UNITED STATES


SECURITIES AND
EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





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FORM 10-Q





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(Mark one)





|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




For the quarterly period ended September 30, 2002





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 1-7368





VERIZON WASHINGTON, DC INC.





A New York Corporation

I.R.S. Employer IdentificationNo. 53-0046277





1710 H Street, N.W., Washington, D.C. 20006





Telephone Number (202) 392-9900





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THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS
THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION  H(2).





Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes x         No  ̈




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PART IFINANCIAL INFORMATION





Item 1.    Financial Statements





VERIZON WASHINGTON, DC INC.





CONDENSED STATEMENTS OF INCOME





Three Months Ended September 30,


Nine Months EndedSeptember 30,(Dollars in Thousands) (Unaudited)

2002

2001


2002


2001OPERATING REVENUES (including $40,476, $35,725, $124,988 and $124,603 from affiliates)

$
176,314

$
172,524


$
529,626


$
527,940Operations and support expense (exclusive of items shown below) (including $36,428, $35,938, $112,061 and
$104,531 to affiliates)


83,275


81,219



283,363



236,617Depreciation and amortization


46,137


46,871



144,068



138,862129,412


128,090



427,431



375,479OPERATING INCOME


46,902


44,434



102,195



152,461OTHER INCOME AND (EXPENSE), NET (including $3, $(2,566), $152 and $(12,154) from affiliates)


63


(2,441
)


520



(12,077
)INTEREST EXPENSE (including $1,475, $2,521, $4,354 and $9,236 to affiliate)


3,004


4,809



9,889



15,460INCOME BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY ITEM


43,961


37,184



92,826



124,924PROVISION FOR INCOME TAXES


18,201


16,480



38,424



56,867INCOME BEFORE EXTRAORDINARY ITEM


25,760


20,704



54,402



68,057EXTRAORDINARY ITEMEarly extinguishment of debt, net of tax









(132
)


NET INCOME

$
25,760

$
20,704


$
54,270


$
68,057





See Notes to Condensed Financial Statements.




1




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VERIZON WASHINGTON, DC INC.







CONDENSED BALANCE SHEETS





(Dollars in Thousands)

September 30, 2002

December 31, 2001(Unaudited)ASSETSCURRENT ASSETSShort-term investments

$
250

$
13,500Accounts receivable:Trade and other, net of allowances for uncollectibles of $49,222 and $11,601


174,948


202,823Affiliates


30,806


41,109Material and supplies


5,798


10,328Prepaid expenses


11,422


1,564Deferred income taxes


28,494


4,697Other


11,917


12,428263,635


286,449PLANT, PROPERTY AND EQUIPMENT


2,197,182


2,171,441Less accumulated depreciation


1,303,133


1,208,739894,049


962,702PREPAID PENSION ASSET


61,360


34,607OTHER ASSETS


44,533


60,337TOTAL ASSETS

$
1,263,577

$
1,344,095





See Notes to Condensed Financial Statements.




2




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VERIZON WASHINGTON, DC INC.







CONDENSED BALANCE SHEETS





(Dollars in Thousands)

September 30, 2002

December 31, 2001(Unaudited)LIABILITIES AND SHAREOWNERS INVESTMENTCURRENT LIABILITIESDebt maturing within one year:Note payable to affiliate

$
296,335

$
266,151Accounts payable and accrued liabilities:Affiliates


26,768


64,908Other


117,081


131,746Other liabilities


27,613


27,423467,797


490,228LONG-TERM DEBT


89,450


164,353EMPLOYEE BENEFIT OBLIGATIONS


91,081


90,149DEFERRED CREDITS AND OTHER LIABILITIESDeferred income taxes


127,384


106,042Unamortized investment tax credits


2,661


2,758Other


31,589


44,253161,634


153,053SHAREOWNERS INVESTMENTCommon stockone share, owned by parent, at stated value


191,968


191,968Capital surplus


66,072


66,039Reinvested earnings


195,575


188,305453,615


446,312TOTAL LIABILITIES AND SHAREOWNERS INVESTMENT

$
1,263,577

$
1,344,095





See Notes to Condensed Financial Statements.




3




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VERIZON WASHINGTON, DC INC.




CONDENSED STATEMENTS OF CASH FLOWS





Nine Months EndedSeptember 30,(Dollars in Thousands) (Unaudited)

2002


2001NET CASH PROVIDED BY OPERATING ACTIVITIES

$
153,477


$
149,991CASH FLOWS FROM INVESTING ACTIVITIESNet change in short-term investments


13,250



8,358Capital expenditures


(70,328
)


(145,783
)Other, net


(750
)


(813
)Net cash used in investing activities


(57,828
)


(138,238
)CASH FLOWS FROM FINANCING ACTIVITIESEarly extinguishment of debt


(75,000
)


Change in note payable to affiliate


30,184



40,252Dividends paid


(47,000
)


(52,000
)Net change in outstanding checks drawn on controlled disbursement accounts


(3,833
)


(5
)Net cash used in financing activities


(95,649
)


(11,753
)NET CHANGE IN CASH






CASH, BEGINNING OF PERIOD






CASH, END OF PERIOD

$



$






See Notes to Condensed Financial Statements.




4




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VERIZON WASHINGTON, DC INC.







NOTES TO CONDENSED FINANCIAL STATEMENTS


(Unaudited)





1.    Basis of
Presentation





Verizon Washington, DC Inc. is a wholly owned subsidiary of Verizon Communications Inc. (Verizon
Communications). The accompanying unaudited condensed financial statements have been prepared based upon Securities and Exchange Commission (SEC) rules that permit reduced disclosure for interim periods. These financial statements reflect all
adjustments that are necessary for a fair presentation of results of operations and financial position for the interim periods shown including normal recurring accruals. The results for the interim periods are not necessarily indicative of results
for the full year. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete
financial statements. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements included in our 2001 Annual Report on Form 10-K.





We have reclassified certain amounts from prior years data to conform to the 2002 presentation.





2.    Adoption of New Accounting Standards





Goodwill and Other Intangible Assets





Effective January 1,
2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 no longer permits the amortization of goodwill and indefinite-lived intangible assets. Instead, these assets
must be reviewed annually (or more frequently under prescribed conditions) for impairment in accordance with this statement. This impairment test uses a fair value approach rather than the undiscounted cash flows approach previously required by SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The goodwill impairment test under SFAS No. 142 requires a two-step approach, which is performed at the reporting unit level, as
defined in SFAS No. 142. Step one identifies potential impairments by comparing the fair value of the reporting unit to its carrying amount. Step two, which is only performed if there is a potential impairment, compares the carrying amount of the
reporting units goodwill to its implied value, as defined in SFAS No. 142. If the carrying amount of the reporting units goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized for an amount equal to
that excess. Intangible assets that do not have indefinite lives are amortized over their useful lives and reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The
adoption of SFAS No. 142 did not impact our results of operations or financial position because we had no goodwill or indefinite-lived intangible assets at December 31, 2001 and 2000.





Our other intangible assets consist of non-network software as follows:





As of September 30, 2002

As of December 31, 2001Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization(Dollars in Thousands)Non-network software (3 to 7 years)

$
30,435

$
11,418

$
29,685

$
7,660





Intangible assets amortization expense was $1,261,000 for the three
months ended September 30, 2002 and $3,758,000 for the nine months ended September 30, 2002. Amortization expense is estimated to be $1,262,000 for the remainder of 2002, $5,046,000 in 2003, $4,694,000 in 2004, $3,339,000 in 2005 and
$2,508,000 in 2006, related to our non-network software.





Impairment or Disposal of Long-Lived Assets





Effective January 1, 2002, we adopted SFAS No. 144. This standard supersedes SFAS No. 121 and the provisions
of Accounting Principles Board (APB) Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, with
regard to reporting the effects of a disposal of a segment of a business. SFAS No. 144 establishes a single accounting model for assets to be disposed of by sale and addresses several SFAS No. 121 implementation issues. The adoption of SFAS No. 144
did not have a material effect on our results of operations or financial position.




5




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VERIZON WASHINGTON, DC INC.





3.    Recent Accounting Pronouncements





Asset Retirement
Obligations





In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This standard provides the accounting for the cost of legal obligations associated with the retirement of long-lived assets. SFAS No. 143 requires that companies recognize the fair value of a
liability for asset retirement obligations in the period in which the obligations are incurred and capitalize that amount as a part of the book value of the long-lived asset. That cost is then depreciated over the remaining life of the underlying
long-lived asset. We are required to adopt SFAS No. 143 effective January 1, 2003. We are currently evaluating the impact this new standard will have on our future results of operations or financial position.





Debt Extinguishment





In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145, among other things, eliminates the
requirement that all gains and losses on the extinguishment of debt must be classified as extraordinary items on the income statement, thereby permitting the classification of such gains and losses as extraordinary items only if the criteria of APB
No. 30 are met. We are required to adopt this provision of SFAS No. 145 effective January 1, 2003 and, upon adoption, we will reclassify in our statements of income previously reported extraordinary charges for the early extinguishment of debt to
income from continuing operations.





Exit or Disposal Activities





In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This standard
addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring). EITF Issue No. 94-3 required accrual of liabilities related to exit and disposal activities at a plan (commitment) date. SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of this standard are effective for exit or disposal activities that are initiated after December 31, 2002.





4.    Dividend





On November 1, 2002, we declared and paid a dividend in the amount of $26,000,000 to Verizon Communications.





5.    Debt





In March 2002, we recorded extraordinary charges associated
with the early extinguishment of long-term debt, which reduced net income by $132,000 (net of income tax benefits of $93,000). These debt extinguishments consisted of the following:





| | · |  | $25,000,000 of 55/8%
debentures due on July 1, 2006
| | - |  | ---------------------------------------------------




| | · |  | $50,000,000 of 7% debentures due on February 1, 2009
| | - |  | ----------------------------------------------------




6.    Shareowners Investment





Common Stock

Capital Surplus

Reinvested Earnings(Dollars in Thousands)Balance at December 31, 2001

$
191,968

$
66,039

$
188,305Net income








54,270Dividends declared to Verizon Communications








(47,000
)Other





33Balance at September 30, 2002

$
191,968

$
66,072

$
195,575





Net income and comprehensive income were the same for the nine
months ended September 30, 2002 and 2001.




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VERIZON WASHINGTON, DC INC.







7.    Commitments and Contingencies





Various legal actions and regulatory proceedings are pending to which we are a party and claims which, if asserted, may lead to other
legal actions. We have established reserves for specific liabilities in connection with regulatory and legal matters that we currently deem to be probable and estimable. We do not expect that the ultimate resolution of pending regulatory and legal
matters in future periods will have a material effect on our financial condition, but it could have a material effect on our results of operations.





Several regulatory matters may require us to refund to customers a portion of the revenues collected in the current and prior periods. The outcome of each pending matter, as well as the time frame
within which each matter will be resolved, is not presently determinable.





Regulatory conditions to the Bell
Atlantic  GTE merger include commitments to, among other things, promote competition and the widespread deployment of advanced services, while helping to ensure that consumers continue to receive high-quality, low cost telephone
services. In some cases, there are significant penalties associated with not meeting these commitments. The cost of satisfying these commitments could have a significant impact on net income in future periods.





8.    Investment in Verizon Ventures III Inc.





In December 2000, we transferred certain advanced data assets to an affiliated company, Verizon Ventures III Inc. (Ventures III) in exchange for common stock of Ventures III. This transfer was done to
satisfy a condition of the Federal Communications Commissions (FCC) approval of the Bell Atlantic  GTE merger, which required the provision of advanced data services through a separate affiliate. Throughout 2000 and 2001, we
continued to invest in Ventures III through the transfer of additional assets. As a result of the transfers, we acquired an ownership interest in Ventures III, which we accounted for under the equity method of accounting.





In September 2001, the FCC issued an order eliminating this merger condition. Following the FCC order, we made necessary filings with our
regulatory commission for approval of the transfer of these assets back to us. On January 1, 2002, after required approvals were obtained from our regulatory commission, Ventures III transferred assets back to us with an aggregate net book value of
$12,306,000. In consideration of the transfer of these assets, we have surrendered our common stock in Ventures III and remitted cash compensation.





No gain or loss was recognized as a result of the reintegration of the advanced data assets to us. This reintegration did not have a material effect on our results of operations or financial condition.





9.    Employee Severance and Other





In connection with the Bell Atlantic-GTE merger on June 30, 2000, we incurred charges associated with employee severance of $3,347,000. These costs, as recorded under SFAS
No. 112, Employers Accounting for Postemployment Benefits, represent the benefit costs for the separation of management employees who were entitled to benefits under pre-existing separation plans. The severances in connection with
the Bell Atlantic-GTE merger are complete.





During the fourth quarter of 2001, we recorded a charge of $8,760,000
for the voluntary and involuntary separation of employees in accordance with SFAS No. 112. During the second quarter of 2002, we recorded a charge of $1,390,000 associated with employee severance and related pension enhancements. The charge included
severance benefits of $1,090,000 as recorded under SFAS No. 112 and related pension enhancements of $300,000 as recorded under SFAS No. 88, Employers Accounting for Settlements and Curtailments of Defined Pension Plans and for
Termination Benefits. As of September 30, 2002, a total of approximately 120 management and associate employees have been separated under the 2001 and 2002 severance programs. The remaining severance liability relating to these programs is
$5,055,000, which includes future payments to employees separated as of September 30, 2002. We expect to complete the severance programs within a year of when the respective charges were recorded. During the nine months ended September 30, 2002, we
recorded a net pension settlement gain of $3,745,000 in connection with previously announced employee separations. SFAS No. 88 requires that settlement gains and losses be recorded once prescribed payment thresholds have been reached. Employee
benefit costs are recorded in Operations and Support Expense in our Statement of Income.





In addition, during the
second quarter of 2002, we recorded an impairment charge of $17,800,000 driven by our financial statement exposure to WorldCom Inc.




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VERIZON WASHINGTON, DC INC.







Item 2.    Managements Discussion and Analysis of Results of
Operations (Abbreviated pursuant to General Instruction H(2).)





This discussion should be read in
conjunction with the Condensed Financial Statements and Condensed Notes to Financial Statements.





RESULTS OF OPERATIONS





We reported net income of $54,270,000 for the nine month period ended September 30, 2002, compared to net
income of $68,057,000 for the same period in 2001. Our reported results included the following special items:





Employee Severance





During the second quarter of 2002, we recorded a charge of $1,390,000 associated with employee severance and
related pension enhancements. The charge included severance benefits of $1,090,000 as recorded under Statement of Financial Accounting Standards (SFAS) No. 112, Employers Accounting for Postemployment Benefits, and related pension
enhancements of $300,000 as recorded under SFAS No. 88, Employers Accounting for Settlements and Curtailments of Defined Pension Plans and for Termination Benefits.





During the nine months ended September 30, 2002, we recorded a net pension settlement gain of $3,745,000 in connection with previously announced employee separations. SFAS
No. 88 requires that settlement gains and losses be recorded once prescribed payment thresholds have been reached.





WorldCom Inc.





During the second quarter of 2002, we recorded an impairment charge of $17,800,000 driven by our financial
statement exposure to WorldCom Inc. (WorldCom).





WorldCom, including its affiliates, purchases dedicated local
exchange capacity from us to support its private networks and we also charge WorldCom for access to our local network. In addition, we sell local wholesale interconnection services and provide billing and collection services to WorldCom. We purchase
long distance and related services from WorldCom. On July 21, 2002, WorldCom filed for Chapter 11 bankruptcy protection.





During the third quarter of 2002, we recorded revenues earned from the provision of primarily network access services to WorldCom of $11,065,000. If WorldCom terminates contracts with us for the provision of services, our operating
revenues would be lower in future periods. Lower revenues as a result of canceling contracts for the provision of services could be partially offset, in some cases, by the migration of customers on the terminated facilities to us or other carriers
who purchase capacity and/or interconnection services from us.





At September 30, 2002, accounts receivable from
WorldCom, net of a provision for uncollectibles, was $3,206,000. We continue to closely monitor our collections on WorldCom account balances. WorldCom is current with respect to its post-bankruptcy obligations. We believe that we are adequately
reserved for the potential risk of non-payment of pre-bankruptcy receivables from WorldCom.





OPERATING REVENUES


(Dollars in Thousands)





Nine Months EndedSeptember 30,2002

2001Local services

$
236,507

$
254,992Network access services


179,200


151,512Long distance services


1,692


1,797Other services


112,227


119,639Total

$
529,626

$
527,940




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VERIZON WASHINGTON, DC INC.





We recognize service revenues based upon usage of our local exchange network and facilities and contract fees. We recognize product and other service revenues when the products are delivered and
accepted by the customers and when services are provided in accordance with contract terms.





LOCAL SERVICES





20022001

(Decrease)Nine Months

$
(18,485
)

(7.2
)%





Local service revenues are earned from the provision of local
exchange, local private line, wire maintenance, voice messaging and value-added services. Value-added services are a family of services that expand the utilization of the network, including products such as Caller ID, Call Waiting and Return Call.
The provision of local exchange services not only includes retail revenues, but also includes local wholesale revenues from unbundled network elements (UNEs), interconnection revenues from competitive local exchange carriers (CLECs), certain data
transport revenues and wireless interconnection revenues.





Local service revenues decreased in the first nine
months of 2002 primarily due to the effect of lower demand and usage of some basic wireline services and price discounts on product bundling offers. Our switched access lines in service declined 3.6% from September 30, 2001 primarily reflecting the
impact of the economic slowdown and competition. Technology substitution has also affected local service revenue growth, as indicated by lower demand for residential access lines.





NETWORK ACCESS SERVICES





20022001

IncreaseNine Months

$
27,688

18.3
%





Network access service revenues are earned from end-user
subscribers and from long distance and other competing carriers who use our local exchange facilities to provide usage services to their customers. Switched access revenues are derived from fixed and usage-based charges paid by carriers for access
to our local network. Special access revenues originate from carriers and end-users that buy dedicated local exchange capacity to support their private networks. End-user access revenues are earned from our customers and from resellers who purchase
dial-tone services.





The increase in network access revenues in the first nine months of 2002 was mainly
attributable to higher customer demand for end-user and special access services. End-user services growth reflects a new contract with the federal government and special access services growth reflects strong demand in the business market for
high-capacity, high-speed digital services. These increases were partially offset by lower demand for switched access services due, in part, to the weakened economy and technology substitution.





LONG DISTANCE SERVICES





20022001

(Decrease)Nine Months

$
(105
)

(5.8
)%





Long distance revenues are earned primarily from calls made to
points outside a customers local calling area, but within our service area (intraLATA toll). IntraLATA toll calls originate and terminate within the same LATA, but generally cover a greater distance than a local call. We also provide 800
services.





Long distance service revenues declined in the first nine months of 2002 primarily due to the effects
of competition and toll calling discount packages and product bundling offers of our intraLATA toll services. Technology substitution and lower access line growth due to the slowing economy also affected long distance service revenue growth.




9




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VERIZON WASHINGTON, DC INC.





OTHER SERVICES





20022001

(Decrease)Nine Months

$
(7,412
)

(6.2
)%





Our other services include such services as billing and collections
for long distance carriers and affiliates, facilities rentals to affiliates and nonaffiliates, public (pay) telephone, customer premises equipment (CPE) and sales of materials and supplies to affiliates. Other service revenues also include fees paid
by customers for nonpublication of telephone numbers and multiple white page listings and fees paid by an affiliate for usage of our directory listings.





Other service revenues decreased in the first nine months of 2002 primarily due to lower facilities rental revenues from affiliates.





OPERATING EXPENSES


(Dollars in Thousands)





OPERATIONS AND SUPPORT





20022001

IncreaseNine Months

$
46,746

19.8
%





Operations and support expenses consist of employee costs and other
operating expenses. Employee costs consist of salaries, wages and other employee compensation, employee benefits and payroll taxes. Other operating expenses consist of contract services including centralized services expenses allocated from
affiliates, rent, network software costs, operating taxes other than income, the provision for uncollectible accounts receivable, reciprocal compensation, and other costs.





The increase in operations and support expenses was mainly attributable to increased costs associated with uncollectible accounts receivable. Employee costs increased
slightly due to salary and wage increases and higher benefit costs, partially offset by the effect of declining workforce levels. As described earlier, in 2002, we recorded charges of $1,390,000 associated with employee severance costs and other
severance-related activities and a charge of $17,800,000 associated with uncollectible accounts receivable from WorldCom. Further, we recorded a net pension settlement gain of $3,745,000 in 2002. Pension income (excluding settlement gains and
losses) was $20,932,000 and $24,449,000 for the nine month periods ended September 30, 2002 and 2001, respectively.





DEPRECIATION AND
AMORTIZATION





20022001

IncreaseNine Months

$
5,206

3.7
%





Depreciation expense is principally based on the composite group
remaining life method and straight-line composite rates. This method provides for the recognition of the cost of the remaining net investment in telephone plant, less anticipated net salvage value, over the remaining asset lives. This method
requires the periodic revision of depreciation rates.





Depreciation and amortization expense increased in the
first nine months of 2002 primarily due to growth in depreciable telephone plant and, to a lesser extent, increased software amortization costs. These increases were partially offset by the effect of lower rates of depreciation.




10




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VERIZON WASHINGTON, DC INC.





OTHER RESULTS


(Dollars in Thousands)





OTHER INCOME AND (EXPENSE), NET





20022001

IncreaseNine Months

$
12,597

104.3
%





Other income and (expense), net includes equity income (losses),
interest income and other nonoperating income and expense items. As a result of the reintegration of Verizon Ventures III Inc. (Ventures III) completed on January 1, 2002, we no longer recognize equity income (losses) from this investment (See Note
8 to the Condensed Financial Statements).





The increase in other income and (expense), net, was primarily
attributable to the effect of equity losses recognized in 2001 from our investment in Ventures III.





INTEREST EXPENSE





20022001

(Decrease)Nine Months

$
(5,571
)

(36.0
)%





Interest expense includes costs associated with borrowing and
capital leases, net of capitalized interest costs. We capitalize interest associated with the acquisition or construction of plant assets. Capitalized interest is reported as a cost of plant and a reduction in interest expense.





Interest expense decreased in the first nine months of 2002, as compared to the same period in 2001, primarily as a result of
lower interest rates on short-term debt with an affiliate.





EFFECTIVE INCOME TAX RATES





Nine Months Ended September,2002

41.4
%2001

45.5
%





The effective income tax rate is the provision for income taxes as
a percentage of income before provision for income taxes and extraordinary item. Our effective income tax rate was lower for the nine months ended September 30, 2002, as compared to the same period in 2001, primarily due to the effect of equity
losses associated with our investment in Ventures III, which were recorded in 2001, for which we did not recognize income tax benefits.





EARLY EXTINGUISHMENT OF DEBT





In March 2002, we recorded extraordinary charges associated
with the early extinguishment of long-term debt, which reduced net income by $132,000 (net of income tax benefits of $93,000).





See Note 5 to the Condensed Financial Statements.




11




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VERIZON WASHINGTON, DC INC.





OTHER MATTERS





In-Region Long Distance





Under the Telecommunications Act of 1996, our ability to offer in-region long distance services (that is,
services originating in the jurisdiction where we operate as a local exchange carrier) is largely dependent on satisfying specified requirements. The requirements include a 14-point competitive checklist of steps which we must take to
help competitors offer local services through resale, through purchase of UNEs, or by interconnecting their own networks to ours. We must also demonstrate to the Federal Communications Commission (FCC) that entry into the in-region long distance
market would be in the public interest.





We expect to file an application by year-end with the FCC for permission
to enter the in-region long distance market in the District of Columbia. In-region long distance would be offered by a separate non-regulated subsidiary of Verizon Communications Inc. as required by law.





Recent Accounting Pronouncements





Asset Retirement Obligations





In June 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 143, Accounting for Asset Retirement Obligations. This standard provides the accounting for the cost of legal obligations associated with the retirement of long-lived assets. SFAS No. 143 requires that companies recognize
the fair value of a liability for asset retirement obligations in the period in which the obligations are incurred and capitalize that amount as a part of the book value of the long-lived asset. That cost is then depreciated over the remaining life
of the underlying long-lived asset. We are required to adopt SFAS No. 143 effective January 1, 2003. We are currently evaluating the impact this new standard will have on our future results of operations or financial position.





Debt Extinguishment





In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145, among other
things, eliminates the requirement that all gains and losses on the extinguishment of debt must be classified as extraordinary items on the income statement, thereby permitting the classification of such gains and losses as extraordinary items only
if the criteria of Accounting Principles Board Opinion No. 30, Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, are met. We are required to adopt this provision of SFAS No. 145 effective January 1, 2003 and, upon adoption, we will reclassify in our statements of income previously reported extraordinary charges for the early extinguishment
of debt to income from continuing operations.





Exit or Disposal Activities





In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This standard
addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring). EITF Issue No. 94-3 required accrual of liabilities related to exit and disposal activities at a plan (commitment) date. SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of this standard are effective for exit or disposal activities that are initiated after December 31, 2002.





Compensation for Internet Traffic





We continue to incur expenditures related to reciprocal compensation arrangements with CLECs and other carriers to terminate calls on their network.





On April 27, 2001, the FCC released an order addressing intercarrier compensation for dial-up connections for Internet-bound traffic. The FCC found that Internet-bound
traffic is interstate and subject to the FCCs jurisdiction. Moreover, the FCC again found that Internet-bound traffic is not subject to reciprocal compensation under Section 251(b)(5) of the 1996 Act. Instead, the FCC established federal rates
per minute for this traffic that decline from $0.0015 to $0.0007 over a three year period. The FCC order also sets caps on the total minutes of this traffic that may be subject to any intercarrier compensation and requires that incumbent local
exchange carriers must offer to pay reciprocal compensation for local traffic at the same rate as they are required to




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VERIZON WASHINGTON, DC INC.





pay on Internet-bound traffic. On May 3, 2002, the U.S. Court of Appeals for the District of Columbia Circuit rejected the justification relied upon by the FCC in its April 27, 2001 order,
and remanded the order for further proceedings. It did not vacate the interim pricing rules established in that order.





Several parties requested rehearing, asking the court to vacate the underlying order. Those requests were denied in a series of orders released on September 24, 2002, and September 25, 2002. As a result, the FCCs underlying
order remains in effect.




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VERIZON WASHINGTON, DC INC.







Item 4.    Controls and Procedures





(a)  Evaluation of disclosure controls and procedures.





Our chief executive officer and chief financial officer have evaluated the effectiveness of the registrants disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934), as of a date within 90 days of the filing date of this quarterly report (Evaluation Date), that ensure that information relating to the registrant which is required to be disclosed in
this report is recorded, processed, summarized and reported, within required time periods. They have concluded that as of the Evaluation Date, the registrants disclosure controls and procedures were adequate and effective to ensure that
material information relating to the registrant and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.





(b)  Changes in internal controls.





There were no significant changes in the registrants internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date, nor were there any
significant deficiencies or material weaknesses in these controls requiring corrective actions.




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VERIZON WASHINGTON, DC INC.







PART IIOTHER INFORMATION





Item 1.    Legal Proceedings





There were no proceedings reportable under this Item.





Item
6.    Exhibits and Reports on Form 8-K





| | (a) |  | Exhibits:
| | --- |  | ---------




Exhibit Number12

Computation of Ratio of Earnings to Fixed Charges.





| | (b) |  | There were no Current Reports on Form 8-K filed during the quarter ended September 30, 2002.
| | --- |  | --------------------------------------------------------------------------------------------



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VERIZON WASHINGTON, DC INC.





SIGNATURES





Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





VERIZON WASHINGTON, DC INC.By:

/s/    EDWIN F.
HALLEdwin F. Hall Controller





Date: November 13, 2002





UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF NOVEMBER 6, 2002.




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VERIZON WASHINGTON, DC INC.





CERTIFICATIONS





I, Lawrence T. Babbio, Jr., certify
that:





| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Verizon Washington, DC Inc.;
| | -- |  | ----------------------------------------------------------------------------------




| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------




| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date: November 13, 2002

/s/ Lawrence T. Babbio, Jr. Lawrence T. Babbio, Jr. Chairman of the Board and Chief Executive Officer




17




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VERIZON WASHINGTON, DC INC.





CERTIFICATIONS





I, Lawrence R. Whitman, certify that:





| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Verizon Washington, DC Inc.;
| | -- |  | ----------------------------------------------------------------------------------




| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly
report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------




| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Date: November 13, 2002

/s/ Lawrence R. Whitman Lawrence R. Whitman Chief Financial Officer




18




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VERIZON WASHINGTON, DC INC.





EXHIBIT INDEX





Exhibit Number12

Computation of Ratio of Earnings to Fixed Charges.




19