Cash of $303 million was used to reduce our total debt during
2005. We repaid $1,533 million of Domestic Wireless, $1,183
million of Domestic Telecom, $996 million of Verizon Global
Funding Corp., $113 million of other corporate and $93 million
of International long-term debt. The Domestic Telecom debt
repayment includes the early retirement of $350 million of
long-term debt and $806 million of other long-term debt at
maturity. This decrease was largely offset by the issuance
by Verizon Global Funding of long-term debt with a total principal
amount of $1,500 million, resulting in total cash proceeds
of $1,478 million, net of discounts and costs, and an increase
in our short-term borrowings of $2,129 million.
Cash of $5,467 million was used to reduce our total debt
during 2004. We repaid $2,315 million and $2,769 million of
Domestic Telecom and corporate long-term debt, respectively.
The Domestic Telecom debt repayment includes the early retirement
of $1,275 million of long-term debt and $950 million of other
long-term debt at maturity. The corporate debt repayment includes
$1,984 million of zero-coupon convertible notes redeemed by
Verizon Global Funding and $723 million of other corporate
long-term debt at maturity. Also, during 2004, we decreased
our short-term borrowings by $783 million and Verizon Global
Funding issued $500 million of long-term debt.
Cash of $7,436 million was used to reduce our total debt
during 2003. We repaid $5,646 million of Verizon Global Funding,
$2,190 million of Domestic Telecom, $1,582 million of Domestic
Wireless and $1,239 million of other corporate long-term debt,
and reduced our short-term borrowings by $1,330 million with
cash from operations and the issuance of Verizon Global Funding,
Domestic Telecom and Domestic Wireless long-term debt. Verizon
Global Funding, Domestic Telecom and Domestic Wireless issued
long-term debt with principal amounts of $1,500 million, $1,653
million and $1,525 million, respectively, resulting in total
cash proceeds of $4,591 million, net of discounts, costs and
a payment related to a hedge on the interest rate for an anticipated
financing.
Our ratio of debt to debt combined with shareowners’
equity was 49.6% at December 31, 2005 compared to 51.1% at
December 31, 2004.
As of December 31, 2005, we had $11 million in bank borrowings
outstanding. We also had approximately $6.7 billion of unused
bank lines of credit (including a $6.0 billion three-year
committed facility which expires in June 2008, a $400 million
one-year committed facility for TELPRI which expires in February
2006 and various other facilities totaling approximately $400
million). In addition, our financing subsidiary had shelf
registrations for the issuance of up to $8.5 billion of unsecured
debt securities. The debt securities of our telephone and
financing subsidiaries continue to be accorded high ratings
by primary rating agencies. In February 2005, both Standard
& Poor’s and Moody’s Investors Service (Moody’s)
indicated that the proposed acquisition of MCI (see “Other
Factors That May Affect Future Results – Recent Developments
– MCI Merger”) may result in downgrades in Verizon’s
debt ratings. At that time, Moody’s placed the short-term
and long-term debt of Verizon and its telephone subsidiaries
on review for possible downgrade, while simultaneously changing
the outlook on the A3-rated Verizon Wireless debt to stable
from positive. Standard & Poor’s placed the A+ long-term
debt rating of Verizon and affiliates (including Verizon Wireless)
on credit watch with negative implications. Fitch Ratings
also placed the A+ rating of Verizon, along with the ratings
of its affiliates, on ratings watch negative as a result of
the proposed acquisition of MCI. In December 2005, Moody’s
downgraded the long-term debt rating of Verizon to A3 from
A2. At the same time, the short-term debt ratings of Verizon
Global Funding and Verizon Network Funding were changed to
Prime-2 from Prime-1. Both outlooks were changed to stable.
Moody’s also placed the A3-rated long-term debt of Verizon
Wireless on review for possible upgrade. These actions resolved
the reviews initiated in February 2005. In January 2006, Fitch
Ratings affirmed the A+ long-term debt ratings of Verizon
and affiliates (including Verizon Wireless), removed them
from rating watch negative, and assigned stable rating outlooks.
The F1 short-term debt ratings of Verizon Global Funding and
Verizon Network Funding were also affirmed. These short-term
ratings had not been on rating watch negative. Also in January
2006, Standard & Poor’s lowered the long-term ratings
of Verizon and subsidiaries (including Verizon Wireless) to
A from A+, removed them from credit watch, and assigned a
negative outlook. Short-term ratings assigned by Standard
& Poor’s to Verizon remain at A-1.
We and our consolidated subsidiaries are in compliance with
all of our debt covenants.
As in prior years, dividend payments were a significant use
of capital resources. We determine the appropriateness of
the level of our dividend payments on a periodic basis by
considering such factors as long-term growth opportunities,
internal cash requirements and the expectations of our shareowners.
In 2005, Verizon increased its quarterly dividend by $.02
per share, or 5.2% to $.405 per share. In 2004 and 2003, we
declared quarterly cash dividends of $.385 per share.
Common stock has generally been issued to satisfy some of
the funding requirements of employee benefit plans. On January
19, 2006, the Board of Directors authorized the repurchase
of up to 100 million common shares terminating no later than
the close of business on February 28, 2008. The Board of Directors
also determined that no additional common shares may be purchased
under the previous program.
