<PAGE> 1
EXHIBIT 99.1
Unaudited Pro Forma Combined Condensed Financial Statements
The unaudited pro forma financial statements that follow were prepared in
connection with the June 30, 2000 merger of Bell Atlantic Corporation (Bell
Atlantic) and GTE Corporation (GTE) (the Merger). The combined company will be
doing business as Verizon Communications.
The unaudited pro forma combined condensed financial statements are presented
using the pooling of interests method of accounting for the Merger. Under
pooling of interests, the companies are treated as if they had always been
combined for accounting and financial reporting purposes. These unaudited pro
forma financial statements have been prepared from, and should be read in
conjunction with, the historical consolidated financial statements and
accompanying notes of Bell Atlantic and GTE, which are included in the
companies' Annual Reports on Form 10-K for the year ended December 31, 1999 and
the quarterly reports on Form 10-Q for the quarterly period ended March 31,
2000. The unaudited pro forma financial information is presented for
illustration purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the Merger had been
completed at the dates indicated. The information is not indicative of the
future operating results or financial position of the combined company.
We prepared the unaudited pro forma combined condensed balance sheet by
combining the balance sheets of Bell Atlantic and GTE at March 31, 2000, giving
effect to the Merger as if it had occurred on March 31, 2000. The unaudited pro
forma combined condensed statements of income give effect to the Merger as if it
had occurred at the beginning of the earliest period presented. We also adjusted
the combined financial statements for significant differences in accounting
methods used by each company. These adjustments are described in the
accompanying notes to the financial statements. Per the terms of the Merger,
each share of GTE common stock was converted into the right to receive 1.22
shares of Bell Atlantic common stock. This exchange ratio was used in computing
certain of the pro forma adjustments and in computing share and per share
amounts in the accompanying unaudited pro forma combined financial information.
The following pro forma financial statements do not reflect the disposal of
businesses that were required by the Federal Communications Commission and the
Department of Justice prior to their approval of the Merger. These disposals
include the reduction of GTE's voting interest in Genuity to a level below 10%
and domestic wireless property overlaps. Consequently, the balance sheet of
Genuity was deconsolidated effective June 30, 2000 and we are accounting for our
investment in Genuity of $2.5 billion using the cost method. The overlapping
domestic wireless properties are classified as Net assets held for sale in the
June 30, 2000 balance sheet. Furthermore, the following pro forma financial
statements do not reflect the merger-related and severance costs, transition
costs, or costs associated with other related actions, which were recorded in
the second quarter of 2000 and are discussed below.
Merger-Related and Severance Costs
During the second quarter of 2000, the combined company recorded a pretax charge
of $472 million ($378 million after-tax) for direct, incremental merger-related
costs that we incurred in that quarter or had previously deferred, and $584
million ($371 million after-tax) for employee severance.
The direct incremental merger costs include the following:
<TABLE>
<CAPTION>
(Dollars in Millions)
---------------------
<S> <C>
Compensation $ 210
Professional services 161
Other 101
-----
$ 472
=====
</TABLE>
Compensation includes retention payments to employees that were contingent on
the Merger close and payments to employees to satisfy contractual obligations
triggered by the change in control. Professional services includes investment
banking, legal, accounting, consulting and other advisory fees incurred to
obtain federal and state regulatory approvals and take other actions necessary
to complete the Merger. Other includes costs incurred to obtain shareholder
approval of the Merger, register securities and communicate with shareholders,
employees and regulatory authorities regarding Merger issues.
<PAGE> 2
Employee severance costs, as recorded under Statement of Financial Accounting
Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits,"
represent the benefit costs for the separation of approximately 5,500 management
employees who are entitled to benefits under pre-existing separation plans, as
well as an accrual of ongoing SFAS No. 112 obligations for GTE employees. Of
these employees, approximately 5,200 are located in the United States and
approximately 300 are located at various international locations. The
separations are expected to occur as a result of consolidations and process
enhancements within our operating segments.
Transition Costs
In addition to the direct merger-related and severance costs discussed above,
over the next several years, we expect to incur substantial transition costs
related to the Merger and the recently formed wireless joint venture, Verizon
Wireless. These costs will be incurred to integrate systems, consolidate real
estate, and relocate employees. They also include advertising and other costs to
establish the Verizon brand. During the second quarter, we incurred
approximately $172 million ($47 million after taxes and minority interests) of
transition costs primarily related to the wireless joint venture.
Other related actions
During the second quarter of 2000, we also recorded various other charges for
other actions in relation to the Merger or other strategic decisions.
The following pro forma financial statements also do not reflect any of the
anticipated revenue increases or expense or capital savings resulting from the
integration of operations of GTE and Bell Atlantic.
<PAGE> 3
BELL ATLANTIC CORPORATION AND GTE CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
For the Three Months Ended March 31, 2000
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Bell Atlantic GTE Adjustments Combined
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues $ 8,534 $ 6,100 $ (85) (2a) $ 14,549
Operating Expenses 6,329 4,515 (85) (2a)
(6) (2b)
(16) (2c)
(17) (2d) 10,720
---------- ---------- ---------- ----------
Operating Income 2,205 1,585 39 3,829
Income (loss) from unconsolidated businesses 123 120 (8) (2a)
1 (2c)
(5) (2d) 231
Other income and (expense), net 71 9 (2) (2d) 78
Interest expense 370 404 774
Minority interest (16) (18) 8 (2a) (26)
Mark-to-market adjustment for exchangeable notes (825) -- (825)
Provision for income taxes 457 476 14 (2g) 947
---------- ---------- ---------- ----------
Income from continuing operations 731 816 19 1,566
Extraordinary charge -- (9) (9)
---------- ---------- ---------- ----------
Net Income 731 807 19 1,557
Redemption of subsidiary preferred stock -- (8) (8)
---------- ---------- ---------- ----------
Net Income Available to Common Shareowners $ 731 $ 799 $ 19 $ 1,549
========== ========== ========== ==========
Basic Earnings per Common Share:
Before extraordinary charges $ 0.47 $ 0.84 $ 0.09 $ 0.57
Extraordinary charges -- (.01) -- --
---------- ---------- ---------- ----------
Net Income $ 0.47 $ 0.83 $ 0.09 $ 0.57
========== ========== ========== ==========
Diluted Earnings per Common Share:
Before extraordinary charge $ 0.46 $ 0.84 $ 0.09 (2f) $ 0.56
Extraordinary charge -- (0.01) -- --
---------- ---------- ---------- ----------
Net Income $ 0.46 $ 0.83 $ 0.09 $ 0.56
========== ========== ========== ==========
Weighted average number of common shares-
basic (in millions) 1,551 962 212 2,725
assuming dilution (in millions) 1,575 968 213 (2f) 2,756
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
<PAGE> 4
\
BELL ATLANTIC CORPORATION AND GTE CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
For the Three Months Ended March 31, 1999
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Bell Atlantic GTE Adjustments Combined
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues $ 7,967 $ 5,879 $ (85) (2a) $ 13,761
Operating Expenses 5,888 4,197 (85) (2a)
(14) (2b)
(6) (2c)
(6) (2d) 9,974
---------- ---------- ---------- ----------
Operating Income 2,079 1,682 26 3,787
Income (loss) from unconsolidated businesses 34 105 (6) (2a)
1 (2c)
(1) (2d) 133
Other income and (expense), net 40 12 52
Interest expense 315 324 639
Minority interest (22) (32) 6 (2a) (48)
Provision for income taxes 674 531 8 (2g) 1,213
---------- ---------- ---------- ----------
Income from continuing operations 1,142 912 18 2,072
Extraordinary charge -- (30) (30)
---------- ---------- ---------- ----------
Net Income $ 1,142 $ 882 $ 18 $ 2,042
========== ========== ========== ==========
Basic Earnings per Common
Share
Before Exraordinary Charges $ 0.74 $ 0.94 $ 0.08 (2f) $ 0.76
Extraordinary charges -- (0.03) -- (0.01)
---------- ---------- ---------- ----------
Net Income $ 0.74 $ 0.91 $ 0.08 $ 0.75
========== ========== ========== ==========
Diluted Earnings per Common Share:
Before extraordinary charge $ 0.72 $ 0.93 $ 0.08 (2f) $ 0.75
Extraordinary charge -- (0.03) -- (0.01)
---------- ---------- ---------- ----------
Net Income $ 0.72 $ 0.90 $ 0.08 $ 0.74
========== ========== ========== ==========
Weighted average number of common shares-
Basic 1,553 969 213 (2f) 2,735
assuming dilution (in millions) 1,582 976 216 2,774
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
<PAGE> 5
BELL ATLANTIC CORPORATION AND GTE CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
For the Year Ended December 31, 1999
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Bell Atlantic GTE Adjustments Combined
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues $ 33,174 $ 25,336 $ (316) (2a) $ 58,194
Operating Expenses 24,626 18,000 (316) (2a)
(24) (2b)
(59) (2c)
14 (2d) 42,241
---------- ---------- ---------- ----------
Operating Income 8,548 7,336 69 15,953
Income (loss) from unconsolidated businesses 143 432 (44) (2a)
2 (2c)
(22) (2d) 511
Other income and (expense), net 82 61 143
Interest expense 1,263 1,353 2,616
Minority interest (81) (122) 44 (2a) (159)
Mark-to-market adjustment for exchangeable notes (664) -- (664)
Provision for income taxes 2,557 2,291 24 (2g) 4,872
---------- ---------- ---------- ----------
Income from continuing operations 4,208 4,063 25 8,296
Extraordinary charges (6) (30) (36)
---------- ---------- ---------- ----------
Net Income $ 4,202 $ 4,033 $ 25 $ 8,260
========== ========== ========== ==========
Basic Earnings per Common Share:
Before extraordinary charge $ 2.72 $ 4.18 $ 0.12 (2f) $ 3.03
Extraordinary charges (.01) (.03) -- (.01)
---------- ---------- ---------- ----------
Net Income $ 2.71 $ 4.15 $ 0.12 $ 3.02
========== ========== ========== ==========
Diluted Earnings per Common Share:
Before extraordinary charges $ 2.66 $ 4.15 $ 0.12 (2f) $ 2.98
Extraordinary charges (0.01) (0.03) -- (0.01)
---------- ---------- ---------- ----------
Net Income $ 2.65 $ 4.12 $ 0.12 $ 2.97
========== ========== ========== ==========
Weighted average number of common shares-
basic (in millions) 1,553 972 214 (2f) 2,739
========== ========== ========== ==========
assuming dilution (in millions) 1,583 979 215 2,777
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
<PAGE> 6
BELL ATLANTIC CORPORATION AND GTE CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
For the Year Ended December 31, 1998
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Bell Atlantic GTE Adjustments Combined
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues $ 31,566 $ 25,753 $ (244) (2a) $ 57,075
Operating Expenses 24,895 20,417 (244) (2a)
(24) (2b)
218 (2c)
57 (2d) 45,319
---------- ---------- ---------- ----------
Operating Income 6,671 5,336 (251) 11,756
Income (loss) from unconsolidated businesses (415) 240 (42) (2a)
2 (2c)
(1) (2d) (216)
Other income and (expense), net 153 128 281
Interest expense 1,335 1,370 2,705
Minority interest (75) (289) 42 (2a)
3 (2c)
4 (2d) (315)
Provision for income taxes 2,008 1,553 (86) (2g) 3,475
---------- ---------- ---------- ----------
Income from continuing operations 2,991 2,492 (157) 5,326
Extraordinary charges (26) (320) (346)
---------- ---------- ---------- ----------
Net Income 2,965 2,172 (157) 4,980
---------- ---------- ---------- ----------
Redemption of minority interest (30) -- (30)
Redemption of investee preferred stock (2) -- (2)
---------- ---------- ---------- ----------
Net Income Available to Common Shareowners $ 2,933 $ 2,172 $ (157) $ 4,948
========== ========== ========== ==========
Basic Earnings per Common Share:
Before extraordinary charges $ 1.90 $ 2.59 $ (0.74) (2f) $ 1.94
Extraordinary charges (.01) (.33) -- (0.13)
---------- ---------- ---------- ----------
Net Income $ 1.89 $ 2.26 $ (0.74) $ 1.81
========== ========== ========== ==========
Diluted Earnings per Common Share:
Before extraordinary charges $ 1.87 $ 2.57 $ (0.74) (2f) $ 1.92
Extraordinary charges (0.01) (0.33) -- (0.13)
---------- ---------- ---------- ----------
Net Income $ 1.86 $ 2.24 $ (0.74) $ 1.79
========== ========== ========== ==========
Weighted average number of common shares-
basic (in millions) 1,553 963 212 (2f) 2,728
========== ========== ========== ==========
assuming dilution (in millions) 1,578 968 213 2,759
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
<PAGE> 7
BELL ATLANTIC CORPORATION AND GTE CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (Unaudited)
For the Year Ended December 31, 1997
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Bell Atlantic GTE Adjustments Combined
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues $ 30,194 $ 23,625 $ (244) (2a) $ 53,575
Operating Expenses 24,836 18,014 (244) (2a)
(12) (2b)
124 (2c)
(24) (2d) 42,694
---------- ---------- ---------- ----------
Operating Income 5,358 5,611 (88) 10,881
Income (loss) from unconsolidated businesses (124) 217 (37) (2a)
(8) (2c) 48
Other income and (expense), net 75 70 145
Interest expense 1,230 1,235 2,465
Minority interest (95) (245) 37 (2a) (303)
Provision for income taxes 1,529 1,624 (28) (2g) 3,125
---------- ---------- ---------- ----------
Income from continuing operations 2,455 2,794 (68) 5,181
---------- ---------- ---------- ----------
Net Income $ 2,455 $ 2,794 $ (68) $ 5,181
========== ========== ========== ==========
Basic Earnings per Common Share $ 1.58 $ 2.92 $ (0.32) (2f) $ 1.90
========== ========== ========== ==========
Diluted Earnings per Common Share $ 1.56 $ 2.90 $ (0.32) (2f) $ 1.89
========== ========== ========== ==========
Weighted average number of common shares-
Basic (in millions) 1,552 958 211 (2f) 2,721
========== ========== ========== ==========
assuming dilution (in millions) 1,571 962 212 2,745
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
<PAGE> 8
BELL ATLANTIC CORPORATION AND GTE CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET (Unaudited)
As of March 31, 2000
(Dollars in Millions)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Bell Atlantic GTE Adjustments Combined
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and temporary cash investments $ 360 $ 344 $ $ 704
Accounts receivable, net 7,085 4,958 (53)(2a) 11,990
Net assets held for sale -- 1,773 1,773
Other current assets 2,415 1,735 (14)(2a)
(47)(2d) 4,089
---------- ---------- ---------- ----------
9,860 8,810 (114) 18,556
---------- ---------- ---------- ----------
Plant, property and equipment, net 39,749 23,386 (68)(2b)
(262)(2c)
(5)(2d) 62,800
Investments in unconsolidated businesses 8,207 4,062 (5)(2c)
(28)(2d) 12,236
Other assets 8,236 14,756 (3)(2c)
(79)(2d) 22,910
---------- ---------- ---------- ----------
Total assets $ 66,052 $ 51,014 $ (564) $ 116,502
========== ========== ========== ==========
Liabilities and Shareowners' Investment
Current liabilities
Debt maturing within one year $ 5,812 $ 10,795 $ $ 16,607
Accounts payable and accrued liabilities 7,000 4,258 (53)(2a)
2 (2d) 11,207
Other current liabilities 1,489 2,281 10 (2d) 3,780
---------- ---------- ---------- ----------
14,301 17,334 (41) 31,594
---------- ---------- ---------- ----------
Long-term debt 20,149 13,643 33,792
Employee benefit obligations 8,958 4,411 13,369
Deferred credits and other liabilities 6,012 4,927 (14)(2a)
(26)(2b)
(96)(2c)
(76)(2d) 10,727
Shareowners' investment
Common stock (2,748,391,520 shares issued) 158 50 67 (2e) 275
Contributed capital 13,691 8,671 (2,565)(2e) 19,797
Reinvested earnings 2,895 5,310 (311)(2h) 7,894
Accumulated other comprehensive income (loss) 1,348 (397) 1 (2c)
(1)(2d) 951
---------- ---------- ---------- ----------
18,092 13,634 (2,809) 28,917
Less common stock in treasury, at cost 1,026 2,498 (2,498)(2e) 1,026
Less deferred compensation - employee
stock ownership plans 434 437 871
---------- ---------- ---------- ----------
Total shareowners' investment 16,632 10,699 (311) 27,020
---------- ---------- ---------- ----------
Total liabilities and shareowners' investment $ 66,052 $ 51,014 $ (564) $ 116,502
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
<PAGE> 9
BELL ATLANTIC CORPORATION AND GTE CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
Note 1 - Reclassifications
Certain reclassifications have been made to the unaudited historical financial
statements of Bell Atlantic Corporation (Bell Atlantic) and GTE Corporation
(GTE) to conform to the presentation used by Verizon Communications following
the Merger.
Note 2 - Pro Forma Adjustments
(a) Pro forma adjustments have been made to eliminate intercompany transactions
between Bell Atlantic and GTE.
(b) Pro forma adjustments have been made to conform GTE to Bell Atlantic's
policy of expensing general support assets costing under $2,000,
retroactive to January 1, 1996. The Federal Communications Commission
raised the capitalization limit for general support assets from $500 to
$2,000, and local exchange carriers were given the option to implement the
change on January 1, 1998 or apply retroactively. Bell Atlantic adopted the
change effective January 1, 1996 for external reporting purposes and wrote
off the embedded base. GTE adopted the change effective January 1, 1998 and
amortized the embedded base over a five year period. Adjustments have been
made to eliminate the capitalization and associated amortization effect of
GTE's embedded base.
(c) Pro forma adjustments have been made to conform GTE to Bell Atlantic's
policy of adoption of Statement of Position (SOP) 98-1 "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." Prior
to SOP 98-1, GTE capitalized non-network software in 1997 and 1998, while
Bell Atlantic expensed non-network software. Adjustments have been made to
eliminate the capitalization and associated amortization effect of
non-network software capitalized by GTE during 1997 and 1998.
(d) Other individually insignificant pro forma adjustments have been made to
conform the accounting policies of Bell Atlantic and GTE.
(e) The terms of the merger agreement specify that each outstanding share of
GTE common stock is converted into 1.22 shares of Bell Atlantic common
stock. A pro forma adjustment has been made to equity, which represents the
issuance of new shares of Bell Atlantic common stock in exchange for all
outstanding shares of GTE common stock at the 1.22 exchange rate. The
adjustment also reflects the cancellation of shares of GTE treasury stock,
but does not reflect the impact of fractional shares.
(f) Pro forma adjustments have been made to the number of weighted average
shares outstanding used in the calculation of basic and diluted earnings
per share. The number of weighted average shares outstanding reflects the
conversion of shares and share equivalents of GTE common stock into Bell
Atlantic common stock in accordance with the Merger agreement.
(g) Pro forma adjustments have been made for the estimated tax effects of the
adjustments discussed in (a) - (d) above.
(h) Pro forma adjustments have been made for the retained earnings effect on
the pro forma adjustments discussed in (a) - (d) above.
Note 3 - Common Stock Split
Bell Atlantic issued a two-for-one split of Bell Atlantic common stock, effected
in the form of a 100% stock dividend to shareholders of record on June 1, 1998
and paid on June 29, 1998. Shareowners' equity accounts were adjusted at the
time of such issuance. The unaudited pro forma combined condensed financial
statements give effect to this stock split as if it had occurred at the earliest
period presented.
