<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, 1996
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,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING REVENUES
(including $801 from affiliates and $28 to
affiliates)......................................... $520,451 $485,957
-------- --------
OPERATING EXPENSES
Employee costs, including benefits and taxes......... 88,855 96,443
Depreciation and amortization........................ 101,519 99,190
Other (including $118,468 and $97,304 to affiliates). 177,999 150,201
-------- --------
368,373 345,834
-------- --------
OPERATING INCOME.......................................... 152,078 140,123
OTHER EXPENSE, NET
(including $201 and $0 from affiliate)............... 953 1,367
INTEREST EXPENSE
(including $206 and $1,137 to affiliate)............. 15,929 16,438
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES.................. 135,196 122,318
PROVISION FOR INCOME TAXES................................ 51,255 46,721
-------- --------
NET INCOME................................................ $ 83,941 $ 75,597
======== ========
REINVESTED EARNINGS
At beginning of period............................... $169,629 $156,709
Add: net income..................................... 83,941 75,597
-------- --------
253,570 232,306
Deduct: dividends................................... 12,246 51,058
other changes............................... 113 ---
-------- --------
At end of period..................................... $241,211 $181,248
======== ========
</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,
1996 1995
---------- ------------
<S> <C> <C>
CURRENT ASSETS
Short-term investments........................... $ 13,200 $ ---
Note receivable from affiliate................... 42,716 ---
Accounts receivable:
Trade and other, net of allowances for
uncollectibles of $21,238 and $19,072........ 363,280 375,872
Affiliates..................................... 31,588 28,973
Material and supplies............................ 12,486 9,156
Prepaid expenses................................. 87,944 67,987
Deferred income taxes............................ 30,348 30,364
Other............................................ 227 217
---------- ----------
581,789 512,569
---------- ----------
PLANT, PROPERTY AND EQUIPMENT.................... 5,425,597 5,383,444
Less accumulated depreciation.................... 2,783,027 2,716,713
---------- ----------
2,642,570 2,666,731
---------- ----------
OTHER ASSETS..................................... 52,313 55,202
---------- ----------
TOTAL ASSETS..................................... $3,276,672 $3,234,502
========== ==========
</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,
1996 1995
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Debt maturing within one year:
Note payable to affiliate..................... $ --- $ 53,590
Other......................................... 2,040 2,033
Accounts payable and accrued liabilities:
Affiliates.................................... 173,709 174,113
Other......................................... 341,394 328,352
Advance billings and customer deposits.......... 77,444 68,055
---------- ----------
594,587 626,143
---------- ----------
LONG-TERM DEBT.................................. 946,554 946,730
---------- ----------
EMPLOYEE BENEFIT OBLIGATIONS.................... 417,290 411,942
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes........................... 119,322 119,175
Unamortized investment tax credits.............. 23,708 24,810
Other........................................... 60,315 62,388
---------- ----------
203,345 206,373
---------- ----------
SHAREOWNER'S INVESTMENT
Common stock - one share, without par value,
owned by parent................................ 873,685 873,685
Reinvested earnings............................. 241,211 169,629
---------- ----------
1,114,896 1,043,314
---------- ----------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT... $3,276,672 $3,234,502
========== ==========
</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,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES............ $ 201,407 $ 170,314
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments................. (13,200) (16,929)
Additions to plant, property and equipment........... (82,713) (167,957)
Net change in note receivable from affiliate......... (42,716) ---
Other, net........................................... 5,309 95
--------- ---------
Net cash used in investing activities................ (133,320) (184,791)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of capital lease obligations.... (240) (175)
Net change in note payable to affiliate.............. (53,590) 41,938
Dividends paid....................................... (12,246) (51,058)
Net change in outstanding checks drawn
on controlled disbursement accounts................ (2,011) 23,772
--------- ---------
Net cash (used in)/provided by financing activities.. (68,087) 14,477
--------- ---------
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
(Unaudited)
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, 1995 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, 1995.
2. Dividend
On May 1, 1996, the Company declared and paid a dividend in the amount of
$100,220,000 to Bell Atlantic Corporation (Bell Atlantic).
3. Reclassifications
Certain reclassifications of the prior year's data have been made to
conform to 1996 classifications.
4. Subsequent Event - Proposed Bell Atlantic - NYNEX Merger
On April 22, 1996, Bell Atlantic and NYNEX Corporation announced a
proposed merger of equals pursuant to a definitive merger agreement dated April
21, 1996, that provides for the formation of a new company to be named Bell
Atlantic Corporation. Under the terms of the agreement, NYNEX shareholders will
receive one share in the new company for each NYNEX share owned and Bell
Atlantic shareholders will receive 1.302 shares in the new company for each Bell
Atlantic share owned. The merger, which is expected to qualify as a pooling of
interests for accounting purposes, is subject to a number of conditions,
including regulatory approvals, receipt of opinions that the merger will be tax
free, and the approval of the shareholders of both Bell Atlantic and NYNEX. The
transaction is expected to close within 12 months.
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 1996 of
$83,941,000, compared to net income of $75,597,000 for the same period in 1995.
Items affecting the comparison of operating results between the three month
periods ended March 31, 1996 and 1995 are discussed in the following sections.
<TABLE>
<CAPTION>
OPERATING REVENUES
- ------------------
(Dollars in Thousands)
For the Three Month Period Ended March 31 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Transport Services
Local service............................ $209,271 $200,442
Network access........................... 150,552 143,909
Toll service............................. 24,504 24,910
Ancillary Services
Directory publishing..................... 46,269 43,437
Other.................................... 23,753 21,826
Value-added Services....................... 66,102 51,433
-------- --------
Total...................................... $520,451 $485,957
======== ========
<CAPTION>
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
Percentage
1996 1995 Increase
- -------------------------------------------------------------------------
<S> <C> <C> <C>
At March 31
- -----------
Access Lines in Service (In thousands)
Residence................................ 1,934 1,872 3.3%
Business................................. 1,121 1,062 5.6
Public................................... 40 40 --
----- -----
3,095 2,974 4.1
===== =====
For the Three Month Period Ended March 31
- -------------------------------------------
Access Minutes of Use (In millions)
Interstate.............................. 2,762 2,524 9.4
Intrastate.............................. 763 662 15.3
----- -----
3,525 3,186 10.6
===== =====
Toll Messages (In thousands)
Intrastate.............................. 27,563 26,713 3.2
Interstate.............................. 3,633 2,799 29.8
------ ------
31,196 29,512 5.7
====== ======
</TABLE>
6
<PAGE>
Bell Atlantic - Virginia, Inc.
LOCAL SERVICE REVENUES
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $8,829 4.4%
- -------------------------------------------------------------------------
Local service revenues are earned by the Company from the provision of local
exchange, local private line and public telephone services.
Higher network usage increased local service revenues during the first quarter
of 1996. The increase in calling volumes principally resulted from growth in
the number of access lines in service, which increased 4.1% from March 31, 1995.
NETWORK ACCESS REVENUES
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $6,643 4.6%
- -------------------------------------------------------------------------
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 due to higher customer demand for access
services, as reflected by growth in access minutes of use of 10.6% over the same
period in 1995. Revenue growth from volume increases was partially offset by
the net effect of price reductions under the Federal Communications Commission's
(FCC) Price Cap Plans and higher obligations to affiliated companies pursuant to
an interstate revenue sharing agreement.
The net effect of price reductions is expected to have a larger negative
impact on reported revenues, relative to the same period last year, in the
second quarter of 1996. See also "Factors That May Impact Future Results - FCC
Interim Price Cap Plan" below for a discussion of Bell Atlantic's proposed FCC
price cap filing, which would become effective during the third quarter of 1996.
TOLL SERVICE REVENUES
1996-1995 (Decrease)
- -------------------------------------------------------------------------
Three Months $(406) (1.6)%
- -------------------------------------------------------------------------
Toll service revenues are earned from calls made outside a customer's local
calling area, but within the same service area 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 company-initiated price
reductions on certain toll services and increased competition for intraLATA toll
and WATS services. IntraLATA toll competition was introduced in Virginia
beginning on October 1, 1995. These decreases were offset, in part, by increased
network usage, partially attributable to severe winter storms in early 1996.
Toll message volumes increased by 5.7% over the first quarter of 1995.
The Company expects that reductions in toll service revenues will continue in
1996, however, the revenue decline is expected to be less than in 1995. See
"Factors That May Impact Future Results" below for a further discussion of toll
service revenue issues.
7
<PAGE>
Bell Atlantic - Virginia, Inc.
DIRECTORY PUBLISHING REVENUES
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $2,832 6.5%
- -------------------------------------------------------------------------
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 principally due to higher rates
charged for these services. Volume growth continues to be negatively impacted
by competition from other directory companies, as well as other advertising
media.
OTHER ANCILLARY SERVICES REVENUES
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $1,927 8.8%
- -------------------------------------------------------------------------
Other ancillary services include billing and collection services provided to
IXCs, facilities rental services provided to affiliates and non-affiliates and
sales of materials and supplies to affiliates.
Other ancillary services revenues increased due to higher facilities rental
revenues from non-affiliates and higher sales of materials and supplies to
affiliates. These increases were partially offset by a reduction in billing and
collection services revenues, primarily as a result of the elimination of
certain services from a contract with an IXC.
VALUE-ADDED SERVICES REVENUES
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $14,669 28.5%
- -------------------------------------------------------------------------
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 other customer premises wiring and
maintenance services.
The increase in value-added services revenues was primarily attributable to
continued growth in the network customer base and higher demand for certain
central office and voice messaging services. An increase in government contract
billing for customer premises services and equipment also contributed to revenue
growth in the first quarter of 1996.
8
<PAGE>
Bell Atlantic - Virginia, Inc.
<TABLE>
<CAPTION>
OPERATING EXPENSES
- ------------------
(Dollars in Thousands)
For the Three Month Period Ended March 31 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Employee costs, including benefits and taxes.. $ 88,855 $ 96,443
Depreciation and amortization................. 101,519 99,190
Other operating expenses...................... 177,999 150,201
-------- --------
Total......................................... $368,373 $345,834
======== ========
</TABLE>
EMPLOYEE COSTS
1996-1995 (Decrease)
- -------------------------------------------------------------------------
Three Months $(7,588) (7.9)%
- -------------------------------------------------------------------------
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 attributable to savings associated with
employees who left the Company during 1995 and the effect of employees
transferred from the Company to NSI in December 1995. These reductions were
partially offset by annual salary and wage increases, as well as increased
overtime pay and repair and maintenance activity principally attributable to
unusually severe weather conditions in the first quarter of 1996.
DEPRECIATION AND AMORTIZATION
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $2,329 2.3%
- -------------------------------------------------------------------------
Depreciation and amortization increased due to growth in depreciable telephone
plant. This increase was partially offset by the effect of lower depreciation
rates. The composite depreciation rate was 7.7% for the first quarter of 1996,
compared to 7.9% for the three month period ended March 31, 1995.
OTHER OPERATING EXPENSES
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $27,798 18.5%
- -------------------------------------------------------------------------
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 largely attributable to higher
centralized services expenses allocated from NSI. This increase was due, in
part, to higher employee costs incurred in that organization as a result of the
transfer of employees from the network services subsidiaries to NSI in December
1995. Additional operating costs incurred to enhance billing and operating
systems, consolidate work activities and market value-added services also
contributed to the increase in centralized services expenses. First quarter
1996 other operating expenses were also higher due to the timing of network
software purchases.
9
<PAGE>
Bell Atlantic - Virginia, Inc.
OTHER EXPENSE, NET
1996-1995 (Decrease)
- -------------------------------------------------------------------------
Three Months $(414)
- -------------------------------------------------------------------------
The change in other expense, net was attributable to additional interest
income related to a note receivable from an affiliate.
INTEREST EXPENSE
1996-1995 (Decrease)
- -------------------------------------------------------------------------
Three Months $(509) (3.1)%
- -------------------------------------------------------------------------
Interest expense decreased principally due to the effect of lower levels of
average short-term debt in the first quarter of 1996.
PROVISION FOR INCOME TAXES
1996-1995 Increase
- -------------------------------------------------------------------------
Three Months $4,534 9.7%
- -------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATES
For the Three Months Ended March 31
- -------------------------------------------------------------------------
1996 37.9%
- -------------------------------------------------------------------------
1995 38.2%
- -------------------------------------------------------------------------
The Company's effective income tax rate was lower in the first quarter of 1996
as a result of a prior period tax true-up of deferred taxes.
FACTORS THAT MAY IMPACT FUTURE RESULTS
- --------------------------------------
Federal Legislation
The Telecommunications Act of 1996 (the Act) became effective on February 8,
1996 and replaces the Modification of Final Judgment (MFJ). In general, the Act
includes provisions that would open the Company's local exchange market 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. 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
promulgated thereunder. The following is a brief discussion regarding certain
provisions of the Act.
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.
In addition, Bell Atlantic's wireless businesses are now permitted to offer
interLATA services without having to comply with the conditions imposed in
waivers granted under the MFJ.
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.
10
<PAGE>
Bell Atlantic - Virginia, Inc.
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 at any technically
feasible point; (ii) provide unbundled access to network elements at any
technically feasible point; (iii) provide retail services at wholesale prices
for resale; (iv) establish reciprocal compensation arrangements for the
origination and termination of telecommunications; and (v) provide physical
collocation.
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 markets 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 service 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 another
carrier 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.
In Virginia, the Virginia State Corporation Commission (SCC) issued an order
on July 24, 1995 denying intraLATA toll presubscription.
Local Exchange Services
The ability to offer local exchange services has historically been subject to
regulation by the SCC. On April 30, 1996, MFS Intelenet of Virginia and MCI
Metro were certified by the SCC to provide local exchange services in Virginia,
pending SCC approval of their tariffs. Applications from other competitors to
provide local exchange services are currently pending. 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.
FCC Interim Price Cap Plan
On April 2, 1996, Bell Atlantic filed its Annual Access Tariff Filing of
Interstate Rates, as required by the FCC's Interim Price Cap Plan. In the
filing, Bell Atlantic selected the 5.3% Productivity Factor for the July 1996 to
June 1997 tariff period. Companies selecting the 5.3% Productivity Factor are
not required to share earnings in excess of allowed rates of return. The
reduction in the price cap index resulting from the 5.3% Productivity Factor was
more than offset by the reversal of prior year exogenous rate reductions and the
FCC's partial annulment of ratemaking requirements related to the Company's
adoption of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The rates included
in the April 2, 1996 filing propose actual price increases for the Company
totaling approximately $2,600,000 on an annual basis, which would become
effective July 1, 1996.
In 1995, Bell Atlantic filed an appeal with the Court of Appeals for the D.C.
Circuit for review of the FCC's Interim Price Cap Plan. On March 29, 1996, the
U.S. Court of Appeals denied Bell Atlantic's petition.
By the end of 1996, Bell Atlantic expects the FCC to replace the Interim Price
Cap Plan for interstate access charges with a revised price cap plan.
11
<PAGE>
Bell Atlantic - Virginia, Inc.
Other State Regulatory Matters
The communications services of the Company are subject to regulation by the
SCC with respect to intrastate rates and services and certain other matters.
Under legislation passed in the 1993 session of the Virginia General Assembly,
the SCC is no longer statutorily required to regulate telephone companies on the
basis of rate of return regulation. In February 1994, the Company filed a
proposal to have its non-competitive services regulated on a price cap basis;
competitive services would not be regulated.
Following public hearings, the SCC approved a new optional regulatory plan,
effective January 1, 1995, which allows the Company to replace traditional cost-
based regulation with a plan that relies on price constraints. The new plan,
which eliminates regulation of profits, includes a temporary moratorium on rate
increases for basic local telephone service until 2001, eliminates the monthly
charge for Touch-Tone service and expands universal telephone service to the
poor. In November 1994, the Company notified the SCC of its election to
participate in the new regulatory plan. Following an appeal, the new plan was
upheld by the Virginia Supreme Court.
The Company has filed financial results with the SCC for the years 1989
through 1994. The SCC issued orders making the Company's rates final and no
longer subject to refund for the years 1989, 1990 and 1991. The SCC has not
completed its review of the Company's 1993 and 1994 financial results.
With respect to the 1992 review period, the SCC staff issued its report in
January 1996 and presented alternative treatment for two issues concerning
expenses to be recognized in 1992. Depending upon the SCC's final ruling on
these issues, the Company could be subject to a refund for the 1992 review
period. The Company plans to fully pursue a favorable decision on these issues.
A final decision by the SCC on the 1992 review period is expected in 1996.
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 Superfund sites for which the Company has been designated as a
potentially responsible party by the U.S. Environmental Protection Agency. Such
designation subjects the Company to potential liability for costs relating to
cleanup of the affected sites. 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.
Subsequent Event - Proposed Bell Atlantic - NYNEX Merger
On April 22, 1996, Bell Atlantic and NYNEX Corporation announced a proposed
merger of equals pursuant to a definitive merger agreement dated April 21, 1996,
that provides for the formation of a new company to be named Bell Atlantic
Corporation. Under the terms of the agreement, NYNEX shareholders will receive
one share in the new company for each NYNEX share owned and Bell Atlantic
shareholders will receive 1.302 shares in the new company for each Bell Atlantic
share owned. The merger, which is expected to qualify as a pooling of interests
for accounting purposes, is subject to a number of conditions, including
regulatory approvals, receipt of opinions that the merger will be tax free, and
the approval of the shareholders of both Bell Atlantic and NYNEX. The
transaction is expected to close within 12 months.
12
<PAGE>
Bell Atlantic - Virginia, Inc.
FINANCIAL CONDITION
- -------------------
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements, including network
expansion and modernization, and payment of dividends. Management expects that
presently foreseeable capital requirements will be financed primarily through
internally generated funds. Additional long-term debt may be needed to fund
development activities and to maintain the Company's capital structure within
management's guidelines.
As of March 31, 1996, the Company had $200,000,000 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 for the issuance of unsecured debt
securities.
The Company's debt ratio was 46.0% at March 31, 1996, compared to 49.0% at
December 31, 1995.
On May 1, 1996, the Company declared and paid a dividend in the amount of
$100,220,000 to Bell Atlantic Corporation.
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, 1995.
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, 1996.
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 8, 1996 By /s/ O. Riley Young, Jr.
-------------------------
O. Riley Young, Jr.
Controller
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MAY 3, 1996.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND THE
BALANCE SHEET AS OF MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 13,200
<RECEIVABLES> 384,518
<ALLOWANCES> 21,238
<INVENTORY> 12,486
<CURRENT-ASSETS> 581,789
<PP&E> 5,425,597
<DEPRECIATION> 2,783,027
<TOTAL-ASSETS> 3,276,672
<CURRENT-LIABILITIES> 594,587
<BONDS> 946,554
0
0
<COMMON> 873,685
<OTHER-SE> 241,211
<TOTAL-LIABILITY-AND-EQUITY> 3,276,672
<SALES> 0
<TOTAL-REVENUES> 520,451
<CGS> 0
<TOTAL-COSTS> 368,373
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,929
<INCOME-PRETAX> 135,196
<INCOME-TAX> 51,255
<INCOME-CONTINUING> 83,941
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,941
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
