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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8606
Bell Atlantic Corporation
(Exact name of registrant as specified in its charter)
Delaware 23-2259884
(State of incorporation) (I.R.S. Employer
Identification No.)
1717 Arch Street
Philadelphia, Pennsylvania 19103
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (215) 963-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common Stock, $1 par value..................... New York, Philadelphia,
Boston, Chicago and
Pacific Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act:
None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.__
At February 28, 1997, the aggregate market value of the registrant's voting
stock held by non-affiliates was approximately $30,249,000,000.
At February 28, 1997, 437,768,397 shares of the registrant's Common Stock were
outstanding, after deducting 47,870 shares held in treasury.
Documents incorporated by reference:
Portions of the registrant's Annual Report to shareowners for the year ended
December 31, 1996 (Part II).
Portions of the registrant's Proxy Statement dated March 10, 1997 prepared
in connection with the Annual Meeting of Shareowners (Part III).
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TABLE OF CONTENTS
Item No. PAGE
- -------- ----
PART I
1. Business........................................................ 1
2. Properties...................................................... 16
3. Legal Proceedings............................................... 17
4. Submission of Matters to a Vote of Security Holders............. 18
Executive Officers of the Registrant................................. 18
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................. 19
6. Selected Financial Data......................................... 19
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 19
8. Financial Statements and Supplementary Data..................... 19
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................. 19
PART III
10. Directors and Executive Officers of the Registrant.............. 20
11. Executive Compensation.......................................... 20
12. Security Ownership of Certain Beneficial Owners and
Management...................................................... 20
13. Certain Relationships and Related Transactions.................. 20
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K..................................................... 21
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 20, 1997
PART I
Item 1. Business
GENERAL
Bell Atlantic Corporation (the "Company") is one of the seven regional holding
companies ("RHCs") formed in connection with the court-approved divestiture (the
"Divestiture"), effective January 1, 1984, of those assets of American Telephone
and Telegraph Company ("AT&T") related to exchange telecommunications, exchange
access functions, printed directories and cellular mobile communications.
Pursuant to the Divestiture, AT&T transferred to the Company, among other
assets, its 100% ownership interest in seven of the twenty-two Bell System
operating companies ("BOCs"): New Jersey Bell Telephone Company; The Bell
Telephone Company of Pennsylvania; The Diamond State Telephone Company; The
Chesapeake and Potomac Telephone Company; The Chesapeake and Potomac Telephone
Company of Maryland; The Chesapeake and Potomac Telephone Company of Virginia;
and The Chesapeake and Potomac Telephone Company of West Virginia (collectively,
the "telephone subsidiaries"). In January, 1994, to facilitate the creation of
a uniform "Bell Atlantic" brand name across the territories served by the
telephone subsidiaries, the names of the telephone subsidiaries were changed to
Bell Atlantic - New Jersey, Inc. ("Bell Atlantic - New Jersey"), Bell Atlantic -
Pennsylvania, Inc. ("Bell Atlantic - Pennsylvania"), Bell Atlantic - Delaware,
Inc. ("Bell Atlantic - Delaware"), Bell Atlantic - Washington, D.C., Inc. ("Bell
Atlantic - Washington, D.C."), Bell Atlantic - Maryland, Inc. ("Bell Atlantic -
Maryland"), Bell Atlantic - Virginia, Inc. ("Bell Atlantic - Virginia") and Bell
Atlantic - West Virginia, Inc. ("Bell Atlantic - West Virginia"), respectively.
The Company was incorporated in 1983 under the laws of the State of Delaware
and has its principal executive offices at 1717 Arch Street, Philadelphia,
Pennsylvania 19103 (telephone number 215-963-6000).
LINE OF BUSINESS RESTRICTIONS AND THE TELECOMMUNICATIONS ACT OF 1996
The consent decree entitled "Modification of Final Judgment" ("MFJ") and the
Plan of Reorganization ("Plan") approved by the United States District Court for
the District of Columbia set forth the terms of Divestiture and established
certain restrictions on the post-Divestiture activities of the RHCs, including
the Company, and their affiliates. The MFJ's principal restrictions on post-
Divestiture RHC activities included prohibitions on (i) providing interLATA
(long distance) telecommunications, and (ii) engaging in the manufacture of
telecommunications equipment and customer premises equipment.
The Telecommunications Act of 1996 (the "Act") became effective on February 8,
1996 and replaces the MFJ. In general, the Act includes provisions to open the
telephone subsidiaries' local exchange markets to competition and to permit
affiliates of local exchange carriers, such as the Company, to provide interLATA
services and engage in manufacturing. However, the ability of the Company to
engage in businesses previously prohibited by the MFJ is largely dependent on
satisfying certain conditions contained in the Act and regulations to be
promulgated thereunder.
With regard to the rules governing competition in the interLATA market, the
Act takes a two-fold approach. Effective February 8, 1996, the Company was
permitted to apply for state approval to offer interLATA services in states
outside of the geographic region in which the telephone subsidiaries currently
operate as local exchange carriers. In addition, the Company's wireless
businesses are now permitted to offer interLATA services without having to
comply with the conditions imposed in waivers granted under the MFJ.
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Secondly, each of the telephone subsidiaries must demonstrate to the Federal
Communications Commission ("FCC") that it has satisfied certain requirements in
order for the Company to be permitted to offer interLATA services for calls
originating within the geographic region in which the telephone subsidiary
operates as a local exchange carrier. Among the requirements with which a
telephone subsidiary must comply is a 14-point "competitive checklist," which
includes steps the telephone subsidiaries must take which will help competitors
offer local services either through resale of the telephone subsidiaries'
service, purchase of unbundled network elements from the telephone subsidiaries,
or though the competitors' own networks. A telephone subsidiary must also
demonstrate to the FCC that its entry into the interLATA market would be in the
public interest.
The FCC is required to conduct a number of rulemakings to implement the Act.
See "FCC Regulation and Interstate Rates - Access Charge and Universal Service
Reform" and "Competition - Local Exchange Services." The ultimate outcome of
FCC rulemakings could have a significant impact upon successful implementation
of the Act and the extent, nature and timing of competition in the local
exchange and interLATA markets.
No definitive prediction can be made as to the impact of the Act on the
business, results of operations or financial condition of the Company. The
financial impact on the Company will depend on several factors, including the
timing, extent and success of competition in the Company's markets and the
timing, extent and success of the Company's pursuit of new business
opportunities resulting from the Act.
PROPOSED MERGER WITH NYNEX CORPORATION
In April, 1996, the Company and NYNEX Corporation announced a definitive
agreement for a merger of equals; the agreement was amended in July, 1996 (the
agreement, as amended, hereinafter the "Merger Agreement").
Under the Merger Agreement, NYNEX will become a subsidiary of the Company and
NYNEX shareowners will receive 0.768 of a share of Company common stock for each
share of NYNEX common stock owned. The shares of Company stock to be issued to
NYNEX stockholders in the merger will constitute approximately 44% of the
outstanding stock of the Company after the merger.
NYNEX is another of the RHCs created at Divestiture, and the BOCs owned by
NYNEX serve the Northeastern portion of the United States. The business of the
NYNEX BOCs is qualitatively similar to that of the Company's telephone
subsidiaries as described below under "The Telephone Subsidiaries - General."
NYNEX is also subject to the Act, and to FCC regulation, in much the same ways
as the Company is, as described above under "Line of Business Restrictions and
the Telecommunications Act of 1996" and below under "The Telephone Subsidiaries
- - FCC Regulation and Interstate Rates," respectively. The operations of the
NYNEX BOCs are also subject to regulation by the public utility commissions of
New York, Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire and
Maine. As discussed below under "Domestic Wireless Communications," the Company
and NYNEX have previously formed partnerships which contain substantially all of
their domestic cellular, paging and personal communications services businesses.
The Company believes that the proposed merger will be an effective means of
achieving the operating efficiency, scale, scope and financial resources
necessary to expand into the new markets available to the Company under the Act
and to compete with new market entrants in the Company's existing markets.
As a result of the merger, the Company will incur certain transition costs,
currently estimated at $700 million to $900 million. The Company also expects
to recognize recurring expense savings of approximately $600 million annually by
the third year following completion of the merger as a result of consolidating
operating systems and other administrative functions and reducing management
positions. Incremental savings in annual capital
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expenditures for the Company should grow to approximately $250 million to $300
million, including efficiencies relating to purchasing, marketing trials and
equipment testing.
Shareowners of both companies approved the merger in November, 1996.
Completion of the merger remains subject to a number of conditions, the
principal ones relating to regulatory reviews. The Company is unable to predict
when it will be able to complete the merger.
Pursuant to the Merger Agreement, the principal executive offices of the
Company following completion of the merger will be in New York, New York.
THE TELEPHONE SUBSIDIARIES
General
The telephone subsidiaries presently serve a territory ("Territory")
consisting of 19 Local Access and Transport Areas ("LATAs"). These LATAs are
generally centered on a city or based on some other identifiable common
geography and, with certain limited exceptions, each LATA marks the boundary
within which a telephone subsidiary has been permitted by the MFJ to provide
telephone service.
The telephone subsidiaries currently provide two basic types of
telecommunications services. First, they transport telecommunications traffic
between subscribers located within the same LATA, including both local and toll
services. Local service includes the provision of local exchange ("dial tone"),
local private line and public telephone services (including dial-tone service
for pay telephones owned by the Company and by other pay telephone providers).
Among other local services provided are Centrex (telephone subsidiary central
office-based switched telephone service enabling the subscriber to make both
intercom and outside calls) and a variety of special and custom calling
services. Toll service includes message toll service (calling service beyond
the local calling area) within LATA boundaries, and intraLATA Wide Area Toll
Service (WATS) and 800 services (volume discount offerings for customers with
highly concentrated demand). As permitted by the Plan, Bell Atlantic - New
Jersey and Bell Atlantic - Pennsylvania also earn revenue from the provision of
telecommunications service between LATAs in corridors between the cities (and
certain surrounding counties) of (i) New York, New York and Newark, New Jersey
and (ii) Philadelphia, Pennsylvania and Camden, New Jersey. Second, the
telephone subsidiaries provide exchange access service, which links a
subscriber's telephone or other equipment to the transmission facilities of long
distance carriers which, in turn, provide interLATA service to their customers.
Bell Atlantic - Pennsylvania, Bell Atlantic - Delaware, Bell Atlantic -
Maryland, Bell Atlantic - West Virginia, Bell Atlantic - Virginia and Bell
Atlantic - New Jersey also provide exchange access service to interexchange
carriers ("IXCs") which provide intrastate intraLATA toll service.
Operations
During 1993, Bell Atlantic reorganized certain functions formerly performed by
each of the telephone subsidiaries into lines of business ("LOBs") operating
across these companies. The LOBs focus on specific market segments. The
telephone subsidiaries remain responsible within their respective service areas
for the provision of telephone services, financial performance and regulatory
matters.
The Consumer Services LOB markets communications services to residential
customers within the Territory (11 million households and 29 million people).
1996 revenues generated by the Consumer Services LOB were approximately $4.3
billion, representing approximately 33% of the telephone subsidiaries' aggregate
revenues. These revenues were derived primarily from the provision of telephone
services to residential users.
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The Carrier Services LOB markets (i) switched and special access to the
telephone subsidiaries' local exchange networks, and (ii) billing and collection
services, including recording, rating, bill processing and bill rendering. 1996
revenues generated by the Carrier Services market were approximately $2.7
billion, representing approximately 21% of the telephone subsidiaries' aggregate
revenues. Approximately 91% of total Carrier Services revenues were derived
from IXCs; AT&T is the largest single customer. Most of the remaining revenues
came from business customers and government agencies with their own special
access network connections, wireless companies and other local exchange carriers
("LECs") which resell network connections to their own customers.
The Small Business Services LOB markets communications and information
services to small businesses (customers having up to 20 access lines). The
Small Business Services LOB has approximately 1.2 million small business
customers in the Territory which in 1996 generated approximately $1.9 billion in
revenues, representing approximately 15% of the telephone subsidiaries'
aggregate revenues.
The Large Business Services LOB markets communications and information
services to large businesses (customers having more than 20 access lines).
These services include voice switching/processing services (e.g., dedicated
private lines, custom Centrex, call management and voice messaging), end-user
networking (e.g., credit and debit card transactions, and personal computer-
based conferencing, including data and video), internetworking (establishing
links between the geographically disparate networks of two or more companies or
within the same company), network integration (integrating multiple
geographically disparate networks into one system), network optimization
(disaster avoidance, 911 service, intelligent vehicle highway systems), video
services (distance learning, telemedicine, videoconferencing) and interactive
multimedia applications services. 1996 revenues from the Large Business
Services LOB were approximately $1.8 billion, representing approximately 14% of
the telephone subsidiaries' aggregate revenues.
The Directory Services LOB manages the provision of (i) advertising and
marketing services to advertisers, and (ii) listing information (e.g., White
Pages and Yellow Pages). These services are currently provided primarily
through print media, but the Company expects that use of electronic formats will
increase in the future. In addition, the Directory Services LOB manages the
provision of photocomposition, database management and other related products
and services to publishers. 1996 revenues from the Directory Services LOB were
approximately $1.1 billion, representing approximately 9% of the telephone
subsidiaries' aggregate revenues. In February, 1997, the Company introduced the
Bell Atlantic Interactive Yellow Pages, an Internet-based electronic shopping
service. That product is designed to meet businesses' needs to advertise in a
variety of media.
The Public and Operator Services LOB markets pay telephone and operator
services in the Territory to meet consumer needs for accessing public networks
and locating and identifying network subscribers, and to provide calling
assistance and arrange billing alternatives (e.g., calling card, collect and
third party calls). 1996 revenues from the Public and Operator Services LOB
were approximately $700 million, representing approximately 5% of the telephone
subsidiaries' aggregate revenues.
The Federal Systems LOB markets communications and information technology and
services to departments, agencies and offices of the executive, judicial and
legislative branches of the federal government. 1996 revenues from the Federal
Systems LOB were approximately $400 million, representing approximately 3% of
the telephone subsidiaries' aggregate revenues.
The Network LOB manages the technologies, services and systems platforms
required by the other LOBs and the telephone subsidiaries to meet the needs of
their respective customers, including switching, feature development and on-
premises installation and maintenance services.
FCC Regulation and Interstate Rates
The telephone subsidiaries are subject to the jurisdiction of the FCC with
respect to interstate services and certain related matters. The FCC prescribes
a uniform system of accounts for the telephone subsidiaries; the
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principles and standard procedures used to separate plant investment, expenses,
taxes and reserves between those applicable to interstate services under the
jurisdiction of the FCC and those applicable to intrastate services under the
jurisdiction of the respective state regulatory authorities ("separations
procedures"); and depreciation rates applicable to assets allocated to
interstate services. The FCC also prescribes procedures for allocating costs and
revenues between regulated and unregulated activities.
The FCC has prescribed structures for exchange access tariffs to specify the
charges ("access charges") for use and availability of the telephone
subsidiaries' facilities for the origination and termination of interstate
interLATA service. In general, the tariff structures prescribed by the FCC
provide that interstate costs of the telephone subsidiaries which do not vary
based on usage are recovered from subscribers through flat monthly charges
("subscriber line charges"), and from IXCs through usage-sensitive Carrier
Common Line ("CCL") charges. Traffic-sensitive interstate costs are recovered
from carriers through variable access charges based on several factors,
primarily usage.
Price Caps
The FCC's price cap system, which became effective in 1991, places caps on
overall telephone subsidiary prices for interstate access services. The caps
are modified annually, in inflation-adjusted terms, to reflect increases in
productivity, and can also be adjusted to reflect certain "exogenous" changes,
such as changes in FCC separations procedures.
Under the current form of the price cap system, the Company's price cap index
is adjusted by an inflation index (GDP-PI) less a fixed percentage, either 4.0%,
4.7% or 5.3% as the Company may elect, which is intended to reflect increases in
productivity ("Productivity Factor"). If the Company selects the 4.0% or 4.7%
Productivity Factor, it is required to share a portion of its future interstate
earnings in excess of a rate of return of 12.25%. If the Company selects the
5.3% Productivity Factor, it is not required to share a portion of its future
interstate earnings.
In July, 1996, the Company selected the 5.3% Productivity Factor for the July,
1996 to June, 1997 tariff period. The rates included in the July, 1996 filing
resulted in price increases totaling approximately $21 million on an annual
basis.
Access Charge and Universal Service Reform
In December, 1996, the FCC commenced a proceeding to reform the interstate
access charge system. The FCC is considering two approaches for establishing a
transition to access charges which more closely reflect the economic cost of
access services and for deregulating access services as competition develops in
the local exchange and exchange access markets. Under a market-based approach,
the FCC would rely on actual and potential competition from new facilities-based
service providers and market entrants purchasing unbundled network elements to
drive prices for access services toward appropriate levels. As competition
develops, the FCC would gradually relax, and ultimately remove, existing access
rate structure requirements and price cap restrictions. Under an alternative
prescriptive approach, the FCC would specify the nature and timing of changes to
the current access charge rate levels. The FCC is expected to release its order
in this proceeding in the second quarter of 1997. The Company is unable to
predict the amount of any modifications in access charges that could result from
this proceeding, the manner in which such modifications would be effectuated, or
the time period over which such modifications would occur.
The FCC has also initiated a rulemaking under the Act designed to preserve
"universal service" by ensuring that local exchange service remains reasonably
available to all residential customers, including low-income customers and
customers in areas which are expensive to serve. The FCC proposes to
restructure the current federal Universal Service Fund, which provides support
for high cost access and low-income assistance, and, as required by the Act, to
establish new support mechanisms for discounted services for schools, libraries
and rural health care providers. The FCC must issue an order resolving the
universal service issues by May, 1997. The Company is
5
unable to predict the ultimate size of the Fund, how contributions to the Fund
by telecommunications providers will be determined, how payments from the Fund
will be distributed, or the financial impact of this proceeding on the Company.
FCC Cost Allocation and Affiliate Transaction Rules
FCC rules govern (i) the allocation of costs between the regulated and
unregulated activities of a communications common carrier and (ii) transactions
between the regulated and unregulated affiliates of a communications common
carrier.
Under the cost allocation rules, unregulated activities include activities
that have never been regulated as communications common carrier offerings and
activities that have been preemptively deregulated by the FCC. The costs of
these activities are removed prior to the separations procedures process and are
assigned to unregulated activities in the aggregate, not to specific services,
for pricing purposes. Other activities must be accounted for as regulated
activities, and their costs are subject to separations procedures.
The affiliate transaction rules govern the pricing of assets transferred, and
services provided, between affiliates. These rules generally require that
assets be transferred between affiliates at "market price," if such price can be
established through a tariff or a prevailing price actually charged to third
parties. In the absence of a tariff or prevailing price, (i) asset transfers
from a regulated to an unregulated affiliate must be valued at the higher of
cost or fair market value, and (ii) asset transfers from an unregulated to a
regulated affiliate must be valued at the lower of cost or fair market value.
The FCC has not attempted to make its cost allocation or affiliate transaction
rules preemptive. State regulatory authorities are free to use different cost
allocation methods and affiliate transaction rules for intrastate ratemaking and
to require carriers to keep separate allocation records.
State Regulation of Rates and Services
The communications services of the telephone subsidiaries are subject to
regulation by the public utility commissions in the jurisdictions in which they
operate with respect to intrastate rates and services and certain other matters.
For a discussion of regulatory proceedings regarding competition in the
telephone subsidiaries' local exchange and intraLATA toll markets, see
"Competition - Local Exchange Services" and "Competition - IntraLATA Toll
Services."
Bell Atlantic - New Jersey, Inc.
The New Jersey Telecommunications Act of 1992 authorized the Board of Public
Utilities ("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, Bell Atlantic - New Jersey
filed a Plan for Alternative Form of Regulation (the "New Jersey Plan"), which
became effective with modifications required by the BPU in May, 1993 and was
affirmed on appeal in 1996.
The New Jersey Plan divides Bell Atlantic - New Jersey's services into Rate-
Regulated Services and Competitive Services. Rate-Regulated Services are
grouped in two categories:
- "Protected Services": Basic residence and business service, Touch-Tone,
access services, message toll services and the ordering, installation and
restoration of these services. Rates for Protected Services, other than basic
residence service, may be increased in an amount limited to the prior year's
increase in the Gross National Product-Price Index ("GNP-PI") less a 2%
productivity offset, as long as the return on equity for Rate-Regulated
Services does not exceed 11.7%. Basic residence service rates are capped
through December
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1999. However, revenue-neutral rate restructuring for Rate-
Regulated Services, including Protected Services and basic residence service,
is permitted.
- "Other Services": Custom Calling, Custom Local Area Signaling Services
("CLASS" services which utilize Signaling System 7), operator services and 911
enhanced service. Rates for Other Services may be increased beginning
January, 1996 in an amount limited to the prior year's increase in the GNP-PI
less a 2% productivity offset, as long as the return on equity for Rate-
Regulated Services does not exceed 12.7%.
All earnings above a return on equity of 13.7% for Rate-Regulated Services
will be shared equally with customers. There is no point at which earnings for
Rate-Regulated Services are capped. Competitive Services are deregulated under
the New Jersey Telecommunications Act of 1992.
Bell Atlantic - Pennsylvania, Inc.
In July, 1993, legislation was enacted in Pennsylvania which enabled Bell
Atlantic - Pennsylvania to petition the Pennsylvania Public Utility Commission
("PPUC") to regulate Bell Atlantic - Pennsylvania under an alternative form of
regulation. In October, 1993, Bell Atlantic - Pennsylvania filed its petition
and plan with the PPUC. In June, 1994, the PPUC approved, with modifications,
Bell Atlantic - Pennsylvania's Alternative Regulation Plan (the "Pennsylvania
Plan"); the modifications were accepted by Bell Atlantic - Pennsylvania in July,
1994.
The Pennsylvania Plan provides for a pure price cap plan with no sharing of
earnings with customers, and replaces rate base rate of return regulation. The
Pennsylvania Plan removes from price and earnings regulation certain competitive
services, including directory advertising, billing services, Centrex service,
paging, speed calling and repeat calling. All remaining services will be price
regulated.
Under price regulation, annual price increases up to, but not exceeding, the
inflation rate (GDP-PI) minus 2.93% will be permitted. Annual price decreases
are required when the GDP-PI falls below 2.93%. Prices for protected services
in the noncompetitive category, which include residential and business basic
exchange services, special access and switched access, are capped through
December 31, 1999. However, revenue-neutral rate restructuring for non-
competitive services is permitted.
The Pennsylvania Plan requires Bell Atlantic - Pennsylvania to propose a
Lifeline service for residential customers on a revenue-neutral basis. The Plan
also requires deployment of a universal broadband network, which must be
completed in phases: 20% by 1998; 50% by 2004; and 100% by 2015. Deployment
must be reasonably balanced among urban, suburban and rural areas.
In July, 1994, several parties filed appeals in the Pennsylvania Commonwealth
Court regarding the PPUC's order approving the Pennsylvania Plan. In December,
1995, the Commonwealth Court issued an opinion and order affirming in part and
reversing, vacating and remanding in part the PPUC's decision. The Commonwealth
Court: (i) vacated the PPUC's determination of the price cap formula and
remanded to the PPUC for quantification of an "input price differential" (i.e.,
difference between the cost of Bell Atlantic - Pennsylvania's inputs and the
U.S. economy's inputs); (ii) vacated and remanded for additional findings the
PPUC's decision that directory advertising and billing services are
"competitive" services; and (iii) reversed the PPUC's decision that paging,
Centrex, speed calling, and repeat call are competitive. In all other respects,
the PPUC's order was sustained. The PPUC and Bell Atlantic - Pennsylvania have
filed petitions requesting that the Pennsylvania Supreme Court review the
Pennsylvania Commonwealth Court's ruling. The Supreme Court has decided to hear
this appeal, and a decision is expected in 1997. In the meantime, the petition
for review has the effect of staying the Commonwealth Court's order.
On November 1, 1996, Bell Atlantic - Pennsylvania made its third annual price
adjustment filing under the Pennsylvania Plan. On December 19, 1996, the PPUC
approved the filing, with modifications, which reduced rates
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by $12.9 million annually, effective January 1, 1997. However, the PPUC ordered
these reductions on services which differed from those proposed by Bell
Atlantic - Pennsylvania.
In 1996, Bell Atlantic - Pennsylvania also filed a plan to rebalance and
restructure rates on a revenue-neutral basis. This filing provided for
increases to specific revenue categories with offsetting decreases in other
categories. On December 12, 1996, the PPUC approved the filing with certain
modifications. Bell Atlantic - Pennsylvania began implementing new rates in
January, 1997, with additional changes to be implemented in May and June, 1997.
Bell Atlantic - Delaware, Inc.
In March, 1994, Bell Atlantic - Delaware elected to be regulated under the
alternative regulation provisions of the Delaware Telecommunications Technology
Investment Act of 1993 (the "Delaware Telecommunications Act"). The Delaware
Telecommunications Act provides that:
-the prices of "Basic Telephone Services" (e.g., dial-tone and local usage)
will remain regulated and cannot change in any one year by more than the
rate of inflation (GDP-PI) less 3%;
-the prices of "Discretionary Services" (e.g., Identa Ring(SM) and Call
Waiting) cannot increase more than 15% per year per service;
-the prices of "Competitive Services" (e.g., directory advertising and
message toll service) will not be subject to tariff or regulation; and
-Bell Atlantic - Delaware will develop a technology deployment plan with a
commitment to invest a minimum of $250 million in Delaware's
telecommunications network during the first five years of the plan.
The Delaware Telecommunications Act also provides protections to ensure that
competitors will not be unfairly disadvantaged, including a prohibition on
cross-subsidization, imputation rules, service unbundling and resale service
availability requirements, and a review by the Delaware Public Service
Commission during the fifth year of the plan.
Bell Atlantic - Washington, D.C., Inc.
In January, 1993, the District of Columbia Public Service Commission ("DCPSC")
adopted a regulatory reform plan for the intra-Washington, D.C. services of Bell
Atlantic - Washington, D.C., to be in effect for a three-year trial period.
This plan provided for a banded rate of return of 100 basis points over or under
the authorized return on equity (which was set at 11.45% in December, 1993).
Bell Atlantic - Washington, D.C. was permitted to seek a rate increase if its
return on equity fell below 10.45% and was required to share, through refunds,
50% of any earnings in excess of a return on equity of 12.45%.
In January, 1995, Bell Atlantic - Washington, D.C. filed a petition with the
DCPSC seeking approval of a proposed price cap plan to become effective upon the
expiration of the 1993 reform plan. In November, 1996, the DCPSC approved a
price cap plan for intra-Washington, D.C. services provided by Bell Atlantic-
Washington, D.C. The plan (1) is for four years, through December 31, 1999; (2)
divides services into three categories: basic, discretionary, and competitive;
(3) caps certain basic residential rates for the term of the plan and allows
other basic rates to change with the rate of inflation (GDP-PI) minus 3%; (4)
allows discretionary service rates to increase up to 15% annually; (5)
eliminates price limits on competitive service rates; (6) reduces residential
rates by $3.2 million in 1996, and business rates by $2.2 million in 1997 and
$3.2 million in 1998; (7) establishes a trust fund to finance advanced
telecommunications services in the District's public schools, libraries, and
community centers; and (8) eliminates the regulation of profits.
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Bell Atlantic - Maryland, Inc.
In January, 1993, the Public Service Commission of Maryland ("MPSC") continued
a regulatory reform plan (the "Reform Plan"), first adopted in 1990, for
regulating the intrastate services provided by Bell Atlantic - Maryland. The
Reform Plan provided for sharing of earnings on Other-Than-Competitive Services
(e.g., basic business and residential dial-tone line and usage, pay telephone
services, and intraLATA toll services) within a prescribed range (12.7% to
16.5%) of return on equity. Earnings on Competitive Services (e.g., Centrex
intercom, and high capacity, special access and private line service) were not
subject to rate of return limitation.
In 1995, the Maryland General Assembly enacted legislation which permitted the
MPSC to regulate Bell Atlantic - Maryland by a method other than rate base rate
of return regulation.
In December, 1995, Bell Atlantic - Maryland filed a proposed price cap plan
with the MPSC. In November, 1996, the MPSC approved a price cap plan for
regulating the intrastate services provided by Bell Atlantic - Maryland. Under
the plan, services are divided into six categories: Access; Basic-Residential;
Basic-Business; Discretionary; Competitive; and Miscellaneous. The MPSC ordered
rates for Access to be reduced by $32.1 million. These reduced rates and rates
for Basic-Residential and Basic-Business are capped for a period of three years.
After the cap period, rates for services in these three categories can be
increased or decreased annually under a formula that is based upon changes in
the rate of inflation (GDP-PI) minus a productivity offset based upon changes in
the rate of inflation (CPI). Rates for Discretionary services may be increased
under the same formula. Rates for Competitive services may be increased without
regulatory limits. Regulation of profits is eliminated.
Certain parties have appealed the MPSC's decision in state court.
Bell Atlantic - Virginia, Inc.
Under legislation passed in the 1993 session of the Virginia General Assembly,
the Virginia State Corporation Commission ("VSCC") is no longer statutorily
required to regulate telephone companies on the basis of rate of return
regulation. In February, 1994, Bell Atlantic - Virginia filed a proposal to
have its noncompetitive services regulated on a price cap basis; competitive
services would not be regulated.
Following public hearings, the VSCC approved a new optional regulatory plan,
effective January 1, 1995, which allows Bell Atlantic - Virginia to replace
traditional cost-based regulation with a plan that relies on price constraints.
The new plan, which eliminates regulation of profits, includes a temporary
moratorium on rate increases for basic local telephone service until 2001,
eliminates the monthly charge for Touch-Tone service and expands universal
telephone service to the poor. In November, 1994, Bell Atlantic - Virginia
notified the VSCC of its election to participate in the new regulatory plan.
Following an appeal, the new plan was upheld by the Virginia Supreme Court.
Bell Atlantic - West Virginia, Inc.
In December, 1991, the West Virginia Public Service Commission ("WVPSC")
approved an "Incentive Regulation Plan." The Incentive Regulation Plan
continued the major provisions of the prior plan, including pricing flexibility
for competitive services and a freeze on rates for basic local exchange service.
It also committed Bell Atlantic - West Virginia to invest $450 million from 1991
through 1995 in West Virginia's telecommunications infrastructure.
In December, 1994, the WVPSC issued an order extending the Incentive
Regulation Plan for three years, with certain modifications. Basic rates remain
frozen through January 15, 1998 and Touch-Tone charges will be eliminated over a
three year period. Bell Atlantic - West Virginia is committed to invest at
least $375 million in its network over the five year period from 1995 through
1999.
9
Competition
Legislative changes, including provisions of the Act discussed above under
"Line of Business Restrictions and the Telecommunications Act of 1996,"
regulatory changes and new technology are continuing to expand the types of
available communications services and equipment and the number of competitors
offering such services. An increasing amount of this competition is from large
companies which have substantial capital, technological and marketing resources,
nationwide presence and brand name recognition.
Local Exchange Services
The ability to offer local exchange service has historically been subject to
regulation by state public utility commissions.
One of the purposes of the Act was to ensure, and accelerate, the emergence of
competition in local exchange markets. Toward this end, the Act requires most
existing local exchange carriers (incumbent local exchange carriers, or
"ILECs"), including the telephone subsidiaries, to permit potential competitors
(competitive local exchange carriers, or "CLECs") to (i) purchase service from
the ILEC for resale to CLEC customers, (ii) purchase unbundled network elements
from the ILEC, and/or (iii) interconnect its network with the ILEC's network.
The Act provides for arbitration by the state public utility commission if an
ILEC and a CLEC are unable to reach agreement on the terms of the arrangement
sought by the CLEC.
In August, 1996, the FCC adopted an order (the "Interconnection Order")
relating to these types of arrangements between ILECs and CLECs. The
Interconnection Order set forth cost methodology to be used by state commissions
in arbitration proceedings to set cost-based rates for purchase of unbundled
network elements and for purchase of services for resale, and established
guideline amounts to be used by state commissions in the absence of full cost
studies. Several parties, including the Company, appealed the Interconnection
Order on the grounds that it was inconsistent with the Act. In October, 1996,
the U.S. Court of Appeals for the Eighth Circuit granted a stay of the
effectiveness of the pricing provisions of the Interconnection Order pending a
final decision on their validity.
Notwithstanding the existence of the stay of the Interconnection Order,
negotiations between the telephone subsidiaries and CLECs, and arbitrations
before state public utility commissions, have continued. As of March 1, 1997,
the Company had entered into approximately 40 agreements with ten CLECs covering
all of the Company's state jurisdictions.
The Company expects that these agreements, and the Act, will lead to
substantially increased competition in its local exchange markets in 1997 and
subsequent years. The Company believes that this competition will be both on a
facilities basis and in the form of resale by CLECs of the telephone
subsidiaries' service. Under the various agreements and arbitrations discussed
above, the telephone subsidiaries are generally required to sell their services
to CLECs at discounts ranging from approximately 9% to 25% from the prices the
telephone subsidiaries charge their retail customers.
IntraLATA Toll Services
Competition to offer intrastate intraLATA toll services is currently permitted
in all of the telephone subsidiaries' state jurisdictions where intraLATA toll
services are provided. Increased competition from IXCs has resulted in a
decline in several components of the telephone subsidiaries' toll service
revenues.
Currently, intraLATA toll calls in these jurisdictions are completed by the
telephone subsidiaries unless the customer dials a code to access a competing
carrier. This dialing method would be changed by "presubscription," which would
enable customers to make intraLATA toll calls using another carrier without
having to dial the access code.
10
In general, the Act prohibits a state from requiring intraLATA presubscription
until the earlier of such time as a BOC in the state is authorized to provide
long distance services within the state or three years from the effective date
of the Act. This prohibition does not apply to a final order requiring a BOC to
implement presubscription that was issued on or prior to December 19, 1995 or to
states consisting of a single LATA.
The state public utilities commissions in several of the jurisdictions in
which the telephone subsidiaries operate have adopted orders requiring
implementation of intraLATA presubscription in 1997. The Pennsylvania PUC has
ordered presubscription by July 31, 1997, but the order states that a reasonable
effort should be made to coordinate implementation of presubscription with the
Company's entry into the interLATA market in Pennsylvania. The West Virginia
PSC has ordered presubscription by August 15, 1997. The Delaware PSC adopted an
order that requires implementation of presubscription by July 31, 1997, although
the Company believes that this order is inconsistent with the Act. The New
Jersey BPU has adopted a rule requiring implementation of presubscription by May
5, 1997; the Company has filed a lawsuit in federal court challenging the BPU's
rule as inconsistent with the Act. The Company expects to offer intraLATA
presubscription in the telephone subsidiaries' other jurisdictions coincident
with the Company's entry into the interLATA market in such jurisdictions, as
required by the Act.
Implementation of intraLATA presubscription in a particular jurisdiction prior
to the time the Company is permitted to enter the interLATA market in the same
jurisdiction will adversely affect the Company's ability to compete in the
intraLATA toll services market in that jurisdiction.
Alternative Access
A substantial portion of the telephone subsidiaries' revenues from business
and government customers is derived from a relatively small number of large,
multiple-line subscribers.
The telephone subsidiaries face competition from alternative communications
systems, constructed by large end users, IXCs and alternative access vendors,
which are capable of originating and/or terminating calls without the use of the
telephone subsidiary's plant. The ability of such alternative access providers
to compete with the telephone subsidiaries has been enhanced by the FCC's orders
requiring the telephone subsidiaries to offer virtual collocated interconnection
for special and switched access services.
Other potential sources of competition include cable television systems,
shared tenant services and other non-carrier systems which are capable of
bypassing the telephone subsidiaries' local plant, either partially or
completely, through substitution of special access for switched access or
through concentration of telecommunications traffic on fewer of the telephone
subsidiaries' lines.
Personal Communications Services
Personal communications services ("PCS") also constitute potential sources of
competition to the telephone subsidiaries. PCS consists of wireless portable
telephone services employing digital technology, which will allow customers to
make and receive telephone calls from any location using small handsets, and
which could also be used for data transmission. The Company's investment in PCS
is described below under "Domestic Wireless Communications."
11
Directories
The Company continues to face significant competition from other providers of
directories, as well as competition from other advertising media. In addition,
the Company's electronic interactive yellow pages faces competition from a
growing number of Internet yellow pages publishers.
Public Telephone Services
The Company faces increasing competition in the provision of pay telephone
services from other providers. In addition, the growth of wireless
communications negatively impacts usage of public telephones.
Operator Services
Alternative operator services providers have entered into competition with the
telephone subsidiaries' operator services product line.
LONG DISTANCE SERVICE
Promptly after the effective date of the Act, the Company announced that it
would enter the interLATA market in states outside the Territory. At year-end
the Company, through its subsidiary Bell Atlantic Communications, Inc., had
complied with state entry requirements in 15 states, and was actively marketing
service in three states.
With respect to interLATA services within the Territory, the Company believes
that, as of March 1, 1997, it is close to completing the "checklist" and other
prerequisites under the Act for entering the market in several of its
jurisdictions. The Company expects to apply to the FCC for permission to offer
interLATA services in one or more of its jurisdictions in the second quarter of
1997, and expects to receive such permission for one or more jurisdictions in
the second half of 1997.
DOMESTIC WIRELESS COMMUNICATIONS
The Company provides wireless communications services in the United States
principally through two joint ventures.
Effective July 1, 1995, the Company and NYNEX Corporation combined
substantially all of their domestic cellular and paging businesses and formed
Bell Atlantic NYNEX Mobile ("BANM"), a partnership which provides wireless
services to over 4.4 million customers in the Northeast, mid-Atlantic, Southeast
and Southwest portions of the United States. BANM is a general partnership and
is controlled equally by Bell Atlantic and NYNEX. Bell Atlantic owns an
approximate 62% economic interest in BANM.
BANM competes in each of its principal markets with a second cellular carrier
licensed by the FCC. In late 1995, BANM began to experience additional
competition from entities entering the wireless communications market through
the provision of PCS. Competing PCS providers offer competitive pricing plans,
digital technology, and enhanced calling features. BANM has introduced new
pricing plans designed to meet this new competition, and has begun offering
digital service in five of its markets. It expects to offer digital service in
all markets by the third quarter of 1997. BANM also has begun offering enhanced
calling features over both its analog and digital networks.
In October, 1994, Bell Atlantic, NYNEX, AirTouch Communications and U S WEST,
Inc. formed a partnership, PrimeCo Personal Communications, L.P. ("PrimeCo"), to
provide PCS. In March, 1995, PrimeCo was a successful bidder in FCC auctions
for licenses for spectrum to provide PCS in the following markets, where none
12
of the partners has cellular operations: Chicago; Dallas; Tampa; Houston; Miami;
New Orleans; Milwaukee; Richmond; San Antonio; Jacksonville; and Honolulu.
PrimeCo paid $1.1 billion for these licenses. In November, 1996, PrimeCo
commenced operations in 16 major cities, and at year-end had approximately
37,000 customers.
INTERNATIONAL WIRELESS INVESTMENTS
Mexico
Through purchases of stock in 1993 and 1994 at prices totaling $1.04
billion, the Company acquired a 41.9% economic interest in Grupo Iusacell, S.A.
de C.V. ("Iusacell"), a leading telecommunications company in Mexico whose
primary business is the provision of cellular telephone service. Another
shareowner group owns 48% of Iusacell, and the remaining 10% is held by public
shareowners.
In February, 1997, the Company consummated a restructuring of its
investment in Iusacell to permit the Company to assume management control
without increasing its percentage ownership. The restructuring also required the
Company to convert certain subordinated debentures into equity and to make
additional financing available to Iusacell. The Company expects that the
restructuring will help Iusacell take advantage of growth opportunities in its
existing cellular business and in emerging fixed wireless and long distance
markets.
Italy
In December, 1996, the Company increased its indirect interest in Omnitel
Pronto Italia, S.p.A. ("Omnitel"), an Italian digital cellular
telecommunications company, from 11.7% to 17.5% for a purchase price of
approximately $274 million. Omnitel commenced operations in December, 1995, and
at year-end 1996 had in excess of 710,000 subscribers.
Czech Republic and Slovakia
The Company has an economic interest of approximately 25% in the Eurotel
companies, which have been operating analog cellular systems in the Czech
Republic and Slovakia since 1991. The Czech Eurotel was awarded one of two
digital cellular licenses in 1995, and commenced digital service in July, 1996.
The Slovak government awarded Eurotel a digital license late in 1996, and
Eurotel launched digital service in early 1997. At year-end 1996, the two
companies had approximately 190,000 customers.
TELECOM CORPORATION OF NEW ZEALAND
In 1990, wholly-owned subsidiaries of the Company and Ameritech Corporation
("Ameritech") each purchased approximately 49.8% of the common shares of Telecom
Corporation of New Zealand Limited ("TCNZ") from the New Zealand government for
an aggregate purchase price of approximately $2.4 billion. Under the terms of
the acquisition and subsequent agreements with the New Zealand government, the
Company and Ameritech were required to sell equity interests in TCNZ such that
their combined ownership would, within four years of the acquisition, be reduced
to 49.9%. Through public and private sales during 1991 and 1993, the Company
reduced its ownership interest in TCNZ to 24.8%, and, together with Ameritech,
completed the sell-down obligation. The New Zealand government retains a single
share in TCNZ, which gives the government the right to limit residential local
service price increases to no more than the rate of inflation and requires a
flat-rate local calling option for residential customers.
13
TCNZ continues to be the principal provider of telecommunications services in
New Zealand, offering local service, national and international long distance
service, cellular service and Internet access. TCNZ faces increasing
competition in most of its markets.
VIDEO SERVICES
Over the last several years the Company has conducted several trials and
investigations to assess the viability of providing entertainment programming
and other video services either through the network of the telephone
subsidiaries or through a wireless delivery mechanism.
In October, 1994, the Company, NYNEX and Pacific Telesis Group formed two
partnerships to provide multimedia services. TELE-TV Media, L.P. was formed to
license, acquire and develop entertainment and information services. TELE-TV
Systems, L.P. was formed to provide the systems necessary to deliver these
services over the partners' networks. At that time, each of the three partners
committed to contribute $100M to fund the activities of these partnerships. The
partners have recently engaged in discussions which could lead to changes in the
role and activities of the TELE-TV entities.
The Company presently intends to participate in the video services market
through the eventual deployment of a "switched digital video" network, which
involves the introduction of additional fiber optic facilities into the
telephone subsidiaries' network. The Company is currently providing video
services under this approach in certain areas of New Jersey, in competition with
a cable operator, and has approximately 3,000 customers.
INTERNET SERVICES
During 1996, the Company, through its Bell Atlantic Internet Solutions
subsidiary, began offering Internet access services to residential, business and
institutional customers. Bell Atlantic Internet Solutions also provides
services that assist businesses and institutions in establishing a presence on
the World Wide Web.
CERTAIN CONTRACTS AND RELATIONSHIPS
Certain planning, marketing, procurement, financial, legal, accounting,
technical support and other management services are provided to the telephone
subsidiaries on a centralized basis by Bell Atlantic's wholly-owned subsidiary,
Bell Atlantic Network Services, Inc. ("NSI"). Bell Atlantic Network Funding
Corporation provides short-term financing and cash management services to the
telephone subsidiaries.
Certain corporate services, including those listed above, also are provided to
other subsidiaries on a centralized basis by NSI. Bell Atlantic Financial
Services, Inc. provides short-, medium- and long-term financing services and
cash management services to subsidiaries of the Company other than the telephone
subsidiaries.
The seven RHCs each own (directly or through subsidiaries) a one-seventh
interest in Bell Communications Research, Inc. ("Bellcore"). Pursuant to the
Plan, Bellcore was created to furnish the RHCs and their BOC subsidiaries with
technical assistance such as network planning, engineering and software
development, as well as various other consulting services that could be provided
more effectively on a centralized basis. Bellcore has also served as the
central point of contact for coordinating the efforts of the RHCs in meeting the
national security and emergency preparedness requirements of the federal
government, and helps to mobilize the combined resources of the RHCs in times of
natural disasters. In November, 1996, the seven RHCs entered into a definitive
agreement to
14
sell their interests in Bellcore to Science Applications International
Corporation. The transaction is subject to regulatory approvals, and is expected
to be completed near the end of 1997. After the sale is completed, centralized
national security and emergency preparedness functions will be performed for the
RHCs by National Telecommunications Association, owned by the seven RHCs.
EMPLOYEES
As of December 31, 1996, the Company and its subsidiaries had approximately
62,600 employees. Approximately 70% of the employees of the Company and its
subsidiaries are represented by unions. Of those so represented, approximately
80% are represented by the Communications Workers of America, and approximately
20% are represented by the International Brotherhood of Electrical Workers, both
of which are affiliated with the American Federation of Labor-Congress of
Industrial Organizations.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
Information set forth above regarding expected or possible future events is
forward-looking and subject to risks and uncertainties. For those statements,
the Company claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
The following important factors could affect the future results of the Company
and could cause those results to differ materially from those expressed in the
forward-looking statements: (i) materially adverse changes in economic
conditions in the markets served by the Company; (ii) a significant delay in the
expected closing of the merger; (iii) the final outcome of FCC rulemakings with
respect to interconnection agreements, access charge reform and universal
service; (iv) the timing of presubscription for toll services; (v) future state
regulatory actions in the telephone subsidiaries' operating areas; (vi) the
extent, timing and success of competition from others in the local telephone and
toll service markets; and (vii) the timing of entry and profitability of the
Company in the long distance market.
15
Item 2. Properties
GENERAL
The principal properties of the Company do not lend themselves to simple
description by character and location. The Company's investment in plant,
property and equipment, 98% of which was held by the telephone subsidiaries in
1996 and 1995, consisted of the following at December 31:
1996 1995
----- -----
Central office equipment................................ 39% 38%
Cable, wiring and conduit............................... 37 37
Other equipment......................................... 12 12
Land and buildings...................................... 9 9
Other................................................... 3 4
---- ----
100% 100%
==== ====
"Central office equipment" consists of switching equipment, transmission
equipment and related facilities. "Cable, wiring and conduit" consists
primarily of aerial cable, underground cable, conduit and wiring. "Other
equipment" consists of public telephone instruments and telephone equipment
(including PBXs) used by the telephone subsidiaries in their operations, poles,
furniture, office equipment, and vehicles and other work equipment. "Land and
buildings" consists of land owned in fee and improvements thereto, principally
central office buildings. "Other" property consists primarily of plant under
construction, capital leases and leasehold improvements.
The customers of the telephone subsidiaries are served by electronic switching
systems that provide a wide variety of services. The telephone subsidiaries'
network is in a transition from an analog to a digital network, which provides
the capabilities to furnish advanced data transmission and information
management services. At December 31, 1996, approximately 86% of the access
lines were served by digital capability.
CAPITAL EXPENDITURES
The telephone subsidiaries have been making and expect to continue to make
significant capital expenditures to meet the demand for communications services
and to further improve such services. Capital expenditures of the telephone
subsidiaries were approximately $2.5 billion in 1996, $2.4 billion in 1995 and
$2.2 billion in 1994. The total investment in plant, property and equipment was
approximately $34.8 billion at December 31, 1996, $33.6 billion at December 31,
1995 and $33.7 billion at December 31, 1994, in each case after giving effect to
retirements, but before deducting accumulated depreciation at such date.
16
Item 3. Legal Proceedings
General
The Company and some of its subsidiaries are parties to litigation and other
claims arising in the ordinary course of business, including matters relating to
employment disputes, customer claims, taxes, contracts, and alleged torts. Some
of these claims purport to be class actions.
In January, 1991, the Company, its Chief Executive Officer and its former
Chief Financial Officer were named as defendants in several identical class
action complaints. These complaints, which were consolidated in a single
proceeding in the United States District Court for the Eastern District of
Pennsylvania and have subsequently been amended, allege that, during a class
period from June 14, 1990 through January 22, 1991, the plaintiffs purchased
shares of Bell Atlantic stock at inflated prices as a result of the defendants'
alleged failure to disclose material information regarding certain aspects of
the Company's financial performance and prospects. The trial court's 1991
decision granting defendants' motion to dismiss this action was reversed by the
United States Court of Appeals for the Third Circuit upon appeal by the
plaintiffs. Discovery in this action has been completed and defendants filed a
motion for summary judgment in June, 1996.
While complete assurance cannot be given as to the outcome of any litigation,
in the opinion of the Company's management, any monetary liability or financial
impact to which the Company would be subject after final adjudication of the
foregoing matters would not be material in amount to the results of operations
or financial position of the Company.
Pre-Divestiture Contingent Liabilities and Litigation
The Plan provides for the recognition and payment by AT&T and the former BOCs
(including the telephone subsidiaries) of liabilities that are attributable to
pre-Divestiture events but do not become certain until after Divestiture. These
contingent liabilities relate principally to litigation and other claims with
respect to the former Bell System's rates, taxes, contracts and torts (including
business torts, such as alleged violations of the antitrust laws). Except to
the extent that affected parties otherwise agree, contingent liabilities that
are attributable to pre-Divestiture events are shared by AT&T and the BOCs in
accordance with formulas prescribed by the Plan, whether or not an entity was a
party to the proceeding and regardless of whether an entity was dismissed from
the proceeding by virtue of settlement or otherwise. Each company's allocable
share of liability under these formulas depends on several factors, including
the type of contingent liability involved and each company's relative net
investment as of the effective date of Divestiture. Under the formula generally
applicable to most of the categories of these contingent liabilities, the
telephone subsidiaries' aggregate allocable share of liability is approximately
10.2%.
AT&T and various of its subsidiaries and the BOCs (including in some cases one
or more of the telephone subsidiaries) have been and are parties to various
types of litigation relating to pre-Divestiture events, including actions and
proceedings involving environmental claims and allegations of violations of
equal employment laws. Damages, if any, ultimately awarded in the remaining
actions relating to pre-Divestiture events could have a financial impact on the
Company whether or not the Company is a defendant since such damages will be
treated as contingent liabilities and allocated in accordance with the
allocation rules established by the Plan.
Effective in 1994, the Company and the other Regional Holding Companies agreed
to discontinue sharing of new pre-Divestiture claims and certain existing claims
other than claims relating to environmental matters. AT&T is not a party to
this agreement.
While complete assurance cannot be given as to the outcome of any contingent
liabilities or litigation, in the opinion of the Company's management, any
monetary liability or financial impact to which the Company would be subject
after final adjudication of all of the remaining potential or actual pre-
Divestiture claims would not be material in amount to the results of operations
or financial position of the Company.
17
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the Company's shareowners was held on November 8, 1996.
At this meeting, the shareowners approved the Amended and Restated Agreement
and Plan of Merger, dated as of April 21, 1996, as amended and restated on July
2, 1996, between NYNEX Corporation and Bell Atlantic Corporation, and related
transactions, including the issuance of shares of Bell Atlantic Common Stock and
the amendment and restatement of Bell Atlantic Corporation's certificate of
incorporation. The vote was 315,431,385 for and 8,391,298 against, with
2,656,918 shares abstaining and no broker non-votes.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to the Company's
executive officers.
Held
Name Age Office Since
- --------------------------- --- --------------------------------------- -----
Raymond W. Smith 59 Chairman of the Board and Chief 1989
Executive Officer
Lawrence T. Babbio, Jr. 52 Vice Chairman 1995
James G. Cullen 54 Vice Chairman 1995
William O. Albertini 53 Executive Vice President and Chief 1995
Financial Officer
P. Alan Bulliner 53 Vice President - Corporate Secretary 1992
and Counsel
Patrick C. G. Coulter 56 Vice President - Corporate 1995
Communications
John F. Gamba 58 Senior Vice President - Corporate 1995
Resources and Performance Assurance
Alexander H. Good 47 President and Chief Executive Officer 1996
Bell Atlantic International Inc., and
Vice President - Strategic Planning
and Development
Bruce S. Gordon 51 Group President - Consumer and Small 1993
Business Services, Bell Atlantic
Network Services, Inc.
Stuart C. Johnson 54 Group President - Large Business and 1993
Information Services, Bell Atlantic
Network Services, Inc.
Thomas R. McKeough 50 Vice President - Mergers and 1994
Acquisitions and Associate
General Counsel
Kevin P. Pennington 40 Vice President - Human Resources 1995
Doreen A. Toben 47 Vice President - Finance and Controller 1995
Ellen C. Wolf 43 Vice President - Treasurer 1995
James R. Young 45 Vice President - General Counsel 1992
Prior to serving as an executive officer of the Company, each of the above
officers, with the exception of Messrs. Coulter, Good, Johnson, and Pennington,
have held high level managerial positions with the Company or one of its
subsidiaries for at least five years. Prior to joining the Company in 1995, Mr.
Coulter was with Raytheon Company, serving as Director of Media Relations and
Advertising (from 1991 to 1992) and Director of Corporate Communications (from
1992 to 1995). From 1990 until joining the Company in 1994, Mr. Good served as
Senior Vice President of Mobile Telecommunications Technology Corporation (MTEL)
and President of MTEL International. From 1987 until joining the Company in
1992, Mr. Johnson served as President, GTE-Contel Federal Sector for GTE
Corporation. Prior to joining the Company in 1995, Mr. Pennington served as
Executive Vice President-Corporate Services and Chief Administrative Officer at
Clark U.S.A., Inc. (from 1993 to 1995) and as Vice President-Human Resources at
Mercy Health System (from 1991 to 1993).
Officers are not elected for a fixed term of office but are removable at the
discretion of the Board of Directors.
18
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The principal market for trading in the common stock of Bell Atlantic
Corporation is the New York Stock Exchange. The common stock is also listed in
the United States on the Boston, Chicago, Pacific, and Philadelphia stock
exchanges. As of December 31, 1996, there were 870,605 shareowners of record.
High and low stock prices, as reported on the New York Stock Exchange
composite tape of transactions, and dividend data are as follows:
Market Price Cash
--------------------- Dividend
High Low Declared
------------- ------- --------
1996: First Quarter........... $74 7/8 $61 1/8 $.72*
Second Quarter.......... 67 3/4 59 .72
Third Quarter........... 64 55 1/8 .72
Fourth Quarter.......... 68 58 1/2 .72
1995: First Quarter........... $55 3/4 $48 3/8 $.70
Second Quarter.......... 58 7/8 52 .70
Third Quarter........... 61 7/8 54 7/8 .70
Fourth Quarter.......... 68 7/8 59 .70
*Includes a payment of $.005 per common share for redemption of rights
under the Company's Shareholder Rights Plan.
Item 6. Selected Financial Data
The Selected Financial and Operating Data on page 10 of the Company's 1996
Annual Report to shareowners is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Management's Discussion and Analysis of Results of Operations and
Financial Condition on pages 11 through 20 of the Company's 1996 Annual Report
to shareowners is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Report of Independent Accountants, Consolidated Statements of Operations,
Consolidated Balance Sheets, Consolidated Statements of Changes in Shareowners'
Investment, Consolidated Statements of Cash Flows, and Notes to Consolidated
Financial Statements on pages 21 through 45 of the Company's 1996 Annual Report
to shareowners are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
19
PART III
Item 10. Directors and Executive Officers of Registrant
For information with respect to the executive officers of the Company, see
"Executive Officers of the Registrant" at the end of Part I of this Report. For
information with respect to the Directors of the Company, see "Election of
Directors" on pages 1 through 8 of the Proxy Statement for the Company's 1997
Annual Meeting of Shareowners, which is incorporated herein by reference. For
information regarding compliance with Section 16(a) of the Securities Exchange
Act of 1934, see "Section 16(a) Beneficial Ownership Reporting Compliance" on
page 20 of the Proxy Statement for the Company's 1997 Annual Meeting of
Shareowners, which is incorporated herein by reference.
Item 11. Executive Compensation
For information with respect to executive compensation, see "Executive
Compensation" on pages 12 through 17, "Stock Performance" on page 19, and
"Employment Agreements" on pages 20 and 21 of the Proxy Statement for the
Company's 1997 Annual Meeting of Shareowners, which are incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
For information with respect to the security ownership of the Directors and
Executive Officers of the Company, see "Ownership of Bell Atlantic Common Stock"
on page 18 of the Proxy Statement for the Company's 1997 Annual Meeting of
Shareowners, which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None.
20
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
See Index to Financial Statements and Financial Statement Schedule
appearing on Page F-1.
(2) Financial Statement Schedules
See Index to Financial Statements and Financial Statement Schedule
appearing on Page F-1.
(3) Exhibits.
Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.
Exhibit
Number
- ------
2 Amended and Restated Agreement and Plan of Merger, dated April 21,
1996, as amended and restated on July 2, 1996, between NYNEX
Corporation, and Bell Atlantic Corporation. (Exhibit 2 to
Registration Statement on Form S-4 No. 333-11573.)
3a Certificate of Incorporation of Bell Atlantic Corporation ("Bell
Atlantic"), dated October 7, 1983. (Exhibit 3a to Registration
Statement on Form S-1 No. 2-87842, File No. 1-8606.)
3b Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 9, 1986 and filed May 16, 1986. (Exhibit 3b to
Form SE dated March 27, 1987, File No. 1-8606.)
3c Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 6, 1987 and filed May 8, 1987. (Exhibit 3c to
Form SE dated March 28, 1988, File No. 1-8606.)
3d Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 10, 1990 and filed June 29, 1990. (Exhibit 3d to
Form SE dated March 28, 1991, File No. 1-8606.)
3e By-Laws of Bell Atlantic, as amended through June 23, 1992. (Exhibit
3e to Form SE dated March 29, 1993, File No. 1-8606).
4 No instrument which defines the rights of holders of long-term debt,
of the Company and all of its consolidated subsidiaries, is filed
herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant
to this regulation, Bell Atlantic hereby agrees to furnish a copy of
any such instrument to the SEC upon request.
10a Bell Atlantic Senior Management Short Term Incentive Plan, as amended
and restated effective as of January 22 1996.*
10b Bell Atlantic Senior Management Long-Term Disability and Survivor
Protection Plan, as amended. (Exhibit 10h to Form SE filed on March
27, 1986, File No. 1-8606.)*
21
10b (i) Resolutions amending the Plan, effective as of January 1,
1989. (Exhibit 10d to Form SE dated March 29, 1989, File
No. 1-8606.)*
10c Bell Atlantic Personal Financial Services Program, as amended and
restated as of July 1, 1995. (Exhibit 10c to Form 10-K for the year
ended December 31, 1995, File No. 1-8606.)*
10d Bell Atlantic Deferred Compensation Plan for Outside Directors, as
amended and restated as of February 1, 1995. (Exhibit 10d to Form 10-
K for the year ended December 31, 1994, File No. 1-8606.)*
10e Bell Atlantic Insurance Plan for Directors. (Exhibit 10hh to
Registration Statement on Form S-1 No. 2-87842, File No. 1-8606.)*
10f Description of Bell Atlantic Plan for Non-Employee Directors' Travel
Accident Insurance. (Exhibit 10ii to Registration Statement on
Form S-1 No. 2-87842, File No. 1-8606.)*
10g Section 6 from Bell Atlantic Cash Balance Plan regarding limitations
on payment of pension amounts which exceed the limitations contained
in the Employee Retirement Income Security Act of 1974.*
10h Bell Atlantic Senior Management Retirement Income Plan, as amended
and restated effective as of January 1, 1996.*
10i Bell Atlantic Deferred Compensation Plan, as amended and restated as
of January 1, 1997.*
10j Bell Atlantic 1985 Incentive Stock Option Plan, as amended and
restated as of July 1, 1996.*
10k Bell Atlantic Retirement Plan for Outside Directors, as amended and
restated as of January 1, 1996. (Exhibit 10k to Form 10-K for the
year ended December 31, 1995, File No. 1-8606.)*
10l Bell Atlantic Stock Compensation Plan for Outside Directors, as
amended and restated as of January 1, 1996. (Exhibit 10l to Form 10-K
for the year ended December 31, 1995, File No. 1-8606.)*
10m Bell Atlantic Corporation Directors' Charitable Giving Program.
(Exhibit 10p to Form SE dated March 29, 1990, File No. 1-8606.)*
10m (i) Resolutions amending and partially terminating the Program.
(Exhibit 10p to Form SE dated March 29, 1993, File No. 1-8606.)*
10n Employment Agreement, dated May 2, 1995, between the Company and
Lawrence T. Babbio, Jr. (Exhibit 10n to Form 10-K for the year ended
December 31, 1995, File No. 1-8606.)*
10n (i) Amendment, dated July 10, 1996, to Employment Agreement,
dated May 2, 1995, between the Company and Lawrence T. Babbio, Jr.*
10o Employment Agreement, dated July 10, 1996, between the Company and
Lawrence T. Babbio, Jr.*
22
10p Resolution, dated January 24, 1994, granting Lawrence T. Babbio, Jr.
certain nonqualified stock options to purchase American Depository
Receipts representing Series L shares of the capital stock of Grupo
Iusacell, S.A. de C.V. (Exhibit 10s to Form 10-K for the year ended
December 31, 1993, File No. 1-8606.)*
10q Form of stock option grant to Lawrene T. Babbio, Jr. and William O.
Albertini, dated February 18, 1997, containing terms and conditions
of certain nonqualifed stock options to purchase American Depository
Receipts representing Series L shares of the capital stock of Grupo
Iusacell, S.A. de C.V. *
10r Employment Agreement, dated May 2, 1995, between the Company and
James G. Cullen. (Exhibit 10p to Form 10-K for the year ended
December 31, 1995, File No. 1-8606.)*
10r(i) Amendment, dated June 30, 1996, to Employment Agreement
dated, May 2, 1995 between the Company and James G. Cullen.*
10s Employment Agreement, dated June 30, 1996, between the Company and
James G. Cullen.*
10t Employment Agreements with William O. Albertini, Bruce S. Gordon,
Stuart C. Johnson and James R. Young. (Exhibit 10(e) to Registration
Statement on Form S-4 No. 333-11573.)*
10u Forms of Stay Incentive Agreement and Separation and Non-Compete
Agreement with P. Alan Bulliner, Patrick C.G. Coulter, Alexander H.
Good, Thomas R. McKeough, Kevin P. Pennington, Doreen A. Toben and
Ellen C. Wolf. (Exhibit 10(f) to Registration Statement on Form S-4
No. 333-11573.)*
10v Term Sheet, dated December 18, 1996 between the Company and Stuart C.
Johnson reciting the terms and conditions of a new employment
agreement.
10w Non-Compete and Proprietary Information Agreement, dated August 9,
1993, among the Company, Bell Atlantic Network Services, Inc. and
Stuart C. Johnson. (Exhibit 10w to Form 10-K for the year ended
December 31, 1993, File No. 1-8606.)*
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the Company's Annual Report to shareowners for the year
ended December 31, 1996.
18 Letter regarding change in accounting principle.
21 List of subsidiaries of Bell Atlantic.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
99a Annual Report on Form 11-K for the Bell Atlantic Savings Plan for
Salaried Employees for the year ended December 31, 1996. (To be filed
by amendment.)
99b Annual Report on Form 11-K for the Bell Atlantic Savings and Security
Plan (Non-Salaried Employees) for the year ended December 31, 1996.
(To be filed by amendment.)
- ----------
*Indicates management contract or compensatory plan or arrangement.
23
Shareowners may request a copy of the exhibits to this Annual Report on
Form 10-K by writing to the Corporate Secretary, Bell Atlantic Corporation, 1717
Arch Street, Philadelphia, Pennsylvania 19103.
(b) Current Reports on Form 8-K filed during the quarter ended December 31,
1996:
A Current Report on Form 8-K, dated October 17, 1996, was filed regarding
the Company's third quarter 1996 financial results.
24
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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 CORPORATION
By /s/ William O. Albertini
--------------------------------------
William O. Albertini
Executive Vice President
and Chief Financial Officer
March 24, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
+++++
Principal Executive Officer: +
Raymond W. Smith Chairman of the +
Board and Chief +
Executive Officer +
+
Principal Financial Officer: +
William O. Albertini Executive Vice +
President and Chief +
Financial Officer +
+
Principal Accounting Officer: +
Doreen A. Toben Vice President - +
Finance and Controller +
+
Directors: +
William W. Adams +++++ By /s/ William O. Albertini
William O. Albertini + --------------------------
Lawrence T. Babbio, Jr. + William O. Albertini
Thomas E. Bolger + (individually and as
Frank C. Carlucci + attorney-in-fact)
James G. Cullen + March 24, 1997
James H. Gilliam, Jr. +
Thomas H. Kean +
John F. Maypole +
Joseph Neubauer +
Thomas H. O'Brien +
Eckhard Pfeiffer +
Rozanne L. Ridgway +
Raymond W. Smith +
Shirley Young +++++
25
BELL ATLANTIC CORPORATION
Index to Financial Statements and Financial Statement Schedule
Page Number
--------------------
Annual
Form Report to
10-K Shareowners
---- -----------
Report of Independent Accountants...................... F-2 21
Consolidated Statements of Operations-
For the years ended December 31, 1996, 1995 and 1994.. -- 22
Consolidated Balance Sheets-
December 31, 1996 and 1995............................ -- 23
Consolidated Statements of Changes in Shareowners'
Investment-
For the years ended December 31, 1996, 1995 and 1994.. -- 24
Consolidated Statements of Cash Flows-
For the years ended December 31, 1996, 1995,
and 1994.............................................. -- 25
Notes to Consolidated Financial Statements............. -- 26-45
Schedule II--Valuation and Qualifying Accounts--
For the years ended December 31, 1996, 1995 and
1994................................................. F-3 --
Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareowners of
Bell Atlantic Corporation
Our report on the consolidated financial statements of Bell Atlantic Corporation
and subsidiaries has been incorporated by reference in this Form 10-K from page
21 of the 1996 Annual Report to shareowners of Bell Atlantic Corporation and
subsidiaries. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in the index
on page F-1 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 5, 1997
F-2
BELL ATLANTIC CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN MILLIONS)
ADDITIONS
--------------------
CHARGED TO
BALANCE AT CHARGED OTHER BALANCE
BEGINNING TO ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES --NOTE(a) --NOTE(b) OF PERIOD
- ---------------------------------------------------------- ---------- -------- ---------- ---------- ---------
Allowance for Uncollectible
Accounts Receivable:
Year 1996............................................... $189.8 $207.4 $192.9 $341.8 $248.3
Year 1995............................................... $188.9 $176.2 $203.5 $378.8 $189.8
Year 1994............................................... $192.6 $176.8 $197.8 $378.3 $188.9
Allowance for Obsolete
Inventory:
Year 1996............................................... $ 1.8 $ 2.4 $ .3 $ 1.3 $ 3.2
Year 1995............................................... $ 18.3 $ 3.6 $ .1 $ 20.2 $ 1.8
Year 1994............................................... $ 18.3 $ 5.0 $ -- $ 5.0 $ 18.3
Valuation Allowances for
Deferred Tax Assets:
Year 1996............................................... $ 9.6 $ 10.8 $ 1.3 $ 2.5 $ 19.2
Year 1995............................................... $ 22.4 $ 1.8 $ -- $ 14.6 $ 9.6
Year 1994............................................... $ 74.8 $ 5.6 $ -- $ 58.0 $ 22.4
Other Allowances (c):
Year 1996............................................... $ 12.2 $ 1.3 $ 3.9 $ 8.3 $ 9.1
Year 1995............................................... $ 10.8 $ 2.1 $ 5.6 $ 6.3 $ 12.2
Year 1994............................................... $ 10.7 $ 4.9 $ -- $ 4.8 $ 10.8
- ----------------
(a) Allowance for Uncollectible Accounts Receivable includes (1) amounts
previously written off which were credited directly to this account when
recovered, and (2) accruals charged to accounts payable for anticipated
uncollectible charges on purchases of accounts receivable from others which
were billed by the Company.
(b) Amounts written off as uncollectible or obsolete or transferred to other
accounts (except for the valuation allowance for deferred tax assets). In
1995 and 1994, amounts include ending balances for businesses sold during
the year.
(c) Other Allowances include allowances for notes receivable, obsolete
equipment and allowances for probable losses incurred in the directory
businesses arising in the normal course of operations.
F-3
EXHIBITS TO FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NO. 1-8606
BELL ATLANTIC CORPORATION
EXHIBIT INDEX
Exhibit
Number
2 Amended and Restated Agreement and Plan of Merger, dated April 21,
1996, as amended and restated on July 2, 1996, between NYNEX
Corporation, and Bell Atlantic Corporation. (Exhibit 2 to
Registration Statement on Form S-4 No. 333-11573.)
3a Certificate of Incorporation of Bell Atlantic Corporation ("Bell
Atlantic"), dated October 7, 1983. (Exhibit 3a to Registration
Statement on Form S-1 No. 2-87842, File No. 1-8606.)
3b Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 9, 1986 and filed May 16, 1986. (Exhibit 3b to
Form SE dated March 27, 1987, File No. 1-8606.)
3c Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 6, 1987 and filed May 8, 1987. (Exhibit 3c to
Form SE dated March 28, 1988, File No. 1-8606.)
3d Certificate of Amendment of Certificate of Incorporation of Bell
Atlantic, dated May 10, 1990 and filed June 29, 1990. (Exhibit 3d to
Form SE dated March 28, 1991, File No. 1-8606.)
3e By-Laws of Bell Atlantic, as amended through June 23, 1992. (Exhibit
3e to Form SE dated March 29, 1993, File No. 1-8606).
4 No instrument which defines the rights of holders of long-term debt,
of the Company and all of its consolidated subsidiaries, is filed
herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant
to this regulation, Bell Atlantic hereby agrees to furnish a copy of
any such instrument to the SEC upon request.
10a Bell Atlantic Senior Management Short Term Incentive Plan, as amended
and restated effective as of January 22 1996.*
10b Bell Atlantic Senior Management Long-Term Disability and Survivor
Protection Plan, as amended. (Exhibit 10h to Form SE filed on March
27, 1986, File No. 1-8606.)*
10b (i) Resolutions amending the Plan, effective as of January 1,
1989. (Exhibit 10d to Form SE dated March 29, 1989, File
No. 1-8606.)*
10c Bell Atlantic Personal Financial Services Program, as amended and
restated as of July 1, 1995. (Exhibit 10c to Form 10-K for the year
ended December 31, 1995, File No. 1-8606.)*
10d Bell Atlantic Deferred Compensation Plan for Outside Directors, as
amended and restated as of February 1, 1995. (Exhibit 10d to Form 10-
K for the year ended December 31, 1994, File No. 1-8606.)*
10e Bell Atlantic Insurance Plan for Directors. (Exhibit 10hh to
Registration Statement on Form S-1 No. 2-87842, File No. 1-8606.)*
10f Description of Bell Atlantic Plan for Non-Employee Directors' Travel
Accident Insurance. (Exhibit 10ii to Registration Statement on
Form S-1 No. 2-87842, File No. 1-8606.)*
10g Section 6 from Bell Atlantic Cash Balance Plan regarding limitations
on payment of pension amounts which exceed the limitations contained
in the Employee Retirement Income Security Act of 1974.*
10h Bell Atlantic Senior Management Retirement Income Plan, as amended
and restated effective as of January 1, 1996.*
10i Bell Atlantic Deferred Compensation Plan, as amended and restated as
of January 1, 1997.*
10j Bell Atlantic 1985 Incentive Stock Option Plan, as amended and
restated as of July 1, 1996.*
10k Bell Atlantic Retirement Plan for Outside Directors, as amended and
restated as of January 1, 1996. (Exhibit 10k to Form 10-K for the
year ended December 31, 1995, File No. 1-8606.)*
10l Bell Atlantic Stock Compensation Plan for Outside Directors, as
amended and restated as of January 1, 1996. (Exhibit 10l to Form 10-K
for the year ended December 31, 1995, File No. 1-8606.)*
10m Bell Atlantic Corporation Directors' Charitable Giving Program.
(Exhibit 10p to Form SE dated March 29, 1990, File No. 1-8606.)*
10m (i) Resolutions amending and partially terminating the Program.
(Exhibit 10p to Form SE dated March 29, 1993, File No. 1-8606.)*
10n Employment Agreement, dated May 2, 1995, between the Company and
Lawrence T. Babbio, Jr. (Exhibit 10n to Form 10-K for the year ended
December 31, 1995, File No. 1-8606.)*
10n (i) Amendment, dated July 10, 1996, to Employment Agreement,
dated May 2, 1995, between the Company and Lawrence T. Babbio, Jr.*
10o Employment Agreement, dated July 10, 1996, between the Company and
Lawrence T. Babbio, Jr.*
10p Resolution, dated January 24, 1994, granting Lawrence T. Babbio, Jr.
certain nonqualified stock options to purchase American Depository
Receipts representing Series L shares of the capital stock of Grupo
Iusacell, S.A. de C.V. (Exhibit 10s to Form 10-K for the year ended
December 31, 1993, File No. 1-8606.)*
10q Form of stock option grant to Lawrene T. Babbio, Jr. and William O.
Albertini, dated February 18, 1997, containing terms and conditions
of certain nonqualifed stock options to purchase American Depository
Receipts representing Series L shares of the capital stock of Grupo
Iusacell, S.A. de C.V. *
10r Employment Agreement, dated May 2, 1995, between the Company and
James G. Cullen. (Exhibit 10p to Form 10-K for the year ended
December 31, 1995, File No. 1-8606.)*
10r(i) Amendment, dated June 30, 1996, to Employment Agreement
dated, May 2, 1995 between the Company and James G. Cullen.*
10s Employment Agreement, dated June 30, 1996, between the Company and
James G. Cullen.*
10t Employment Agreements with William O. Albertini, Bruce S. Gordon,
Stuart C. Johnson and James R. Young. (Exhibit 10(e) to Registration
Statement on Form S-4 No. 333-11573.)*
10u Forms of Stay Incentive Agreement and Separation and Non-Compete
Agreement with P. Alan Bulliner, Patrick C.G. Coulter, Alexander H.
Good, Thomas R. McKeough, Kevin P. Pennington, Doreen A. Toben and
Ellen C. Wolf. (Exhibit 10(f) to Registration Statement on Form S-4
No. 333-11573.)*
10v Term Sheet, dated December 18, 1996 between the Company and Stuart C.
Johnson reciting the terms and conditions of a new employment
agreement.
10w Non-Compete and Proprietary Information Agreement, dated August 9,
1993, among the Company, Bell Atlantic Network Services, Inc. and
Stuart C. Johnson. (Exhibit 10w to Form 10-K for the year ended
December 31, 1993, File No. 1-8606.)*
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the Company's Annual Report to shareowners for the year
ended December 31, 1996.
18 Letter regarding change in accounting principle.
21 List of subsidiaries of Bell Atlantic.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.
99a Annual Report on Form 11-K for the Bell Atlantic Savings Plan for
Salaried Employees for the year ended December 31, 1996. (To be filed
by amendment.)
99b Annual Report on Form 11-K for the Bell Atlantic Savings and Security
Plan (Non-Salaried Employees) for the year ended December 31, 1996.
(To be filed by amendment.)
- ----------
*Indicates management contract or compensatory plan or arrangement.