financials > notes to consolidated financial statements > note 14
note 14
EARNINGS PER SHARE AND SHAREOWNERS’ INVESTMENT

Earnings Per Share
The following table is a reconciliation of the numerators and denominators used in computing earnings per common share:
(dollars and shares in millions, except per share amounts )
Years Ended December 31,   2004     2003     2002  
Net Income Used For Basic Earnings
   Per Common Share		                  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 7,261   $ 3,460   $ 4,591  
Income (loss) on discontinued operations, net of tax   570     (886 )   (16 )
Cumulative effect of accounting change, net of tax   –     503     (496 )
Net income $ 7,831   $ 3,077   $ 4,079  
Net Income Used For Diluted Earnings
   Per Common Share		                  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 7,261   $ 3,460   $ 4,591  
After-tax minority interest expense related to exchangeable
   equity interest		   27     21     7  
After-tax interest expense related to zero-coupon convertible notes   41     61     60  
Income before discontinued operations and cumulative
   effect of accounting change – after assumed conversion
   of dilutive securities 		  7,329     3,542     4,658  
Income (loss) on discontinued operations, net of tax   570     (886 )   (16 )
Cumulative effect of accounting change, net of tax   –     503     (496 )
Net income – after assumed conversion of dilutive securities $ 7,899   $ 3,159   $ 4,146  
Basic Earnings Per Common Share                  
Weighted-average shares outstanding – basic   2,770     2,756     2,729  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 2.62   $ 1.26   $ 1.68  
Income (loss) on discontinued operations, net of tax   .21     (.32 )   (.01 )
Cumulative effect of accounting change, net of tax   –     .18     (.18 )
Net income $ 2.83   $ 1.12   $ 1.49  
Diluted Earnings Per Common Share(1)                  
Weighted-average shares outstanding   2,770     2,756     2,729  
Effect of dilutive securities:                  
   Stock options   5     5     6  
   Exchangeable equity interest   29     28     10  
   Zero-coupon convertible notes   27     43     44  
Weighted-average shares – diluted   2,831     2,832     2,789  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 2.59   $ 1.25   $ 1.67  
Income (loss) on discontinued operations, net of tax   .20     (.31 )   (.01 )
Cumulative effect of accounting change, net of tax   –     .18     (.18 )
Net income $ 2.79   $ 1.12   $ 1.49  
(1) Total per share amounts may not add due to rounding.

Certain outstanding options to purchase shares were not included in the computation of diluted earnings per common share because to do so would have been anti-dilutive for the period, including approximately 253 million shares during 2004, 248 million shares during 2003 and 228 million shares during 2002.

The diluted earnings per share calculation considers the assumed conversion of an exchangeable equity interest (see Note 10) and Verizon’s zero-coupon convertible notes (see Note 12). In 2004, EITF Issue No. 04-8 was issued and became effective, pertaining to including contingently convertible debt in diluted earnings per share calculations in all periods presented. Verizon’s zero-coupon convertible notes, which are convertible into Verizon common stock, are now included in the current and prior periods’ diluted earnings per common share calculations.

Shareowners’ Investment
Our certificate of incorporation provides authority for the issuance of up to 250 million shares of Series Preferred Stock, $.10 par value, in one or more series, with such designations, preferences, rights, qualifications, limitations and restrictions as the Board of Directors may determine.

We are authorized to issue up to 4.25 billion shares of common stock.

On January 22, 2004, the Board of Directors authorized the repurchase of up to 80 million common shares terminating no later than the close of business on February 28, 2006. During 2004, we repurchased 9.5 million Verizon common shares.
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* This is an interactive electronic version of Verizon’s 2004 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