<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 1-3488
BELL ATLANTIC - NEW JERSEY, INC.
A New Jersey Corporation I.R.S. Employer Identification No. 22-1151770
540 Broad Street, Newark, New Jersey 07101
Telephone Number (201) 649-9900
----------------
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 - New Jersey, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF OPERATIONS AND REINVESTED EARNINGS
(Unaudited)
(Dollars in Millions)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATING REVENUES (including $21.1
and $14.4 from affiliates)............... $847.7 $843.1
------ ------
OPERATING EXPENSES
Employee costs, including benefits
and taxes.............................. 188.6 199.1
Depreciation and amortization........... 166.0 150.4
Other (including $153.6
and $147.4 to affiliates).............. 258.7 284.1
------ ------
613.3 633.6
------ ------
OPERATING INCOME.......................... 234.4 209.5
OTHER INCOME AND (EXPENSE), NET
Allowance for funds used
during construction.................... --- 3.5
Other, net (including $0
and $.1 from affiliate)................ (1.0) (1.8)
------ ------
(1.0) 1.7
INTEREST EXPENSE (including $2.3
and $.8 to affiliate).................... 20.7 26.9
------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY ITEM................... 212.7 184.3
PROVISION FOR INCOME TAXES................ 73.6 57.2
------ ------
INCOME BEFORE EXTRAORDINARY ITEM.......... 139.1 127.1
EXTRAORDINARY ITEM
Early Extinguishment of Debt,
Net of Tax.............................. --- (6.7)
------ ------
NET INCOME................................ $139.1 $120.4
====== ======
REINVESTED EARNINGS
At beginning of period.................. $174.8 $750.1
Add: net income........................ 139.1 120.4
------ ------
313.9 870.5
Deduct: dividends...................... 108.0 91.7
------ ------
At end of period........................ $205.9 $778.8
====== ======
</TABLE>
See Notes to Financial Statements.
-1-
<PAGE>
Bell Atlantic - New Jersey, Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Millions)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
CURRENT ASSETS
Short-term investments......................... $ 32.2 $ ---
Accounts receivable:
Customers and agents, net of allowances for
uncollectibles of $61.7 and $51.4........... 487.5 577.8
Affiliates................................... 16.6 17.7
Other........................................ 29.1 28.4
Material and supplies.......................... 15.3 9.9
Prepaid expenses............................... 170.9 192.6
Deferred income taxes.......................... 24.8 24.5
Other.......................................... 7.8 5.8
-------- --------
784.2 856.7
-------- --------
PLANT, PROPERTY AND EQUIPMENT.................... 8,809.5 8,697.3
Less accumulated depreciation.................. 4,670.8 4,555.7
-------- --------
4,138.7 4,141.6
-------- --------
OTHER ASSETS..................................... 86.9 54.8
-------- --------
TOTAL ASSETS..................................... $5,009.8 $5,053.1
======== ========
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
Bell Atlantic - New Jersey, Inc.
BALANCE SHEETS
(Unaudited)
(Dollars in Millions)
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................... $ 102.9 $ 117.4
Other....................................... 29.4 29.3
Accounts payable:
Affiliates.................................. 240.3 246.8
Other....................................... 206.3 321.7
Accrued expenses:
Taxes....................................... 84.5 20.4
Other....................................... 157.8 140.7
Advance billings and customer deposits....... 137.1 151.4
-------- --------
958.3 1,027.7
-------- --------
LONG-TERM DEBT................................. 1,300.2 1,301.3
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS................... 829.6 821.3
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes........................ 43.8 48.1
Unamortized investment tax credits........... 44.9 46.6
Other........................................ 245.9 252.1
-------- --------
334.6 346.8
-------- --------
SHAREOWNER'S INVESTMENT
Common stock-one share, without par value,
owned by parent............................. 1,381.2 1,381.2
Reinvested earnings.......................... 205.9 174.8
-------- --------
1,587.1 1,556.0
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT.. $5,009.8 $5,053.1
======== ========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
Bell Atlantic - New Jersey, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Millions)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1995 1994
------- -------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES ........ $ 352.6 $ 139.5
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in short-term investments.......... (32.2) ---
Additions to plant, property and equipment.... (162.1) (92.9)
Net change in note receivable from affiliate.. --- 9.4
Other, net.................................... .1 (.8)
------- -------
Net cash used in investing activities........... (194.2) (84.3)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings...................... --- 249.5
Principal repayments of capital lease
obligations.................................. (1.0) (.9)
Early extinguishment of debt.................. --- (350.0)
Net change in note payable to affiliate....... (14.5) 170.1
Dividends paid................................ (108.0) (91.7)
Net change in outstanding checks drawn
on controlled disbursement accounts.......... (34.9) (22.0)
------- -------
Net cash used in financing activities........... (158.4) (45.0)
------- -------
NET CHANGE IN CASH .............................. --- 10.2
CASH, BEGINNING OF PERIOD ....................... --- ---
------- -------
CASH, END OF PERIOD ............................. $ --- $ 10.2
======= =======
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
Bell Atlantic - New Jersey, Inc.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying financial statements are unaudited and have been prepared
by Bell Atlantic - New Jersey, 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
$128.0 million 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 - New Jersey, 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 $139.1
million, compared to net income of $120.4 million 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 Millions)
<S> <C> <C>
Transport Services
Local service $210.6 $204.6
Network access 232.2 222.8
Toll service 175.6 192.5
Ancillary Services
Directory advertising 86.2 86.3
Other 35.8 36.0
Value-added Services 107.3 100.9
------ ------
Total $847.7 $843.1
====== ======
</TABLE>
<TABLE>
<CAPTION>
TRANSPORT SERVICES OPERATING STATISTICS
- ---------------------------------------
Percentage
Increase
1995 1994 (Decrease)
------ ------ ----------
<C> <C> <C>
<S>
At March 31
- -----------
Access Lines in Service (In thousands)
Residence 3,541 3,471 2.0%
Business 1,743 1,657 5.2
Public 95 96 (1.0)
------ ------
5,379 5,224 3.0
====== ======
For the Three Month Period Ended March 31
- -----------------------------------------
Access Minutes of Use (In millions)
Interstate 4,555 4,328 5.2
Intrastate 1,122 937 19.7
------ ------
5,677 5,265 7.8
====== ======
Toll Messages (In millions)
Intrastate 526 563 (6.6)
Interstate 16 20 (20.0)
------ ------
542 583 (7.0)
====== ======
</TABLE>
-6-
<PAGE>
Bell Atlantic - New Jersey, Inc.
LOCAL SERVICE REVENUES
Dollars in Millions Increase
================================================================================
Three Months $ 6.0 2.9%
================================================================================
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 3.0% 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 lower directory assistance
volumes and the effect of storm-driven usage experienced in the first quarter of
1994.
NETWORK ACCESS REVENUES
Dollars in Millions Increase
================================================================================
Three Months $ 9.4 4.2%
================================================================================
Network access revenues are received from interexchange carriers (IXCs) for
their use of the Company's local exchange facilities in providing long-distance
services to IXCs' customers and from end-user subscribers. Switched access
service revenues are derived from usage-based charges paid by IXCs for access to
the Company's network. Special access revenues arise from access charges paid
by IXCs and end-users who have private networks, and end-user access revenues
are earned from local exchange carrier customers who pay for access to the
network.
Network access revenues increased in 1995 principally due to higher
customer demand for access services as reflected by a 7.8% growth in access
minutes of use, as well as growth in revenues from end-user charges attributable
to increasing access lines in service. Increased demand for digital data
transport services also contributed to growth in access revenues. Revenues were
further increased by higher revenues recognized through an interstate revenue
sharing agreement with affiliated companies. Reported growth in access minutes
of use and revenues was negatively impacted by storm-related calling volumes
experienced in the first quarter of 1994. Volume-related revenue increases were
partially offset by the effect of price reductions 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.
TOLL SERVICE REVENUES
Dollars in Millions (Decrease)
================================================================================
Three Months $(16.9) (8.8)%
================================================================================
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, Wide
Area Telephone Service (WATS) and corridor services (between southern New Jersey
and Philadelphia and northern New Jersey and New York City).
The decrease in toll service revenues was caused by a decline of 7.0% in
toll message volumes and price reductions on certain toll services. 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, WATS
and corridor services. Beginning in July 1994, IXCs were permitted to compete
for intraLATA toll services on an access code basis. The Company expects that
competition will continue to negatively impact toll service revenues in 1995,
relative to 1994 levels.
-7-
<PAGE>
Bell Atlantic - New Jersey, Inc.
DIRECTORY ADVERTISING REVENUES
Dollars in Millions (Decrease)
================================================================================
Three Months $ (0.1) (0.1)%
================================================================================
Directory advertising revenues are earned primarily from local advertising
and marketing services provided to businesses in White and Yellow Pages
directories. Other directory advertising services include database and foreign
directory marketing.
Directory advertising revenues declined slightly in 1995. Increased
revenues due to higher rates charged for the services were more than offset by a
decrease in volume due to competition from other directory companies, as well as
other advertising media.
OTHER ANCILLARY SERVICES REVENUES
Dollars in Millions (Decrease)
================================================================================
Three Months $ (0.2) (0.6)%
================================================================================
Other ancillary services include billing and collection services provided
to IXCs, and facilities rental services provided to affiliates and non-
affiliates.
Other ancillary services decreased due primarily to a reduction in
intraLATA toll compensation, which ceased July 1, 1994 with the commencement of
intraLATA toll competition. An increase in facilities rental revenues from
affiliates partially offset this decrease.
VALUE-ADDED SERVICES REVENUES
Dollars in Millions Increase
================================================================================
Three Months $ 6.4 6.3%
================================================================================
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 offered by the Company increased value-added services revenues in the
first quarter of 1995.
<TABLE>
<CAPTION>
OPERATING EXPENSES
- ------------------
For the Three Months Ended March 31 1995 1994
- ---------------------------------------------------------------------
(Dollars in Millions)
<S> <C> <C>
Employee costs, including benefits and taxes $188.6 $199.1
Depreciation and amortization 166.0 150.4
Other operating expenses 258.7 284.1
------ ------
Total $613.3 $633.6
====== ======
</TABLE>
-8-
<PAGE>
Bell Atlantic - New Jersey, Inc.
EMPLOYEE COSTS
Dollars in Millions (Decrease)
================================================================================
Three Months $(10.5) (5.3)%
================================================================================
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 services on a contract basis, are allocated to the Company and are
included in other operating expenses.
The decline in employee costs was principally due to a decrease in overtime
pay and repair and maintenance activity, both of which were higher in the first
quarter of 1994 as a result of unusually severe weather conditions. The effect
of lower workforce levels also contributed to the overall decrease in employee
costs. These reductions were partially offset by annual salary and wage
increases for management and associate employees, effective April and August
1994, respectively. Associate employee wage increases were determined under
contracts ratified in October 1992 by unions representing associate employees of
the Company. Such contracts will expire in August 1995.
DEPRECIATION AND AMORTIZATION
Dollars in Millions Increase
================================================================================
Three Months $ 15.6 10.4%
================================================================================
Depreciation and amortization increased due to higher depreciation rates
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 7.9%
for the first quarter of 1995. The Company expects this composite depreciation
rate to remain substantially unchanged for the remainder of 1995.
OTHER OPERATING EXPENSE
Dollars in Millions (Decrease)
================================================================================
Three Months $(25.4) (8.9)%
================================================================================
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.
Other operating expenses decreased due to a reduction in uncollectible
accounts receivable associated with fraudulent calling card toll calls, as
compared to the same period in 1994. Other operating expenses were further
reduced by the effect of the severe winter storms in the first quarter of 1994,
lower network software costs due to the timing of purchases, and a decrease in
directory production costs.
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.
-9-
<PAGE>
Bell Atlantic - New Jersey, Inc.
OTHER INCOME AND (EXPENSE), NET
Dollars in Millions (Decrease)
================================================================================
Three Months $ (2.7)
================================================================================
The change in other income and (expense), net was largely attributable to a
reduction in income related to the allowance for funds used during construction.
Upon the discontinued application of regulatory accounting principles,
effective August 1, 1994, the Company began recognizing capitalized interest
costs as a reduction of interest expense. Previously, the Company recorded an
allowance for funds used during construction as an item of other income.
INTEREST EXPENSE
Dollars in Millions (Decrease)
================================================================================
Three Months $ (6.2) (23.0)%
================================================================================
Interest expense decreased principally due to the recognition of
capitalized interest costs, subsequent to the discontinued application of
regulatory accounting principles. Also contributing to the decrease was the
effect of a long-term debt refinancing completed in the first quarter of 1994.
Partially offsetting these decreases 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 Millions Increase
================================================================================
Three Months $ 16.4 28.7%
================================================================================
EFFECTIVE INCOME TAX RATES
For the Three Months Ended March 31
================================================================================
1995 34.6%
- --------------------------------------------------------------------------------
1994 31.0%
================================================================================
The Company's effective income tax rate was higher in the first quarter of
1995 due principally to the reduction in the amortization of investment tax
credits and the elimination of the benefit of the rate differential applied to
reversing timing differences as a result of the discontinued application of
regulatory accounting principles in August 1994.
COMPETITIVE AND REGULATORY ENVIRONMENT
- --------------------------------------
The communications industry continues to undergo fundamental changes which
may have a significant impact on future financial performance of
telecommunications companies. These changes are being driven by a number of
factors, including the accelerated pace of technological innovation, the
convergence of the telecommunications, cable television, information services
and entertainment businesses and a regulatory environment in which traditional
barriers are being lowered or eliminated and competition permitted or
encouraged.
The Company's telecommunications business is subject to competition from
numerous sources. An increasing amount of this competition is from companies
that have substantial capital, technological and marketing resources, many of
which do not face the same regulatory constraints as the Company.
-10-
<PAGE>
Bell Atlantic - New Jersey, Inc.
Well-financed competitors are seeking authority, or are likely soon to seek
authority, to offer competing local exchange services, such as dial tone and
local usage, in some of the most lucrative of the Company's local telephone
service areas. In January 1995, MFS-Intelenet filed a petition with the Board
of Public Utilities (BPU) to provide local exchange service in areas served by
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 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
-11-
<PAGE>
Bell Atlantic - New Jersey, Inc.
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 $87.8 million on an annual basis. These price
decreases include the scheduled expiration of a temporary rate increase of
approximately $28.2 million 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 $59.6 million reduction
results from compliance with the Interim Plan. The remaining 20% represents
reductions that the Company was required to make under the prior Price Cap Plan.
It is expected that the earnings impact of these price decreases will be
substantially mitigated by volume increases and cost reductions that result from
improved productivity.
Bell Atlantic has appealed the Orders with the D.C. Circuit Court of
Appeals and has petitioned the FCC for a stay of certain aspects of the Orders
pending the results of the appeals.
State Regulation
The communications services of the Company are subject to regulation by the
BPU with respect to intrastate rates and services and other matters.
The New Jersey Telecommunications Act of 1992 authorized the BPU to adopt
alternative regulatory frameworks to address changes in technology and the
structure of the telecommunications industry and to promote economic
development. It also deregulated services which the BPU found to be
competitive. Pursuant to that legislation, the Company filed a Plan for
Alternative Form of Regulation, which became effective in May 1993.
In May 1994, the BPU approved a settlement of a proceeding addressing
intraLATA toll competition. The settlement permits IXCs to compete for the
provision of intraLATA toll services on an access code basis (e.g., customers
must dial 10XXX to use an IXC), beginning July 1, 1994, and granted the Company
substantial flexibility in the pricing and marketing of the services it offers
to enable it to compete with the IXCs. In January 1995, the BPU commenced a
further proceeding to examine issues of intraLATA toll service competition
including whether presubscription should be authorized, and if so, under what
terms and conditions, and to address the issue of subsidies embodied in the
Company's rates. Presubscription would enable customers to make intraLATA toll
calls using the carrier of their choice without having to dial the five digit
access code. A decision on this proceeding is expected by the end of 1995. The
Company's ability to offset such competition will depend, in part, upon the
terms and conditions under which presubscription of intraLATA toll services may
be authorized.
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 joined as a
third-party defendant in pending Superfund litigation. Such 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
-12-
<PAGE>
Bell Atlantic - New Jersey, Inc.
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 $369.2 million of an unused line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. In
addition, the Company had $50.0 million remaining under a shelf registration
statement filed with the Securities and Exchange Commission.
The Company's debt ratio was 47.4% at March 31, 1995, compared to 48.2% at
December 31, 1994.
-13-
<PAGE>
Bell Atlantic - New Jersey, Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For background concerning the Company's contingent liabilities under
the Plan of Reorganization governing the divestiture by AT&T Corp.
(formerly American Telephone and Telegraph Company) of certain assets
of the former Bell System Operating Companies with respect to private
actions relating to pre-divestiture events, including pending antitrust
cases, see Item 3 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Number
27 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K, filed during the quarter
ended March 31, 1995.
-14-
<PAGE>
Bell Atlantic - New Jersey, 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 - NEW JERSEY, INC.
Date: May 11, 1995 By /s/ Joseph M. Milanowycz
--------------------------------------
Joseph M. Milanowycz
Controller and Treasurer
and Chief Financial Officer
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MAY 8, 1995.
-15-
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<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATMENT
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OF MARCH 31, 1995 AND IS QUALFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
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