<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6964
BELL ATLANTIC - VIRGINIA, INC.
A Virginia Corporation I.R.S. Employer Identification No. 54-0167060
600 East Main Street, Richmond, Virginia 23219
Telephone Number (804) 225-6300
---------------
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF BELL ATLANTIC CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION H(2).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
<PAGE>
Bell Atlantic - Virginia, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATING REVENUES (including $28 to
affiliates and $704 from affiliates)................... $485,957 $476,275
-------- --------
OPERATING EXPENSES
Employee costs, including benefits
and taxes............................................ 96,443 98,880
Depreciation and amortization......................... 99,190 97,182
Other (including $97,304
and $89,220 to affiliates)........................... 150,201 148,610
-------- --------
345,834 344,672
-------- --------
OPERATING INCOME........................................ 140,123 131,603
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used
during construction.................................. --- 793
Other, net............................................ (1,367) (616)
-------- --------
(1,367) 177
INTEREST EXPENSE (including $1,137
and $432 to affiliate)................................. 16,438 17,226
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES................ 122,318 114,554
PROVISION FOR INCOME TAXES.............................. 46,721 42,214
-------- --------
NET INCOME.............................................. $ 75,597 $ 72,340
======== ========
REINVESTED EARNINGS
At beginning of period................................ $156,709 $438,860
Add: net income...................................... 75,597 72,340
-------- --------
232,306 511,200
Deduct: dividends.................................... 51,058 50,510
-------- --------
At end of period...................................... $181,248 $460,690
======== ========
</TABLE>
See Notes to Financial Statements.
-1-
<PAGE>
Bell Atlantic - Virginia, Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
CURRENT ASSETS
Short-term investments.................................... $ 16,929 $ ---
Accounts receivable:
Customers and agents, net of
allowances for uncollectibles of $15,770 and $15,031... 301,326 295,406
Affiliates.............................................. 33,699 32,188
Other................................................... 57,414 34,995
Material and supplies..................................... 9,132 6,619
Prepaid expenses.......................................... 78,457 64,354
Deferred income taxes..................................... 16,077 15,605
Other..................................................... 2,468 285
---------- ----------
515,502 449,452
---------- ----------
PLANT, PROPERTY AND EQUIPMENT............................... 5,248,304 5,080,239
Less accumulated depreciation............................. 2,561,349 2,471,865
---------- ----------
2,686,955 2,608,374
---------- ----------
OTHER ASSETS................................................ 82,093 87,782
---------- ----------
TOTAL ASSETS................................................. $3,284,550 $3,145,608
========== ==========
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
Bell Atlantic - Virginia, Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
LIABILITIES AND SHAREOWNER'S INVESTMENT
---------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Debt maturing within one year:
Note payable to affiliate........................ $ 61,725 $ 19,787
Other............................................ 1,373 905
Accounts payable:
Affiliates....................................... 145,214 157,749
Other............................................ 182,565 190,904
Accrued expenses:
Taxes............................................ 72,853 7,229
Other............................................ 102,968 99,897
Advance billings and customer deposits............ 71,090 64,069
---------- ----------
637,788 540,540
---------- ----------
LONG-TERM DEBT..................................... 948,780 937,415
---------- ----------
EMPLOYEE BENEFIT OBLIGATIONS....................... 411,404 406,664
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes............................. 128,802 129,987
Unamortized investment tax credits................ 28,492 29,757
Other............................................. 74,351 70,851
---------- ----------
231,645 230,595
---------- ----------
SHAREOWNER'S INVESTMENT
Common stock - one share, without
par value, owned by parent....................... 873,685 873,685
Reinvested earnings............................... 181,248 156,709
---------- ----------
1,054,933 1,030,394
---------- ----------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT...... $3,284,550 $3,145,608
========== ==========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
Bell Atlantic - Virginia, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1995 1994
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES............... $ 170,314 $ 174,879
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments.................. (16,929) ---
Additions to plant, property and equipment............ (167,957) (92,782)
Other, net............................................ 95 503
--------- ---------
Net cash used in investing activities................... (184,791) (92,279)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of capital lease
obligations.......................................... (175) (251)
Net change in note payable to affiliate............... 41,938 (6,201)
Dividends paid........................................ (51,058) (50,510)
Net change in outstanding checks drawn
on controlled disbursement accounts.................. 23,772 (25,638)
--------- ---------
Net cash provided by/(used in) financing activities..... 14,477 (82,600)
--------- ---------
NET CHANGE IN CASH...................................... --- ---
CASH, BEGINNING OF PERIOD............................... --- ---
--------- ---------
CASH, END OF PERIOD..................................... $ --- $ ---
========= =========
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
Bell Atlantic - Virginia, Inc.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared
by Bell Atlantic - Virginia, Inc. (the Company) pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). The December 31,
1994 balance sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles. In
the opinion of management, these financial statements include all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the results of operations, financial position and cash flows. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. The Company
believes that the disclosures made are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Effective August 1, 1994, the Company discontinued accounting for its operations
in accordance with Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulations."
2. Dividend
On May 1, 1995, the Company declared and paid a dividend in the amount of
$65,000,000 to Bell Atlantic Corporation.
3. Reclassifications
Certain reclassifications of prior year's data have been made to conform to
1995 classifications.
-5-
<PAGE>
Bell Atlantic - Virginia, Inc.
Item 2. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction H(2).)
This discussion should be read in conjunction with the Financial Statements
and Notes to Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
The Company reported net income for the first quarter of 1995 of
$75,597,000, compared to net income of $72,340,000 for the same period in 1994.
Major items affecting the comparison of operating results for the three
month period ended March 31, 1995, versus the three month period ended March 31,
1994, are discussed in the following sections.
OPERATING REVENUES
- ------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31 1995 1994
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Transport Services
Local service $200,442 $195,156
Network access 143,909 140,884
Toll service 24,910 34,141
Ancillary Services
Directory advertising 43,437 41,217
Other 21,826 20,734
Value-added Services 51,433 44,143
-------- --------
Total $485,957 $476,275
======== ========
</TABLE>
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
<TABLE>
<CAPTION>
Percentage
Increase
1995 1994 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
At March 31
- -----------
Access Lines in Service (In thousands)
Residence 1,872 1,824 2.6%
Business 1,062 999 6.3
Public 40 40 -
------ ------
2,974 2,863 3.9
====== ======
For the Three Month Period Ended March 31
- -----------------------------------------
Access Minutes of Use (In millions)
Interstate 2,524 2,355 7.2
Intrastate 662 654 1.2
------ ------
3,186 3,009 5.9
====== ======
Toll Messages (In thousands)
Intrastate 26,713 38,972 (31.5)
Interstate 2,799 2,867 (2.4)
------ ------
29,512 41,839 (29.5)
====== ======
</TABLE>
-6-
<PAGE>
Bell Atlantic - Virginia, Inc.
LOCAL SERVICE REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 5,286 2.7%
- --------------------------------------------------------------------------------
</TABLE>
Local service revenues are earned by the Company from the provision of local
exchange, local private line and public telephone services.
Local service revenues increased in 1995 due primarily to a 3.9% growth in
the number of access lines in service, higher usage of basic calling services by
residence customers and increased usage and data transport by business
customers. This growth was partially offset by the effect of storm-driven usage
experienced in the first quarter of 1994.
NETWORK ACCESS REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 3,025 2.1%
- --------------------------------------------------------------------------------
</TABLE>
Network access revenues are received from interexchange carriers (IXCs) for
their use of the Company's local exchange facilities in providing long-distance
services to IXCs' customers and from end-user subscribers. Switched access
service revenues are derived from usage-based charges paid by IXCs for access to
the Company's network. Special access revenues arise from access charges paid by
IXCs and end-users who have private networks, and end-user access revenues are
earned from local exchange carrier customers who pay for access to the network.
Network access revenues increased in 1995 principally due to higher customer
demand for access services as reflected by a 5.9% growth in access minutes of
use, as well as growth in revenues from end-user charges attributable to
increasing access lines in service. Increased demand for digital data transport
services also contributed to growth in access revenues. Reported growth in
access minutes of use and revenues was negatively impacted by storm-related
calling volumes experienced in the first quarter of 1994. Volume-related
revenue increases were partially offset by the effect of price reductions, the
recognition of the Company's obligations under the Federal Communications
Commission's (FCC) current price cap order and lower revenues recognized through
an interstate revenue sharing agreement with affiliated companies. See
"Competitive and Regulatory Environment - Federal Regulation" for a discussion
of FCC interstate access revenue issues.
TOLL SERVICE REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $(9,231) (27.0)%
- --------------------------------------------------------------------------------
</TABLE>
Toll service revenues are earned from calls made outside a customer's local
calling area, but within the same service area boundaries of the Company,
commonly referred to as "LATAs." Other toll services include 800 services and
Wide Area Telephone Service (WATS).
Toll service revenues decreased in 1995 primarily due to the effects of
extended local calling areas and storm-driven usage experienced in the first
quarter of 1994, as reflected by a 29.5% decline in toll message volume. The
Company also implemented price reductions on certain toll services which
contributed to the decline in toll service revenues in the first quarter of
1995. The Company expects that reductions in toll service revenues will
continue in 1995.
-7-
<PAGE>
Bell Atlantic - Virginia, Inc.
DIRECTORY ADVERTISING REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 2,220 5.4%
- --------------------------------------------------------------------------------
</TABLE>
Directory advertising revenues are earned primarily from local advertising
and marketing services provided to businesses in White and Yellow Pages
directories. Other directory advertising services include database and foreign
directory marketing.
Growth in directory advertising revenues was principally due to higher rates
charged for these services. Volume growth continues to be impacted by
competition from other directory companies, as well as other advertising media.
OTHER ANCILLARY SERVICES REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 1,092 5.3%
- --------------------------------------------------------------------------------
</TABLE>
Other ancillary services include billing and collection services provided to
IXCs, and facilities rental services provided to affiliates and non-affiliates.
Other ancillary services increased due to higher billing and collection
services revenues and higher facilities rental revenues from affiliates.
VALUE-ADDED SERVICES REVENUES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 7,290 16.5%
- --------------------------------------------------------------------------------
</TABLE>
Value-added services represent a family of enhanced services including Call
Waiting, Return Call, Caller ID and Caller ID Deluxe, Answer Call, and Voice
Mail. These services also include customer premises services such as inside
wire installation and maintenance and other central office services and
features.
Continued growth in the network customer base (access lines) and higher
demand by residence customers for value-added central office and voice messaging
services offered by the Company, including the introduction of Caller ID Deluxe
in the fourth quarter of 1994, increased value-added services revenues in the
first quarter of 1995. Higher customer premises services revenues also
contributed to revenue growth in the first quarter of 1995. These revenue
increases were offset, in part, by the elimination of Touch-Tone service
charges, in accordance with the Virginia State Corporation Commission's (SCC)
new regulatory plan for the Company, effective January 1, 1995. The elimination
of Touch-Tone service charges is expected to reduce value-added services
revenues by approximately $25 million annually.
OPERATING EXPENSES
- ------------------
<TABLE>
<CAPTION>
For the Three Months Ended March 31 1995 1994
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Employee costs, including benefits and taxes $ 96,443 $ 98,880
Depreciation and amortization 99,190 97,182
Other operating expenses 150,201 148,610
-------- --------
Total $345,834 $344,672
======== ========
</TABLE>
-8-
<PAGE>
Bell Atlantic - Virginia, Inc.
EMPLOYEE COSTS
<TABLE>
<CAPTION>
Dollars in Thousands (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $(2,437) (2.5)%
- --------------------------------------------------------------------------------
</TABLE>
Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by the Company. Similar costs
incurred by employees of Bell Atlantic Network Services, Inc. (NSI), who provide
centralized services on a contract basis, are allocated to the Company and are
included in other operating expenses.
The decline in employee costs was principally due to a decrease in overtime
pay and repair and maintenance activity, both of which were higher in the first
quarter of 1994 as a result of unusually severe weather conditions. The effect
of lower workforce levels also contributed to the overall decrease in employee
costs. These reductions were partially offset by annual salary and wage
increases for management and associate employees, effective April and August
1994, respectively. Associate employee wage increases were determined under a
contract ratified in October 1992 by the union representing associate employees
of the Company. Such contract will expire in August 1995.
DEPRECIATION AND AMORTIZATION
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 2,008 2.1%
- --------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization increased due to growth in depreciable
telephone plant and higher depreciation rates. The higher depreciation rates
resulted principally from the discontinued application of regulatory accounting
principles, effective August 1, 1994. These increases were partially offset by
the effect of additional expense in 1994 for the amortization of intra-building
cable. The composite depreciation rate was 7.9% for the first quarter of 1995.
The Company expects this composite depreciation rate to remain substantially
unchanged for the remainder of 1995.
OTHER OPERATING EXPENSE
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 1,591 1.1%
- --------------------------------------------------------------------------------
</TABLE>
Other operating expenses consist primarily of contracted services including
centralized service expenses allocated from NSI, rent, network software costs,
operating taxes other than income, provision for uncollectible accounts
receivable, and other costs.
The increase in other operating expenses was largely attributable to higher
costs allocated from NSI, primarily as a result of increased rent expense, as
well as additional costs incurred in that organization to enhance systems and
consolidate work activities at Bell Atlantic's network services subsidiaries,
including the Company.
This increase was substantially offset by decreases in rent expense from
other affiliates, lower network software costs due to the timing of purchases,
and the effect of the severe winter storms in the first quarter of 1994.
-9-
<PAGE>
Bell Atlantic - Virginia, Inc.
OTHER INCOME AND (EXPENSE), NET
<TABLE>
<CAPTION>
Dollars in Thousands (Decrease)
- --------------------------------------------------------------------------------
<S> <C>
Three Months $(1,544)
- --------------------------------------------------------------------------------
</TABLE>
The change in other income and (expense), net was largely attributable to a
reduction in income related to the allowance for funds used during construction.
Upon the discontinued application of regulatory accounting principles,
effective August 1, 1994, the Company began recognizing capitalized interest
costs as a reduction of interest expense. Previously, the Company recorded an
allowance for funds used during construction as an item of other income.
INTEREST EXPENSE
<TABLE>
<CAPTION>
Dollars in Thousands (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ (788) (4.6)%
- --------------------------------------------------------------------------------
</TABLE>
Interest expense decreased principally due to the recognition of capitalized
interest costs, subsequent to the discontinued application of regulatory
accounting principles. Partially offsetting this decrease was additional
expense resulting from higher interest rates and higher levels of average short-
term debt in the first quarter of 1995.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
Dollars in Thousands Increase
- --------------------------------------------------------------------------------
<S> <C> <C>
Three Months $ 4,507 10.7%
- --------------------------------------------------------------------------------
</TABLE>
EFFECTIVE INCOME TAX RATES
<TABLE>
<CAPTION>
For the Three Months Ended March 31
- --------------------------------------------------------------------------------
<S> <C>
1995 38.2%
- --------------------------------------------------------------------------------
1994 36.9%
- --------------------------------------------------------------------------------
</TABLE>
The Company's effective income tax rate was higher in the first quarter of
1995 due principally to the reduction in the amortization of investment tax
credits and the elimination of the benefit of the rate differential applied to
reversing timing differences as a result of the discontinued application of
regulatory accounting principles in August 1994.
COMPETITIVE AND REGULATORY ENVIRONMENT
- --------------------------------------
The communications industry continues to undergo fundamental changes which
may have a significant impact on future financial performance of
telecommunications companies. These changes are being driven by a number of
factors, including the accelerated pace of technological innovation, the
convergence of the telecommunications, cable television, information services
and entertainment businesses and a regulatory environment in which traditional
barriers are being lowered or eliminated and competition permitted or
encouraged.
The Company's telecommunications business is subject to competition from
numerous sources. An increasing amount of this competition is from companies
that have substantial capital, technological and marketing resources, many of
which do not face the same regulatory constraints as the Company. The entry of
well-financed competitors has the potential to adversely affect multiple revenue
streams of the Company, including toll, local exchange and network access
services in the market segments and geographical
-10-
<PAGE>
Bell Atlantic - Virginia, Inc.
areas in which the competitors operate. The amount of revenue reductions will
depend, in part, on the competitors' success in marketing these services, and
the conditions established by regulatory authorities. The potential impact is
expected to be offset, to some extent, by revenues from interconnection charges
to be paid to the Company by these competitors.
The Company continues to respond to competitive challenges by intensely
focusing on meeting customer requirements and by reducing its cost structure
through efficiency and productivity initiatives. In addition, the Company
continues to seek growth opportunities in businesses where it possesses core
competencies.
Federal Regulation
Legislation has been introduced in the current session of the United States
Congress that would open local exchange markets to competitors and would permit
local exchange carriers, such as the Company, to provide interLATA services upon
meeting certain conditions. No definitive prediction can be made as to whether
or when such legislation will be enacted, the provisions thereof or the impact
on the business or financial condition of the Company.
On April 28, 1995, the U.S. District Court, which administers the
Modification of Final Judgment (MFJ), granted the Regional Bell Operating
Companies' (RBOCs) joint motion for a waiver of the MFJ permitting them to
provide interLATA wireless telecommunications services. The Court's decision
contained a number of restrictions limiting the extent and manner in which the
RBOCs may provide interLATA wireless services. While Bell Atlantic plans to
comply with the requirements of the Court's decision so that it may provide the
services authorized therein, it has appealed the decision to the U.S. Court of
Appeals for the District of Columbia Circuit.
In February 1995, the FCC issued an Order to Show Cause with respect to
certain findings contained in an independent audit of Bell Atlantic's network
services subsidiaries' 1988 and first quarter 1989 reported adjustments to the
National Exchange Carrier Association (NECA) interstate common line pool. On
May 2, 1995, Bell Atlantic filed its response to the Show Cause Order, asserting
that there is no legal basis for the FCC to institute enforcement proceedings
with respect to these findings. Resolution of this matter is expected later in
1995.
FCC Interim Price Cap Orders
On March 30, 1995, the FCC adopted its Report and Order approving an Interim
Price Cap Plan for interstate access rates. The Interim Plan, which is
effective August 1, 1995, replaces the Price Cap Plan that the FCC adopted in
1990.
Under the Interim Plan, the Company's Price Cap Index must be reduced by a
fixed percentage, either 4.0%, 4.7%, or 5.3%, which is intended to reflect
increases in productivity (Productivity Factor). Companies selecting the 4.0%
or 4.7% Productivity Factor are required to reduce future prices and share a
portion of their interstate return in excess of 12.25%. Companies selecting the
5.3% Productivity Factor are also required to reduce prices but are not required
to share. The Interim Plan also provides for a reduction in the Price Cap Index
of 2.8% to adjust for what the FCC believes was an underestimate in its
calculation of the Productivity Factor in prior years. The Interim Plan
provides for increases to the Price Cap Indices for inflation, 2.9% effective
August 1, 1995, based on the increase in the GDP-PI. The Interim Plan also
eliminated the recovery of certain "exogenous" cost changes including changes in
accounting costs that the FCC believes have no economic consequences.
On March 30, 1995, the FCC also adopted an Order relating to the Price Cap
Plan requiring local exchange carriers to include in their calculation of
interstate earnings an adjustment to add back to revenues the amounts that were
required to be shared with ratepayers. This adjustment, which is effective for
1994 and subsequent years, increased 1994 calculated interstate returns for the
purpose of determining the prior years sharing amounts that will be reflected in
rate reductions that become effective August 1, 1995.
-11-
<PAGE>
Bell Atlantic - Virginia, Inc.
On May 9, 1995, Bell Atlantic filed its Transmittal of Interstate Rates as
required by the March 30, 1995 Orders. In the filing, Bell Atlantic selected
the 5.3% productivity factor for the August 1995 to June 1996 tariff period.
The rates included in the May 9, 1995 filing result in price decreases for the
Company totaling approximately $48,900,000 on an annual basis. These price
decreases include the scheduled expiration of a temporary rate increase of
approximately $15,700,000 on an annualized basis that is in effect from March
17, 1995 through July 31, 1995 to recover prior years "exogenous" postemployment
benefit costs. Approximately 80% of the remaining $33,200,000 reduction results
from compliance with the Interim Plan. The remaining 20% represents reductions
that the Company was required to make under the prior Price Cap Plan. It is
expected that the earnings impact of these price decreases will be substantially
mitigated by volume increases and cost reductions that result from improved
productivity.
Bell Atlantic has appealed the Orders with the D.C. Circuit Court of Appeals
and has petitioned the FCC for a stay of certain aspects of the Orders pending
the results of the appeals.
State Regulation
The communications services of the Company are subject to regulation by the
SCC with respect to intrastate rates and services and other matters.
The SCC approved a new regulatory plan, effective January 1, 1995, which
eliminates regulation of profits, with provisions that cap basic local services
rates until the year 2001, eliminate monthly Touch-Tone charges and expand
eligibility for lifeline telephone services.
During the 1995 session of the Virginia General Assembly, legislation was
passed that will allow the SCC to authorize other telephone companies, beginning
January 1, 1996, to compete with the Company in the provision of local exchange
services. These telephone companies will come under the jurisdiction of the SCC
and will be required to comply with rules and regulations which will be
determined by the SCC during 1995.
The SCC has instituted a proceeding to consider whether, and on what terms,
to permit intraLATA toll competition in Virginia. Comments were filed in March
1995 and a decision on the docket is pending.
OTHER MATTERS
- -------------
Environmental Issues
The Company is subject to a number of environmental proceedings as a result
of its operations and shared liability provisions in the Plan of Reorganization
related to the Modification of Final Judgment. 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 liability reflects those
specific issues where remediation activities are currently deemed to be probable
and where the cost of remediation is estimable. Management believes that the
aggregate amount of any additional potential liability would not have a material
effect on the Company's results of operations or financial condition.
FINANCIAL CONDITION
- -------------------
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements, including network
expansion and modernization, 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.
-12-
<PAGE>
Bell Atlantic - Virginia, Inc.
As of March 31, 1995, the Company had $138,300,000 of an unused line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. In
addition, the Company had $100,000,000 remaining under a shelf registration
statement filed with the Securities and Exchange Commission.
The Company's debt ratio was 49.0% at March 31, 1995, compared to 48.2% at
December 31, 1994.
-13-
<PAGE>
Bell Atlantic - Virginia, Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For background concerning the Company's contingent liabilities under
the Plan of Reorganization governing the divestiture by AT&T Corp.
(formerly American Telephone and Telegraph Company) of certain assets
of the former Bell System Operating Companies with respect to private
actions relating to pre-divestiture events, including pending antitrust
cases, see Item 3 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
27 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed during the
quarter ended March 31, 1995.
-14-
<PAGE>
Bell Atlantic - Virginia, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BELL ATLANTIC - VIRGINIA, INC.
Date: May 11, 1995 By /s/ O. Riley Young, Jr.
-----------------------------------
O. Riley Young, Jr.
Controller
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MAY 8, 1995.
-15-
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<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Operations for the three months ended March 31, 1995 and the
Balance Sheet as of March 31, 1995 and is qualified in its entirety by reference
to such financial statements.
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