<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 1-6875
BELL ATLANTIC - MARYLAND, INC.
A Maryland Corporation I.R.S. Employer Identification No. 52-0270070
One East Pratt Street, Baltimore, Maryland 21202
Telephone Number (410) 539-9900
---------------
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 - Maryland, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATING REVENUES (including $8,457
and $5,896 from affiliates).............. $497,729 $483,580
-------- --------
OPERATING EXPENSES
Employee costs, including benefits
and taxes.............................. 100,870 107,271
Depreciation and amortization........... 102,815 94,767
Other (including $99,075
and $92,845 to affiliates)............. 165,076 165,896
-------- --------
368,761 367,934
-------- --------
OPERATING INCOME.......................... 128,968 115,646
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used
during construction.................... --- 1,319
Other, net (including $1
and $0 from affiliate)................. (1,346) (1,383)
-------- --------
(1,346) (64)
INTEREST EXPENSE (including $743
and $278 to affiliate)................... 15,747 18,114
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES.. 111,875 97,468
PROVISION FOR INCOME TAXES................ 40,448 34,609
-------- --------
NET INCOME................................ $ 71,427 $ 62,859
======== ========
REINVESTED EARNINGS
At beginning of period.................. $124,391 $460,246
Add: net income........................ 71,427 62,859
-------- --------
195,818 523,105
Deduct: dividends...................... 58,900 54,911
other changes.................. 2 ---
-------- --------
At end of period........................ $136,916 $468,194
======== ========
</TABLE>
See Notes to Financial Statements.
-1-
<PAGE>
Bell Atlantic - Maryland, Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
CURRENT ASSETS
Short-term investments.................... $ 18,144 $ ---
Accounts receivable:
Customers and agents, net of allowances
for uncollectibles of $19,390 and
$18,646............................... 302,478 290,021
Affiliates.............................. 46,827 49,233
Other................................... 17,787 28,571
Material and supplies..................... 16,864 10,185
Prepaid expenses.......................... 81,124 97,730
Deferred income taxes..................... 22,227 14,942
Other..................................... 820 193
---------- ----------
506,271 490,875
---------- ----------
PLANT, PROPERTY AND EQUIPMENT............... 5,359,556 5,268,419
Less accumulated depreciation............. 2,660,998 2,574,532
---------- ----------
2,698,558 2,693,887
---------- ----------
OTHER ASSETS................................ 44,274 43,357
---------- ----------
TOTAL ASSETS................................ $3,249,103 $3,228,119
========== ==========
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
Bell Atlantic - Maryland, 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.................... $ 44,449 $ 15,273
Other........................................ 6,544 31,418
Accounts payable:
Affiliates................................... 150,031 160,513
Other........................................ 172,284 187,167
Accrued expenses:
Taxes........................................ 60,722 35,537
Other........................................ 88,074 82,991
Advance billings and customer deposits........ 43,344 46,607
---------- ----------
565,448 559,506
---------- ----------
LONG-TERM DEBT.................................. 974,474 976,036
---------- ----------
EMPLOYEE BENEFIT OBLIGATIONS.................... 464,468 459,789
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes......................... 135,808 133,847
Unamortized investment tax credits............ 24,321 25,358
Other......................................... 122,248 123,772
---------- ----------
282,377 282,977
---------- ----------
SHAREOWNER'S INVESTMENT
Common stock - one share, without par value,
owned by parent.............................. 825,420 825,420
Reinvested earnings........................... 136,916 124,391
---------- ----------
962,336 949,811
---------- ----------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT... $3,249,103 $3,228,119
========== ==========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
Bell Atlantic - Maryland, 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 ......... $ 172,387 $169,419
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments............. (18,144) ---
Additions to plant, property and equipment (120,487) (87,455)
Other plant-related changes...................... 12,026 1,996
--------- --------
Net cash used in investing activities.............. (126,605) (85,459)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of borrowings and capital
lease obligations............................... (26,564) (1,698)
Net change in note payable to affiliate.......... 29,176 (17,284)
Dividends paid................................... (58,900) (54,911)
Net change in outstanding checks drawn
on controlled disbursement accounts............. 10,506 (10,067)
--------- --------
Net cash used in financing activities.............. (45,782) (83,960)
--------- --------
NET CHANGE IN CASH ................................ --- ---
CASH, BEGINNING OF PERIOD ......................... --- ---
--------- --------
CASH, END OF PERIOD ............................... $ --- $ ---
========= ========
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
Bell Atlantic - Maryland, Inc.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared
by Bell Atlantic - Maryland, 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."
2. Dividend
On May 1, 1995, the Company declared and paid a dividend in the amount of
$65,130,000 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 - Maryland, 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
$71,427,000, compared to net income of $62,859,000 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 $225,707 $221,186
Network access 132,585 127,804
Toll service 27,428 29,307
Ancillary Services
Directory advertising 41,540 39,012
Other 21,245 17,954
Value-added Services 49,224 48,317
-------- ----------
Total $497,729 $483,580
======== ==========
</TABLE>
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
<TABLE>
<CAPTION>
Percentage
Increase
1995 1994 (Decrease)
- -------------------------------------------------------------------------
<S> <C> <C> <C>
At March 31
- -----------
Access Lines in Service (In thousands)
Residence 2,067 2,011 2.8%
Business 1,083 1,031 5.0
Public 40 41 (2.4)
------ ------
3,190 3,083 3.5
====== ======
For the Three Months Period Ended March 31
- ------------------------------------------
Access Minutes of Use (In millions)
Interstate 2,347 2,223 5.6
Intrastate 691 653 5.8
------ ------
3,038 2,876 5.6
====== ======
Toll Messages (In thousands)
Intrastate 26,340 26,801 (1.7)
Interstate 5,773 5,675 1.7
------ ------
32,113 32,476 (1.1)
====== ======
</TABLE>
-6-
<PAGE>
Bell Atlantic - Maryland, Inc.
LOCAL SERVICE REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 4,521 2.0%
================================================================================
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 primarily due to a 3.5% 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 partially offset by the effect of storm-driven usage
experienced in the first quarter of 1994.
NETWORK ACCESS REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 4,781 3.7%
================================================================================
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 5.6% growth in access minutes of
use, as well as growth in revenues from end-user charges attributable to
increasing access 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 obligations 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 (Decrease)
================================================================================
Three Months $(1,879) (6.4)%
================================================================================
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." Other toll services include 800 services and
Wide Area Telephone Service (WATS).
The decrease in toll service revenues was caused by a decline of 1.1% in
toll message volumes and price reductions on certain toll services. The decline
in toll message volumes was due to the effect of storm-driven usage experienced
in the first quarter of 1994 and increased competition for intraLATA toll and
WATS services. The Company expects that competition will continue to negatively
impact toll service revenues in 1995, relative to 1994 levels.
-7-
<PAGE>
Bell Atlantic - Maryland, Inc.
DIRECTORY ADVERTISING REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 2,528 6.5%
================================================================================
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 $ 3,291 18.3%
================================================================================
Other ancillary services include billing and collection services provided to
IXCs, and facilities rental services provided to affiliates and non-affiliates.
Other ancillary services increased due to higher facilities rental revenues
from affiliates and higher billing and collection services revenues.
VALUE-ADDED SERVICES REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 907 1.9%
================================================================================
Value-added services represent a family of enhanced services including Call
Waiting, Return Call, Caller ID, Caller ID Deluxe, 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.
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, including the introduction of Caller ID Deluxe
in the fourth quarter of 1994, increased value-added services revenues in the
first quarter of 1995. These increases were partially offset by lower premises
services revenues from services provided under certain government contracts.
<TABLE>
<CAPTION>
OPERATING EXPENSES
- ------------------
For the Three Months Ended March 31 1995 1994
- ------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Employee costs, including benefits and taxes $100,870 $107,271
Depreciation and amortization 102,815 94,767
Other operating expenses 165,076 165,896
-------- --------
Total $368,761 $367,934
======== ========
</TABLE>
-8-
<PAGE>
Bell Atlantic - Maryland, Inc.
EMPLOYEE COSTS
Dollars in Thousands (Decrease)
================================================================================
Three Months $(6,401) (6.0)%
================================================================================
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 contract basis, are allocated to the Company and are
included in other operating expenses.
The decline in employee costs was principally due to a decrease in overtime
pay and repair and maintenance activity, both of which were higher in the first
quarter of 1994 as a result of unusually severe weather conditions experienced
throughout the region. The effect of lower workforce levels also contributed to
the overall decrease in employee costs. These reductions were partially offset
by 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.
DEPRECIATION AND AMORTIZATION
Dollars in Thousands Increase
================================================================================
Three Months $ 8,048 8.5%
================================================================================
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 8.0%
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 (Decrease)
================================================================================
Three Months $ (820) (.5)%
================================================================================
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.
Other operating expenses decreased due to lower expenses attributable to the
timing of network software purchases and the effect of the severe winter storms
in the first quarter of 1994. A decrease in the provision for uncollectible
accounts receivable also contributed to the lower other operating expense in the
first quarter of 1995.
These decreases were substantially offset by an increase in materials
expense and 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.
-9-
<PAGE>
Bell Atlantic - Maryland, Inc.
OTHER INCOME AND (EXPENSE), NET
Dollars in Thousands (Decrease)
================================================================================
Three Months $(1,282)
================================================================================
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.
INTEREST EXPENSE
Dollars in Thousands (Decrease)
================================================================================
Three Months $(2,367) (13.1)%
================================================================================
Interest expense decreased principally due to the recognition of capitalized
interest costs, subsequent to the discontinued application of regulatory
accounting principles.
PROVISION FOR INCOME TAXES
Dollars in Thousands Increase
================================================================================
Three Months $ 5,839 16.9%
================================================================================
EFFECTIVE INCOME TAX RATES
For the Three Months Ended March 31
================================================================================
1995 36.2%
================================================================================
1994 35.5%
================================================================================
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.
A number of well-financed competitors have been granted authority, and
others 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
-10-
<PAGE>
Bell Atlantic - Maryland, Inc.
service areas. In April 1994, the Public Service Commission of Maryland (PSC)
approved an application from MFS-Intelenet of Maryland, Inc. (MFS-I), a
subsidiary of MFS Communications Company, Inc. (MFS), to provide and resell
local exchange and interexchange telecommunications services to business
customers in areas served by the Company. MFS-I is authorized to be a co-
carrier in Maryland and has been assigned its own central office codes for use
with its customers, and the Company is required to provide intrastate switched
access collocation. The Commission has determined that the rates that MFS-I
will pay to interconnect with the Company include MFS-I's fair share of the
joint and common costs that support universal service. On an interim basis,
MFS-I will pay 6.1 cents per call to terminate a call on the Company's network.
The PSC has established a schedule, which extends into 1995, for Phase II of
this case. Final interconnection rates will be decided in Phase II. In late
1994, MCI Metro ATS and Teleport Communications Group received approval for the
same waivers and interconnection rates established in the MFS-I proceeding. An
application by SBC Media Ventures (SBC) to provide residential service in
Montgomery County was suspended at SBC's request pending completion of Phase II
of the MFS-I proceeding.
The entry of well-financed competitors has the potential to adversely affect
multiple revenue streams of the Company, including toll, 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.
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
-11-
<PAGE>
Bell Atlantic - Maryland, Inc.
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 $45,800,000 on an annual basis. These price
decreases include the scheduled expiration of a temporary rate increase of
approximately $14,700,000 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 $31,100,00 reduction results
from compliance with the Interim Plan. The 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 substantially
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.
The Company has been operating under a regulatory reform plan instituted by
the PSC in 1990. Legislation was passed by both houses of the Maryland General
Assembly that would enable the PSC to regulate the Company by a method other
than rate base rate of return regulation. On May 9, 1995, the bill was signed
into law giving the PSC such authority. The Company plans to petition the PSC
later this year concerning the election to be regulated under a method other
than rate base rate of return regulation.
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.
-12-
<PAGE>
Bell Atlantic - Maryland, Inc.
FINANCIAL CONDITION
- -------------------
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements, including network
expansion and modernization, and payment of dividends. Management expects that
presently foreseeable capital requirements will be financed primarily 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 $203,800,000 of an unused line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. In
addition, the Company had $50,000,000 remaining under a shelf registration
statement filed with the Securities and Exchange Commission.
The Company's debt ratio was 51.6% at March 31, 1995, compared to 51.9% at
December 31, 1994.
-13-
<PAGE>
Bell Atlantic - Maryland, 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 - Maryland, 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 - MARYLAND, INC.
Date: May 11, 1995 By /s/ W. M. English
--------------------------------------
W. M. English
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> 18,144
<RECEIVABLES> 321,868
<ALLOWANCES> 19,390
<INVENTORY> 16,864
<CURRENT-ASSETS> 506,271
<PP&E> 5,359,556
<DEPRECIATION> 2,660,998
<TOTAL-ASSETS> 3,249,103
<CURRENT-LIABILITIES> 565,448
<BONDS> 974,474
<COMMON> 825,420
0
0
<OTHER-SE> 136,916
<TOTAL-LIABILITY-AND-EQUITY> 3,249,103
<SALES> 0
<TOTAL-REVENUES> 497,729
<CGS> 0
<TOTAL-COSTS> 368,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,747
<INCOME-PRETAX> 111,875
<INCOME-TAX> 40,448
<INCOME-CONTINUING> 71,427
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,427
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
