01—Abstract
Summary
Summary of the 10-K filed March 31, 1994. Cited figures are marked; the original filing is the authoritative source.
Bell Atlantic Corporation's 1993 Form 10-K (filed March 31, 1994) portrays a company whose core telephone business is growing modestly while it repositions for multimedia and wireless opportunities.
Reported 1993 operating revenues were $12,990.2 milliona, up 2.1% (about 4.5% excluding the computer leasing and customer premises equipment dispositions), and operating income rose 11.6% to $2,797.6 million. Net income was $1,403.4 million, or $3.22 per share, versus $3.13 in 1992, a 2.9% gain in reported EPS that management says was nearly 9% excluding one-time and extraordinary items. Results were affected by accounting changes (SFAS 109 and 112) and a 1-point federal tax rate increase.
Cash from operations rose to $4.23 billionb, and the debt ratio improved to 54.6% from 56.3%. The filing's central strategic theme is the transformation of the Network Services Companies into a segment-focused organization. The company reorganized into nine lines of business, pledged $11 billion over five years to build broadband "information highway" networks, and is pursuing video dial tone and entertainment services after a federal court struck down the 1984 Cable Act's restriction on local carriers providing programming.
It is also expanding internationally, notably a $520 millionc stake in Grupo Iusacell of Mexico, with up to 42% economic interest planned. Management expects Iusacell to dilute earnings by about $0.14 per share in 1994, but views the investment as a major long-term growth driver for its wireless business. Investors should weigh substantial competitive and regulatory risk.
The filing warns that long-distance carriers (AT&T via McCaw, MCI with a $2 billiond local network plan) and cable operators could erode local exchange revenues, and that PCS auctions and alternative access providers add pressure. Financial services are being exited, with a sale of a significant part of the TriCon leasing business to GFC Financial planned for the second quarter of 1994. The company also disclosed that the planned TCI/Liberty Media merger was terminated in February 1994.
02—Key points
Key Highlights
- 1993 operating revenues of $12,990.2 million, up 2.1% reported and 4.5% for ongoing businesses; operating income up 11.6% to $2,797.6 million.
- Net income of $1,403.4 million ($3.22 per share) versus $3.13 in 1992; ex-one-time items, net income grew 10.5% and EPS nearly 9%.
- Cellular subscribers grew 340,700 (about 49%) to over 1 million; cellular revenues rose 32% to $187.3 million increase, with Bell Atlantic Mobile a key growth engine.
- Commitment to invest $11 billion over five years in broadband full-service networks, targeting 8.75 million homes by end of 2000 and wiring the top 20 Mid-Atlantic markets by 1998.
- Cash from operations of $4.23 billion and debt ratio improved to 54.6% from 56.3%; approximately $1.7 billion of debt refinanced at lower rates, saving about $47 million annually.
- Exit from financial services underway: sale of a significant portion of diversified leasing business (TriCon) to GFC Financial expected to close Q2 1994; leasing segment revenues fell to $455.4 million from $553.8 million.
- Expected $0.14 per share earnings dilution in 1994 from the Grupo Iusacell investment (23% interest acquired for $520 million, up to 42%-46% planned), and the TCI/Liberty Media merger was terminated in February 1994.
03—Questions
Frequently Asked Questions
How did Bell Atlantic perform financially in 1993?
Revenue rose 2.1% to $12.99 billion and operating income rose 11.6% to $2.80 billion. Net income reached $1.40 billion, or $3.22 per share, up from $3.13. Excluding one-time items, EPS grew nearly 9% and net income grew 10.5%. Growth was supported by access line and minute-of-use increases, value-added services, and cellular expansion, while expenses were held flat.
What are the main growth drivers Bell Atlantic is pursuing?
Management is focused on video entertainment and interactive multimedia services over a broadband network, with an $11 billion five-year investment plan. Other drivers include cellular and wireless growth (over 1 million subscribers), value-added IQ services (about $414 million in 1993 revenue), and international expansion, most notably the Grupo Iusacell investment in Mexico.
What competitive and regulatory risks could affect future earnings?
Local exchange revenues could fall as large carriers (AT&T through McCaw, MCI with a planned $2 billion local network build) and alternative access providers enter markets. Collocation rules, the FCC's intelligent network proceeding, and pending PCS spectrum auctions add risk. Regulatory outcomes in individual states, including price cap and alternative regulation plans, could also limit pricing. Congressional action on the line-of-business restrictions remains uncertain.
Why is Bell Atlantic exiting financial services, and what is the impact?
The company is refocusing on core communications and information services. It agreed in March 1994 to sell a significant portion of its diversified leasing business to GFC Financial, expected to close in Q2 1994. Management said the disposition would not materially affect 1994 net income, but future revenues and expenses from this segment will decline significantly.
Does the company's dividend and balance sheet appear sound?
Yes, based on the filing. Dividends declared rose to $2.68 per share in 1993 from $2.60, and shareowners' investment grew to $8.22 billion. The debt ratio fell to 54.6%, and the company reported more than $2.0 billion in unused bank lines of credit. Management expects most capital needs to be met through internally generated funds, though additional debt or equity financing may be needed for development activities.
04—Continue