<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 1-7150
BELL ATLANTIC - WEST VIRGINIA, INC.
A West Virginia Corporation I.R.S. Employer Identification No. 54-0142020
1500 MacCorkle Avenue, S.E., Charleston, West Virginia 25314
Telephone Number (304) 343-9911
---------------
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 - West Virginia, 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 $9,932
and $11,082 from affiliates).............. $144,636 $148,770
-------- --------
OPERATING EXPENSES
Employee costs, including benefits
and taxes............................... 29,552 33,417
Depreciation and amortization............ 29,399 26,261
Other (including $26,189
and $25,825 to affiliates).............. 47,728 47,064
-------- --------
106,679 106,742
-------- --------
OPERATING INCOME........................... 37,957 42,028
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used
during construction..................... --- 205
Other, net (including $225
and $0 from affiliate).................. (64) (375)
-------- --------
(64) (170)
INTEREST EXPENSE (including $0
and $118 to affiliate).................... 4,277 4,796
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES... 33,616 37,062
PROVISION FOR INCOME TAXES................. 13,449 14,994
-------- --------
NET INCOME................................. $ 20,167 $ 22,068
======== ========
REINVESTED EARNINGS (ACCUMULATED DEFICIT)
At beginning of period................... $ (6,549) $ 41,833
Add: net income......................... 20,167 22,068
-------- --------
13,618 63,901
Deduct: dividend........................ --- 17,140
other changes................... 3 ---
-------- --------
At end of period......................... $ 13,615 $ 46,761
======== ========
</TABLE>
See Notes to Financial Statements.
-1-
<PAGE>
Bell Atlantic - West Virginia, Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Short-term investments....................... $ 5,697 $ ---
Note receivable from affiliate............... 18,222 11,377
Accounts receivable:
Customers and agents, net of allowances for
uncollectibles of $2,246 and $2,560....... 79,683 73,452
Affiliates................................. 9,645 17,791
Other...................................... 2,823 5,980
Material and supplies........................ 3,390 3,529
Prepaid expenses............................. 12,785 13,099
Deferred income taxes........................ 1,868 1,435
Other........................................ 66 66
---------- ----------
134,179 126,729
---------- ----------
PLANT, PROPERTY AND
EQUIPMENT..................................... 1,602,648 1,571,784
Less accumulated depreciation................ 795,385 764,580
---------- ----------
807,263 807,204
---------- ----------
OTHER ASSETS................................... 11,855 13,474
---------- ----------
TOTAL ASSETS................................... $ 953,297 $ 947,407
========== ==========
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
Bell Atlantic - West Virginia, 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:
Other....................................... $ 25 $ 27
Accounts payable:
Affiliates.................................. 39,483 41,134
Other....................................... 36,783 39,276
Accrued expenses:
Taxes....................................... 22,576 8,767
Other....................................... 30,224 28,573
Advance billings and customer deposits....... 15,254 15,382
-------- --------
144,345 133,159
-------- --------
LONG-TERM DEBT................................. 263,683 263,664
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS................... 145,411 144,301
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes........................ 50,118 51,576
Unamortized investment tax credits........... 12,460 13,066
Other........................................ 23,686 24,461
-------- --------
86,264 89,103
-------- --------
SHAREOWNER'S INVESTMENT
Common stock - one share, owned by
parent, at stated value..................... 264,065 304,065
Capital surplus.............................. 35,914 19,664
Reinvested earnings (accumulated deficit).... 13,615 (6,549)
-------- --------
313,594 317,180
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $953,297 $947,407
======== ========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
Bell Atlantic - West Virginia, 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 ...... $ 61,960 $ 48,393
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments.......... (5,697) ---
Additions to plant, property and equipment.... (29,110) (14,357)
Net change in note receivable from affiliate.. (6,845) (3,433)
Other plant-related changes................... (1,092) (415)
-------- --------
Net cash used in investing activities........... (42,744) (18,205)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of capital lease
obligations.................................. (7) (15)
Net change in note payable to affiliate....... --- (20,387)
Dividend paid................................. --- (17,140)
Capital surplus distribution.................. (23,750) ---
Net change in outstanding checks drawn on
controlled disbursement accounts............. 4,541 624
Net cash used in financing ------- -------
activities..................................... (19,216) (36,918)
------- -------
NET CHANGE IN CASH ............................. --- (6,730)
CASH, BEGINNING OF PERIOD ...................... --- 6,730
-------- --------
CASH, END OF PERIOD ............................ $ --- $ ---
======== ========
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
Bell Atlantic - West Virginia, Inc.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared
by Bell Atlantic - West Virginia, 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. Shareowner's Investment
<TABLE>
<CAPTION>
Common Capital Reinvested Earnings
(Dollars in Thousands) Stock Surplus (Accumulated Deficit)
- ------------------------------- ------ ------- ---------------------
<S> <C> <C> <C>
Balance at December 31, 1994... $304,065 $ 19,664 $ (6,549)
Net income..................... 20,167
Transfer of stated capital to
capital surplus............... (40,000) 40,000
Distribution of capital surplus
to Bell Atlantic Corporation.. (23,750)
Other.......................... (3)
-------- -------- --------
Balance at March 31, 1995...... $264,065 $ 35,914 $ 13,615
======== ======== ========
</TABLE>
On January 31, 1995, the Board of Directors of the Company approved a
transfer in the amount of $40,000,000 from stated capital, as represented by the
Company's one issued share of common stock without par value, to capital
surplus.
On May 1, 1995, the Company declared and paid a capital surplus distribution
in the amount of $28,495,000 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 - West Virginia, 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
$20,167,000, compared to net income of $22,068,000 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.
OPERATING REVENUES
- ------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31 1995 1994
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Transport Services
Local service $ 63,288 $ 63,918
Network access 42,071 43,966
Toll service 17,129 19,434
Ancillary Services
Directory advertising 7,737 7,107
Other 3,009 3,229
Value-added Services 11,402 11,116
-------- --------
Total $144,636 $148,770
======== ========
<CAPTION>
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
Percentage
Increase
1995 1994 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
At March 31
- -----------
Access Lines in Service (In thousands)
Residence 564 554 1.8%
Business 175 166 5.4
Public 10 10 -
--- ---
749 730 2.6
=== ===
For the Three Month Period Ended March 31
- -----------------------------------------
Access Minutes of Use (In millions)
Interstate 541 506 6.9
Intrastate 104 102 2.0
--- ---
645 608 6.1
=== ===
Toll Messages (In thousands)
Intrastate 10,053 10,734 (6.3)
Interstate 623 619 .6
------ ------
10,676 11,353 (6.0)
====== ======
</TABLE>
-6-
<PAGE>
Bell Atlantic - West Virginia, Inc.
LOCAL SERVICE REVENUES
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (630) (1.0)%
================================================================================
Local service revenues are earned by the Company from the provision of local
exchange, local private line and public telephone services.
Local service revenues decreased in 1995 primarily due to the completion, on
December 31, 1994, of the phased elimination of Locality Rate Area charges
pursuant to the Company's Incentive Regulation Plan. The elimination of this
charge is expected to reduce local service revenues by approximately $6 million
in 1995. In addition, local service revenues were negatively impacted by the
effect of storm-related usage experienced in the first quarter of 1994.
Substantially offsetting these decreases were a 2.6% growth in the number of
access lines in service and higher usage of basic calling services by residence
customers.
NETWORK ACCESS REVENUES
Dollars in Thousands (Decrease)
================================================================================
Three Months $(1,895) (4.3)%
================================================================================
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 decreased in 1995 principally due to the effect of
price reductions, the recognition of the Company's obligations under the Federal
Communications Commission's (FCC) current price cap order and lower revenues
recognized through an interstate revenue sharing agreement with affiliated
companies. See "Competitive and Regulatory Environment - Federal Regulation"
for a discussion of FCC interstate access revenue issues. Higher customer
demand for access services, as reflected by a 6.1% growth in access minutes of
use, as well as growth in revenues from end-user charges attributable to
increasing access lines in service partially offset these decreases. Increased
demand for digital data transport services further offset the decrease in
network access revenues. Reported growth in access minutes of use and revenues
was negatively impacted by storm-related calling volumes experienced in the
first quarter of 1994.
TOLL SERVICE REVENUES
Dollars in Thousands (Decrease)
================================================================================
Three Months $(2,305) (11.9)%
================================================================================
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 6.0% 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 - West Virginia, Inc.
DIRECTORY ADVERTISING REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 630 8.9%
================================================================================
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 (Decrease)
================================================================================
Three Months $ (220) (6.8)%
================================================================================
Other ancillary services include billing and collection services provided to
IXCs, and facilities rental services provided to affiliates and non-affiliates.
Other ancillary services decreased due to lower facilities rental revenues
from affiliates, partially offset by higher billing and collection services
revenues.
VALUE-ADDED SERVICES REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 286 2.6%
================================================================================
Value-added services represent a family of enhanced services including Call
Waiting, Return Call, Caller ID and 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, 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 offset, in part, by lower revenues from customer premises
services.
OPERATING EXPENSES
- ------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31 1995 1994
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Employee costs, including benefits and taxes $ 29,552 $ 33,417
Depreciation and amortization 29,399 26,261
Other operating expenses 47,728 47,064
-------- --------
Total $106,679 $106,742
======== ========
</TABLE>
-8-
<PAGE>
Bell Atlantic - West Virginia, Inc.
EMPLOYEE COSTS
Dollars in Thousands (Decrease)
================================================================================
Three Months $(3,865) (11.6)%
================================================================================
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. 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 $ 3,138 11.9%
================================================================================
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 7.6%
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 $ 664 1.4%
================================================================================
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 largely attributable to 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.
These increases were partially offset by lower expenses attributable to the
effect of the severe winter storms in the first quarter of 1994 and the timing
of network software purchases.
-9-
<PAGE>
Bell Atlantic - West Virginia, Inc.
OTHER INCOME AND (EXPENSE), NET
Dollars in Thousands Increase
================================================================================
Three Months $ 106 62.4%
================================================================================
The change in other income and (expense), net was attributable to additional
interest income recognized on a note receivable from an affiliate. This
increases was partially offset by 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 $ (519) (10.8)%
================================================================================
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 (Decrease)
================================================================================
Three Months $(1,545) (10.3)%
================================================================================
EFFECTIVE INCOME TAX RATES
For the Three Months Ended March 31
================================================================================
1995 40.0%
- --------------------------------------------------------------------------------
1994 40.5%
================================================================================
The Company's effective income tax rate was slightly lower in 1995 principally
due to a decrease in state deferred tax expense related to 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. 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
-10-
<PAGE>
Bell Atlantic - West Virginia, Inc.
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 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 $16,100,000 on an annual basis. These price
decreases include the
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<PAGE>
Bell Atlantic - West Virginia, Inc.
scheduled expiration of a temporary rate increase of approximately $5,200,000 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 $10,900,000 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
Public Service Commission of West Virginia (PSC) with respect to intrastate
rates and services and other matters.
The Company has been operating under an Incentive Regulation Plan, as approved
by the PSC in December 1991. In December 1994, the PSC issued an order
extending the Incentive Regulation Plan for three years, with certain
modifications. Basic rates remain frozen through January 15, 1998 and Touch-
Tone charges will be eliminated over a three year period. The Company is
committed to invest at least $375 million in its network over the next five
years.
The PSC has set aside for separate proceedings the issues of intraLATA
presubscription and local service competition. Currently, intraLATA toll calls
default to the Company unless the customer dials a five-digit access code to use
an alternate carrier. Presubscription would enable customers to make intraLATA
toll calls using the carrier of their choice without having to dial a five-digit
access code. Testimony has been filed in the intraLATA presubscription case
with hearings scheduled to begin on June 6, 1995. Proposed local rules were
filed on the local service competition case with reply comments filed on
April 24, 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 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 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 $69,600,000 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 45.7% at March 31, 1995, compared to 45.4% at
December 31, 1994.
-12-
<PAGE>
Bell Atlantic - West Virginia, 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.
-13-
<PAGE>
Bell Atlantic - West Virginia, 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 - WEST VIRGINIA, INC.
Date: May 11, 1995 By /s/ John Ruddick
--------------------------------------
John Ruddick
Principal Accounting Officer
and Treasurer
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MAY 8, 1995.
-14-
<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> 5,697
<RECEIVABLES> 81,929
<ALLOWANCES> 2,246
<INVENTORY> 3,390
<CURRENT-ASSETS> 134,179
<PP&E> 1,602,648
<DEPRECIATION> 795,385
<TOTAL-ASSETS> 953,297
<CURRENT-LIABILITIES> 144,345
<BONDS> 263,683
<COMMON> 264,065
0
0
<OTHER-SE> 49,529
<TOTAL-LIABILITY-AND-EQUITY> 953,297
<SALES> 0
<TOTAL-REVENUES> 144,636
<CGS> 0
<TOTAL-COSTS> 106,679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,277
<INCOME-PRETAX> 33,616
<INCOME-TAX> 13,449
<INCOME-CONTINUING> 20,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,167
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
