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Verizon 2005 Interactive Annual Report
note 13
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,   2005     2004     2003  
Net Income Used For Basic Earnings
   Per Common Share		                  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 7,397   $ 7,261   $ 3,460  
Income (loss) on discontinued operations, net of tax   –     570     (886 )
Cumulative effect of accounting change, net of tax   –     –     503  
Net income $ 7,397   $ 7,831   $ 3,077  
Net Income Used For Diluted Earnings
   Per Common Share		                  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 7,397   $ 7,261   $ 3,460  
After-tax minority interest expense related to exchangeable
   equity interest		   32     27     21  
After-tax interest expense related to zero-coupon convertible notes   28     41     61  
Income before discontinued operations and cumulative
   effect of accounting change – after assumed conversion
   of dilutive securities 		  7,457     7,329     3,542  
Income (loss) on discontinued operations, net of tax   –     570     (886 )
Cumulative effect of accounting change, net of tax   –     –     503  
Net income – after assumed conversion of dilutive securities $ 7,457   $ 7,899   $ 3,159  
Basic Earnings Per Common Share                  
Weighted-average shares outstanding – basic   2,766     2,770     2,756  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 2.67   $ 2.62   $ 1.26  
Income (loss) on discontinued operations, net of tax   –     .21     (.32 )
Cumulative effect of accounting change, net of tax   –     –     .18  
Net income $ 2.67   $ 2.83   $ 1.12  
Diluted Earnings Per Common Share(1)                  
Weighted-average shares outstanding   2,766     2,770     2,756  
Effect of dilutive securities:                  
   Stock options   5     5     5  
   Exchangeable equity interest   29     29     28  
   Zero-coupon convertible notes   17     27     43  
Weighted-average shares – diluted   2,817     2,831     2,832  
Income before discontinued operations and cumulative effect
   of accounting change		 $ 2.65   $ 2.59   $ 1.25  
Income (loss) on discontinued operations, net of tax   –     .20     (.31 )
Cumulative effect of accounting change, net of tax   –     –     .18  
Net income $ 2.65   $ 2.79   $ 1.12  
(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 242 million shares during 2005, 253 million shares during 2004 and 248 million shares during 2003.

The diluted earnings per share calculation considers the assumed conversion of an exchangeable equity interest (see Note 9) and Verizon’s zero-coupon convertible notes (see Note 11).

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. We repurchased 7.9 million and 9.5 million common shares during 2005 and 2004, respectively.

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.
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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.