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Consolidated Statements of Cash Flows (dollars in millions, except per share amounts) Years Ended December 31,   2006     2005     2004   Cash Flows from Operating Activities Net Income $ 6,197   $ 7,397   $ 7,831   Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense   14,545     13,615     13,503   Sales of businesses, net   –     (530 )   –   (Gain) loss on sale of discontinued operations   541     –     –   Employee retirement benefits   1,923     1,695     1,836   Deferred income taxes   (252 )   (1,093 )   1,721   Provision for uncollectible accounts   1,034     1,076     890   Equity in earnings of unconsolidated businesses   (773 )   (686 )   (1,690 ) Cumulative effect of accounting change, net of tax   42     –     –   Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses: Accounts receivable   (1,312 )   (788 )   (1,293 ) Inventories   8     (236 )   (226 ) Other assets   52     (176 )   539   Accounts payable and accrued liabilities   (383 )   (899 )   (1,820 ) Other, net   1,408     1,069     (1,115 ) Net cash provided by operating activities – continuing operations   23,030     20,444     20,176   Net cash provided by operating activities ­ discontinued operations   1,076     1,581     1,615   Net cash provided by operating activities   24,106     22,025     21,791   Cash Flows from Investing Activities Capital expenditures (including capitalized software)   (17,101 )   (14,964 )   (12,794 ) Acquisitions, net of cash acquired, and investments   (1,422 )   (4,684 )   (1,196 ) Proceeds from disposition of businesses   –     1,326     117   Net change in short-term and other current investments   290     (346 )   (90 ) Other, net   811     532     2,474   Net cash used in investing activities ­ continuing operations   (17,422 )   (18,136 )   (11,489 ) Net cash provided by (used in) investing activities – discontinued operations   1,806     (356     1,146   Net cash used in investing activities   (15,616 )   (18,492 )   (10,343 ) Cash Flows from Financing Activities                   Proceeds from long-term borrowings   3,983     1,487     514   Repayments of long-term borrowings and capital lease obligations   (11,233 )   (3,825 )   (5,168 ) Increase (decrease) in short-term obligations, excluding current maturities   7,944     2,098     (747 ) Dividends paid   (4,719 )   (4,427 )   (4,262 ) Proceeds from sale of common stock   174     37     320   Purchase of common stock for treasury   (1,700 )   (271 )   (370 ) Other, net   (201 )   (57 )   (125 ) Net cash used in financing activities ­ continuing operations   (5,752 )   (4,958 )   (9,838 ) Net cash used in financing activities ­ discontinued operations   (279 )   (76 )   (18 ) Net cash used in financing activities   (6,031 )   (5,034 )   (9,856 ) Increase (decrease) in cash and cash equivalents   2,459     (1,501 )   1,592   Cash and cash equivalents, beginning of year   760     2,261     669   Cash and cash equivalents, end of year $ 3,219   $ 760   $ 2,261   See Notes to Consolidated Financial Statements.

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* This is an interactive electronic version of Verizon’s 2006 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.