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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: July 1, 2003
(Date of earliest event reported)
VERIZON COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8606 23-2259884
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
1095 Avenue of the Americas,
New York, New York 10036
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (212) 395-2121
Not applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events and Regulation FD Disclosure.
Verizon Communications Inc. (Verizon) announced it has changed its method for
recognizing revenues and expenses in its directory business. In addition,
resulting from its recent decision to sell its consolidated 39.4% interest in
Grupo Iusacell S.A. de C.V. (Iusacell), Verizon announced it has reclassified
this investment as a discontinued operation in accordance with Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." As required by generally accepted accounting
principles (GAAP), the directory accounting change will be retroactive to
January 1, 2003, and will result in an impact on first-quarter financial
results. Current and prior-period financial information for Iusacell will be
reported as a discontinued operation. Additional reconciliations now required
under Securities and Exchange Commission (SEC) Regulation G pertaining to
non-GAAP financial information included in Verizon's 2002 SEC Annual Report on
Form 10-K are also provided herein.
Directory Accounting Change
The directory accounting change at Verizon's Information Services segment is
from the publication-date method to the amortization method. The
publication-date method recognizes revenues and direct expenses when
directories are distributed. Under the amortization method, which is
increasingly becoming the industry standard, revenues and direct expenses,
primarily printing and distribution costs, are recognized over the life of the
directory, which is usually 12 months. This accounting change affects the
timing of the recognition of revenues and expenses. It does not affect the
timing of cash flows. A one-time non-cash charge of approximately $2.7 billion
before taxes ($1.6 billion after-tax) was recorded, retroactive to January 1,
2003, for the cumulative effect of this accounting change.
This directory accounting change increases first quarter 2003 revenues,
operating expenses and net income of Verizon and its Information Services
segment by $321 million, $89 million and $143 million (5 cents per diluted
share), respectively. For comparison purposes only, if this accounting change
had occurred in the first quarter of 2002, Verizon's and its Information
Services segment's revenues, operating expenses and net income would have been
higher by $226 million, $67 million and $98 million (4 cents per diluted share),
respectively.
Iusacell Sale
The accounting for Iusacell is the result of Verizon's decision, announced June
13, 2003, to sell its 39.4% consolidated interest in Iusacell into a tender
offer launched by Movil Access, a Mexican company. Verizon recorded a one-time
charge of approximately $1.0 billion before taxes ($.9 billion after-tax) to
write-off its interest in Iusacell during the second quarter.
Iusacell's annual revenues ranged between $.5 billion to $.6 billion from 2000
through 2002. During that period, Iusacell reported net losses of less than $.1
billion (less than 1 cent to 3 cents per diluted share) in each year and cash
from operating activities of $.1 billion or less each year. As of December 31,
2002 and 2001, Iusacell's total assets were $1.3 billion and $1.7 billion,
respectively, and debt (non-recourse to Verizon) was $.8 billion in each period.
Iusacell's revenues in the first quarter 2003 and 2002 were $.1 billion, net
losses in each period were less than $15 million (less than 1 cent per diluted
share) and cash from operating activities was $.1 billion or less in each
period. As of March 31, 2003, Iusacell's total assets were $1.2 billion and debt
(non-recourse to Verizon) was $.8 billion.
Regulation G Reconciliations
(dollars in millions)
2002 2001 2000
-------- -------- --------
OPERATING REVENUES
Domestic Telecom $ 40,712 $ 42,081 $ 42,322
Domestic Wireless 19,260 17,393 14,236
International 2,962 2,337 1,976
Information Services 4,287 4,313 4,144
-------- -------- --------
Total reportable segments 67,221 66,124 62,678
-------- -------- --------
Genuity and GTE Government Systems -- -- 529
Domestic Telecom access line sales 623 997 1,787
Merger-related regulatory settlements -- -- (69)
Corporate, eliminations and other (219) 69 (218)
-------- -------- --------
Consolidated operating revenues - reported $ 67,625 $ 67,190 $ 64,707
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OPERATING EXPENSES
Domestic Telecom $ 31,730 $ 32,847 $ 32,750
Domestic Wireless 15,620 15,088 12,457
International 2,355 2,044 1,714
Information Services 2,173 2,040 2,100
-------- -------- --------
Total reportable segments 51,878 52,019 49,021
-------- -------- --------
Merger-related costs -- -- 1,056
Transition costs 510 1,039 694
Sales of assets and investments, net (2,747) 350 (3,793)
Investment-related charges 733 672 --
Settlement gains -- -- (911)
Genuity loss -- -- 829
NorthPoint settlement 175 -- --
Severance, pension and benefit charges 1,952 1,596 --
Other special items 593 220 754
Operating expenses of operations sold 241 413 883
Corporate and other (707) (651) (584)
-------- -------- --------
Consolidated operating expenses - reported $ 52,628 $ 55,658 $ 47,949
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NET INCOME
Domestic Telecom $ 4,387 $ 4,551 $ 4,839
Domestic Wireless 966 537 444
International 1,047 958 733
Information Services 1,281 1,352 1,238
-------- -------- --------
Segment income - reportable segments 7,681 7,398 7,254
-------- -------- --------
Merger-related costs -- -- (749)
Transition costs (288) (578) (316)
Sales of assets and investments, net 1,895 (226) 1,987
Investment-related gains / (charges) (5,652) (5,495) 1,941
Settlement gains -- -- 564
Mark-to-market adjustment - financial instruments (15) (179) 431
Genuity loss -- -- (281)
NorthPoint investment write-off -- -- (153)
NorthPoint settlement (114) -- --
Severance, pension and benefit charges (1,264) (1,001) --
International restructuring -- (26) (50)
Other special items (445) (95) (526)
Extraordinary items (9) (19) 1,027
Cumulative effect of accounting change (496) (182) (40)
Tax benefits 2,104 -- --
Corporate and other 682 792 708
-------- -------- --------
Consolidated net income - reported $ 4,079 $ 389 $ 11,797
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Verizon Communications Inc.
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(Registrant)
Date: July 1, 2003 /s/ David H. Benson
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David H. Benson
Senior Vice President and Controller