8-KOther Events

VERIZON COMMUNICATIONS INC 8-K Report (Sep 23, 2003)

Filed September 23, 2003For Securities:VZ

Summary

Verizon Communications Inc. announced a revision to its 2003 financial forecast, primarily due to second-half operational and economic factors. The company has lowered its diluted Earnings Per Share (EPS) guidance to a range of $2.56 to $2.60, down from the previously projected $2.70 to $2.80. This adjustment is attributed to approximately 10-12 cents per share from emerging operational issues and 4 cents per share from non-cash expenses related to retiree healthcare obligations. Despite the EPS revision, Verizon reiterated its commitment to overall revenue growth of 0-2 percent and its year-end net debt target of $46 billion to $47 billion. The company also increased its outlook for Verizon Wireless, now expecting over 4.5 million net retail customer additions for the year, up from a previous expectation of over 4 million. Furthermore, Verizon announced a reduction in its full-year capital expenditure forecast to $12 billion - $12.5 billion, down from $12.5 billion - $13.5 billion.

Key Highlights

  • 1Verizon lowered its 2003 diluted EPS guidance to $2.56-$2.60, citing second-half operational impacts and changes in accounting for retiree healthcare.
  • 2The company reiterated its comparable revenue growth target of 0-2 percent for 2003.
  • 3Verizon Wireless exceeded expectations, with an increased forecast of over 4.5 million net retail customer additions for 2003.
  • 4Full-year capital expenditures are reduced to $12-$12.5 billion, from a previous range of $12.5-$13.5 billion.
  • 5The year-end net debt target of $46-$47 billion was reiterated.
  • 6Labor stability was highlighted as a positive factor due to groundbreaking labor contracts.
  • 7Pressure on Domestic Telecom revenues is expected due to economic conditions and regulatory constraints, including the FCC's Triennial Review order.

Frequently Asked Questions

Verizon is lowering its EPS guidance due to several factors emerging in the second half of 2003. These include approximately 10-12 cents per share in additional operational impacts, such as economic pressures on Domestic Telecom revenues and increased customer acquisition expenses at Verizon Wireless. Additionally, there's a 4-cent per share impact from primarily non-cash expenses related to a change in the accounting treatment of retiree healthcare obligations (FAS 106).

The company highlighted that groundbreaking labor contracts, announced earlier in September, will slow the rate of expense growth in its Domestic Telecom segment and provide labor stability for the next five years. While this contributed to expense management, other operational impacts led to the EPS revision.

Verizon reduced its full-year capital expenditure forecast from $12.5 billion - $13.5 billion to $12 billion - $12.5 billion. This reduction is due to decreased investment in Domestic Telecom stemming from falling access lines and other reductions, including the sale of its stake in Grupo Iusacell and lower spending at subsidiaries.

Verizon Wireless is a strong performer, exceeding expectations. The company increased its forecast for net retail customer additions for 2003 to over 4.5 million, up from the previous guidance of over 4 million. This growth is being fueled by increased customer acquisition expenses.