, new broadband and video sales have more than made up for a reduction in primary wireline voice access lines of customers who turned to wireless, cable or Internet protocol (IP) services. Verizon Telecom added 142,000 more net broadband and video customers during the fourth quarter 2006 than it lost in primary wireline voice access lines, compared with 120,000 added in the third quarter 2006. Primary residential access lines decreased by 366,000 in the fourth quarter 2006 compared with the third quarter 2006, while Verizon added 508,000 residential broadband and video customers over the same period. At year-end 2006, Verizon served 45.1 million total domestic wireline access lines -- which also include secondary residential lines, public telephones, business lines and wholesale voice connections. This is a 7.6 percent decrease compared with year-end 2005. Continued Revenue Growth at Verizon Business Verizon Business, which provides advanced communications and information technology solutions to large-business and government customers globally, generated sequential revenue growth for the third consecutive quarter as well as year-over-year revenue growth for the fourth quarter 2006. The company is the only major U.S.-based enterprise carrier to show such growth in that market. Verizon Business operating revenues rose to $5.3 billion in the fourth quarter 2006. This is a 2.3 percent increase compared with the third quarter 2006, and a 2.7 percent increase compared with the fourth quarter 2005 (pro- forma). During 2006, Verizon realized approximately $600 million in synergies from the integration of the former MCI, ahead of the company's year-end target of $550 million. With systems integration projects well under way, Verizon has increased its 2007 MCI synergy target to $900 million, from $825 million. Verizon Business again launched new products and capabilities during the quarter as it continued to meet the ongoing global enterprise market shift to IP-based products and services. New offerings included expansion of the company's VoIP (voice over IP) and Ethernet capabilities internationally; cutting-edge video- and Web-based conferencing capabilities; and enhancements to its virtual private network portfolio. Verizon Business also signed an agreement with five major Asia-Pacific carriers to build the first next- generation, high-speed cable system directly linking mainland China and the United States, further highlighting the company's global presence and growth. Strong Cash Flows, Share Repurchases At the consolidated level, cash flows from continuing operations were $23.0 billion in 2006, compared with $20.4 billion in 2005. Capital expenditures totaled $17.1 billion in 2006, including $1.6 billion due to the inclusion of former MCI, compared with $15.0 billion in 2005. Verizon repurchased $1.7 billion in shares in 2006 and returned $4.7 billion in dividends to shareholders. Verizon's total debt at the end of 2006 was $36.4 billion, compared with $38.3 billion at the end of 2005, excluding debt from discontinued operations. Special Items Detailed Verizon's adjusted earnings from continuing operations (non-GAAP) exclude income from directories publishing, Verizon Dominicana and PRT, and were 52 cents per share for the fourth quarter 2006 and $2.06 per share for the full year. Special items in the fourth quarter 2006 included $541 million, or 19 cents per share, related to the sale of Verizon Dominicana which, as previously announced, was due to the impact of taxes on reinvested earnings net of a pre-tax gain on the sale. Other special items were 3 cents per share in charges for costs related to the fourth-quarter spin-off of Verizon's directories publishing business, and a total of 5 cents per share for severance, pension and benefits charges; MCI merger integration costs; and relocation and other costs related to establishing the Verizon Center in New Jersey. Special items in the fourth quarter 2005 included a total of 4 cents per share in net expenses for changes to management retirement benefit plans, as well as severance and relocation costs. Special items for the full-year 2006 totaled 42 cents per share in charges, including the 27 cents per share detailed above for the fourth quarter; additional severance, pension and benefits charges, and merger integration and relocation costs in the first three quarters; the extinguishment of debt; and the cumulative effect of an accounting change. Special items for 2005 included non-recurring gains of 12 cents per share each related to tax benefits and the sale of operations in Hawaii. These gains were partially offset by a total of 15 cents per share in charges for a net tax expense related to the repatriation of foreign earnings, as well as asset impairments and other costs. In January 2007, the government of Venezuela issued statements expressing its intent to nationalize certain companies, including Compania Anonima Nacional Telefonos de Venezuela (CANTV). As a result of these statements, Verizon is evaluating the potential effect on its investment in CANTV, which is currently carried at approximately $750 million. 2007 Guidance Items Verizon is targeting capital expenditures of from $17.5 billion to $17.9 billion in 2007. As part of that total, Wireline capital expenditures are expected in the range of $10.7 billion to $10.9 billion, and Wireless capital expenditures are expected in the range of $6.6 billion to $6.8 billion. Verizon is also targeting approximately the same level of share repurchases in 2007 as the $1.7 billion repurchased in 2006. Earnings dilution from FiOS deployment -- which, as previously announced, will be at its peak through the first quarter 2007 -- is expected to be about 11 cents per share in the first quarter and then decline in each successive quarter in 2007. Business Highlights Following are highlights for Verizon's Wireless and Wireline business segments. Wireless:
* Service revenues (which do not include taxes and regulatory fees) were
$8.7 billion for the fourth quarter 2006, up 16.9 percent year-over-
year. For the year, service revenues were $32.8 billion, up 16.6
percent. Total service ARPU (average revenue per user, per month) was
$50.12 for the quarter and $49.80 for the full year, up 1.5 percent and
0.6 percent, respectively, compared with similar periods in 2005.
Retail service ARPU was higher at $50.78 for the fourth quarter and
$50.44 for the full year, an increase of 1.7 percent and 0.7 percent,
respectively, compared with similar periods in 2005.
* Cost efficiency continued to lead the industry. Cash expense per
customer declined 1.3 percent for the full year, but increased slightly
in the fourth quarter to $28.46 as the company added a record volume of
net new retail customers.
* For the third consecutive year, data services revenues doubled over the
previous year, contributing $4.5 billion in revenues in 2006. In the
fourth quarter, data revenues were 15.8 percent of all service revenues,
up from 9.8 percent in the fourth quarter of 2005. Data service ARPU in
the fourth quarter increased by 63 percent over the year-ago quarter.
The company had 34.3 million retail data customers in December -- a 44
percent increase over fourth quarter 2005.
* The company's continued expansion of its national 3G EV-DO high-speed
data network, and a leading lineup of business and consumer devices,
drove growth in revenues from data services. During the fourth quarter,
Verizon Wireless extended its wireless broadband network reach to new
areas in more than 30 states across the country, making it available to
more than 200 million Americans. At the end of the fourth quarter, one-
third of the company's retail customers -- 18.8 million -- had
broadband-capable devices, including phones, PDAs, BlackBerries and
laptop PC cards.
* During the fourth quarter, the company continued to roll out more
broadband-capable devices. To enhance business connectivity, Verizon
Wireless introduced the Sierra Wireless AirCard 595 PC card, the first
EV-DO Revision A-compatible PC card for use on the Verizon Wireless
network. The PC card currently is fully compatible with the company's
nationwide EV-DO and CDMA 1X networks and will enable customers, through
a simple over-the-air download, to take advantage of Rev A increased
speeds where the enhanced service becomes available, beginning shortly.
Verizon Wireless was selected as the world's best wireless service
provider in the 2006 Reader's Choice Best in Business Travel Awards by
Business Traveler magazine.
* For consumers, the company launched two new handsets available
exclusively from Verizon Wireless: the LG enV, which offers a full
QWERTY keyboard for e-mail and messaging, Bluetooth capabilities, an
integrated 2.0 megapixel camera and camcorder, and multimedia features
such as V CAST Music and VZ Navigator; and the LG 8600, an ultra-sleek
lightweight phone with a glossy black finish that comes fully loaded
with the ability to download V CAST Music, video clips and 3D games,
among other features. Verizon Wireless now offers 18 music-enabled
models that allow customers to browse and download from the V CAST Music
store of 1.5 million songs.
* In early January, Verizon Wireless announced that it plans to launch V
CAST Mobile TV later in the first quarter of 2007. V CAST Mobile TV,
expected to be the first true mobile TV service in the nation, will
feature the best of broadcast and cable television with live content and
other programming 24 hours a day from many of the world's best-known
entertainment brands, including CBS Mobile, Comedy Central, Fox Mobile,
MTV Mobile, NBC News, NBC Entertainment and Nickelodeon.
* Get It Now services continued to grow in popularity. During the fourth
quarter, Verizon Wireless customers exchanged a total of 17.7 billion
text messages -- a company and industry record -- and more than 353
million picture/video messages. Customers also completed more than 78
million downloads of games, ringtones, ringback tones and exclusive
content.
* In November, Verizon Wireless enhanced its Worry Free Guarantee with
additional benefits for its loyal customers and those newly joining who
sign up for My Account, the company's free account management online
site. In addition, Verizon Wireless became the first wireless company
to introduce a declining early termination fee structure for contracts
signed or renewed beginning Nov. 16, 2006.
Wireline:
* Total Wireline operating revenues, which includes both Verizon Telecom
and Verizon Business, were $12.7 billion in the fourth quarter 2006 and
$50.8 billion for the year, increases of 36.1 percent and 35.0 percent,
respectively, compared with fourth quarter and full-year 2005.
* On a pro-forma basis, Wireline operating revenues decreased 3.5 percent,
comparing fourth quarter 2006 with fourth quarter 2005, driven in part
by a continuation of the expected declines in former MCI operations
serving mass market (residential and small business) customers. This is
a sequential improvement from the 4.7 percent decrease in pro-forma
Wireline operating revenues, comparing third quarter 2006 with third
quarter 2005.
* Data revenues were $4.2 billion in the fourth quarter 2006, up 92.8
percent from the fourth quarter 2005 -- a comparison favorably affected
by the inclusion of MCI this year. For the year, data revenues of $16.1
billion were 31.6 percent of total annual Wireline revenues.
Verizon Telecom
* FiOS Internet services are becoming increasingly available for sale in
16 states, as Verizon's FTTP network passed more than 6 million premises
by the end of the year. As previously announced, the company's target
is to pass 9 million premises by year-end 2007.
* FiOS Internet service penetration stands at more than 14 percent across
all markets, with the service available for sale to 4.8 million premises
as of the end of the year. This compares with more than 7 percent
market penetration at year-end 2005. In December, Verizon Telecom
announced the availability of TrueSwitch service, a product that helps
Internet-access customers in switching to Verizon Internet or DSL
services.
* Verizon had 207,000 FiOS TV customers at year-end, and the service was
available for sale to 2.4 million premises, with almost half of the
increased availability in the fourth quarter occurring in the last two
weeks of the year. This represents a 9 percent market penetration rate
after the company's first full year of offering video, and FiOS TV is
now offered in more than 200 cities in parts of 10 states.
* By year-end 2006, Verizon Telecom had obtained more than 600 cable TV
franchises covering more than 7 million households. In the fourth
quarter, the company announced programming distribution agreements with
Comcast and Rainbow Media Holdings.
* In early January 2007, Verizon Telecom introduced a new FiOS interactive
media guide and a platform that offers the company's growing base of
FiOS TV customers a myriad of multimedia applications linking
television, the Internet, personal computers and phones. Both will be
available in the first half of 2007.
* Complementing the FiOS TV rollout, Verizon now has 540,000 customers who
receive a Verizon DIRECTV bundle, adding 44,000 net new customers in the
fourth quarter.
* As FiOS customer growth ramped up, earnings dilution from FiOS
deployment was 10 cents per share in the fourth quarter and 32 cents per
share for the year.
* Approximately 7.9 million Verizon Freedom packages were in service to
mass market customers by the end of 2006, an increase from approximately
5.5 million at the end of 2005. Verizon Freedom packages, which offer
local wireline services with various combinations of long-distance and
Internet access, are part of a bundling strategy designed to retain
retail, primary access line customers.
* Among legacy Verizon customers (that is, excluding former MCI mass
market customers), the average monthly revenue per household in the
fourth quarter 2006 was $53.60, an increase of 3.6 percent compared with
the fourth quarter 2005.
* In the fourth quarter, Verizon opened pilot Verizon Experience stores in
Texas and Virginia. The hi-tech stores, featuring a concierge and
innovative demo bar, bring together the services offered by Verizon
Wireless and Verizon Telecom, including FiOS services; Verizon One, an
advanced home communications system for broadband customers; and
VoiceWing, a high-quality, low-cost, Internet-based calling service.
Verizon Business
* Pro-forma revenues from key strategic services, such as IP and managed
services, grew more than 27 percent in the fourth quarter 2006, compared
with the fourth quarter 2005.
* Leading industry authorities continued to recognize the power of the
company's strategy and product portfolio during the quarter. Industry
analyst firm Frost & Sullivan selected Verizon Business to receive both
its 2006 North American Enterprise VoIP Services Customer Value
Enhancement Award and its Customer Service Leadership Award for the
North American managed services market. Verizon Business also received
the 2006 Ethernet Provider of the Year Award for Market Leadership from
Heavy Reading, another industry analyst firm, as well as the 2006
INTERNET TELEPHONY Excellence Award for its Hosted IP Centrex solution.
Additionally, Verizon Business was named a Leader in the Gartner Magic
Quadrant report for European network services providers.
* In addition to enhancing its global VoIP capabilities during the
quarter, Verizon Business expanded its Ethernet Virtual Private Line
International service from the United States to six countries and
territories in the Asia-Pacific region. The company also expanded its
information technology support services for corporate and government
customers; unveiled a new integrated online customer center portal; and
extended its Remote IP Application Management service to Europe, Latin
America and Asia-Pacific.
* The company's undersea cable initiative, called the Trans-Pacific
Express, will use the latest optical technology to provide greater
capacity and higher speeds to meet the dramatic increase in demand for
IP, data and voice communications with the Asia-Pacific region.
* Verizon Business continues to outpace the industry in selling strategic
services, including IP, IT, Ethernet, and managed and professional
services. GS1, a leading global organization dedicated to improving the
efficiency and visibility of supply and demand chains globally and
across sectors, has signed an agreement with Verizon Business for IP
Application Hosting Services, as did Plateau Systems, a leading provider
of software for developing, managing and optimizing organizational
skills.
* Multinational corporations completing new agreements with Verizon
Business during the quarter included Time Warner Inc. Financial
customers, including JPMorgan Chase, extended relationships with Verizon
Business, while customers such as Barnes & Noble College Booksellers and
Interwise continued to contribute to the success of Private IP, the
fastest growing product at Verizon Business. Nearly 40 percent of
Private IP customers choose a Managed Private IP solution.
* Colonial Williamsburg, the world's largest living history museum,
selected the company's IP multimedia content distribution platform --
including reliable, high-quality streaming and downloading solutions --
to enhance the way the popular Virginia vacation attraction delivers
entertainment and educational packages and other services to patrons
worldwide.
* Verizon Business completed important agreements with federal customers,
including the U.S. Department of Agriculture's Forest Service and the
U.S. Postal Service. In addition, through its Government and Education
organization, Verizon Business reached agreements for Enhanced 911
services with the city of New York and an extension of the CALNET I
contract with the state of California.
* Verizon Business also won significant new business internationally
during the quarter. This included Tandberg, a video conferencing
provider that turned to Verizon Business for a Private IP solution to
support its global operations. Reinforcing its prominence in the
automotive sector, Verizon Business signed a new contract with leading
manufacturer BMW AG, which will extend its Private IP network into
Eastern Europe. Customers that have extended their relationship with
Verizon Business include global beverage company Campari Group; Royal
Numico, a Netherlands-based producer of nutritional products; and MCAP,
Canada's largest independent mortgage and equipment financing company.
Verizon Communications Inc. (NYSE: VZ) , headquartered in New York, is a leader in delivering broadband and other wireline and wireless communication innovations to mass market, business, government and wholesale customers. Verizon Wireless operates America's most reliable wireless network, serving more than 59 million customers nationwide. Verizon's Wireline operations include Verizon Business, which operates one of the most expansive wholly owned global IP networks, and Verizon Telecom, which is deploying the nation's most advanced fiber-optic network to deliver the benefits of converged communications, information and entertainment services to customers. A Dow 30 company, Verizon has a diverse workforce of approximately 242,000 and last year generated consolidated operating revenues of more than $88 billion. For more information, visit http://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 http://www.verizon.com/news. To receive news releases by e-mail, visit the News Center and register for customized automatic delivery of Verizon news releases. NOTE: This news release contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: materially adverse changes in economic and industry conditions and 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; 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; the timing, scope and financial impacts of our deployment of fiber-to-the-premises broadband technology; the ability of Verizon Wireless to continue to obtain sufficient spectrum resources; 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; the timing of the closings of the sales of our Latin American and Caribbean properties; and the extent and timing of our ability to obtain revenue enhancements and cost savings following our business combination with MCI, Inc. Verizon Communications Inc. Consolidated Statements of Income (dollars in millions, except per share amounts) 3 Mos. 3 Mos. 12 Mos. 12 Mos. Ended Ended % Ended Ended % Unaudited 12/31/06 12/31/05 Change 12/31/06 12/31/05 Change Operating Revenues $22,598 $17,927 26.1 $88,144 $69,518 26.8 Operating Expenses Cost of services and sales 9,058 6,246 45.0 34,994 24,200 44.6 Selling, general & administrative expense 6,431 5,063 27.0 25,232 19,652 28.4 Depreciation and amortization expense 3,665 3,466 5.7 14,545 13,615 6.8 Sales of businesses, net - - * - (530) (100.0) Total Operating Expenses 19,154 14,775 29.6 74,771 56,937 31.3 Operating Income 3,444 3,152 9.3 13,373 12,581 6.3 Equity in earnings of unconsolidated businesses 157 133 18.0 773 686 12.7 Other income and (expense), net 132 22 * 395 311 27.0 Interest expense (551) (528) 4.4 (2,349) (2,129) 10.3 Minority interest (1,098) (937) 17.2 (4,038) (3,001) 34.6 Income Before Provision for Income Taxes, Discontinued Operations and Cumulative Effect of Accounting Change 2,084 1,842 13.1 8,154 8,448 (3.5) Provision for income taxes (694) (532) 30.5 (2,674) (2,421) 10.5 Income Before Discontinued Operations and Cumulative Effect of Accounting Change 1,390 1,310 6.1 5,480 6,027 (9.1) Income (loss) from discontinued operations, net of tax (1) (358) 348 * 759 1,370 (44.6) Cumulative effect of accounting change, net of tax - - * (42) - * Net Income $1,032 $1,658 (37.8) $6,197 $7,397 (16.2) Basic Earnings per Common Share (2) Income before discontinued operations and cumulative effect of accounting change $.48 $.47 2.1 $1.88 $2.18 (13.8) Income (loss) from discontinued operations, net of tax (.12) .13 * .26 .50 (48.0) Cumulative effect of accounting change, net of tax - - * (.01) - * Net income $.35 $.60 (41.7) $2.13 $2.67 (20.2) Weighted average number of common shares (in millions) 2,916 2,764 2,912 2,766 Diluted Earnings per Common Share (2) (3) Income before discontinued operations and cumulative effect of accounting change $.48 $.47 2.1 $1.88 $2.16 (13.0) Income (loss) from discontinued operations, net of tax (.12) .12 * .26 .49 (46.9) Cumulative effect of accounting change, net of tax - - * (.01) - * Net income $.35 $.59 (40.7) $2.12 $2.65 (20.0) Weighted average number of common shares-assuming dilution (in millions) 2,919 2,816 2,938 2,817 Footnotes: (1) Discontinued Operations includes Verizon Information Services as well as our interests in Telecomunicaciones de Puerto Rico, Inc. and Verizon Dominicana, C. por A. (2) EPS totals may not add due to rounding. (3) Diluted Earnings per Share includes (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $31 million for the year-to-date 2006, and $17 million and $60 million for the fourth quarter and year-to-date 2005, respectively, and (ii) the dilutive effect of shares issuable under our stock-based compensation plans, exchangeable equity interests and zero coupon convertible debt, which represent the only potential dilution. The zero coupon debt was retired on May 15, 2006. The exchangeable equity interest was converted on August 15, 2006 by issuing 29.5 million Verizon shares. * Not meaningful Verizon Communications Inc. Consolidated Statements of Income Before Special Items (dollars in millions, except per share amounts) 3 Mos. 3 Mos. 12 Mos. 12 Mos. Ended Ended % Ended Ended % Unaudited 12/31/06 12/31/05 Change 12/31/06 12/31/05 Change Operating Revenues (1) Wireline $12,733 $9,359 36.1 $50,794 $37,616 35.0 Domestic Wireless 10,099 8,686 16.3 38,043 32,301 17.8 Other (234) (118) 98.3 (693) (579) 19.7 Total Operating Revenues 22,598 17,927 26.1 88,144 69,338 27.1 Operating Expenses (1) Cost of services and sales 9,039 6,246 44.7 34,969 24,129 44.9 Selling, general & administrative expense 6,238 4,860 28.4 24,416 19,341 26.2 Depreciation and amortization expense 3,665 3,466 5.7 14,545 13,615 6.8 Total Operating Expenses 18,942 14,572 30.0 73,930 57,085 29.5 Operating Income 3,656 3,355 9.0 14,214 12,253 16.0 Operating income impact of operations sold (1) - - * - 62 (100.0) Equity in earnings of unconsolidated businesses 157 133 18.0 773 686 12.7 Other income and (expense), net 132 26 * 395 325 21.5 Interest expense (551) (528) 4.4 (2,323) (2,129) 9.1 Minority interest (1,098) (937) 17.2 (4,038) (3,001) 34.6 Income Before Provision for Income Taxes and Discontinued Operations 2,296 2,049 12.1 9,021 8,196 10.1 Provision for income taxes (774) (618) 25.2 (3,000) (2,415) 24.2 Income Before Discontinued Operations 1,522 1,431 6.4 6,021 5,781 4.2 Income from discontinued operations, net of tax (2) 284 348 (18.4) 1,398 1,370 2.0 Net Income Before Special Items $1,806 $1,779 1.5 $7,419 $7,151 3.7 Basic Adjusted Earnings per Common Share (3) Income before discontinued operations $.52 $.52 - $2.07 $2.09 (1.0) Income from discontinued operations, net of tax .10 .13 (23.1) .48 .50 (4.0) Net income $.62 $.64 (3.1) $2.55 $2.59 (1.5) Weighted average number of common shares (in millions) 2,916 2,764 2,912 2,766 Diluted Adjusted Earnings per Common Share (3) (4) Income before discontinued operations $.52 $.51 2.0 $2.06 $2.07 (0.5) Income from discontinued operations, net of tax .10 .12 (16.7) .48 .49 (2.0) Net income $.62 $.64 (3.1) $2.54 $2.56 (0.8) Weighted average number of common shares-assuming dilution (in millions) 2,919 2,816 2,938 2,817 Footnotes: (1) Reclassifications of prior period amounts have been made, where appropriate, to reflect comparable operating results, primarily to exclude Wireline access lines sold, as follows: Revenues $- $- $- $180 Expenses $- $- $- $118 (2) Discontinued Operations includes Verizon Information Services as well as our interests in Telecomunicaciones de Puerto Rico, Inc. and Verizon Dominicana, C. por A. (3) EPS totals may not add due to rounding. (4) Diluted Adjusted Earnings per Share includes (i) income related to share dilution (exchangeable equity interests and zero coupon convertible debt) of $31 million for the year-to-date 2006, and $17 million and $60 million for the fourth quarter and year-to-date 2005, respectively, and (ii) the dilutive effect of shares issuable under our stock-based compensation plans, exchangeable equity interests and zero coupon convertible debt, which represent the only potential dilution. The zero coupon debt was retired on May 15, 2006. The exchangeable equity interest was converted on August 15, 2006 by issuing 29.5 million Verizon shares. * Not meaningful Verizon Communications Inc. Consolidated Statements of Income - Reconciliations (dollars in millions, except per share amounts) Special and Non-Recurring Items Sever- 3 Mos. 3 Mos. Verizon ance, Ended Ended Merger Center Pension Loss on Idearc 12/31/06 12/31/06 Integr- Relo- and Sale of Spin-Off Before Reported ation cation, Benefits Verizon Related Special Unaudited (GAAP) Costs Net Charges Dominicana Charges Items Operating Revenues $22,598 $- $- $- $- $- $22,598 Operating Expenses Cost of services and sales 9,058 (19) - - - - 9,039 Selling, general & adminis- trative expense 6,431 (56) (46) (91) - - 6,238 Depreciation and amortization expense 3,665 - - - - - 3,665 Total Operating Expenses 19,154 (75) (46) (91) - - 18,942 Operating Income 3,444 75 46 91 - - 3,656 Equity in earnings of unconsolidated businesses 157 - - - - - 157 Other income and (expense), net 132 - - - - - 132 Interest expense (551) - - - - - (551) Minority interest (1,098) - - - - - (1,098) Income Before Provision for Income Taxes and Discontinued Operations 2,084 75 46 91 - - 2,296 Provision for income taxes (694) (28) (16) (36) - - (774) Income Before Discontinued Operations 1,390 47 30 55 - - 1,522 Income (loss) from discontinued operations, net of tax (358) - - - 541 101 284 Net Income $1,032 $47 $30 $55 $541 $101 $1,806 Basic Earnings per Common Share (1) Income before discontinued operations $.48 $.02 $.01 $.02 $- $- $.52 Income (loss) from discontinued operations, net of tax (.12) - - - .19 .03 .10 Net income $.35 $.02 $.01 $.02 $.19 $.03 $.62 Diluted Earnings per Common Share (1) Income before discontinued operations $.48 $.02 $.01 $.02 $- $- $.52 Income (loss) from discontinued operations, net of tax (.12) - - - .19 .03 .10 Net income $.35 $.02 $.01 $.02 $.19 $.03 $.62 Special and Non-Recurring Items 3 Mos. 3 Mos. Verizon Ended Ended Center Pension Tax on 12/31/05 12/31/05 Relo- and Other Re- Before Reported cation, Benefit Special patriated Special Unaudited (GAAP) Net Charges Severance Items Earnings Items Operating Revenues $17,927 $- $- $- $- $- $17,927 Operating Expenses Cost of services and sales 6,246 - - - - - 6,246 Selling, general & adminis- trative expense 5,063 (46) (98) (59) - - 4,860 Depreciation and amortization expense 3,466 - - - - - 3,466 Total Operating Expenses 14,775 (46) (98) (59) - - 14,572 Operating Income 3,152 46 98 59 - - 3,355 Equity in earnings of unconsolidated businesses 133 - - - - - 133 Other income and (expense), net 22 - - - 4 - 26 Interest expense (528) - - - - - (528) Minority interest (937) - - - - - (937) Income Before Provision for Income Taxes and Discontinued Operations 1,842 46 98 59 4 - 2,049 Provision for income taxes (532) (17) (39) (23) (2) (5) (618) Income Before Discontinued Operations 1,310 29 59 36 2 (5) 1,431 Income from discontinued operations, net of tax 348 - - - - - 348 Net Income $1,658 $29 $59 $36 $2 $(5) $1,779 Basic Earnings per Common Share (1) Income before discontinued operations $.47 $.01 $.02 $.01 $- $- $.52 Income from discontinued operations, net of tax .13 - - - - - .13 Net income $.60 $.01 $.02 $.01 $- $- $.64 Diluted Earnings per Common Share (1) Income before discontinued operations $.47 $.01 $.02 $.01 $- $- $.51 Income from discontinued operations, net of tax .12 - - - - - .12 Net income $.59 $.01 $.02 $.01 $- $- $.64 Footnote: (1) EPS totals may not add due to rounding. Note: See http://www.verizon.com/investor for a reconciliation of other non-GAAP measures included in this Quarterly Bulletin. Verizon Communications Inc. Consolidated Statements of Income - Reconciliations (dollars in millions, except per share amounts) Special and Non-Recurring Items 12 Mos. Impact of Ended Accounting 12/31/06 for Merger Reported Extinguishment Share Based Integration Unaudited (GAAP) of Debt Payments Costs Operating Revenues $88,144 $- $- $- Operating Expenses Cost of services and sales 34,994 - - (25) Selling, general & administrative expense 25,232 - - (207) Depreciation and amortization expense 14,545 - - - Total Operating Expenses 74,771 - - (232) Operating Income 13,373 - - 232 Equity in earnings of unconsolidated businesses 773 - - - Other income and (expense), net 395 - - - Interest expense (2,349) 26 - - Minority interest (4,038) - - - Income Before Provision for Income Taxes, Discontinued Operations and Cumulative Effect of Accounting Change 8,154 26 - 232 Provision for income taxes (2,674) (10) - (86) Income Before Discontinued Operations and Cumulative Effect of Accounting Change 5,480 16 - 146 Income from discontinued operations, net of tax 759 - - - Cumulative effect of accounting change, net of tax (42) - 42 - Net Income $6,197 $16 $42 $146 Basic Earnings per Common Share (1) Income before discontinued operations and cumulative effect of accounting change $1.88 $.01 $- $.05 Income from discontinued operations, net of tax .26 - - - Cumulative effect of accounting change, net of tax (.01) - .01 - Net income $2.13 $.01 $.01 $.05 Diluted Earnings per Common Share (1) Income before discontinued operations and cumulative effect of accounting change $1.88 $.01 $- $.05 Income from discontinued operations, net of tax .26 - - - Cumulative effect of accounting change, net of tax (.01) - .01 - Net income $2.12 $.01 $.01 $.05 Special and Non-Recurring Items 12 Mos. Severance, Ended Verizon Pension Loss on Idearc 12/31/06 Center and Sale of Spin-Off Before Relocation, Benefits Verizon Related Special Unaudited Net Charges Dominicana Charges Items Operating Revenues $- $- $- $- $88,144 Operating Expenses Cost of services and sales - - - - 34,969 Selling, general & administrative expense (184) (425) - - 24,416 Depreciation and amortization expense - - - - 14,545 Total Operating Expenses (184) (425) - - 73,930 Operating Income 184 425 - - 14,214 Equity in earnings of unconsolidated businesses - - - - 773 Other income and (expense), net - - - - 395 Interest expense - - - - (2,323) Minority interest - - - - (4,038) Income Before Provision for Income Taxes, Discontinued Operations and Cumulative Effect of Accounting Change 184 425 - - 9,021 Provision for income taxes (66) (164) - - (3,000) Income Before Discontinued Operations and Cumulative Effect of Accounting Change 118 261 - - 6,021 Income from discontinued operations, net of tax - (3) 541 101 1,398 Cumulative effect of accounting change, net of tax - - - - - Net Income $118 $258 $541 $101 $7,419 Basic Earnings per Common Share (1) Income before discontinued operations and cumulative effect of accounting change $.04 $.09 $- $- $2.07 Income from discontinued operations, net of tax - - .19 .03 .48 Cumulative effect of accounting change, net of tax - - - - - Net income $.04 $.09 $.19 $.03 $2.55 Diluted Earnings per Common Share (1) Income before discontinued operations and cumulative effect of accounting change $.04 $.09 $- $- $2.06 Income from discontinued operations, net of tax - - .18 .03 .48 Cumulative effect of accounting change, net of tax - - - - - Net income $.04 $.09 $.18 $.03 $2.54 Special and Non-Recurring Items 12 Mos. Lease Ended Verizon Impairment 12/31/05 Sales of Impact of Center and Other Reported Businesses, Operations Relocation, Special Unaudited (GAAP) Net Sold Net Items Operating Revenues $69,518 $- $(180) $- $- Operating Expenses Cost of services and sales 24,200 - (71) - - Selling, general & administrative expense 19,652 - (47) 18 (125) Depreciation and amortization expense 13,615 - - - - Sales of businesses, net (530) 530 - - - Total Operating Expenses 56,937 530 (118) 18 (125) Operating Income 12,581 (530) (62) (18) 125 Operating income impact of operations sold - - 62 - - Equity in earnings of unconsolidated businesses 686 - - - - Other income and (expense), net 311 - - - 14 Interest expense (2,129) - - - - Minority interest (3,001) - - - - Income Before Provision for Income Taxes and Discontinued Operations 8,448 (530) - (18) 139 Provision for income taxes (2,421) 194 - 10 (6) Income Before Discontinued Operations 6,027 (336) - (8) 133 Income from discontinued operations, net of tax 1,370 - - - - Net Income $7,397 $(336) $- $(8) $133 Basic Earnings per Common Share (1) Income before discontinued operations $2.18 $(.12) $- $- $.05 Income from discontinued operations, net of tax .50 - - - - Net income $2.67 $(.12) $- $- $.05 Diluted Earnings per Common Share (1) Income before discontinued operations $2.16 $(.12) $- $- $.05 Income from discontinued operations, net of tax .49 - - - - Net income $2.65 $(.12) $- $- $.05 Special and Non-Recurring Items 12 Mos. Ended Pension 12/31/05 Tax on and Before Tax Repatriated Benefit Special Unaudited Benefits Earnings Charges Severance Items Operating Revenues $- $- $- $- $69,338 Operating Expenses Cost of services and sales - - - - 24,129 Selling, general & administrative expense - - (98) (59) 19,341 Depreciation and amortization expense - - - - 13,615 Sales of businesses, net - - - - - Total Operating Expenses - - (98) (59) 57,085 Operating Income - - 98 59 12,253 Operating income impact of operations sold - - - - 62 Equity in earnings of unconsolidated businesses - - - - 686 Other income and (expense), net - - - - 325 Interest expense - - - - (2,129) Minority interest - - - - (3,001) Income Before Provision for Income Taxes and Discontinued Operations - - 98 59 8,196 Provision for income taxes (336) 206 (39) (23) (2,415) Income Before Discontinued Operations (336) 206 59 36 5,781 Income from discontinued operations, net of tax - - - - 1,370 Net Income $(336) $206 $59 $36 $7,151 Basic Earnings per Common Share (1) Income before discontinued operations $(.12) $.07 $.02 $.01 $2.09 Income from discontinued operations, net of tax - - - - .50 Net income $(.12) $.07 $.02 $.01 $2.59 Diluted Earnings per Common Share (1) Income before discontinued operations $(.12) $.07 $.02 $.01 $2.07 Income from discontinued operations, net of tax - - - - .49 Net income $(.12) $.07 $.02 $.01 $2.56 Footnote: (1) EPS totals may not add due to rounding. Note: See http://www.verizon.com/investor for a reconciliation of other non-GAAP measures included in this Quarterly Bulletin. Verizon Communications Inc.
Selected Financial and Operating Statistics
(dollars in millions, except per share amounts)
Unaudited 12/31/06 12/31/05
Debt to debt and shareowners' equity
ratio-end of period 43.1% 49.1%
Book value per common share $16.48 $14.36
Common shares outstanding (in millions)
End of year 2,912 2,763
Total employees (1) 242,330 206,036
Unaudited 3 Mos. 3 Mos. 12 Mos. 12 Mos.
Ended Ended Ended Ended
12/31/06 12/31/05 12/31/06 12/31/05
Capital expenditures (including
capitalized software)
Wireline $2,915 $2,051 $10,259 $8,267
Domestic Wireless 1,817 1,522 6,618 6,484
Other 91 81 224 213
Total $4,823 $3,654 $17,101 $14,964
Cash dividends declared per common
share $.405 $.405 $1.62 $1.62
Footnote:
(1) Prior period has been reclassified to reflect comparable amount.
Verizon Communications Inc.
Consolidated Balance Sheets
(dollars in millions)
Unaudited 12/31/06 12/31/05 $ Change
Assets
Current assets
Cash and cash equivalents $3,219 $760 $2,459
Short-term investments 2,434 2,146 288
Accounts receivable, net 10,891 8,534 2,357
Inventories 1,514 1,522 (8)
Assets held for sale 2,592 4,233 (1,641)
Prepaid expenses and other 1,888 2,125 (237)
Total current assets 22,538 19,320 3,218
Plant, property and equipment 204,109 187,761 16,348
Less accumulated depreciation 121,753 114,774 6,979
82,356 72,987 9,369
Investments in unconsolidated
businesses 4,868 4,602 266
Wireless licenses 50,959 47,781 3,178
Goodwill 5,655 315 5,340
Other intangible assets, net 5,140 4,068 1,072
Other assets 17,288 19,057 (1,769)
Total Assets $188,804 $168,130 $20,674
Liabilities and Shareowners'
Investment
Current liabilities
Debt maturing within one year $7,715 $6,688 $1,027
Accounts payable and accrued
liabilities 14,320 11,747 2,573
Liabilities related to assets held
for sale 2,154 2,870 (716)
Other 8,091 5,395 2,696
Total current liabilities 32,280 26,700 5,580
Long-term debt 28,646 31,569 (2,923)
Employee benefit obligations 30,779 17,693 13,086
Deferred income taxes 16,804 22,831 (6,027)
Other liabilities 3,957 3,224 733
Minority interest 28,337 26,433 1,904
Shareowners' investment
Common stock 297 277 20
Contributed capital 40,124 25,369 14,755
Reinvested earnings 17,324 15,905 1,419
Accumulated other comprehensive loss (8,064) (1,783) (6,281)
Common stock in treasury, at cost (1,871) (353) (1,518)
Deferred compensation - employee
stock ownership plans and other 191 265 (74)
Total shareowners' investment 48,001 39,680 8,321
Total Liabilities and Shareowners'
Investment $188,804 $168,130 $20,674
Verizon Communications Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
12 Mos. 12 Mos.
Ended Ended
Unaudited 12/31/06 12/31/05 $ Change
Cash Flows From Operating Activities
Net Income $6,197 $7,397 $(1,200)
Adjustments to reconcile net income
to net cash provided by operating
activities - continuing operations:
Depreciation and amortization expense 14,545 13,615 930
Sales of businesses, net - (530) 530
Loss on sale of discontinued
operations 541 - 541
Employee retirement benefits 1,923 1,695 228
Deferred income taxes (252) (1,093) 841
Provision for uncollectible accounts 1,034 1,076 (42)
Equity in earnings of unconsolidated
businesses (773) (686) (87)
Cumulative effect of accounting
change, net of tax 42 - 42
Changes in current assets and
liabilities, net of effects
from acquisition/disposition of
businesses (1,635) (2,099) 464
Other, net 1,408 1,069 339
Net cash provided by operating
activities - continuing operations 23,030 20,444 2,586
Net cash provided by operating
activities - discontinued operations 1,076 1,581 (505)
Net cash provided by operating
activities 24,106 22,025 2,081
Cash Flows From Investing Activities
Capital expenditures (including
capitalized software) (17,101) (14,964) (2,137)
Acquisitions, net of cash acquired,
and investments (1,422) (4,684) 3,262
Proceeds from disposition of
businesses - 999 (999)
Net change in short-term investments 290 (346) 636
Other, net 811 532 279
Net cash used in investing activities
- continuing operations (17,422) (18,463) 1,041
Net cash used in investing activities
- discontinued operations 1,806 (29) 1,835
Net cash used in investing activities (15,616) (18,492) 2,876
Cash Flows From Financing Activities
Proceeds from long-term borrowings 3,983 1,487 2,496
Repayments of long-term borrowings
and capital lease obligations (11,233) (3,825) (7,408)
Increase in short-term obligations,
excluding current maturities 7,944 2,098 5,846
Dividends paid (4,719) (4,427) (292)
Proceeds from sale of common stock 174 37 137
Purchase of common stock for treasury (1,700) (271) (1,429)
Other, net (201) (57) (144)
Net cash used in financing activities
- continuing operations (5,752) (4,958) (794)
Net cash used in financing activities
- discontinued operations (279) (76) (203)
Net cash used in financing activities (6,031) (5,034) (997)
Increase (decrease) in cash and cash
equivalents 2,459 (1,501) 3,960
Cash and cash equivalents, beginning
of period 760 2,261 (1,501)
Cash and cash equivalents, end of
period $3,219 $760 $2,459
Verizon Communications Inc.
Wireline - Selected Financial Results
(dollars in millions)
3 Mos. 3 Mos. 12 Mos. 12 Mos.
Ended Ended % Ended Ended %
Unaudited 12/31/06 12/31/05 Change 12/31/06 12/31/05 Change
Wireline Operating
Revenues
Verizon Telecom
Mass Markets $5,514 $5,070 8.8 $22,528 $20,446 10.2
Wholesale 2,061 2,268 (9.1) 8,323 9,075 (8.3)
Other 580 708 (18.1) 2,408 2,593 (7.1)
Verizon Business
Enterprise Business 3,661 1,497 144.6 13,999 6,018 132.6
Wholesale 866 347 149.6 3,381 1,376 145.7
International and
Other 792 - * 3,110 - *
Eliminations (741) (531) 39.5 (2,955) (1,892) 56.2
Total Operating Revenues $12,733 $9,359 36.1 $50,794 $37,616 35.0
Operating Expenses
Cost of services and
sales 6,196 3,971 56.0 24,522 15,604 57.2
Selling, general &
administrative
expense 2,974 2,131 39.6 12,116 8,419 43.9
Depreciation and
amortization expense 2,426 2,219 9.3 9,590 8,801 9.0
Total Operating Expenses $11,596 8,321 39.4 $46,228 $32,824 40.8
Operating Income $1,137 $1,038 9.5 $4,566 $4,792 (4.7)
Operating Income Margin 8.9% 11.1% 9.0% 12.7%
Segment Income $434 $406 6.9 $1,634 $1,906 (14.3)
* Not meaningful
Verizon Communications Inc.
Wireline - Selected Operating Statistics
Unaudited 12/31/06 12/31/05 % Change
Switched access lines in service* (000)
Residence 27,797 30,902 (10.0)
Business 16,938 17,509 (3.3)
Public 344 392 (12.2)
Total 45,079 48,803 (7.6)
Wholesale voice connections** (000) 3,474 5,518 (37.0)
Broadband connections (000) 6,982 5,144 35.7
3 Mos. 3 Mos. 12 Mos. 12 Mos.
Ended Ended Ended Ended
Unaudited 12/31/06 12/31/05 % Change 12/31/06 12/31/05 % Change
High capacity and
digital data
revenues ($ in
millions)***
Data transport $3,881 $1,970 97.0 $14,973 $7,660 95.5
Data solutions 343 221 55.2 1,095 829 32.1
Total revenues $4,224 $2,191 92.8 $16,068 $8,489 89.3
Footnotes:
* Includes former MCI In-Franchise retail lines in 2006.
** Resale and UNE-P lines, including lines covered under commercial
agreements. Wholesale voice connections in 2006 exclude in-region
UNE-P lines purchased by former MCI entities as retail lines.
*** High capacity and digital data revenues for the year ended December
31, 2006 exclude approximately $96 million, attributable to amounts
earned by the former MCI prior to the completion of the merger with
Verizon.
The segment financial results above are adjusted to exclude the
effects of special and non-recurring items. The company's chief
decision makers exclude these items in assessing business unit
performance, primarily due to their non-operational nature.
Intersegment transactions have not been eliminated.
Certain reclassifications have been made, where appropriate, to
reflect comparable operating results.
Verizon Communications Inc.
Verizon Wireless - Selected Financial Results
(dollars in millions)
3 Mos. 3 Mos. 12 Mos. 12 Mos.
Ended Ended % Ended Ended %
Unaudited 12/31/06 12/31/05 Change 12/31/06 12/31/05 Change
Revenues
Service revenues $8,682 $7,430 16.9 $32,796 $28,131 16.6
Equipment and other 1,417 1,256 12.8 5,247 4,170 25.8
Total Revenues $10,099 $8,686 16.3 $38,043 $32,301 17.8
Operating Expenses
Cost of services and
sales 3,144 2,494 26.1 11,491 9,393 22.3
Selling, general &
administrative expense 3,202 2,717 17.9 12,039 10,768 11.8
Depreciation and
amortization expense 1,229 1,236 (0.6) 4,913 4,760 3.2
Total Operating Expenses $7,575 $6,447 17.5 $28,443 $24,921 14.1
Operating Income $2,524 $2,239 12.7 $9,600 $7,380 30.1
Operating Income Margin 25.0% 25.8% 25.2% 22.8%
Segment Income $812 $695 16.8 $2,976 $2,219 34.1
Verizon Communications Inc.
Verizon Wireless - Selected Operating Statistics
Unaudited 12/31/06 12/31/05 % Change
Subscribers (000) 59,052 51,337 15.0
Penetration 23.1% 20.5%
3 Mos. 3 Mos. 12 Mos. 12 Mos.
Ended Ended Ended Ended
Unaudited 12/31/06 12/31/05 % Change 12/31/06 12/31/05 % Change
Subscriber net
adds in
period (1) (000) 2,305 2,046 12.7 7,715 7,521 2.6
Total churn rate,
including prepaid 1.1% 1.2% 1.2% 1.3%
Footnotes:
The segment financial results above are adjusted to exclude the effects of special and non-recurring items. The company's chief decision makers exclude these items in assessing business unit performance, primarily due to their non-operational nature. Intersegment transactions have not been eliminated. Certain reclassifications have been made, where appropriate, to reflect comparable operating results. (1) Includes acquisition of 17,000 and 7,000 customers in the first and
second quarters of 2006, respectively; and 32,000, 4,000, 11,000 and
11,000 customers in the first, second, third and fourth quarters of
2005, respectively.
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