<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
---------------------
(Mark one) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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
CONDENSED STATEMENTS OF INCOME AND REINVESTED EARNINGS
(Unaudited)
(Dollars in Millions)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- --------------------
1998 1997 1998 1997
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES (including $3.5, $1.0,
$5.8 and $2.6 from affiliates)........................... $ 542.0 $ 520.5 $ 1,072.8 $ 1,033.1
---------- ---------- --------- ---------
OPERATING EXPENSES
Employee costs, including benefits and taxes........... 83.5 84.3 168.0 167.3
Depreciation and amortization.......................... 110.1 108.3 218.6 214.9
Taxes other than income................................ 14.3 14.0 28.9 28.6
Other (including $132.7, $125.0,
$251.9 and $248.2 to affiliates)..................... 194.7 179.5 370.9 349.7
---------- ---------- --------- ---------
402.6 386.1 786.4 760.5
---------- ---------- --------- ---------
OPERATING INCOME............................................ 139.4 134.4 286.4 272.6
OTHER INCOME, NET........................................... 3.3 1.0 3.6 1.1
INTEREST EXPENSE (including $1.9, $.5,
$2.9 and $.9 to affiliate)............................. 16.1 16.2 32.2 32.3
---------- ---------- --------- ---------
Income Before Provision for Income Taxes.................... 126.6 119.2 257.8 241.4
PROVISION FOR INCOME TAXES.................................. 49.4 44.0 99.8 90.9
---------- ---------- --------- ---------
NET INCOME.................................................. $ 77.2 $ 75.2 $ 158.0 $ 150.5
========== ========== ========= =========
REINVESTED EARNINGS
At beginning of period................................. $ 220.8 $ 222.1 $ 140.0 $ 204.8
Add: net income....................................... 77.2 75.2 158.0 150.5
---------- ---------- --------- ---------
298.0 297.3 298.0 355.3
Deduct: dividends..................................... 73.5 103.8 73.5 149.0
other changes................................. --- .4 --- 13.2
---------- ---------- --------- ---------
At end of period....................................... $ 224.5 $ 193.1 $ 224.5 $ 193.1
========== ========== ========= =========
</TABLE>
See Notes to Condensed Financial Statements.
1
<PAGE>
Bell Atlantic - Virginia, Inc.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in Millions)
ASSETS
------
June 30, December 31,
1998 1997
---------- ------------
CURRENT ASSETS
Short-term investments.............................. $ 18.0 $ 26.0
Accounts receivable:
Trade and other, net of allowances for
uncollectibles of $32.1 and $27.6......... 443.4 436.5
Affiliates..................................... 28.7 29.6
Material and supplies............................... 8.7 15.5
Prepaid expenses.................................... 15.6 8.9
Deferred income taxes............................... --- 3.4
Other............................................... .2 .2
-------- --------
514.6 520.1
-------- --------
PLANT, PROPERTY AND EQUIPMENT....................... 6,223.8 5,957.0
Less accumulated depreciation....................... 3,418.2 3,265.8
-------- --------
2,805.6 2,691.2
-------- --------
OTHER ASSETS........................................ 52.9 70.5
-------- --------
TOTAL ASSETS........................................ $3,373.1 $3,281.8
======== ========
See Notes to Condensed Financial Statements.
2
<PAGE>
Bell Atlantic - Virginia, Inc.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in Millions)
LIABILITIES AND SHAREOWNER'S INVESTMENT
---------------------------------------
June 30, December 31,
1998 1997
---------- ------------
CURRENT LIABILITIES
Debt maturing within one year:
Note payable to affiliate......................... $ 171.0 $ 110.7
Other............................................. 1.3 1.3
Accounts payable and accrued liabilities:
Affiliates........................................ 212.7 226.1
Other............................................. 318.2 343.8
Other liabilities...................................... 65.4 61.8
-------- --------
768.6 743.7
-------- --------
LONG-TERM DEBT......................................... 945.1 945.7
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS........................... 364.9 384.0
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes.................................. 124.5 107.9
Unamortized investment tax credits..................... 15.8 17.1
Other.................................................. 56.0 69.7
-------- --------
196.3 194.7
-------- --------
SHAREOWNER'S INVESTMENT
Common stock - one share, without par value, owned by
parent.............................................. 873.7 873.7
Reinvested earnings.................................... 224.5 140.0
-------- --------
1,098.2 1,013.7
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.......... $3,373.1 $3,281.8
======== ========
See Notes to Condensed Financial Statements.
3
<PAGE>
Bell Atlantic - Virginia, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
Six months ended
June 30,
-------------------------
1998 1997
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......... $ 348.6 $ 389.6
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments............... 8.0 9.3
Additions to plant, property and equipment......... (338.5) (219.9)
Other, net......................................... 5.5 8.8
-------- --------
Net cash used in investing activities.............. (325.0) (201.8)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of capital lease obligations.. (.6) (.5)
Net change in note payable to affiliate............ 60.3 (23.5)
Dividends paid..................................... (73.5) (149.0)
Net change in outstanding checks drawn
on controlled disbursement accounts........... (9.8) (14.8)
-------- --------
Net cash used in financing activities.............. (23.6) (187.8)
-------- --------
NET CHANGE IN CASH................................. --- ---
CASH, BEGINNING OF PERIOD.......................... --- ---
-------- --------
CASH, END OF PERIOD................................ $ --- $ ---
======== ========
See Notes to Condensed Financial Statements.
4
<PAGE>
Bell Atlantic - Virginia, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Bell Atlantic - Virginia, Inc. (the Company) is a wholly owned subsidiary of
Bell Atlantic Corporation (Bell Atlantic). The accompanying unaudited condensed
financial statements have been prepared based upon Securities and Exchange
Commission rules that permit reduced disclosure for interim periods. These
financial statements reflect all adjustments which are necessary for a fair
presentation of results of operations and financial position for the interim
periods shown including normal recurring accruals. The results for the interim
periods are not necessarily indicative of results for the full year. For a more
complete discussion of significant accounting policies and certain other
information, refer to the financial statements included in the Company's 1997
Form 10-K.
The Company has reclassified certain amounts from prior year's data to
conform with the 1998 presentation.
2. Dividend
On August 3, 1998, the Company declared and paid a dividend in the amount of
$73.5 million to Bell Atlantic.
3. Litigation and Other Contingencies
Various legal actions and regulatory proceedings are pending to which the
Company is a party. The Company has established reserves for liabilities in
connection with regulatory and legal matters which it currently deems to be
probable and estimable. The Company does not expect that the ultimate
resolution of these matters in future periods will have a material effect on the
Company's financial position, but it could have a material effect on results of
operations.
4. Recent Accounting Pronouncement
Costs of Computer Software
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," (SOP 98-1). SOP 98-1 provides, among
other things, guidance for determining whether computer software is for internal
use and when the cost related to such software should be expensed as incurred or
capitalized and amortized. SOP 98-1 is required to be adopted no later than
January 1, 1999.
The Company currently capitalizes initial right-to-use fees for central
office switching equipment, including initial operating system and initial
application software costs. For noncentral office equipment, only the initial
operating system software is capitalized. Subsequent additions, modifications,
or upgrades of initial software programs, whether operating or application
packages, are expensed as incurred. The Company is currently evaluating the
provisions of SOP 98-1 and has not yet quantified the effect at this time. The
adoption of SOP 98-1 is expected to result in an increase in earnings in the
year of adoption due to the prospective capitalization of costs which were
previously expensed.
5. Proposed Bell Atlantic - GTE Merger
Bell Atlantic and GTE Corporation (GTE) have announced a proposed merger of
equals under a definitive merger agreement dated as of July 27, 1998. Under the
terms of the agreement, GTE shareholders will receive 1.22 shares of Bell
Atlantic common stock for each share of GTE common stock that they own. Bell
Atlantic shareholders will continue to own their existing shares after the
merger.
It is expected that the merger will qualify as a "pooling of interests,"
which means for accounting and financial reporting purposes the companies will
be treated as if they had always been combined. The completion of the merger is
subject to a number of conditions, including certain regulatory approvals,
receipt of opinions that the merger will be tax free, and the approval of the
shareholders of both Bell Atlantic and GTE. The companies expect to close the
merger in the second half of 1999.
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 of $158.0 million for the six month period
ended June 30, 1998, compared to net income of $150.5 million for the same
period in 1997.
Items affecting the comparison of the Company's results of operations for the
six month periods ended June 30, 1998 and 1997 are discussed in the following
sections. This Management's Discussion and Analysis should also be read in
conjunction with the Company's 1997 Annual Report on Form 10-K.
OPERATING REVENUE STATISTICS
- ----------------------------
1998 1997 % Change
- --------------------------------------------------------------------------------
At June 30
- ----------
Access Lines in Service (in thousands)*
Residence............................. 2,120 2,021 4.9%
Business.............................. 1,326 1,258 5.4
Public................................ 42 42 ---
----- -----
3,488 3,321 5.0
===== =====
Six Month Period Ended June 30
- ------------------------------
Access Minutes of Use (in millions)...... 8,056 7,461 8.0
===== =====
* 1997 reflects a restatement of access lines in service to include Primary Rate
ISDN (Integrated Services Digital Network) channels to conform with the 1998
presentation.
OPERATING REVENUES
- ------------------
(Dollars in Millions)
Six Month Period Ended June 30 1998 1997
- --------------------------------------------------------------------------------
Local services............................. $ 584.8 $ 560.0
Network access services.................... 333.3 318.4
Long distance services..................... 34.9 37.6
Ancillary services......................... 113.6 111.1
Directory and information services......... 6.2 6.0
-------- --------
Total...................................... $1,072.8 $1,033.1
======== ========
6
<PAGE>
Bell Atlantic - Virginia, Inc.
LOCAL SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $24.8 4.4%
- --------------------------------------------------------------------------------
Local services revenues are earned by the Company from the provision of local
exchange, local private line, public telephone (pay phone) and value-added
services. Value-added services are a family of services which expand the
utilization of the network. These services include products such as Caller ID,
Call Waiting and Return Call.
Higher usage of the Company's network facilities was the primary reason for
the increase in local services revenues in the first half of 1998. This growth
was generated by an increase in access lines in service of 5.0% from June 30,
1997. Access line growth reflects primarily higher demand for Centrex services
and an increase in additional residential lines. Higher revenues from private
line and switched data services also contributed to the revenue growth in 1998.
The Company also recognized higher revenues from public telephone and value-
added services. Value-added services revenues grew principally due to higher
customer demand and usage, while price increases for usage of the Company's pay
phones and the implementation of new charges to carriers resulting from pay
phone deregulation in April 1997 were the principal reasons for the improvement
in public telephone services revenues. Revenue growth was partially offset by
the effect of rate reductions on certain local services.
NETWORK ACCESS SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $14.9 4.7%
- --------------------------------------------------------------------------------
Network access services revenues are earned from carriers for their use of
the Company's local exchange facilities in providing usage services to their
customers. In addition, end-user subscribers pay flat rate access fees to
connect to the Company's network.
Network access services revenues grew in the first six months of 1998
primarily as a result of higher customer demand as reflected by growth in access
minutes of use of 8.0% from June 30, 1997. Volume growth was boosted by the
expansion of the business market, particularly for high-capacity services.
Demand for special access services grew as Internet service providers and other
high-capacity users increased their utilization of the Company's network.
Network access revenues were also higher due to the effect of recording amounts
received from other local exchange carriers for terminating calls on the
Company's network in Network Access Services Revenues, beginning in 1998. In
1997, these amounts were recorded in Ancillary Services Revenues. In addition,
higher end-user revenues attributable to an increase in access lines in service
contributed to revenue growth in 1998. These increases were partially offset by
net price reductions mandated by a federal price cap plan.
Effective July 1, 1998, the Company implemented price decreases of
approximately $8 million on an annual basis for interstate services, in
connection with the Federal Communications Commission's (FCC) Price Cap Plan.
The rates included in this 1998 filing will be in effect through June 1999. The
July 1, 1998 rates include amounts necessary to recover the Company's
contribution to the FCC's new universal service fund. The FCC has created a
multi-billion dollar interstate fund to link schools and libraries to the
Internet and to subsidize low-income consumers and rural health care providers.
Under the FCC's rules, all providers of interstate telecommunications services
must contribute to the fund. The Company's contributions to the universal
service fund are included in Other Operating Expenses.
7
<PAGE>
Bell Atlantic - Virginia, Inc.
LONG DISTANCE SERVICES REVENUES
1998 - 1997 (Decrease)
- --------------------------------------------------------------------------------
Six Months $(2.7) (7.2)%
- --------------------------------------------------------------------------------
Long distance services revenues are earned primarily from calls made outside
a customer's local calling area, but within the same service area of the Company
(intraLATA toll). Other long distance services that the Company provides
include 800 services and Wide Area Telephone Service (WATS).
Long distance services revenues declined in the first half of 1998 primarily
due to lower revenues related to the continued expansion of local calling areas
in 1998 and the effects of increased competition for intraLATA toll, WATS and
private line services.
ANCILLARY SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $2.5 2.3%
- --------------------------------------------------------------------------------
The Company provides ancillary services which include billing and collection
services provided to long distance carriers and affiliates, customer premises
equipment (CPE) services, facilities rental services for affiliates and
nonaffiliates, usage of separately priced (unbundled) components of its network,
sales of materials and supplies to affiliates and voice messaging services.
Ancillary services revenues increased in the first six months of 1998
principally due to higher revenues resulting from increased demand by long
distance carriers and affiliates for billing and collection services and
increased market penetration for voice messaging services, principally Home
Voice Mail.
These increases were partially offset by the effect of recording amounts
received from other local exchange carriers for terminating calls on the
Company's network in Network Access Services Revenues, beginning in 1998. In
1997, these amounts were recorded in Ancillary Services Revenues.
DIRECTORY AND INFORMATION SERVICES REVENUES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $.2 3.3%
- --------------------------------------------------------------------------------
Directory and information services revenues are earned primarily from fees
for nonpublication of telephone numbers and multiple white page listings, and
from a contract with an affiliate for usage of the Company's directory listings.
Higher fees received from an affiliate for use of the Company's directory
listings was the principal reason for the increase in directory and information
services revenues in 1998.
8
<PAGE>
Bell Atlantic - Virginia, Inc.
OPERATING EXPENSES
- ------------------
(Dollars in Millions)
Six Month Period Ended June 30 1998 1997
- --------------------------------------------------------------------------------
Employee costs, including benefits and taxes.. $168.0 $167.3
Depreciation and amortization................. 218.6 214.9
Taxes other than income....................... 28.9 28.6
Other operating expenses...................... 370.9 349.7
------ ------
Total......................................... $786.4 $760.5
====== ======
EMPLOYEE COSTS
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $.7 .4%
- --------------------------------------------------------------------------------
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 contractual basis, are allocated to the Company and
are included in Other Operating Expenses.
The increase in employee costs was caused by a combination of annual salary
and wage increases for management and associate employees, the effect of higher
work force levels and an increase in overtime pay. These increases were
substantially offset by lower pension and benefit costs. The reduction in
pension and benefit costs was caused by a number of factors, including changes
in actuarial assumptions, favorable pension plan investment returns and lower
than expected medical claims.
Associate employee wages and pension and other benefits are determined under
a contract with the union representing associate employees of the Company. On
August 11, 1998, the Company and the Communications Workers of America (CWA)
reached a tentative agreement on a new 2-year contract. The contract provides
for wage increases of up to 3.8 percent effective August 9, 1998, and up to 4
percent effective August 8, 1999. Pensions will increase by 11 percent. Union-
represented employees are eligible for standard cash awards of $400 for 1998 and
$500 for 1999, which can be increased or decreased based on financial and
customer care performance results. The new contract also includes other benefit
improvements and certain employment security provisions.
The labor agreement with the CWA is subject to ratification by the union
membership, which is expected within the next 30 days.
DEPRECIATION AND AMORTIZATION
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $3.7 1.7%
- --------------------------------------------------------------------------------
Depreciation and amortization expense increased in the first six months of
1998 over the same period in 1997 principally as a result of growth in
depreciable telephone plant. This expense increase was substantially offset by
the effect of lower rates of depreciation and amortization.
TAXES OTHER THAN INCOME
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $.3 1.0%
- --------------------------------------------------------------------------------
Taxes other than income consist principally of taxes for gross receipts,
property, capital stock and business licenses.
The increase in taxes other than income was primarily due to higher gross
receipts tax resulting from an increase in the revenue tax base and an increase
in the surcharge for Telephone Relay Service resulting from the inclusion of
additional revenue subject to the surcharge. These increases were substantially
offset by lower assessments for property taxes.
9
<PAGE>
Bell Atlantic - Virginia, Inc.
OTHER OPERATING EXPENSES
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $21.2 6.1%
- --------------------------------------------------------------------------------
Other operating expenses consist of contract services including centralized
services expenses allocated from NSI, rent, network software costs, the
provision for uncollectible accounts receivable, and other costs.
The increase in other operating expenses was largely attributable to the
Company's contribution to the federal universal service fund, as described
earlier, and higher costs for network software purchases and materials. An
increase in the provision for uncollectible accounts receivable associated with
the Company's billing and collection services, higher interconnection charges
for terminating calls on the networks of competitive local exchange and other
carriers, and higher centralized services expenses allocated from NSI also
contributed to the increase in other operating expense, but to a lesser degree.
The rise in centralized services expenses was primarily caused by transition and
integration costs allocated to the Company in connection with the merger of Bell
Atlantic and NYNEX Corporation, partially offset by lower pension and benefit
costs incurred by NSI.
These increases were partially offset by lower costs for contract services
due, in part, to the disposition of Bell Atlantic's ownership interest in Bell
Communications Research Inc. (Bellcore) in November 1997. The Company continues
to contract with Bellcore for technical and support services, but to a lesser
extent.
OTHER INCOME, NET
1998 - 1997 Increase
- --------------------------------------------------------------------------------
Six Months $2.5 227.3%
- --------------------------------------------------------------------------------
The change in other income, net, was attributable to the recognition of
interest income in connection with the settlement of tax-related matters.
INTEREST EXPENSE
1998 - 1997 (Decrease)
- --------------------------------------------------------------------------------
Six Months $(.1) (.3)%
- --------------------------------------------------------------------------------
Interest expense decreased in the first six months of 1998 primarily as a
result of higher capitalized interest costs resulting from higher levels of
average telephone plant under construction. A reduction in interest costs
associated with capitalized leases also contributed to the decrease, but to a
lesser extent. These decreases were substantially offset by additional expense
resulting from higher levels of average short-term debt.
EFFECTIVE INCOME TAX RATES
Six Months Ended June 30
- --------------------------------------------------------------------------------
1998 38.7%
- --------------------------------------------------------------------------------
1997 37.7%
- --------------------------------------------------------------------------------
The effective income tax rate is the provision for income taxes as a
percentage of income before the provision for income taxes. The Company's
effective income tax rate was higher in the first six months of 1998 principally
due to higher tax credits recorded in 1997.
10
<PAGE>
Bell Atlantic - Virginia, Inc.
FINANCIAL CONDITION
- -------------------
The Company uses the net cash generated from operations and from external
financing to fund capital expenditures for network expansion and modernization,
and to pay dividends. While current liabilities exceeded current assets at both
June 30, 1998 and 1997 and December 31, 1997, the Company's sources of funds,
primarily from operations and, to the extent necessary, from readily available
financing arrangements with an affiliate, are sufficient to meet ongoing
operating requirements. Management expects that presently foreseeable capital
requirements will continue to be financed primarily through internally generated
funds. Additional long-term debt may be needed to fund development activities or
to maintain the Company's capital structure to ensure financial flexibility.
As of June 30, 1998, the Company had $29.0 million of an unused line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. In
addition, the Company had $100.0 million 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 50.4% as of June 30, 1998, compared to 47.8% as
of June 30, 1997 and 51.1% as of December 31, 1997.
On August 3, 1998, the Company declared and paid a dividend in the amount of
$73.5 million to Bell Atlantic.
11
<PAGE>
Bell Atlantic - Virginia, Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There were no proceedings reportable under this Item.
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 June 30, 1998.
12
<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: August 13, 1998 By /s/ Edwin F. Hall
---------------------------------
Edwin F. Hall
Controller
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF AUGUST 12, 1998.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE BALANCE
SHEET AT JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 475
<ALLOWANCES> 32
<INVENTORY> 29
<CURRENT-ASSETS> 3,373
<PP&E> 6,224
<DEPRECIATION> 3,418
<TOTAL-ASSETS> 3,373
<CURRENT-LIABILITIES> 769
<BONDS> 945
0
0
<COMMON> 874
<OTHER-SE> 224
<TOTAL-LIABILITY-AND-EQUITY> 3,373
<SALES> 0
<TOTAL-REVENUES> 1,073
<CGS> 0
<TOTAL-COSTS> 786
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32
<INCOME-PRETAX> 258
<INCOME-TAX> 100
<INCOME-CONTINUING> 158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
