<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
---------------------
(Mark one) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6393
BELL ATLANTIC - PENNSYLVANIA, INC.
A Pennsylvania Corporation I.R.S. Employer Identification No. 23-0397860
1717 Arch Street, 32nd Fl., Philadelphia, Pennsylvania 19103
Telephone Number (215) 466-9900
-------------------------
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF BELL ATLANTIC CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION H(2).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
(Unaudited)
(Dollars in Millions)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------- ----------------------
1998 1997 1998 1997
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES (including $16.2, $15.3,
$32.1 and $31.3 from affiliates).............. $ 852.6 $ 836.7 $ 1,698.5 $ 1,661.3
----------- ---------- ---------- ----------
OPERATING EXPENSES
Employee costs, including benefits and taxes.. 157.8 161.6 311.7 326.1
Depreciation and amortization................. 175.4 167.2 346.0 331.6
Taxes other than income....................... 37.7 31.9 74.7 69.5
Other (including $193.3, $175.1,
$356.8 and $343.4 to affiliates)......... 292.8 256.9 549.6 504.8
----------- ---------- ---------- ----------
663.7 617.6 1,282.0 1,232.0
----------- ---------- ---------- ----------
OPERATING INCOME................................... 188.9 219.1 416.5 429.3
OTHER INCOME, NET.................................. 2.0 1.7 2.6 1.7
INTEREST EXPENSE (including $7.1, $4.1,
$11.9 and $7.3 to affiliate).................. 31.3 29.1 60.7 57.0
----------- ---------- ---------- ----------
Income Before Provision for Income Taxes........... 159.6 191.7 358.4 374.0
PROVISION FOR INCOME TAXES......................... 67.4 76.2 149.3 149.8
----------- ---------- ---------- ----------
NET INCOME......................................... $ 92.2 $ 115.5 $ 209.1 $ 224.2
=========== ========== ========== ==========
ACCUMULATED DEFICIT
At beginning of period........................ $ (384.4) $ (306.6) $ (396.8) $ (257.1)
Add: net income.............................. 92.2 115.5 209.1 224.2
----------- ---------- ---------- ----------
(292.2) (191.1) (187.7) (32.9)
Deduct: dividends............................ 52.8 102.3 157.3 236.1
other changes........................ --- .9 --- 25.3
----------- ---------- ---------- ----------
At end of period.............................. $ (345.0) $ (294.3) $ (345.0) $ (294.3)
=========== ========== ========== ==========
</TABLE>
See Notes to Condensed Financial Statements.
1
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in Millions)
ASSETS
------
June 30, December 31,
1998 1997
---------- ------------
CURRENT ASSETS
Short-term investments....................... $ 37.7 $ 58.3
Accounts receivable:
Trade and other, net of allowances for
uncollectibles of $63.4 and $53.8.... 635.5 609.7
Affiliates.............................. 11.2 12.3
Material and supplies........................ 26.8 23.1
Prepaid expenses............................. 93.8 45.5
Deferred income taxes........................ 33.3 30.1
Other........................................ 6.0 7.1
--------- ---------
844.3 786.1
--------- ---------
PLANT, PROPERTY AND EQUIPMENT................ 10,139.4 9,749.3
Less accumulated depreciation................ 5,978.9 5,750.4
--------- ---------
4,160.5 3,998.9
--------- ---------
OTHER ASSETS................................. 92.1 115.6
--------- ---------
TOTAL ASSETS................................. $ 5,096.9 $ 4,900.6
========= =========
See Notes to Condensed Financial Statements.
2
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in Millions, Except Per Share Amount)
LIABILITIES AND SHAREOWNER'S INVESTMENT
---------------------------------------
June 30, December 31,
1998 1997
------------ -------------
CURRENT LIABILITIES
Debt maturing within one year:
Note payable to affiliate ................ $ 555.0 $ 277.7
Other..................................... 1.1 1.4
Accounts payable and accrued liabilities:
Affiliates................................ 315.5 354.0
Other..................................... 492.4 574.3
Advance billings and customer deposits......... 78.0 75.4
-------- --------
1,442.0 1,282.8
-------- --------
LONG-TERM DEBT................................. 1,430.8 1,431.5
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS................... 740.2 778.9
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes.......................... 70.8 36.4
Unamortized investment tax credits............. 30.5 32.1
Other.......................................... 132.2 140.3
-------- --------
233.5 208.8
-------- --------
SHAREOWNER'S INVESTMENT
Common stock - $20 par value per share......... 1,594.7 1,594.7
Authorized shares: 80,210,000
Outstanding shares: 79,732,681
Contributed capital............................ .7 .7
Accumulated deficit............................ (345.0) (396.8)
-------- --------
1,250.4 1,198.6
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $5,096.9 $4,900.6
======== ========
See Notes to Condensed Financial Statements.
3
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
Six months ended
June 30,
------------------------
1998 1997
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES............ $ 378.0 $ 487.0
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments................. 20.6 25.6
Additions to plant, property and equipment........... (513.1) (341.8)
Other, net........................................... 5.0 14.2
-------- --------
Net cash used in investing activities................ (487.5) (302.0)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of capital lease obligations.... (.7) (.6)
Net change in note payable to affiliate.............. 277.3 63.1
Dividends paid....................................... (157.3) (236.1)
Net change in outstanding checks drawn
on controlled disbursement accounts............... (9.8) (11.4)
-------- --------
Net cash provided by/(used in) financing activities.. 109.5 (185.0)
-------- --------
NET CHANGE IN CASH................................... --- ---
CASH, BEGINNING OF PERIOD............................ --- ---
-------- --------
CASH, END OF PERIOD.................................. $ --- $ ---
======== ========
See Notes to Condensed Financial Statements.
4
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Bell Atlantic - Pennsylvania, Inc. (the Company) is a wholly owned subsidiary
of Bell Atlantic Corporation (Bell Atlantic). The accompanying unaudited
condensed financial statements have been prepared based upon Securities and
Exchange Commission rules that permit reduced disclosure for interim periods.
These financial statements reflect all adjustments which are necessary for a
fair presentation of results of operations and financial position for the
interim periods shown including normal recurring accruals. The results for the
interim periods are not necessarily indicative of results for the full year.
For a more complete discussion of significant accounting policies and certain
other information, refer to the financial statements included in the Company's
1997 Form 10-K.
The Company has reclassified certain amounts from prior year's data to
conform with the 1998 presentation.
2. Dividend
On August 3, 1998, the Company declared and paid a dividend in the amount of
$70.8 million to Bell Atlantic.
3. Litigation and Other Contingencies
Various legal actions and regulatory proceedings are pending to which the
Company is a party. The Company has established reserves for liabilities in
connection with regulatory and legal matters which it currently deems to be
probable and estimable. The Company does not expect that the ultimate
resolution of these matters in future periods will have a material effect on the
Company's financial position, but it could have a material effect on results of
operations.
4. Recent Accounting Pronouncements
Costs of Computer Software
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," (SOP 98-1). SOP 98-1 provides, among
other things, guidance for determining whether computer software is for internal
use and when the cost related to such software should be expensed as incurred or
capitalized and amortized. SOP 98-1 is required to be adopted no later than
January 1, 1999.
The Company currently capitalizes initial right-to-use fees for central
office switching equipment, including initial operating system and initial
application software costs. For noncentral office equipment, only the initial
operating system software is capitalized. Subsequent additions, modifications,
or upgrades of initial software programs, whether operating or application
packages, are expensed as incurred. The Company is currently evaluating the
provisions of SOP 98-1 and has not yet quantified the effect at this time. The
adoption of SOP 98-1 is expected to result in an increase in earnings in the
year of adoption due to the prospective capitalization of costs which were
previously expensed.
Derivatives and Hedging Activities
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" in June 1998. This statement
requires that all derivatives are measured at fair value and recognized as
either assets or liabilities on the Company's balance sheet. Changes in the
fair values of the derivative instruments will be recognized in either earnings
or comprehensive income, depending on the designated use and effectiveness of
the instruments. The Company must adopt SFAS No. 133 no later than January 1,
2000. The Company is currently evaluating the provisions of SFAS No. 133 and
has not yet determined what the impact of adopting this statement will be on its
future results of operations or financial condition.
5
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
5. Proposed Bell Atlantic - GTE Merger
Bell Atlantic and GTE Corporation (GTE) have announced a proposed merger of
equals under a definitive merger agreement dated as of July 27, 1998. Under the
terms of the agreement, GTE shareholders will receive 1.22 shares of Bell
Atlantic common stock for each share of GTE common stock that they own. Bell
Atlantic shareholders will continue to own their existing shares after the
merger.
It is expected that the merger will qualify as a "pooling of interests,"
which means for accounting and financial reporting purposes the companies will
be treated as if they had always been combined. The completion of the merger is
subject to a number of conditions, including certain regulatory approvals,
receipt of opinions that the merger will be tax free, and the approval of the
shareholders of both Bell Atlantic and GTE. The companies expect to close the
merger in the second half of 1999.
6
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
Item 2. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction H(2).)
This discussion should be read in conjunction with the Financial Statements
and Notes to Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
The Company reported net income of $209.1 million for the six month period
ended June 30, 1998, compared to net income of $224.2 million for the same
period in 1997.
Items affecting the comparison of the Company's results of operations for the
six month periods ended June 30, 1998 and 1997 are discussed in the following
sections. This Management's Discussion and Analysis should also be read in
conjunction with the Company's 1997 Annual Report on Form 10-K.
OPERATING REVENUE STATISTICS
- ----------------------------
1998 1997 % Change
- --------------------------------------------------------------------------------
At June 30
- ----------
Access Lines in Service (in thousands)*
Residence............................. 4,094 3,961 3.4%
Business.............................. 2,212 2,104 5.1
Public................................ 73 75 (2.7)
----- -----
6,379 6,140 3.9
===== =====
Six Month Period Ended June 30
- ------------------------------
Access Minutes of Use (in millions)...... 12,442 11,262 10.5
====== ======
* 1997 reflects a restatement of access lines in service to include Primary Rate
ISDN (Integrated Services Digital Network) channels to conform with the 1998
presentation.
OPERATING REVENUES
- ------------------
(Dollars in Millions)
Six Month Period Ended June 30 1998 1997
- --------------------------------------------------------------------------------
Local services............................. $ 862.4 $ 825.6
Network access services.................... 540.6 497.0
Long distance services..................... 163.2 208.4
Ancillary services......................... 116.8 115.2
Directory and information services......... 15.5 15.1
-------- --------
Total...................................... $1,698.5 $1,661.3
======== ========
7
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
LOCAL SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $36.8 4.5%
- --------------------------------------------------------------------------------
Local services revenues are earned by the Company from the provision of local
exchange, local private line, public telephone (pay phone) and value-added
services. Value-added services are a family of services which expand the
utilization of the network. These services include products such as Caller ID,
Call Waiting and Return Call.
Higher usage of the Company's network facilities was the primary reason for
the increase in local services revenues in the first half of 1998. This growth
was generated by an increase in access lines in service of 3.9% from June 30,
1997. Access line growth reflects primarily higher demand for Centrex services
and an increase in additional residential lines. Higher revenues from private
line and switched data services also contributed to the revenue growth in the
six month period of 1998.
The Company also recognized higher revenues from public telephone and value-
added services. Value-added services revenues grew principally as a result of
higher customer demand and usage, while price increases for usage of the
Company's pay phones and the implementation of new charges to carriers resulting
from pay phone deregulation in April 1997 were the principal reasons for the
improvement in public telephone services revenues.
NETWORK ACCESS SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $43.6 8.8%
- --------------------------------------------------------------------------------
Network access services revenues are earned from carriers for their use of
the Company's local exchange facilities in providing usage services to their
customers. In addition, end-user subscribers pay flat rate access fees to
connect to the Company's network.
Network access services revenues grew in the first six months of 1998
primarily as a result of higher customer demand as reflected by growth in access
minutes of use of 10.5% from June 30, 1997. Volume growth was boosted by the
expansion of the business market, particularly for high-capacity services.
Demand for special access services grew as Internet service providers and other
high-capacity users increased their utilization of the Company's network.
Growth in access revenues also reflects higher network usage by alternative
providers of intraLATA toll services. Network access revenues were also higher
due to the effect of recording amounts received from other local exchange
carriers for terminating calls on the Company's network in Network Access
Services Revenues, beginning in 1998. In 1997, these amounts were recorded in
Ancillary Services Revenues. In addition, higher end-user revenues attributable
to an increase in access lines in service contributed to revenue growth in the
six month period of 1998. These increases were partially offset by net price
reductions mandated by federal and state price cap plans.
Effective July 1, 1998, the Company implemented price decreases of
approximately $13 million on an annual basis for interstate services, in
connection with the Federal Communications Commission's (FCC) Price Cap Plan.
The rates included in this 1998 filing will be in effect through June 1999. The
July 1, 1998 rates include amounts necessary to recover the Company's
contribution to the FCC's new universal service fund. The FCC has created a
multi-billion dollar interstate fund to link schools and libraries to the
Internet and to subsidize low-income consumers and rural health care providers.
Under the FCC's rules, all providers of interstate telecommunications services
must contribute to the fund. The Company's contributions to the universal
service fund are included in Other Operating Expenses.
8
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
LONG DISTANCE SERVICES REVENUES
1998 - 1997 (Decrease)
- --------------------------------------------------------------------------------
Six Months $(45.2) (21.7)%
- --------------------------------------------------------------------------------
Long distance services revenues are earned primarily from calls made outside
a customer's local calling area, but within the same service area of the Company
(intraLATA toll). Other long distance services that the Company provides
include 800 services, Wide Area Telephone Service (WATS), and corridor services
(between LATAs in Philadelphia and southern New Jersey).
Long distance services revenues declined in the first half of 1998
principally due to increased competition for intraLATA toll services as a result
of the introduction of presubscription in July 1997. Presubscription permits
customers to use an alternative provider of their choice for intraLATA toll
calls without dialing a special access code when placing a call. The adverse
impact on revenues as a result of presubscription was partially mitigated by
increased network access services revenues for usage of the Company's network
by these alternative providers.
Price reductions on certain toll services as part of the Company's response
to competition also contributed to the decline in long distance services
revenues in 1998. These revenue reductions were partially offset by higher
calling volumes generated by an increase in access lines in service.
ANCILLARY SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $1.6 1.4%
- --------------------------------------------------------------------------------
The Company provides ancillary services which include billing and collection
services provided to long distance carriers and affiliates, customer premises
equipment (CPE) services, facilities rental services for affiliates and
nonaffiliates, usage of separately priced (unbundled) components of its network,
sales of materials and supplies to affiliates and voice messaging services.
Ancillary services revenues grew in the first six months of 1998 as a result
of increased demand by long distance carriers and affiliates for billing and
collection services and the introduction of residential customer late payment
charges in the second quarter of 1997. Increased market penetration for voice
messaging services, principally Home Voice Mail, also contributed to higher
ancillary services revenues in 1998.
These increases were partially offset by the effect of recording amounts
received from other local exchange carriers for terminating calls on the
Company's network in Network Access Services Revenues, beginning in 1998. In
1997, these amounts were recorded in Ancillary Services Revenues.
DIRECTORY AND INFORMATION SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $.4 2.6%
- --------------------------------------------------------------------------------
Directory and information services revenues are earned primarily from fees
for nonpublication of telephone numbers and multiple white page listings, and
from a contract with an affiliate for usage of the Company's directory listings.
Higher fees received from an affiliate for use of the Company's directory
listings was the principal reason for the increase in directory and information
services revenues in 1998.
9
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
OPERATING EXPENSES
- ------------------
(Dollars in Millions)
Six Month Period Ended June 30 1998 1997
- --------------------------------------------------------------------------------
Employee costs, including benefits and taxes.. $ 311.7 $ 326.1
Depreciation and amortization................. 346.0 331.6
Taxes other than income....................... 74.7 69.5
Other operating expenses...................... 549.6 504.8
-------- --------
Total......................................... $1,282.0 $1,232.0
======== ========
EMPLOYEE COSTS
1998 - 1997 (Decrease)
- --------------------------------------------------------------------------------
Six Months $(14.4) (4.4)%
- --------------------------------------------------------------------------------
Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by the Company. Similar costs
incurred by employees of Bell Atlantic Network Services, Inc. (NSI), who provide
centralized services on a contractual basis, are allocated to the Company and
are included in Other Operating Expenses.
Employee costs decreased in the first six months of 1998 primarily as a
result of lower pension and benefit costs. The reduction in pension and benefit
costs was caused by a number of factors, including changes in actuarial
assumptions, favorable pension plan investment returns and lower than expected
medical claims. A decline in repair and maintenance activity further reduced
employee costs. These cost reductions were partially offset by annual salary
and wage increases for management and associate employees and higher overtime
pay.
Associate employee wages and pension and other benefits are determined under
contracts with unions representing associate employees of the Company. On August
11, 1998, the Company and the Communications Workers of America (CWA) reached a
tentative agreement on a new 2-year contract. The contract provides for wage
increases of up to 3.8 percent effective August 9, 1998, and up to 4 percent
effective August 8, 1999. Pensions will increase by 11 percent.
Union-represented employees are eligible for standard cash awards of $400 for
1998 and $500 for 1999, which can be increased or decreased based on financial
and customer care performance results. The new contract also includes other
benefit improvements and certain employment security provisions. The labor
agreement with the CWA is subject to ratification by the union membership,
which is expected within the next 30 days.
The contract covering International Brotherhood of Electrical Workers'
members does not expire until August 2000.
DEPRECIATION AND AMORTIZATION
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $14.4 4.3%
- --------------------------------------------------------------------------------
Depreciation and amortization expense increased in the first six months of
1998 over the same period in 1997 principally as a result of growth in
depreciable telephone plant. This expense increase was offset, in part, by the
effect of lower rates of depreciation and amortization.
10
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
TAXES OTHER THAN INCOME
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $5.2 7.5%
- --------------------------------------------------------------------------------
Taxes other than income consist principally of taxes for gross receipts,
property, capital stock and business licenses.
The increase in taxes other than income was primarily due to the effect of
a prior period adjustment which resulted in lower expense in 1997. Also
contributing to the increase, but to a lesser extent, was higher gross receipts
taxes resulting from an increase in the revenue tax base. These increases were
partially offset by lower capital stock taxes resulting from an adjustment for a
liability related to a prior year.
OTHER OPERATING EXPENSES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $44.8 8.9%
- --------------------------------------------------------------------------------
Other operating expenses consist of contract services including centralized
services expenses allocated from NSI, rent, network software costs, the
provision for uncollectible accounts receivable, and other costs.
The increase in other operating expenses was largely attributable to higher
network software purchases and higher interconnection charges for terminating
calls on the networks of competitive local exchange and other carriers. The
Company also recognized additional costs in the first six months of 1998 as a
result of its contributions to the federal universal service fund, as described
earlier, and to a state universal service fund. Under a proposed joint
settlement agreement filed with the Pennsylvania Public Utility Commission, all
telecommunications providers in the state will contribute to a fund established
to support the small incumbent local exchange carriers serving the more rural
areas. Higher centralized services expenses allocated from NSI also contributed
to the increase in other operating expenses, but to a lesser degree. The rise
in centralized services expenses was primarily caused by transition and
integration costs allocated to the Company in connection with the merger of Bell
Atlantic and NYNEX Corporation, partially offset by lower pension and benefit
costs incurred by NSI.
These increases were partially offset by lower costs for contract services
due, in part, to the disposition of Bell Atlantic's ownership interest in Bell
Communications Research Inc. (Bellcore) in November 1997. The Company continues
to contract with Bellcore for technical and support services, but to a lesser
extent.
OTHER INCOME, NET
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $.9 52.9%
- --------------------------------------------------------------------------------
The change in other income, net, was attributable to the recognition of
interest income in connection with the settlement of tax-related matters.
INTEREST EXPENSE
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $3.7 6.5%
- --------------------------------------------------------------------------------
Interest expense increased in the first six months of 1998 principally as a
result of higher levels of average short-term debt. This increase was partially
offset by higher capitalized interest costs resulting from higher levels of
average telephone plant under construction.
11
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
EFFECTIVE INCOME TAX RATES
Six Months Ended June 30
- --------------------------------------------------------------------------------
1998 41.7%
- --------------------------------------------------------------------------------
1997 40.1%
- --------------------------------------------------------------------------------
The effective income tax rate is the provision for income taxes as a
percentage of income before the provision for income taxes. The Company's
effective income tax rate was higher in the first six months of 1998 principally
as a result of prior year adjustments.
FINANCIAL CONDITION
- -------------------
The Company uses the net cash generated from operations and from external
financing to fund capital expenditures for network expansion and modernization,
and to pay dividends. While current liabilities exceeded current assets at both
June 30, 1998 and 1997 and December 31, 1997, the Company's sources of funds,
primarily from operations and, to the extent necessary, from readily available
financing arrangements with an affiliate, are sufficient to meet ongoing
operating requirements. Management expects that presently foreseeable capital
requirements will continue to be financed primarily through internally generated
funds. Additional long-term debt may be needed to fund development activities
or to maintain the Company's capital structure to ensure financial flexibility.
As of June 30, 1998, the Company had no funds available under its line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. The
Company had $300.0 million remaining under a shelf registration statement filed
with the Securities and Exchange Commission for the issuance of unsecured debt
securities.
The Company's debt ratio was 61.4% as of June 30, 1998, compared to 56.8% as
of June 30, 1997 and 58.8% as of December 31, 1997.
On August 3, 1998, the Company declared and paid a dividend in the amount of
$70.8 million to Bell Atlantic.
12
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
Item 1. Legal Proceedings
There were no proceedings reportable under this Item.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
27 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed during the quarter
ended June 30, 1998.
13
<PAGE>
Bell Atlantic - Pennsylvania, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BELL ATLANTIC - PENNSYLVANIA, INC.
Date: August 13, 1998 By /s/ Edwin F. Hall
----------------------------------
Edwin F. Hall
Controller and
Chief Financial Officer
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF AUGUST 12, 1998.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE BALANCE SHEET
AT JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 38
<SECURITIES> 0
<RECEIVABLES> 699
<ALLOWANCES> 63
<INVENTORY> 27
<CURRENT-ASSETS> 844
<PP&E> 10,139
<DEPRECIATION> 5,979
<TOTAL-ASSETS> 5,097
<CURRENT-LIABILITIES> 1,442
<BONDS> 1,431
0
0
<COMMON> 1,595
<OTHER-SE> (344)
<TOTAL-LIABILITY-AND-EQUITY> 5,097
<SALES> 0
<TOTAL-REVENUES> 1,699
<CGS> 0
<TOTAL-COSTS> 1,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61
<INCOME-PRETAX> 358
<INCOME-TAX> 149
<INCOME-CONTINUING> 209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
