8-KOther Events

VERIZON COMMUNICATIONS INC 8-K Report (Dec 5, 2002)

Filed December 5, 2002For Securities:VZ

Summary

Verizon Communications Inc. (VZ) announced on December 5, 2002, a significant accounting policy change: the company will begin expensing the fair value of employee stock options granted on or after January 1, 2003. This change, which is expected to result in a modest charge of 2 cents per diluted share in 2003, reflects a response to investor interest and aligns with evolving accounting practices. The company also provided updated guidance on its pension and other retiree benefit costs, anticipating a non-cash pension income of approximately 35 cents per share for 2002, which is expected to decrease to between 2 to 8 cents per share in 2003 due to market conditions and rising healthcare costs. Despite these adjustments, Verizon reaffirmed its 2002 earnings per share guidance of $3.05 to $3.09, signaling confidence in its operational performance. Management highlighted a focus on continued market leadership in wireless, consumer services (long distance, DSL, product bundles), and enterprise solutions for 2003. The company expects to provide more comprehensive financial guidance for 2003 on January 29, 2003, alongside its fourth-quarter and full-year 2002 results.

Key Highlights

  • 1Verizon will expense the fair value of employee stock options granted from January 1, 2003, onwards.
  • 2Expensing stock options is estimated to reduce 2003 diluted earnings per share by 2 cents.
  • 3The company expects non-cash pension income, net of post-retirement benefit costs, of approximately 35 cents per share for 2002.
  • 4Expected non-cash pension income is projected to significantly decline in 2003, ranging from 2 to 8 cents per share.
  • 5The decrease in pension income is attributed to lower expected returns on plan assets, discount rates, and increased medical costs.
  • 6Verizon reaffirmed its 2002 EPS guidance of $3.05 to $3.09.
  • 7Management expressed confidence in achieving operational growth in 2003, focusing on wireless, consumer, and enterprise markets.

Frequently Asked Questions

Verizon is expensing stock options to align with investor interests and current accounting discussions. While options were previously disclosed in filings, the company believes expensing their fair value, starting with grants in 2003, will provide a more transparent view of compensation costs in its reported earnings.

The company estimates that expensing stock options prospectively will result in a charge to earnings of approximately 2 cents per diluted share in 2003.

Verizon expects a significant reduction in non-cash pension income (net of post-retirement benefit costs) in 2003. For 2002, this income was about 35 cents per share, but it's projected to fall to between 2 and 8 cents per share in 2003 due to market conditions affecting investment returns and discount rates, as well as rising healthcare costs.

No, Verizon does not foresee a need to add funding to its pension plans overall in 2003. The company stated that its plans are adequately funded and expected to remain so. Other post-retirement benefits will continue to be funded from operating cash flow.