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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(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, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3488
BELL ATLANTIC - NEW JERSEY, INC.
(Former Name: New Jersey Bell Telephone Company)
A New Jersey Corporation I.R.S. Employer Identification No. 22-1151770
540 Broad Street, Newark, New Jersey 07101
Telephone Number (201) 649-9900
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Securities registered pursuant to Section 12(b) of the Act: See attached
Schedule A.
Securities registered pursuant to Section 12(g) of the Act: None.
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF BELL ATLANTIC CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1) (a) AND (b) OF FORM 10-K
AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO
GENERAL INSTRUCTION J(2).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
BELL ATLANTIC - NEW JERSEY, INC.
SCHEDULE A
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------------------------------ ------------------
* Forty Year 8 1/4% Debentures, due February 15, 1994 New York Stock
Exchange
Forty Year 7 1/4% Debentures, due April 1, 2011 "
Forty Year 7 3/8% Debentures, due June 1, 2012 "
** Forty Year 7 3/4% Debentures, due September 1, 2013 "
** Forty Year 8% Debentures, due September 15, 2016 "
- --------------------------------------------------------------------------------
* These debentures were redeemed on January 7, 1994.
** These debentures were redeemed on March 2, 1994.
BELL ATLANTIC - NEW JERSEY, INC.
TABLE OF CONTENTS
Item No. Page
- -------- ----
PART I
1. Business................................................... 1
2. Properties................................................. 14
3. Legal Proceedings.......................................... 15
4. Submission of Matters to a Vote of Security Holders ....... 16
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters .......................................... 16
6. Selected Financial Data ...................................... 16
7. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction J(2)) ........... 17
8. Financial Statements and Supplementary Data .................. 24
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ..................................... 24
PART III
10. Directors and Executive Officers of the Registrant ........... 24
11. Executive Compensation........................................ 24
12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 24
13. Certain Relationships and Related Transactions................ 24
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ..................................................... 24
UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 24, 1994.
BELL ATLANTIC - NEW JERSEY, INC.
PART I
ITEM 1. BUSINESS
GENERAL
Bell Atlantic - New Jersey, Inc. (formerly New Jersey Bell Telephone Company)
(the "Company") is incorporated under the laws of the State of New Jersey and
has its principal offices at 540 Broad Street, Newark, New Jersey 07101
(telephone number 201-649-9900). The Company is a wholly owned subsidiary of
Bell Atlantic Corporation ("Bell Atlantic"), which 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
the American Telephone and Telegraph Company ("AT&T") related to exchange
telecommunications, exchange access functions, printed directories and cellular
mobile communications.
The Company presently serves a territory consisting of three 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 the Company may provide
telephone service.
The Company provides two basic types of telecommunications services. First,
the Company transports telecommunications traffic between subscribers located
within the same LATA ("intraLATA service"), 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 other pay telephone providers).
Among other local services provided are Centrex (telephone company 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)/800 services (volume discount offerings for customers with highly
concentrated demand). The Company also earns toll revenue from the provision of
telecommunications service between LATAs ("interLATA service") in the 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 Company provides exchange access service, which links a
subscriber's telephone or other equipment to the transmission facilities of
interexchange carriers which, in turn, provide interLATA telecommunications
service to their customers. See "Competiton - IntraLATA Toll Competition".
The communications industry is currently undergoing fundamental changes
driven by the accelerated pace of technological innovation, the convergence of
the telecommunications, cable television, information services and entertainment
businesses, and a regulatory environment in which many traditional regulatory
barriers are being lowered and competition permitted or encouraged. Although no
definitive predictions can be made of the market opportunities these changes
will present or whether Bell Atlantic and its subsidiaries, including the
Company, will be able successfully to take advantage of these opportunities,
Bell Atlantic is positioning itself to be a leading communications, information
services and entertainment company.
OPERATIONS
During 1993, Bell Atlantic reorganized certain functions formerly performed
by each of the seven Bell System operating companies ("BOCs") transferred to it
pursuant to the Divestiture, including the Company (collectively, the "Network
Services Companies"), into nine lines of business ("LOBs") organized across the
Network Services Companies around specific market segments. The Network
Services Companies, however, remain responsible within their respective service
areas for the provision of telephone services, for financial performance and for
regulatory matters. The nine LOBs are:
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BELL ATLANTIC - NEW JERSEY, INC.
The Consumer Services LOB markets communications services to residential
-----------------
customers within the service territories of the Network Services Companies,
including the service territory of the Company, and plans in the future to
market information services and entertainment programming.
The Carrier Services LOB markets (i) switched and special access to the
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Company's local exchange network, and (ii) billing and collection services,
including recording, rating, bill processing and bill rendering. The principal
customers of this LOB are interexchange carriers; AT&T is the largest single
customer. Other customers include business customers and government agencies
with their own special access network connections, wireless customers 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 or 100
Centrex lines).
The Large Business Services LOB markets communications and information
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services to large businesses (customers having more than 20 access lines or more
than 100 Centrex 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, intelligent vehicle
highway systems), video services (distance learning, telemedicine, surveillance,
videoconferencing) and integrated multi-media applications services.
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.
The Public and Operator Services LOB markets pay telephone and operator
----------------------------
services in the service territories of the Network Services Companies to meet
consumer needs for accessing public networks, locating and identifying network
subscribers, providing calling assistance and arranging billing alternatives
(e.g., calling card, collect and third party calls).
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.
The Information Services LOB has been established to provide programming
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services, including on-demand entertainment, transactions and interactive
multimedia applications within the Territory and in selected other markets. See
"FCC Regulation and Interstate Rates - Telephone Company Provision of Video Dial
Tone and Video Programming".
The Network LOB manages the technologies, services and systems platforms
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required by the other eight LOBs and the Network Services Companies, including
the Company, to meet the needs of their respective customers, including, without
limitation, switching, feature development and on-premises installation and
maintenance services.
The Company has been making and expects to continue to make significant
capital expenditures on its networks to meet the demand for communications
services and to further improve such services. Capital expenditures of the
Company were approximately $609 million in 1991, $596 million in 1992 and $590
million in 1993. The total investment of the Company in plant, property and
equipment decreased from approximately $8.39 billion at December 31, 1991 to
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BELL ATLANTIC - NEW JERSEY, INC.
approximately $8.08 billion at December 31, 1992, and increased to approximately
$8.38 billion at December 31, 1993, in each case after giving effect to
retirements, but before deducting accumulated depreciation at such date.
The Company is projecting construction expenditures for 1994 of approximately
$630 million. However, subject to regulatory approvals, the Network Services
Companies, including the Company, plan to allocate capital resources to the
deployment of broadband network platforms (technologies ultimately capable of
providing a switched facility for access to and transport of high-speed data
services, video-on-demand, and image and interactive multimedia applications).
Most of the funds for these expenditures are expected to be generated
internally. Some additional external financing may be necessary or desirable.
LINE OF BUSINESS RESTRICTIONS
The consent decree entitled "Modification of Final Judgment" ("MFJ") approved
by the United States District Court for the District of Columbia (the "D.C.
District Court") which, together with the Plan of Reorganization ("Plan")
approved by the D.C. District Court, set forth the terms of Divestiture also
established certain restrictions on the post-Divestiture activities of the RHCs,
including Bell Atlantic. The MFJ's principal restrictions on post-Divestiture
RHC activities included prohibitions on (i) providing interexchange
telecommunications, (ii) providing information services, (iii) engaging in the
manufacture of telecommunications equipment and customer premises equipment
("CPE"), and (iv) entering into any non-telecommunications businesses, in each
case without the approval of the D.C. District Court. Since Divestiture, the
D.C. District Court has retained jurisdiction over the construction,
modification, implementation and enforcement of the MFJ.
In September 1987, the D.C. District Court rendered a decision which
eliminated the need for the RHCs to obtain its approval prior to entering into
non-telecommunications businesses. However, the D.C. District Court refused to
eliminate the restrictions relating to equipment manufacturing or providing
interexchange services. With respect to information services, the Court issued
a ruling in March 1988 which permitted the RHCs to engage in a number of
information transport functions as well as voice storage and retrieval services,
including voice messaging, electronic mail and certain information gateway
services. However, the RHCs were generally prohibited from providing the
content of the data they transmitted. As the result of an appeal of the D.C.
District Court's September 1987 and March 1988 decisions by the RHCs and other
parties, the United States Court of Appeals for the District of Columbia Circuit
ordered the D.C. District Court to reconsider the RHCs' request to provide
information content and determine whether removal of the restrictions thereon
would be in the public interest. In July 1991, the D.C. District Court removed
the remaining restrictions on RHC participation in information services, but
imposed a stay pending appeal of that decision. In October 1991, the United
States Court of Appeals for the District of Columbia Circuit vacated the stay,
thereby permitting the RHCs to provide information services, and in May 1993
affirmed the D.C. District Court's July 1991 decision. The United States
Supreme Court denied certiorari in November 1993.
Several bills have been introduced in the current session of Congress
pursuant to which the line of business restrictions established by the MFJ could
be eliminated or modified. No definitive prediction can be made as to whether or
when any such legislation will be enacted, the provisions thereof or their
impact on the business or financial condition of the Company.
FCC REGULATION AND INTERSTATE RATES
The Company is subject to the jurisdiction of the Federal Communications
Commission ("FCC") with respect to interstate services and certain related
matters. The FCC prescribes a uniform system of accounts for telephone
companies, interstate depreciation rates and the principles and standard
procedures used to separate plant investment, expenses, taxes and reserves
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BELL ATLANTIC - NEW JERSEY, INC.
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"). The FCC
also prescribes procedures for allocating costs and revenues between regulated
and unregulated activities.
Interstate Access Charges
The Company provides intraLATA service and, with certain limited exceptions,
does not participate in the provision of interLATA service except through
offerings of exchange access service. The FCC has prescribed structures for
exchange access tariffs to specify the charges ("Access Charges") for use and
availability of the Company's facilities for the origination and termination of
interstate interLATA service. Access Charges are intended to recover the
related costs of the Company which have been allocated to the interstate
jurisdiction ("Interstate Costs") under the FCC's separations procedures.
In general, the tariff structures prescribed by the FCC provide that
Interstate Costs of the Company which do not vary based on usage ("non-traffic
sensitive costs") are recovered from subscribers through flat monthly charges
("Subscriber Line Charges"), and from interexchange carriers through usage-
sensitive Carrier Common Line ("CCL") charges. See "FCC Regulation and
Interstate Rates - FCC Access Charge Pooling Arrangements". Traffic-sensitive
Interstate Costs are recovered from carriers through variable access charges
based on several factors, primarily usage.
In May 1984, the FCC authorized the implementation of Access Charge tariffs
for "switched access service" (access to the local exchange network) and of
Subscriber Line Charges for multiple line business customers (up to $6.00 per
month per line). In 1985, the FCC authorized Subscriber Line Charges for
residential and single-line business customers at the rate of $1.00 per month
per line, which increased in installments to $3.50 effective April 1, 1989.
As a result of the phasing in of Subscriber Line Charges, a substantial
portion of non-traffic sensitive Interstate Costs is now recovered directly from
subscribers, thereby reducing the per-minute CCL charges to interexchange
carriers. This significant reduction in CCL charges has tended to reduce the
incentive for interexchange carriers and their high-volume customers to bypass
the Company's switched network via special access lines or alternative
communications systems. However, competition for this access business has
increased in recent years. See "Competition - Alternative Access and Local
Services".
FCC Access Charge Pooling Arrangements
The FCC previously required that all LECs, including the Company, pool
revenues from CCL and Subscriber Line Charges that cover the non-traffic
sensitive costs of the local exchange network, that is, the Interstate Costs
associated with the lines from subscribers' premises to telephone company
central offices. To administer such pooling arrangements, the FCC mandated the
formation of the National Exchange Carrier Association, Inc. Some LECs received
more revenue from the pool than they billed their interexchange carrier
customers using the nationwide average CCL rate. Other companies, including the
Company, received substantially less from the pool than the amount billed to
their interexchange carrier customers.
By an order adopted in 1987, the FCC changed its mandatory pooling
requirements. These changes, which became effective April 1, 1989, permitted all
of the Network Services Companies as a group to withdraw from the pool and to
charge CCL rates which more closely reflect their non-traffic sensitive costs.
The Network Services Companies, including the Company, are still obligated to
make contributions of CCL revenues to companies who choose to continue to pool
non-traffic sensitive costs so that the pooling companies can charge a CCL rate
no greater than the nationwide average CCL rate. In addition to this continuing
obligation, the Network Services Companies, including the Company, have a
transitional support obligation to high cost companies who left the pool in 1989
and 1990. This transitional support obligation phases out over five years.
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BELL ATLANTIC - NEW JERSEY, INC.
These long-term and transitional support requirements will be recovered in the
Network Services Companies' (including the Company's) CCL rates.
Depreciation
Depreciation rates provide for the recovery of the Company's investment in
telephone plant and equipment, and are revised periodically to reflect more
current estimates of remaining service lives and future net salvage values. In
October 1993, the FCC issued an order simplifying the depreciation filing
process by reducing the information required for certain categories of plant and
equipment whose remaining service life, salvage estimates and depreciatation
rates fall within an approved range. Petitions for reconsideration of that order
were filed in December 1993. In November 1993, the FCC issued a further order
inviting comments on proposed ranges for an initial group of categories of plant
and equipment.
Price Caps
In September 1990, the FCC adopted "price cap" regulation to replace the
traditional rate of return regulation of LECs. LEC price cap regulation became
effective on January 1, 1991.
The price cap system places a cap on overall prices for interstate services
and requires that the cap decrease annually, in inflation-adjusted terms, by a
fixed percentage which is intended to reflect expected increases in
productivity. The price cap level can also be adjusted to reflect "exogenous"
changes, such as changes in FCC separations procedures or accounting rules.
LECs subject to price caps have somewhat increased flexibility to change the
prices of existing services within certain groupings of interstate services,
known as "baskets".
Under price cap regulation, the FCC set an authorized rate of return of
11.25% for the years 1991 and beyond. To the extent that a company is able to
earn a higher rate of return through improved efficiency, the FCC's price cap
rules permit them to retain the full amount of this higher return up to 100
basis points above the authorized rate of return (currently, up to a 12.25% rate
of return). If a company's rate of return is between 100 and 500 basis points
above the authorized rate of return (that is, currently, between 12.25% and
16.25%), the company must share 50% of the earnings above the 100-basis-point
level with customers by reducing rates prospectively. All earnings above the
500-basis-point level must be returned to customers in the form of prospective
rate decreases. If, on the other hand, a company's rate of return is more than
100 basis points below the authorized rate of return (that is, currently, below
10.25%), the company is permitted to increase rates prospectively to make up the
deficiency.
Under FCC-approved tariffs, the Network Services Companies are charging
uniform rates for interstate access services (with the exception of Subscriber
Line Charges) throughout their service areas and are regarded as a single unit
by the FCC for rate of return measurement.
On February 16, 1994, the FCC initiated a rulemaking proceeding to determine
the effectiveness of LEC price cap rules and decide what changes, if any, should
be made to those rules. This rulemaking is expected to be concluded by the end
of 1994.
In January 1993, the FCC denied the Company exogenous treatment of the
increased expense for postretirement benefits required under Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", which the Company adopted
effective January 1, 1991. The Company has appealed this decision. The appeal
is likely to be decided during the second half of 1994.
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BELL ATLANTIC - NEW JERSEY, INC.
Computer Inquiry III
In August 1985, the FCC initiated Computer Inquiry III to re-examine its
regulations requiring that "enhanced services" (e.g., voice messaging services,
electronic mail, videotext gateway, protocol conversion) be offered only through
a structurally separated subsidiary. In 1986, the FCC eliminated this
requirement, permitting the Company to offer enhanced services, subject to
compliance with a series of nonstructural safeguards designed to promote an
effectively competitive market. These safeguards include detailed cost
accounting, protection of customer information and certain reporting
requirements.
In June 1990, the United States Court of Appeals for the Ninth Circuit
vacated and remanded the Computer Inquiry III decisions to the FCC, finding that
the FCC had not fully justified those decisions. In December 1991, the FCC
adopted an order which reinstated relief from the separate subsidiary
requirement upon a company's compliance with the FCC's Computer III Open Network
Architecture ("ONA") requirements and strengthened some of the nonstructural
safeguards. In the interim, the Network Services Companies, including the
Company, had filed interstate tariffs implementing the ONA requirements. Those
tariffs became effective in February 1992, subject to further investigation.
That investigation was completed on December 15, 1993, when an order was
released making minor changes to the Network Services Companies' ONA rates. In
March 1992, the Company certified to the FCC that it had complied with all
initial ONA obligations and therefore should be granted structural relief for
enhanced services. The FCC granted the Company structural relief in June 1992.
Other parties have appealed this decision, which remains in effect pending the
outcome of the appeal. A decision on the appeal is likely by the end of 1994.
The FCC's December 1991 order has been appealed to the United States Court of
Appeals for the Ninth Circuit by several parties. Pending decision on those
appeals, the FCC's decision remains in effect. If a court again reverses the
FCC, the Company's right to offer enhanced services could be impaired.
FCC Cost Allocation and Affiliate Transaction Rules
In 1987, the FCC adopted rules governing (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.
The cost allocation rules apply to certain unregulated activities:
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 allocated 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.
These activities include (i) those which have been deregulated by the FCC
without preempting state regulation, (ii) those which have been deregulated by a
state but not the FCC and (iii) "incidental activities," which cannot, in the
aggregate, generate more than 1% of a company's revenues. Since the Network
Services Companies, including the Company, engage in these types of activities,
the Network Services Companies, including the Company, pursuant to the FCC's
cost allocation rules, filed a cost allocation manual, which has been approved
by the FCC.
The affiliate transaction rules govern the pricing of assets transferred to
and services provided by 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, "market price" cannot
be established, in which case (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 affiliate transaction
rules require that a service provided by one affiliate to another affiliate,
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BELL ATLANTIC - NEW JERSEY, INC.
which service is also provided to unaffiliated entities, must be valued at
tariff rates or market prices. If the affiliate does not also provide the
service to unaffiliated entities the price must be determined in accordance with
the FCC's cost allocation principles. In October 1993, the FCC proposed new
affiliate transaction rules which would essentially eliminate the different
rules for the provision of services and apply the asset transfer rules to all
affiliate transactions. The Network Services Companies, including the Company,
have filed comments opposing the proposed rules.
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.
Telephone Company Provision of Video Dial Tone and Video Programming
In 1987, the FCC initiated an inquiry into whether developments in the cable
and telephone industries warranted changes in the rules prohibiting telephone
companies such as the Company from providing video programming in their
respective service territories directly or indirectly through an affiliate.
In November 1991, the FCC released a Further Notice of Proposed Rulemaking in
these proceedings. In August 1992, the FCC issued an order permitting telephone
companies such as the Company to provide "video dial tone" service. Video dial
tone permits telephone companies to provide video transport to multiple
programmers on a non-discriminatory common carrier basis. The FCC has also
ruled that neither telephone companies that provide video dial tone service, nor
video programmers that use these services, are required to obtain local cable
franchises. Other parties have appealed these orders, which remain in effect
pending the outcome of the appeal.
In late 1992, the Company entered into agreements pursuant to which, pending
regulatory approval, it would provide video dial tone transport services to two
video programmers in New Jersey. As contemplated by its contract with Sammons
Communications, Incorporated ("Sammons"), the Company will deploy fiber optic
technology that will enable Sammons and other video information providers to
deliver video programming in three Morris County, New Jersey communities over a
video dial tone platform. The Company's contract with Future Vision of America
Corporation ("Future Vision") contemplates that the Company will deploy fiber
optic technology in the Dover Township, New Jersey telephone network to
establish a video dial tone platform that will allow Future Vision and other
video information providers to deliver competitive video programming services in
that community. Applications for approval to deploy these video dial tone
systems are pending at the FCC.
In December 1992, two Bell Atlantic Companies, Bell Atlantic - Virginia,
Inc. and Bell Atlantic Video Services Company, filed a lawsuit against the
federal government in the United States District Court for the Eastern District
of Virginia seeking to overturn the prohibition in the Cable Communications
Policy Act of 1984 against LECs providing video programming in their respective
service areas. In a decision rendered in August 1993 and clarified in October
1993, the court struck down this prohibition as a violation of the First
Amendment's freedom of speech protections and enjoined its enforcement against
Bell Atlantic, the Network Services Companies, including the Company, and Bell
Atlantic Video Services Company. This decision has been appealed to the United
States Court of Appeals for the Fourth Circuit.
In early 1993, the FCC granted Bell Atlantic authority to test a new
technology known as Asynchronous Digital Subscriber Line ("ADSL") for use in
delivering video entertainment and information over existing copper telephone
lines. Beginning in March 1993, Bell Atlantic began a one-year technical trial
of ADSL serving up to 400 Bell Atlantic employees in northern Virginia. In the
Fall of 1993, Bell Atlantic petitioned the FCC for authorization to expand and
convert this technical trial upon its completion into a six month market trial
serving up to 2000 customers. Bell Atlantic also requested authority to offer a
commercial video dial tone service to customers served by 25 central offices in
parts of northern Virginia and southern Maryland
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BELL ATLANTIC - NEW JERSEY, INC.
upon completion of the six month market trial. These applications are pending
at the FCC.
Interconnection and Collocation
In October 1992, the FCC issued an order allowing third parties to collocate
their equipment in telephone company offices to provide special access (private
line) services to the public. The FCC's stated purpose was to encourage greater
competition in the provision of interstate special access services. The order
permits collocating parties to pay LECs an interconnection charge that is lower
than the existing tariffed rates for similar non-collocated services; it allows
LECs limited additional pricing flexibility for their own special access
services when collocated interconnection is operational. In February 1993, Bell
Atlantic's seven telephone subsidiaries, including the Company, filed an
interstate tariff to allow collocation for special access services. This tariff
is currently effective. Bell Atlantic and certain other parties have appealed
the FCC's special access collocation order. Bell Atlantic expects the appeal to
be decided in 1994.
On September 2, 1993, the FCC extended collocation to switched access
services. The terms and conditions for switched access collocation are similar
to those for special access collocation. On November 18, 1993, Bell Atlantic's
seven telephone subsidiaries, including the Company, filed an interstate tariff
to allow collocation for switched access services. This tariff became effective
on February 16, 1994. Bell Atlantic and certain other parties have appealed the
FCC's switched access collocation order. Appeals of this order have been stayed
pending a decision on the appeals of the special access collocation order.
Increased competition through collocation will adversely affect the revenues
of the Company, although some of the lost revenues could be offset by increased
demand of the Company's own special access services as a result of the slightly
increased pricing flexibility that the FCC has permitted. The Company does not
expect the net revenue impact of special access collocation to be material.
Revenue losses from switched access collocation, however, may be larger than
from special access collocation.
Intelligent Networks
In December 1991, the FCC issued a Notice of Inquiry into the plans of the
BOCs, including the Company, to deploy new "modular" network architectures, such
as Advanced Intelligent Network ("AIN") technology. The Notice of Inquiry asks
what, if any, regulatory action the FCC should take to assure that such
architectures are deployed in a manner that is "open, responsive, and
procompetitive". On August 31, 1993, the FCC issued a Notice of Proposed
Rulemaking proposing a schedule for AIN deployment. The proposals in that Notice
of Proposed Rulemaking generally follow those that Bell Atlantic proposed in its
response to the Notice of Inquiry. The Company cannot estimate when the FCC will
conclude this proceeding.
The results of this proposed rulemaking could include a requirement that the
Company offer individual components of its services, such as switching and
transport, to competitors who will provide the remainder of such services
through their own facilities. Such increased competition could divert revenues
from the Company. However, deployment of AIN technology may also enable the
Company to respond more quickly and efficiently to customer requests for new
services. This could result in increased revenues from new services that could
at least partially offset losses resulting from increased competition.
STATE REGULATION AND INTRASTATE RATES
The communications services of the Company are subject to regulation by the
New Jersey Board of Regulatory Commissioners (formerly the Board of Public
Utilities) (the "BRC") with respect to intrastate rates and services and other
matters.
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BELL ATLANTIC - NEW JERSEY, INC.
In June 1987, the BRC issued an order approving a Rate Stability Plan ("RSP")
that modified the way the BRC monitors the Company's intrastate earnings.
Rather than continue to monitor overall company financial performance, the RSP
authorized financial performance surveillance only of less competitive services.
The RSP also capped intrastate tariffed rates for its six year duration (July 1,
1987 through June 30, 1993), subject, however, to certain exceptions which would
permit the Company to seek increases in tariffed rates during the RSP's fourth
through sixth years.
The RSP separated the Company's intrastate services into two categories:
Group I (more competitive) services such as directory advertising, Centrex, pay
telephone services, billing and collection services, high capacity channel and
special access services, public data networks, central office local area
networks, pay-per-view ordering service, high capacity digital hand-off service,
Bellboy/(R)/ paging service, 911 enhanced terminal equipment and Home Intercom;
and Group II (less competitive) services such as local exchange service, local
usage, message toll service, 800 data base complementary service, and Repeat
Call and Return Call. Only the Group II services were subject to financial
performance monitoring by the BRC for the purpose of determining whether or not
the Company was earning the target rate of return for those services. In January
1989, the BRC issued an order which established a target rate of return on
equity of 12.9% for the purpose of monitoring the financial performance of the
Group II category of services. Under the RSP, the Company was allowed to charge
competitive rates for Group I services, without restriction and without
financial performance monitoring.
The New Jersey Telecommunications Act of 1992 (the "NJ Telecommunications
Act") became effective in January 1992. The NJ Telecommunications Act
authorized the BRC to adopt alternative regulatory frameworks that provide
incentives to telecommunications companies for aggressive deployment of new
technologies. It also deregulated services which the BRC has found to be
competitive. Pursuant to that legislation, the Company filed its Plan for
Alternative Form of Regulation in March 1992, and a revised plan in May 1992.
This revised plan was unanimously approved by the BRC in December 1992, with
certain modifications the written order reflecting that approval was issued on
May 6, 1993. The Company filed a plan conforming to the BRC's order (the "NJ
PAR"), which became effective on May 20, 1993. Several parties have filed
judicial appeals of the BRC's order. The briefing schedule for this appeal
extends through the middle of August 1994.
The NJ PAR, which supersedes the RSP, divides the Company's services into
Rate-Regulated Services (formerly Group II services) and Competitive Services
(formerly Group I and services which have never been regulated by the BRC).
Under this Plan, the Company's 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 beginning January 1996 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
frozen through December 1999.
- "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 the earnings
are capped.
Competitive Services are deregulated under the NJ Telecommunications Act.
Other services such as premises wire maintenance, Answer Call and electronic
9
BELL ATLANTIC - NEW JERSEY, INC.
messaging, which have never been regulated by the BRC, continue to be
deregulated under the NJ Telecommunications Act.
NEW PRODUCTS AND SERVICES
The following were among the new products and services introduced by the
Company in 1993:
IntelliLinQ PRI (Integrated Service Digital Network - Primary Rate Interface
---------------
(ISDN-PRI) is an optional arrangement for local exchange access, directed at
medium and large business customers with PBX service, which enables customers to
increase the efficacy of their current trunking and to transmit 64Kbps circuit-
switch data over the public network.
64 Clear Channel Capability is a new option of Feature Group D Access Service
---------------------------
which increases a channel's traffic capacity and provides customers with the
ability to establish interLATA calls to and from end-users who are served by
ISDN-equipped switches and access lines.
Three-Way Calling Usage Service is an interim limited product offering
-------------------------------
providing the ability to add another party to an established call and conduct a
three-way conference or after establishing the conference call allowing the
initiating party to hang up without disconnecting the remaining two parties;
Centrex Extend permits multi-location Centrex intercom service for a closed
--------------
end user group of a single Centrex customer.
The Company also introduced Flexible Automatic Number Identification Service,
------------------------------------------------
Call Restriction, Expanded Calling Area Service and Connect Request Service.
- ---------------- ----------------------------- -----------------------
COMPETITION
Regulatory proceedings, as well as 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, many of which do not face the same regulatory constraints as the
Company.
Alternative Access and Local Services
A substantial portion of the Company's revenues from business and government
customers is derived from a relatively small number of large, multiple-line
subscribers.
The Company faces competition from alternative communications systems,
constructed by large end users, interexchange carriers, and alternative access
vendors which are capable of originating and/or terminating calls without the
use of the local telephone company's plant. Teleport Communications Group Inc.
("Teleport") provides competitive access service in the New York metropolitan
area, including northern New Jersey.
The ability of such alternative access providers to compete with the Company
has been enhanced by the FCC's orders requiring the Company to offer collocated
interconnection for special and switched access services.
Other potential sources of competition are cable television systems, shared
tenant services and other non-carrier systems which are capable of bypassing the
Company's local plant, either partially or completely, through substitution of
special access for switched access or through concentration of
telecommunications traffic on fewer of the Company's lines.
Well-financed competitors may soon seek authority to offer competing local
exchange services, such as dial tone and local usage, in some of the most
lucrative of the Company's local telephone service areas.
10
BELL ATLANTIC - NEW JERSEY, INC.
Teleport and MFS Communications Company, Inc. ("MFS") both offer local exchange
service in metropolitan New York and may seek to extend that service into
northern New Jersey.
The two largest long-distance carriers are also positioning themselves to
begin to offer services that will compete with the Company's local exchange
services. In November 1992, AT&T announced its intention to acquire a
controlling interest in McCaw Cellular Communications Inc. ("McCaw"), the
largest cellular company in the United States, and to integrate McCaw's wireless
local service network with AT&T's long distance network. In December 1993, MCI
Communications Corporation ("MCI") announced its intention to invest $2 billion
to begin building competing local exchange and access networks in twenty major
markets in the United States, some of which are likely to be in the Company's
service territory. In March 1994, MCI also announced its intention to acquire a
substantial interest in Nextel Communications Inc. (formerly Fleet Call Inc.),
and to integrate Nextel's wireless local service network with MCI's long
distance network in at least 10 major markets, one or more of which might be in
the Company's service territory.
The entry of these and other local exchange service competitors will almost
certainly reduce the local exchange service revenues of the Company, at least in
the market segments and geographical areas in which the competitors operate.
Depending on such competitors' success in marketing their services, and the
conditions of interconnection established by the regulatory commissions, these
reductions could be significant. These revenue reductions may be offset to some
extent by revenues from interconnection charges to be paid to the Company by
these competitors.
The Company seeks to meet such competition by establishing and/or maintaining
competitive cost-based prices for local exchange services (to the extent the FCC
and state regulatory authorities permit the Company's prices to move toward
costs), by keeping service quality high and by effectively implementing advances
in technology. See "FCC Regulation and Interstate Rates -Interstate Access
Charges" and "- FCC Access Charge Pooling Arrangements".
Personal Communications Services
Radio-based personal communications services ("PCS") also constitute
potential sources of competition to the Company. PCS consists of wireless
portable telephone services which would allow customers to make and receive
telephone calls from any location using small handsets, and which could also be
used for data transmission. The FCC has authorized trials of such services,
using a variety of technologies, by numerous companies.
In September 1993, the FCC issued a report and order allocating radio
spectrum to be licensed for use in providing PCS. Under the order, seven
separate bandwidths of spectrum, ranging in size from 10 MHz to 30 MHz, would be
auctioned to potential PCS providers in each geographic area of the United
States; five of the spectrum blocks would be auctioned by "basic trading area"
and the remaining two would be auctioned by larger "major trading area" (as such
trading areas are defined by Rand McNally). LECs and companies with LEC
subsidiaries, such as Bell Atlantic, are eligible to bid for PCS licenses,
except that cellular carriers, such as Bell Atlantic, are limited to obtaining
only 10 MHz of PCS bandwidth in areas where they provide cellular service.
Bidders other than cellular providers may obtain multiple licenses aggregating
up to 40 MHz of bandwidth in any area. Bell Atlantic has stated that it intends
to pursue PCS licenses in the auctions, which are expected to be held in 1994 or
in early 1995.
In December 1993, the FCC awarded Pioneer's preference PCS licenses to, among
other entities, Omnipoint Communications, Inc. ("Omnipoint"), whose license
authorizes it to provide service in the New York metropolitan area, which
includes the northern New Jersey areas served by the Company.
If implemented, PCS and other similar services would compete with services
currently offered by the Company, and could result in losses of revenues.
11
BELL ATLANTIC - NEW JERSEY, INC.
Centrex
The Company offers Centrex service, which is a telephone company central
office-based communications system for business, government and other
institutional customers consisting of a variety of integrated software-based
features located in a centralized switch or switches and extended to the
customer's premises primarily via local distribution facilities. In the
provision of Centrex, the Company is subject to significant competition from the
providers of CPE systems, such as private branch exchanges ("PBXs"), which
perform similar functions with less use of the Company's switching facilities.
Users of Centrex systems generally require more subscriber lines than users
of PBX systems of similar capacity. The FCC increased the maximum Subscriber
Line Charge on embedded Centrex lines to $6.00 per month per line effective
April 1, 1989. Increases in Subscriber Line Charges result in Centrex users
incurring higher charges than users of comparable PBX systems. The BRC has
permitted flexible pricing of certain Centrex services, which helps offset the
effects of higher Subscriber Line Charges.
IntraLATA Toll Competition
The ability of interexchange carriers to engage in the provision of
intrastate intraLATA toll service in competition with the Company is subject to
state regulation. Such competition has not been permitted in New Jersey, but the
BRC has initiated a proceeding in response to petitions filed by interexchange
carriers to consider whether and on what terms to permit intraLATA competition.
The Company does not oppose competition in principle, but has urged the BRC
to implement certain required fundamental regulatory changes necessary for
competition to be fair and effective. Parties participating in the proceeding
include, among others, AT&T, MCI, Sprint Communications Company, L.P.and
MFS, all of which are urging the BRC to revise its current policy and permit
competition. A comment phase of the proceeding was completed in October, 1993.
Evidentiary hearings will be held over the next several months and a BRC
decision is expected in mid-1994.
Directories
The Company continue to face significant competition from other providers of
directories as well as competition from other advertising media. In particular,
the former sales representative of several of the Network Services Companies,
including the Company, publishes directories in competition with those published
by the Company in its service territory.
Public Telephone Services
The Company faces increasing competition in the provision of pay telephone
services from other pay telephone service 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 Company's operator services product line.
CERTAIN CONTRACTS AND RELATIONSHIPS
Certain planning, marketing, procurement, financial, legal, accounting,
technical support and other management services are provided on behalf of the
Company 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
Company.
The seven RHCs each own (directly or through subsidiaries) a one-seventh
interest in Bell Communications Research, Inc. ("Bellcore"). Pursuant to the
Plan, Bellcore furnishes the RHCs and their BOC subsidiaries with technical
12
BELL ATLANTIC - NEW JERSEY, INC.
assistance such as network planning, engineering and software development, as
well as various other consulting services that can be provided more effectively
on a centralized basis. Bellcore is 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. It also helps to
mobilize the combined resources of the RHCs in times of natural disasters.
EMPLOYEE RELATIONS
As of December 31, 1993, the Company employed approximately 15,000 persons,
including employees of the centralized staff at NSI. This represents
approximately a 1% decrease from the number of employees at December 31, 1992.
The Company's workforce is augmented by members of the centralized staff of
NSI, who perform services for the Company on a contract basis.
Approximately 85% of the employees of the Company are represented by unions.
Of those so represented, approximately 39% are represented by the Communications
Workers of America, and approximately 61% are represented by the International
Brotherhood of Electrical Workers, which are both affiliated with the American
Federation of Labor - Congress of Industrial Organizations.
Under the terms of the three-year contracts ratified in October 1992 by
unions representing associate employees of the Network Services Companies,
including the Company, and NSI, represented associates received a base wage
increase of 3.74% in August 1993. Under the same contracts, associates received
a Corporate Profit Sharing payment of $495 per person in 1994 based upon
Bell Atlantic's 1993 financial performance.
13
BELL ATLANTIC - NEW JERSEY, INC.
ITEM 2. PROPERTIES
The principal properties of the Company do not lend themselves to simple
description by character and location. At December 31, 1993, the Company's
investment in plant, property and equipment consisted of the following:
Connecting lines ................. 40%
Central office equipment ......... 38
Land and buildings ............... 8
Telephone instruments and
related equipment ............... 2
Other ............................ 12
---
100%
===
"Connecting lines" consists primarily of aerial cable, underground cable,
poles, conduit and wiring. "Central office equipment" consists of switching
equipment, transmission equipment and related facilities. "Land and buildings"
consists of land owned in fee and improvements thereto, principally central
office buildings. "Telephone instruments and related equipment" consists
primarily of public telephone terminal equipment and other terminal equipment.
"Other" property consists primarily of furniture, office equipment, vehicles and
other work equipment, capital leases, leasehold improvements and plant under
construction.
The Company's central offices are served by various types of switching
equipment. At December 31, 1993 and 1992, the number of local exchanges and the
percent of subscriber lines served by each type of equipment were as follows:
1993 1992
---------------------------- ----------------------------
# OF LOCAL % OF SUBSCRIBER # OF LOCAL % OF SUBSCRIBER
EXCHANGES LINES SERVED EXCHANGES LINES SERVED
----------- --------------- ----------- ---------------
Digital................ 504 50.1 479 49.8
Analog................. 484 49.9 470 50.2
---- ---- ---- ----
988 100 949 100
==== ==== ==== ====
14
BELL ATLANTIC - NEW JERSEY, INC.
ITEM 3. LEGAL PROCEEDINGS
PRE-DIVESTITURE CONTINGENT LIABILITIES AND LITIGATION
The Plan provides for the recognition and payment by AT&T and the former
BOCs (including the Company) 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
Company's aggregate allocable share of liability is approximately 2.8%.
AT&T and various of its subsidiaries and the BOCs (including, in some cases,
the Company) 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.
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 financial position of
the Company.
15
BELL ATLANTIC - NEW JERSEY, INC.
PART I
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Omitted pursuant to General Instruction J(2).)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(Inapplicable.)
ITEM 6. SELECTED FINANCIAL DATA
(Omitted pursuant to General Instruction J(2).)
16
BELL ATLANTIC - NEW JERSEY, INC.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Abbreviated pursuant to General Instruction J(2).)
This discussion should be read in conjunction with the Financial Statements
and Notes to the Financial Statements included in the index set forth on page
F-1.
RESULTS OF OPERATIONS
Net income for 1993 increased $6.0 million or 1.4% from the same period last
year. Results for 1993 reflect an after-tax charge of $30.0 million for the
adoption of Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (Statement No. 112) and an extraordinary
charge, net of tax, of $6.9 million for the early extinguishment of debt.
Results for 1992 included a $16.7 million extraordinary charge, net of tax, for
the early extinguishment of debt.
OPERATING REVENUES
Operating revenues increased $69.6 million or 2.2% in 1993. The increase in
total operating revenues was comprised of the following:
(Dollars in Millions)
---------------------
Local service ......................... $43.6
Network access ........................ 24.5
Toll service .......................... 15.6
Directory advertising, billing
services and other ................... 9.4
Less: Provision for uncollectibles ... 23.5
-----
$69.6
=====
Local service revenues are earned from the provision of local exchange, local
private line, and public telephone services. Local service revenues increased
$43.6 million or 4.0% in 1993. The increase resulted primarily from growth in
network access lines and higher demand for value-added central office services
such as Custom Calling and Caller ID. The growth in access lines in service was
approximately 139,000 lines or a 2.8% increase in 1993.
Network access revenues are received from interexchange carriers (IXCs) for
their use of the Company's local exchange facilities in providing long-distance
services to IXCs' customers and from end-user subscribers. Switched access
revenues are derived from usage-based charges paid by IXCs for access to the
Company's network. Special access revenues arise from access charges paid by
customers who have private lines, and end-user access revenues are earned from
local exchange carrier customers who pay for access to the network.
Network access revenues increased $24.5 million or 3.0% in 1993, primarily
due to lower support payments to the National Exchange Carrier Association
(NECA) interstate common line pool and a 3.9% growth in access minutes of use.
Also contributing to this increase were higher end-user revenues principally due
to growth in network access lines. These increases were partially offset by the
effect of interstate rate reductions filed by the Company with the Federal
Communications Commission (FCC), which became effective on July 2, 1993 and July
1, 1992, and by related estimated price cap sharing liabilities.
Toll service revenues are earned from interexchange usage services such as
Message Toll Services (MTS), Unidirectional Services (Wide Area
Telecommunications Services (WATS) and 800 services), Corridor Services between
northern New Jersey and New York City and southern New Jersey and southeastern
Pennsylvania, and private line services. Toll service revenues increased $15.6
million or 2.2% in 1993. Total message volumes were 4.5% higher than the prior
year. Toll service revenues increased principally due to increased demand for
MTS, Corridor, WATS, and private line services.
17
BELL ATLANTIC - NEW JERSEY, INC.
Directory advertising, billing services and other revenues include amounts
earned from directory advertising, billing and collection services provided to
IXCs, premises services such as inside wire installation and maintenance,
intraLATA toll compensation, rent of Company facilities by affiliates and non-
affiliates, and certain nonregulated enhanced network services.
Directory advertising, billing services and other revenues in 1993 increased
$9.4 million or 1.7%. This increase was primarily due to higher intraLATA toll
compensation; an increase in revenues from Answer Call, a nonregulated enhanced
network service; and higher business volumes for premises services. Also
contributing to this increase was higher directory advertising revenue due to
volume growth. Partially offsetting these increases were lower billing and
collection revenues in 1993, primarily as a result of the effect of favorable
claim adjustments recorded in 1992 and reductions in services provided under
long-term contracts with certain IXCs, and lower rent revenue.
The provision for uncollectibles, expressed as a percentage of total revenue,
was 1.7% in 1993 and 1.1% in 1992. The increase in the provision reflects
unfavorable collection experience principally related to directory revenues.
OPERATING EXPENSES
Operating expenses increased $23.1 million or 1.0% in 1993. The increase in
total operating expenses was comprised of the following:
Increase/(Decrease)
(Dollars in Millions)
---------------------
Employee costs ..................... $(10.6)
Depreciation and amortization ...... 60.8
Taxes other than income ............ 6.7
Other .............................. (33.8)
------
$ 23.1
======
Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by the Company. Similar costs
incurred by employees of Bell Atlantic Network Services, Inc. (NSI), who provide
centralized services on a contract basis, are allocated to the Company and are
included in other operating expenses. Employee costs decreased $10.6 million or
1.4% in 1993. The decrease in employee costs is principally due to savings
resulting from workforce reduction programs implemented in 1992, partially
offset by higher costs from salary and wage increases and overtime.
The Company continues to evaluate ways to streamline and restructure its
operations and reduce its workforce requirements in an effort to improve its
cost structure.
Depreciation and amortization expense increased $60.8 million or 11.3% in
1993 due primarily to approximately $58 million of additional expense resulting
from represcribed intrastate depreciation rates in 1993. Also contributing to
the increase was growth in the level of depreciable plant in 1993. These
increases were partially offset by the completion of the FCC-ordered Reserve
Deficiency Amortization in June 1992.
Pursuant to the Plan for Alternative Regulation (PAR), approved by the Board
of Regulatory Commissioners (BRC), the Company plans to annually adjust
intrastate depreciation rates in connection with the Company's technology
deployment program and BRC-approved depreciation methods and techniques.
Taxes other than income increased $6.7 million or 3.8% in 1993, primarily due
to an increase in property taxes and higher gross receipts tax resulting from an
increase in operating revenues.
18
BELL ATLANTIC - NEW JERSEY, INC.
Other operating expenses consist primarily of contracted services including
centralized service expenses allocated from NSI, rent, network software costs,
and other general and administrative expenses. Other operating expenses
decreased $33.8 million or 3.7% in 1993. The decrease was principally due to
decreases in contracted services and the effect of the reversal of accruals in
1993 for certain liabilities. Also contributing to these decreases were lower
rent expense and a reduction in network software costs.
OPERATING INCOME TAXES
The provision for income taxes increased $33.8 million or 18.3% in 1993. The
Company's effective income tax rate was 30.7% in 1993, compared to 28.7% in
1992. The increase in the 1993 effective tax rate is principally the result of
federal tax legislation enacted in 1993, which increased the federal corporate
tax rate from 34% to 35%, a decrease in the amortization of investment tax
credits, and the effect of recording in 1992 an adjustment to deferred taxes
associated with the retirement of certain plant investment. A reconciliation of
the statutory federal income tax rate to the effective rate for each period is
provided in Note 5 of Notes to Financial Statements.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109).
In connection with the adoption of Statement No. 109, the Company recorded a
charge to income of $.8 million in the first quarter of 1993. (see Note 5 of
Notes to Financial Statements).
OTHER INCOME AND EXPENSE
Other income, net of expense, increased $8.1 million in 1993, primarily as a
result of the reversal in 1993 of an accrual related to a tax issue. Partially
offsetting this increase was the effect of interest income recognized in 1992 in
connection with the settlement of various federal income tax matters related to
prior periods.
INTEREST EXPENSE
Interest expense decreased $5.4 million or 4.6% in 1993, principally due to
the effects of long-term debt refinancings in 1993 and 1992.
EXTRAORDINARY ITEM
The Company called $200.0 million in 1993 of long-term debentures which were
refinanced at more favorable interest rates. As a result of these early
retirements, the Company incurred after-tax charges of $6.9 million in 1993.
These debt refinancings will reduce interest costs on the refinanced debt by
approximately $3 million annually.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In connection with the adoption of Statement No. 112, effective January 1,
1993, the Company recorded a one-time, cumulative effect after-tax charge of
$30.0 million in 1993 (see Note 4 of Notes to Financial Statements).
The adoption of Statement No. 112 did not have a significant effect on the
Company's ongoing level of expense in 1993 and is not expected to have a
significant effect in future periods.
COMPETITION AND REGULATORY ENVIRONMENT
The telecommunications industry is currently undergoing fundamental changes
which may have a significant impact on future financial performance of all
telecommunications companies. These changes are driven by a number of factors,
including the accelerated pace of technology change, customer requirements, a
changing industry structure characterized by strategic alliances and the
convergence of telecommunications and cable television, and a changing
regulatory
19
BELL ATLANTIC - NEW JERSEY, INC.
environment in which traditional regulatory barriers are being lowered and
competition encouraged.
The convergence of cable television, computer technology, and
telecommunications can be expected to dramatically increase competition in the
future. The Company is already subject to competition from numerous sources,
including competitive access providers for network access services, competing
cellular telephone companies and others.
During 1993, a number of business alliances were announced that have the
potential to significantly increase competition both within the industry and
within the areas currently served by Bell Atlantic. Over the past several
years, Bell Atlantic has taken a number of actions in anticipation of the
increasingly competitive environment. Cost reductions have been achieved,
giving greater pricing flexibility for services exposed to competition. A new
lines of business organization structure was adopted. Subject to regulatory
approval, the Company plans to allocate capital resources to the deployment of
broadband network platforms. On the regulatory front, the BRC has approved a
plan for alternative regulation, which will be in effect through 1999, pending
appeals.
The Company conducts ongoing evaluations of its accounting practices, many of
which have been prescribed by regulators. These evaluations include the
assessment of whether costs that have been deferred as a result of actions of
regulators and the cost of the Company's telephone plant will be recoverable in
the future. In the event recoverability of costs becomes unlikely due to
decisions by the Company to accelerate deployment of new technology, in response
to specific regulatory actions or increasing levels of competition, the Company
may no longer apply the provisions of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation"
(Statement No. 71). The discontinued application of Statement No. 71 would
require the Company to write off its regulatory assets and liabilities and may
require the Company to adjust the carrying amount of its telephone plant should
it determine that such amount is not recoverable. The Company believes that it
continues to meet the criteria for continued financial reporting under Statement
No. 71. A determination in the future that such criteria are no longer met may
result in a significant one-time, non-cash, extraordinary charge, if the Company
determines that a substantial portion of the carrying value of its telephone
plant may not be recoverable.
In September 1993, the FCC issued a report and order allocating radio
spectrum to be licensed for use in providing personal communications services
(PCS). Under the order, seven separate bandwidths of spectrum, ranging in size
from 10 MHz to 30 MHz, would be auctioned to potential PCS providers in each
geographic area of the United States. The geographical units by which the
licenses would be allocated will be "basic trading areas" or larger "major
trading areas." Five of the spectrum blocks are to be auctioned on a basic
trading area basis, and the remaining two are to be auctioned by major trading
area. Local exchange carriers such as the Company are eligible to bid for PCS
licenses, except that cellular carriers are limited to obtaining 10 MHz of PCS
bandwidth in areas where they provide cellular service. Bidders other than
cellular providers may obtain multiple licenses aggregating up to 40 MHz of
bandwidth in any area. Bell Atlantic has stated that it intends to pursue PCS
licenses in the auctions, which are expected to be held in 1994.
In August 1993, the United States District Court for the Eastern District of
Virginia ruled unconstitutional the 1984 Cable Act's limitation on in-territory
provision of programming by local exchange carriers such as the Company. The
Cable Act currently prohibits local exchange carriers from owning more than 5%
of any company that provides cable programming in their local service area. In
a case originally brought by two Bell Atlantic subsidiaries, the court ruled
that this prohibition violates the First Amendment's freedom of speech
protections, and enjoined enforcement of the prohibition against Bell Atlantic
and its telephone subsidiaries. The ruling has been appealed.
20
BELL ATLANTIC - NEW JERSEY, INC.
STATE REGULATORY ENVIRONMENT
The communications services of the Company are subject to regulation by the
New Jersey Board of Regulatory Commissioners (formerly the Board of Public
Utilities) (the BRC) with respect to intrastate rates and services and other
matters.
In June 1987, the BRC issued an order approving a Rate Stability Plan ("RSP")
that modified the way the BRC monitors the Company's intrastate earnings.
Rather than continue to monitor overall company financial performance, the RSP
authorized financial performance surveillance only of less competitive services.
The RSP also capped intrastate tariffed rates for its six year duration (July 1,
1987 through June 30, 1993), subject, however, to certain exceptions which would
permit the Company to seek increases in tariffed rates during the RSP's fourth
through sixth years.
The RSP separated the Company's intrastate services into two categories:
Group I (more competitive) services such as directory advertising, Centrex, pay
telephone services, billing and collection services, high capacity channel and
special access services, public data networks, central office local area
networks, pay-per-view ordering service, high capacity digital hand-off service,
Bellboy/(R)/ paging service, 911 enhanced terminal equipment and Home Intercom;
and Group II (less competitive) services such as local exchange service, local
usage, message toll service, 800 data base complementary service, and Repeat
Call and Return Call. Only the Group II services were subject to financial
performance monitoring by the BRC for the purpose of determining whether or not
the Company was earning the target rate of return for those services. In January
1989, the BRC issued an order which established a target rate of return on
equity of 12.9% for the purpose of monitoring the financial performance of the
Group II category of services. Under the RSP, the Company was allowed to charge
competitive rates for Group I services, without restriction and without
financial performance monitoring.
The New Jersey Telecommunications Act of 1992 (the "NJ Telecommunications
Act") became effective in January 1992. The NJ Telecommunications Act
authorized the BRC to adopt alternative regulatory frameworks that provide
incentives to telecommunications companies for aggressive deployment of new
technologies. It also deregulated services which the BRC has found to be
competitive. Pursuant to that legislation, the Company filed its Plan for
Alternative Form of Regulation in March 1992, and a revised plan in May 1992.
This revised plan was unanimously approved by the BRC in December 1992, with
certain modifications the written order reflecting that approval was issued on
May 6, 1993. The Company filed a plan conforming to the BRC's order (the "NJ
PAR"), which became effective on May 20, 1993. Several parties have filed
judicial appeals of the BRC's order. The briefing schedule for this appeal
extends through the middle of August 1994.
The NJ PAR, which supersedes the RSP, divides the Company's services into
Rate-Regulated Services (formerly Group II services) and Competitive Services
(formerly Group I and services which have never been regulated by the BRC).
Under this Plan, the Company's 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 beginning January 1996 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
frozen through December 1999.
- "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%
21
BELL ATLANTIC - NEW JERSEY, INC.
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 the earnings
are capped.
Competitive Services are deregulated under the NJ Telecommunications Act.
Other services such as premises wire maintenance, Answer Call and electronic
messaging, which have never been regulated by the BRC, continue to be
deregulated under the NJ Telecommunications Act.
The BRC has initiated a proceeding to consider whether to continue its
existing policy that prohibits intraLATA toll service competition. The Company
does not oppose competition in principle, but has urged the BRC to implement
certain required fundamental regulatory changes necessary for competition to be
fair and effective. Parties participating in the proceeding include, among
others, AT&T, MCI Communications Corporation, Sprint Communications Company,
L.P. and MFS Communications Company, Inc., all of which are urging the BRC to
revise its current policy and permit competition. A comment phase of the
proceeding was completed in October, 1993. Evidentiary hearings will be held
over the next several months and a BRC decision is expected in mid-1994.
OTHER MATTERS
The Company has been designated as a potentially responsible party by the
U.S. Environmental Protection Agency in connection with one Superfund site.
Designation as a potentially responsible party subjects the named company to
potential liability for costs relating to cleanup of the affected sites.
Management believes that the aggregate amount of any potential liability would
not have a material effect on the Company's financial condition or results of
operations.
FINANCIAL CONDITION
Management believes that the Company has adequate internal and external
resources available to meet ongoing operating requirements including network
expansion and modernization, and payment of dividends. Management expects that
presently foreseeable capital requirements will be financed primarily through
internally generated funds, although additional long-term debt may be needed to
fund development activities and to maintain the Company's capital structure
within management's guidelines.
During 1993, as in prior years, the Company's primary source of funds
continued to be cash generated from operations. Revenue growth, cost
containment measures and savings on interest costs contributed to cash provided
from operations of $1,105.6 million for the year ended December 31, 1993.
The primary use of capital resources continued to be capital expenditures.
The Company invested $590.0 million in 1993 in the network. This level of
investment is expected to continue in 1994. The Company plans to allocate
capital resources to the deployment of broadband network platforms, subject to
regulatory approval.
The Company's debt ratio was 39.6% as of December 31, 1993 compared to 39.6%
at December 31, 1992.
On March 11, 1993, the Company sold $100.0 million of Thirty Year 7 1/4%
Debentures through a public offering. The debentures are not redeemable prior
to March 1, 2003. The net proceeds from this issuance were ultimately used on
April 7, 1993 to redeem $100.0 million of Forty Year 8 3/4% Debentures. This
refinancing will reduce annual interest costs on the refinanced debt by
approximately $2 million.
On December 22, 1993, the Company sold $100.0 million of Thirty-one Year 6.8%
Debentures through a public offering. The debentures are not redeemable prior
to December 15, 2008. The net proceeds from this issuance were used on January
7, 1994 to redeem $100.0 million of Forty Year 8 1/4% Debentures. This
22
BELL ATLANTIC - NEW JERSEY, INC.
refinancing will reduce annual interest costs on the refinanced debt by
approximately $1 million.
On February 14, 1994, the Company sold $250.0 million of Ten Year 5 7/8%
Debentures through a public offering. The debentures are not redeemable prior
to maturity. The net proceeds from this issuance were used on March 2, 1994 to
redeem $150.0 million of Forty Year 7 3/4% Debentures and $100.0 million of
Forty Year 8% Debentures. These refinancings will reduce annual interest costs
on the refinanced debt by approximately $5 million.
As of December 31, 1993, the Company had $300.0 million outstanding under an
a shelf registration statement filed with the Securities and Exchange
Commission. After the $250.0 million debt issuance on February 14, 1994, the
total debt securities outstanding under the shelf registration statement is
$50.0 million.
23
BELL ATLANTIC - NEW JERSEY, INC.
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth on pages F-1 through
F-25.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(Omitted pursuant to General Instruction J(2).)
ITEM 11. EXECUTIVE COMPENSATION
(Omitted pursuant to General Instruction J(2).)
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(Omitted pursuant to General Instruction J(2).)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Omitted pursuant to General Instruction J(2).)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements
See Index to Financial Statements and Financial Statement Schedules
appearing on Page F-1.
(2) Financial Statement Schedules
See Index to Financial Statements and Financial Statement Schedules
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.
24
BELL ATLANTIC - NEW JERSEY, INC.
Exhibit Number (Referenced to Item 601 of Regulation S-K)
---------------------------------------------------------
3a Restated Certificate of Incorporation of the registrant, dated
September 28, 1989 and filed November 28, 1989. (Exhibit 3a to the
registrant's Annual Report on Form 10-K for the year ended December
31, 1989, File No. 1-3488.
3a(i) Certificate of Amendment to the Certificate of
Incorporation of the registrant, dated January 7, 1994 and
filed January 13, 1994.
3b By-Laws of the registrant, as amended March 31, 1988. (Exhibit 3b to
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1988, File No. 1-3488.)
3b(i) By-Law resolution, dated June 25, 1992, amending Article
VI, Section 6:1, of the Company's By-Laws (re: the
indemnification by the Company of reasonable costs and
expenses incurred for actions brought against Directors,
Trustees and Officers of the Company). (Exhibit 3b to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-3488.)
3b(ii) By-Law resolution, dated November 19, 1992, amending
Article III, Section 3:1, of the Company's By-Laws (re: the
establishment of a Dividend Committee). (Exhibit 3b to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-3488.)
3b(iii) By-Law resolution, dated January 28, 1993, amending Article
V, Section 5:7, of the Company's By-Laws (re: the
elimination of the title "Vice President - External Affairs
and Chief Financial Officer" and the substitution therein
of the title "Chief Financial Officer"). (Exhibit 3b to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-3488.)
4 No instrument which defines the rights of holders of long and
intermediate term debt of the registrant is filed herewith pursuant
to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this
regulation, the registrant hereby agrees to furnish a copy of any
such instrument to the SEC upon request.
10a Agreement Concerning Contingent Liabilities, Tax Matters and
Termination of Certain Agreements among AT&T, Bell Atlantic
Corporation, and the Bell Atlantic Corporation telephone
subsidiaries, and certain other parties, dated as of November 1,
1983. (Exhibit 10a to Bell Atlantic Corporation Annual Report on
Form 10-K for the year ended December 31, 1993, File No. 1-8606).
10b Agreement among Bell Atlantic Network Services, Inc. and the Bell
Atlantic Corporation telephone subsidiaries, dated November 7, 1983.
(Exhibit 10b to Bell Atlantic Corporation Annual Report on Form 10-K
for the year ended December 31, 1993, File No. 1-8606).
23 Consent of Coopers & Lybrand.
24 Powers of attorney.
(b) Reports on Form 8-K:
A Current Report on Form 8-K, dated December 8, 1993, was filed
reporting on Item 7 (Financial Statements and Exhibits) in
connection with the sale of debt securities.
25
BELL ATLANTIC - NEW JERSEY, INC.
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 - New Jersey, Inc.
By /s/ Michael J. Losch
------------------------------------
Michael J. Losch
Controller and Treasurer
and Chief Financial Officer
March 29, 1994
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:
____
Alfred C. Koeppe President and Chief )
Executive Officer )
)
Principal Accounting and Financial Officer: )
)
Michael J. Losch Controller and Treasurer )
and Chief Financial )
Officer )
)
)
) By /s/ Michael J. Losch
) ---------------------------
) Michael J. Losch
) (individually and as
) attorney-in-fact)
) March 29, 1994
)
Directors: )
)
Brendan T. Byrne )
Robert E. Campbell )
Bruce S. Gordon )
Jon F. Hanson )
Alfred C. Koeppe )
James M. Seabrook )
Anthony P. Terracciano )
Leslie A. Vial ____)
(constituting a majority
of the registrant's
Board of Directors)
26
BELL ATLANTIC - NEW JERSEY, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
----
Report of Independent Accountants ........................ F-2
Statements of Income and Reinvested Earnings
For the years ended December 31, 1993, 1992, and 1991.. F-3
Balance Sheets - December 31, 1993, and 1992.............. F-4
Statements of Cash Flows
For the years ended December 31, 1993, 1992, and 1991.. F-6
Notes to Financial Statements............................. F-7
Schedule V - Plant, Property and Equipment
For the years ended December 31, 1993, 1992, and 1991.. F-19
Schedule VI - Accumulated Depreciation
For the years ended December 31, 1993, 1992, and 1991.. F-23
Schedule VIII - Valuation and Qualifying Accounts
For the years ended December 31, 1993, 1992, and 1991.. F-24
Schedule X - Supplementary Income Statement Information
For the years ended December 31, 1993, 1992, and 1991.. F-25
Financial statement schedules other than those listed above have been omitted
either because the required information is contained in the financial statements
and the notes thereto, or because such schedules are not required or applicable.
F-1
BELL ATLANTIC - NEW JERSEY, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareowner of
Bell Atlantic - New Jersey, Inc.
We have audited the financial statements and financial statement schedules of
Bell Atlantic - New Jersey, Inc. as listed in the index on page F-1 of this Form
10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bell Atlantic - New Jersey,
Inc. as of December 31, 1993 and 1992, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
As discussed in Notes 1, 4 and 5 to the financial statements, the Company
changed its method of accounting for income taxes and postemployment benefits in
1993 and postretirement benefits other than pensions in 1991.
/s/ Coopers & Lybrand
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 7, 1994, except as to
the information presented in
paragraph 6 of Note 2, for
which the date is March 2, 1994
F-2
BELL ATLANTIC - NEW JERSEY, INC.
STATEMENTS OF INCOME AND REINVESTED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN MILLIONS)
OPERATING REVENUES 1993 1992 1991
--------- --------- ---------
Local service........................... $1,123.7 $1,080.1 $1,068.7
Network access.......................... 851.3 826.8 818.8
Toll service............................ 724.6 709.0 694.0
Directory advertising, billing
services and other (including $54.3,
$46.0, and $37.9 from affiliates)...... 576.5 567.1 548.2
Provision for uncollectibles............ (57.2) (33.7) (31.1)
-------- -------- --------
3,218.9 3,149.3 3,098.6
-------- -------- --------
OPERATING EXPENSES
Employee costs, including benefits
and taxes.............................. 760.2 770.8 808.1
Depreciation and amortization........... 596.6 535.8 506.0
Taxes other than income................. 185.2 178.5 176.0
Other (including $511.5, $515.6, and
$481.9 to affiliates).................. 876.6 910.4 869.3
-------- -------- --------
2,418.6 2,395.5 2,359.4
-------- -------- --------
NET OPERATING REVENUES................... 800.3 753.8 739.2
-------- -------- --------
FEDERAL OPERATING INCOME TAXES........... 218.9 185.1 182.2
-------- -------- --------
OPERATING INCOME......................... 581.4 568.7 557.0
-------- -------- --------
OTHER INCOME (EXPENSE)
Allowance for funds used during
construction........................... 11.3 10.9 7.0
Miscellaneous - net..................... 7.0 (.7) (8.6)
-------- -------- --------
18.3 10.2 (1.6)
-------- -------- --------
INTEREST EXPENSE (including $3.1, $3.0,
and $8.4 to affiliate).................. 112.4 117.8 127.9
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES................... 487.3 461.1 427.5
EXTRAORDINARY ITEM
Early Extinguishment of Debt,
Net of Tax............................. (6.9) (16.7) ---
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES
Postemployment Benefits, Net of Tax.... (30.0) --- ---
Postretirement Benefits Other Than
Pensions, Net of Tax.................. --- --- (469.1)
-------- -------- --------
NET INCOME (LOSS)........................ $ 450.4 $ 444.4 $ (41.6)
======== ======== ========
REINVESTED EARNINGS
At beginning of year.................... $ 739.4 $ 652.1 $1,056.1
Add: net income (loss)................. 450.4 444.4 (41.6)
-------- -------- --------
1,189.8 1,096.5 1,014.5
Deduct: dividends....................... 439.5 357.1 362.2
other changes................... .2 --- .2
-------- -------- --------
At end of year.......................... $ 750.1 $ 739.4 $ 652.1
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-3
BELL ATLANTIC - NEW JERSEY, INC.
BALANCE SHEETS
(DOLLARS IN MILLIONS)
December 31,
------------------
1993 1992
-------- --------
ASSETS
CURRENT ASSETS
Note from affiliate...................... $ 9.4 $ ---
Accounts receivable:
Customers and agents, net of allowances
for uncollectibles of $57.7 and $40.6.. 562.3 541.1
Affiliates.............................. 24.8 31.5
Other................................... 24.9 21.9
Material and supplies.................... 17.1 22.7
Prepaid expenses......................... 137.2 97.9
Deferred income taxes.................... 9.9 4.1
Other.................................... 12.4 11.7
-------- --------
798.0 730.9
-------- --------
PLANT, PROPERTY AND EQUIPMENT
In service............................... 8,174.4 7,900.9
Under construction and other............. 203.7 174.6
-------- --------
8,378.1 8,075.5
Less accumulated depreciation............ 3,295.3 2,998.9
-------- --------
5,082.8 5,076.6
-------- --------
OTHER ASSETS............................... 168.4 44.6
-------- --------
TOTAL ASSETS............................... $6,049.2 $5,852.1
======== ========
The accompanying notes are an integral part of these financial statements.
F-4
BELL ATLANTIC - NEW JERSEY, INC.
BALANCE SHEETS
(DOLLARS IN MILLIONS)
December 31,
------------------
1993 1992
-------- --------
LIABILITIES AND SHAREOWNER'S INVESTMENT
CURRENT LIABILITIES
Debt maturing within one year:
Affiliate.............................. $ --- $ 57.9
Other.................................. 103.8 38.9
Accounts payable:
Parent and affiliates.................. 194.3 160.4
Other.................................. 354.5 357.2
Accrued expenses:
Vacation pay........................... 52.7 51.0
Interest............................... 19.5 20.1
Taxes ................................. 27.0 16.9
Other.................................. 61.7 43.3
Advance billings and customer deposits... 155.6 148.8
-------- --------
969.1 894.5
-------- --------
LONG-TERM DEBT............................. 1,294.7 1,294.5
-------- --------
EMPLOYEE BENEFIT OBLIGATIONS............... 744.5 679.6
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes.................... 380.0 485.4
Unamortized investment tax credits....... 125.1 138.9
Other.................................... 404.5 238.6
-------- --------
909.6 862.9
-------- --------
COMMITMENTS (Note 3)
SHAREOWNER'S INVESTMENT
Common stock-one share, without par
value, owned by parent.................. 1,381.2 1,381.2
Reinvested earnings...................... 750.1 739.4
-------- --------
2,131.3 2,120.6
-------- --------
TOTAL LIABILITIES AND SHAREOWNER'S
INVESTMENT................................ $6,049.2 $5,852.1
======== ========
The accompanying notes are an integral part of these financial statements.
F-5
BELL ATLANTIC - NEW JERSEY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN MILLIONS)
1993 1992 1991
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................. $ 450.4 $ 444.4 $ (41.6)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................. 596.6 535.8 506.0
Extraordinary item related to the early
extinguishment of debt, net of tax benefit.. 6.9 16.7 ---
Cumulative effect of changes in accounting
principles.................................. 30.0 --- 469.1
Allowance for funds used during construction.. (11.3) (10.9) (7.0)
Other items, net.............................. 2.6 1.5 10.6
Changes in certain assets and liabilities:
Accounts receivable......................... (17.5) (69.4) .4
Material and supplies....................... (.1) 3.7 12.3
Other assets................................ (38.0) 45.9 (11.5)
Accounts payable and accrued taxes.......... 106.8 30.6 29.5
Deferred income taxes, net.................. (42.8) (39.5) (32.9)
Unamortized investment tax credits.......... (13.8) (22.6) (18.5)
Employee benefit obligations................ 23.3 12.1 28.6
Other liabilities........................... 12.5 50.4 55.2
-------- ------- --------
Net cash provided by operating activities......... 1,105.6 998.7 1,000.2
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant, property and equipment........ (590.0) (589.6) (601.4)
Net change in note receivable from affiliate...... (9.4) --- ---
Other plant-related changes....................... 4.2 (4.1) (5.5)
-------- ------- --------
Net cash used in investing activities............. (595.2) (593.7) (606.9)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings.......................... 198.2 295.3 ---
Principal repayments of borrowings and
capital lease obligations....................... (37.9) (14.3) (8.8)
Early extinguishment of debt and related
call premium.................................... (104.6) (321.5) ---
Net change in note payable to affiliate........... (57.9) .3 (54.7)
Dividends paid.................................... (439.5) (357.1) (362.2)
Net change in outstanding checks drawn on
controlled disbursement accounts................ (68.7) (7.7) 32.4
-------- ------- --------
Net cash used in financing activities............. (510.4) (405.0) (393.3)
-------- ------- --------
NET CHANGE IN CASH................................ --- --- ---
-------- ------- --------
CASH, BEGINNING OF YEAR........................... --- --- ---
-------- ------- --------
CASH, END OF YEAR................................. $ --- $ --- $ ---
======== ======= =======
The accompanying notes are an integral part of these financial statements.
F-6
BELL ATLANTIC - NEW JERSEY, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Bell Atlantic - New Jersey, Inc. (formerly New Jersey Bell Telephone Company)
(the Company), a wholly owned subsidiary of Bell Atlantic Corporation (Bell
Atlantic), maintains its accounts in accordance with the Uniform System of
Accounts (USOA) prescribed by the Federal Communications Commission (FCC) and
makes certain adjustments necessary to present the accompanying financial
statements in accordance with generally accepted accounting principles
applicable to regulated entities. Such principles differ in certain respects
from those used by unregulated entities, but are required to appropriately
reflect the financial and economic impacts of regulation and the ratemaking
process. Significant differences resulting from the application of these
principles are disclosed elsewhere in these Notes to Financial Statements where
appropriate.
REVENUE RECOGNITION
Revenues are recognized as earned on the accrual basis, which is generally
when services are rendered based on the usage of the Company's local exchange
network and facilities.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of 90
days or less when purchased to be cash equivalents. Cash equivalents are stated
at cost, which approximates market value.
MATERIAL AND SUPPLIES
New and reusable materials are carried in inventory, principally at average
original cost, except that specific costs are used in the case of large
individual items. Nonreusable material is carried at estimated salvage value.
PREPAID DIRECTORY
Costs of directory production and advertising sales are deferred until the
directory is published. Such costs are amortized to expense and the related
advertising revenues are recognized over the average life of the directory,
which is generally 12 months.
PLANT AND DEPRECIATION
The Company's provision for depreciation is based principally on the
remaining life method of depreciation and straight-line composite rates. The
provision for depreciation is based on the following estimated remaining service
lives: buildings, 25 to 35 years; central office equipment, 2 to 11 years;
telephone instruments and related equipment, 4 to 7 years; poles, 21 to 25
years; cable and wiring, 10 to 18 years; conduit, 44 to 45 years; office
equipment and furniture, 4 to 14 years; and vehicles and other work equipment, 3
to 7 years. This method provides for the recovery of the remaining net
investment in telephone plant, less anticipated net salvage value, over the
remaining service lives authorized by regulatory commissions. Depreciation
expense also includes amortization of certain classes of telephone plant (and
certain identified depreciation reserve deficiencies) over periods authorized by
regulatory commissions.
When depreciable plant is replaced or retired, the amounts at which such
plant has been carried in plant, property and equipment are removed from the
respective accounts and charged to accumulated depreciation, and any gains or
losses on disposition are amortized over the remaining service lives of the
remaining net investment in telephone plant.
F-7
BELL ATLANTIC - NEW JERSEY, INC.
MAINTENANCE AND REPAIRS
The cost of maintenance and repairs of plant, including the cost of replacing
minor items not constituting substantial betterments, is charged to operating
expenses.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
Regulatory commissions allow the Company to record an allowance for funds
used during construction, which includes both interest and equity return
components, as a cost of plant and as an item of other income. Such income is
not recovered in cash currently, but will be recoverable over the service life
of the plant through higher depreciation expense recognized for regulatory
purposes.
EMPLOYEE BENEFITS
Pension Plans
Substantially all employees of the Company are covered under noncontributory
multi-employer defined benefit pension plans sponsored by Bell Atlantic and its
subsidiaries, including the Company. The Company uses the projected unit credit
actuarial cost method for determining pension cost for financial reporting
purposes. Amounts contributed to the Company's pension plans are actuarially
determined principally under the aggregate cost actuarial method, and are
subject to applicable federal income tax regulations.
Postretirement Benefits Other Than Pensions
Substantially all employees of the Company are covered under postretirement
health and life insurance benefit plans.
Effective January 1, 1991, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," which requires accrual accounting for all postretirement
benefits other than pensions. Under the prescribed accrual method, the
Company's obligation for these postretirement benefits is to be fully accrued by
the date employees attain full eligibility for such benefits.
A portion of the postretirement accrued benefit obligation is contributed to
501(c)(9) trusts and 401h accounts under applicable federal income tax
regulations. The amounts contributed to these trusts and accounts are
actuarially determined, principally under the aggregate cost actuarial method.
Postemployment Benefits
The Company provides employees with postemployment benefits such as
disability benefits, workers' compensation, and severance pay.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires accrual accounting for the estimated cost of benefits
provided to former or inactive employees after employment but before retirement.
Prior to 1993, the cost of these benefits was primarily charged to expense as
the benefits were paid.
INCOME TAXES
Bell Atlantic and its domestic subsidiaries, including the Company, file a
consolidated federal income tax return.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109),
which requires the determination of deferred taxes using the liability method.
F-8
BELL ATLANTIC - NEW JERSEY, INC.
Under the liability method, deferred taxes are provided on book and tax basis
differences and deferred tax balances are adjusted to reflect enacted changes in
income tax rates.
The consolidated amount of current and deferred tax expense is allocated by
applying the provisions of Statement No. 109 to each subsidiary as if it were a
separate taxpayer.
Prior to 1993, the Company accounted for income taxes based on the provisions
of Accounting Principles Board Opinion No. 11, "Accounting for Income Taxes"
(APB No. 11). Under APB No. 11, deferred taxes were generally provided to
reflect the effect of timing differences on the recognition of revenue and
expense determined for financial and income tax reporting purposes.
The Tax Reform Act of 1986 repealed the investment tax credit (ITC) as of
January 1, 1986, subject to certain transitional rules. ITCs were deferred and
are being amortized as a reduction to income tax expense over the estimated
service lives of the related assets.
RECLASSIFICATIONS
Certain reclassifications of prior years' data have been made to conform to
1993 classifications.
2. DEBT
LONG-TERM
Long-term debt consists principally of debentures issued by the Company.
Interest rates and maturities of the amounts outstanding at December 31 are as
follows:
1993 1992
-------- ---------
(DOLLARS IN MILLIONS)
Thirty-five year 3 7/8%, due 1993................... $ --- $ 30.0
Forty year 8 1/4%, due 1994......................... 100.0 100.0
Forty year 3 3/8%, due 1995......................... 25.0 25.0
Forty year 4 7/8%, due 2000......................... 20.0 20.0
Ten year 7 1/4%, due 2002........................... 100.0 100.0
Forty year 4 5/8%, due 2005......................... 40.0 40.0
Forty year 5 7/8%, due 2006......................... 55.0 55.0
Forty year 6 5/8%, due 2008......................... 50.0 50.0
Forty year 7 1/4%, due 2011......................... 125.0 125.0
Forty year 7 3/8%, due 2012......................... 75.0 75.0
Forty year 7 3/4%, due 2013......................... 150.0 150.0
Forty year 8%, due 2016............................. 100.0 100.0
Forty year 8 3/4%, due 2018......................... --- 100.0
Thirty year 8%, due 2022............................ 200.0 200.0
Thirty year 7 1/4%, due 2023........................ 100.0 ---
Thirty-one year 6.80%, due 2024..................... 100.0 ---
Forty year 7.85%, due 2029.......................... 150.0 150.0
-------- --------
1,390.0 1,320.0
Unamortized discount and premium, net............... (41.9) (44.9)
Capital lease obligations-average rate
10.8% and 10.7%................................... 50.4 58.3
-------- --------
Total long-term debt, including current maturities.. 1,398.5 1,333.4
Less maturing within one year....................... 103.8 38.9
-------- --------
Total long-term debt................................ $1,294.7 $1,294.5
======== ========
F-9
BELL ATLANTIC - NEW JERSEY, INC.
Long-term debt outstanding at December 31, 1993 includes $640.0 million that
is callable by the Company. The call prices range from 104.1% to 100% of face
value, depending upon the remaining term to maturity of the issue. In addition,
long-term debt includes $150.0 million that will become redeemable only on
November 15, 1999 at the option of the holders. The redemption prices will be
100% of face value plus accrued interest.
On March 11, 1993, the Company sold $100.0 million of Thirty Year 7 1/4%
Debentures, due March 1, 2023, through a public offering. The debentures are
not redeemable by the Company prior to March 1, 2003. The net proceeds of this
debt issuance were ultimately used to redeem $100.0 million of Forty Year 8 3/4%
Debentures due in 2018, which were redeemed by the Company on April 7, 1993 at a
call price equal to 104.59% of the principal amount, plus accrued interest from
December 1, 1992. As a result of the early extinguishment of this debt, which
was called on March 8, 1993, the Company recorded a charge of $5.7 million,
before an income tax benefit of $1.9 million, in the first quarter of 1993.
On December 22, 1993, the Company sold $100.0 million of Thirty-one Year 6.8%
Debentures, due December 15, 2024, through a public offering. The debentures
are not redeemable by the Company prior to December 15, 2008. The net proceeds
from this issuance were used to redeem $100.0 million of Forty Year 8 1/4%
Debentures with an original maturity date of 2016, which were redeemed by the
Company on January 7, 1994 at a call price equal to 103.7% of the principal
amount, plus accrued interest from August 15, 1993. As a result of the early
extinguishment of this debt, which was called on December 8, 1993, the Company
recorded a charge of $4.8 million, before an income tax benefit of $1.7 million,
in the fourth quarter of 1993.
In 1992, the Company recorded extraordinary charges associated with the early
extinguishment of debentures called by the Company of $25.3 million, before an
income tax benefit of $8.6 million.
On February 14, 1994, the Company sold $250.0 million of Ten Year 5 7/8%
Debentures, due February 1, 2004, through a public offering. The debentures are
not redeemable by the Company prior to maturity. The net proceeds from this
issuance were used on March 2, 1994, to redeem $150.0 million of Forty Year 7
3/4% Debentures due in 2013, and $100.0 million of Forty Year 8% Debentures due
in 2016. The Company redeemed the $150.0 million 7 3/4% debentures at a call
price equal to 102.8% of the principal amount, plus accrued interest from March
1, 1994, and the $100 million 8% debentures at a call price equal to 104.1% of
the principal amount, plus accrued interest from September 15, 1993. As a
result of the early extinguishment of these debentures, which were called on
January 31, 1994, the Company recorded a charge of $10.3 million, before an
income tax benefit of $3.6 million, in the first quarter of 1994.
At December 31, 1993, the Company had $300.0 million outstanding under a
shelf registration statement filed with the Securities and Exchange Commission.
After the $250.0 million debt issuance in February 1994, the total debt
securities outstanding under the shelf registration is $50.0 million.
The fair value of long-term debt is estimated based on the quoted market
prices for the same or similar issues. At December 31, 1993 and 1992, the fair
value of the Company's long-term debt, excluding the amount maturing within one
year, unamortized discount and premium and capital lease obligations, is
estimated at $1,345 million and $1,271 million, respectively.
F-10
BELL ATLANTIC - NEW JERSEY, INC.
MATURING WITHIN ONE YEAR
Debt maturing within one year consists of the following at December 31:
WEIGHTED AVERAGE
INTEREST RATES**
-------------------
1993 1992 1991 1993 1992 1991
------ ------ ------ ----- ----- -----
(DOLLARS IN MILLIONS)
Note payable to
affiliate................. $ --- $ 57.9 $ 57.6 3.3% 3.7% 5.0%
==== ==== ====
Long-term debt maturing
within one year........... 100.0 --- ---
Capital lease obligations 3.8 38.9 9.5
------ ------ ------
Total...................... $103.8 $ 96.8 $ 67.1
====== ====== ======
Average amount of note
payable outstanding
during the year *......... $ 96.6 $ 78.2 $137.5 3.2% 5.0% 6.8%
==== ==== ====
Maximum amount of note
payable at any month-
end during the year....... $189.3 $200.8 $199.1
* Amounts represent average daily face amount of the note.
** Weighted average interest rates are computed by dividing the average daily
face amount of the note into the aggregate related interest expense.
At December 31, 1993, the Company had an unused line of credit balance of
$472.1 million with an affiliate, Bell Atlantic Network Funding Corporation
(BANFC) (Note 7).
The fair value of debt maturing within one year, excluding capital lease
obligations, is estimated based on quoted market prices for the same or similar
issues. At December 31, 1993, the fair value of debt maturing within one year,
excluding capital lease obligations, is estimated at $104 million. At December
31, 1992, the carrying amount of debt maturing within one year, excluding
capital lease obligations, approximates fair value.
3. LEASES
The Company has entered into both capital and operating leases for facilities
and equipment used in operations. Plant, property and equipment included
capital leases of $85.4 million and $87.7 million and related accumulated
amortization of $47.1 million and $36.9 million at December 31, 1993 and 1992,
respectively. The Company incurred no initial capital lease obligations in
1993, as compared to $.3 million in 1992 and $20.3 million in 1991.
Total rent expense amounted to $53.6 million in 1993, $55.1 million in 1992,
and $50.7 million in 1991. Of these amounts, the Company incurred rent expense
of $6.8 million, $3.6 million, and $2.9 million in 1993, 1992, and 1991,
respectively, from affiliated companies.
F-11
BELL ATLANTIC - NEW JERSEY, INC.
At December 31, 1993, the aggregate minimum rental commitments under
noncancelable leases for the periods shown are as follows:
YEARS CAPITAL LEASES OPERATING LEASES
----- -------------- ----------------
(DOLLARS IN MILLIONS)
1994.......................... $ 9.4 $11.5
1995.......................... 9.4 9.2
1996.......................... 9.3 7.1
1997.......................... 9.1 5.4
1998.......................... 9.2 3.7
Thereafter.................... 35.0 17.0
----- -----
Total......................... 81.4 $53.9
=====
Less imputed interest and
executory costs.............. 31.0
-----
Present value of net
minimum lease payments....... 50.4
Less current installments..... 3.8
-----
Long-term obligation at
December 31, 1993............ $46.6
=====
4. EMPLOYEE BENEFITS
PENSION PLANS
Substantially all of the Company's management and associate employees are
covered under multi-employer noncontributory defined benefit pension plans
sponsored by Bell Atlantic and its subsidiaries, including the Company. The
pension benefit formula is based on a flat dollar amount per year of service
according to job classification under the associate plan and a stated percentage
of adjusted career average earnings under the plans for management employees.
The Company's objective in funding the plans is to accumulate funds at a
relatively stable level over participants' working lives so that benefits are
fully funded at retirement. Plan assets consist principally of investments in
domestic and foreign corporate equity securities, U.S. and foreign Government
and corporate debt securities, and real estate.
Aggregate pension cost for the plans is as follows:
YEARS ENDED DECEMBER 31,
---------------------------
1993 1992 1991
-------- -------- -------
(DOLLARS IN MILLIONS)
Pension cost.................. $25.4 $35.2 $30.4
===== ===== =====
Pension cost as a percentage
of salaries and wages....... 4.5% 4.8% 4.2%
===== ===== =====
The decrease in pension cost in 1993 is due to the net effect of the
elimination of one-time charges associated with special termination benefits
that were recognized in the preceding years, favorable investment experience and
changes in plan demographics due to retirement and severance programs.
In 1992, the Company recognized $14.6 million of special termination benefit
costs related to the early retirement of associate employees. The special
termination benefit costs and the net effect of changes in plan provisions,
certain actuarial assumptions, and the amortization of actuarial gains and
losses related to demographic and investment experience increased pension cost
in 1992. A change in the expected long-term rate of return on plan assets
resulted in a reduction of $16.6 million in pension cost (which reduced
operating expenses by $14.4 million after capitalization of amounts related to
the construction program) and substantially offset the 1992 cost increase.
F-12
BELL ATLANTIC - NEW JERSEY, INC.
Statement of Financial Accounting Standards No. 87, "Employers' Accounting
for Pensions" (Statement No. 87) requires a comparison of the actuarial present
value of projected benefit obligations with the fair value of plan assets, the
disclosure of the components of net periodic pension costs and a reconciliation
of the funded status of the plans with amounts recorded on the balance sheets.
The Company participates in multi-employer plans and therefore, such disclosures
are not presented for the Company because the structure of the plans does not
allow for the determination of this information on an individual participating
company basis.
Significant actuarial assumptions are as follows:
1993 1992 1991
---- ---- ----
Discount rate used to measure the projected
benefit obligation ....................... 7.25% 7.75% 7.75%
Assumed rate of future increases in
compensation levels ...................... 5.25% 5.25% 5.25%
Expected long-term rate of return on plan
assets to calculate pension cost ......... 8.25% 8.25% 7.50%
The Company has in the past entered into collective bargaining agreements
with unions representing certain employees and expects to do so in the future.
Pension benefits have been included in these agreements and improvements in
benefits have been made from time to time. Additionally, the Company has amended
the benefit formula under pension plans maintained for its management employees.
Expectations with respect to future amendments to the Company's pension plans
have been reflected in determining the Company's pension cost under Statement
No. 87.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1991, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (Statement No. 106). Statement No. 106 requires accrual
accounting for all postretirement benefits other than pensions. Under the
prescribed accrual method, the Company's obligation for these postretirement
benefits is to be fully accrued by the date employees attain full eligibility
for such benefits.
In conjunction with the adoption of Statement No. 106, the Company elected
for financial reporting purposes, to recognize immediately the accumulated
postretirement benefit obligation for current and future retirees, net of the
fair value of plan assets and recognized accrued postretirement benefit cost
(transition obligation), in the amount of $469.1 million, net of a deferred
income tax benefit of $241.7 million.
For purposes of measuring the interstate rate of return achieved by the
Company, the FCC permits recognition of postretirement benefit costs, including
amortization of the transition obligation, in accordance with the prescribed
accrual method included in Statement No. 106. In January 1993, the FCC denied
adjustments to the interstate price cap formula which would have permitted
tariff increases to reflect the incremental postretirement benefit cost
resulting from the adoption of Statement No. 106.
For the purposes of measuring intrastate rate of return, the Company
recognizes the accrued postretirement benefit cost, including amortization of
the transition obligation, in accordance with the prescribed method in Statement
No. 106. This method is subject to authoritative approval by the Board of
Regulatory Commissioners.
Pursuant to Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation" (Statement No. 71), a regulatory
asset associated with the recognition of the transition obligation was not
recorded because of uncertainties as to the timing and extent of recovery given
the Company's assessment of its long-term competitive environment.
F-13
BELL ATLANTIC - NEW JERSEY, INC.
Substantially all of the Company's management and associate employees are
covered under multi-employer postretirement health and life insurance benefit
plans sponsored by Bell Atlantic and certain of its subsidiaries, including the
Company. The determination of benefit cost for postretirement health benefit
plans is based on comprehensive hospital, medical, surgical and dental benefit
plan provisions. The postretirement life insurance benefit formula used in the
determination of postretirement benefit cost is primarily based on annual basic
pay at retirement.
The Company funds the postretirement health and life insurance benefits of
current and future retirees. Plan assets consist principally of investments in
domestic and foreign corporate equity securities, and U.S. Government and
corporate debt securities.
The aggregate postretirement benefit cost for the year ended December 31,
1993, 1992, and 1991, was $64.1 million, $59.7 million, and $57.8 million,
respectively. As a result of the 1992 collective bargaining agreements, Bell
Atlantic amended the postretirement medical benefit plan for associate employees
and certain associate retirees of the Company. The increases in the
postretirement benefit cost between 1993 and 1991 were primarily due to the
change in benefit levels and claims experience. Also contributing to these
increases were changes in actuarial assumptions and demographic experience.
Statement No. 106 requires a comparison of the actuarial present value of
projected benefit obligations with the fair value of plan assets, the disclosure
of the components of net periodic postretirement benefit costs, and a
reconciliation of the funded status of the plan with amounts recorded on the
balance sheets. The Company participates in multi-employer plans and therefore,
such disclosures are not presented for the Company because the structure of the
plans does not provide for the determination of this information on an
individual participating company basis.
The assumed discount rate used to measure the accumulated postretirement
benefit obligation was 7.25% at December 31, 1993 and 7.75% at December 31,
1992. The assumed rate of future increases in compensation levels was 5.25% at
December 31, 1993 and 1992. The expected long-term rate of return on plan
assets was 8.25% for 1993 and 1992 and 7.5% for 1991. The medical cost trend
rate in 1993 was approximately 13.0%, grading down to an ultimate rate in 2003
of approximately 5.0%. The dental cost trend rate in 1993 and thereafter is
approximately 4.0%.
Postretirement benefits other than pensions have been included in collective
bargaining agreements and have been modified from time to time. The Company has
periodically modified benefits under the plans maintained for its management
employees. Expectations with respect to future amendments to the Company's
postretirement plans have been reflected in determining the Company's
postretirement benefit costs under Statement No. 106.
POSTEMPLOYMENT BENEFITS
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (Statement No. 112). Statement No. 112 requires accrual accounting
for the estimated cost of benefits provided to former or inactive employees
after employment but before retirement. This change principally affects the
Company's accounting for disability and workers' compensation benefits, which
previously were charged to expense as the benefits were paid.
The cumulative effect at January 1, 1993 of adopting Statement No. 112
reduced net income by $30.0 million, net of a deferred income tax benefit of
$15.4 million. The adoption of Statement No. 112 did not have a significant
effect on the Company's ongoing level of operating expense in 1993.
F-14
BELL ATLANTIC - NEW JERSEY, INC.
5. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement No. 109).
Statement No. 109 requires the determination of deferred taxes using the
liability method. Under the liability method, deferred taxes are provided on
book and tax basis differences and deferred tax balances are adjusted to reflect
enacted changes in income tax rates. Prior to 1993, the Company accounted for
income taxes based on the provisions of Accounting Principles Board Opinion
No. 11.
Statement No. 109 has been adopted on a prospective basis and amounts
presented for prior years have not been restated. As of January 1, 1993, the
Company recorded a charge to income of $.8 million, representing the cumulative
effect of adopting Statement No. 109, which has been reflected in Federal
Operating Income Taxes in the Statement of Income and Reinvested Earnings.
Upon adoption of Statement No. 109, the effects of required adjustments to
deferred tax balances were primarily deferred on the balance sheet as regulatory
assets and liabilities in accordance with Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation"
(Statement No. 71). At January 1, 1993, the Company recorded income tax-related
regulatory assets totaling $130.6 million in Other Assets. These regulatory
assets represent the anticipated future regulatory recognition of the Statement
No. 109 adjustments to recognize temporary differences for which deferred income
taxes had not been provided. In addition, income tax-related regulatory
liabilities totaling $228.6 million were recorded in Deferred Credits and Other
Liabilities - Other. These regulatory liabilities represent the anticipated
future regulatory recognition of the Statement No. 109 adjustments to recognize
(i) a reduced deferred tax liability resulting from decreases in federal income
tax rates subsequent to the dates the deferred taxes were recorded and (ii) a
deferred tax benefit required to recognize the effects of the temporary
differences attributable to the Company's policy of accounting for investment
tax credits using the deferred method. These deferred taxes and regulatory
assets and liabilities have been increased for the tax effect of future revenue
requirements. These regulatory assets and liabilities are amortized at the time
the related deferred taxes are recognized in the ratemaking process.
Prior to the adoption of Statement No. 109, the Company had income tax timing
differences for which deferred taxes had not been provided pursuant to the
ratemaking process of $197.8 million and $177.5 million at December 31, 1992 and
1991, respectively. These timing differences principally related to the
allowance for funds used during construction and certain taxes and payroll-
related construction costs capitalized for financial statement purposes, but
deducted currently for income tax purposes, net of applicable depreciation.
The Omnibus Budget Reconciliation Act of 1993, which was enacted in August
1993, increased the federal corporate income tax rate from 34% to 35%, effective
January 1, 1993. In the third quarter of 1993, the Company recorded a net
charge to the tax provision of $.1 million, which included a $6.7 million charge
for the nine month effect of the 1% rate increase, largely offset by a one-time
net benefit of $6.6 million related to adjustments to deferred tax assets
associated with the postretirement benefit obligation.
Pursuant to Statement No. 71, the effect of the income tax rate increase on
the deferred tax balances was primarily deferred through the establishment of
regulatory assets of $5.9 million and the reduction of regulatory liabilities of
$21.7 million. The Company did not recognize regulatory assets and liabilities
related to the postretirement benefit obligation or the associated deferred
income tax asset.
F-15
BELL ATLANTIC - NEW JERSEY, INC.
The components of income tax expense are as follows:
YEARS ENDED DECEMBER 31,
------------------------
1993 1992 1991
------ ------ ------
(DOLLARS IN MILLIONS)
Current:
Federal....................... $275.5 $247.2 $233.4
Deferred:
Federal....................... (42.8) (39.5) (32.9)
Investment tax credits........ (13.8) (22.6) (18.3)
------ ------ ------
Total........................... $218.9 $185.1 $182.2
====== ====== ======
Income tax expense (benefit) which relates to non-operating income and
expense and is included in Miscellaneous-net was $(2.5) million, $1.1 million,
and $1.6 million in 1993, 1992, and 1991, respectively.
For the years ended December 31, 1992 and 1991, deferred income tax expense
resulted from timing differences in the recognition of revenue and expense for
financial and income tax accounting purposes. The sources of these timing
differences and the tax effects of each were as follows:
YEARS ENDED DECEMBER 31,
-----------------------
1992 1991
------ ------
(DOLLARS IN MILLIONS)
Accelerated depreciation .................. $ 3.9 $(10.6)
Employee benefits.......................... (32.7) (10.5)
Other, net................................. (10.7) (11.8)
------ ------
Total...................................... $(39.5) $(32.9)
====== ======
The provision for income taxes varies from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes. The difference is attributable to the following factors:
YEARS ENDED DECEMBER 31,
------------------------
1993 1992 1991
---- ---- ----
Statutory federal income tax rate............ 35.0% 34.0% 34.0%
Investment tax credits....................... (1.9) (2.8) (2.9)
Benefit of rate differential applied to
reversing timing differences................ (2.8) (2.5) (3.3)
Reversal of previously capitalized taxes
and payroll-related construction costs...... 1.1 1.6 1.3
Other, net................................... (.7) (1.6) 1.0
---- ---- ----
Effective income tax rate.................... 30.7% 28.7% 30.1%
==== ==== ====
At December 31, 1993, the significant components of deferred tax assets and
liabilities were as follows:
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES
------------ ------------
(DOLLARS IN MILLIONS)
Depreciation................................. $ --- $832.7
Employee benefits............................ 337.4 ---
Investment tax credits....................... 67.4 ---
Advance payments............................. 34.4 ---
Other........................................ 47.4 24.1
------ ------
486.6 $856.8
====== ======
F-16
BELL ATLANTIC - NEW JERSEY, INC.
Total deferred tax assets include approximately $257 million related to
postretirement benefit costs recognized in accordance with Statement No. 106.
This deferred tax asset will gradually be realized over the estimated lives of
current retirees and employees.
6. SUPPLEMENTAL CASH FLOW AND ADDITIONAL FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31,
------------------------
1993 1992 1991
------- ------- ------
(DOLLARS IN MILLIONS)
Supplemental Cash Flow Information:
Interest paid, net of interest
capitalized.............................. $102.6 $113.8 $117.3
Income taxes paid.......................... $259.3 $274.9 $196.6
Additional Financial Information:
Interest expense:
Interest on long-term debt............... $ 97.9 $111.4 $113.0
Interest on note payable to affiliate . 3.1 3.0 8.4
Interest on other notes payable.......... --- .9 ---
Other.................................... 11.4 2.5 6.5
------ ------ ------
Total interest expense..................... $112.4 $117.8 $127.9
====== ====== ======
For the years ended December 31, 1993, 1992, and 1991, revenues generated
from services provided to AT&T, principally network access, billing and
collection, and sharing of network facilities, were $423.8 million, $470.1
million, and $474.5 million, respectively. At December 31, 1993 and 1992,
Accounts receivable, net, included $66.1 million and $54.8 million,
respectively, from AT&T.
Financial instruments that potentially subject the Company to concentrations
of credit risk consist of trade receivables with AT&T, as noted above. Credit
risk with respect to other trade receivables is limited due to the large number
of customers included in the Company's customer base.
At December 31, 1993 and 1992, $22.0 million and $90.6 million, respectively,
of negative cash balances were classified as Accounts payable.
7. TRANSACTIONS WITH AFFILIATES
The Company has contractual arrangements with an affiliated company, Bell
Atlantic Network Services, Inc. (NSI), for the provision of various centralized
corporate, administrative, planning, financial and other services. These
arrangements serve to fulfill the common needs of Bell Atlantic's telephone
subsidiaries on a centralized basis.
In connection with these services, the Company recognized $498.7 million,
$512.0 million, and $479.0 million in operating expenses for the years ended
December 31, 1993, 1992, and 1991, respectively. Included in these expenses
were $39.9 million in 1993, $55.0 million in 1992, and $45.2 million in 1991
billed to NSI and allocated to the Company by Bell Communications Research,
Inc., another affiliated company owned jointly by the seven regional holding
companies. In 1991, these charges included $12.7 million associated with NSI's
adoption of Statement No. 106. In addition, in 1991, the Company recognized
$128.0 million representing the Company's proportionate share of NSI's accrued
transition obligation under Statement No. 106.
In connection with the adoption of Statement No. 112 in 1993, the cumulative
effect included $2.5 million, net of a deferred income tax benefit of $1.3
million, representing the Company's proportionate share of NSI's accrued cost of
postemployment benefits at January 1, 1993.
F-17
BELL ATLANTIC - NEW JERSEY, INC.
The Company has a contractual agreement with an affiliated company, BANFC,
for the provision of short-term financing and cash management services. BANFC
issues commercial paper and secures bank loans to fund the working capital
requirements of the telephone subsidiaries and NSI and invests funds in
temporary investments on their behalf. In connection with this arrangement, the
Company recognized interest expense of $3.1 million, $3.0 million, and $8.4
million in 1993, 1992, and 1991, respectively, and $.1 million in interest
income in 1993.
In 1993, the Company received $54.3 million in revenue from affiliates,
principally related to rent received for the use of Company facilities and
equipment, and paid $12.8 million in other operating expenses to affiliated
companies. These amounts were $46.0 million and $3.6 million, respectively, in
1992 and $37.9 million and $2.9 million, respectively, in 1991.
On February 1, 1994, the Company declared and paid a dividend in the amount
of $91.7 million to Bell Atlantic.
8. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
INCOME BEFORE
EXTRAORDINARY
ITEM AND
CUMULATIVE
TOTAL NET EFFECT OF CHANGE
OPERATING OPERATING IN ACCOUNTING NET
QUARTER ENDED REVENUES REVENUES PRINCIPLE INCOME
- ------------- --------- --------- ---------------- ------
(DOLLARS IN MILLIONS)
1993:
March 31...................... $ 797.9 $204.7 $123.0 $ 89.2
June 30....................... 803.6 224.4 143.7 143.7
September 30.................. 811.9 193.1 116.5 116.5
December 31................... 805.5 178.1 104.1 101.0
-------- ------ ------ ------
Total......................... $3,218.9 $800.3 $487.3 $450.4
======== ====== ====== ======
1992:
March 31...................... $ 775.7 $185.7 $112.9 $112.9
June 30....................... 787.8 194.4 116.7 100.0
September 30.................. 788.5 194.3 113.6 113.6
December 31................... 797.3 179.4 117.9 117.9
-------- ------ ------ ------
Total......................... $3,149.3 $753.8 $461.1 $444.4
======== ====== ====== ======
Net income for the first quarter of 1993 has been restated to include a
charge of $30.0 million, net of a deferred income tax benefit of $15.4 million,
related to the adoption of Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (Note 4).
F-18
BELL ATLANTIC - NEW JERSEY, INC.
SCHEDULE V - PLANT, PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
- ----------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS
BEGINNING AT COST RETIREMENTS OTHER BALANCE AT
CLASSIFICATION OF PERIOD NOTE (a) NOTE (b) CHANGES END OF PERIOD
- --------------------------------------------- --------- ---------- ----------- ------- -------------
Land......................................... $ 45.0 $ .9 $ .1 $ - $ 45.8
Buildings.................................... 580.6 15.7 2.1 - 594.2
Central Office Equipment..................... 3,060.1 314.1 217.1 .1 3,157.2
Telephone Instruments and Related Equipment.. 145.9 19.4 9.7 .1 155.7
Poles........................................ 154.6 5.1 1.8 .1 158.0
Cable and Wiring............................. 2,482.9 125.6 20.6 - 2,587.9
Conduit...................................... 605.1 21.2 .2 - 626.1
Office Equipment and Furniture............... 485.7 65.9 28.6 (.1) 522.9
Vehicles and Other Work Equipment............ 214.5 10.4 21.2 - 203.7
Other........................................ 126.5 1.8 5.2 (.2) 122.9
-------- ------ ------ ---- --------
Total in Service (c)....................... 7,900.9 580.1 306.6 - 8,174.4
Plant Under Construction..................... 162.0 29.3 .4 .2 191.1
Other........................................ 12.6 1.3 1.1 (.2) 12.6
-------- ------ ------ ---- --------
Total Plant, Property and Equipment........ $8,075.5 $610.7 $308.1 $ - $8,378.1
======== ====== ====== ===== ========
The notes on page F-22 are an integral part of this schedule.
F-19
BELL ATLANTIC - NEW JERSEY, INC.
SCHEDULE V - PLANT, PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN MILLIONS)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS
BEGINNING AT COST RETIREMENTS OTHER BALANCE AT
CLASSIFICATION OF PERIOD NOTE (a) NOTE (b) CHANGES END OF PERIOD
- --------------------------------------------- ---------- ----------- --------- ----------- -------------
Land......................................... $ 43.1 $ 1.9 $ - $ - $ 45.0
Buildings.................................... 566.5 15.7 1.6 - 580.6
Central Office Equipment..................... 2,950.1 292.3 182.3 - 3,060.1
Telephone Instruments and Related Equipment.. 137.5 17.4 9.0 - 145.9
Poles........................................ 151.9 4.7 1.8 (.2) 154.6
Cable and Wiring............................. 2,973.0 144.6 634.7 - 2,482.9
Conduit...................................... 580.5 25.0 .4 - 605.1
Office Equipment and Furniture............... 490.5 57.9 62.7 - 485.7
Vehicles and Other Work Equipment............ 218.8 10.5 14.8 - 214.5
Other........................................ 129.0 3.4 5.4 (.5) 126.5
-------- ------ ------ ----- --------
Total in Service (c)....................... 8,240.9 573.4 912.7 (.7) 7,900.9
Plant Under Construction..................... 137.5 24.6 - (.1) 162.0
Other........................................ 13.3 (.2) - (.5) 12.6
-------- ------ ------ ----- --------
Total Plant, Property and Equipment........ $8,391.7 $597.8 $912.7 $(1.3) $8,075.5
======== ====== ====== ===== ========
The notes on page F-22 are an integral part of this schedule.
F-20
BELL ATLANTIC - NEW JERSEY, INC.
SCHEDULE V - PLANT, PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
(DOLLARS IN MILLIONS)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS
BEGINNING AT COST RETIREMENTS OTHER BALANCE AT
CLASSIFICATION OF PERIOD NOTE (a) NOTE (b) CHANGES END OF PERIOD
- --------------------------------------------- ---------- ------------ -------- ----------- -------------
Land......................................... $ 42.2 $ 1.1 $ - $ (.2) $ 43.1
Buildings.................................... 551.3 18.0 1.8 (1.0) 566.5
Central Office Equipment..................... 2,872.7 236.2 158.8 - 2,950.1
Telephone Instruments and Related Equipment.. 177.3 17.1 56.9 - 137.5
Poles........................................ 151.6 6.4 6.1 - 151.9
Cable and Wiring............................. 2,898.2 158.4 83.6 - 2,973.0
Conduit...................................... 553.2 27.8 .5 - 580.5
Office Equipment and Furniture............... 434.8 73.0 17.3 - 490.5
Vehicles and Other Work Equipment............ 189.8 41.1 12.1 - 218.8
Other........................................ 107.7 24.5 3.2 - 129.0
-------- ------ ------ ----- --------
Total in Service (c)....................... 7,978.8 603.6 340.3 (1.2) 8,240.9
Plant Under Construction..................... 114.8 22.7 - - 137.5
Other........................................ 9.3 4.0 - - 13.3
-------- ------ ------ ----- --------
Total Plant, Property and Equipment........ $8,102.9 $630.3 $340.3 $(1.2) $8,391.7
======== ====== ====== ===== ========
The notes on page F-22 are an integral part of this schedule.
F-21
BELL ATLANTIC - NEW JERSEY, INC.
NOTES TO SCHEDULE V - PLANT, PROPERTY AND EQUIPMENT
- ----------------
(a) These additions include (1) the original cost (estimated if not
specifically determinable) of reused material, which is concurrently
credited to material and supplies, and (2) allowance for funds used during
construction. Transfers between Plant in Service, Plant Under Construction
and Other are also included in Additions at Cost.
(b) Items of plant, property and equipment are deducted from the property
accounts when retired or sold at the amounts at which they are included
therein, estimated if not specifically determinable.
(c) The Company's provision for depreciation is principally based on the
remaining life method and straight-line composite rates prescribed by
regulatory authorities. The remaining life method provides for the full
recovery of the remaining net investment in plant, property and equipment.
In 1993 and 1991, the Company implemented changes in depreciation rates
approved by regulatory authorities. These changes reflect reductions in
estimated service lives of the Company's plant, property and equipment in
service. The rulings will allow a more rapid recovery of the Company's
investment in plant, property and equipment through closer alignment with
current estimates of its remaining economic useful life. For the years
1993, 1992, and 1991, depreciation expressed as a percentage of average
depreciable plant was 7.5%, 6.5%, and 6.3%, respectively.
(d) See Note 1 of Notes to Financial Statements for the Company's depreciation
policies.
F-22
BELL ATLANTIC - NEW JERSEY, INC.
SCHEDULE VI - ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN MILLIONS)
- ------------------------------------------------------------------------------
BALANCE AT ADDITIONS OTHER
BEGINNING CHARGED TO CHANGES BALANCE AT
CLASSIFICATION OF PERIOD EXPENSE RETIREMENTS NOTE (a) END OF PERIOD
- ---------------- ---------- ---------- ----------- -------- -------------
Year 1993....... $2,998.9 $596.6 $301.5 $ 1.3 $3,295.3
Year 1992....... $3,392.4 $535.8 $921.2 $ (8.1) $2,998.9
Year 1991....... $3,238.3 $506.0 $340.3 $(11.6) $3,392.4
- ---------------------------
(a) Includes any gains or losses on disposition of plant, property and
equipment. These gains and losses are amortized to depreciation expense
over the remaining service lives of remaining net investment in plant,
property and equipment. Consists primarily of salvage and cost of removal
amounts related to the retirement of plant assets.
F-23
BELL ATLANTIC - NEW JERSEY, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN MILLIONS)
- -----------------------------------------------------------------------------------------------------------
ADDITIONS
-------------------------
(1) (2)
-------- --------------
BALANCE AT CHARGED CHARGED TO
BEGINNING TO OTHER ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES NOTE (a) NOTE (b) END OF PERIOD
- --------------------------------------- ---------- -------- -------------- ---------- -------------
Allowance for Uncollectible Accounts:
Year 1993............................ $40.6 $57.2 $48.1 $88.2 $57.7
Year 1992............................ $37.1 $33.7 $40.2 $70.4 $40.6
Year 1991............................ $24.5 $31.1 $40.6 $59.1 $37.1
- ---------------------------
(a) (i) Amounts previously written off which were credited directly to this
account when recovered; and (ii) 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.
F-24
BELL ATLANTIC - NEW JERSEY, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN MILLIONS)
CHARGED TO COSTS
ITEM AND EXPENSES
---- ----------------
Year 1993
Maintenance and repairs ..................................... $626.9
======
Taxes other than payroll and income taxes:
Property .................................................. $110.5
Gross receipts ............................................ 73.9
Other ..................................................... .8
------
$185.2
======
Year 1992
Maintenance and repairs .................................... $638.5
======
Taxes other than payroll and income taxes:
Property ................................................. $104.8
Gross receipts ............................................ 72.7
Other ..................................................... 1.0
------
$178.5
======
Advertising costs ........................................... $ 29.7
======
Year 1991
Maintenance and repairs ..................................... $618.6
======
Taxes other than payroll and income taxes:
Property .................................................. $100.4
Gross receipts ............................................ 74.7
Other ..................................................... .9
------
$176.0
======
Advertising costs ........................................... $ 33.1
======
Advertising costs for 1993 are not presented, as such amounts are less than 1
percent of total operating revenues.
Amounts reported for 1992 and 1991 for maintenance and repairs have been revised
to include certain additional costs.
F-25
EXHIBITS
FILED WITH ANNUAL REPORT FORM 10-K
UNDER THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
Bell Atlantic - New Jersey, Inc.
COMMISSION FILE NUMBER 1-3488
Form 10-K for 1993
File No. 1-3488
Page 1 of 1
EXHIBIT INDEX
Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.
Exhibit Number (Referenced to Item 601 of Regulation S-K)
---------------------------------------------------------
3a Restated Certificate of Incorporation of the registrant, dated September
28, 1989 and filed November 28, 1989. (Exhibit 3a to the registrant's
Annual Report on Form 10-K for the year ended December 31, 1989, File No.
1-3488.)
3a(i) Certificate of Amendment to the Certificate of Incorporation of
the registrant, dated January 7, 1994 and filed January 13,
1994.
3b By-Laws of the registrant, as amended March 31, 1988. (Exhibit 3b to the
registrant's Annual Report on Form 10-K for the year ended December 31,
1988, File No. 1-3488.)
3b(i) By-Law resolution, dated June 25, 1992, amending Article VI,
Section 6:1, of the Company's By-Laws (re: the indemnification
by the Company of reasonable costs and expenses incurred for
actions brought against Directors, Trustees and Officers of the
Company). (Exhibit 3b to the registrant's Annual Report on Form
10-K for the year ended December 31, 1992, File No. 1-3488.)
3b(ii) By-Law resolution, dated November 19, 1992, amending Article
III, Section 3:1, of the Company's By-Laws (re: the
establishment of a Dividend Committee). (Exhibit 3b to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1992, File No. 1-3488.)
3b(iii) By-Law resolution, dated January 28, 1993, amending Article V,
Section 5:7, of the Company's By-Laws (re: the elimination of
the title "Vice President - External Affairs and Chief
Financial Officer" and the substitution therein of the title
"Chief Financial Officer"). (Exhibit 3b to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1992, File No. 1-3488.)
4 No instrument which defines the rights of holders of long and
intermediate term debt of the registrant is filed herewith pursuant to
Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the
registrant hereby agrees to furnish a copy of any such instrument to the
SEC upon request.
10a Agreement Concerning Contingent Liabilities, Tax Matters and Termination
of Certain Agreements among AT&T, Bell Atlantic Corporation, and the Bell
Atlantic Corporation telephone subsidiaries, and certain other parties,
dated as of November 1, 1983. (Exhibit 10a to Bell Atlantic Corporation
Annual Report on Form 10-K for the year ended December 31, 1993, File No.
1-8606.)
10b Agreement among Bell Atlantic Network Services, Inc. and the Bell
Atlantic Corporation telephone subsidiaries, dated November 7, 1983.
(Exhibit 10b to Bell Atlantic Corporation Annual Report on Form 10-K for
the year ended December 31, 1993, File No. 1-8606.)
23 Consent of Coopers & Lybrand.
24 Powers of attorney.