Why is Verizon presenting non-GAAP financial measures?

Verizon presents non-GAAP financial measures like 'income before special items' and 'free cash flow' to offer investors a clearer view of the company's underlying operational performance and trends. Management believes these metrics are more indicative of future operating results by excluding items that are non-operational or non-recurring, which can fluctuate and are often outside management's control.

What are 'special items' that Verizon excludes?

Special items are revenues, expenses, gains, and losses that are of a non-operational and/or non-recurring nature. Examples mentioned include significant severance and impairment charges. Verizon removes these to provide a more comparable view of its results from period to period.

How is 'free cash flow' defined by Verizon?

Verizon defines free cash flow as cash generated from operating activities less capital expenditures and dividends paid to shareholders. This measure is presented to help investors and management evaluate the company's liquidity and its ability to meet financial obligations.

Should investors rely solely on these non-GAAP measures?

No, Verizon explicitly states that its non-GAAP financial information is intended to enhance understanding of its GAAP consolidated financial statements. Investors are encouraged to consider these non-GAAP measures in addition to, but not instead of, the financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP).

VZ 8-K SEC Disclosure — Oct 28, 2003

Summary

Verizon Communications Inc. (VZ) filed an 8-K on October 28, 2003, reporting on its financial results and condition. The company emphasized the use of non-GAAP financial measures, such as "income before special items," "free cash flow," and "net debt," to provide investors with a clearer understanding of its operational performance and trends. Management believes these non-GAAP metrics offer a more indicative view of future operating results by excluding non-recurring and non-operational items like severance and impairment charges, which can be volatile and beyond management's control. The company also highlighted "Verizon Information Services revenues - conforming basis," a pro forma presentation to illustrate the impact of a prior accounting change as if it had occurred in the previous year. This approach aims to enhance comparability for investors. Verizon stresses that these non-GAAP measures are supplementary to, and should be considered alongside, their GAAP financial statements, providing a more comprehensive view for strategic analysis, capital allocation, and compensation evaluations.

Key Highlights

1Verizon is reporting financial results and condition as of October 27, 2003.
2The filing emphasizes the use of non-GAAP financial measures to provide enhanced insights into operational performance.
3Key non-GAAP metrics highlighted include 'income before special items,' 'free cash flow,' and 'net debt.'
4'Income before special items' aims to remove non-recurring and non-operational charges (e.g., severance, impairments) for better trend analysis.
5Free cash flow is defined as cash from operations less capital expenditures and dividends.
6The report also introduces 'Verizon Information Services revenues - conforming basis' to present prior year impact of accounting changes for better comparability.
7Verizon states these non-GAAP measures are supplemental to GAAP financials and should be considered in addition to them.

VERIZON COMMUNICATIONS INC 8-K Report (Oct 28, 2003)

Summary

Key Highlights

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