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.