10-QPeriod: Q1 FY2009

VERIZON COMMUNICATIONS INC Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 11, 2009For Securities:VZ

Summary

Verizon Communications Inc. reported solid financial results for the first quarter of 2009, demonstrating resilience amidst a challenging economic environment. The company's strategic focus on higher-growth markets, particularly wireless and broadband, fueled significant revenue growth. The acquisition of Alltel Corporation, completed in January 2009, was a major driver of this top-line expansion, substantially increasing the customer base and overall revenues. Despite increased interest expenses due to higher debt levels associated with the acquisition and market conditions, Verizon maintained a focus on operational efficiency and cost control, contributing to stable operating income margins. Investors will note the continued strength in the Domestic Wireless segment, significantly boosted by the Alltel acquisition, with strong growth in data revenues. The Wireline segment, while facing pressure from declining traditional services, showed resilience in Mass Markets driven by FiOS adoption, though Global Enterprise and Wholesale segments experienced revenue declines. The company's financial position remains robust, with strong operating cash flow generation, although significant investments in capital expenditures and debt management are ongoing. The company's commitment to shareholder returns is evident through dividend payments and share repurchases.

Financial Highlights

25 data points
Beta

Revenue

$26.59B

61.2% Gross Margin

Net Income

$1.52B

5.7% Net Margin

EPS (Diluted)

$0.54

Cash & Equivalents

$3.98B

Free Cash Flow

$6.62B

Financial Statements
Beta
Revenue$26.59B
Cost of Revenue$10.31B
Gross Profit$16.28B
SG&A Expenses$7.56B
Operating Expenses$21.90B
Operating Income$4.53B
Interest Expense$925.00M
Net Income$1.52B
EPS (Basic)$0.54
EPS (Diluted)$0.54
Shares Outstanding (Basic)2.84B
Shares Outstanding (Diluted)2.84B

Key Highlights

  • 1Total operating revenues increased by 11.6% to $26.591 billion compared to the prior year, largely driven by the acquisition of Alltel Corporation.
  • 2Domestic Wireless segment revenue surged by 29.6% to $15.122 billion, primarily due to the inclusion of Alltel's operations and continued growth in data services.
  • 3Net income attributable to Verizon was $1.645 billion, or $0.58 per diluted share, a slight increase from $1.642 billion, or $0.57 per diluted share, in the prior year.
  • 4Operating income increased by 8.3% to $4.694 billion, reflecting strong performance from the Domestic Wireless segment.
  • 5Cash flows from operating activities significantly improved, increasing by $1.030 billion to $6.420 billion, demonstrating strong cash generation.
  • 6The company undertook significant debt financing activities, including borrowing $12.4 billion under a credit facility to fund the Alltel acquisition and issuing new notes.
  • 7Wireline segment revenues declined by 3.8% to $11.567 billion, impacted by decreases in Global Wholesale and Global Enterprise, though Mass Markets saw slight growth driven by FiOS services.

Frequently Asked Questions

The acquisition of Alltel Corporation, completed in January 2009, was the primary driver of Verizon's financial performance in the first quarter of 2009. It significantly boosted operating revenues, particularly in the Domestic Wireless segment, by expanding the customer base and contributing to service and equipment sales. However, it also led to an increase in debt and associated interest expenses.

The Domestic Wireless segment showed robust revenue growth of 29.6%, largely due to the Alltel acquisition and increasing data revenues. In contrast, the Wireline segment experienced a revenue decline of 3.8%. While Mass Markets revenue saw modest growth driven by FiOS adoption, Global Enterprise and Global Wholesale revenues decreased due to competitive pressures and evolving market dynamics.

Verizon's debt levels increased significantly due to the Alltel acquisition, reflected in higher interest expenses. However, the company demonstrated strong cash generation, with operating cash flow increasing substantially. The company utilized a mix of debt financing and cash from operations to manage its financial obligations and fund investments, while maintaining a focus on its capital structure and credit ratings.

The company faces ongoing challenges including intense competition in the telecommunications market, the decline in traditional wireline services, and integration costs and complexities associated with the Alltel acquisition. Additionally, broader economic uncertainties and fluctuating interest rates present potential headwinds for future performance and financial management.