<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 1-7368
BELL ATLANTIC - WASHINGTON, D.C., INC.
A New York Corporation I.R.S. Employer Identification No. 53-0046277
1710 H Street, N.W., Washington, D.C. 20006
Telephone Number (202) 392-9900
---------------
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 - Washington, D.C., Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS (ACCUMULATED DEFICIT)
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATING REVENUES (including $12,532
and $10,944 from affiliates).............. $136,799 $134,132
-------- --------
OPERATING EXPENSES
Employee costs, including benefits
and taxes............................... 39,007 38,737
Depreciation and amortization............ 27,059 25,973
Other (including $31,861
and $29,821 to affiliates).............. 61,979 51,295
-------- --------
128,045 116,005
-------- --------
OPERATING INCOME........................... 8,754 18,127
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used
during construction..................... --- 110
Other, net (including $0
and $19 from affiliate)................. (316) (202)
-------- --------
(316) (92)
INTEREST EXPENSE (including $491
and $68 to affiliate)..................... 4,311 4,693
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES... 4,127 13,342
PROVISION FOR INCOME TAXES................. 1,590 4,682
-------- --------
NET INCOME................................. $ 2,537 $ 8,660
======== ========
REINVESTED EARNINGS (ACCUMULATED DEFICIT)
At beginning of period................... $(27,330) $ 33,739
Add: net income......................... 2,537 8,660
-------- --------
(24,793) 42,399
Deduct: dividend........................ --- 7,672
other changes................... --- 70
-------- --------
At end of period......................... $(24,793) $ 34,657
======== ========
</TABLE>
See Notes to Financial Statements.
-1-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- -------------
<S> <C> <C>
CURRENT ASSETS
Short-term investments............... $ 5,791 $ ---
Accounts receivable:
Customers and agents, net of
allowances for uncollectibles of
$6,354 and $6,475................. 114,250 113,812
Affiliates.......................... 9,165 20,268
Other............................... 36,693 32,411
Material and supplies................ 1,401 2,418
Prepaid expenses..................... 11,281 23,464
Deferred income taxes................ 3,972 3,668
Other................................ 686 682
---------- ----------
183,239 196,723
---------- ----------
PLANT, PROPERTY AND EQUIPMENT.......... 1,387,946 1,354,514
Less accumulated depreciation........ 718,909 695,888
---------- ----------
669,037 658,626
---------- ----------
OTHER ASSETS........................... 15,419 31,693
---------- ----------
TOTAL ASSETS........................... $ 867,695 $ 887,042
========== ==========
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
LIABILITIES AND SHAREOWNER'S INVESTMENT
---------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Debt maturing within one year
Note payable to affiliate................... $ 26,698 $ 7,462
Other....................................... 1,241 1,162
Accounts payable:
Affiliates.................................. 95,872 99,007
Other....................................... 36,190 63,827
Accrued expenses:
Taxes....................................... 6,580 3,985
Other....................................... 27,000 27,527
Advance billings and customer deposits....... 9,807 9,856
-------- --------
203,388 212,826
-------- --------
LONG-TERM DEBT................................. 248,733 248,947
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS................... 153,305 152,019
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes........................ 18,889 19,977
Unamortized investment tax credits........... 5,593 5,785
Other........................................ 37,597 37,079
-------- --------
62,079 62,841
-------- --------
SHAREOWNER'S INVESTMENT
Common stock - one share, owned by
parent, at stated value..................... 191,968 191,968
Capital surplus.............................. 33,015 45,771
Accumulated deficit.......................... (24,793) (27,330)
-------- --------
200,190 210,409
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $867,695 $887,042
======== ========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ...... $ 42,582 $ 31,354
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments.......... (5,791) ---
Additions to plant, property and equipment.... (37,547) (11,517)
Net change in note receivable from
affiliate.................................... --- (4,626)
Other plant-related changes................... (30) 440
-------- --------
Net cash used in investing activities........... (43,368) (15,703)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of borrowings and
capital lease obligations.................... (292) (301)
Net change in note payable to affiliate....... 19,236 ---
Dividend paid................................. --- (7,672)
Capital surplus distribution.................. (12,756) ---
Net change in outstanding checks drawn
on controlled disbursement accounts.......... (5,402) ---
-------- --------
Net cash provided by/(used in) financing
activities..................................... 786 (7,973)
-------- --------
NET CHANGE IN CASH ............................. --- 7,678
CASH, BEGINNING OF PERIOD ...................... --- 36
-------- --------
CASH, END OF PERIOD ............................ $ --- $ 7,714
======== ========
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared
by Bell Atlantic - Washington, D.C., Inc. (the Company) pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC). The December
31, 1994 balance sheet was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles. In the opinion of management, these financial statements include all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the results of operations, financial position and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such SEC rules and regulations. The
Company believes that the disclosures made are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Effective August 1, 1994, the Company discontinued accounting for its operations
in accordance with Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulations."
<TABLE>
<CAPTION>
2. Shareowner's Investment
Common Capital Accumulated
(Dollars in Thousands) Stock Surplus Deficit
- ----------------------------- --------- --------- ------------
<S> <C> <C> <C>
Balance at December 31, 1994. $ 191,968 $ 45,771 $ (27,330)
Net income................... 2,537
Distribution of capital surplus
to Bell Atlantic Corporation (12,756)
--------- --------- ----------
Balance at March 31, 1995.... $ 191,968 $ 33,015 $ (24,793)
========= ========= ==========
</TABLE>
On May 1, 1995, the Company declared and paid a capital surplus distribution
in the amount of $2,233,000 to Bell Atlantic Corporation.
3. Reclassifications
Certain reclassifications of prior year's data have been made to conform to
1995 classifications.
-5-
<PAGE>
Bell Atlantic - Washington, D.C., 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 for the first quarter of 1995 of
$2,537,000, compared to net income of $8,660,000 for the same period in 1994.
Major items affecting the comparison of operating results for the three
month period ended March 31, 1995, versus the three month period ended March
31, 1994, are discussed in the following sections.
<TABLE>
<CAPTION>
OPERATING REVENUES
- ------------------
For the Three Months Ended March 31 1995 1994
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Transport Services
Local service $ 59,773 $ 59,315
Network access 29,985 28,147
Toll service 1,130 1,113
Ancillary Services
Directory advertising 8,048 7,741
Other 15,369 15,287
Value-added Services 22,494 22,529
---------- ---------
Total $136,799 $134,132
========== =========
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
Percentage
1995 1994 Increase
- -------------------------------------------------------------------------------
At March 31
- -----------
Access Lines in Service (In thousands)
Residence 287 283 1.4%
Business 566 555 2.0
Public 10 10 -
--- ---
863 848 1.8
=== ===
For the Three Month Period Ended March 31
- -----------------------------------------
Access Minutes of Use (In millions)
Interstate 674 659 2.3
=== ===
Toll Messages (In thousands)
Interstate 1,060 1,016 4.3
===== =====
</TABLE>
-6-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
LOCAL SERVICE REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 458 0.8%
================================================================================
Local service revenues are earned by the Company from the provision of local
exchange, local private line and public telephone services.
Local service revenues increased in 1995 due primarily to a 1.8% growth in the
number of access lines in service, higher usage of basic calling services by
residence customers and increased usage and data transport by business
customers. This growth was substantially offset by the effect of a reduction in
the Subscriber Plant Factor Surcharge, effective May 1994, and the effect of
storm-driven usage experienced in the first quarter of 1994.
NETWORK ACCESS REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 1,838 6.5%
================================================================================
Network access revenues are received from interexchange carriers (IXCs) for
their use of the Company's local exchange facilities in providing long-distance
services to IXCs' customers and from end-user subscribers. Switched access
service revenues are derived from usage-based charges paid by IXCs for access to
the Company's network. Special access revenues arise from access charges paid by
IXCs and end-users who have private networks, and end-user access revenues are
earned from local exchange carrier customers who pay for access to the network.
Network access revenues increased in 1995 principally due to higher customer
demand for access services as reflected by a 2.3% growth in access minutes of
use, as well as growth in revenues from end-user charges attributable to
increasing lines in service. Increased demand for digital data transport
services also contributed to growth in access revenues. Revenues were further
increased by higher revenues recognized through an interstate revenue sharing
agreement with affiliated companies. Reported growth in access minutes of use
and revenues was negatively impacted by storm-related calling volumes
experienced in the first quarter of 1994. Volume-related revenue increases were
partially offset by the effect of price reductions and the recognition of the
Company's obligation under the Federal Communications Commission's (FCC) current
price cap order. See "Competitive and Regulatory Environment - Federal
Regulation" for a discussion of FCC interstate access revenue issues.
TOLL SERVICE REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 17 1.5%
================================================================================
Toll service revenues are earned from calls made outside a customer's local
calling area, but within the same service area boundaries of the Company,
commonly referred to as "LATAs."
Toll service revenues increased in 1995 due primarily to an increase in
demand, as reflected by an increase of 4.3% in toll message volume.
-7-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
DIRECTORY ADVERTISING REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 307 4.0%
================================================================================
Directory advertising revenues are earned primarily from local advertising and
marketing services provided to businesses in White and Yellow Pages directories.
Other directory advertising services include database and foreign directory
marketing.
Growth in directory advertising revenues was principally due to higher rates
charged for these services. Volume growth continues to be impacted by
competition from other directory companies, as well as other advertising media.
OTHER ANCILLARY SERVICES REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 82 0.5%
================================================================================
Other ancillary services include billing and collection services provided to
IXCs, and facilities rental services provided to affiliates and non-affiliates.
Revenues from other ancillary services were substantially unchanged in the
first quarter of 1995, as compared to the first quarter of 1994.
VALUE-ADDED SERVICES REVENUES
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (35) (0.2)%
================================================================================
Value-added services represent a family of enhanced services including Call
Waiting, Return Call, Caller ID, Answer Call, and Voice Mail. These services
also include customer premises services such as inside wire installation and
maintenance and other central office services and features.
Value-added services decreased in 1995 primarily due to a reduction in
premises services revenues from services provided under certain government
contracts. Continued growth in the network customer base (access lines) and
higher demand by residence customers for value-added central office and voice
messaging services offered by the Company substantially offset the decrease in
value-added services revenues in the first quarter of 1995.
OPERATING EXPENSES
- ------------------
For the Three Months Ended March 31 1995 1994
- -------------------------------------------------------------------------------
(Dollars in Thousands)
Employee costs, including benefits and taxes $ 39,007 $ 38,737
Depreciation and amortization 27,059 25,973
Other operating expenses 61,979 51,295
-------- --------
Total $128,045 $116,005
======== ========
EMPLOYEE COSTS
Dollars in Thousands Increase
================================================================================
Three Months $ 270 0.7%
================================================================================
Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by the Company. Similar costs
incurred by
-8-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
employees of Bell Atlantic Network Services, Inc. (NSI), who provide centralized
services on a contract basis, are allocated to the Company and are included in
other operating expenses.
The increase in employee costs was principally due to annual salary and wage
increases for management and associate employees, effective April and August
1994, respectively. Associate employee wage increases were determined under a
contract ratified in October 1992 by the union representing associate employees
of the Company. Such contract will expire in August 1995.
These increases were substantially offset by the effect of lower workforce
levels and a decrease in overtime pay which was higher in the first quarter of
1994 as a result of unusually severe weather conditions.
DEPRECIATION AND AMORTIZATION
Dollars in Thousands Increase
================================================================================
Three Months $ 1,086 4.2%
================================================================================
Depreciation and amortization increased due to growth in depreciable telephone
plant and higher depreciation rates. The higher depreciation rates resulted
principally from the discontinued application of regulatory accounting
principles, effective August 1, 1994. The composite depreciation rate was 8.3%
for the first quarter of 1995. The Company expects this composite depreciation
rate to remain substantially unchanged for the remainder of 1995.
OTHER OPERATING EXPENSE
Dollars in Thousands Increase
================================================================================
Three Months $10,684 20.8%
================================================================================
Other operating expenses consist primarily of contracted services including
centralized service expenses allocated from NSI, rent, network software costs,
operating taxes other than income, provision for uncollectible accounts
receivable, and other costs.
The increase in other operating expenses was attributable to higher costs for
contracted services, higher assessments for Public Service Commission fees, and
an increase in software costs associated with the enhancement of the Company's
network. Also contributing to the increase was higher costs allocated from NSI,
primarily as a result of increased rent expense, as well as additional costs
incurred in that organization to enhance systems and consolidate work activities
at Bell Atlantic's network services subsidiaries, including the Company.
OTHER INCOME AND (EXPENSE), NET
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (224)
================================================================================
The change in other income and (expense), net was largely attributable to a
reduction in income related to the allowance for funds used during construction.
Upon the discontinued application of regulatory accounting principles,
effective August 1, 1994, the Company began recognizing capitalized interest
costs as a reduction of interest expense. Previously, the Company recorded an
allowance for funds used during construction as an item of other income.
-9-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
INTEREST EXPENSE
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (382) (8.1)%
================================================================================
Interest expense decreased principally due to the recognition of capitalized
interest costs, subsequent to the discontinued application of regulatory
accounting principles. Partially offsetting this decrease was additional
expense resulting from higher levels of average short-term debt and higher
interest rates in the first quarter of 1995.
PROVISION FOR INCOME TAXES
Dollars in Thousands (Decrease)
================================================================================
Three Months $(3,092) (66.0)%
================================================================================
EFFECTIVE INCOME TAX RATES
For the Three Months Ended March 31
================================================================================
1995 38.5%
- --------------------------------------------------------------------------------
1994 35.1%
================================================================================
The Company's effective income tax rate was higher in the first quarter of
1995 due principally to the reduction in the amortization of investment tax
credits and the elimination of the benefit of the rate differential applied to
reversing timing differences as a result of the discontinued application of
regulatory accounting principles in August 1994.
COMPETITIVE AND REGULATORY ENVIRONMENT
- --------------------------------------
The communications industry continues to undergo fundamental changes which may
have a significant impact on future financial performance of telecommunications
companies. These changes are being driven by a number of factors, including the
accelerated pace of technological innovation, the convergence of the
telecommunications, cable television, information services and entertainment
businesses and a regulatory environment in which traditional barriers are being
lowered or eliminated and competition permitted or encouraged.
The Company's telecommunications business is subject to competition from
numerous sources. An increasing amount of this competition is from companies
that have substantial capital, technological and marketing resources, many of
which do not face the same regulatory constraints as the Company.
Well-financed competitors are seeking authority, or are likely soon to seek
authority, to offer competing local exchange services, such as dial tone and
local usage, in some of the most lucrative of the Company's local telephone
service areas. MFS - Intelenet of Washington, D.C., a subsidiary of MFS
Communications Company, Inc., has filed an application with the District of
Columbia Public Service Commission (PSC) for authority to provide local exchange
services.
The entry of well-financed competitors has the potential to adversely affect
multiple revenue streams of the Company, including local exchange and network
access services in the market segments and geographical areas in which the
competitors operate. The amount of revenue reductions will depend, in part, on
the competitors' success in marketing these services, and the conditions
established by regulatory authorities. The potential impact is expected to be
offset, to some extent, by revenues from interconnection charges to be paid to
the Company by these competitors.
-10-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
The Company continues to respond to competitive challenges by intensely
focusing on meeting customer requirements and by reducing its cost structure
through efficiency and productivity initiatives. In addition, the Company
continues to seek growth opportunities in businesses where it possesses core
competencies.
Federal Regulation
Legislation has been introduced in the current session of the United States
Congress that would open local exchange markets to competitors and would permit
local exchange carriers, such as the Company, to provide interLATA services upon
meeting certain conditions. No definitive prediction can be made as to whether
or when such legislation will be enacted, the provisions thereof or the impact
on the business or financial condition of the Company.
On April 28, 1995, the U.S. District Court, which administers the Modification
of Final Judgment (MFJ), granted the Regional Bell Operating Companies' (RBOCs)
joint motion for a waiver of the MFJ permitting them to provide interLATA
wireless telecommunications services. The Court's decision contained a number
of restrictions limiting the extent and manner in which the RBOCs may provide
interLATA wireless services. While Bell Atlantic plans to comply with the
requirements of the Court's decision so that it may provide the services
authorized therein, it has appealed the decision to the U.S. Court of Appeals
for the District of Columbia Circuit.
In February 1995, the FCC issued an Order to Show Cause with respect to
certain findings contained in an independent audit of Bell Atlantic's network
services subsidiaries' 1988 and first quarter 1989 reported adjustments to the
National Exchange Carrier Association (NECA) interstate common line pool. On
May 2, 1995, Bell Atlantic filed its response to the Show Cause Order, asserting
that there is no legal basis for the FCC to institute enforcement proceedings
with respect to these findings. Resolution of this matter is expected later in
1995.
FCC Interim Price Cap Orders
On March 30, 1995, the FCC adopted its Report and Order approving an Interim
Price Cap Plan for interstate access rates. The Interim Plan, which is
effective August 1, 1995, replaces the Price Cap Plan that the FCC adopted in
1990.
Under the Interim Plan, the Company's Price Cap Index must be reduced by a
fixed percentage, either 4.0%, 4.7%, or 5.3%, which is intended to reflect
increases in productivity (Productivity Factor). Companies selecting the 4.0%
or 4.7% Productivity Factor are required to reduce future prices and share a
portion of their interstate return in excess of 12.25%. Companies selecting the
5.3% Productivity Factor are also required to reduce prices but are not required
to share. The Interim Plan also provides for a reduction in the Price Cap Index
of 2.8% to adjust for what the FCC believes was an underestimate in its
calculation of the Productivity Factor in prior years. The Interim Plan
provides for increases to the Price Cap Indices for inflation, 2.9% effective
August 1, 1995, based on the increase in the GDP-PI. The Interim Plan also
eliminated the recovery of certain "exogenous" cost changes including changes in
accounting costs that the FCC believes have no economic consequences.
On March 30, 1995, the FCC also adopted an Order relating to the Price Cap
Plan requiring local exchange carriers to include in their calculation of
interstate earnings an adjustment to add back to revenues the amounts that were
required to be shared with ratepayers. This adjustment, which is effective for
1994 and subsequent years, increased 1994 calculated interstate returns for the
purpose of determining the prior years sharing amounts that will be reflected in
rate reductions that become effective August 1, 1995.
On May 9, 1995, Bell Atlantic filed its Transmittal of Interstate Rates as
required by the March 30, 1995 Orders. In the filing, Bell Atlantic selected
the 5.3% productivity factor for the August 1995 to June 1996 tariff period.
The rates included in the May 9, 1995 filing result in price decreases for the
Company totaling approximately $14,600,000 on an annual basis. These price
decreases include the scheduled expiration of a temporary rate increase of
approximately $4,700,000 on an annualized basis that is in effect from March 17,
1995 through July 31, 1995 to recover prior years "exogenous" postemployment
benefit costs. Approximately 80% of the remaining $9,900,000 reduction results
from compliance with the Interim Plan. The
-11-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
remaining 20% represents reductions that the Company was required to make under
the prior Price Cap Plan. It is expected that the earnings impact of these
price decreases will be mitigated by volume increases and cost reductions that
result from improved productivity.
Bell Atlantic has appealed the Orders with the D.C. Circuit Court of Appeals
and has petitioned the FCC for a stay of certain aspects of the Orders pending
the results of the appeals.
State Regulation
The communications services of the Company are subject to regulation by the
PSC with respect to intrastate rates and services and other matters.
In January 1993, the PSC adopted a regulatory reform plan (D.C. Reform Plan)
for a three year trial period, effective April 1, 1993. In December 1993, the
PSC approved a $15,800,000 rate increase, effective January 1, 1994.
The second monitoring period for the Company's regulatory reform plan ended on
March 31, 1995. The Company will submit its report to the PSC by June 30, 1995.
In accordance with the regulatory plan, the PSC will review the Company's
current earnings and determine whether or not a refund is appropriate.
In January 1995, the Company filed a petition with the PSC seeking approval of
a proposed price cap plan to become effective upon the expiration of the D.C.
Reform Plan in January 1996. The price cap plan would: (i) divide services into
three categories: basic, discretionary and competitive; (ii) allow basic prices
to be increased annually at one half the rate of inflation (GDP - PI) except for
basic residential rates which would be capped through January 1, 2000; (iii)
permit annual increases of up to 25% for discretionary services; (iv) eliminate
price regulation for all competitive services; and (v) classify services among
the three categories and establish a process for moving services between
categories going forward. Hearings on the proposed price cap plan are expected
to commence later in 1995.
In March 1995, the PSC issued an order requiring the Company to refund
approximately $1,000,000 for the overcollection of the Subscriber Plant Factor
(SPF) Surcharge Revenues for the period January 1, 1994 through May 12, 1994.
The disbursement of the refund is to be determined and implemented in Formal
Case No. 814, Phase IV - the Company's Price Cap Plan case. Hearings on this
filing are scheduled to begin in September 1995.
OTHER MATTERS
- -------------
Environmental Issues
The Company is subject to a number of environmental proceedings as a result of
its operations and shared liability provisions in the Plan of Reorganization
related to the Modification of Final Judgment. The Company is also responsible
for the remediation of sites with underground fuel storage tanks and other
expenses associated with environmental compliance.
The Company continually monitors its operations with respect to potential
environmental issues, including changes in legally mandated standards and
remediation technologies. The Company's recorded liability reflects those
specific issues where remediation activities are currently deemed to be probable
and where the cost of remediation is estimable. Management believes that the
aggregate amount of any additional potential liability would not have a material
effect on the Company's results of operations or financial condition.
FINANCIAL CONDITION
- -------------------
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements, including network
expansion and modernization, payment of dividends, and distributions of capital
surplus. Management expects that presently foreseeable capital requirements
will be financed primarily
-12-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
through internally generated funds. Additional long-term debt may be needed to
fund development activities and to maintain the Company's capital structure
within management's guidelines.
As of March 31, 1995, the Company had $98,300,000 of an unused line of credit
with an affiliate, Bell Atlantic Network Funding Corporation. In addition, the
Company had $60,000,000 remaining under a shelf registration statement filed
with the Securities and Exchange Commission.
The Company's debt ratio was 58.0% at March 31, 1995, compared to 55.0% at
December 31, 1994.
-13-
<PAGE>
Bell Atlantic - Washington, D.C., Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For background concerning the Company's contingent liabilities under
the Plan of Reorganization governing the divestiture by AT&T Corp.
(formerly American Telephone and Telegraph Company) of certain assets
of the former Bell System Operating Companies with respect to private
actions relating to pre-divestiture events, including pending antitrust
cases, see Item 3 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
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 March 31, 1995.
-14-
<PAGE>
Bell Atlantic - Washington, D.C., 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 - WASHINGTON, D.C., INC.
Date: May 11, 1995 By /s/ Sheila D. Shears
-------------------------------------
Sheila D. Shears
Controller
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MAY 8, 1995.
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from: the
Statement of Operations for the three months ended March 31, 1995 and the
Balance Sheet as of March 31, 1995 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 0
<SECURITIES> 5,791
<RECEIVABLES> 120,604
<ALLOWANCES> 6,354
<INVENTORY> 1,401
<CURRENT-ASSETS> 183,239
<PP&E> 1,387,946
<DEPRECIATION> 718,909
<TOTAL-ASSETS> 867,695
<CURRENT-LIABILITIES> 203,388
<BONDS> 248,733
<COMMON> 191,968
0
0
<OTHER-SE> 8,222
<TOTAL-LIABILITY-AND-EQUITY> 867,695
<SALES> 0
<TOTAL-REVENUES> 136,799
<CGS> 0
<TOTAL-COSTS> 128,045
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,311
<INCOME-PRETAX> 4,127
<INCOME-TAX> 1,590
<INCOME-CONTINUING> 2,537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,537
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
