<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-K
________________
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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
----------------
Securities registered pursuant to Section 12(b) of the Act: See attached
Schedule A.
Securities registered pursuant to Section 12(g) of the Act: None.
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF BELL ATLANTIC CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a) AND (b) OF FORM 10-K AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION J(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
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Bell Atlantic - West Virginia, Inc.
SCHEDULE A
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------------------------------------- ---------------------
Forty Year 7 1/4% Debentures, due February 1, 2013 New York Stock
Exchange
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Bell Atlantic - West Virginia, Inc.
TABLE OF CONTENTS
ITEM NO. PAGE
-------- ----
PART I
1. Business ..................................................... 1
2. Properties ................................................... 10
3. Legal Proceedings ............................................ 11
4. Submission of Matters to a Vote of Security Holders .......... 12
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters .......................................... 12
6. Selected Financial Data ...................................... 12
7. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction J(2).)........... 13
8. Financial Statements and Supplementary Data .................. 20
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ..................................... 20
PART III
10. Directors and Executive Officers of the Registrant .......... 20
11. Executive Compensation ...................................... 20
12. Security Ownership of Certain Beneficial Owners and
Management .................................................. 20
13. Certain Relationships and Related Transactions .............. 20
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K .................................................... 20
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 27, 1995.
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Bell Atlantic - West Virginia, Inc.
PART I
Item 1. Business
GENERAL
Bell Atlantic - West Virginia, Inc. (the "Company") is incorporated under the
laws of the State of West Virginia and has its principal offices at 1500
MacCorkle Avenue, S.E., Charleston, West Virginia 25314 (telephone number 304-
343-9911). The Company is a wholly owned subsidiary of Bell Atlantic
Corporation ("Bell Atlantic"), which is one of the seven regional holding
companies ("RHCs") formed in connection with the court-approved divestiture (the
"Divestiture"), effective January 1, 1984, of those assets of American Telephone
and Telegraph Company ("AT&T") related to exchange telecommunications, exchange
access functions, printed directories and cellular mobile communications.
The Company presently serves a territory consisting of two complete Local
Access and Transport Areas ("LATAs") and part of a third LATA. These LATAs are
generally centered on a city or based on some other identifiable common
geography and, with certain limited exceptions, each LATA marks the boundary
within which the Company may provide telephone service.
The Company provides two basic types of telecommunications services. First,
the Company transports telecommunications traffic between subscribers located
within the same LATA ("intraLATA service"), including both local and toll
services. Local service includes the provision of local exchange ("dial tone"),
local private line and public telephone services (including dial tone service
for pay telephones owned by the Company and other pay telephone providers).
Among other local services provided are Centrex (telephone company central
office-based switched telephone service enabling the subscriber to make both
intercom and outside calls) and a variety of special and custom calling
services. Toll service includes message toll service (calling service beyond
the local calling area) within LATA boundaries, and intraLATA Wide Area Toll
Service (WATS)/800 services (volume discount offerings for customers with highly
concentrated demand). Second, the Company provides exchange access service,
which links a subscriber's telephone or other equipment to the transmission
facilities of interexchange carriers which, in turn, provide telecommunications
service between LATAs ("interLATA service") to their customers. The Company
also provides exchange access service to interexchange carriers which provide
intrastate intraLATA long distance telecommunications service.
OPERATIONS
During 1993, Bell Atlantic reorganized certain functions formerly performed
by each of the seven Bell System operating companies ("BOCs") transferred to it
pursuant to the Divestiture, including the Company (collectively, the "Network
Services Companies"), into lines of business ("LOBs") organized across the
Network Services Companies around specific market segments. The Network
Services Companies, however, remain responsible within their respective service
areas for the provision of telephone services, financial performance and
regulatory matters. The LOBs are:
The Consumer Services LOB markets communications services to residential
customers within the service territories of the Network Services Companies,
including the service territory of the Company, and plans to market information
services and entertainment programming.
The Carrier Services LOB markets (i) switched and special access to the
Company's local exchange network, and (ii) billing and collection services,
including recording, rating, bill processing and bill rendering. The principal
customers of this LOB are interexchange carriers; AT&T is the largest single
customer. Other customers include business customers and government agencies
with their own special access network connections, wireless companies and other
local exchange carriers ("LECs") which resell network connections to their own
customers.
The Small Business Services LOB markets communications and information
services to small businesses (customers having up to 20 access lines or 100
Centrex lines).
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Bell Atlantic - West Virginia, Inc.
The Large Business Services LOB markets communications and information
services to large businesses (customers having more than 20 access lines or more
than 100 Centrex lines). These services include voice switching/processing
services (e.g., dedicated private lines, custom Centrex, call management and
voice messaging), end-user networking (e.g., credit and debit card transactions,
and personal computer-based conferencing, including data and video),
internetworking (establishing links between the geographically disparate
networks of two or more companies or within the same company), network
integration (integrating multiple geographically disparate networks into one
system), network optimization (disaster avoidance, 911, intelligent vehicle
highway systems), video services (distance learning, telemedicine, surveillance,
videoconferencing) and integrated multi-media applications services.
The Directory Services LOB manages the provision of (i) advertising and
marketing services to advertisers, and (ii) listing information (e.g., White
Pages and Yellow Pages). These services are currently provided primarily
through print media, but the Company expects that use of electronic formats will
increase in the future. In addition, the Directory Services LOB manages the
provision of photocomposition, database management and other related products
and services to publishers.
The Public and Operator Services LOB markets pay telephone and operator
services in the service territories of the Network Services Companies to meet
consumer needs for accessing public networks, locating and identifying network
subscribers, providing calling assistance and arranging billing alternatives
(e.g., calling card, collect and third party calls).
The Federal Systems LOB markets communications and information technology and
services to departments, agencies and offices of the executive, judicial and
legislative branches of the federal government.
The Network LOB manages the technologies, services and systems platforms
required by the other LOBs and the Network Services Companies, including
the Company, to meet the needs of their respective customers, including
switching, feature development and on-premises installation and maintenance
services.
The Company has been making and expects to continue to make significant
capital expenditures to meet the demand for communications services and to
further improve such services. Capital expenditures were approximately $110
million in 1992, $100 million in 1993 and $85 million in 1994. The total
investment in plant, property and equipment was approximately $1.46 billion at
December 31, 1992, $1.52 billion at December 31, 1993, and $1.57 billion at
December 31, 1994, in each case after giving effect to retirements, but before
deducting accumulated depreciation at such date.
The Company is projecting construction expenditures for 1995 at approximately
$81 million. However, subject to regulatory approvals, the Network Services
Companies, including the Company, plan to allocate a greater portion of capital
resources to the deployment of broadband network platforms (technologies
ultimately capable of providing a switched facility for access to and transport
of high-speed data services, video-on-demand, and image and interactive
multimedia applications). Most of the funds for these expenditures are expected
to be generated internally. Some additional external financing may be necessary
or desirable.
LINE OF BUSINESS RESTRICTIONS
The consent decree entitled "Modification of Final Judgment" ("MFJ") approved
by the United States District Court for the District of Columbia (the "D.C.
District Court") which, together with the Plan of Reorganization ("Plan")
approved by the D.C. District Court, set forth the terms of Divestiture also
established certain restrictions on the post-Divestiture activities of the RHCs,
including Bell Atlantic and its subsidiaries. Currently, the MFJ's principal
restrictions on post-Divestiture RHC activities are prohibitions on (i)
providing interexchange telecommunications, and (ii) engaging in the
manufacture of telecommunications equipment and customer
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Bell Atlantic - West Virginia, Inc.
premises equipment ("CPE"). Since Divestiture, the D.C. District Court has
retained jurisdiction over the construction, modification, implementation and
enforcement of the MFJ.
Legislation has been introduced in the current session of Congress pursuant
to which the line of business restrictions established by the MFJ could be
eliminated or modified. No definitive prediction can be made as to whether or
when any such legislation will be enacted, the provisions thereof or the impact
on the business or financial condition of the Company.
FCC REGULATION AND INTERSTATE RATES
The Company is subject to the jurisdiction of the Federal Communications
Commission ("FCC") with respect to interstate services and certain related
matters. The FCC prescribes a uniform system of accounts for telephone
companies, interstate depreciation rates and the principles and standard
procedures used to separate plant investment, expenses, taxes and reserves
between those applicable to interstate services under the jurisdiction of the
FCC and those applicable to intrastate services under the jurisdiction of the
respective state regulatory authorities ("separations procedures"). The FCC
also prescribes procedures for allocating costs and revenues between regulated
and unregulated activities.
Interstate Access Charges
The Company provides intraLATA service and does not participate in the
provision of interLATA service except through offerings of exchange access
service. The FCC has prescribed structures for exchange access tariffs to
specify the charges ("Access Charges") for use and availability of the Company's
facilities for the origination and termination of interstate interLATA service.
In general, the tariff structures prescribed by the FCC provide that
interstate costs of the Company which do not vary based on usage ("non-traffic
sensitive costs") are recovered from subscribers through flat monthly charges
("Subscriber Line Charges"), and from interexchange carriers through usage-
sensitive Carrier Common Line ("CCL") charges. Traffic-sensitive interstate
costs are recovered from carriers through variable access charges based on
several factors, primarily usage.
In May 1984, the FCC authorized the implementation of Access Charge tariffs
for "switched access service" (access to the local exchange network) and of
Subscriber Line Charges for multiple line business customers (up to $6.00 per
month per line). In 1985, the FCC authorized Subscriber Line Charges for
residential and single-line business customers at the rate of $1.00 per month
per line, which increased in installments to $3.50, effective April 1, 1989.
FCC Access Charge Pooling Arrangements
The FCC previously required that all LECs, including the Company, pool
revenues from CCL and Subscriber Line Charges that cover the non-traffic
sensitive costs of the local exchange network, that is, the interstate costs
associated with the lines from subscribers' premises to telephone company
central offices. To administer such pooling arrangements, the FCC mandated the
formation of the National Exchange Carrier Association, Inc. ("NECA"). Some
LECs, including the Company, received more revenue from the pool than they
billed their interexchange carrier customers.
The FCC changed its mandatory pooling requirements, effective April 1, 1989.
As a result, the Network Services Companies withdrew as a group from the pool.
In February 1995, the FCC issued an Order to Show Cause with respect to
certain findings contained in an independent audit concluded in December 1991
with respect to certain filings by the Network Services Companies with NECA.
Resolution of these issues is expected in the second half of 1995.
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Bell Atlantic - West Virginia, Inc.
Price Caps
The price cap system, which has been in effect since 1991, places a cap on
overall LEC prices for interstate access services which is modified annually, in
inflation-adjusted terms, by a fixed percentage which is intended to reflect
increases in productivity. The price cap level can also be adjusted to reflect
"exogenous" changes, such as changes in FCC separations procedures or accounting
rules. LECs subject to price caps have somewhat increased flexibility to change
the prices of existing services within certain groupings of interstate services,
known as "baskets".
FCC regulations applicable to the Company provide for an authorized rate of
return of 11.25% for the years 1991 and beyond. To the extent that a company is
able to earn a higher rate of return through improved efficiency, the FCC's
price cap rules permit them to retain the full amount of this higher return up
to 100 basis points above the authorized rate of return (currently, up to a
12.25% rate of return). If a company's rate of return is between 100 and 500
basis points above the authorized rate of return (that is, currently, between
12.25% and 16.25%), the company must share 50% of the earnings above the 100-
basis-point level with customers by reducing rates prospectively. All earnings
above the 500-basis-point level must be returned to customers in the form of
prospective rate decreases. If, on the other hand, a company's rate of return
is more than 100 basis points below the authorized rate of return (that is,
currently, below 10.25%), the company is permitted to increase rates
prospectively to make up the deficiency.
Under FCC-approved tariffs, the Network Services Companies are charging
uniform rates for interstate access services (with the exception of Subscriber
Line Charges) throughout the service territories and are regarded as a single
unit by the FCC for rate of return measurement.
In February 1994, the FCC initiated a rulemaking proceeding to determine the
effectiveness of LEC price cap rules and to decide what changes, if any, should
be made to those rules. This rulemaking is expected to be concluded in the
first half of 1995.
Enhanced Services
In 1985, the FCC initiated an examination of its regulations requiring that
"enhanced services" (e.g. voice messaging services, electronic mail, videotext
gateway, protocol conversion) be offered only through a structurally separated
subsidiary. In 1986, the FCC eliminated this requirement, permitting the Company
to offer enhanced services, subject to compliance with a series of non-
structural safeguards. These safeguards include detailed cost accounting,
protection of customer information, public disclosure of technical interfaces
and certain reporting requirements. In 1990, the U.S. Court of Appeals for the
Ninth Circuit (Court of Appeals) vacated and remanded the matter to the FCC. In
1991, the FCC adopted an order which reinstated relief from the separate
subsidiary requirement upon a company's compliance with the FCC's Open Network
Architecture requirements and strengthened some of the nonstructural safeguards.
In 1992, the Company certified to the FCC that it had complied with applicable
requirements, and the FCC granted structural relief.
In October 1994, the Court of Appeals vacated the 1991 order and remanded the
matter to the FCC for further proceedings. As a result, the FCC has initiated a
broad examination of the state of competition in the enhanced services business
and the adequacy of existing non-structural safeguards. The Company is permitted
to continue to offer existing enhanced services pending further action.
FCC Cost Allocation and Affiliate Transaction Rules
FCC rules govern: (i) the allocation of costs between the regulated and
unregulated activities of a communications common carrier and (ii) transactions
between the regulated and unregulated affiliates of a communications common
carrier.
The cost allocation rules apply to certain unregulated activities: activities
that have never been regulated as communications common carrier offerings and
activities that have been preemptively deregulated by the FCC. The costs of
these activities are removed prior to the separations procedures process and are
assigned to unregulated activities in the aggregate, not to specific services,
for pricing
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Bell Atlantic - West Virginia, Inc.
purposes. Other activities must be accounted for as regulated activities, and
their costs are subject to separations procedures.
The affiliate transaction rules govern the pricing of assets transferred to
and services provided by affiliates. These rules generally require that assets
be transferred between affiliates at "market price", if such price can be
established through a tariff or a prevailing price actually charged to third
parties. In the absence of a tariff or prevailing price, "market price" cannot
be established, in which case (i) asset transfers from a regulated to an
unregulated affiliate must be valued at the higher of cost or fair market value,
and (ii) asset transfers from an unregulated to a regulated affiliate must be
valued at the lower of cost or fair market value.
The FCC has not attempted to make its cost allocation or affiliate
transaction rules preemptive. State regulatory authorities are free to use
different cost allocation methods and affiliate transaction rules for intrastate
ratemaking and to require carriers to keep separate allocation records.
Telephone Company Provision of Video Dial Tone and Video Programming
In August 1992, the FCC issued an order permitting telephone companies such
as the Company to provide "video dial tone" service. Video dial tone permits
telephone companies to provide video transport to multiple programmers on a non-
discriminatory common carrier basis. In November 1994, the FCC issued an order
which stated that jurisdiction for video dial tone service will be divided
between the FCC and the states. Over the air services and services transported
across state lines will be deemed interstate services subject to regulation by
the FCC. Services delivered entirely within a single state will be deemed
intrastate services subject to state regulation. The order also generally
prohibits the Company from acquiring in-region cable television facilities or
entering into a joint venture with an in-region cable television company or
other video programmer to jointly construct or operate a video dial tone
platform.
In December 1992, two Bell Atlantic Companies, Bell Atlantic - Virginia, Inc.
and Bell Atlantic Video Services Company, filed a lawsuit against the federal
government in the United States District Court for the Eastern District of
Virginia seeking to overturn the prohibition in the Cable Communications Policy
Act of 1984 against LECs providing video programming in their respective
telephone service areas. In 1993, the court struck down this prohibition as a
violation of the First Amendment's freedom of speech protections and enjoined
its enforcement against Bell Atlantic, the Network Services Companies, including
the Company, and Bell Atlantic Video Services Company. This decision was
affirmed by the United States Court of Appeals for the Fourth Circuit in 1994.
The federal government is expected to petition the United States Supreme Court
to review the decision.
Interconnection and Collocation
In order to encourage greater competition in the provision of interstate
special access services, the FCC issued an order in 1992 allowing third parties
to collocate their equipment in telephone company offices to provide special
access (private line) services to the public. The order permits collocating
parties to pay LECs an interconnection charge that is lower than the existing
tariffed rates for similar non-collocated services and it allows LECs limited
additional pricing flexibility for their own special access services when
collocated interconnection is operational. In 1993, the FCC extended collocation
to switched access services under terms and conditions similar to those for
special access collocation. In June 1994, the U.S. Court of Appeals for the
District of Columbia vacated the FCC's special access collocation order insofar
as it required physical collocation. In July 1994, the FCC voted to require LECs
to offer virtual collocation, with the LECs having the option to offer physical
collocation.
STATE REGULATION AND COMPETITIVE ENVIRONMENT
The communications services of the Company are subject to regulation by the
Public Service Commission of West Virginia (the "PSC") with respect to
intrastate rates and services and other matters.
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Bell Atlantic - West Virginia, Inc.
In 1988, the PSC approved a plan ("Flexible Regulation Plan") which gave the
Company flexibility in the pricing of competitive services (e.g., intraLATA toll
service, intraLATA "800" service, intraLATA WATS service, billing and collection
services and directory advertising) and provided for a freeze on rates for basic
local exchange services through December 31, 1990, and a lifting on January 1,
1989 of the moratorium on intraLATA toll competition. The Flexible Regulation
Plan was subsequently extended through 1991.
In March 1990, the West Virginia legislature enacted legislation, which
became effective on January 1, 1991, requiring the PSC to cease its regulation
of the rates charged by a telephone utility for any service that the PSC finds
to be subject to "workable competition", unless the PSC finds that to do so
would adversely affect the continued availability of adequate, economical and
reliable local telephone service.
In December 1991, the PSC approved a new "Incentive Regulation Plan". The
Incentive Regulation Plan continued the major provisions of the Flexible
Regulation Plan, including pricing flexibility for competitive services and a
freeze on rates for basic local exchange service. It also committed the Company
to invest $450 million from 1991 through 1995 in West Virginia's
telecommunications infrastructure.
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 set aside for separate proceedings issues regarding intraLATA
presubscription and local service competition.
COMPETITION
General
Regulatory proceedings, as well as new technology, are continuing to expand
the types of available communications services and equipment and the number of
competitors offering such services. An increasing amount of this competition is
from large companies which have substantial capital, technological and marketing
resources, many of which do not face the same regulatory constraints as the
Company.
Alternative Access
A substantial portion of the Company's revenues from business and government
customers is derived from a relatively small number of large, multiple-line
subscribers.
The Company faces competition from alternative communications systems,
constructed by large end users, interexchange carriers, and alternative access
vendors which are capable of originating and/or terminating calls without the
use of the company's plant.
The ability of alternative access providers to compete with the Company has
been enhanced by the FCC's orders requiring the Company to offer virtual
collocated interconnection for special and switched access services.
Other potential sources of competition are cable television systems, shared
tenant services and other non-carrier systems which are capable of bypassing the
Company's local plant, either partially or completely, through substitution of
special access for switched access or through concentration of
telecommunications traffic on fewer of the Company's lines.
IntraLATA Toll Competition
The ability of interexchange carriers to engage in the provision of
intrastate intraLATA toll service in competition with the Company is subject to
state regulation. Such competition is permitted in West Virginia.
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Bell Atlantic - West Virginia, Inc.
Personal Communications Services
Radio-based personal communications services ("PCS") also constitute
potential sources of competition to the Company. PCS consists of wireless
portable telephone services which would allow customers to make and receive
telephone calls from any location using small handsets, and which could also be
used for data transmission. The FCC has authorized trials of such services,
using a variety of technologies, by numerous companies, including Bell
Atlantic's cellular telecommunications subsidiaries.
In September 1993, the FCC issued an order allocating radio spectrum to be
licensed for use in providing PCS. Under the order, seven separate bandwidths
of spectrum, ranging in size from 10 MHz to 30 MHz, would be auctioned to
potential PCS providers in each geographic area of the United States; five of
the spectrum blocks would be auctioned by "basic trading area" and the remaining
two would be auctioned by larger "major trading area" (as such trading areas are
defined by Rand McNally). LECs and companies with LEC subsidiaries, such as
Bell Atlantic, are eligible to bid for PCS licenses, except that cellular
carriers, such as Bell Atlantic, are limited to obtaining only 10 MHz of PCS
bandwidth in areas where they provide cellular service. Bidders other than
cellular providers may obtain multiple licenses aggregating up to 40 MHz of
bandwidth in any area.
In October 1994, Bell Atlantic, NYNEX, AirTouch Communications and U S WEST,
Inc., formed a partnership to bid jointly in the FCC's auctions for PCS
licenses. In March 1995, this partnership was a successful bidder for licenses
for spectrum to provide PCS services in the following markets: Chicago; Dallas;
Tampa; Houston; Miami; New Orleans; Milwaukee; Richmond; San Antonio;
Jacksonville; and Honolulu.
Centrex
The Company offers Centrex service, which is a telephone company central
office-based communications system for business, government and other
institutional customers consisting of a variety of integrated software-based
features located in a centralized switch or switches and extended to the
customer's premises primarily via local distribution facilities. In the
provision of Centrex, the Company is subject to significant competition from the
providers of CPE systems, such as private branch exchanges ("PBXs"), which
perform similar functions with less use of the Company's switching facilities.
Users of Centrex systems generally require more subscriber lines than users
of PBX systems of similar capacity. The FCC increased the maximum Subscriber
Line Charge on embedded Centrex lines to $6.00 per month per line, effective
April 1, 1989. Increases in Subscriber Line Charges result in Centrex users
incurring higher charges than users of comparable PBX systems. In West
Virginia, the intercom portion of Centrex service has been detariffed. This
enables the Company to charge rates for these services which offset the effects
of such higher Subscriber Line Charges.
Directories
The Company continues to face significant competition from other providers of
directories, as well as competition from other advertising media.
Public Telephone Services
The Company faces increasing competition in the provision of pay telephone
services from other pay telephone service providers. In addition, the growth of
wireless communications negatively impacts usage of public telephones.
Operator Services
Alternative operator services providers have entered into competition with
the Company's operator services product line.
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Bell Atlantic - West Virginia, Inc.
NEW PRODUCTS AND SERVICES
All of the Network Services Companies, including the Company, have introduced
the Bell Atlantic(R)IQ(SM) Services family of calling features (although not
all features are available in all states). These features include Identa
Ring(SM), which allows a single line to have multiple telephone numbers, each
with a distinctive ring; Repeat Call, which allows customers automatically to
redial busy phone numbers; Return Call, which allows customers automatically to
return the last incoming call, even without knowing the number; Ultra
Forward(SM), which customers can use to program call-forwarding instructions;
Home Intercom, which allows for phone-to-phone dialing within the home; Caller
ID service, which displays the number of the calling party; and Caller ID Deluxe
service, which displays the name and number of the calling party.
CustoPak is a Centrex service targeted to small business customers which
provides intercommunication between Centrex lines within the customer's system,
Local Exchange Service, direct in dialing to Centrex lines, identification and
billing of outgoing long distance messages by line number where such billing is
done by the Company, Touch Tone Calling service, and intercept to the main
listed number.
ISDN Anywhere allows customers in non-equipped Integrated Services Digital
Network ("ISDN") offices to be offered service from a designated host switch.
Customers served by non-equipped offices will be offered service from the
designated host switch until such time as their home office becomes equipped
with ISDN. ISDN services provide for simultaneous transport of voice, data and
images.
Community Opportunity Savings Plan (20\20) is a new toll discount plan
offered to residence customers. This plan provides a discount of 20% once a
customer's accumulated tolls exceed $20 in a given month. The discount is then
applied to the entire toll bill.
The Company offers various types of information services, such as message
storage services, voice mail and electronic mail, and Answer Call, a telephone
answering service aimed at residential and small business customers.
CERTAIN CONTRACTS AND RELATIONSHIPS
Certain planning, marketing, procurement, financial, legal, accounting,
technical support and other management services are provided on behalf of the
Company on a centralized basis by Bell Atlantic's wholly owned subsidiary, Bell
Atlantic Network Services, Inc. ("NSI"). Bell Atlantic Network Funding
Corporation provides short-term financing and cash management services to the
Company.
The seven RHCs each own (directly or through subsidiaries) a one-seventh
interest in Bell Communications Research, Inc. ("Bellcore"). Pursuant to the
Plan, Bellcore furnishes the RHCs and their BOC subsidiaries with technical
assistance such as network planning, engineering and software development, as
well as various other consulting services that can be provided more effectively
on a centralized basis. Bellcore is the central point of contact for
coordinating the efforts of the RHCs in meeting the national security and
emergency preparedness requirements of the federal government. It also helps to
mobilize the combined resources of the RHCs in times of natural disasters.
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Bell Atlantic - West Virginia, Inc.
EMPLOYEE RELATIONS
As of December 31, 1994, the Company had approximately 3,000 employees,
including personnel managed by the centralized staff of NSI. This represents a
decrease of approximately 6% from December 31, 1993. This workforce is
augmented by employees of the centralized staff of NSI, who perform services for
the Company on a contract basis.
Approximately 90% of the employees of the Company are represented by the
Communications Workers of America which is affiliated with the American
Federation of Labor - Congress of Industrial Organizations.
The represented associates received a base wage increase of 4.00% in August
1994 under the terms of three-year contracts, which were ratified in October
1992 by unions representing associate employees of the Bell Atlantic Network
Services Companies, including the Company and NSI. Under the same contracts,
associates received a Corporate Profit Sharing payment of $480 per person in
1995 based on Bell Atlantic's 1994 financial performance.
The terms of the contracts ratified in October 1992 by unions representing
associate employees of the Bell Atlantic Network Services Companies, including
the Company and NSI, expire in August 1995.
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Bell Atlantic - West Virginia, Inc.
Item 2. Properties
The principal properties of the Company do not lend themselves to simple
description by character and location. The Company's investment in plant,
property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Central office equipment.... 36% 36%
Cable, wiring, and conduit.. 41 41
Land and buildings.......... 8 8
Other equipment............. 13 13
Other....................... 2 2
--- ---
100% 100%
=== ===
</TABLE>
"Central office equipment" consists of switching equipment, transmission
equipment and related facilities. "Cable, wiring, and conduit" consists
primarily of aerial cable, underground cable, conduit and wiring. "Land and
buildings" consists of land owned in fee and improvements thereto, principally
central office buildings. "Other equipment" consists of public telephone
terminal equipment and other terminal equipment, poles, furniture, office
equipment, and vehicles and other work equipment. "Other" property consists
primarily of plant under construction, capital leases and leasehold
improvements.
The Company's customers are served by electronic switching systems that
provide a wide variety of services. The Company's network has been in a
transition from an analog to a digital network, which provides the capabilities
to furnish advanced data transmission and information management services. At
December 31, 1994, all existing access lines have been transitioned to digital
capability.
10
<PAGE>
Bell Atlantic - West Virginia, Inc.
Item 3. Legal Proceedings
PRE-DIVESTITURE CONTINGENT LIABILITIES AND LITIGATION
The Plan provides for the recognition and payment by AT&T and the former BOCs
(including the Company) of liabilities that are attributable to pre-Divestiture
events but do not become certain until after Divestiture. These contingent
liabilities relate principally to litigation and other claims with respect to
the former Bell System's rates, taxes, contracts and torts (including business
torts, such as alleged violations of the antitrust laws). Except to the extent
that affected parties otherwise agree, contingent liabilities that are
attributable to pre-Divestiture events are shared by AT&T and the BOCs in
accordance with formulas prescribed by the Plan, whether or not an entity was a
party to the proceeding and regardless of whether an entity was dismissed from
the proceeding by virtue of settlement or otherwise. Each company's allocable
share of liability under these formulas depends on several factors, including
the type of contingent liability involved and each company's relative net
investment as of the effective date of Divestiture. Under the formula generally
applicable to most of the categories of these contingent liabilities, the
Company's aggregate allocable share of liability is approximately 0.6%.
AT&T and various of its subsidiaries and the BOCs (including, in some cases,
the Company) have been and are parties to various types of litigation relating
to pre-Divestiture events, including actions and proceedings involving
environmental claims and allegations of violations of equal employment laws.
Damages, if any, ultimately awarded in the remaining actions relating to pre-
Divestiture events could have a financial impact on the Company whether or not
the Company is a defendant since such damages will be treated as contingent
liabilities and allocated in accordance with the allocation rules established by
the Plan.
While complete assurance cannot be given as to the outcome of any contingent
liabilities or litigation, in the opinion of the Company's management, any
monetary liability or financial impact to which the Company would be subject
after final adjudication of all of the remaining potential or actual pre-
Divestiture claims would not be material in amount to the financial position of
the Company.
11
<PAGE>
Bell Atlantic - West Virginia, Inc.
PART I
Item 4. Submission of Matters to a Vote of Security Holders
(Omitted pursuant to General Instruction J(2).)
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
(Inapplicable.)
Item 6. Selected Financial Data
(Omitted pursuant to General Instruction J(2).)
12
<PAGE>
Bell Atlantic - West Virginia, Inc.
Item 7. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction J(2).)
This discussion should be read in conjunction with the Financial Statements
and Notes to Financial Statements included in the index set forth on page F-1.
RESULTS OF OPERATIONS
---------------------
<TABLE>
<CAPTION>
For the Years Ended December 31 1994 1993
------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Income Before Extraordinary Items and
Cumulative Effect of Change in Accounting Principle $ 84,259 $76,442
Extraordinary Items
Discontinuation of regulatory accounting
principles, net of tax (76,616) ---
Early extinguishment of debt, net of tax --- (1,456)
Cumulative Effect of Change in Accounting Principle
Postemployment benefits, net of tax --- (7,397)
-------- -------
Net Income $ 7,643 $67,589
======== =======
</TABLE>
The Company reported net income of $7,643,000 in 1994, compared to net income
of $67,589,000 in 1993.
Results for 1994 included a noncash, after-tax extraordinary charge of
$76,616,000 in connection with the Company's decision to discontinue application
of regulatory accounting principles required by Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (Statement No. 71).
The discontinued application of Statement No. 71 required the Company, for
financial reporting purposes, to eliminate its regulatory assets and
liabilities, resulting in an after-tax charge of $12,954,000. In addition, the
Company recorded an after-tax charge of $63,662,000, net of related investment
tax credits of $4,979,000, to adjust the carrying amount of its telephone plant
and equipment. On August 1, 1994, the Company began using shorter asset lives
to depreciate certain categories of plant and equipment. The use of shorter
asset lives did not significantly change depreciation expense in 1994, for
financial reporting purposes, from the amount that would have been recorded
using asset lives prescribed by regulators at the time of the discontinued
application of Statement No. 71. See Notes 1, 2 and 3 to the Financial
Statements for additional information on the discontinuation of regulatory
accounting principles.
Results for 1993 included an extraordinary charge of $1,456,000 for the early
extinguishment of debt, net of tax, and $7,397,000 for the cumulative effect of
adopting Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (Statement No. 112).
In the third quarter of 1994, the Company recorded a pretax charge of
$8,605,000, in accordance with Statement No. 112, to recognize the Company's
proportionate share of benefit costs for the separation of employees who are
entitled to benefits under preexisting Bell Atlantic separation pay plans. The
charge, which was actuarially determined, represents benefits earned through
July 1, 1994 for employees who are expected to receive separation payments in
the future, including those who will be separated through 1997, pursuant to
initiatives announced in August 1994. These workforce reductions will be made
possible by changes in provisioning systems and customer service processes,
increased spans of control, and consolidation and centralization of
administrative and staff groups. Costs to enhance systems and consolidate work
activities will be charged to expense as incurred. The Company will continue to
evaluate ways to streamline and restructure its operations and reduce its
workforce to improve its future cost structure.
13
<PAGE>
Bell Atlantic - West Virginia, Inc.
OPERATING REVENUES
------------------
<TABLE>
<CAPTION>
For the Years Ended December 31 1994 1993
-------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Transport Services
Local service $257,547 $251,390
Network access 170,019 163,030
Toll service 74,389 77,728
Ancillary Services
Directory advertising 29,397 27,881
Other 14,951 12,902
Value-added Services 46,501 41,577
-------- --------
Total $592,804 $574,508
======== ========
</TABLE>
TRANSPORT SERVICES OPERATING STATISTICS
---------------------------------------
<TABLE>
<CAPTION>
Percentage
Increase
1994 1993 (Decrease)
------------------------------------------------------------------------
<S> <C> <C> <C>
AT YEAR-END
ACCESS LINES IN SERVICE (In thousands)
Residence 559 550 1.6%
Business 173 165 4.8
Public 10 11 (9.1)
------- --------
742 726 2.2
======= ========
FOR THE YEAR
ACCESS MINUTES OF USE (In millions)
Interstate 2,041 1,896 7.6
Intrastate 415 360 15.3
------- --------
2,456 2,256 8.9
======= ========
TOLL MESSAGES (In thousands)
Intrastate 42,076 41,238 2.0
Interstate 2,448 2,253 8.7
------- --------
44,524 43,491 2.4
======= ========
</TABLE>
LOCAL SERVICE REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 6,157 2.4%
--------------------------------------------------------------------------------
</TABLE>
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 1994 due primarily to the 2.2% growth in
the number of access lines in service, as well as higher usage of basic calling
services.
NETWORK ACCESS REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 6,989 4.3%
--------------------------------------------------------------------------------
</TABLE>
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 customers who have private lines, and end-user access revenues are earned
from local exchange carrier customers who pay for access to the network.
14
<PAGE>
Bell Atlantic - West Virginia, Inc.
Network access revenues increased principally due to higher customer demand
for access services as reflected by growth in access minutes of use of 8.9%, as
well as growth in revenue from end-user charges attributable to increasing
access lines in service. Volume-related increases were partially offset by the
effect of price reductions.
TOLL SERVICE REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands (Decrease)
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $(3,339) (4.3)%
--------------------------------------------------------------------------------
</TABLE>
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).
Toll service revenues declined in the first half of 1994 by $1,109,000, and
declined by an additional $2,230,000 during the second half of 1994 over
comparable periods in 1993. The decline in revenues reflects price reductions
and increased competition for intrastate toll, WATS, and private line services.
The decline in the first half of the year was offset, in part, by higher usage
due to harsh weather conditions. The Company expects that competition for toll
services will continue to intensify in 1995.
DIRECTORY ADVERTISING REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 1,516 5.4%
--------------------------------------------------------------------------------
</TABLE>
Directory advertising revenues are earned primarily from local advertising
and marketing services provided to businesses in White and Yellow Page
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 REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 2,049 15.9%
--------------------------------------------------------------------------------
</TABLE>
Other ancillary services include billing and collection services provided to
IXCs, and facilities rental services provided to affiliates and non-affiliates.
Other ancillary services revenues increased principally due to an increase in
rental revenue from affiliate companies resulting from rate changes made to
facilities rental agreements and an increase in the number of facilities rented
by affiliates.
VALUE-ADDED SERVICES REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 4,924 11.8%
--------------------------------------------------------------------------------
</TABLE>
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.
15
<PAGE>
Bell Atlantic - West Virginia, Inc.
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 increased value-added services revenues in 1994.
Value-added services revenues were positively impacted by increased demand and
higher rates for inside wire installation and maintenance services. These
revenue increases were offset, in part, by lower revenues generated from certain
maturing central office services and features.
OPERATING EXPENSES
------------------
<TABLE>
<CAPTION>
For the Years Ended December 31 1994 1993
---------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Employee costs, including benefits and taxes $133,996 $127,736
Depreciation and amortization 107,083 116,164
Other operating expenses 191,066 182,646
-------- --------
Total $432,145 $426,546
======== ========
</TABLE>
EMPLOYEE COSTS
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 6,260 4.9%
--------------------------------------------------------------------------------
</TABLE>
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 increase in employee costs was largely attributable to a charge of
$7,010,000 to recognize the Company's proportionate share of benefit costs for
the aforementioned separation of employees. The third and fourth quarters of
1994 also included approximately $500,000 for the ongoing recognition of costs
under separation pay plans. Benefit costs associated with the separation of
employees of NSI were allocated to the Company and are included in other
operating expenses. In addition, employee costs were higher due to salary and
wage increases and higher repair and maintenance activity caused by unusually
severe weather conditions experienced during the year. These expense increases
were partially offset by the effect of lower workforce levels in 1994.
DEPRECIATION AND AMORTIZATION
<TABLE>
<CAPTION>
Dollars in Thousands (Decrease)
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $(9,081) (7.8)%
--------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization decreased primarily due to lower depreciation
expense resulting from the completion, in December 1993, of accelerated
depreciation for analog switching equipment. This decrease was partially offset
by growth in telephone plant.
On August 1, 1994, the Company began using shorter asset lives for certain
categories of plant and equipment which reflect the Company's expectations as to
the revenue-producing lives of the assets (see Note 3 to the Financial
Statements). The use of the shorter asset lives did not significantly change
depreciation expense in 1994, for financial reporting purposes, from the amount
that would have been recorded using asset lives prescribed by regulators at the
time of the discontinued application of Statement No. 71. Future depreciation
represcriptions by regulators will not affect depreciation expense recognized
for financial reporting purposes.
16
<PAGE>
Bell Atlantic - West Virginia, Inc.
OTHER OPERATING EXPENSE
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 8,420 4.6%
--------------------------------------------------------------------------------
</TABLE>
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 expense was principally due to higher costs
allocated from NSI primarily as a result of higher employee costs, contracted
services, and employee-related expenses incurred in that organization, including
$1,595,000 for the Company's allocated share of separation benefit costs
associated with employees of NSI.
This increase was offset, in part, by lower rent expense and the Company's
allocated share of reimbursements of $2,472,000 of previously recognized costs
as a result of the decision by other Bell Communications Research, Inc. owners
to participate in the Advanced Intelligent Network (AIN) project. Previously,
this project had been supported entirely by Bell Atlantic's network services
subsidiaries, including the Company.
OTHER INCOME AND (EXPENSE), NET
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 340 39.7%
--------------------------------------------------------------------------------
</TABLE>
The change in other income and (expense), net was largely attributable to
additional interest income recognized on a note receivable from an affiliate in
1994, slightly offset by a reduction in income related to the allowance for
funds used during construction.
Upon the discontinued application of Statement No. 71, effective August 1,
1994, interest costs on telephone plant under construction were capitalized in
accordance with the provisions of Statement of Financial Accounting Standards
No. 34, "Capitalization of Interest Cost," and reported as a cost of telephone
plant and a reduction of interest expense. Previously, the Company recorded an
allowance for funds used during construction as a cost of plant and an item of
other income. The allowance for funds used during construction recorded prior
to August 1, 1994 totaled $492,000, compared to $544,000 for the twelve-month
period ended December 31, 1993. The lower amount in 1994 resulted primarily
from the discontinued application of Statement No. 71 offset by increased levels
of telephone plant under construction during 1994.
INTEREST EXPENSE
<TABLE>
<CAPTION>
Dollars in Thousands (Decrease)
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $(1,838) (9.1)%
--------------------------------------------------------------------------------
</TABLE>
Interest expense decreased in 1994 principally due to the effect of a long-
term debt refinancing in 1993 and lower levels of average short-term debt.
Interest expense was further reduced by the recognition of $436,000 in
capitalized interest costs, subsequent to the discontinued application of
Statement No. 71.
17
<PAGE>
Bell Atlantic - West Virginia, Inc.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
--------------------------------------------------------------------------------
<S> <C> <C>
1994 - 1993 $ 7,058 14.0%
--------------------------------------------------------------------------------
</TABLE>
EFFECTIVE INCOME TAX RATES
<TABLE>
<CAPTION>
For the Years Ended December 31
--------------------------------------------------------------------------------
<S> <C>
1994 40.5%
--------------------------------------------------------------------------------
1993 39.7%
--------------------------------------------------------------------------------
</TABLE>
The Company's effective income tax rate was higher in 1994 due 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 Statement No. 71. The higher
effective income tax rate also resulted from the effect of a one-time net
benefit recorded in 1993 to adjust deferred taxes for the increase in the
federal corporate income tax rate from 34% to 35%.
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 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 remove barriers to entry in the local exchange markets and
would permit local exchange carriers, such as the Company, to provide interLATA
services. The impact of the enactment of such legislation on the Company's
future financial performance will depend on a number of factors, including the
degree of parity under which competition is permitted in the local and long-
distance markets.
In February 1994, the Federal Communications Commission (FCC) initiated a
rulemaking proceeding to determine the effectiveness of the price cap rules
affecting local exchange carriers, including the Company, and to decide what
changes, if any, should be made to those rules. This rulemaking is expected to
be concluded in the first half of 1995.
18
<PAGE>
Bell Atlantic - West Virginia, Inc.
Recent FCC rulings have sought to expand competition for special and switched
access services. The FCC ordered local exchange carriers, including the
Company, to provide virtual collocation in the Company's central offices to
competitors, with the option of offering physical collocation, for the purpose
of providing special and switched access transport services. The Company does
not expect the net revenue impact of collocation to be material.
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.
See Item 1 - Description of Business, State Regulation and Competitive
Environment for a complete description of the Company's current regulatory plan
and competitive environment.
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 December 31, 1994, 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 45.4% at December 31, 1994, compared to 42.3% at
December 31, 1993. The 1994 debt ratio was impacted significantly by the equity
reduction associated with the discontinued application of Statement No. 71.
As a result of the discontinued application of Statement No. 71, the Balance
Sheet at December 31, 1994 reflects significant changes due to the elimination
of regulatory assets and liabilities, the revaluation of plant and equipment and
the accelerated amortization of investment tax credits (see Note 2 to the
Financial Statements).
19
<PAGE>
Bell Atlantic - West Virginia, Inc.
PART II
Item 8. Financial Statements and Supplementary Data
The information required by this Item is set forth on pages F-1
through F-20.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
(Omitted pursuant to General Instruction J(2).)
Item 11. Executive Compensation
(Omitted pursuant to General Instruction J(2).)
Item 12. Security Ownership of Certain Beneficial Owners and Management
(Omitted pursuant to General Instruction J(2).)
Item 13. Certain Relationships and Related Transactions
(Omitted pursuant to General Instruction J(2).)
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements
See Index to Financial Statements and Financial Statement
Schedule appearing on page F-1.
(2) Financial Statement Schedules
See Index to Financial Statements and Financial Statement
Schedule appearing on page F-1.
20
<PAGE>
Bell Atlantic - West Virginia, Inc.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(Continued)
(3) Exhibits
Exhibits identified in parentheses below, on file with the
Securities and Exchange Commission (SEC), are incorporated herein
by reference as exhibits hereto.
Exhibit Number (Referenced to Item 601 of Regulation S-K)
---------------------------------------------------------
3a Certificate of Incorporation of the registrant as amended July
30, 1975 (Exhibit 3a to the registrant's Annual Report on Form
10-K for the year ended December 31, 1985, File No. 1-7150.)
3a(i) Articles of Amendment dated August 29, 1990 (Exhibit 3a(i)
to the registrant's Annual Report on Form 10-K for the
year ended December 31, 1990, File No. 1-7150.)
3a(ii) Articles of Amendment, dated January 6, 1994 and filed
January 13, 1994. (Exhibit 3a(ii) to the registrant's
Annual Report on Form 10-K for the year ended December
31, 1993, File No. 1-7150.)
3b By-Laws of the registrant, as amended April 28, 1994.
4 No instrument which defines the rights of holders of long and
intermediate term debt of the registrant is filed herewith
pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to
this regulation, the registrant hereby agrees to furnish a copy
of any such instrument to the SEC upon request.
10a Agreement Concerning Contingent Liabilities, Tax Matters and
Termination of Certain Agreements among AT&T, Bell Atlantic
Corporation, the Bell Atlantic Corporation telephone
subsidiaries, and certain other parties, dated as of November 1,
1983. (Exhibit 10a to Bell Atlantic Corporation Annual Report on
Form 10-K for the year ended December 31, 1993, File No. 1-8606.)
10b Agreement among Bell Atlantic Network Services, Inc. and the Bell
Atlantic Corporation telephone subsidiaries, dated November 7,
1983. (Exhibit 10b to Bell Atlantic Corporation Annual Report on
Form 10-K for the year ended December 31, 1993, File No. 1-8606.)
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
There were no Current Reports on Form 8-K filed during the
quarter ended December 31, 1994.
21
<PAGE>
Bell Atlantic - West Virginia, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ Ritchie A. Ireland, II
--------------------------------
Ritchie A. Ireland, II
Principal Financial
Officer and Controller
March 29, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Principal Executive Officer: _
|
David E. Lowe President and |
Chief Executive |
Officer |
|
Principal Financial Officer: |
|
Ritchie A. Ireland, II Principal |
Financial Officer|
and Controller |
| By /s/ Ritchie A. Ireland, II
| ---------------------------
Directors: | Ritchie A. Ireland, II
Neil S. Bucklew | (individually and as
William C. Campbell | attorney-in-fact)
David K. Hall | March 29, 1995
Russell L. Isaacs |
Wilbur S. Jones |
David E. Lowe |
Dan R. Moore |
Lacy I. Rice, Jr. |
Susan S. Ross _|
22
<PAGE>
Bell Atlantic - West Virginia, Inc.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Statements of Operations and Reinvested Earnings (Accumulated Deficit)
For the years ended December 31, 1994, 1993, and 1992.................. F-3
Balance Sheets - December 31, 1994 and 1993.............................. F-4
Statements of Cash Flows
For the years ended December 31, 1994, 1993, and 1992.................. F-6
Notes to Financial Statements............................................ F-7
Schedule II - Valuation and Qualifying Accounts
For the years ended December 31, 1994, 1993, and 1992.................. F-20
</TABLE>
Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.
F-1
<PAGE>
Bell Atlantic - West Virginia, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareowner of
Bell Atlantic - West Virginia, Inc.
We have audited the financial statements and the financial statement schedule of
Bell Atlantic - West Virginia, Inc. as listed in the index on page F-1 of this
Form 10-K. The financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bell Atlantic - West Virginia,
Inc. as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
As discussed in Notes 1 and 2 to the financial statements, 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 Regulation," effective August 1, 1994. Also, as discussed in Notes 1, 8
and 9 to the financial statements, the Company changed its method of accounting
for income taxes and postemployment benefits in 1993.
/s/ COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 6, 1995
F-2
<PAGE>
Bell Atlantic - West Virginia, Inc.
STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS (ACCUMULATED DEFICIT)
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES (including $45,440,
$41,536 and $40,168 from affiliates)....... $592,804 $574,508 $564,716
-------- -------- --------
OPERATING EXPENSES
Employee costs, including benefits
and taxes................................ 133,996 127,736 128,278
Depreciation and amortization............. 107,083 116,164 111,890
Other (including $97,793,
$94,945 and $90,873 to affiliates)....... 191,066 182,646 188,213
-------- -------- --------
432,145 426,546 428,381
-------- -------- --------
OPERATING INCOME............................ 160,659 147,962 136,335
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used
during construction...................... 492 544 849
Other, net (including $274,
$28 and $42 from affiliate).............. (1,009) (1,401) 4,126
-------- -------- --------
(517) (857) 4,975
INTEREST EXPENSE (including $186,
$829 and $1,113 to affiliate).............. 18,468 20,306 22,384
-------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES,
EXTRAORDINARY ITEMS, AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE.................................. 141,674 126,799 118,926
PROVISION FOR INCOME TAXES.................. 57,415 50,357 44,310
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE....................... 84,259 76,442 74,616
-------- -------- --------
EXTRAORDINARY ITEMS
Discontinuation of Regulatory Accounting
Principles, Net of Tax................... (76,616) --- ---
Early Extinguishment of Debt,
Net of Tax............................... --- (1,456) (1,948)
-------- -------- --------
(76,616) (1,456) (1,948)
-------- -------- --------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE
Postemployment Benefits, Net of Tax....... --- (7,397) ---
-------- -------- --------
NET INCOME.................................. $ 7,643 $ 67,589 $ 72,668
======== ======== ========
REINVESTED EARNINGS (ACCUMULATED DEFICIT)
At beginning of year...................... $ 41,833 $ 47,769 $ 37,875
Add: net income.......................... 7,643 67,589 72,668
-------- -------- --------
49,476 115,358 110,543
Deduct: dividends........................ 56,060 73,150 62,750
other changes.................... (35) 375 24
-------- -------- --------
At end of year............................ $ (6,549) $ 41,833 $ 47,769
======== ======== ========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
Bell Atlantic - West Virginia, Inc.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
------
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1993
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash.......................................... $ --- $ 6,730
Note receivable from affiliate................ 11,377 ---
Accounts receivable:
Customers and agents, net of allowances for
uncollectibles of $2,560 and $3,077......... 73,452 63,925
Affiliates................................... 17,791 15,166
Other........................................ 5,980 2,848
Material and supplies......................... 3,529 2,836
Prepaid expenses.............................. 13,099 11,605
Deferred income taxes......................... 1,435 680
Other......................................... 66 1,101
---------- ----------
126,729 104,891
---------- ----------
PLANT, PROPERTY AND EQUIPMENT.................. 1,571,784 1,518,354
Less accumulated depreciation................. 764,580 577,344
---------- ----------
807,204 941,010
---------- ----------
OTHER ASSETS................................... 13,474 50,789
---------- ----------
TOTAL ASSETS................................... $ 947,407 $1,096,690
========== ==========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
Bell Atlantic - West Virginia, Inc.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
LIABILITIES AND SHAREOWNER'S INVESTMENT
---------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1993
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Debt maturing within one year:
Note payable to affiliate.................... $ --- $ 20,387
Other........................................ 27 55
Accounts payable:
Affiliates................................... 41,134 35,466
Other........................................ 39,276 30,379
Accrued expenses:
Vacation pay................................. 10,460 10,161
Interest..................................... 4,909 5,012
Taxes........................................ 8,767 9,687
Other........................................ 13,204 11,770
Advance billings and customer deposits........ 15,382 13,956
-------- ----------
133,159 136,873
-------- ----------
LONG-TERM DEBT................................. 263,664 263,679
-------- ----------
EMPLOYEE BENEFIT OBLIGATIONS................... 144,301 128,866
-------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes......................... 51,576 88,064
Unamortized investment tax credits............ 13,066 24,100
Other......................................... 24,461 67,136
-------- ----------
89,103 179,300
-------- ----------
COMMITMENTS (Note 4)
SHAREOWNER'S INVESTMENT
Common stock - one share, owned by
parent, at stated value...................... 304,065 304,065
Capital surplus............................... 19,664 42,074
Reinvested earnings (accumulated deficit)..... (6,549) 41,833
-------- ----------
317,180 387,972
-------- ----------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $947,407 $1,096,690
======== ==========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
Bell Atlantic - West Virginia, Inc.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................... $ 7,643 $ 67,589 $ 72,668
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization................. 107,083 116,164 111,890
Extraordinary items, net of tax............... 76,616 1,456 1,948
Cumulative effect of change in accounting
principle, net of tax....................... --- 7,397 ---
Allowance for funds used during construction.. (492) (544) (849)
Other items, net.............................. 126 (2,489) (2,471)
Changes in certain assets and liabilities:
Accounts receivable........................ (15,284) 1,742 (13,164)
Material and supplies...................... (1,501) (46) (66)
Other assets............................... (9,111) 16,817 (5,211)
Accounts payable and accrued taxes......... 9,477 (12,941) 24,988
Deferred income taxes, net................. (3,354) (3,511) (3,782)
Unamortized investment tax credits......... (2,616) (4,585) (4,785)
Employee benefit obligations............... 15,435 6,899 873
Other liabilities.......................... 3,175 (4,411) (406)
-------- --------- ---------
Net cash provided by operating activities........ 187,197 189,537 181,633
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant, property and equipment....... (84,902) (99,925) (109,036)
Net change in note receivable from affiliate..... (11,377) --- ---
Other plant-related changes...................... (2,914) (1,630) (3,022)
-------- --------- ---------
Net cash used in investing activities............ (99,193) (101,555) (112,058)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings......................... --- 49,250 49,640
Principal repayments of capital lease
obligations..................................... (44) (500) (532)
Early extinguishment of debt..................... --- (50,000) (50,000)
Net change in note payable to affiliate.......... (20,387) (1,788) (11,145)
Dividends paid................................... (56,060) (73,150) (62,750)
Capital surplus distribution..................... (22,410) --- ---
Net change in outstanding checks drawn
on controlled disbursement accounts............. 4,167 (5,064) 4,861
-------- --------- ---------
Net cash used in financing activities............ (94,734) (81,252) (69,926)
-------- --------- ---------
INCREASE (DECREASE) IN CASH...................... (6,730) 6,730 (351)
CASH, BEGINNING OF YEAR.......................... 6,730 --- 351
-------- --------- ---------
CASH, END OF YEAR................................ $ --- $ 6,730 $ ---
======== ========= =========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
Bell Atlantic - West Virginia, Inc.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Bell Atlantic - West Virginia, Inc. (the Company), is a wholly owned
subsidiary of Bell Atlantic Corporation (Bell Atlantic).
Effective August 1, 1994, the Company discontinued accounting for its
operations under the provisions of Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain Types of Regulation" (Statement
No. 71) (see Note 2).
REVENUE RECOGNITION
Revenues are recognized as earned on the accrual basis, which is generally
when services are rendered based on the usage of the Company's local exchange
network and facilities.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of 90
days or less when purchased to be cash equivalents. Cash equivalents are stated
at cost, which approximates market value.
MATERIAL AND SUPPLIES
New and reusable materials are carried in inventory, principally at average
original cost, except that specific costs are used in the case of large
individual items.
PREPAID DIRECTORY
Costs of directory production and advertising sales are principally deferred
until the directory is published. Such costs are amortized to expense and the
related advertising revenues are recognized over the average life of the
directory, which is generally 12 months.
PLANT AND DEPRECIATION
The Company's provision for depreciation is based principally on the
composite group remaining life method of depreciation and straight-line
composite rates. This method provides for the recovery of the remaining net
investment in telephone plant, less anticipated net salvage value, over the
remaining asset lives. In connection with the discontinued application of
Statement No. 71, the Company began recording depreciation expense based on
expected revenue-producing asset lives. The following asset lives were used,
effective August 1, 1994: buildings, 30 to 40 years; central office equipment,
6 to 12 years; cable, wiring, and conduit, 15 to 50 years; and other equipment,
6 to 27 years. Previously, depreciation expense was based on asset lives that
were authorized by regulatory commissions (see Note 3) and included regulator-
approved amortization of certain classes of telephone plant.
When depreciable plant is replaced or retired, the amounts at which such
plant has been carried in plant, property and equipment are removed from the
respective accounts and charged to accumulated depreciation, and any gains or
losses on disposition are amortized over the remaining asset lives of the
remaining net investment in telephone plant.
MAINTENANCE AND REPAIRS
The cost of maintenance and repairs, including the cost of replacing minor
items not constituting substantial betterments, is charged to operating expense.
F-7
<PAGE>
Bell Atlantic - West Virginia, Inc.
CAPITALIZED INTEREST COST
Upon the discontinued application of Statement No. 71, effective August 1,
1994, the Company began reporting capitalized interest as a cost of telephone
plant and equipment and a reduction in interest expense, in accordance with the
provisions of Statement of Financial Accounting Standards No. 34,
"Capitalization of Interest Cost."
Prior to the discontinued application of Statement No. 71, the Company
recorded an allowance for funds used during construction, which included both
interest and equity return components, as a cost of plant and as an item of
other income.
EMPLOYEE BENEFITS
Pension Plans
Substantially all employees of the Company are covered under multi-employer
noncontributory defined benefit pension plans sponsored by Bell Atlantic and
certain of its subsidiaries, including the Company.
Amounts contributed to the Company's pension plans are actuarially
determined, principally under the aggregate cost actuarial method, and are
subject to applicable federal income tax regulations.
Postretirement Benefits Other Than Pensions
Substantially all employees of the Company are covered under postretirement
health and life insurance benefit plans sponsored by Bell Atlantic and certain
of its subsidiaries, including the Company.
Amounts contributed to 501(c)(9) trusts and 401(h) accounts under applicable
federal income tax regulations to pay certain postretirement benefits are
actuarially determined, principally under the aggregate cost actuarial method.
Postemployment Benefits
The Company provides employees with postemployment benefits such as
disability, benefits, workers' compensation, and severance pay.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires accrual accounting for the estimated cost of benefits
provided to former or inactive employees after employment but before retirement.
Prior to 1993, the cost of these benefits was charged to expense as the benefits
were paid.
INCOME TAXES
Bell Atlantic and its domestic subsidiaries, including the Company, file a
consolidated federal income tax return.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109),
which requires the determination of deferred taxes using the asset and liability
method. Under the asset and liability method, deferred taxes are provided on
book and tax basis differences and deferred tax balances are adjusted to reflect
enacted changes in income tax rates.
The consolidated amount of current and deferred tax expense is allocated by
applying the provisions of Statement No. 109 to each subsidiary as if it were a
separate taxpayer.
Prior to 1993, the Company accounted for income taxes based on the provisions
of Accounting Principles Board Opinion No. 11, "Accounting for Income Taxes"
(APB No. 11). Under APB No. 11, deferred taxes were generally provided to
reflect the effect of timing differences on the recognition of revenue and
expense determined for financial and income tax reporting purposes.
F-8
<PAGE>
Bell Atlantic - West Virginia, Inc.
The Tax Reform Act of 1986 repealed the investment tax credit (ITC) as of
January 1, 1986, subject to certain transitional rules. ITCs were deferred and
are being amortized as a reduction to income tax expense over the estimated
service lives of the related assets.
RECLASSIFICATIONS
Certain reclassifications of prior years' data have been made to conform to
1994 classifications.
2. DISCONTINUATION OF REGULATORY ACCOUNTING PRINCIPLES
In the third quarter of 1994, the Company determined that it was no longer
eligible for continued application of the accounting required by Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" (Statement No. 71). In connection with the decision to
discontinue regulatory accounting principles under Statement No. 71, the Company
recorded a noncash, after-tax extraordinary charge of $76,616,000, which is net
of an income tax benefit of $43,792,000.
The Company's determination that it was no longer eligible for continued
application of the accounting required by Statement No. 71 was based on the
belief that the convergence of competition, technological change (including the
Company's technology deployment plans), actual and potential regulatory,
legislative and judicial actions, and other factors are creating fully open and
competitive markets. In such markets, the Company does not believe it can be
assured that prices can be maintained at levels that will recover the net
carrying amount of existing telephone plant and equipment, which has been
depreciated over relatively long regulator-prescribed lives. In addition,
changes from cost-based regulation to a form of incentive regulation contributed
to the determination that the continued application of Statement No. 71 is
inappropriate.
The components of the charge recognized as a result of the discontinued
application of Statement No. 71 follow:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------
PRE-TAX AFTER-TAX
---------- -----------
<S> <C> <C>
Increase in plant and equipment depreciation reserve.... $116,046 $68,641
Accelerated investment tax credit amortization.......... --- (4,979)
Tax-related regulatory asset and liability elimination.. --- 10,374
Other regulatory asset and liability elimination........ 4,362 2,580
-------- -------
Total................................................... $120,408 $76,616
======== =======
</TABLE>
The increase in the accumulated depreciation reserve of $116,046,000 was
supported by both an impairment analysis, which identified estimated amounts not
recoverable from future discounted cash flows, and a depreciation study, which
identified inadequate depreciation reserve levels which the Company believes
resulted principally from the cumulative underdepreciation of plant as a result
of the regulatory process. Investment tax credit amortization was accelerated
as a result of the reduction in remaining asset lives of the associated
telephone plant and equipment.
Upon adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," the effects of required adjustments to deferred
tax balances were deferred on the balance sheet as regulatory assets and
liabilities and amortized at the time the related deferred taxes were recognized
in the ratemaking process. As of August 1, 1994, tax-related regulatory assets
of $53,617,000 and tax-related regulatory liabilities of $43,243,000 were
eliminated. The elimination of other regulatory assets and liabilities relate
principally to deferred vacation pay costs, which were being amortized as they
were recognized in the ratemaking process.
F-9
<PAGE>
Bell Atlantic - West Virginia, Inc.
3. PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment, which is stated at cost, is summarized as
follows at December 31:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land........................ $ 6,035 $ 5,940
Buildings................... 115,932 110,626
Central office equipment.... 577,296 552,221
Cable, wiring, and conduit.. 641,440 623,475
Other equipment............. 202,234 193,026
Other....................... 6,277 7,737
Construction-in-progress.... 22,570 25,329
---------- ----------
1,571,784 1,518,354
Accumulated depreciation.... (764,580) (577,344)
---------- ----------
Total....................... $ 807,204 $ 941,010
========== ==========
</TABLE>
The increase in accumulated depreciation in 1994 included $116,046,000
attributable to the adjustment to the carrying value of plant and equipment
resulting from the discontinued application of Statement No. 71 (see Note 2).
The components of the adjustment to the accumulated depreciation reserve are
summarized as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Buildings................... $ 7,629
Central office equipment.... 40,111
Cable, wiring, and conduit.. 62,338
Other equipment............. 5,968
--------
Total....................... $116,046
========
</TABLE>
In connection with the discontinued application of Statement No. 71,
effective August 1, 1994, for financial reporting purposes, the Company began
using estimated asset lives for certain categories of plant and equipment that
are shorter than those approved by regulators prior to the discontinuance of
Statement No. 71. The shorter lives result from the Company's expectation as to
the revenue-producing lives of the assets. A comparison of the regulator-
approved asset lives to the shorter new asset lives for the most significantly
impacted categories of plant and equipment follows:
<TABLE>
<CAPTION>
AVERAGE LIVES (IN YEARS)
------------------------------------------
REGULATOR-APPROVED NEW
ASSET LIVES ASSET LIVES
------------------ ----------------------
<S> <C> <C>
Buildings....... 30 - 50 30 - 40
Digital switch.. 17.5 12
Copper cable.... 20 - 25 15.5 - 19
Fiber cable..... 20 - 30 20 - 25
</TABLE>
4. LEASES
The Company has entered into both capital and operating leases for facilities
and equipment used in operations. Plant, property and equipment included
capital leases of $99,000 and $1,737,000 and related accumulated amortization of
$75,000 and $1,561,000 at December 31, 1994 and 1993, respectively. The Company
incurred no initial capital lease obligations in 1994 and 1993, as compared to
$860,000 in 1992.
Total rent expense amounted to $19,878,000 in 1994, $23,207,000 in 1993, and
$26,257,000 in 1992. Of these amounts, the Company incurred rent expense of
$9,593,000, $10,332,000, and $10,531,000 in 1994, 1993, and 1992, respectively,
to affiliated companies.
F-10
<PAGE>
Bell Atlantic - West Virginia, Inc.
At December 31, 1994, the aggregate minimum rental commitments under
noncancelable leases for the periods shown are as follows:
<TABLE>
<CAPTION>
YEARS CAPITAL LEASES OPERATING LEASES
----- --------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1995....................... $32 $ 2,062
1996....................... 10 1,729
1997....................... -- 1,520
1998....................... -- 1,045
1999....................... -- 942
Thereafter................. -- 3,255
--- -------
Total...................... 42 $10,553
=======
Salvage value, net of
imputed interest.......... (5)
---
Present value of net
minimum lease payments.... 37
Less current installments.. 27
---
Long-term obligation at
December 31, 1994......... $10
===
</TABLE>
5. DEBT
LONG-TERM
Long-term debt consists principally of debentures issued by the Company.
Interest rates and maturities of the amounts outstanding are as follows at
December 31:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Forty year 5%, due 2000................... $ 25,000 $ 25,000
Ten year 6.05%, due 2003.................. 50,000 50,000
Twelve year 7%, due 2004.................. 50,000 50,000
Forty year 7 1/4%, due 2009............... 40,000 40,000
Forty year 7 1/4%, due 2013............... 50,000 50,000
Forty year 8.4%, due 2029................. 50,000 50,000
-------- --------
265,000 265,000
Unamortized discount and premium, net..... (1,346) (1,437)
Capital lease obligations - average rate
17.6% and 11.7%.......................... 37 171
-------- --------
Total long-term debt, including
current maturities....................... 263,691 263,734
Less maturing within one year............. 27 55
-------- --------
Total long-term debt...................... $263,664 $263,679
======== ========
</TABLE>
Long-term debt outstanding at December 31, 1994 includes $115,000,000 that is
callable by the Company. The call prices of these debentures range from 102.6%
to 100.2% of face value, depending upon the remaining term to maturity of the
issue. In addition, long-term debt includes $50,000,000 that will become
redeemable only on October 15, 1996 at the option of the holders. The
redemption price will be 100.0% of face value, plus accrued interest.
The Company recorded extraordinary charges associated with the early
extinguishment of debentures called by the Company of $2,425,000, before an
income tax benefit of $969,000 in 1993, and $3,246,000, before an income tax
benefit of $1,298,000 in 1992.
At December 31, 1994 the Company had $50,000,000 remaining under a shelf
registration statement filed with the Securities and Exchange Commission.
F-11
<PAGE>
Bell Atlantic - West Virginia, Inc.
DEBT MATURING WITHIN ONE YEAR
Debt maturing within one year consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Note payable to affiliate (BANFC)................ $ -- $20,387
Long-term debt maturing within one year.......... 27 55
----- -------
Total............................................ $ 27 $20,442
===== =======
Weighted average interest rate for note payable
outstanding at year-end......................... --% 3.3%
===== =======
</TABLE>
The Company has a contractual agreement with an affiliated company, Bell
Atlantic Network Funding Corporation (BANFC), for the provision of short-term
financing and cash management services. BANFC issues commercial paper and
secures bank loans to fund the working capital requirements of Bell Atlantic's
network services subsidiaries, including the Company, and invests funds in
temporary investments on their behalf. At December 31, 1994, the Company had
$69,600,000 of an unused line of credit with BANFC.
6. FINANCIAL INSTRUMENTS
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of trade receivables and a note receivable from
affiliate.
Concentrations of credit risk with respect to trade receivables, other than
those from AT&T, are limited due to the large number of customers in the
Company's customer base. For the years ended December 31, 1994, 1993, and 1992,
revenues generated from services provided to AT&T, primarily network access,
billing and collection, and sharing of network facilities, were $78,455,000,
$79,506,000, and $85,436,000, respectively. At December 31, 1994 and 1993,
Accounts receivable, net, included $6,382,000 and $6,504,000, respectively, from
AT&T.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments.
Accounts Receivable, Note Receivable from Affiliate (BANFC), Accounts Payable,
Note Payable to Affiliate (BANFC), and Accrued Liabilities
The carrying amount approximates fair value.
Debt Maturing Within One Year and Long-Term Debt
Fair value is estimated based on the quoted market prices for the same or
similar issues or is based on the net present value of the expected future cash
flows using current interest rates.
F-12
<PAGE>
Bell Atlantic - West Virginia, Inc.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1994 1993
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Debt maturing within one
year, excluding capital
lease obligations.......... $ --- $ --- $ 20,387 $ 20,387
Long-term debt, excluding
unamortized discount and
premium and capital lease
obligations................ 265,000 242,092 265,000 276,985
Note receivable from
affiliate ................. 11,377 11,377 --- ---
</TABLE>
7. SHAREOWNER'S INVESTMENT
<TABLE>
<CAPTION>
COMMON CAPITAL REINVESTED EARNINGS
(DOLLARS IN THOUSANDS) STOCK SURPLUS (ACCUMULATED DEFICIT)
----------------------- ----------- ---------- ---------------------
<S> <C> <C> <C>
Balance at December 31, 1992.. $304,065 $42,074 $ 47,769
Net income.................... 67,589
Dividends paid to parent...... (73,150)
Other......................... (375)
-------- ------- --------
Balance at December 31, 1993.. 304,065 42,074 41,833
Net income.................... 7,643
Dividends paid to parent...... (56,060)
Distribution of capital
surplus to parent............ (22,410)
Other......................... 35
-------- -------- --------
Balance at December 31, 1994.. $304,065 $ 19,664 $ (6,549)
======== ======== ========
</TABLE>
The Company has reclassified $36,417,000 previously reported for common stock
to capital surplus to conform to the classification adopted at December 31,
1994.
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 February 1, 1995, the Company declared and paid a cash distribution of
$23,750,000 to Bell Atlantic, which was charged to capital surplus.
8. EMPLOYEE BENEFITS
PENSION PLANS
Substantially all of the Company's management and associate employees are
covered under multi-employer noncontributory defined benefit pension plans
sponsored by Bell Atlantic and certain of its subsidiaries, including the
Company. The pension benefit formula is based on a flat dollar amount per year
of service according to job classification under the associate plan and a stated
percentage of adjusted career average earnings under the plans for management
employees. The Company's objective in funding the plans is to accumulate funds
at a relatively stable level over participants' working lives so that benefits
are fully funded at retirement. Plan assets consist principally of investments
in domestic and foreign corporate equity securities, U.S. and foreign government
and corporate debt securities, and real estate.
F-13
<PAGE>
Bell Atlantic - West Virginia, Inc.
Aggregate pension cost is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Pension cost.................. $4,569 $3,886 $6,793
====== ====== ======
Pension cost as a percentage
of salaries and wages........ 4.7% 4.2% 5.9%
====== ====== ======
</TABLE>
Pension cost in 1994 increased slightly over 1993 cost. Pension cost
decreases resulting from plan amendments were more than offset by cost increases
resulting from assumption changes, primarily a decrease in the discount rate
from 7.75% to 7.25%.
The decrease in pension cost in 1993 compared to 1992 is due to the net
effect of the elimination of one-time charges associated with special
termination benefits that were recognized in the preceding year, favorable
investment experience, and changes in plan demographics due to retirement and
severance programs.
Statement of Financial Accounting Standards No. 87, "Employers' Accounting
for Pensions" (Statement No. 87) requires a comparison of the actuarial present
value of projected benefit obligations with the fair value of plan assets, the
disclosure of the components of net periodic pension costs and a reconciliation
of the funded status of the plans with amounts recorded on the balance sheets.
The Company participates in multi-employer plans and therefore, such disclosures
are not presented for the Company because the structure of the plans does not
allow for the determination of this information on an individual participating
company basis.
Significant actuarial assumptions for pension benefits are as follows at
December 31:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Discount rate................ 8.25% 7.25% 7.75%
Rate of future increases in
compensation levels......... 5.25% 5.25% 5.25%
</TABLE>
The expected long-term rate of return on plan assets was 8.25% for 1994,
1993, and 1992.
The Company has in the past entered into collective bargaining agreements
with unions representing certain employees and expects to do so in the future.
Pension benefits have been included in these agreements and improvements in
benefits have been made from time to time. Additionally, the Company has
amended the benefit formula under pension plans maintained for its management
employees. Expectations with respect to future amendments to the Company's
pension plans have been reflected in determining the Company's pension cost
under Statement No. 87.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Substantially all of the Company's management and associate employees are
covered under postretirement health and life insurance benefit plans sponsored
by Bell Atlantic and certain of its subsidiaries, including the Company. The
determination of benefit cost for postretirement health benefit plans is based
on comprehensive hospital, medical, surgical and dental benefit plan provisions.
The postretirement life insurance benefit formula used in the determination of
postretirement benefit cost is primarily based on annual basic pay at
retirement. The Company funds the postretirement health and life insurance
benefits of current and future retirees. Plan assets consist principally of
investments in domestic and foreign corporate equity securities, and U.S.
Government and corporate debt securities.
F-14
<PAGE>
Bell Atlantic - West Virginia, Inc.
Aggregate postretirement benefit cost is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Postretirement benefit cost .......... $11,114 $11,396 $10,181
======= ======= =======
</TABLE>
Postretirement benefit cost decreased in 1994 as a result of favorable claims
and demographic experience offset, in part, by cost increases resulting from
assumption changes, primarily a decrease in the discount rate from 7.75% to
7.25%. As a result of the 1992 collective bargaining agreements, Bell Atlantic
amended the postretirement medical benefit plan for associate employees and
certain associate retirees of the Company. The increase in 1993 postretirement
benefit cost over 1992 cost was primarily due to the change in benefit levels
and claims experience. Also contributing to the increase were changes in
actuarial assumptions and demographic experience.
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions," (Statement No. 106) requires a
comparison of the actuarial present value of projected postretirement benefit
obligations with the fair value of plan assets, the disclosure of the components
of net periodic postretirement benefit costs, and a reconciliation of the funded
status of the plan with amounts recorded on the balance sheets. The Company
participates in multi-employer plans and therefore, such disclosures are not
presented for the Company because the structure of the plans does not provide
for the determination of this information on an individual participating company
basis.
Significant actuarial assumptions for postretirement benefits are as follows
at December 31:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Discount rate................ 8.25% 7.25% 7.75%
Rate of future increases in
compensation levels......... 5.25 5.25 5.25
Medical cost trend rate:
Year ending................ 12.00 13.00 14.50
Ultimate (year 2003)....... 5.00 5.00 5.00
Dental cost trend rate....... 4.00 4.00 4.00
</TABLE>
The expected long-term rate of return on plan assets was 8.25% for 1994,
1993, and 1992.
Postretirement benefits other than pensions have been included in collective
bargaining agreements and have been modified from time to time. The Company has
periodically modified benefits under plans maintained for its management
employees. Expectations with respect to future amendments to the Company's
postretirement benefit plans have been reflected in determining the Company's
postretirement benefit cost under Statement No. 106.
POSTEMPLOYMENT BENEFITS
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (Statement No. 112). Statement No. 112 requires accrual accounting
for the estimated cost of benefits provided to former or inactive employees
after employment but before retirement. The cumulative effect at January 1,
1993 of adopting Statement No. 112 reduced net income by $7,397,000, net of a
deferred income tax benefit of $4,919,000. The adoption of Statement No. 112
did not have a significant effect on the Company's ongoing level of operating
expense.
In the third quarter of 1994, the Company recorded a pretax charge of
$8,605,000, in accordance with Statement No. 112, to recognize the Company's
proportionate share of benefit costs for the separation of employees who are
entitled to benefits under preexisting Bell Atlantic separation pay plans. The
charge, which was actuarially
F-15
<PAGE>
Bell Atlantic - West Virginia, Inc.
determined, represents benefits earned through July 1, 1994 for employees who
are expected to receive separation payments in the future, including those
employees who will be separated through 1997, pursuant to initiatives announced
in August 1994.
SAVINGS PLANS AND EMPLOYEE STOCK OWNERSHIP PLANS
Substantially all of the Company's employees are eligible to participate in
savings plans established by Bell Atlantic to provide opportunities for eligible
employees to save for retirement on a tax-deferred basis and encourage employees
to acquire and maintain an equity interest in Bell Atlantic. Under these plans,
a certain percentage of eligible employee contributions are matched with shares
of Bell Atlantic common stock. Bell Atlantic funds the matching contribution
through two leveraged employee stock ownership plans (ESOPs). Bell Atlantic
accounts for its ESOPs in accordance with the accounting rules applicable to
companies with ESOP trusts that held securities prior to December 15, 1989. The
Company recognizes its proportionate share of total ESOP cost based on the
Company's matching obligation attributable to participating Company employees.
The Company recorded total ESOP cost of $2,271,000, $2,097,000, and $2,986,000,
in 1994, 1993, and 1992, respectively.
9. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109).
Statement No. 109 requires the determination of deferred taxes using the asset
and liability method. Under the asset and liability method, deferred taxes are
provided on book and tax basis differences and deferred tax balances are
adjusted to reflect enacted changes in income tax rates. Prior to 1993, the
Company accounted for income taxes based on the provisions of Accounting
Principles Board Opinion No. 11.
Statement No. 109 has been adopted on a prospective basis and amounts
presented for prior years have not been restated. As of January 1, 1993, the
Company recorded a charge to income of $173,000, representing the cumulative
effect of adopting Statement No. 109, which has been reflected in the Provision
for Income Taxes in the Statement of Operations and Reinvested Earnings
(Accumulated Deficit).
Upon adoption of Statement No. 109, the effects of required adjustments to
deferred tax balances of the Company, which would be recognized in the future
for regulatory purposes, were deferred on the balance sheet as regulatory assets
and liabilities in accordance with Statement No. 71. At January 1, 1993, the
Company recorded income tax-related regulatory assets totaling $43,899,000 in
Other Assets and income tax-related regulatory liabilities totaling $48,460,000
in Deferred Credits and Other Liabilities - Other. During 1993, these
regulatory assets were increased by $1,483,000 and regulatory liabilities were
reduced by $4,379,000 for the effect of the federal corporate income tax rate
increase from 34% to 35%, effective January 1, 1993.
The income tax-related regulatory assets and liabilities were eliminated as a
result of the discontinued application of Statement No. 71, effective August 1,
1994 (see Note 2).
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
1994 1993 1992
------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.................. $49,423 $45,945 $41,444
State and local.......... 13,962 12,508 11,433
------- ------- -------
Total.................... 63,385 58,453 52,877
------- ------- -------
Deferred:
Federal.................. (3,770) (6,153) (8,420)
State and local.......... 416 2,642 4,638
------- ------- -------
Total.................... (3,354) (3,511) (3,782)
------- ------- -------
60,031 54,942 49,095
Investment tax credits.... (2,616) (4,585) (4,785)
------- ------- -------
Total income tax expense.. $57,415 $50,357 $44,310
======= ======= =======
</TABLE>
F-16
<PAGE>
Bell Atlantic - West Virginia, Inc.
As a result of the increase in the federal corporate income tax rate from 34%
to 35%, effective January 1, 1993, the Company recorded a net charge to the tax
provision of $212,000 in 1993.
The provision for income taxes varies from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes. The difference is attributable to the following factors:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
1994 1993 1992
---- ----- ----
<S> <C> <C> <C>
Statutory federal income tax rate......... 35.0% 35.0% 34.0%
Investment tax credits.................... (1.9) (2.6) (3.6)
State income taxes, net of federal
tax benefits.............................. 6.0 6.2 6.8
Benefit of rate differential applied to
reversing timing differences.............. .1 .5 (2.3)
Reversal of previously capitalized taxes
and payroll-related construction costs.... .8 1.7 1.9
Prior year tax adjustments................ -- (1.4) (.2)
Other, net................................ .5 .3 .7
---- ---- ----
Effective income tax rate................. 40.5% 39.7% 37.3%
==== ==== ====
</TABLE>
Significant components of deferred tax liabilities (assets) were as follows
at December 31:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation............... $130,700 $ 183,700
Other...................... 11,800 5,200
-------- ---------
142,500 188,900
-------- ---------
Deferred tax assets:
Employee benefits.......... (77,200) (67,500)
Investment tax credits..... (5,300) (16,600)
Advance payments........... (200) (200)
Other...................... (9,700) (17,200)
-------- ---------
(92,400) (101,500)
-------- ---------
Net deferred tax liability.. $ 50,100 $ 87,400
======== =========
</TABLE>
Total deferred tax assets include approximately $54,000,000 and $55,000,000
at December 31, 1994 and 1993, respectively, related to postretirement benefit
costs recognized in accordance with Statement No. 106. This deferred tax asset
will gradually be realized over the estimated lives of current retirees and
employees.
For the year ended December 31, 1992, a deferred income tax benefit resulted
from timing differences in the recognition of revenue and expense for financial
and income tax accounting purposes. The sources of these timing differences and
the tax effects of each were as follows:
<TABLE>
<CAPTION>
1992
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Accelerated depreciation ................. $ 2,484
Employee benefits ........................ (4,299)
Other, net ............................... (1,967)
-------
Total .................................... $(3,782)
=======
</TABLE>
F-17
<PAGE>
Bell Atlantic - West Virginia, Inc.
10. SUPPLEMENTAL CASH FLOW AND ADDITIONAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of amounts capitalized... $18,289 $20,311 $23,015
Income taxes, net of amounts refunded.. 65,272 58,589 49,836
ADDITIONAL FINANCIAL INFORMATION:
Interest expense incurred, net of
amounts capitalized.................... 18,468 20,306 22,384
Capitalized interest.................... 436 --- ---
</TABLE>
Interest paid during the year includes $242,000 in 1994, $847,000 in 1993,
and $1,158,000 in 1992 related to short-term financing services provided by Bell
Atlantic Network Funding Corporation (see Note 5).
At December 31, 1994, $4,167,000 of negative cash was classified as accounts
payable.
11. TRANSACTIONS WITH AFFILIATES
The financial statements include transactions with Bell Atlantic Network
Services, Inc. (NSI), Bell Atlantic Network Funding Corporation (BANFC), Bell
Atlantic, and various other affiliates.
The Company has contractual arrangements with NSI for the provision of
various centralized corporate, administrative, planning, financial and other
services. These arrangements serve to fulfill the common needs of Bell
Atlantic's telephone subsidiaries on a centralized basis. The Company's
allocated share of NSI costs include costs billed by Bell Communications
Research, Inc. (Bellcore), another affiliated company owned jointly by the seven
regional holding companies (as shown separately below).
The Company recognizes interest expense and income in connection with
contractual arrangements with BANFC to provide short-term financing, investing
and cash management services to the Company (see Note 5).
Operating revenues include amounts received from other affiliates in
connection with an interstate revenue sharing arrangement with Bell Atlantic
network services subsidiaries. Operating revenues and expenses also include
miscellaneous items of income and expense resulting from transactions with other
affiliates, primarily rental of facilities and equipment. The Company also paid
cash dividends to its parent, Bell Atlantic.
Transactions with affiliates are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Operating revenues................... $45,440 $41,536 $40,168
Operating expenses:
NSI................................ 83,246 77,079 71,041
Bellcore........................... 4,908 6,982 9,301
Other.............................. 9,639 10,884 10,531
------- ------- -------
97,793 94,945 90,873
Interest income from BANFC........... 274 28 42
Interest expense to BANFC............ 186 829 1,113
Dividends paid and distributions of
capital surplus to Bell Atlantic.... 78,470 73,150 62,750
</TABLE>
F-18
<PAGE>
Bell Atlantic - West Virginia, Inc.
Outstanding balances with affiliates are reported on the balance sheets at
December 31, 1994 and 1993 as Note receivable from affiliate, Accounts
receivable - affiliates, Note payable to affiliate, and Accounts payable -
affiliates.
In 1994, NSI expenses included $1,595,000, representing the Company's
proportionate share of separation benefit costs associated with employees of
NSI. Bellcore expenses in 1994 included reimbursements of $2,472,000 from other
Bellcore owners in connection with their decision to participate in the Advanced
Intelligent Network (AIN) project. This project previously had been supported
entirely by Bell Atlantic's network services subsidiaries, including the
Company.
In 1993, the Company's reported charge for the cumulative effect of the
change in accounting for postemployment benefits included $377,000, net of a
deferred income tax benefit of $251,000, representing the Company's
proportionate share of NSI's accrued cost of postemployment benefits at January
1, 1993.
12. QUARTERLY FINANCIAL INFORMATION (unaudited)
<TABLE>
<CAPTION>
INCOME BEFORE
EXTRAORDINARY
ITEMS AND
CUMULATIVE
EFFECT OF CHANGE NET
OPERATING OPERATING IN ACCOUNTING INCOME
QUARTER ENDED REVENUES INCOME PRINCIPLE (LOSS)
----------------- --------- --------- ---------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1994:
March 31....... $148,783 $ 42,041 $22,068 $ 22,068
June 30........ 144,430 36,560 18,704 18,704
September 30*.. 151,576 35,520 18,494 (58,122)
December 31.... 148,015 46,538 24,993 24,993
-------- -------- ------- --------
Total.......... $592,804 $160,659 $84,259 $ 7,643
======== ======== ======= ========
1993:
March 31**..... $142,212 $ 36,136 $17,900 $ 10,503
June 30........ 143,894 38,710 19,976 18,520
September 30... 145,796 38,993 21,062 21,062
December 31.... 142,606 34,123 17,504 17,504
-------- -------- ------- --------
Total.......... $574,508 $147,962 $76,442 $ 67,589
======== ======== ======= ========
</TABLE>
* The loss for the third quarter of 1994 includes an extraordinary charge of
$76,616,000, net of an income tax benefit of $43,792,000, related to the
discontinuation of regulatory accounting principles (see Note 2).
** Net income for the first quarter of 1993 includes a charge of $7,397,000, net
of a deferred income tax benefit of $4,919,000, related to the adoption of
Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" (see Note 8).
F-19
<PAGE>
Bell Atlantic - West Virginia, Inc.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993, and 1992
(Dollars in Thousands)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
CHARGED
BALANCE AT CHARGED TO OTHER CHARGED TO BALANCE
BEGINNING TO ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES NOTE(a) NOTE(b) OF PERIOD
----------------------------- --------- -------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Uncollectible
Accounts Receivable:
Year 1994.................. $3,077 $4,169 $4,664 $9,350 $2,560
Year 1993.................. $3,452 $3,508 $4,803 $8,686 $3,077
Year 1992.................. $2,756 $4,100 $5,122 $8,526 $3,452
</TABLE>
------------------------------------------
(a) (i) Amounts previously written off which were credited directly to this
account when recovered; and (ii) accruals charged to accounts payable for
anticipated uncollectible charges on purchases of accounts receivable from
others which were billed by the Company.
(b) Amounts written off as uncollectible.
F-20
<PAGE>
EXHIBITS
FILED WITH ANNUAL REPORT FORM 10-K
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
BELL ATLANTIC - WEST VIRGINIA, INC.
COMMISSION FILE NUMBER 1-7150
<PAGE>
Form 10-K for 1994
File No. 1-7150
Page 1 of 1
EXHIBITS INDEX
Exhibits identified in parentheses below, on file with the SEC, are incorporated
herein by reference as exhibits hereto.
Exhibit Number (Referenced to Item 601 of Regulation S-K)
---------------------------------------------------------
3a Certificate of Incorporation of the registrant as amended July 30,
1975. (Exhibit 3a to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1985, File No. 1-7150.)
3a(i) Articles of Amendment dated August 29, 1990. (Exhibit 3a(i) to
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1990, File No. 1-7150.)
3a(ii) Articles of Amendment, dated January 6, 1994 and filed January
13, 1994. (Exhibit 3a(ii) to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, File No. 1-
7150.)
3b By-Laws of the registrant, as amended April 28, 1994.
4 No instrument which defines the rights of holders of long and
intermediate term debt of the registrant is filed herewith pursuant to
Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation,
the registrant hereby agrees to furnish a copy of any such instrument
to the SEC upon request.
10a Agreement Concerning Contingent Liabilities, Tax Matters and
Termination of Certain Agreements among AT&T, Bell Atlantic
Corporation, the Bell Atlantic Corporation telephone subsidiaries,
and certain other parties, dated as of November 1, 1983. (Exhibit
10a to Bell Atlantic Corporation Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-8606.)
10b Agreement among Bell Atlantic Network Services, Inc. and the Bell
Atlantic Corporation telephone subsidiaries, dated November 7, 1983.
(Exhibit 10b to Bell Atlantic Corporation Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-8606.)
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
<PAGE>
Bell Atlantic - West Virginia, Inc.
INCORPORATED UNDER THE LAWS OF THE
STATE OF WEST VIRGINIA
MAY 11, 1916
BY-LAWS
ADOPTED AT A MEETING OF STOCKHOLDERS,
FEBRUARY 13, 1931
AMENDED APRIL 28, 1994
<PAGE>
-2-
[This is a blank page]
<PAGE>
Exhibit 3b
By-Laws
of
Bell Atlantic - West Virginia, Inc.
CONTENTS
Article I . . . . . . . . . . . Shareholder's Meetings
Article II . . . . . . . . . . . Directors
Article III . . . . . . . . . . . Officers
Article IV . . . . . . . . . . . Certificates for Stock,
Transfers,
Article V . . . . . . . . . . . Indemnification of Directors
and Officers
Article VI . . . . . . . . . . . Miscellaneous
<PAGE>
Bell Atlantic - West Virginia, Inc.
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1-a Place of Meetings. All meetings of the shareholders shall be
held at the principal office of the corporation in the City of Charleston or at
such other place, within or without the State of West Virginia, as the Board of
Directors or shareholders may from time to time determine.
Section 1-b Annual Meeting. An annual meeting of the shareholders shall be
held in April of each year on a business day and at an hour to be fixed by the
President and set forth in the notice of the meeting, for the election of
Directors and the transaction of such other business as may properly be brought
before the meeting.
Section 1-c Special Meetings. Special meetings of the shareholders may be
called at any time by the Board of Directors or the President, or the holder or
holders of not less than one-tenth of all the shares of the corporation
outstanding and entitled to vote at the particular meeting.
Section 1-d Notice of Meetings. Written notice of every meeting of the
shareholders shall be given by or at the direction of the person or persons
authorized to call the meeting, to each shareholder of record entitled to vote
at the meeting, not less than ten (10) nor more than fifty (50) days prior to
the date named for the meeting, unless a greater period of notice is required by
law in a particular case, by delivery of or by mailing such notice to each
shareholder addressed to such shareholder at such shareholder's address
appearing on the books of the corporation for the purpose of notice. Such
notice shall specify the place, day and hour of the meeting, and shall state the
nature of the business to be transacted if, and to the extent, required by law.
Section 1-e Quorum. The presence, in person or by proxy, of a majority of
the shares entitled to vote shall constitute a quorum, except as otherwise
provided by statute.
Section 1-f Shareholders Entitled to Vote. As may otherwise
<PAGE>
-2-
be provided in the Articles of Incorporation, each outstanding share, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of the shareholders, except that, at each election for directors, every
shareholder entitled to vote shall have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote, or to
cumulate his votes.
Section 1-g Voting. When a quorum exists at any meeting and unless
otherwise provided by law the vote of a majority of the shares present or
represented, in person or by proxy, shall be sufficient to elect and to pass any
measure.
Section 1-h Informal Action. Except as may be otherwise provided in the
Articles of Incorporation, any action which could be taken at a meeting of the
shareholders may be taken without a meeting, if consent in writing, setting
forth the action so taken, is signed by all of the shareholders who would be
entitled to vote at a meeting for such purpose and is filed with the Secretary
of the corporation.
ARTICLE II
DIRECTORS
Section 2-a Number and Term of Office. The business and affairs of the
corporation shall be managed by a Board of Directors. The Board of Directors
shall consist of not less than seven (7) nor more than fifteen (15) Directors,
the exact number to be determined from time to time by the Board of Directors,
provided that not more than three (3) Directors shall be employees of the
corporation or any affiliated company and not more than twelve (12) shall be
outside Directors. Directors shall be natural persons of full age. At each
annual meeting the directors shall be elected by the shareholders to serve until
their respective successors shall be elected and shall qualify.
Section 2-b Place of Meetings. The meetings of the Board of Directors may
be held at such place, within or without the State of West Virginia, as a
majority of the Directors may, from time to time, by resolution prescribe, or as
may be designated in the
<PAGE>
-3-
notice or waiver of notice of a particular meeting. In the absence of
specification, such meetings shall be held at the registered office of the
corporation.
Section 2-c Time of Meetings. The first meeting of each newly elected
Board of Directors shall be the regularly scheduled meeting of the Board of
Directors next following the annual meeting of the shareholders, unless
otherwise provided in the notice of the meeting. Such meeting shall be for the
purpose of organization, the election of officers and the transaction of other
business.
Regular meetings of the Board of Directors may be held at such times as the
Board of Directors may by resolution determine. Unless otherwise specified by
resolution of the Board of Directors, if any day fixed for a regular meeting
shall be a legal holiday, then the meeting shall be held at the same hour and
place on the immediately preceding business day which is not a legal holiday.
Special meetings of the Board of Directors may be called at any time by the
President, and shall be called upon the written request of any two or more
Directors stating the purpose or purposes for which the meeting is to be called.
Upon receipt of such request it shall be the duty of the Secretary promptly to
issue the call for such meeting.
Section 2-d Notice of Meetings. Written notice of every meeting of the
Board of Directors shall be given personally or by mailing the same at least
forty-eight (48) hours before the time named for such meeting, except that
notice of a special meeting of the Board may instead be given by telegraphing or
telephoning the same, at least twenty-four (24) hours before the time named for
such meeting. Such notice shall specify the place, day and hour of the meeting,
and shall also state the nature of the business to be transacted at a special
meeting or if otherwise required by law.
Section 2-e Quorum. At all meetings of the Board of Directors a majority
of the number of directors fixed pursuant to Section 2-a hereof shall be
necessary to constitute a quorum for the transaction of business, and the acts
of a majority of the Directors present at a meeting at which a quorum is present
shall be the acts of the Board of Directors, except as may otherwise be
specifically provided by statute.
<PAGE>
-4-
Section 2-f Vacancies. Vacancies in the Board of Directors, whether or not
caused by an increase in the number of Directors, may be filled by a majority of
the remaining members of the Board though less than a quorum, and each person so
elected shall be a Director until his or her successor is elected and qualified
or until his or her earlier death, resignation or removal. Any Director may
resign at any time upon written notice to the corporation.
Section 2-g Removal of Directors. Any Director, or the entire Board of
Directors, may be removed with or without cause by vote of a majority of the
shares then entitled to vote at an election of Directors.
Section 2-h General Powers. The Board of Directors may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute, or by the Articles of Incorporation, directed or required to be
exercised and done by the shareholders. The Board of Directors may adopt and
enforce such rules and regulations, not inconsistent herewith, as they may deem
necessary for the conduct of the corporation's business; the Board of Directors
may, from time to time, designate one of its members to serve as Chairman, with
such duties as the Board of Directors shall specify. The Chairman or, if the
position is vacant, the President, shall preside at all Board Meetings.
<PAGE>
-5-
Section 2-i Board Committees. The Board of Directors shall, by resolution
adopted by a majority of the whole Board of Directors, designate an Executive
Committee, which shall consist of three or more Directors, and the Board of
Directors may, by resolution adopted by a majority of the whole Board of
Directors, designate from time to time such other Committees consisting of three
or more Directors, as it shall deem necessary or appropriate, each to have such
powers, in addition to those set forth in these By-Laws, as the Board of
Directors by resolution shall authorize. Vacancies in the membership of any
Committee shall be filled by the Board of Directors at a regular or special
meeting of the Board of Directors. The Board of Directors may designate one or
more Directors as alternate members of the Executive or other Committee (to
serve in the order named if more than one) who may replace any absent or
disqualified member at any meeting of such Committee. If the Board of Directors
has not made such designation, or if none of the alternate members designated is
available, in the absence or disqualification of any member of the Executive or
other Committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not the member or members constitute a
quorum, may unanimously appoint another Director to act at the meeting in the
place of any such absent or disqualified member. The Executive or other
Committee shall keep regular minutes of its proceedings and shall report actions
taken by it to the next meeting of the Board of Directors.
Section 2-j Specific Powers of Executive and Other Committees. The
President, if a Director, shall be a member of the Executive Committee. Except
as prohibited by law or granted to another Committee by resolution of the Board
of Directors, the Executive Committee shall have and exercise all the powers of
the Board of Directors provided that neither the Executive nor any other
Committee shall have the power to adopt, amend or repeal the By-Laws of the
corporation or to elect Directors. At any meeting of a Committee a majority of
such Committee shall constitute a quorum. Each Committee may fix the time and
place of its regular meetings, and after such time and place shall have been
fixed no notice of such regular meeting shall be necessary. Special meetings of
the Executive Committee may be called by the President whenever he or she shall
think proper, and the President shall call such meetings whenever requested, in
writing, by any two members of the Executive Committee. Special Meetings of
other Committees may be called by the respective chairmen. Notice of the time
and place of every
<PAGE>
-6-
special meeting of a Committee shall be given by the Secretary to each member of
the Committee in the manner prescribed in Section 2-d for special meetings of
the whole Board of Directors.
<PAGE>
-7-
Section 2-k Informal Action. Any action which could be taken at a meeting
of the Board of Director or the Executive or other Board Committee, may be taken
without a meeting, if consent in writing setting forth the action so taken is
signed by all of the Directors or the members of the Executive or other
Committee, as the case may be, and is filed by the Secretary of the corporation
with the minutes of the proceedings of the Board of Directors or the appropriate
Committee.
Section 2-1 Emergency Authority. The Board of Directors may adopt
emergency succession rules which make advance provision for the continuity and
authority of the corporation's management in the event of a major catastrophe,
such as a nuclear attack, or other disaster resulting in the loss or
unavailability of members of the Board of Directors, whether by death,
incapacity, isolation or otherwise, or in loss or unavailability of officers of
the corporation, and in the event of such a major catastrophe or disaster, the
terms of any such rules shall have the same affect as if included in these By-
Laws and shall supersede the terms of these By-laws and any resolutions of the
Board of Directors, to the extent that they may be inconsistent therewith, until
the Board of Directors can be convened pursuant to such rules.
Section 2-m Compensation of Directors. The Board of Directors shall have
the authority to fix the compensation of Directors and Committee Members and to
provide for reimbursement of expenses incurred in the performance of duties as a
Director or Committee Member. A Director may serve the corporation in any other
capacity and may receive compensation therefor.
Section 2-n Telecommunications. One or more Directors may participate in a
meeting of the Board of Directors or a Committee thereof, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
--------
Section 3-a Number, Qualifications and Designation. The
<PAGE>
-8-
officers of the corporation shall be a President, who shall be the chief
executive officer, a Secretary, a Treasurer and such other officers (who may
also be officers of an affiliated company) as may be required by law or may from
time to time be elected by the Board of Directors and whose powers and duties
shall be as prescribed by these By-Laws or as from time to time prescribed by
the Board of Directors. One person may hold more than one office except that the
same person shall not hold the offices of President and Secretary.
Section 3-b Election and Term of Office. The officers of the corporation,
except subordinate officers appointed pursuant to Section 3-c hereof, shall be
elected by the Board of Directors for such terms as may be specified by the
Board of Directors, and each such officer shall hold such office until such
officer's successor shall have been elected and qualified, or until such
officer's earlier death, resignation or removal. The Board of Directors shall
designate a principal financial officer and a principal accounting officer. Any
officer may resign at any time upon written notice to the corporation and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. If the office of an officer elected by the
Board of Directors becomes vacant for any reason, the vacancy may be filled by
the President on an interim basis until the next meeting of the Board of
Directors, at which time the position shall be filled by the Board of Directors.
Section 3-c Subordinate Officers, Employees, Agents. The Board of
Directors may from time to time appoint such subordinate officers, employees or
agents (who may also be officers or employees of an affiliated company) as it
deems necessary, who shall hold such positions for such terms and shall exercise
such powers and perform such duties as are provided in these By-Laws, or as the
Board of Directors may from time to time determine. The Board of Directors may
delegate to any officer or Committee of the Board of Directors the power to
appoint or remove subordinate officers and to retain, appoint or remove
employees or other agents, and to prescribe the authority and duties, not
inconsistent with these By-Laws, of such subordinate officers, employees or
other agents. In the absence of any such specific delegation, the President
shall have the authority to appoint subordinate officers, employees or agents.
The President shall have the authority to approve giving one or more subordinate
officers the title of Vice
<PAGE>
-9-
President, if deemed appropriate under the circumstances.
Section 3-d Removal of Officers, Agents or Employees. Any officer,
subordinate officer, agent or employee of the corporation may be removed, or his
or her authority revoked, by resolution of the Board of Directors whenever in
its judgment the best interests of the corporation will be served thereby. Any
subordinate officer, agent or employee likewise may be removed by the President
or, subject to the President's supervision, by the person having authority with
respect to the appointment of such subordinate officer, agent or employee.
Section 3-e President. The President shall have such authority and perform
such duties as usually appertain to that office in business corporations, and
shall perform such other duties as shall from time to time be assigned to him or
her by the Board of Directors.
Section 3-f Secretary. The Secretary, or an Assistant Secretary, shall
attend all meetings of the shareholders and of the Board of Directors and shall
record the proceedings of the shareholders and Directors in a book or books to
be kept for that purpose; see that notices are given and records and reports
properly kept and filed by the corporation as required by law; be the custodian
of the seal of the corporation and attest or cause to be attested documents on
behalf of the corporation under its seal; and in general, perform all duties
incident to the office of Secretary and such other duties as may from time to
time be assigned to him or her by the Board of Directors or President. The
Secretary shall appoint one or more Assistant Secretaries with such powers and
duties as the Board of Directors, the President or the Secretary shall from time
to time determine.
Section 3-g Treasurer. The Treasurer, or an Assistant Treasurer, shall
have or provide for the custody of the funds and other property of the
corporation and shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the corporation; collect and
receive, or provide for the collection and receipt of, moneys earned by or in
any manner due to or received by the corporation; deposit all funds in his or
her custody as Treasurer in such banks or other places of deposit as may be
designated from time to time by the Board of
<PAGE>
-10-
Directors or pursuant to its authority; whenever so required by the Board of
Directors, render an account showing his or her transactions as Treasurer and
the financial condition of the corporation; and, in general, discharge such
other duties as may from time to time be assigned to him or her by the Board of
Directors or the President. The Treasurer shall appoint one or more Assistant
Treasurers with such powers and duties as the Board of Directors, the President
or the Treasurer shall from time to time determine.
Section 3-h Controller. The Controller, if one shall have been elected or
appointed, shall have custody and charge of all books of account, except those
required by the Treasurer in keeping records of the work of the Treasurer's
office, and shall have supervision over subsidiary accounting records, wherever
located. The Controller shall have access to all books of account, including
the Treasurer's records, for purposes of audit and for obtaining information
necessary to verify or complete the records of the Controller's office. Unless
otherwise provided by the Board of Directors, the Controller shall certify to
authorization and approvals pertaining to vouchers and shall perform such other
duties as may be assigned by the Board of Directors or the President. With the
approval of the President, the Controller may designate one or more persons to
perform all of the Controller's duties as may be found necessary to delegate in
the ordinary course of the business or in the event of the absence or disability
of the Controller.
Section 3-i Delegation of Duties. The President may delegate duties to
other officers, subordinate officers, employees or agents and may similarly
provide for the redelegation thereof.
Section 3-j Voting of Stock. Unless otherwise provided by the Board of
Directors, the President or the Treasurer shall have full power and authority,
on behalf of the corporation, to attend, and to act and vote, in person or by
proxy, at, any meeting of the shareholders of any company in which the
corporation may hold stock, and at any such meeting shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock which, as the owner thereof the corporation might have possessed and
exercised if present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
<PAGE>
-11-
Section 3-k Endorsement of Securities for Transfer. The President and the
Treasurer shall each have power to endorse and deliver for sale, assignment or
transfer certificates of stock, bonds or other securities, registered in the
name of or belonging to the corporation, whether issued by this corporation or
by any other corporation, government, state or municipality or agency thereof.
ARTICLE IV
CERTIFICATES FOR STOCK, TRANSFER, ETC.
Section 4-a Issuance. Each shareholder shall be entitled to a certificate
or certificates, under the seal of the corporation, showing the number of shares
to which the shareholder is entitled. Such certificates shall be signed by the
President and by the Treasurer or an Assistant Treasurer.
Section 4-b Transfer. Stock shall be transferable on the books of the
corporation only by the holder thereof in person, or by attorney, upon surrender
of the outstanding certificate; provided, however, that in the case of a lost,
stolen or destroyed certificate, a new certificate may be issued in place
thereof upon such terms as the Board of Directors may prescribe.
Section 4-c Record Holder of Shares; Record Date. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends and to vote as such owner and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person except as otherwise provided by law.
In order that the corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders, to receive any dividend or other
distribution, or to exercise any other right to which a shareholder is entitled,
the Board of Directors may fix in advance a record date in accordance
with the provision specified by statute. If no record date is fixed, then the
record date shall be determined in accordance with the applicable statutory
provisions.
<PAGE>
-12-
ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5-a Indemnification of Directors and Officers. Each person made or
threatened to be made a party to an action, suit or proceeding, civil, criminal
or administrative, by reason of the fact that he or she, his or her testator or
intestate is or was a director or officer of the corporation, shall be
indemnified by the Company against the liabilities, costs and expenses of every
kind actually and reasonably incurred by him or her as a result of such action,
suit or proceeding, or any threat thereof or any appeal thereon, but in each
case only if and to the extent permissible under applicable law. The foregoing
indemnity shall not be exclusive of other rights to which such person may be
entitled.
Section 5-b Advancing Expenses. Expenses incurred in defending a civil or
criminal action or proceeding may be paid by the corporation in advance of the
final disposition of such action or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by the
corporation.
Section 5-c Insurance. The corporation may purchase and maintain insurance
on behalf of any person for whom indemnity would be provided pursuant to Section
5-a, above, in the capacity therein set forth, against liability asserted
against such person and incurred by such person in any such capacity, or arising
out of such person's status as such, whether or not the corporation would have
the power to indemnify such person against such liability under the provisions
of this article or otherwise.
ARTICLE VI
MISCELLANEOUS
Section 6-a Waiver of Notice. Except as otherwise provided by law or the
Articles of Incorporation, any notice required to be given under the provision
of the By-Laws, or otherwise, may be waived in writing by the shareholder,
director or officer to whom such notice is required to be given, either before
or after the meeting or action of which notice is waived. Attendance of any
shareholder, in person or by proxy, and of any director or officer
<PAGE>
-13-
at any meeting shall constitute a waiver of notice of such meeting except where
a person entitled to notice attends the meeting for the express purpose of
objecting to the transaction of any business because the meeting was not
lawfully called or convened. A shareholder or director who signs a written
consent, in lieu of a meeting, as provided for in these By-Laws, shall be deemed
to have waived any notice of such meeting.
Section 6-b Checks, Notes, Etc. All checks, notes and evidences of
indebtedness of the corporation shall be signed by such person or persons as the
Board of Directors may from time to time designate or the Board of Directors may
adopt a single symbol to be affixed to such documents. In either case, the
signature of such person or persons, or a symbol, if such is adopted, and any
facsimile or facsimiles thereof, shall be an "authorized signature" of the
corporation and shall be affixed to such checks, notes, and evidences of
indebtedness in such manner, and by such persons, as the Board of Directors
shall authorize.
Section 6-c Corporate Seal. The corporate seal shall have inscribed
thereon the name of the corporation, with such device or devices as the Board of
Directors may determine. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
Section 6-d Amendments of By-Laws. The By-Laws may be adopted, amended or
repealed by the Board of Directors at any meeting, except that Section 2-a,
above, shall be amended or repealed by the shareholders.
<PAGE>
Bell Atlantic - WV, Inc.
Directors - April 28, 1994
AUDIT COMMITTEE RESOLUTION
Mr. Hall recommended that the Board dissolve the Audit Committee. It has
been determined that matters which have been addressed by the Audit Committee
should be addressed in extended meetings of the full Board.
After full discussion, upon motion, duly seconded, the following resolution
was adopted:
RESOLVED, that Article II, Section 2-i of the By-Laws be amended in the
fourth and fifth lines by striking out the words "and an Audit Committee, which
shall consist of three or more outside Directors only," and
RESOLVED, that the appointment of the Audit Committee is hereby rescinded
and that review of audit reports and related functions shall, in the future, be
performed by the full Board of Directors in the course of its regular duties.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Bell Atlantic - West Virginia, Inc. on Form S-3 (File No. 33-60126) of our
report dated February 6, 1995, which includes an explanatory paragraph stating
that 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 Regulation," effective August 1, 1994, and changed its
method of accounting for income taxes and postemployment benefits in 1993, on
our audit of the financial statements and financial statement schedule of the
Company as of December 31, 1994 and December 31, 1993, and for each of the three
years in the period ended December 31, 1994, which report is included in this
Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 29, 1995
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, BELL ATLANTIC - WEST VIRGINIA, INC., a West Virginia corporation
(hereinafter referred to as the "Company"), will file with the Securities and
Exchange Commission on or before March 31, 1995, an Annual Report on Form 10K
pursuant to provisions of the Securities Exchange Act of 1934, as amended, and
implementing regulations thereto; and
WHEREAS, each of the undersigned is an officer or director, or both, of the
Company as stated below;
NOW THEREFORE, each of the undersigned hereby constitutes and appoints David E.
Lowe, Ritchie A. Ireland, II and John R. Ruddick and each of them, as attorneys
for the purpose of executing and filing such Annual Report, and thereafter to
execute and file any amended Annual Report or supplements to such reports,
hereby granting to said attorneys full power to do all things necessary to be
done as fully to all intents and purposes as if the undersigned were personally
present, hereby ratifying and conforming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this power of attorney
on the 28th day of March, 1995.
/s/ DAVID E. LOWE /s/ NEIL S. BUCKLEW
------------------------------------- -------------------------------------
David E. Lowe Neil S. Bucklew
Director, President Director
/s/ WILLIAM C. CAMPBELL /s/ DAVID K. HALL
------------------------------------- -------------------------------------
William C. Campbell David K. Hall
Director Director, Vice President
/s/ RUSSELL L. ISAACS /s/ WILBUR S. JONES
------------------------------------- -------------------------------------
Russell L. Isaacs Wilbur S. Jones
Director Director
/s/ DAN R. MOORE /s/ LACY I. RICE, JR.
------------------------------------- -------------------------------------
Dan R. Moore Lacy I. Rice, Jr.
Director Director
/s/ SUSAN S. ROSS
-------------------------------------
Susan S. Ross
Director
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>This schedule contains summary financial information extracted from
the statement of operations for the year ended December 31, 1994 and the balance
sheet as of December 31, 1994 and is qualified in its entirely by reference to
such financial statements.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 76,012
<ALLOWANCES> 2,560
<INVENTORY> 3,529
<CURRENT-ASSETS> 126,729
<PP&E> 1,571,784
<DEPRECIATION> 764,580
<TOTAL-ASSETS> 947,407
<CURRENT-LIABILITIES> 133,159
<BONDS> 263,664
<COMMON> 304,065
0
0
<OTHER-SE> 13,115
<TOTAL-LIABILITY-AND-EQUITY> 947,407
<SALES> 0
<TOTAL-REVENUES> 592,804
<CGS> 0
<TOTAL-COSTS> 432,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,468
<INCOME-PRETAX> 141,674
<INCOME-TAX> 57,415
<INCOME-CONTINUING> 84,259
<DISCONTINUED> 0
<EXTRAORDINARY> (76,616)
<CHANGES> 0
<NET-INCOME> 7,643
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<EPS-DILUTED> 0
</TABLE>
