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Verizon 2005 Interactive Annual Report
note 17 (page 1 of 2)
SEGMENT INFORMATION

Reportable Segments
We have four reportable segments, which we operate and manage as strategic business units and organize by products and services. We measure and evaluate our reportable segments based on segment income. This segment income excludes unallocated corporate expenses and other adjustments arising during each period. The other adjustments include transactions that the chief operating decision makers exclude in assessing business unit performance due primarily to their non-recurring and/or non-operational nature. Although such transactions are excluded from the business segment results, they are included in reported consolidated earnings. Gains and losses that are not individually significant are included in all segment results, since these items are included in the chief operating decision makers’ assessment of unit performance. These gains and losses are primarily contained in Information Services and International since they actively manage investment portfolios.

Our segments and their principal activities consist of the following:

Domestic Telecom
Domestic Telecom provides local telephone services, including voice, DSL, data transport, enhanced and custom calling features, network access, directory assistance, private lines and public telephones in 28 states and Washington, D.C. This segment also provides long distance services, customer premises equipment distribution, video services, data solutions and systems integration, billing and collections and inventory management services.

Domestic Wireless
Domestic wireless products and services include wireless voice and data services and equipment sales across the United States. This segment primarily represents the operations of the Verizon Wireless joint venture with Vodafone. Verizon owns a 55% interest in the joint venture and Vodafone owns the remaining 45%. All financial results included in the tables below reflect the consolidated results of Verizon Wireless.

Information Services
Information Services’ multi-platform business comprises yellow pages directories, SuperPages.com, our online directory and search services, and SuperPages On the Go, our directory and information services on wireless telephones. This segment’s operations are principally in the United States.

International
International wireline and wireless communications operations and investments in the Americas and Europe.

The following table provides operating financial information for our four reportable segments:
(dollars in millions )
Domestic   Domestic   Information      
Total  
2005 Telecom   Wireless   Services   International  
Segments  
External revenues $ 36,628   $ 32,219   $ 3,452   $ 2,159  
$ 74,458  
Intersegment revenues   988     82     –     34  
  1,104  
   Total operating revenues   37,616     32,301     3,452     2,193  
  75,562  
Cost of services and sales   15,604     9,393     593     707  
  26,297  
Selling, general & administrative expense   8,419     10,768     1,107     675  
  20,969  
Depreciation & amortization expense   8,801     4,760     92     340  
  13,993  
   Total operating expenses   32,824     24,921     1,792     1,722  
  61,259  
Operating income   4,792     7,380     1,660     471  
  14,303  
Equity in earnings of
   unconsolidated businesses		   –     27     –     807  
  834  
Income from other unconsolidated businesses   –     –     –     56  
  56  
Other income and (expense), net   79     6     17     259  
  361  
Interest expense   (1,701 )   (601 )   –     (127 )
  (2,429 )
Minority interest   –     (2,995 )   (7 )   (44 )
  (3,046 )
Provision for income taxes   (1,264 )   (1,598 )   (626 )   (171 )
  (3,659 )
Segment income $ 1,906   $ 2,219   $ 1,044   $ 1,251  
$ 6,420  
Assets $ 75,188   $ 76,729   $ 1,525   $ 11,603  
$ 165,045  
Investments in unconsolidated businesses   2     154     1     2,767  
  2,924  
Plant, property and equipment, net   49,618     22,790     166     2,155  
  74,729  
Capital expenditures   8,267     6,484     80     283  
  15,114  
2004                
   
External revenues $ 37,160   $ 27,586   $ 3,549   $ 1,982  
$ 70,277  
Intersegment revenues   861     76     –     32  
  969  
   Total operating revenues   38,021     27,662     3,549     2,014  
  71,246  
Cost of services and sales   14,830     7,747     542     626  
  23,745  
Selling, general & administrative expense   8,621     9,591     1,319     471  
  20,002  
Depreciation & amortization expense   8,910     4,486     87     324  
  13,807  
   Total operating expenses   32,361     21,824     1,948     1,421  
  57,554  
Operating income   5,660     5,838     1,601     593  
  13,692  
Equity in earnings of
   unconsolidated businesses		   –     45     –     1,031  
  1,076  
Income from other
   unconsolidated businesses		   –     –     –     31  
  31  
Other income and (expense), net   100     11     15     35  
  161  
Interest expense   (1,602 )   (661 )   (33 )   (85 )
  (2,381 )
Minority interest   –     (2,323 )   (6 )   (80 )
  (2,409 )
Provision for income taxes   (1,506 )   (1,265 )   (609 )   (300 )
  (3,680 )
Segment income $ 2,652   $ 1,645   $ 968   $ 1,225  
$ 6,490  
Assets $ 78,824   $ 68,027   $ 1,680   $ 14,885  
$ 163,416  
Investments in unconsolidated businesses   3     148     4     4,914  
  5,069  
Plant, property and equipment, net   50,608     20,516     179     2,391  
  73,694  
Capital expenditures   7,118     5,633     87     382  
  13,220  
2003                
   
External revenues $ 38,281   $ 22,436   $ 3,763   $ 1,921  
$ 66,401  
Intersegment revenues   774     53     –     28  
  855  
   Total operating revenues   39,055     22,489     3,763     1,949  
  67,256  
Cost of services and sales   14,512     6,460     554     574  
  22,100  
Selling, general & administrative expense   8,363     8,057     1,387     691  
  18,498  
Depreciation & amortization expense   9,107     3,888     79     346  
  13,420  
Sales of businesses, net   –     –     (141 )   –  
  (141 )
   Total operating expenses   31,982     18,405     1,879     1,611  
  53,877  
Operating income   7,073     4,084     1,884     338  
  13,379  
Equity in earnings (loss) of
   unconsolidated businesses		   –     15     (1 )   1,091  
  1,105  
Income (loss) from other
   unconsolidated businesses		   (4 )   –     –     169  
  165  
Other income and (expense), net   45     12     7     32  
  96  
Interest expense   (1,648 )   (626 )   (38 )   (160 )
  (2,472 )
Minority interest   –     (1,554 )   (8 )   (20 )
  (1,582 )
Provision for income taxes   (2,167 )   (848 )   (716 )   (58 )
  (3,789 )
Segment income $ 3,299   $ 1,083   $ 1,128   $ 1,392  
$ 6,902  
Assets $ 82,087   $ 65,166   $ 1,726   $ 11,872  
$ 160,851  
Investments in unconsolidated businesses   64     288     4     4,555  
  4,911  
Plant, property and equipment, net   53,378     18,998     190     2,164  
  74,730  
Capital expenditures   6,820     4,590     74     358  
  11,842  
For continuation of Note 17, see next page.
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* This is an interactive electronic version of Verizon’s 2005 Annual Report to Shareholders, and it is intended to be complete and accurate. The contents of this version are qualified in their entirety by reference to the printed version. A reproduction of the printed version is available in PDF format on this website.