Verizon Reports Q4 Results

NEW YORK -- Verizon Communications Inc. (NYSE: VZ) today announced fourth-quarter and year-end 2003 results highlighted by customer gains in wireless, long-distance and broadband, continued solid cash flow, and overall revenue growth.

For the fourth quarter 2003, Verizon reported a loss of $1.5 billion (53 cents in fully diluted EPS) that includes $3.1 billion in special items, primarily $2.9 billion in previously announced costs associated with a voluntary separation plan under which more than 21,000 employees left the payroll in the quarter. Excluding special items, Verizon earned $1.6 billion in the quarter, or 58 cents per share.

For the year, Verizon reported earnings of $3.1 billion ($1.11 per share), or $7.3 billion ($2.62 per share) before special items.

Strength of Business Model

"In 2003, Verizon once again demonstrated the strength of its business model," said Chairman and CEO Ivan Seidenberg. "We have been successful at increasing our revenues, our customer base and our cash flow at the same time we have been transforming our cost structure, our operational efficiency, and our mix of products and services.

"We are winning customers in markets new to Verizon, such as nationwide long-distance and sophisticated data services to large businesses. In wireless, we are widening our industry lead. In broadband, we have aggressively added customers in DSL while setting a stake in the ground for new growth in 2004. Verizon has a unique leadership role to play in the new broadband and wireless era of communications."

Fourth-Quarter Financial Results

Verizon's fourth-quarter 2003 operating revenues were $17.3 billion, up 0.7 percent from the prior year's quarter, driven by Verizon Wireless' sixth consecutive quarter of double-digit, year-over-year revenue increases. Wireless service revenue grew 13.9 percent, to $5.4 billion, from $4.7 billion in the fourth quarter 2002. Total Verizon Wireless revenue, which includes equipment and other revenue, grew 14.6 percent to $6.0 billion, from $5.2 billion in the fourth quarter 2002.

Beginning in 2003, results from Verizon's directory publishing unit have been reported using the amortization method of accounting (see Information Services section below). Applying consistent accounting treatment to directory revenues, Verizon's consolidated revenues increased 2.6 percent in the fourth quarter 2003, compared with the fourth quarter 2002.

Total operating expenses were $19.4 billion in the fourth quarter 2003 and include special items as well as costs, such as a 3 percent lump-sum payment, associated with contract agreements covering most of Verizon's unionized workforce.

Fourth-quarter special items included a $2.9 billion severance, pension and benefit charge for the voluntary separation plan, and $0.2 billion for other charges associated with environmental remediation programs and leasing operations partially offset by net gains from sales of investments.

Year-End Financial Results

For the year, operating revenues totaled $67.8 billion in 2003, a 0.7 percent increase from 2002 on a reported basis and a 1.6 percent increase on a comparable basis. Revenues, operating expenses and statistics described on a comparable basis exclude the effects of 1.27 million switched access lines that were sold during 2002. Applying consistent accounting treatment to directory revenues, Verizon's comparable revenues increased 1.7 percent in 2003, compared with 2002.

Reported 2003 earnings of $3.1 billion included net charges of $4.2 billion. These net charges include special gains of $0.5 billion related to accounting changes and the net proceeds from sales of investments. These gains were more than offset by charges, including $3.4 billion related to severance, pension and benefit costs; $0.9 billion related to Verizon's decision to sell its consolidated interest in Mexican wireless carrier Grupo Iusacell; and $0.4 billion in other special items.

Reported operating expenses were $60.3 billion in 2003.

Debt Reduction and Cash Flow Gains

Total debt decreased 14.8 percent to $45.4 billion at year-end 2003, compared with $53.3 billion at year-end 2002. Net debt was $44.7 billion at year-end 2003, compared with $51.8 billion at year-end 2002.

Net cash provided by operating activities was $22.5 billion in 2003, compared with $22.1 billion in 2002, and capital expenditures totaled $11.9 billion in 2003, compared with $13.1 billion in 2002. With $4.2 billion in dividends paid in both years, free cash flow was $6.4 billion in 2003, compared with $4.8 billion in 2002.

Operational Growth

Verizon Wireless added nearly 1.5 million net subscribers in the fourth quarter and 5.0 million net subscribers for the year, the highest quarterly and annual net adds in the company's history. Customers totaled 37.5 million at year-end, up 15.5 percent over year-end 2002. In addition to its record net subscribers, Verizon Wireless sustained all-around strong performance for the quarter and for the year in revenue growth, profitability, record low churn and efficiency gains.

Verizon's revenue from interLATA long-distance services totaled more than $2 billion in 2003, as the company added a net of 736,000 long-distance lines in the fourth quarter 2003. Verizon ended the year with more than 16.6 million long-distance lines -- a net gain of about 4.2 million lines, or 33.3 percent, compared with the 12.5 million lines in service at year-end 2002.

Verizon also added a net of 203,000 DSL lines in the fourth quarter 2003, the company's largest quarterly gain in DSL lines in two years. Verizon ended the year with more than 2.3 million DSL lines, representing a net of 649,000 additional DSL lines since year-end 2002, a growth rate of 38.9 percent.

Verizon Communications Inc.