<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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7150
BELL ATLANTIC - WEST VIRGINIA, INC.
A West Virginia Corporation I.R.S. Employer Identification No. 55-0142020
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
<TABLE>
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Item No. Page
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<S> <C>
PART I
1. Business.......................................................... 1
2. Properties........................................................ 6
3. Legal Proceedings................................................. 7
4. Submission of Matters to a Vote of Security Holders............... 8
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................... 8
6. Selected Financial Data........................................... 8
7. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction J(2).)............... 9
8. Financial Statements and Supplementary Data....................... 17
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..... ........................................ 17
PART III
10. Directors and Executive Officers of the Registrant................ 17
11. Executive Compensation............................................ 17
12. Security Ownership of Certain Beneficial Owners and Management.... 17
13. Certain Relationships and Related Transactions.................... 17
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 17
</TABLE>
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 25, 1996.
<PAGE>
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 has historically been permitted to provide telephone
service.
The Company currently 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.
LINE OF BUSINESS RESTRICTIONS AND THE TELECOMMUNICATIONS ACT OF 1996
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. The MFJ's principal restrictions
on post-Divestiture RHC activities included prohibitions on (i) providing
interexchange telecommunications, and (ii) engaging in the manufacture of
telecommunications equipment and customer premises equipment ("CPE").
The Telecommunications Act of 1996 (the "Act") became effective on February
8, 1996 and replaces the MFJ. In general, the Act includes provisions that
would open the Company's local exchange markets to competition and would permit
local exchange carriers, such as the Company, to provide interLATA services
(long distance) and video programming and to engage in manufacturing. However,
the ability of the Company to engage in businesses previously prohibited by the
MFJ is largely dependent on satisfying certain conditions contained in the Act
and regulations to be promulgated thereunder. For a brief discussion of certain
provisions of the Act, see "Management's Discussion and Analysis of Results of
Operations - Factors That May Impact Future Results, Federal Legislation" on
pages 14 and 15.
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
1
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Bell Atlantic - West Virginia, Inc.
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.
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).
The Large Business Services LOB markets communications and information
-----------------------
services to large businesses (customers having more than 20 access 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, videoconferencing) and interactive 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.
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.
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 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
2
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Bell Atlantic - West Virginia, Inc.
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.
Price Caps
The price cap system, which became effective in 1991, (the "Prior Price Cap
Plan") placed a cap on overall LEC prices for interstate access services which
was modified annually, in inflation-adjusted terms, by a fixed percentage which
was intended to reflect increases in productivity. The price cap level could
also be adjusted to reflect "exogenous" changes, such as changes in FCC
separations procedures or accounting rules. Under the Prior Price Cap Plan, the
Company was required to share with customers in the form of prospective rate
reductions a portion of its earnings above a certain authorized rate of return.
In March 1995, the FCC approved an Interim Price Cap Plan ("Interim Plan")
for interstate access charges, which became effective on August 1, 1995, and
replaced the Prior Price Cap Plan.
Under the Interim Plan, the Company's price cap index must be adjusted by an
inflation index (GDP-PI), less a fixed percentage, either 4.0%, 4.7% or 5.3%,
which is intended to reflect increases in productivity ("Productivity Factor").
Companies selecting the 4.0% or 4.7% Productivity Factor are required to reduce
future prices and share a portion of their interstate return in excess of
12.25%. Companies selecting the 5.3% Productivity Factor are also required to
reduce prices but are not required to share a portion of their future interstate
earnings. The Interim Plan also provided for a reduction in the price cap index
of 2.8% to adjust for what the FCC believes was an underestimate in its
calculation of the Productivity Factor in prior years. The Interim Plan also
eliminated the recovery of certain "exogenous" cost changes, including changes
in accounting costs that the FCC believes have no economic consequences.
In May 1995, Bell Atlantic selected the 5.3% Productivity Factor for the
August 1995 to June 1996 tariff period. The rates included in the May 1995
filing resulted in price decreases totaling approximately $16,100,000 on an
annual basis. These price decreases included the scheduled expiration of a
temporary rate increase of approximately $5,200,000 on an annualized basis that
was in effect from March 17, 1995 through July 31, 1995 to recover prior years
"exogenous" postemployment benefit costs. Approximately 80% of the remaining
$10,900,000 reduction resulted from compliance with the Interim Plan. The
remaining 20% represented reductions that the Company was required to make under
the Prior Price Cap Plan.
Bell Atlantic appealed the Interim Price Cap Order to the Court of Appeals
for the D.C. Circuit, and that case is currently pending.
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 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.
3
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Bell Atlantic - West Virginia, Inc.
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 certain other matters.
In December 1991, the PSC approved an "Incentive Regulation Plan". The
Incentive Regulation Plan continued the major provisions of the prior 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 five year period from 1995 through 1999.
COMPETITION
General
Regulatory changes, 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. For a discussion of competition in the local exchange and intraLATA
toll markets, see "Management's Discussion and Analysis of Results of Operations
- - Factors That May Impact Future Results" on pages 14 and 15.
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 such 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.
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.
Directories
The Company continues to face significant competition from other providers of
directories, as well as competition from other advertising media.
4
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Bell Atlantic - West Virginia, Inc.
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.
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.
EMPLOYEES
As of December 31, 1995, the Company had approximately 1,800 employees. This
workforce is augmented by employees of the centralized staff of NSI, who perform
services for the Company on a contract basis.
5
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Bell Atlantic - West Virginia, Inc.
Item 2. Properties
GENERAL
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>
1995 1994
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<S> <C> <C>
Central office equipment... 37% 36%
Cable, wiring and conduit.. 40 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, 1995, all existing access lines have been transitioned to digital
capability.
CAPITAL EXPENDITURES
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 $100
million in 1993, $85 million in 1994 and $88 million in 1995. The total
investment in plant, property and equipment was approximately $1.52 billion at
December 31, 1993, $1.57 billion at December 31, 1994, and $1.63 billion at
December 31, 1995, in each case after giving effect to retirements, but before
deducting accumulated depreciation at such date.
6
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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.
Effective in 1994, the Company and the other Regional Holding Companies
agreed to discontinue sharing of new pre-Divestiture claims and certain existing
claims other than claims relating to environmental matters. AT&T is not a party
to this agreement.
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.
7
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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).)
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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
- ---------------------
The Company reported net income of $81,247,000 in 1995, compared to net
income of $7,643,000 in 1994.
In 1994, the Company recorded a pretax charge of $8,605,000, in accordance
with Statement of Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" (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.
Results for 1994 also 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" (see Note 2 to the Financial Statements).
These and other items affecting the comparison of operating results between
1995 and 1994 are discussed in the following sections.
<TABLE>
<CAPTION>
OPERATING REVENUES
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For the Years Ended December 31 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
(Dollars in Thousands)
Transport Services
Local service................................. $257,858 $257,547
Network access................................ 170,757 170,019
Toll service.................................. 64,027 74,389
Ancillary Services
Directory publishing.......................... 32,408 29,397
Other......................................... 12,280 14,951
Value-added Services........................... 47,855 46,501
-------- --------
Total.......................................... $585,185 $592,804
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</TABLE>
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Bell Atlantic - West Virginia, Inc.
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
<TABLE>
<CAPTION>
Percentage
Increase
1995 1994 (Decrease)
------ ------ -----------------
<S> <C> <C> <C>
At Year-End
- -----------
Access Lines in Service (In thousands)
Residence............................. 568 559 1.6%
Business.............................. 183 173 5.8
Public................................ 10 10 ---
------ ------
761 742 2.6
====== ======
For the Year
- ------------
Access Minutes of Use (In millions)
Interstate............................ 2,175 2,041 6.6
Intrastate............................ 449 415 8.2
------ ------
2,624 2,456 6.8
====== ======
Toll Messages (In thousands)
Intrastate............................ 41,145 42,076 (2.2)
Interstate............................ 2,669 2,448 9.0
------ ------
43,814 44,524 (1.6)
====== ======
</TABLE>
LOCAL SERVICE REVENUES
Dollars in Thousands Increase
- -------------------------------------------------------------------------------
1995 - 1994 $311 .1%
- -------------------------------------------------------------------------------
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 primarily due to a 2.6% growth in network
access lines in service. This increase was substantially offset by the
completion, on December 31, 1994, of the phased elimination of Locality Rate
Area charges, pursuant to the Company's Incentive Regulation Plan. The
elimination of these charges reduced local service revenues by approximately
$6,000,000 in 1995.
NETWORK ACCESS REVENUES
Dollars in Thousands Increase
- -------------------------------------------------------------------------------
1995 - 1994 $738 .4%
- -------------------------------------------------------------------------------
Network access revenues are received from interexchange carriers (IXCs) for
their use of the Company's local exchange facilities in providing long distance
services to IXCs' customers and from end-user subscribers. Switched access
service revenues are derived from usage-based charges paid by IXCs for access to
the Company's network. Special access revenues arise from access charges paid
by IXCs and end-users who have private networks. End-user access revenues are
earned from local exchange carrier customers who pay for access to the network.
Network access revenues increased principally due to higher customer demand
for access services as reflected by growth of 6.8% in access minutes of use.
Higher end-user revenues attributable to increases in access lines in service
also contributed to the growth in network access revenues in 1995. Revenues in
1995 were positively impacted by a temporary rate increase that was in effect
from March 17, 1995 through July 31, 1995 to recover prior years "exogenous"
postemployment benefit costs.
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Bell Atlantic - West Virginia, Inc.
Revenue growth from volume increases was substantially offset by lower
revenues from affiliated companies pursuant to an interstate revenue sharing
agreement, and the effect of price reductions under the Federal Communications
Commission's (FCC) Price Cap Plans.
In March 1995, the FCC adopted an order approving an Interim Price Cap Plan
for interstate access charges, which replaced the prior Price Cap Plan. As
required by the FCC's order, Bell Atlantic filed its Transmittal of Interstate
Rates, which resulted in price decreases for the Company totaling approximately
$16,100,000 on an annual basis, effective August 1, 1995. These price decreases
included the scheduled expiration of a temporary rate increase of approximately
$5,200,000 on an annualized basis that was in effect from March 17, 1995 through
July 31, 1995 to recover prior years "exogenous" postemployment benefit costs.
Also as part of the filing, Bell Atlantic selected a 5.3% Productivity Factor,
which eliminates the requirement to share a portion of interstate overearnings
related to the August 1995 to June 1996 tariff period.
While the Company expects current volume growth trends to continue, the
impact of the August 1, 1995 price decreases is expected to substantially offset
volume-related growth during the first half of 1996, relative to 1995 network
access revenues.
TOLL SERVICE REVENUES
Dollars in Thousands (Decrease)
- -------------------------------------------------------------------------------
1995 - 1994 $(10,362) (13.9)%
- -------------------------------------------------------------------------------
Toll service revenues are earned from calls made outside a customer's local
calling area, but within the same service area boundaries of the Company,
commonly referred to as Local Access and Transport Areas (LATAs). Other toll
services include 800 services and Wide Area Telephone Service (WATS).
The reduction in toll service revenues was caused by a decline of 1.6% in
toll message volumes and company-initiated price reductions. The decrease in
toll messages was due primarily to increased competition for intraLATA toll and
WATS services. Effective July 1, 1995, residential intrastate intraLATA toll
rates were reduced by 18%, or $6,000,000 on an annual basis. The reduction in
toll service revenues also reflects the impact of customers switching to lower
priced optional calling plans offered by the Company.
The Company expects that competition for toll service revenues will continue
in 1996. See "Factors That May Impact Future Results" below for a further
discussion of toll service revenue issues.
DIRECTORY PUBLISHING REVENUES
Dollars in Thousands Increase
- -------------------------------------------------------------------------------
1995 - 1994 $ 3,011 10.2%
- -------------------------------------------------------------------------------
Directory publishing revenues are earned primarily from local advertising and
marketing services provided to businesses in White and Yellow Pages directories.
Other directory publishing services include database and foreign directory
marketing.
Growth in directory publishing revenues was due to higher rates charged for
these services, as well as growth in advertising volumes. Changes in billing
procedures and lower customer claims and disconnects further boosted directory
publishing revenues in 1995.
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Bell Atlantic - West Virginia, Inc.
OTHER ANCILLARY SERVICES REVENUES
Dollars in Thousands (Decrease)
- -------------------------------------------------------------------------------
1995 - 1994 $ (2,671) (17.9)%
- -------------------------------------------------------------------------------
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 decreased principally due to lower
facilities rental revenues from affiliates and a reduction in billing and
collection services revenues as a result of the elimination of certain services
from a contract with an IXC.
VALUE-ADDED SERVICES REVENUES
Dollars in Thousands Increase
- -------------------------------------------------------------------------------
1995 - 1994 $ 1,354 2.9%
- -------------------------------------------------------------------------------
Value-added services represent a family of services which expand the
utilization of the network. These services include recent products such as
voice messaging services, Caller ID and Return Call as well as more mature
products such as Centrex, Touch-Tone, and customer premises wiring and
maintenance services.
Continued growth in the network customer base (access lines) and higher
demand by customers for certain value-added central office and voice messaging
services offered by the Company, including the introduction of Caller ID Deluxe
in the fourth quarter of 1994, increased value-added services revenues in 1995.
Partially offsetting this revenue growth was a reduction in contract billing for
certain advanced premises services for large business customers. Such premises
services, which were primarily performed by the Company until May 1994, are now
contracted with another affiliate of Bell Atlantic.
<TABLE>
<CAPTION>
OPERATING EXPENSES
- ------------------
For the Years Ended December 31 1995 1994
- -----------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Employee costs, including benefits and taxes.. $117,149 $133,996
Depreciation and amortization................. 119,732 107,083
Other operating expenses...................... 196,428 191,066
-------- --------
Total......................................... $433,309 $432,145
======== ========
</TABLE>
EMPLOYEE COSTS
Dollars in Thousands (Decrease)
- -------------------------------------------------------------------------------
1995 - 1994 $(16,847) (12.6)%
- -------------------------------------------------------------------------------
Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by the Company. Similar costs
incurred by employees of Bell Atlantic Network Services, Inc. (NSI), who provide
centralized services on a contract basis, are allocated to the Company and are
included in other operating expenses.
The decrease in employee costs was principally due to the effects of lower
workforce levels in 1995 and a third quarter 1994 charge of $7,010,000 to
recognize benefit costs, in accordance with Statement No. 112, for the
separation of employees who are entitled to benefits under preexisting Bell
Atlantic separation pay plans. Benefit costs associated with the separation of
employees of NSI were allocated to the Company and included in other operating
expenses. Decreased overtime pay and a reduction in pension and postretirement
benefit costs further reduced employee costs in 1995. These cost
12
<PAGE>
Bell Atlantic - West Virginia, Inc.
reductions were partially offset by annual salary and wage increases and the
recognition of certain contract labor and separation pay costs in 1995
associated with the contract settlement with the Communications Workers of
America (CWA).
The Company's contract with the CWA, representing approximately 2,300
employees, expired on August 5, 1995. In January 1996, a tentative three-year
labor agreement was reached, which was subsequently ratified in February 1996.
The agreement includes a 10.6% wage increase over the three-year contract
period, a ratification bonus, improved pensions and benefits, and certain
employment security provisions.
DEPRECIATION AND AMORTIZATION
Dollars in Thousands Increase
- -------------------------------------------------------------------------------
1995 - 1994 $12,649 11.8%
- -------------------------------------------------------------------------------
Depreciation and amortization increased due to growth in depreciable
telephone plant and higher depreciation rates. The composite depreciation rates
were 7.6% in 1995 and 7.0% in 1994.
OTHER OPERATING EXPENSES
Dollars in Thousands Increase
- -------------------------------------------------------------------------------
1995 - 1994 $5,362 2.8%
- -------------------------------------------------------------------------------
Other operating expenses consist primarily of contract services including
centralized services expenses allocated from NSI, rent, network software costs,
operating taxes other than income, provision for uncollectible accounts
receivable and other costs.
The increase in other operating expenses was attributable to higher
centralized services costs allocated from NSI, primarily as a result of
additional costs incurred in that organization to enhance systems, consolidate
work activities and market value-added services at Bell Atlantic's network
services subsidiaries. Higher rent expense and network software costs also
contributed to the increase in other operating expenses in 1995.
These increases were partially offset by lower costs for contracted labor and
engineering services and the effect of a third quarter 1994 charge for the
Company's allocated share of separation benefit costs associated with employees
of NSI.
OTHER INCOME AND (EXPENSE), NET
Dollars in Thousands Increase
- -------------------------------------------------------------------------------
1995 - 1994 $435
- -------------------------------------------------------------------------------
The change in other income and (expense), net was attributable to additional
interest income related to a note receivable from an affiliate and short-term
investments. Lower non-operating costs in 1995 also contributed to the change
in other income and (expense), net. These increases were partially offset by
the elimination of the allowance for funds used during construction.
Upon the discontinued application of regulatory accounting principles,
effective August 1, 1994, the Company began recognizing capitalized interest
costs as a reduction of interest expense. Previously, the Company recorded an
allowance for funds used during construction as an item of other income.
13
<PAGE>
Bell Atlantic - West Virginia, Inc.
INTEREST EXPENSE
Dollars in Thousands (Decrease)
- -------------------------------------------------------------------------------
1995 - 1994 $(895) (4.8)%
- -------------------------------------------------------------------------------
Interest expense decreased principally due to the recognition of increased
capitalized interest costs, subsequent to the discontinued application of
regulatory accounting principles, effective August 1, 1994.
PROVISION FOR INCOME TAXES
Dollars in Thousands (Decrease)
- -------------------------------------------------------------------------------
1995 - 1994 $(4,441) (7.7)%
- -------------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATES
For the Years Ended December 31
- -------------------------------------------------------------------------------
1995 39.5%
- -------------------------------------------------------------------------------
1994 40.5%
- -------------------------------------------------------------------------------
The Company's effective income tax rate was lower in 1995 principally due to
a decrease in state deferred tax expense related to the discontinued application
of regulatory accounting principles in August 1994.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate for each period is provided in Note 9 to the Financial
Statements.
FACTORS THAT MAY IMPACT FUTURE RESULTS
- --------------------------------------
FEDERAL LEGISLATION
The Telecommunications Act of 1996 (the Act), which became effective on
February 8, 1996, is the most comprehensive revision of the federal
communications laws in over 60 years. In general, the Act includes provisions
that would open the Company's local exchange markets to competition and would
permit local exchange carriers, such as the Company, upon meeting certain
conditions, to provide interLATA services (long distance) and video programming
and to engage in manufacturing.
With regard to the rules governing competition in the interLATA market, the
Act takes a two-fold approach. Effective February 8, 1996, Bell Atlantic is
permitted to apply for approval to offer interLATA services outside of the
geographic region in which it currently operates as a local exchange carrier.
Bell Atlantic has announced its plans to offer such services in several states.
Secondly, within Bell Atlantic's geographic region, each of the telephone
subsidiaries, including the Company, must demonstrate to the FCC that it has
satisfied certain requirements in order to be permitted to offer interLATA
services within its jurisdiction. Among the requirements with which the Company
must comply is a 14-point "competitive checklist" which is aimed at ensuring
that competitors have the ability to connect to the Company's network. The
Company must also demonstrate to the FCC that its entry into the interLATA
market would be in the public interest.
The Act also imposes specific requirements on the Company that are intended
to promote competition in the local exchange markets. These requirements
include the duty to: (i) provide interconnection to any other carrier for the
transmission and routing of telephone exchange service and exchange access at
any technically feasible point; (ii) provide unbundled access to network
elements at any technically feasible point; (iii) provide retail services for
resale at wholesale prices; (iv) establish reciprocal compensation arrangements
for the origination and termination of telecommunications and (v) provide
physical collocation.
14
<PAGE>
Bell Atlantic - West Virginia, Inc.
No definitive prediction can be made as to the specific impact of the Act on
the business or financial condition of the Company. The financial impact on the
Company will be dependent on several factors, including the timing, extent and
success of competition in the Company's market and the timing, extent and
success of the Company's pursuit of new business opportunities resulting from
the Act.
COMPETITION
IntraLATA Toll Services
Competition to offer intrastate intraLATA toll services is currently
permitted in the Company's jurisdiction. Increased competition from IXCs has
resulted in a decline in several components of the Company's toll services
revenues.
Currently, intraLATA toll calls are completed by the Company unless the
customer dials a five-digit access code. Presubscription for intraLATA toll
services would enable customers to make intraLATA toll calls using the carrier
of their choice without having to dial the five-digit access code.
In general, the Act prohibits a state from requiring presubscription or
"dialing parity" until the earlier of such time as an operating telephone
company in the state is authorized to provide long distance services within the
state or three years from the effective date of the Act. This prohibition does
not apply to a final order requiring an operating telephone company to implement
presubscription that was issued on or prior to December 19, 1995.
During 1995, the Public Service Commission of West Virginia (PSC) conducted
proceedings to determine whether, and under what conditions, to authorize
presubscription. In October 1995, the PSC issued an order directing the
implementation of presubscription within eighteen months of that order. The
Company has filed an appeal with the West Virginia Supreme Court.
Implementation of presubscription for intraLATA toll services could have a
material negative impact on toll service revenues, especially if the Company is
not permitted contemporaneously to offer interLATA services.
Local Exchange Services
The ability to offer local exchange services has historically been subject to
regulation by the PSC. The Act is expected to significantly increase the level
of competition in the Company's local exchange market. However, increased
competition in the local exchange market will facilitate FCC approval of the
Company's entry into the interLATA markets.
Other
See Item 1 - Description of Business, Competition on pages 4 and 5 for
additional information on the Company's competitive environment.
OTHER STATE REGULATORY MATTERS
The communications services of the Company are subject to regulation by the
PSC with respect to intrastate rates and services and certain other matters.
See Item 1 - Description of Business, State Regulation on page 4 for a
description of the Company's current regulatory plan.
15
<PAGE>
Bell Atlantic - West Virginia, Inc.
OTHER MATTERS
- -------------
Environmental Issues
The Company is subject to a number of environmental proceedings as a result
of its operations and the shared liability provisions in the Plan of
Reorganization related to the Modification of Final Judgment. Certain of these
environmental matters relate to a Superfund site for which the Company has
received a request for information. The Company is also responsible for the
remediation of sites with underground fuel storage tanks and other expenses
associated with environmental compliance.
The Company continually monitors its operations with respect to potential
environmental issues, including changes in legally mandated standards and
remediation technologies. The Company's recorded liabilities reflect those
specific situations 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, and payment of dividends. Management expects that
presently foreseeable capital requirements will be financed primarily through
internally generated funds. Additional long-term debt may be needed to fund
development activities and to maintain the Company's capital structure within
management's guidelines.
As of December 31, 1995, the Company had $69,600,000 of an unused line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. In
addition, the Company had $50,000,000 remaining under a shelf registration
statement filed with the Securities and Exchange Commission for the issuance of
unsecured debt securities.
The Company's debt ratio was 47.7% at December 31, 1995, compared to 45.4% at
December 31, 1994.
On February 1, 1996, the Company declared and paid a cash dividend in the
amount of $14,000,000 to Bell Atlantic.
16
<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 Schedule
See Index to Financial Statements and Financial Statement
Schedule appearing on page F-1.
17
<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 December 15, 1995.
3b(i) Consent of Sole Stockholder of Bell Atlantic - West
Virginia, Inc., dated December 15, 1995.
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, 1995.
18
<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 27, 1996
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:
Dennis M. Bone 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
Dennis M. Bone (individually and as
David B. Frost attorney-in-fact)
Ritchie A. Ireland, II March 27, 1996
19
<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
For the years ended December 31, 1995, 1994 and 1993.. F-3
Balance Sheets - December 31, 1995 and 1994................ F-4
Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993.. F-6
Notes to Financial Statements.............................. F-7
Schedule II - Valuation and Qualifying Accounts
For the years ended December 31, 1995, 1994 and 1993.. 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, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995 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 5, 1996
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>
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
OPERATING REVENUES (including $39,293,
$45,633 and $41,553 from affiliates)..... $585,185 $592,804 $574,508
-------- -------- --------
OPERATING EXPENSES
Employee costs, including benefits
and taxes.............................. 117,149 133,996 127,736
Depreciation and amortization........... 119,732 107,083 116,164
Other (including $106,822, $103,517
and $100,568 to affiliates)............ 196,428 191,066 182,646
-------- -------- --------
433,309 432,145 426,546
-------- -------- --------
OPERATING INCOME.......................... 151,876 160,659 147,962
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used during
construction........................... --- 492 544
Other, net (including $466, $274 and
$28 from affiliate).................... (82) (1,009) (1,401)
-------- -------- --------
(82) (517) (857)
INTEREST EXPENSE (including $114, $186
and $829 to affiliate)................... 17,573 18,468 20,306
-------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES,
EXTRAORDINARY ITEMS, AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE............................... 134,221 141,674 126,799
PROVISION FOR INCOME TAXES................ 52,974 57,415 50,357
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE................................ 81,247 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)
-------- -------- --------
--- (76,616) (1,456)
-------- -------- --------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE
Postemployment Benefits, Net of Tax..... --- --- (7,397)
-------- -------- --------
NET INCOME................................ $ 81,247 $ 7,643 $ 67,589
======== ======== ========
REINVESTED EARNINGS (ACCUMULATED DEFICIT)
At beginning of year.................... $ (6,549) $ 41,833 $ 47,769
Add: net income........................ 81,247 7,643 67,589
-------- -------- --------
74,698 49,476 115,358
Deduct: dividends...................... 56,990 56,060 73,150
other changes.................. 170 (35) 375
-------- -------- --------
At end of year.......................... $ 17,538 $ (6,549) $ 41,833
======== ======== ========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
Bell Atlantic - West Virginia, Inc.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
------
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Note receivable from affiliate.................... $ 4,939 $ 11,377
Accounts receivable:
Customers and agents, net of allowances for
uncollectibles of $4,178 and $2,560............ 79,232 73,452
Affiliates...................................... 8,037 17,791
Other........................................... 2,463 5,980
Material and supplies............................. 2,693 3,529
Prepaid expenses.................................. 16,412 13,099
Deferred income taxes............................. 1,899 1,435
Other............................................. --- 66
---------- ----------
115,675 126,729
---------- ----------
PLANT, PROPERTY AND EQUIPMENT..................... 1,625,779 1,571,784
Less accumulated depreciation..................... 849,205 764,580
---------- ----------
776,574 807,204
---------- ----------
OTHER ASSETS...................................... 11,124 13,474
---------- ----------
TOTAL ASSETS...................................... $ 903,373 $ 947,407
========== ==========
</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
---------------------
1995 1994
--------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Debt maturing within one year:
Other........................................ $ 10 $ 27
Accounts payable and accrued liabilities:
Affiliates................................... 41,020 41,134
Other........................................ 74,571 76,616
Advance billings and customer deposits......... 16,684 15,382
-------- --------
132,285 133,159
-------- --------
LONG-TERM DEBT................................. 263,750 263,664
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS................... 144,193 144,301
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes.......................... 42,708 51,576
Unamortized investment tax credits............. 10,112 13,066
Other.......................................... 21,303 24,461
-------- --------
74,123 89,103
-------- --------
COMMITMENTS (Note 4)
SHAREOWNER'S INVESTMENT
Common stock - one share, owned by
parent, at stated value....................... 264,065 304,065
Capital surplus................................ 7,419 19,664
Reinvested earnings (accumulated deficit)...... 17,538 (6,549)
-------- --------
289,022 317,180
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $903,373 $947,407
======== ========
</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>
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................ $ 81,247 $ 7,643 $ 67,589
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................. 119,732 107,083 116,164
Extraordinary items, net of tax................ --- 76,616 1,456
Cumulative effect of change in accounting
principle, net of tax......................... --- --- 7,397
Allowance for funds used during construction... --- (492) (544)
Other items, net............................... 4 126 (2,489)
Changes in certain assets and liabilities:
Accounts receivable......................... 3,815 (15,284) 1,742
Material and supplies....................... 835 (1,501) (46)
Other assets................................ 2,908 (9,111) 16,817
Accounts payable and accrued taxes.......... (5,534) 9,477 (12,941)
Deferred income taxes, net.................. (9,333) (3,354) (3,511)
Unamortized investment tax credits.......... (2,954) (2,616) (4,585)
Employee benefit obligations................ (108) 15,435 6,899
Other liabilities........................... (760) 3,175 (4,411)
--------- -------- ---------
Net cash provided by operating activities......... 189,852 187,197 189,537
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments............... (5,697) --- ---
Proceeds from sale of short-term investments...... 5,697 --- ---
Additions to plant, property and equipment........ (88,499) (84,902) (99,925)
Net change in note receivable from affiliate...... 6,438 (11,377) ---
Other, net........................................ (681) (2,914) (1,630)
--------- -------- ---------
Net cash used in investing activities............. (82,742) (99,193) (101,555)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings.......................... --- --- 49,250
Principal repayments of capital lease obligations. (26) (44) (500)
Early extinguishment of debt...................... --- --- (50,000)
Net change in note payable to affiliate........... --- (20,387) (1,788)
Dividends paid.................................... (56,990) (56,060) (73,150)
Capital surplus distribution...................... (52,245) (22,410) ---
Net change in outstanding checks drawn
on controlled disbursement accounts.............. 2,151 4,167 (5,064)
--------- -------- ---------
Net cash used in financing activities............. (107,110) (94,734) (81,252)
--------- -------- ---------
NET CHANGE IN CASH................................ --- (6,730) 6,730
CASH, BEGINNING OF YEAR........................... --- 6,730 ---
--------- -------- ---------
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. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Bell Atlantic - West Virginia, Inc. (the Company) is a wholly owned
subsidiary of Bell Atlantic Corporation (Bell Atlantic). The Company provides
two basic types of telecommunications services in a territory consisting of two
complete Local Access and Transport Areas (LATAs) and part of a third LATA in
the state of West Virginia. 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, local private line and public telephone services. Toll service
includes message toll services and intraLATA Wide Area Toll Service/800
services. Second, the Company provides exchange access service, which links a
subscriber's telephone equipment to the facilities of an interexchange carrier
(IXC) which, in turn, provides telecommunications service between LATAs
(interLATA service) to their customers. The Company also provides exchange
access service to IXCs which provide intrastate intraLATA long distance
telecommunications service. Other services provided by the Company include
directory publishing, customer premises wiring and maintenance, and billing and
collection services.
The Telecommunications Act of 1996 is the most comprehensive revision of the
federal communications laws in over 60 years. In general, the
Telecommunications Act includes provisions that would open the Company's local
exchange markets to competition and would permit local exchange carriers, such
as the Company, upon meeting certain conditions, to provide interLATA services
(long distance) and video programming and to engage in manufacturing.
BASIS OF PRESENTATION
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).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues, expenses, assets, and
liabilities and disclosure of contingencies. Actual results could differ from
those estimates.
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.
SHORT-TERM INVESTMENTS
Short-term investments consist of investments that mature 91 days to 12
months from the date of purchase. Short-term investments 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.
F-7
<PAGE>
Bell Atlantic - West Virginia, Inc.
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. The composite group method requires periodic revisions
to depreciation rates based on a number of variables, including retirement
estimates, survivor curves, salvage, and cost of removal.
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
were shorter than those approved by regulators prior to the discontinuance of
Statement No. 71. The shorter lives result principally from the Company's
expectation as to the revenue-producing lives of the assets.
The following asset lives were used in 1994 and 1995:
<TABLE>
<CAPTION>
JANUARY 1, 1994 EFFECTIVE
AVERAGE LIVES (IN YEARS) TO JULY 31, 1994 AUGUST 1, 1994 1995
- ------------------------------ ---------------- -------------- -------
<S> <C> <C> <C>
Buildings.................. 30 - 50 30 - 40 30 - 40
Central office equipment... 8 - 18 6 - 12 7 - 15
Cable, wiring and conduit.. 20 - 50 15 - 50 18 - 50
Other equipment............ 7 - 27 6 - 27 6 - 27
</TABLE>
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.
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
Pensions, Postretirement Benefits Other Than Pensions, and Postemployment
Benefits
Substantially all employees of the Company are covered under multi-employer
noncontributory defined benefit pension plans and postretirement health and life
insurance benefit plans sponsored by Bell Atlantic and certain of its
subsidiaries, including the Company.
F-8
<PAGE>
Bell Atlantic - West Virginia, Inc.
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. 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.
The Company also 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."
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).
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.
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
1995 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, 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, actual and
potential regulatory, legislative and judicial actions, and other factors were
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 was inappropriate.
A summary of the components of the after-tax charge recognized as a result
of the discontinued application of Statement No. 71 follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------
<S> <C>
Increase in plant and equipment depreciation
reserve.......................................... $68,641
Accelerated investment tax credit amortization.... (4,979)
Tax-related regulatory asset and liability
elimination...................................... 10,374
Other regulatory asset and liability elimination.. 2,580
-------
Total............................................. $76,616
=======
</TABLE>
F-9
<PAGE>
Bell Atlantic - West Virginia, Inc.
The increase in the accumulated depreciation reserve 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.
Tax-related regulatory assets of $53,617,000 and tax-related regulatory
liabilities of $43,243,000, which were established upon the adoption of
Statement No. 109 and amortized as the related deferred taxes were recognized in
the ratemaking process, were eliminated (see Note 9). The elimination of other
regulatory assets and liabilities relates principally to deferred vacation pay
costs, which were being amortized as they were recognized in the ratemaking
process.
3. PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment, which is stated at cost, is summarized as
follows at December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land....................... $ 6,523 $ 6,035
Buildings.................. 120,589 115,932
Central office equipment... 603,504 577,296
Cable, wiring and conduit.. 655,927 641,440
Other equipment............ 211,119 202,234
Other...................... 8,994 9,512
Construction-in-progress... 19,123 19,335
---------- ----------
1,625,779 1,571,784
Accumulated depreciation... (849,205) (764,580)
---------- ----------
Total...................... $ 776,574 $ 807,204
========== ==========
</TABLE>
Certain prior year amounts previously included in Construction-in-progress
have been reclassified to Other to conform to 1995 classifications.
4. LEASES
The Company leases certain facilities and equipment for use in its
operations under both capital and operating leases. Plant, property and
equipment included capital leases of $65,000 and $99,000, and related
accumulated amortization of $59,000 and $75,000 at December 31, 1995 and 1994,
respectively. The Company incurred no initial capital lease obligations in
1995, 1994 and 1993.
Total rent expense amounted to $20,781,000 in 1995, $19,878,000 in 1994 and
$23,207,000 in 1993. Of these amounts, $9,149,000, $9,593,000 and $10,332,000
in 1995, 1994 and 1993, respectively, were lease payments to affiliated
companies.
F-10
<PAGE>
Bell Atlantic - West Virginia, Inc.
At December 31, 1995, the aggregate minimum rental commitments under
noncancelable leases for the periods shown are as follows:
<TABLE>
<CAPTION>
YEARS CAPITAL LEASES OPERATING LEASES
----- -------------- ----------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
1996....................... $11 $ 726
1997....................... -- 725
1998....................... -- 704
1999....................... -- 659
2000....................... -- 639
Thereafter................. -- 1,999
--- ------
Total...................... 11 $5,452
======
Less imputed interest...... 1
---
Present value of net
minimum lease payments.... 10
Less current installments.. 10
---
Long-term obligation at
December 31, 1995......... $--
===
</TABLE>
5. DEBT
DEBT MATURING WITHIN ONE YEAR
Long-term debt maturing within one year was $10,000 and $27,000 at December
31, 1995 and 1994, respectively.
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, 1995 and 1994, there was
no outstanding Note payable balance with BANFC. At December 31, 1995, the
Company had $69,600,000 of an unused line of credit with BANFC.
LONG-TERM DEBT
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>
1995 1994
----------- -----------
(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............. (1,250) (1,346)
Capital lease obligations - average rate
20.7% and 17.6%.................................. 10 37
-------- --------
Total long-term debt, including current maturities 263,760 263,691
Less maturing within one year..................... 10 27
-------- --------
Total long-term debt.............................. $263,750 $263,664
======== ========
</TABLE>
F-11
<PAGE>
Bell Atlantic - West Virginia, Inc.
Long-term debt outstanding at December 31, 1995 includes $115,000,000 that
is callable by the Company. The call prices of these debentures range from
102.5% to 100.0% of face value, depending upon the remaining term to maturity of
the issue. In addition, $50,000,000 of long-term debt, bearing interest at
8.4%, 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 an extraordinary charge associated with the early
extinguishment of debentures called by the Company of $1,456,000, net of an
income tax benefit of $969,000 in 1993.
At December 31, 1995 the Company had $50,000,000 remaining under a shelf
registration statement filed with the Securities and Exchange Commission.
6. FINANCIAL INSTRUMENTS
CONCENTRATIONS OF CREDIT RISK
Financial instruments that 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, 1995, 1994 and 1993,
revenues generated from services provided to AT&T, primarily network access and
billing and collection, were $72,512,000, $78,455,000 and $79,506,000,
respectively. At December 31, 1995 and 1994, Accounts receivable, net, included
$3,910,000 and $6,382,000, 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.
Note Receivable from Affiliate (BANFC)
The carrying amount approximates fair value.
Debt
Fair value is estimated based on the quoted market prices for the same or
similar issues or on the net present value of the expected future cash flows
using current interest rates.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Debt *.......................... $265,000 $283,512 $265,000 $242,092
Note receivable from affiliate.. $ 4,939 $ 4,939 $ 11,377 $ 11,377
</TABLE>
* Debt includes Long-term debt and Debt maturing within one year, but
excludes capital lease obligations and unamortized discount and premium.
F-12
<PAGE>
Bell Atlantic - West Virginia, Inc.
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 Bell Atlantic
Corporation..................... (73,150)
Other............................ (375)
-------- -------- --------
Balance at December 31, 1993..... 304,065 42,074 41,833
Net income....................... 7,643
Dividends paid to Bell Atlantic
Corporation..................... (56,060)
Distribution of capital surplus
to Bell Atlantic Corporation.... (22,410)
Other............................ 35
-------- -------- --------
Balance at December 31, 1994..... 304,065 19,664 (6,549)
Net income....................... 81,247
Transfer of stated capital to
capital surplus................. (40,000) 40,000
Distribution of capital surplus
to Bell Atlantic Corporation.... (52,245)
Dividends paid to Bell Atlantic
Corporation..................... (56,990)
Other............................ (170)
-------- -------- --------
Balance at December 31, 1995 .... $264,065 $ 7,419 $ 17,538
======== ======== ========
</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, 1996, the Company declared and paid a cash dividend in the
amount of $14,000,000 to Bell Atlantic.
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. The
pension benefit formula for plans covering management employees in 1995 and
prior years is based on a stated percentage of adjusted career average earnings.
The Company's objective in funding these 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.
Effective January 1, 1996, the plan covering management employees was
converted to a cash balance plan. Under the cash balance plan, pension benefits
are determined by a combination of compensation credits based on age and service
and individual account-based interest credits. Each management employee's
opening account balance is based on accrued pension benefits as of December 31,
1995, and converted to a lump-sum amount determined under the prior plan's
F-13
<PAGE>
Bell Atlantic - West Virginia, Inc.
provisions. The lump-sum value is multiplied by a transition factor, based on
age and service, to arrive at the opening balance.
Pension cost was $1,411,000, $4,569,000 and $3,886,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. The reduction in 1995 pension
cost is principally due to an increase in the discount rate from 7.25% at
December 31, 1993 to 8.25% at December 31, 1994, and plan changes.
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.
The significant assumptions used for the pension measurements were as
follows at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Discount rate.................................... 7.25% 8.25% 7.25%
Rate of future increases in
compensation levels............................. 4.75% 5.25% 5.25%
</TABLE>
The expected long-term rate of return on plan assets was 8.25% for 1995,
1994 and 1993.
Pension benefits for associate employees are subject to collective
bargaining. Modifications in pension benefits have been bargained from time to
time. Additionally, the Company has amended the benefit formula under pension
plans maintained for its management employees. Substantive commitments for
future amendments to the Company's pension plans have been reflected in
determining the Company's pension cost. The actuarial assumptions used to
determine pension cost are based on financial market interest rates, past
experience, and management's best estimate of future benefit changes and
economic conditions. Changes in these assumptions may impact future pension
cost levels and benefit obligations.
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 medical 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.
Postretirement benefit cost was $7,798,000, $11,114,000 and $11,396,000 for
the years ended December 31, 1995, 1994 and 1993, respectively. Postretirement
benefit cost decreased in 1995 principally as a result of an increase in the
discount rate from 7.25% at December 31, 1993 to 8.25% at December 31, 1994, and
the effect of favorable plan 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, a reconciliation of the funded
status of the plan with amounts recorded on the balance sheets and the effect of
a one-percentage-point increase in the assumed health care cost trend rates for
each future year on net periodic postretirement benefit cost and the accumulated
postretirement benefit obligation. 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.
F-14
<PAGE>
Bell Atlantic - West Virginia, Inc.
Assumptions used in the actuarial computations for postretirement benefits
are as follows at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Discount rate.................................... 7.25% 8.25% 7.25%
Rate of future increases in compensation levels.. 4.75 5.25 5.25
Medical cost trend rate:
Year ending.................................... 11.00 12.00 13.00
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 1995,
1994 and 1993.
Postretirement benefits other than pensions for associate employees are
subject to collective bargaining agreements and have been modified from time to
time. The Company has also periodically modified benefits under plans
maintained for its management employees. Substantive commitments for future
amendments to the Company's postretirement benefit plans have been reflected in
determining the Company's postretirement benefit cost. The actuarial assumptions
used to determine postretirement benefit cost are based on financial market
interest rates, past experience, and management's best estimate of future
benefit changes and economic conditions. Changes in these assumptions may
impact future postretirement benefit cost levels and benefit obligations.
POSTEMPLOYMENT BENEFITS
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (Statement No. 112). 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.
In the third quarter of 1994, the Company recorded a pretax charge of
$8,605,000 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.
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 $2,757,000, $2,271,000, and $2,097,000,
in 1995, 1994 and 1993, respectively.
F-15
<PAGE>
Bell Atlantic - West Virginia, Inc.
9. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109).
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 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
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Current:
Federal.................. $51,092 $49,423 $45,945
State and local.......... 14,169 13,962 12,508
------- ------- -------
Total.................... 65,261 63,385 58,453
------- ------- -------
Deferred:
Federal.................. (7,470) (3,770) (6,153)
State and local.......... (1,863) 416 2,642
------- ------- -------
Total.................... (9,333) (3,354) (3,511)
------- ------- -------
55,928 60,031 54,942
Investment tax credits.... (2,954) (2,616) (4,585)
------- ------- -------
Total income tax expense.. $52,974 $57,415 $50,357
======= ======= =======
</TABLE>
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
---------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Statutory federal income tax rate. 35.0% 35.0% 35.0%
Investment tax credits............ (1.4) (1.9) (2.6)
State income taxes, net of
federal tax benefits............. 6.0 6.0 6.2
Expense related to rate
differential applied to
reversing timing differences.... -- .1 .5
Other, net........................ (.1) 1.3 .6
---- ---- ----
Effective income tax rate......... 39.5% 40.5% 39.7%
==== ==== ====
</TABLE>
F-16
<PAGE>
Bell Atlantic - West Virginia, Inc.
Significant components of deferred tax liabilities (assets) were as follows at
December 31:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................... $124,200 $130,700
Other........................... 11,200 11,800
-------- --------
135,400 142,500
-------- --------
Deferred tax assets:
Employee benefits............... (83,000) (77,200)
Investment tax credits.......... (4,100) (5,300)
Advance payments................ (100) (200)
Other........................... (7,400) (9,700)
-------- --------
(94,600) (92,400)
-------- --------
Net deferred tax liability........ $ 40,800 $ 50,100
======== ========
</TABLE>
Total deferred tax assets include approximately $56,000,000 and $54,000,000
at December 31, 1995 and 1994, 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.
10. ADDITIONAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1994
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEETS:
Accounts payable and accrued liabilities:
Accounts payable - affiliates......... $ 41,019 $ 41,134
Accounts payable - other.............. 37,498 39,276
Accrued expenses...................... 14,995 13,204
Accrued vacation pay.................. 9,305 10,460
Accrued taxes......................... 7,882 8,767
Interest payable - other.............. 4,891 4,909
Interest payable - affiliate.......... 1 ---
-------- --------
$115,591 $117,750
======== ========
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
1995 1994 1993
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENTS OF CASH FLOWS:
Cash paid during the year for:
Interest, net of amounts capitalized.... $ 19,358 $ 18,289 $20,311
Income taxes, net of amounts refunded... 66,724 65,272 58,589
STATEMENTS OF OPERATIONS AND REINVESTED
EARNINGS (ACCUMULATED DEFICIT):
Interest expense, net of amounts
capitalized............................. 17,573 18,468 20,306
Capitalized interest..................... 1,562 436 ---
</TABLE>
Interest paid during the year includes $75,000 in 1995, $242,000 in 1994 and
$847,000 in 1993 related to short-term financing services provided by Bell
Atlantic Network Funding Corporation (see Note 5).
F-17
<PAGE>
Bell Atlantic - West Virginia, Inc.
At December 31, 1995 and 1994, $6,318,000 and $4,167,000, respectively, of
negative cash was classified as accounts payable.
Total advertising expense amounted to $3,226,000 in 1995, $3,357,000 in 1994
and $2,697,000 in 1993. Of these amounts, $2,788,000, $2,862,000 and $2,072,000
in 1995, 1994 and 1993, respectively, were advertising expenses allocated to the
Company by Bell Atlantic Network Services, Inc. (NSI).
11. TRANSACTIONS WITH AFFILIATES
The financial statements include transactions with 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 operating 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.
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 from affiliates in connection with an
interstate revenue sharing arrangement with Bell Atlantic's operating telephone
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 and made distributions of capital surplus to its parent company, Bell
Atlantic.
Transactions with affiliates are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Operating revenues:
Interstate revenue sharing
from affiliates............... $ 35,223 $ 39,099 $ 36,569
Other revenue from affiliates.. 4,070 6,534 4,984
-------- -------- --------
39,293 45,633 41,553
-------- -------- --------
Operating expenses:
NSI........................... 87,889 83,246 77,079
Bellcore...................... 5,080 4,908 6,982
Other......................... 13,853 15,363 16,507
-------- -------- --------
106,822 103,517 100,568
-------- -------- --------
Interest income from BANFC...... 466 274 28
Interest expense to BANFC....... 114 186 829
Dividends paid and distributions
of capital surplus to Bell
Atlantic....................... 109,235 78,470 73,150
</TABLE>
Outstanding balances with affiliates are reported on the Balance Sheets at
December 31, 1995 and 1994 as Note receivable from affiliate, Accounts
receivable - affiliates, and Accounts payable and accrued liabilities -
affiliates.
In 1994, NSI operating expenses included $1,595,000, representing the
Company's proportionate share of separation benefit costs for 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 project. This
F-18
<PAGE>
Bell Atlantic - West Virginia, Inc.
project previously had been supported entirely by Bell Atlantic's operating
telephone 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 NET
OPERATING OPERATING EXTRAORDINARY INCOME
QUARTER ENDED REVENUES INCOME ITEM (LOSS)
- ------------------------ --------- --------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1995:
March 31.............. $144,636 $ 37,957 $20,167 $ 20,167
June 30............... 146,267 39,020 20,909 20,909
September 30.......... 145,846 38,093 20,180 20,180
December 31........... 148,436 36,806 19,991 19,991
-------- -------- ------- --------
Total................. $585,185 $151,876 $81,247 $ 81,247
======== ======== ======= ========
1994:
March 31.............. $148,770 $ 42,028 $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........... 148,028 46,551 24,993 24,993
-------- -------- ------- --------
Total................. $592,804 $160,659 $84,259 $ 7,643
======== ======== ======= ========
</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).
F-19
<PAGE>
Bell Atlantic - West Virginia, Inc.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
CHARGED
BALANCE AT CHARGED TO OTHER 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 1995.................. $2,560 $4,488 $6,116 $8,986 $4,178
Year 1994.................. $3,077 $4,169 $4,664 $9,350 $2,560
Year 1993.................. $3,452 $3,508 $4,803 $8,686 $3,077
</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, 1995
Bell Atlantic - West Virginia, Inc.
COMMISSION FILE NUMBER 1-7150
<PAGE>
Form 10-K for 1995
File No. 1-7150
Page 1 of 1
EXHIBIT 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 December 15, 1995.
3b(i) Consent of Sole Stockholder of Bell Atlantic-West Virginia,
Inc., dated December 15, 1995.
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>
Exhibit 3b
BELL ATLANTIC - WEST VIRGINIA, INC.
BY-LAWS
As Amended December 15, 1995
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.
<PAGE>
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 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 one (1) nor more than ten (10) 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
-2-
<PAGE>
time, by resolution prescribe, or as may be designated in the 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 Directors in office shall constitute a quorum for the transaction of
business, and the acts of a majority
-3-
<PAGE>
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.
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.
Section 2-i Board Committees. The Board of Directors may, by resolution
-----------------------------
adopted by a majority of the whole Board of Directors, designate an Executive
Committee, which shall consist of two 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 two
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
-4-
<PAGE>
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 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.
Section 2-k Informal Action. Any action which could be taken at a meeting
----------------------------
of the Board of Directors 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,
-5-
<PAGE>
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-l 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 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 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.
-6-
<PAGE>
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
officers 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 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
-7-
<PAGE>
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 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
-8-
<PAGE>
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 Treasurers 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.
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
-9-
<PAGE>
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.
-10-
<PAGE>
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 corporation 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
-11-
<PAGE>
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 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.
-12-
<PAGE>
Exhibit 3b(i)
CONSENT OF SOLE STOCKHOLDER
OF BELL ATLANTIC - WEST VIRGINIA, INC.
The undersigned, which holds all of the outstanding stock of Bell Atlantic -
West Virginia, Inc. (the "Corporation"), does hereby consent to and adopt the
following resolution pursuant to Section 31-1-73 of the West Virginia
Corporation Act:
RESOLVED, that the By-Laws of the Corporation be, and they hereby are, amended
and restated in their entirety as set forth on Exhibit A attached hereto and
made a part hereof.
IN WITNESS WHEREOF, the undersigned sole stockholder of Bell Atlantic - West
Virginia, inc. has executed this consent as of the 15th day of December, 1995.
Bell Atlantic Corporation
By:
Raymond W. Smith
Chairman of the Board and
Chief Executive Officer
<PAGE>
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. 60126) of our report
dated February 5, 1996, 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 audits of the financial statements and financial statement schedule of the
Company as of December 31, 1995 and December 31, 1994, and for each of the three
years in the period ended December 31, 1995, which report is included in this
Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 27, 1996
<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, 1996, 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
Dennis M. Bone and Ritchie A. Ireland, II 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 17th day of March, 1996.
/s/ DAVID B. FROST
______________________________
David B. Frost
Director, Vice President
<PAGE>
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, 1996, 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
Ritchie A. Ireland, II as attorney 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 attorney 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 attorney 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 20th day of March, 1996.
/s/ DENNIS M. BONE
____________________________
Dennis M. Bone
Director, President
<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, 1995 AND THE BALANCE
SHEET AS OF DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
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<RECEIVABLES> 83,410
<ALLOWANCES> 4,178
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0
0
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