<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 1-7757
BELL ATLANTIC - DELAWARE, INC.
A Delaware Corporation I.R.S. Employer Identification No. 23-0523775
901 Tatnall Street, Wilmington, Delaware 19801
Telephone Number (302) 576-5420
---------------
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 - Delaware, 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 $3,483
and $1,275 to affiliates)................ $62,870 $64,952
------- -------
OPERATING EXPENSES
Employee costs, including benefits
and taxes.............................. 14,170 14,211
Depreciation and amortization........... 14,651 10,556
Other (including $12,327
and $11,880 to affiliates)............. 18,327 19,640
------- -------
47,148 44,407
------- -------
OPERATING INCOME.......................... 15,722 20,545
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used
during construction.................... --- 81
Other, net (including $0
and $14 from affiliate)................ (100) (82)
------- -------
(100) (1)
INTEREST EXPENSE (including $281
and $47 to affiliate).................... 1,795 1,904
------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES.. 13,827 18,640
PROVISION FOR INCOME TAXES................ 5,553 7,466
------- -------
NET INCOME................................ $ 8,274 $11,174
======= =======
REINVESTED EARNINGS
At beginning of period.................. $16,564 $54,235
Add: net income........................ 8,274 11,174
------- -------
24,838 65,409
Deduct: dividends...................... 11,100 10,060
------- -------
At end of period........................ $13,738 $55,349
======= =======
</TABLE>
See Notes to Financial Statements.
-1-
<PAGE>
Bell Atlantic - Delaware, Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
CURRENT ASSETS
Short-term investments................ $ 2,201 $ ---
Accounts receivable:
Customers and agents, net of
allowances for uncollectibles of
$3,032 and $2,768................... 33,790 32,925
Affiliates........................... 4,381 4,403
Other................................ 1,973 974
Material and supplies................. 2,984 1,581
Prepaid expenses...................... 10,538 11,513
Deferred income taxes................. 1,929 1,802
Other................................. 265 611
-------- --------
58,061 53,809
-------- --------
PLANT, PROPERTY AND EQUIPMENT........... 714,811 688,509
Less accumulated depreciation......... 351,196 339,173
-------- --------
363,615 349,336
-------- --------
OTHER ASSETS............................ 3,241 12,532
-------- --------
TOTAL ASSETS............................ $424,917 $415,677
======== ========
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
Bell Atlantic - Delaware, 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................... $ 22,702 $ 12,038
Accounts payable:
Affiliates.................................. 23,794 24,150
Other....................................... 20,030 34,116
Accrued expenses:
Taxes....................................... 12,250 1,648
Other....................................... 13,089 10,985
Advance billings and customer deposits....... 13,378 11,976
-------- --------
105,243 94,913
-------- --------
LONG-TERM DEBT................................. 101,129 101,123
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS................... 50,423 49,632
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes........................ 14,247 15,256
Unamortized investment tax credits........... 4,023 4,193
Other........................................ 17,672 15,554
-------- --------
35,942 35,003
-------- --------
SHAREOWNER'S INVESTMENT
Common stock, $25 par value per share........ 118,442 118,442
Authorized shares: 5,262,280
Outstanding shares: 4,737,686
Reinvested earnings.......................... 13,738 16,564
-------- --------
132,180 135,006
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $424,917 $415,677
======== ========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
Bell Atlantic - Delaware, 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 ........ $35,334 $16,113
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments............ (2,201) ---
Additions to plant, property and equipment...... (28,919) (7,388)
Other, net...................................... (222) 58
------- -------
Net cash used in investing activities............. (31,342) (7,330)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in note payable to affiliate......... 10,664 (351)
Dividends paid.................................. (11,100) (10,060)
Net change in outstanding checks drawn
on controlled disbursement accounts........... (3,556) 1,315
------- -------
Net cash used in financing activities............. (3,992) (9,096)
------- -------
NET CHANGE IN CASH ............................... --- (313)
CASH, BEGINNING OF PERIOD ........................ --- 313
------- -------
CASH, END OF PERIOD .............................. $ --- $ ---
======= =======
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
Bell Atlantic - Delaware, Inc.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared by
Bell Atlantic - Delaware, 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
$7,000,000 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 - Delaware, 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 $8,274,000,
compared to net income of $11,174,000 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.
<TABLE>
<CAPTION>
OPERATING REVENUES
- ------------------
For the Three Months Ended March 31 1995 1994
- -----------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C>
Transport Services
Local service $24,292 $23,330
Network access 14,219 15,972
Toll service 7,794 9,711
Ancillary Services
Directory advertising 8,085 7,540
Other 804 1,161
Value-added Services 7,676 7,238
------- -------
Total $62,870 $64,952
======= =======
</TABLE>
<TABLE>
<CAPTION>
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
Percentage
Increase
1995 1994 (Decrease)
- -----------------------------------------------------------------
<S> <C> <C> <C>
At March 31
- -----------
Access Lines in Service (In thousands)
Residence 308 300 2.7%
Business 165 157 5.1
Public 6 6 -
--- ---
479 463 3.5
=== ===
For the Three Month Period Ended March 31
- -----------------------------------------
Access Minutes of Use (In millions)
Interstate 389 358 8.7
Intrastate 13 8 62.5
--- ---
402 366 9.8
=== ===
Toll Messages (In thousands)
Intrastate 7,786 8,202 (5.1)
Interstate 6,166 6,402 (3.7)
----- -----
13,952 14,604 (4.5)
====== ======
</TABLE>
-6-
<PAGE>
Bell Atlantic - Delaware, Inc.
LOCAL SERVICE REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 962 4.1%
================================================================================
Local service revenues are earned by the Company from the provision of local
exchange, local private line and public telephone services.
Local service revenues increased in 1995 due primarily to a 3.5% 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
Dollars in Thousands (Decrease)
================================================================================
Three Months $(1,753) (11.0)%
================================================================================
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 decreased in 1995 due to the effect of price
reductions and the recognition of the Company's obligations under the Federal
Communications Commission's (FCC) current price cap order. See "Competitive and
Regulatory Environment - Federal Regulation" for a discussion of FCC interstate
access revenue issues. Also contributing to the decrease was lower revenues
recognized through an interstate revenue sharing agreement with affiliated
companies. Bell Atlantic made certain modifications to the calculation of the
Company's portion of the interstate revenue sharing arrangement with affiliated
companies, effective January 1, 1995. This change is expected to reduce network
access revenues by approximately $12 million annually.
Higher customer demand for access services as reflected by a 9.8% growth in
access minutes of use, as well as growth in revenues from end-user charges
attributable to increasing access lines in service and increased demand for
digital data transport services partially offset these decreases. Reported
growth in access minutes of use and revenues was negatively impacted by storm-
related calling volumes experienced in the first quarter of 1994.
TOLL SERVICE REVENUES
Dollars in Thousands (Decrease)
================================================================================
Three Months $(1,917) (19.7)%
================================================================================
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).
The decrease in toll service revenues was caused by price reductions on
certain toll services and a decline of 4.5% in toll message volumes. The
decline in toll message volumes was due to the effect of storm-driven usage
experienced in the first quarter of 1994 and increased competition for intraLATA
toll and WATS services. The Company expects that competition will continue to
negatively impact toll service revenues in 1995, relative to 1994 levels.
-7-
<PAGE>
Bell Atlantic - Delaware, Inc.
DIRECTORY ADVERTISING REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 545 7.2%
================================================================================
Directory advertising revenues are earned primarily from local advertising and
marketing services provided to businesses in White and Yellow Page directories.
Other directory advertising services include database and foreign directory
marketing.
Growth in directory advertising revenues was principally due to higher rates
charged for these services. Volume growth continues to be impacted by
competition from other directory companies, as well as other advertising media.
OTHER ANCILLARY SERVICES REVENUES
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (357) (30.7)%
================================================================================
Other ancillary services include billing and collection services provided to
IXCs, and facilities rental services provided to affiliates and non-affiliates.
Other ancillary services revenues decreased principally due to a decline in
rental revenues from non-affiliates.
VALUE-ADDED SERVICES REVENUES
Dollars in Thousands Increase
================================================================================
Three Months $ 438 6.1%
================================================================================
Value-added services represent a family of enhanced services including Call
Waiting, Return Call, Caller ID, Answer Call, and Voice Mail. These services
also include customer premises services such as inside wire installation and
maintenance and other central office services and features.
Continued growth in the network customer base (access lines) and higher demand
by residence customers for value-added central office and voice messaging
services increased value-added services revenues in the first quarter of 1995.
Increased demand and higher rates for optional wire maintenance services also
contributed to the increase in value-added services revenues.
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 $14,170 $14,211
Depreciation and amortization 14,651 10,556
Other operating expenses 18,327 19,640
------- -------
Total $47,148 $44,407
======= =======
</TABLE>
EMPLOYEE COSTS
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (41) (.3)%
================================================================================
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
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<PAGE>
Bell Atlantic - Delaware, Inc.
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. 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
Dollars in Thousands Increase
================================================================================
Three Months $ 4,095 38.8%
================================================================================
Depreciation and amortization increased due to the effects of higher rates of
depreciation and growth in depreciable telephone plant. The higher depreciation
rates resulted principally from the discontinued application of regulatory
accounting principles, effective August 1, 1994. The composite depreciation
rate was 8.6% 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
Dollars in Thousands (Decrease)
================================================================================
Three Months $(1,313) (6.7)%
================================================================================
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 decrease in other operating expenses was largely attributable to lower
contracted services and the effect of the severe winter storms in the first
quarter of 1994. A decrease in the provision for uncollectible accounts
receivable also contributed to the lower other operating expense in the first
quarter of 1995.
These decreases were partially offset by 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.
OTHER INCOME AND (EXPENSE), NET
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (99)
================================================================================
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.
-9-
<PAGE>
Bell Atlantic - Delaware, Inc.
INTEREST EXPENSE
Dollars in Thousands (Decrease)
================================================================================
Three Months $ (109) (5.7)%
================================================================================
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 levels of average short-term debt and higher
interest rates in the first quarter of 1995.
PROVISION FOR INCOME TAXES
Dollars in Thousands (Decrease)
================================================================================
Three Months $(1,913) (25.6)%
================================================================================
EFFECTIVE INCOME TAX RATES
For the Three Months Ended March 31
================================================================================
1995 40.2%
================================================================================
1994 40.1%
================================================================================
The Company's effective income tax rate was slightly higher in the first
quarter of 1995 due principally to the effect of the reduction in the
amortization of investment tax credits 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 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
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<PAGE>
Bell Atlantic - Delaware, Inc.
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.
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 $8,700,000 on an annual basis. These price
decreases include the scheduled expiration of a temporary rate increase of
approximately $2,800,000 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 $5,900,000 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.
-11-
<PAGE>
Bell Atlantic - Delaware, Inc.
State Regulation
The communications services of the Company are subject to regulation by the
Delaware Public Service Commission (the PSC) with respect to intrastate rates
and services and other matters.
In March 1994, the Company elected to be regulated under the
Telecommunications Technology Investment Act (the Act) pursuant to which the
prices of competitive services will not be tariffed, price increases for
discretionary services will be limited to 15% annually, basic local service rate
increases will be limited to inflation minus 3%, and profits will not be
regulated.
The PSC has initiated a rulemaking docket to develop regulations for the
implementation of the Act. Public hearings were held in March 1995, with a PSC
decision expected during the third quarter of 1995.
The PSC is currently conducting a proceeding to examine issues regarding
intrastate intraLATA toll competition, including whether to authorize
presubscription and dialing parity ("1+ dialing") for intrastate toll
competitors, and if so, under what terms and conditions. Currently, intraLATA
toll calls default to the Company unless the customer dials a five-digit access
code to use an alternate carrier. Presubscription would enable customers to
make intrastate intraLATA toll calls using the carrier of their choice without
having to dial a five-digit access code. The Company's ability to offset such
competition will depend, in part, upon the terms and conditions under which
presubscription for intrastate intraLATA toll services may be authorized.
Management believes that intrastate presubscription, if implemented without
adequate compensation and regulatory relief, could have a material effect on the
Company's financial condition and results of operations. A decision on this
proceeding is expected in the second quarter of 1995.
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 Superfund sites for which the Company has been designated as a
potentially responsible party by the U.S. Environmental Protection Agency or
joined as a third-party defendant in pending Superfund litigation. Such
designation or joinder 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 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.
As of March 31, 1995, the Company had $17,300,000 of an unused line of credit
with an affiliate, Bell Atlantic Network Funding Corporation.
The Company's debt ratio was 48.4% at March 31, 1995, compared to 45.6% at
December 31, 1994.
-12-
<PAGE>
Bell Atlantic - Delaware, 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.
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<PAGE>
Bell Atlantic - Delaware, 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 - DELAWARE, INC.
Date: May 11, 1995 By /s/ John J. Parker
--------------------------------------
John J. Parker
Controller and Treasurer
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MAY 8, 1995.
-14-
<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, 1995 AND THE
BALANCE SHEET AS OF MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 0
<SECURITIES> 2,201
<RECEIVABLES> 36,822
<ALLOWANCES> 3,032
<INVENTORY> 2,984
<CURRENT-ASSETS> 58,061
<PP&E> 714,811
<DEPRECIATION> 351,196
<TOTAL-ASSETS> 424,917
<CURRENT-LIABILITIES> 105,243
<BONDS> 101,129
<COMMON> 118,442
0
0
<OTHER-SE> 13,738
<TOTAL-LIABILITY-AND-EQUITY> 424,917
<SALES> 0
<TOTAL-REVENUES> 62,870
<CGS> 0
<TOTAL-COSTS> 47,148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,795
<INCOME-PRETAX> 13,827
<INCOME-TAX> 5,553
<INCOME-CONTINUING> 8,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,274
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
