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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 1-8607
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BELLSOUTH CORPORATION
A GEORGIA I.R.S. EMPLOYER
CORPORATION NO. 58-1533433
1155 Peachtree Street, N.E., Atlanta, Georgia 30309-3610
Telephone number 404 249-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock New York, Boston, Chicago,
(par value $1 per share) Pacific and Philadelphia
and Stock Exchanges
Preferred Stock Purchase Rights
9 1/4% Notes due 1/15/98 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None.
At March 22, 1994, 496,125,929 shares of Common Stock and Preferred Stock
Purchase Rights were outstanding.
At March 22, 1994, the aggregate market value of the voting stock held by
non-affiliates was $27,224,910,354.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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 / /
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement dated March 14,
1994, issued in connection with the 1994 annual meeting of shareholders (Part
III).
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
1. Business............................................................................................ 1
Telephone Company Operations........................................................................ 2
Other Telecommunications Business Operations........................................................ 8
Competition......................................................................................... 12
Legislation......................................................................................... 16
Research and Development............................................................................ 16
Licenses and Franchises............................................................................. 16
Employees........................................................................................... 17
2. Properties.......................................................................................... 18
3. Legal Proceedings................................................................................... 19
4. Submission of Matters to a Vote of Shareholders..................................................... 19
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Additional Information......................................................................................... 19
Executive Officers............................................................................................. 22
PART II
5. Market for Registrant's Common Equity and Related Shareholder Matters............................... 23
6. Selected Financial Data............................................................................. 24
7. Management's Discussion and Analysis of Results of Operations and Financial Condition............... 25
8. Consolidated Financial Statements and Supplementary Data............................................ 37
9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure................. 61
PART III
10. Directors and Executive Officers of the Registrant.................................................. 61
11. Executive Compensation.............................................................................. 61
12. Security Ownership of Certain Beneficial Owners and Management...................................... 61
13. Certain Relationships and Related Transactions...................................................... 61
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................... 61
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
BellSouth Corporation ("BellSouth") is a holding company providing
telecommunications services and communications systems and products through two
wholly-owned subsidiaries, BellSouth Telecommunications, Inc. ("BellSouth
Telecommunications") and BellSouth Enterprises, Inc. ("BellSouth Enterprises").
BellSouth Telecommunications, which is the surviving corporation from the
merger, effective at midnight December 31, 1991, of South Central Bell Telephone
Company ("South Central Bell") and Southern Bell Telephone and Telegraph Company
("Southern Bell"), provides predominantly tariffed wireline telecommunications
services to approximately two-thirds of the population and one-half of the
territory within Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina and Tennessee. These areas were previously served
by South Central Bell and Southern Bell. BellSouth Telecommunications continues
to use the names South Central Bell and Southern Bell for various purposes.
BellSouth's other businesses (primarily wireless communications, advertising and
publishing and international operations) are conducted through subsidiaries of
BellSouth Enterprises.
BellSouth was incorporated in 1983 under the laws of the State of Georgia.
On December 31, 1983, pursuant to a consent decree approved by the United States
District Court for the District of Columbia (the "D. C. District Court")
entitled "Modification of Final Judgment" (the "MFJ") settling antitrust
litigation brought by the United States Department of Justice (the "Justice
Department") in 1974 and the related Plan of Reorganization (the "POR"),
American Telephone and Telegraph Company ("AT&T") transferred to BellSouth its
100% ownership of South Central Bell and Southern Bell. On January 1, 1984,
ownership of BellSouth was divested from AT&T and BellSouth became a publicly
traded company.
BellSouth has its principal executive offices at 1155 Peachtree Street,
N.E., Atlanta, Georgia 30309-3610 (telephone number 404 249-2000).
MODIFICATION OF FINAL JUDGMENT
Pursuant to the MFJ, AT&T divested the 22 wholly-owned operating telephone
companies (the "Operating Telephone Companies"), including South Central Bell
and Southern Bell, that were included in the former Bell System. The ownership
of such 22 Operating Telephone Companies was transferred by AT&T to seven
holding companies (the "Holding Companies"), including BellSouth. All territory
in the continental United States served by the Operating Telephone Companies was
divided into geographical areas termed "Local Access and Transport Areas"
("LATAs"). These LATAs are generally centered in a city or other identifiable
community of interest.
The MFJ limits the telecommunications-related scope of the Operating
Telephone Companies'* post-divestiture business activities, and the D. C.
District Court retained jurisdiction over its construction, implementation,
modification and enforcement. Under the MFJ, the Operating Telephone Companies
may provide local exchange, exchange access, information access and toll
telecommunications services within the LATAs. Although prohibited from providing
service between LATAs, the Operating Telephone Companies provide exchange access
services that link a subscriber's telephone or other equipment in one of their
LATAs to the transmission facilities of carriers (the "Interexchange Carriers"),
which provide toll telecommunications services between different LATAs. The
Operating Telephone Companies may market, but not manufacture, customer premises
equipment ("CPE"), which is defined in the MFJ as equipment used on customers'
premises to originate, route or terminate
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*The provisions of the MFJ are applicable also to the Holding Companies.
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telecommunications. A similar restriction applies to the manufacture or
provision of "telecommunications equipment," which is defined in the MFJ as
including equipment used by carriers to provide telecommunications services. The
MFJ restrictions precluding the Holding Companies from providing information
services and non-telecommunications related products and services have been
judicially removed.
The D.C. District Court has established procedures for obtaining generic and
specific waivers from the manufacturing and interLATA communications
restrictions of the MFJ, although the required filings with and review by the
Justice Department and the D.C. District Court usually result in lengthy and
uncertain proceedings. The foregoing restrictions present significant obstacles
to the provision of certain wireless, cable television and other communications
services and require that such business operations, even where waivers are
ultimately obtained, be conducted under burdensome arrangements or subject to
elaborate structural separation or other conditions. BellSouth is advocating
legislation which would remove or relax the MFJ restrictions. (See "Business
Operations -- Legislation.")
The MFJ requires the Operating Telephone Companies to provide, upon a bona
fide request by any Interexchange Carrier or information service provider,
exchange access, information access and exchange services for such access that
will be equal to that provided to AT&T in quality, type and price. BellSouth
Telecommunications believes it is in compliance with this requirement.
BUSINESS OPERATIONS
Approximately 73%, 74% and 76% of BellSouth's operating revenues and 95%,
97% and 97% of its net income for the years ended December 31, 1993, 1992 and
1991, respectively, were from wireline telecommunications services, which were
provided by BellSouth Telecommunications. The remainder was principally from
directory advertising and publishing operations, cellular and paging operations,
billing and collection services, CPE sales, computer leasing and maintenance and
rental of facilities. (See "Other Telecommunications Business Operations.")
In the aggregate, access revenues, revenues from billing and collection
activities and rental of facilities comprised approximately 25%, 26% and 28% of
1993, 1992 and 1991 operating revenues, respectively. The majority of such
revenues was from services provided to AT&T, BellSouth's largest customer.
TELEPHONE COMPANY OPERATIONS
BellSouth Telecommunications provides services, which include local
exchange, exchange access and intraLATA toll services, within each of the 38
LATAs in its combined nine-state operating area. (See "Local and Toll Services"
and "Access Services.") The tables below set forth the following: network access
lines in service at December 31 for the last five years; access lines in each
state at December 31, 1993; and the annual percentage increase in access lines
in each state at December 31 for the last four years.
<TABLE>
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1993 1992 1991 1990 1989
----- ----- ----- ----- -----
(MILLIONS)
<S> <C> <C> <C> <C> <C>
NETWORK ACCESS LINES IN SERVICE:*
Residence............................................ 13.7 13.3 12.9 12.6 12.2
Business............................................. 5.4 5.1 4.8 4.6 4.4
Other................................................ .2 .2 .3 .3 .3
----- ----- ----- ----- -----
Total............................................ 19.3 18.6 18.0 17.5 16.9
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
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*Prior period operating data are revised at later dates to reflect the most
current information. This information reflects the latest data available for
the periods indicated.
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<TABLE>
<CAPTION>
ACCESS LINES PERCENT ACCESS LINE
------------ INCREASE
1993 --------------------------
------------ 1993 1992 1991 1990
(MILLIONS) ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATES
Alabama............................... 1.7 3.6 3.0 2.8 3.4
Florida............................... 5.1 4.0 3.5 3.3 3.7
Georgia............................... 3.2 4.2 4.6 4.3 3.4
Kentucky.............................. 1.0 2.9 2.9 3.1 1.9
Louisiana............................. 1.9 2.4 2.4 1.9 2.7
Mississippi........................... 1.1 3.4 2.3 2.9 2.9
North Carolina........................ 1.9 4.1 3.7 3.0 2.7
South Carolina........................ 1.2 2.7 3.0 2.8 3.5
Tennessee............................. 2.2 4.0 3.5 3.2 3.5
---
Total Lines/Increase.............. 19.3 3.7 3.4 3.2 3.2
--- ----- ----- ----- -----
--- ----- ----- ----- -----
</TABLE>
Approximately 72% of such lines were in 53 metropolitan areas, each having a
population of 125,000 or more. Many localities and some sizable areas in the
states in which BellSouth Telecommunications operates are served by
non-affiliated telephone companies, which had approximately 29% of the network
access lines in such states on December 31, 1993. BellSouth Telecommunications
does not furnish local exchange, access or toll services in the areas served by
such companies.
The following table reflects access minutes of use and toll message volume
for the last five years.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ACCESS MINUTES OF USE:*
Interstate........................................ 53,345.0 50,546.4 47,255.3 44,903.3 41,464.2
Intrastate........................................ 15,260.9 13,994.2 13,237.7 12,119.5 11,252.7
TOLL MESSAGES*...................................... 1,251.0 1,280.3 1,387.1 1,457.5 1,462.3
</TABLE>
The number of intraLATA toll messages carried by BellSouth
Telecommunications has declined, primarily because of the effect of expanded
local area calling plans and competition by others for the provision of toll
services. Toll message volumes are expected to decline further as additional
intraLATA toll competition is authorized in many of the states served by
BellSouth Telecommunications. (See "Competition" and "Management's Discussion
and Analysis of Results of Operations and Financial Condition -- Operating
Environment and Trends of the Business -- Volumes of Business.")
LOCAL AND TOLL SERVICES
Charges for local services for the years ended December 31, 1993, 1992 and
1991 accounted for approximately 41%, 41% and 40%, respectively, of BellSouth's
operating revenues. Local services operations provide lines from telephone
exchange offices to subscribers' premises for the origination and termination of
telecommunications, including the following: basic local telephone service
provided through the regular switching network; dedicated private line
facilities for voice and special services, such as transport of data, radio and
video, and foreign exchange services; switching services for customers' internal
communications through facilities owned by BellSouth Telecommunications;
services for data transport that include managing and configuring special
service networks; and dedicated low or high capacity public or private digital
networks. Other local services revenue is derived from intercept and directory
assistance, public telephones and various special and custom calling services.
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*Prior period operating data are often revised at later dates to reflect the
most current information. This information reflects the latest data available
for the periods indicated.
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BellSouth Telecommunications has the ability to offer certain enhanced
services through its network. Such offerings include various forms of data and
voice transmission, voice messaging and storage services and gateway
communications between customers and information services providers. The extent
to which these offerings can be profitably provided will depend on the degree of
market acceptance and the resolution of various issues still pending before the
Federal Communications Commission (the "FCC") regarding a company's offering of
both enhanced and basic network services on an integrated basis. (See "Access
Services.")
BellSouth Telecommunications provides intraLATA toll services within, but
not between, its 38 LATAs. Such toll services provided approximately 8%, 8% and
10% of BellSouth's operating revenues for the years ended December 31, 1993,
1992 and 1991, respectively. These services include the following: intraLATA
service beyond the local calling area; Wide Area Telecommunications Service
("WATS" or "800" services) for customers with highly concentrated demand; and
special services, such as transport of data, radio and video.
BellSouth Telecommunications is subject to state regulatory authorities in
each state in which it provides telecommunications services with respect to
intrastate rates, services and other issues. Traditionally, BellSouth
Telecommunications' rates were set in each state in its service areas at levels
which were anticipated to generate revenues sufficient to cover its allowed
expenses and to provide an opportunity to earn a fair return on its capital
investment. Such a regulatory structure was satisfactory in a less competitive
era; however, BellSouth Telecommunications is currently advocating changes to
the regulatory processes responsive to the increasingly competitive
telecommunications environment. Modified forms of state regulation are in effect
in Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi and Tennessee.
Under such modified form of regulation, economic incentives are provided to
lower costs and increase productivity through the potential availability of
"shared" earnings over a benchmark rate of return. Generally, when levels above
targeted returns are reached, earnings are "shared" by providing refunds or rate
reductions to customers. The amounts of any such excess which may be retained
under some plans depend upon attaining mandated service standards, certain
productivity improvement provisions or both. Under some plans, if earnings fall
below a targeted minimum, additional earnings required to return to the bottom
of the allowed range can be obtained through rate increases. Sharing plans are
generally subject to renewal after two or three years, and may be subject to
modification prior to renewal.
Despite the potential advantages offered by sharing plans, substantial rate
reductions have been incurred in connection with their adoption and operation.
Of the states in which these types of plans were in place, BellSouth
Telecommunications attained the earnings sharing range in Alabama, Kentucky,
Louisiana and Mississippi in 1993.
ALABAMA
An incentive regulation plan has been in effect in Alabama since December
1988, which provides for a return on average total capital* in the range of
11.65% to 12.30%. If earnings exceed 12.30%, sharing with customers may range
from 0% to 50%, depending upon whether certain service and efficiency
requirements are met.
In December 1993, in conjunction with approval of rate adjustments required
by its incentive plans, the Alabama Public Service Commission approved a
settlement of several outstanding issues. The settlement resulted in a net rate
reduction to the Company of $15.72 million.
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* As defined in the plan for this state.
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FLORIDA
From 1988 through 1992, the Florida incentive plan provided for a return on
equity* of 11.5% to 16%, with earnings from 14% to 16% to be shared 40% by
BellSouth Telecommunications and 60% by customers. The sharing level was not
attained under the plan.
In 1993, BellSouth Telecommunications filed a petition to extend the
existing plan. In January 1994, after extensive proceedings and negotiations
between BellSouth Telecommunications, Public Counsel and intervenors, the
Florida Public Service Commission approved a settlement that extends incentive
regulation through 1996. Among other things, the terms of the settlement provide
for rate reductions of $55 million in February 1994, an additional $60 million
in July 1994, $80 million in October 1995 and $84 million in October 1996. The
settlement provides for other changes in service offerings and tariffs including
approximately $21 million in revenue reductions or increased expenses. Basic
service rates have been capped at their current levels through 1997, and
BellSouth Telecommunications has agreed not to propose any local measured
service on a statewide basis through the same time period. (See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Operating Environment and Trends of the Business -- Regulatory Environment --
State Regulation.")
The agreement establishes a 1994 return on equity* sharing level of 12% with
a cap of 14%, increasing in 1995 to a 12.5% sharing level with a cap of 14.5%.
Rates of return beyond 1995 would vary based upon changes in utility bond yields
but would change no more than 75 basis points from 1995 levels.
GEORGIA
The Georgia incentive plan adopted in 1990 provided that BellSouth
Telecommunications would retain all earnings up to a 14% return on equity*.
Subject to the attainment of service standards and productivity improvement
provisions, BellSouth Telecommunications could retain a portion of earnings
between 14% and 16%. The plan also provided for a reduction of rates if earnings
exceed 14% return on equity, even if the service standards and productivity
improvement provisions are met. The amount of any sharing and rate adjustments
would depend upon attaining certain service standards and productivity
improvements. BellSouth Telecommunications has yet to attain the sharing level
under the Georgia plan.
In December 1993, the Georgia Public Service Commission voted to extend the
plan for six months, effective January 1, 1994. Concurrent with the extension,
the Commission modified the return on equity at which sharing would occur from
14% to 13%.
KENTUCKY
Under the Kentucky incentive regulation plan, BellSouth Telecommunications
may earn a return on average total capital* in the range of 10.99% to 11.61%.
Earnings above 11.61% are subject to sharing. If the return on average total
capital falls below 10.99%, 50% of the shortfall may be recovered from
customers, and if the return falls below 9.49%, 75% of the shortfall may be
recovered. BellSouth Telecommunications achieved the sharing level during 1993
and reduced rates by $6.4 million in June. This plan will be reviewed by the
Kentucky Public Service Commission later in 1994.
LOUISIANA
In February 1992, in settlement of several years of regulatory and judicial
proceedings, BellSouth Telecommunications and the Louisiana Public Service
Commission agreed to a three year incentive regulation plan providing for an
immediate $55.0 million refund, a rate reduction of $31.4 million and an
authorized return on investment* in the range of 10.7% to 11.7%, with sharing of
earnings above 11.7% and below 12.7%. Based on 1992 results, BellSouth
Telecommunications reduced rates by
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* As defined in the plan for this state.
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$13.8 million in February and $7.8 million in August 1993, reflecting its
sharing obligation under the new plan. In January 1994, BellSouth
Telecommunications filed a petition with the Louisiana Commission requesting a
price regulation plan. No hearings have been scheduled on this proposal.
MISSISSIPPI
In June 1990, the Mississippi Public Service Commission authorized
implementation of an incentive plan that includes a return on average net
investment* ranging from 10.74% to 11.74% and provides that earnings above
11.74% and shortfalls below 10.74% would be shared with customers on a 50/50
basis. Rate reductions totaling $22.8 million on an annual basis were required
prior to implementation of the plan.
Additional revenue reductions in the amount of $12.8 million related to
intrastate access and area calling plan impacts became effective in January
1993. In June 1993, the Mississippi Commission renewed, through July 1, 1995 the
incentive plan and ordered BellSouth Telecommunications to reduce rates,
effective July 1993, based on a targeted 11.24% return.
Legislation has recently been passed in Mississippi which would allow price
regulation.
NORTH CAROLINA
In 1989, legislation was enacted in North Carolina authorizing the North
Carolina Public Service Commission to consider alternative forms of regulation.
No specific proposal has been approved or is pending. The North Carolina
Commission reviews BellSouth Telecommunications' rates annually.
In November 1993, the Commission approved one-time depreciation reserve
deficiency amortizations of $28.5 million and $25 million in 1993 and 1994,
respectively.
SOUTH CAROLINA
In August 1991, the South Carolina Public Service Commission authorized
implementation of an incentive plan providing for a return on equity* ranging
from 12.0% to 16.5%, and the sharing of earnings between 14.0% to 16.5%, on a
50/50 basis with customers. However, in August 1993, the South Carolina Supreme
Court ruled that the South Carolina Commission lacked the statutory authority to
approve incentive regulation plans. Legislation has been proposed in South
Carolina which would permit the Commission to adopt alternative forms of
regulation, including price regulation. In the interim, traditional rate of
return regulation is in effect.
TENNESSEE
In August 1993, the Tennessee Public Service Commission approved a three
year revised incentive regulation plan which lowered the sharing range as a
percentage return on average net investment* from 11.0% - 12.2% to 10.65% -
11.85%. Earnings between 11.85% - 15.85% must be shared with ratepayers in
varying degrees, depending on the quality of service. The plan also provides for
rate increases to cover up to 60% of the amount by which earnings fall below
10.65%. The Tennessee Commission's decision was appealed by several intervenors
to the Tennessee Court of Appeals. The appeal, which is pending, challenges the
validity of the Commission's order and its rate of return finding.
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In addition to the above matters, BellSouth Telecommunications is a party to
numerous proceedings pending before state regulatory bodies which involve, among
other things, terms and conditions of services provided by BellSouth
Telecommunications, rates charged for such services and relationships with
affiliates. No assurance can be given as to the outcome of any such matters.
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* As defined in the plan for this state.
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ACCESS SERVICES
BellSouth Telecommunications provides access services by connecting the
communications networks of Interexchange Carriers with the equipment and
facilities of subscribers. These connections are provided by linking these
carriers and subscribers through the public switched network of BellSouth
Telecommunications or through dedicated private lines furnished by BellSouth
Telecommunications.
Access charges, which are payable both by Interexchange Carriers and
subscribers, provided approximately 24%, 25% and 26% of BellSouth's operating
revenues for the years ended December 31, 1993, 1992 and 1991, respectively.
These charges are designed to recover the costs of the common and dedicated
facilities and switching equipment used to connect networks of Interexchange
Carriers with the telephone company's local network. In addition, an interstate
monthly subscriber line access charge of $3.50 per line per month applies to
single-line business and residential customers. The interstate subscriber access
charge for multi-line business customers varies by state but cannot exceed $6.00
per line per month.
In October 1990, the FCC authorized an alternative to traditional rate of
return regulation called "price caps," effective January 1, 1991, which is
mandatory for certain local exchange carriers ("LECs"), including BellSouth
Telecommunications and the other Operating Telephone Companies. In contrast to
traditional rate of return regulation price caps limits the prices telephone
companies can charge for their services. The price cap plan limits aggregate
price changes to the rate of inflation minus a productivity offset, plus or
minus exogenous cost changes recognized by the FCC. The FCC expects price cap
regulation to provide LECs with enhanced incentives to increase productivity and
efficiency. Concurrent with the implementation of price caps, the FCC reduced
the allowed rate of return on interstate operations from 12.0% to 11.25%.
Those LECs which operate under price caps are allowed to elect annually by
April 1 a productivity offset factor of 3.3% or 4.3%. If the lower offset is
chosen, such carriers will be allowed to earn up to a 12.25% overall rate of
return without sharing. If such carriers earn between 12.25% and 16.25%, half of
the earnings in this range will be flowed through to customers in the form of a
lower price cap index in the following year. All earnings over 16.25% would be
flowed through to customers. If such carriers elect a 4.3% productivity offset,
all earnings below 13.25% may be retained, earnings up to 17.25% would be shared
and earnings over 17.25% would be flowed through to customers. BellSouth
Telecommunications elected to operate under the 3.3% productivity offset factor
for the period July 1, 1993 through June 30, 1994 and intends to elect the same
factor for the ensuing annual period.
In February 1994, the FCC initiated its review of the price cap plan
described in the preceeding paragraph. The FCC identified three broad sets of
issues for examination including those related to the basic goals of price cap
regulation, the operation of price caps and the transition of local exchange
services to a fully competitive market. BellSouth believes and will advocate
that a revised price cap plan should be structured to provide increased pricing
flexibility for services as competition evolves in the telecommunications
markets. Any changes to the current plan are expected to be effective January 1,
1995 or soon thereafter.
State regulatory commissions have jurisdiction over charges related to the
provision of access to the Interexchange Carriers to complete intrastate
telecommunications. The state commissions have authorized BellSouth
Telecommunications to collect access charges from the Interexchange Carriers
and, in several states, from customers.
Open Network Architecture ("ONA") plans, permitting all users of the basic
network to interconnect to specific basic network functions and interfaces on an
unbundled and equal access basis for the provision of enhanced services, will
eliminate the FCC requirement that certain enhanced telecommunications services
be offered only through a separate subsidiary. The plans may be implemented when
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ONA tariffs filed with the FCC become effective and are filed with the states in
which ONA services will be offered and the FCC is notified by the company that
it is prepared to offer the ONA services described in its plan. In November
1992, BellSouth Telecommunications filed a Notice of Initial ONA Implementation
and Petition for Removal of Structural Separation Requirement (the "Notice").
The Notice informed the FCC of BellSouth Telecommunications' completion of the
required steps for initial ONA implementation and asked the FCC to remove the
structural separation requirements currently imposed on enhanced services
offerings. The FCC granted the petition for structural relief in July 1993.
In addition to the above matters, BellSouth Telecommunications is a party to
numerous proceedings pending before the FCC which involve, among other things,
terms and conditions of services provided by BellSouth Telecommunications, rates
charged for such services and relationships with affiliates. No assurance can be
given as to the outcome of any such matters.
BILLING AND COLLECTION SERVICES
BellSouth Telecommunications provides, under contract and/or tariff, billing
and collection services for certain long distance services of AT&T and several
other Interexchange Carriers. The agreement with AT&T has been extended through
1996, subject to the right of AT&T to assume billing and collection for certain
of its services prior to the expiration of the agreement. Revenues from such
services are expected to decrease as AT&T and other carriers assume more direct
billing for their own services. BellSouth Enterprises also provides limited
billing and collection services in foreign countries.
OPERATOR SERVICES
Directory assistance and local and toll operator services are provided by
BellSouth Telecommunications in its service areas. Toll operator services
include alternate billing arrangements, such as collect calls, third number
billing, person-to-person and calling card calls; dialing instructions; pre-
billed credit; and rate information. In addition, directory assistance is
provided for some Interexchange Carriers which do not directly provide such
services for their own customers.
OTHER TELECOMMUNICATIONS BUSINESS OPERATIONS
DIRECTORY ADVERTISING AND PUBLISHING
BellSouth Enterprises owns a group of companies which publish, print and
sell advertising in, and perform related services concerning, alphabetical and
classified telephone directories. Directory advertising and publishing revenues
represented nearly 10% of BellSouth's total operating revenues for each of the
years ended December 31, 1993, 1992 and 1991. Several of these companies also
provide publishing and related products and services to other directory
publishers. During 1993, these companies published approximately 500 directories
for BellSouth Telecommunications and contracted with more than 160 nonaffiliated
companies to sell advertising space in more than 400 publications of such
nonaffiliated companies.
A percentage of the billed revenues from directory advertising operations of
BellSouth Advertising & Publishing Corporation, a wholly-owned subsidiary of
BellSouth, are paid as publication fees to BellSouth Telecommunications for
publishing rights and other services in its franchise areas.
WIRELESS COMMUNICATIONS
BellSouth Enterprises provides wireless communications services which
consist mainly of cellular telephone and paging services. Revenues from wireless
communications comprise approximately 10%, 8% and 5% of BellSouth's total
operating revenues for the years ended December 31, 1993, 1992 and 1991,
respectively. In addition, BellSouth Enterprises owns minority interests in a
number of
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wireless businesses whose revenues are not reflected in operating revenues
because of the method of accounting required for such investments. BellSouth has
significantly expanded these businesses in recent years through development of
existing franchises and through acquisitions.
The predominant part of these business operations is cellular telephone
service. Cellular radio telephone systems provide customers with high-quality
and readily available two-way communications services that interconnect with the
local and long distance telephone networks. Cellular systems utilize a large
number of low power transmitters that transmit within a small geographic area,
or cell, and a switching system that monitors and allocates available
frequencies to users traveling within and between cells. The number of cells
varies from market to market depending on several factors, including the
topography and demographics of the service area. As the number of subscribers
and calls increase, additional channels may be allocated to each cell or
additional cells may be created, either by sectorizing or splitting existing
cells to create greater capacity or adding new cells.
DOMESTIC CELLULAR OPERATIONS
Domestic cellular wireless telephone business has become a significant
contributor to BellSouth's operations, primarily due to the continued expansion
of the customer base for mobile communications services and as a result of
significant acquisitions of other systems. BellSouth maintains and operates
cellular systems through wholly-owned subsidiaries and business ventures with
other entities. Cellular service and related equipment are marketed to
consumers, directly and through authorized agents, and to businesses that resell
the service.
At December 31, 1993, licensees in which BellSouth had an equity interest
provided cellular service to a total of approximately 2.1 million domestic
customers in 16 states. BellSouth's proportionate share of such total customers,
based on its percentage ownership interests of such licensees, was approximately
1.6 million customers. (See "Consolidated Financial Statements and Supplementary
Data -- Domestic Cellular and Paging Operations Proportionate Operating Data.")
Within its nine-state wireline service territory, BellSouth offers cellular
service in cities, including Atlanta, Miami, New Orleans, Memphis, Louisville,
Birmingham and Orlando, while outside its wireline service territory it offers
cellular service in cities including Los Angeles, Houston, Milwaukee,
Indianapolis, Honolulu and Richmond. BellSouth's proportionate interest in the
aggregate population served by its domestic cellular systems is approximately
38.8 million persons.
Public utility commissions in several states have expressed an interest in
examining whether the cellular industry should be more closely regulated by such
states. For example, in October of 1989, the California Public Utility
Commission issued an order instituting an investigation of the cellular industry
in California. (BellSouth has significant interests in cellular licensees in Los
Angeles and Bakersfield.) The purpose of the investigation was to determine what
state regulatory changes were needed in light of the continued growth of the
cellular industry and the numerous regulatory issues that had been raised since
its inception. This investigation has been through several phases and continues
today by virtue of a December 1993 order of the California Commission, which
began a new round of hearings regarding the regulatory framework and related
issues.
INTERNATIONAL CELLULAR OPERATIONS
Outside the United States, BellSouth owns interests in consortiums that hold
licenses for, and are building and/or operating, cellular telephone systems in
Argentina, Australia, Denmark, Germany, Uruguay and Venezuela. Through
wholly-owned subsidiaries, BellSouth holds licenses for Chile and New Zealand
cellular telephone systems. At December 31, 1993, such systems provided cellular
service to a total of approximately 499,300 international customers. BellSouth's
proportionate share of such customers, based on its percentage ownership
interests in such systems, was approximately 192,200 customers. BellSouth offers
cellular service under regional licenses to areas within Argentina, Uruguay and
Chile and offers cellular service under nationwide licenses in Australia,
Denmark, Venezuela and New Zealand. Service in Australia is also currently being
provided by reselling service obtained from the government owned carrier. (See
"Other International Operations.") In addition,
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BellSouth has been granted a license and is constructing a system for nationwide
cellular service in Germany. During the first quarter of 1994, BellSouth
disposed of its interest in a cellular telephone business in Mexico. BellSouth's
international cellular systems operate in areas with an aggregate population of
approximately 55.4 million persons, based on its percentage ownership interests
in licensees in such countries.
PAGING OPERATIONS
BellSouth also provides domestic and international paging services. Paging
services provide the ability to contact, by means of a radio transmitted signal,
persons who carry small radio receivers. The caller uses a cellular or wireline
telephone to reach an assigned telephone or PIN number at the service provider's
facilities. The assigned number is automatically relayed to the paging terminal,
and the call triggers a signal which is relayed to the terminal's transmitter
and transmitted to the paging unit. Subscribers typically rent the paging units
on a month-to-month basis, or purchase such units, and pay a flat monthly fee
for paging services. These services are subject to regulation by the FCC.
BellSouth has local and regional paging operations in many areas throughout
the United States. In addition, BellSouth offers nationwide messaging service.
BellSouth's paging and messaging services are offered under the MobileComm-R-
service mark.
As of December 31, 1993, BellSouth had approximately 1,344,400 pagers in
service based upon its ownership percentage in markets served. Of this amount,
approximately 1,232,200 pagers were in service in the United States while
approximately 112,200 pagers were in service in Australia.
OTHER WIRELESS OPERATIONS
BellSouth and RAM Broadcasting Corporation ("RBC") have formed a business
venture ("RAM") to own and operate certain mobile data communications networks
worldwide. These networks enable mobile applications such as computer-aided
dispatch, electronic mail, transaction processing and remote data entry and
retrieval. They can also be used for such fixed applications as credit card
validation and telemetry. BellSouth has a 49 percent interest in the United
States mobile data operations, which will continue to be operated by RBC, and a
substantial interest in all foreign mobile data operations of the RAM venture
except the United Kingdom and France, where BellSouth has a 37.5 percent and
11.25 percent ownership interest, respectively. The RAM networks cover the top
100 metropolitan markets and 90% of the urban United States business population.
Some additional construction of RAM's networks is planned to expand coverage.
Personal communications services ("PCS") are in the developmental stage and
are anticipated to provide a wide range of wireless communications services. The
FCC is currently putting a licensing process in place that will allocate 160
megahertz for broadband PCS, with 120 megahertz being given to licensed
operators, 20 megahertz reserved for unlicensed voice operations and 20
megahertz reserved for unlicensed data operations. The FCC is developing rules
to award the licensed spectrum on an auction basis, with up to seven licenses
per geographic area. BellSouth will be able to bid on all potential licenses in
areas where it does not provide cellular service. Where it provides cellular
service, BellSouth likely will be limited to bidding on one 10 megahertz PCS
license. It is anticipated that the auctions could begin as early as the Fall of
1994. The federal government hopes to raise $10 billion auctioning off the PCS
spectrum. BellSouth has conducted several trials of PCS-like services under
experimental licenses from the FCC, but has made no final determination of the
scope of its participation in the PCS licensing auctions. It is anticipated that
substantial capital would be required to bid on licenses and to construct the
systems should BellSouth elect to participate.
OTHER INTERNATIONAL OPERATIONS
BellSouth is a 24.5 percent participant in Optus Communications Pty. Ltd.
("Optus"), an international consortium which has been licensed by the Australian
government to build and operate Australia's second telecommunications network.
Optus offers a full spectrum of cellular telecommunications, switched network,
enhanced wireline services and satellite-based services.
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Optus has completed construction of the bulk of its long distance network
and has built basic infrastructure for the local business services in Canberra,
Melbourne and Sydney. Long distance and local service switching centers have
been established in the six mainland capital cities and over 3,000 miles of
optical fiber cable has been placed. Approximately 70% of the population
currently has access to the long distance service provided on the Optus network.
During the fourth quarter of 1993, Optus began offering a limited number of
local business services such as data services via its terrestrial and satellite
facilities.
Optus had over 230,000 analog cellular resale customers at December 31,
1993. In addition to reselling analog cellular service provided by the
government-owned carrier, Optus has installed its own digital cellular service
in five capital cities. Optus also owns AUSSAT, Australia's national satellite
communications carrier. AUSSAT satellites provide voice, data and television
broadcast communications to Australia and New Zealand, air traffic control
communications to Australia's Civil Aviation Authority and mobile communications
to Australia's rural areas.
BellSouth has entered into a joint venture agreement with Ji Tong Company,
an operating unit within the Chinese government, to invest up to $30 million in
communications projects in China. The venture's main business will be to provide
contract work for the construction and implementation of telecommunications and
information network projects, including the provision of network planning,
design and engineering. In addition, the joint venture will perform software and
hardware systems integration, development and production.
BellSouth has received a license to operate a competing domestic and
international long distance concession in Chile. BellSouth plans to construct
the network utilizing a combination of satellite, microwave digital switching
and fiber optic facilities and begin service later in 1994.
BROADBAND SERVICES
In August 1992, the FCC issued an order allowing the LECs to offer video
dial tone for transmitting video services. These services would allow customers
of the LECs to have access through the network to video services such as
educational programs and pay per view television. BellSouth Telecommunications
expects to request FCC permission to construct facilities necessary to test
video dial tone services later this year. The FCC has also recommended that
Congress repeal the restriction in the Cable Act of 1984 which prohibits LECs
from providing cable television programming in their service territories, and
has proposed that LECs be allowed to provide and to acquire minor ownership
interests in, video programming in such territories.
In December 1993, BellSouth filed suits in U.S. District Courts in Alabama
and Tennessee seeking relief from the Cable Communications Policy Act of 1984,
under which BellSouth is prohibited from providing video programming, such as
that provided by a television broadcast station, directly to consumers within
BellSouth Telecommunications' wireline service areas. If successful, BellSouth
intends to seek the appropriate governmental authorizations necessary to provide
video transport, video programming and interactive services in such areas.
BellSouth has formed a strategic alliance with a major cable TV operator,
Prime Cable, pursuant to which it has entered into a credit agreement with Prime
South Diversified, Inc. ("Prime South"), which indirectly wholly-owns Community
Cable TV ("CCTV"), a Las Vegas cable operation managed by Prime Cable, to
provide up to $250 million in financing. CCTV is the nation's 14th largest cable
system serving over 200,000 cable connections and more than 70,000 hotel rooms.
The loan to Prime South, which closed in January 1994 and matures in 2001, is
secured by the stock of Prime South and that of a wholly-owned subsidiary.
BellSouth also has the option to acquire such stock at various dates over the
term of the loan. Concurrently, BellSouth entered into an agreement to acquire a
22.5%
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interest in Prime Cable's management company, which provides management services
to five affiliated cable systems nationwide, with an option to acquire the
remaining 77.5% over the term of the loan to Prime South. This transaction is
expected to close in late 1994, subject to regulatory approval.
In an effort to pursue opportunities in interactive programming, television
shopping and other advanced services, BellSouth had agreed to invest
approximately $2 billion in QVC Network, Inc. ("QVC"), contingent on QVC's
successfully completing its acquisition of Paramount Communications, Inc.
("Paramount"), and had also received an option to acquire approximately $500
million of QVC stock at a purchase price of $60 per share in the event QVC was
unsuccessful in its proposed acquisition of Paramount. QVC's bid for Paramount
was terminated on February 14, 1994, and BellSouth has six months thereafter to
determine whether to exercise the option.
SELLING, LEASING AND MAINTAINING EQUIPMENT
BellSouth sells, leases and maintains CPE, and to a lesser extent, computers
and related office equipment. The Holding Companies, AT&T and other substantial
enterprises compete in the provision of CPE and other services and products.
COMPETITION
GENERAL
BellSouth is subject to increasing competition in all areas of its business.
Regulatory, legislative and judicial actions and technological developments have
expanded the types of available services and products and the number of
companies which may offer them. Increasingly, this competition is from large
companies which have substantial capital, technological and marketing resources.
Developments during 1993 indicate that a technological convergence is
occurring in the telephone, cable and broadcast television, computer,
entertainment and information services industries. The technologies utilized and
being developed in these industries will enable companies to provide multiple
forms of communications offerings.
Current policies of Congress and the FCC strongly favor lowering legislative
and regulatory barriers to competition in the telecommunications industry.
Accordingly, the nature of competition which BellSouth will face will depend to
a large degree on regulatory actions at the state and federal levels, decisions
with respect to the MFJ and possible state and federal legislation.
NETWORK AND RELATED SERVICES
LOCAL SERVICE
Many services traditionally provided exclusively by the LECs have been
deregulated, detariffed or otherwise opened for competition. For example, some
carriers and other customers with concentrated, high usage characteristics are
utilizing shared tenant services, private branch exchange (PBX) systems (which
are owned by customers and provide internal switching functions without using
BellSouth Telecommunications' central office facilities), private line services
and other telecommunications links which bypass the switched networks of
BellSouth Telecommunications. An increasing number of private voice and data
communications networks utilizing fiber optic lines have been and are being
constructed in metropolitan areas, including Atlanta, Georgia, Charlotte, North
Carolina and Jacksonville, Miami and Orlando, Florida, which will offer certain
high volume users a competitive alternative to the public and private line
offerings of the LECs. In addition, the existing networks of cable television
systems are capable of carrying two-way interactive data messages and can be
configured to provide voice communications. Furthermore, wireless services, such
as cellular telephone and paging services, and PCS services when operational,
increasingly compete with wireline communications services.
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BellSouth Telecommunications is presently vulnerable to bypass to the extent
that its access charges reflect subsidies for other services. Although BellSouth
Telecommunications believes that bypass has already occurred to a significant
degree in its nine-state area, it is difficult to quantify the lost revenues
since customers are not required to report to the telephone companies the
components of their telecommunications systems. In general, telephone company
telecommunications services in highly concentrated population and business areas
are more vulnerable to bypass.
MCI Communications Corporation has announced long range plans to invest more
than $20 billion to create and deliver a wide array of communications services.
Included in these plans is an investment of $2 billion to construct local
networks in major United States cities, including Atlanta, Georgia and other
cities in the Southeast. MCI has stated that it would connect directly to
customers and provide alternative local voice and data communications services.
Local service competition from MCI could emerge in Atlanta by mid-1994.
AT&T has announced an agreement to acquire McCaw Communications, Inc., the
largest domestic cellular communications company, which serves customers in 10
cities in BellSouth's local wireline territory and seven cities in which
BellSouth provides competing cellular communications. AT&T's capital and
marketing resources would be expected to make McCaw a more formidable cellular
competitor and could provide an integrated network for carrying communications
traffic that otherwise would have been carried over the public switched and
private line networks of BellSouth Telecommunications.
Alliances are also being formed between other Holding Companies and large
corporations that operate cable television systems in many localities throughout
the United States, e.g., U S West, Inc./ Time Warner Communications,
Southwestern Bell Corporation/Cox Enterprises, Inc. and NYNEX
Corporation/Viacom, Inc. As technological and regulatory developments make it
more feasible for cable television to carry data and voice communications, it is
increasingly likely that BellSouth Telecommunications will face competition
within its region from the other Holding Companies through their cable
television venture arrangements.
U S West and Time Warner have announced plans to upgrade certain of their
cable TV systems to full-service networks which would support new interactive
and telephone services that will compete with the incumbent local exchange
carriers. The first of these full-service networks is being built in Orlando,
Florida and is expected to begin offering services in the Fall of this year.
Tele-Communications, Inc. has announced plans to offer similar services in South
Florida and Louisville, Kentucky.
ACCESS SERVICE
The FCC has adopted rules requiring local exchange carriers to offer
expanded interconnection for interstate special and switched transport. As a
result, BellSouth Telecommunications will be required to permit competitive
carriers and customers to terminate their transmission facilities in its central
office buildings. Virtual collocation agreements may also be negotiated between
carriers. Various aspects of these rules have been challenged by a number of
carriers, including BellSouth Telecommunications. The effects of the rules would
be to increase competition for access transport. It is uncertain whether the
local exchange carriers will receive the pricing flexibility necessary to
compete effectively with alternative access providers.
TOLL SERVICE
A number of firms compete with BellSouth Telecommunications for intraLATA
toll business by reselling toll services obtained at bulk rates from BellSouth
Telecommunications or, subject to the approval of the applicable state public
utility commission, providing toll services over their own facilities.
Commissions in the states in BellSouth Telecommunications' operating territory
have allowed the latter type of intraLATA toll calling, whereby the
Interexchange Carriers are assigned a multiple digit access code ("10XXX") which
customers may dial to place intraLATA toll calls through
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facilities of such Interexchange Carriers. The Kentucky Commission has concluded
that competing carriers should be allowed to provide intraLATA toll
presubscribed calling with a single digit access code (1+ or 0+) but is
considering how and when such authorization should be implemented.
DIRECTORY ADVERTISING AND PUBLISHING
In BellSouth's advertising and publishing business, competition for
advertising revenues has expanded. Many different media compete for advertising
revenues, and some newspaper organizations and other companies have begun
publishing their own directories. Competition for directory sales agency
contracts for the sale of advertising in publications of nonaffiliated companies
also continues to be strong.
WIRELESS COMMUNICATIONS
The FCC has jurisdiction over the licensing of cellular mobile radio
services in domestic markets. The FCC limits entry for providers of cellular
mobile telecommunications to two licensees for each defined metropolitan
statistical area ("MSA") and each rural service area ("RSA") within the country.
Each MSA and RSA in which BellSouth participates in the provision of cellular
mobile communications has a competing service provider.
BellSouth's international cellular joint ventures are generally subject to
competition from at least one other cellular service provider, and sometimes
more than one other provider, as in, for example, Germany where there are two
additional competitors. These competing cellular service providers are generally
supported by partners at least as well-capitalized as BellSouth and its
partners. In some cases the competing cellular provider is owned by the
state-owned telephone company, which may have access to the financial resources
of the government.
BellSouth's paging operations experience competition from one or more
competitors in all markets in which they are conducted. Although some of
BellSouth's competitors are small privately-owned companies serving only one
market area, others are large companies such as Paging Network, Inc. and
MobileMedia Communications, Inc. Competition for paging subscribers is based
primarily on the price and quality of service and the geographic area covered.
BellSouth believes that the price and quality of its services and its geographic
coverage areas generally compare favorably with those of its competitors.
BellSouth's mobile data business venture with RAM expects competition from
private wireless data networks, Specialized Mobile Radio, analog cellular and
future Cellular Digital Packet Data technology. RAM's primary competitor today
in the wireless data market is ARDIS, a wireless data joint venture between IBM
Corporation and Motorola, Inc. The ARDIS network, which was started in 1983 as a
private network for IBM, currently has the advantage of a larger installed
customer base and greater network coverage. RAM, however, expects to attract
customers with its unique network feature of automatic, seamless nationwide
roaming. Success of the RAM venture will depend significantly on early marketing
efforts to enroll customers and the relative market acceptance of RAM
technology.
The FCC has approved construction of enhanced specialized mobile radio
("ESMR") systems in many cities around the country. These digital mobile
communications systems are expected to provide service very similar to cellular
telephone service. There has been a consolidation of the licenses required to
provide ESMR service, so that control of this business is concentrated in the
hands of a few potential operators, giving them the ability to offer services
like nationwide roaming quickly and efficiently once the systems are built. It
is expected that the first location where ESMR will become available
commercially is Los Angeles during second quarter of 1994 in competition with
BellSouth's cellular telephone partnership. MCI has also announced an alliance
with Nextel Communications and Comcast Corp. to offer wireless personal
communications services in most major cities.
The FCC's PCS licensing process will create up to seven new competitors for
BellSouth's cellular business in each geographic area where BellSouth provides
that service. It is also anticipated that in
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conjunction with cable operators, interexchange carriers, or other alternative
local service providers, PCS will provide some competition to BellSouth's local
wireline telephone business. The exact service offerings and functionality of
PCS still has not been completely determined, but it is anticipated that the
competitive systems could be in place in late 1995 or early 1996. While
BellSouth believes that it can evolve the capabilities of its existing cellular
business to meet this competitive challenge, it is also considering the
possibility of applying for PCS licenses.
BELLSOUTH COMPETITIVE STRATEGY
REGULATORY AND LEGISLATIVE CHANGES
The states in BellSouth Telecommunications' service area currently provide
for some form of regulation of earnings, a regulatory framework that BellSouth
believes is not appropriate for the increasingly competitive telecommunications
environment. Accordingly, BellSouth's primary regulatory focus continues to be
directed toward modifying the regulatory process to one that is more closely
aligned with changing market conditions and overall public policy objectives. As
an alternative to the current regulatory process, BellSouth believes that price
regulation, whereby prices of basic local exchange service are directly
regulated and prices for other products and services are based on market
factors, is a logical progression toward regulatory flexibility and is fair to
consumers. As such, BellSouth Telecommunications intends to pursue
implementation of price regulation plans through filings with state regulatory
commissions or through legislative initiatives.
BellSouth is also seeking relief in the courts and before Congress and
regulatory agencies from current laws, regulations and judicial restrictions
(including the MFJ) for the provision of voice, data and video communications
throughout its wireline service territory and elsewhere. It is furthermore
advocating legislative and regulatory initiatives which would eliminate or
modify restrictions on its current and future business offerings. (See
"Legislation.") Competitors and other interest groups with substantial resources
oppose many of these initiatives. The ultimate outcome and timing of any relief
obtained cannot be predicted with certainty.
Technological changes and the effects of competition reduce the economic
useful lives of BellSouth Telecommunications' fixed assets. As competition
increases in both the exchange access and local exchange markets, the economic
lives of related properties should continue to decrease. Therefore, BellSouth
Telecommunications is examining the rates of depreciation of fixed assets
authorized by the FCC and state regulatory commissions to ensure that these
rates are adequate to recover fixed asset costs in a timely fashion. The FCC and
the state commissions represcribe depreciation rates for BellSouth
Telecommunications at three-year intervals.
ENTRY INTO NEW MARKETS
Notwithstanding the risks associated with increased competition, BellSouth
will have the opportunity to benefit from entry into new business markets.
BellSouth believes that in order to remain competitive in the future, it must
aggressively pursue a corporate strategy of expanding its offerings beyond its
traditional businesses. These offerings may include information services,
interactive communications and cable television and other entertainment
services. BellSouth plans to enter such businesses through acquisitions,
investments, and strategic alliances with established companies in such
industries and through the development of such capabilities internally.
RESTRUCTURING
BellSouth Telecommunications is restructuring its telephone operations by
streamlining its fundamental processes and work activities to better respond to
an increasingly competitive business environment. The restructuring is expected
to improve overall responsiveness to customer needs, permit more rapid
introduction of new products and services and reduce costs. A primary objective
of this restructuring is the plan to downsize BellSouth Telecommunications'
workforce by 10,200 by the end of 1996.
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LEGISLATION
There are a number of bills pending in Congress that, if enacted into law,
could significantly affect BellSouth's business operations and opportunities.
The provisions of the bills set the terms, conditions, obligations and time
frames under which the Operating Telephone Companies would be permitted 1) to
offer interLATA services, 2) to manufacture CPE, 3) to manufacture and provide
telecommunications equipment, 4) to provide video programming in their telephone
service territories and 5) to offer electronic publishing services or alarm
monitoring services. They also would address the need to preserve universal
service in a competitive telecommunications marketplace and would preempt state
laws prohibiting competition for intrastate telephone services. In the House of
Representatives, these items are addressed in the provisions of two bills, H.R.
3626 and H.R. 3636. In the Senate, they are contained in S.1822. H.R. 3636 as
currently drafted also specifies that a Federal/ State Joint Board should
require that large carriers like BellSouth Telecommunications be subject to
alternative or price regulation rather than traditional rate of return
regulation.
The House has held several hearings on the House bills, and the House
Judiciary Committee and the House Energy and Commerce Committee have each
adopted a version of H.R. 3626, and the House Energy and Commerce Committee has
adopted H.R. 3636. The Rules Committee will decide how and when these bills will
proceed to the floor of the House.
RESEARCH AND DEVELOPMENT
The services and products of BellSouth are in a highly technological field.
BellSouth has expended $45.9, $52.5 and $42.0 million in 1993, 1992 and 1991,
respectively, on company-sponsored research and development activities. The
majority of this activity is conducted at Bell Communications Research, Inc.
("Bellcore"), one-seventh of which is owned by BellSouth, through BellSouth
Telecommunications, with the remainder owned by the other Holding Companies.
Bellcore provides research and development and other services for its owners and
is the central point of contact for coordinating the Federal government's
telecommunications requirements relating to national security and emergency
preparedness.
LICENSES AND FRANCHISES
BellSouth Telecommunications' local exchange business is typically provided
under certificates of public convenience and necessity granted pursuant to state
statutes and public interest findings of the various public utility commissions
of the states in which BellSouth Telecommunications does business. These
certificates provide for a franchise of indefinite duration, subject to the
maintenance of satisfactory service at reasonable rates.
The domestic cellular, paging and mobile data systems that BellSouth owns or
has an interest in are operated under licenses granted by the FCC. Prior
approval of the FCC is required for the assignment of a license or the transfer
of control of a licensee. The licenses are generally issued for up to 10 year
periods. For the paging and mobile data licenses, at the end of the license
period a renewal application must be made which BellSouth believes will
generally be granted upon showing compliance with FCC regulations and continuing
service to the public. Licenses may be revoked and license renewal applications
may be denied for cause. With regard to cellular licenses, the FCC has
established the procedures and standards for conducting comparative renewal
proceedings which include a "renewal expectancy" for cellular operators meeting
specific criteria. This ruling is presently undergoing further FCC review.
International cellular, paging and mobile data systems also operate under
licenses granted by the governments in the countries where such systems are
located. The foreign licenses are issued for
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varied terms and are generally renewable at the end of the initial license
period. As is the case with BellSouth's domestic wireless properties, the
foreign licenses may be revoked and license renewal applications may be denied
for cause.
BellSouth owns or has licenses to use all patents, copyrights, licenses,
trademarks and other intellectual property necessary for it to conduct its
present business operations. It is not anticipated that any of such property
will be subject to expiration or non-renewal of rights which would materially
and adversely affect BellSouth or its subsidiaries.
EMPLOYEES
At December 31, 1993, 1992 and 1991 BellSouth and its subsidiaries employed
approximately 95,100, 97,100 and 96,100 persons, respectively. Of these amounts
at these dates, approximately 81,400, 82,900 and 82,200 were employees of
BellSouth Telecommunications. About 71% of BellSouth's employees at December 31,
1993 were represented by the Communications Workers of America (the "CWA"),
which is affiliated with the AFL-CIO.
In September 1992, the CWA ratified new three-year contracts with BellSouth
covering about 61,000 employees. These contracts included provisions for wage
increases, a cost-of-living adjustment and an increase in the team incentive
award that will total, in the aggregate, an estimated 11.3% over the three year
contract period.
In November, 1993, BellSouth Telecommunications announced plans to reduce
its work force by approximately 10,200 employees by the end of 1996 through
normal attrition, transitional programs, other voluntary options and involuntary
separations.
ITEM 2. PROPERTIES
GENERAL
BellSouth's properties do not lend themselves to description by character
and location of principal units. BellSouth's investment in property, plant and
equipment, 96% of which is held by BellSouth Telecommunications, consists of the
following at December 31:
<TABLE>
<CAPTION>
1993 1992
----- -----
<S> <C> <C>
Outside Plant.................................................... 44% 46%
Central Office Equipment......................................... 35% 35%
Land and Buildings............................................... 7% 7%
Station Equipment................................................ 2% 2%
Other............................................................ 12% 10%
----- -----
100% 100%
----- -----
----- -----
</TABLE>
Outside plant consists of connecting lines (aerial, underground and buried
cable) not on customers' premises, the majority of which are on or under public
roads, highways or streets while the remainder is on or under private property.
Central office equipment consists of analog switching equipment, digital
electronic switching equipment and circuit equipment. Land and buildings are
occupied principally by central offices. Station equipment consists of embedded
intrasystem wiring, substantially all of which is on the premises of customers.
Substantially all of the installations of central office equipment and
administrative offices are located in buildings and on land owned by BellSouth
Telecommunications. Many garages, business offices and telephone service centers
are in leased quarters.
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BellSouth Telecommunications' customers are now served by electronic
switching systems that provide a wider variety of services than their mechanical
predecessors. The BellSouth Telecommunications network is in transition from an
analog to a digital network, which provides capabilities for BellSouth
Telecommunications to furnish advanced data transmission and information
management services.
PROPERTY ADDITIONS
Property additions include gross additions to property, plant and equipment
having an estimated service life of one year or more, plus the incidental costs
of preparing the asset for its intended use. In the case of constructed assets,
an amount related to the cost of debt and equity used in the construction of an
asset is capitalized as part of the asset when the construction period is in
excess of one year. Property additions also include assets acquired by means of
entering into a capital lease agreement, gross additions to operating lease
equipment and reused materials.
Significant additions to property, plant and equipment will be required to
meet the demand for telecommunications services and to further improve such
services. The level of property additions indicated below is expected to be
maintained in the near future. The total investment in telephone plant has
increased from about $34,143 million at January 1, 1989 to about $41,975 million
at December 31, 1993, including the effects of retirements and property
transferred at divestiture, but not including deductions of accumulated
depreciation at either date.
BellSouth's property additions at December 31 since 1989 are approximately
as follows:
<TABLE>
<CAPTION>
MILLIONS
---------
<S> <C>
1989.......................... $ 3,155
1990.......................... $ 3,386
1991.......................... $ 3,192
1992.......................... $ 3,266
1993.......................... $ 3,595
</TABLE>
In 1993, BellSouth generated substantially all of its funds for property
additions internally; substantially all such additions are expected to be
financed through internally generated funds in 1994.
BellSouth projects property additions for BellSouth Telecommunications to be
approximately $3,000 million during 1994. The continued modernization of the
BellSouth Telecommunications' network is necessary to meet the needs of
customers and competitive demands. Population and economic expansion is
projected by BellSouth in certain growth centers within its nine-state area
during the next five to ten years. Expansion of the network will be needed to
accommodate such projected growth.
BellSouth projects that during 1994 it will invest approximately $500
million in the properties of BellSouth Enterprises' consolidated subsidiaries. A
majority of such expenditures will be for property additions to its cellular
systems to complete construction of new systems and to expand, enhance and
modernize its operating systems. BellSouth has commenced adding digital
technology to certain systems which are operating at or near capacity with
analog technology.
ENVIRONMENTAL MATTERS
BellSouth Telecommunications is subject to a number of environmental matters
as a result of its operations and the shared liability provisions in the POR. As
a result, BellSouth Telecommunications expects that it will be required to
expend funds to remedy certain facilities, including those Superfund sites for
which BST has been named as a potentially responsible party, for the remediation
of sites
18
<PAGE>
with underground fuel storage tanks and other expenses associated with
environmental compliance. At December 31, 1993, BST's recorded liability related
primarily to remediation of these sites was $35.5 million.
BellSouth continually monitors its operations with respect to potential
environmental issues, including changes in legally mandated standards and
remediation technologies. BellSouth's recorded liability reflects those specific
issues where remediation activities are currently deemed to be probable and
where the cost of remediation is estimable. BellSouth continues to believe that
expenditures in connection with additional remedial actions under the current
environmental protection laws or related matters will not be material.
ITEM 3. LEGAL PROCEEDINGS
The MFJ and the related POR provide for the recognition and payment of
liabilities by AT&T and the Operating Telephone Companies that are attributable
to pre-divestiture events but that did 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). Contingent liabilities that are attributable to pre-divestiture events
are shared by AT&T and the Operating Telephone Companies in accordance with
formulae prescribed by the POR, 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. BellSouth Telecommunications' share of
these liabilities to date has not been material to its financial position or
results of operations for any period.
BellSouth and its subsidiaries are subject to claims and proceedings arising
in the ordinary course of business. While complete assurance cannot be given as
to the outcome of any contingent liabilities, in the opinion of BellSouth, any
financial impact to which BellSouth and its subsidiaries are subject is not
expected to be material in amount to BellSouth's operating results or its
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matter was submitted to a vote of shareholders in the fourth quarter of
the fiscal year ended December 31, 1993.
------------------------
ADDITIONAL INFORMATION
DESCRIPTION OF BELLSOUTH STOCK
GENERAL
The Articles of Incorporation of BellSouth authorize the issuance of
1,100,000,000 shares of common stock, par value $1 per share (the "Common
Stock"), and 100,000,000 shares of cumulative, first preferred stock, par value
$1 per share (the "Preferred Stock"). BellSouth's Board of Directors (the
"Board") is authorized to provide for the issuance, from time to time, of the
Preferred Stock in series and, as to each series, to fix the number of shares in
such series and the voting, dividend, redemption, liquidation, retirement and
conversion provisions applicable to the shares of such series. No shares of
Preferred Stock are outstanding. The Board has created Series A First Preferred
Stock consisting of 30 million shares (the "Series A Preferred Stock") for
possible issuance under BellSouth's Shareholder Rights Plan. (See "Preferred
Stock Purchase Rights.")
DIVIDEND RIGHTS
The holders of Common Stock are entitled to receive, from funds legally
available for the payment thereof, dividends when and as declared by resolution
of the Board. While any series of Preferred Stock is outstanding, no dividends
(other than dividends payable solely in Common Stock) may be declared or paid on
Common Stock, and no Common Stock may be purchased, redeemed or otherwise
acquired for value, (a) unless dividends on all outstanding shares of Preferred
Stock for the current and all past dividend periods have been paid or declared
and provision made for payment thereof and
19
<PAGE>
(b) unless all requirements with respect to any purchase, retirement or sinking
fund or funds applicable to all outstanding series of Preferred Stock have been
satisfied. Dividends on the Preferred Stock would be cumulative.
VOTING RIGHTS
Except in connection with the "business combinations" and "fair price"
provisions discussed below, holders of shares of Common Stock are entitled to
one vote, in person or by proxy, for each share held on the applicable record
date with respect to each matter submitted to a vote at a meeting of
shareholders, but such holders do not have cumulative voting rights. The holders
of any series of Preferred Stock, when issued, may receive the right to vote as
a class on certain amendments to the Articles of Incorporation and on certain
other matters, including the election of directors in the event of certain
defaults, which may include non-payment of Preferred Stock dividends.
LIQUIDATION RIGHTS
In the event of voluntary or involuntary liquidation of BellSouth, holders
of the Common Stock will be entitled to receive, after creditors have been paid
and the holders of the Preferred Stock, if any, have received their liquidation
preferences and accumulated and unpaid dividends, all the remaining assets of
BellSouth.
PRE-EMPTIVE RIGHTS; CONVERSION RIGHTS; REDEMPTION
No shareholders of any class shall be entitled to any pre-emptive rights to
subscribe for or purchase any shares or other securities issued by BellSouth.
The Common Stock has no conversion rights and is not subject to redemption.
PREFERRED STOCK PURCHASE RIGHTS
The Board has declared a dividend of one preferred stock purchase right
("Right") for each share of Common Stock from time to time outstanding. Under
certain circumstances, each Right will entitle the holder to purchase one
one-hundredth of a share of Series A Preferred Stock, $1.00 par value ("Common
Equivalent Preferred Stock"), which unit is substantially equivalent in voting
and dividend rights to one whole share of the Common Stock, at a price of $175
per whole share (the "Purchase Price"). The Rights are not presently exercisable
and may be exercised only if a person or group acquires 10% of the outstanding
voting stock of BellSouth without the prior approval of the Board ("Acquiring
Person") or announces a tender or exchange offer that would result in ownership
of 25% or more of the Common Stock.
If an Acquiring Person becomes such without prior Board approval, the Rights
are adjusted, and each holder, other than the Acquiring Person, then has the
right to receive, on payment of the Purchase Price, the number of shares of
Common Stock, units of the Common Equivalent Preferred Stock or other assets
having a market value equal to twice the Purchase Price.
The Rights currently trade with the Common Stock and expire after ten years.
BUSINESS COMBINATIONS
The Georgia legislature has enacted legislation which generally prohibits a
corporation which has adopted a by-law electing to be covered thereby (which
BellSouth has done) from engaging in any "business combination" (i.e., a merger,
consolidation or other specified corporate transaction) with an "interested
shareholder" (i.e., a 10% shareholder or an affiliate of the corporation which
was a 10% shareholder at any time within the preceding two years) for a period
of five years from the date such person becomes an interested shareholder,
unless the interested shareholder (i) prior to becoming an interested
shareholder, obtained the approval of the Board of Directors for either the
business combination or the transaction which resulted in the shareholder
becoming an interested shareholder, (ii) becomes the owner of at least 90% of
the outstanding voting stock of the corporation in the same transaction in which
the interested shareholder became an interested shareholder, excluding for
purposes of determining the number of shares outstanding those shares owned by
officers, directors,
20
<PAGE>
subsidiaries and certain employee stock plans of the corporation or (iii)
subsequent to the acquisition of 10% or more of the outstanding voting stock of
the corporation, acquires additional shares resulting in ownership of at least
90% of the outstanding voting stock of the corporation and obtains approval of
the business combination by the holders of a majority of the shares of voting
stock of the corporation, other than those shares held by an interested
shareholder, officers, directors, subsidiaries and certain employee stock plans
of the corporation. BellSouth's "business combinations" by-law may be repealed
only by an affirmative vote of two-thirds of the continuing directors and a
majority of the votes entitled to be cast by the shareholders, other than
interested shareholders, and shall not be effective until 18 months after such
shareholder vote. The Georgia statute provides that a domestic corporation which
has thus repealed such a by-law may not thereafter readopt the by-law as
provided therein.
FAIR PRICE PROVISIONS
"Fair price" provisions contained in the Articles of Incorporation require,
generally, in connection with a merger or similar transaction between BellSouth
and an "interested shareholder" (a 10% shareholder or an affiliate of BellSouth
which was a 10% shareholder at any time within the preceding two years), the
unanimous approval of BellSouth's directors not affiliated with the interested
shareholder or the affirmative vote of two-thirds of such directors and a
majority of the outstanding shares held by disinterested shareholders, unless
(i) within the past three years the shareholder has been an interested
shareholder and has not increased its shareholdings by more than one percent in
any 12-month period or (ii) all shareholders receive at least the same
consideration for their shares as the interested shareholder previously paid.
Additionally, these provisions may be revised or rescinded only upon the
affirmative vote of at least two-thirds of the directors not affiliated with an
interested shareholder and a majority of the outstanding shares held by
disinterested shareholders.
BOARD CLASSIFICATION
Board classification provisions adopted by the shareholders and contained in
the By-laws prescribe a shareholder vote for approximately one-third of the
directors, instead of all directors, at each annual meeting of shareholders for
a three-year term. Additionally, such provisions provide that shareholders may
remove directors from office, with or without cause, amend the By-laws with
respect to the number of directors or amend the board classification provisions
only by the affirmative vote of the holders of at least 75% of the outstanding
shares entitled to vote for the election of directors.
REMOVAL OF DIRECTORS
BellSouth's Articles of Incorporation provide that the shareholders of
BellSouth may remove a director, with or without cause, by the affirmative vote
of the holders of at least 75% of the voting power of all shares of stock
entitled to vote generally in the election of directors, voting together as a
single class.
LIMITATION ON SHAREHOLDERS' PROCEEDINGS
BellSouth's By-laws require 60 days advance notice of shareholder
nominations for directors and of other matters to be brought before annual
shareholders' meetings. Such By-laws also provide that a special shareholders'
meeting may not be called by fewer than two-thirds of the outstanding shares
entitled to vote at the meeting.
------------------------
The provisions discussed under the six preceding sub-headings and the
ability to issue Preferred Stock, such as the Series A Preferred Stock described
above, with characteristics established by the Board and without the consent of
the holders of Common Stock and the ability to issue additional shares of Common
Stock may have the effect of discouraging takeover attempts and may also have
the effect of maintaining the position of incumbent management. In addition,
these provisions may have a significant effect on the ability of shareholders of
BellSouth to benefit from certain kinds of transactions that may be opposed by
the incumbent Board.
21
<PAGE>
EXECUTIVE OFFICERS
The executive officers of BellSouth are listed below:
<TABLE>
<CAPTION>
THIS
OFFICER OFFICE
NAME AGE OFFICE SINCE SINCE
- ------------------------- --- ------------------------------------------------------------ ------- ------
<S> <C> <C> <C> <C>
John L. Clendenin 59 Chairman of the Board and Chief Executive Officer 1983 1984
Walter H. Alford 55 Executive Vice President and General Counsel 1983 1988
John F. Beasley 54 Vice President and Associate General Counsel 1985 1993
Ronald M. Dykes 47 Vice President and Comptroller 1988 1993
Mark L. Feidler 37 Vice President -- Corporate Development 1993 1993
J. Robert Fitzgerald 54 Vice President and Associate General Counsel 1983 1993
H. C. Henry, Jr. 49 Executive Vice President -- Corporate Relations 1984 1993
David J. Markey 53 Vice President -- Governmental Affairs 1986 1993
Earle Mauldin 53 Executive Vice President -- Chief Financial Officer 1987 1993
William O. McCoy 60 Vice Chairman of the Board 1983 1993
Charles C. Miller, III 41 Vice President -- Strategic Planning and Development 1990 1993
Robert W. O'Neill 59 Vice President -- Corporate Responsibility and Compliance 1991 1993
William F. Reddersen 46 Senior Vice President -- Broadband Strategies 1987 1993
Arlen G. Yokley 56 Vice President, Secretary and Treasurer 1984 1989
</TABLE>
All of the executive officers of BellSouth, other than Mr. Feidler, have for
at least the past five years held high level management or executive positions
with BellSouth or its subsidiaries. Prior to joining BellSouth in 1992, Mr.
Feidler was employed by The Robinson-Humphrey Company, Inc. (1986 - 1990) and
The Breckenridge Group (1990 - 1991), investment banking firms.
All officers serve until their successors have been elected and qualified.
22
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The principal market for trading in BellSouth common stock is the New York
Stock Exchange, Inc. ("NYSE"). BellSouth common stock is also listed on the
Boston, Chicago, Pacific and Philadelphia exchanges in the United States and the
London, Zurich, Basel, Geneva, Frankfurt and Amsterdam exchanges. The ticker
symbol for BellSouth common stock is BLS. As of January 31, 1994, there were
1,237,677 holders of record of BellSouth common stock. Market data, obtained
from the NYSE Composite Tape, which encompasses trading on the principal United
States stock exchanges as well as off-board trading, for 1991 through 1993 are
listed below. High and low prices represent the highest and lowest sales prices
for the periods indicated. Dividend data also are listed.
<TABLE>
<CAPTION>
MARKET PRICES PER SHARE
------------------ DIVIDENDS
HIGH LOW DECLARED
------- ------- ---------
<S> <C> <C> <C>
1993
First Quarter................................................................... $57 1/2 $50 3/8 $ .69
Second Quarter.................................................................. 57 50 5/8 .69
Third Quarter................................................................... 62 7/8 54 1/8 .69
Fourth Quarter.................................................................. 63 7/8 54 1/8 .69
1992
First Quarter................................................................... $52 5/8 $43 5/8 $ .69
Second Quarter.................................................................. 50 3/8 43 3/8 .69
Third Quarter................................................................... 55 1/2 49 1/4 .69
Fourth Quarter.................................................................. 53 7/8 46 3/4 .69
1991
First Quarter................................................................... $55 $49 7/8 $ .69
Second Quarter.................................................................. 54 46 3/8 .69
Third Quarter................................................................... 50 1/4 46 1/8 .69
Fourth Quarter.................................................................. 51 3/4 45 3/8 .69
</TABLE>
STOCK TRANSFER AGENT AND REGISTRAR
Chemical Bank is BellSouth's stock transfer agent and registrar.
23
<PAGE>
[THE FOLLOWING REPORT SENT TO SECURITY HOLDERS IS PROVIDED TO THE COMMISSION
SOLELY AS INFORMATION AND IS NOT DEEMED "SOLICITING MATERIAL" OR TO BE "FILED"
WITH THE COMMISSION EXCEPT TO THE EXTENT THAT THE COMPANY HAS INCORPORATED
INFORMATION INCLUDED IN THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1992.]
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating Revenues.................................... $ 15,880 $ 15,202 $ 14,445 $ 14,345 $ 13,996
Operating Expenses (1)................................ 13,593 12,041 11,636 11,318 11,008
----------- ----------- ----------- ----------- -----------
Operating Income...................................... 2,287 3,161 2,809 3,027 2,988
Interest Expense...................................... 689 746 802 774 776
Other Income, net..................................... 8 178 253 157 241
Provision for Income Taxes............................ 572 934 753 778 758
Extraordinary Loss, net of tax........................ (87) (41) -- -- (22)
Accounting Change, net of tax......................... (67) -- (35) -- 68
----------- ----------- ----------- ----------- -----------
Net Income.......................................... $ 880 $ 1,618 $ 1,472 $ 1,632 $ 1,741
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Earnings Per Share.................................... $ 1.77 $ 3.30 $ 3.04 $ 3.38 $ 3.64
Dividends Declared Per Common Share................... $ 2.76 $ 2.76 $ 2.76 $ 2.68 $ 2.52
Book Value Per Share.................................. $ 27.20 $ 27.94 $ 26.93 $ 26.28 $ 27.21
Return to Average Common Equity....................... 6.3% 11.9% 11.3% 12.8% 13.7%
Weighted Average Common Shares Outstanding............ 496.1 490.8 484.3 482.4 477.7
Return on Average Total Capital....................... 6.1% 9.8% 9.4% 10.4% 11.2%
Total Assets.......................................... $ 32,873 $ 31,463 $ 30,942 $ 30,207 $ 30,050
Capital Expenditures.................................. $ 3,486 $ 3,189 $ 3,102 $ 3,191 $ 3,223
Long-Term Debt........................................ $ 7,381 $ 7,360 $ 7,677 $ 7,781 $ 7,055
Debt Ratio at End of Period........................... 40.2% 39.0% 41.3% 40.7% 38.0%
Ratio of Earnings to Fixed Charges (2)................ 2.98 4.00 3.47 3.68 3.85
Total Employees....................................... 95,084 97,112 96,084 101,945 101,230
Telephone Employees................................... 81,415 82,866 82,245 85,967 86,728
Business Volumes (In Millions): (3)
Network Access Lines in Service:
Residence........................................... 13.7 13.3 12.9 12.6 12.2
Business............................................ 5.4 5.1 4.8 4.6 4.4
Other............................................... .2 .2 .3 .3 .3
----------- ----------- ----------- ----------- -----------
Total............................................. 19.3 18.6 18.0 17.5 16.9
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Access Minutes of Use:
Interstate.......................................... 53,345.0 50,546.4 47,255.3 44,903.3 41,464.2
Intrastate.......................................... 15,260.9 13,994.2 13,237.7 12,119.5 11,252.7
Toll Messages......................................... 1,251.0 1,280.3 1,387.1 1,457.5 1,462.3
Cellular Customers (In Thousands): (4)
Domestic............................................ 1,559.1 1,118.1 774.2 498.3 311.4
International....................................... 192.2 77.6 26.0 5.1 .6
----------- ----------- ----------- ----------- -----------
Total............................................. 1,751.3 1,195.7 800.2 503.4 312.0
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<FN>
- ------------------------
(1) Operating Expenses for 1993 include a charge for restructuring of $1,136.4,
which reduced net income by $696.6. See Note K to the Consolidated Financial
Statements.
(2) For the purpose of this ratio: (i) earnings have been calculated by adding
income before income taxes, interest expense and such portion of rental
expense representative of the interest factor on such rentals; (ii) fixed
charges are comprised of total interest expense and such portion of rental
expense representative of the interest factor on such rentals.
(3) Prior period operating data are revised at later dates to reflect the most
current information. The above information reflects the latest data
available for the periods indicated.
(4) Equity Basis.
</TABLE>
24
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
BellSouth Corporation ("BellSouth") is a holding company headquartered in
Atlanta, Georgia whose operating telephone company subsidiary, BellSouth
Telecommunications, Inc. ("BellSouth Telecommunications") serves, in the
aggregate, approximately two-thirds of the population and one-half of the
territory within Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina and Tennessee. BellSouth Telecommunications
primarily provides local exchange and toll communications services within 38
court-defined geographic areas, called Local Access and Transport Areas
("LATAs"), and network access services to enable interLATA communications using
the long-distance facilities of interexchange carriers. BellSouth Enterprises,
Inc. ("BellSouth Enterprises"), another wholly-owned subsidiary, owns businesses
providing domestic wireless and international communications services and
advertising and publishing services and products.
Prior to January 1, 1992, the majority of the operations of BellSouth
Telecommunications was conducted through South Central Bell Telephone Company
("South Central Bell") and Southern Bell Telephone and Telegraph Company
("Southern Bell"). Effective at midnight December 31, 1991, South Central Bell
merged with and into Southern Bell and Southern Bell's name was changed to
BellSouth Telecommunications.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PERCENT CHANGE
-----------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Income.......................................... $ 880.1 $ 1,617.7 $ 1,471.5 (45.6%) 9.9%
Earnings Per Share.................................. $ 1.77 $ 3.30 $ 3.04 (46.4%) 8.6%
</TABLE>
Net Income and Earnings Per Share for 1993 decreased $737.6 and $1.53,
respectively, compared to the previous year. The decreases were due primarily to
a charge of $696.6 ($1.40 per share) for restructuring of BellSouth's telephone
operations (see Note K). Other charges in 1993 that contributed to the decreases
were $86.6 ($.17 per share) for debt refinancings by BellSouth
Telecommunications (see Note E), $67.4 ($.14 per share) for the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 112 (see Notes H and
N), $47 ($.09 per share) for the initial impact of a regulatory settlement in
Florida, approximately $45 ($.09 per share) related to the increase in the
Federal statutory income tax rate for corporations, exclusive of the tax benefit
associated with the restructuring charge, and approximately $25 ($.05 per share)
associated with severe weather conditions during first quarter 1993. The
decreases were also attributable in part to the inclusion in 1992's results of
gains of $39.5 ($.08 per share) and $32.9 ($.07 per share), respectively, from
the settlement of a Federal income tax matter and the settlement of prior year
regulatory issues. The 1993 decreases were partially offset by overall growth of
operating revenues, driven by an improvement in key business volumes, and the
inclusion in 1992 of charges for debt refinancing and Hurricane Andrew.
Net Income and Earnings Per Share for 1992 increased $146.2 and $.26,
respectively, compared to 1991. Factors contributing to these increases include
the gains from the settlement of a Federal income tax matter and the settlement
of prior year regulatory issues, expense reductions attributable to salary
savings since implementation of an early retirement program, the inclusion in
1991 of a charge associated with the early retirement program and the inclusion
in 1991 of a one-time charge for the cumulative effect of the change in
accounting principle for cellular service sales commissions (see Note N). Also
contributing to the increases were growth in business volumes at BellSouth
Telecommunications, partially offset by rate reductions, and in the wireless
businesses at BellSouth Enterprises. The 1992 increases were partially offset by
charges of $40.7 ($.08 per share) associated with refinancing at lower interest
rates of certain long-term debt issues at BellSouth Telecommunications (see Note
E) and approximately $28 ($.06 per share) associated with Hurricane Andrew, and
costs attributable to investments in certain start-up operations.
25
<PAGE>
OPERATING REVENUES
Total Operating Revenues increased $678.7 (4.5%) during 1993, compared to an
increase of $756.1 (5.2%) during 1992. Both increases resulted from growth in
revenues from BellSouth's wireline telephone businesses, coupled with a
significant increase in revenues from wireless communications businesses.
Traditionally, BellSouth's local, access and toll services offered by BellSouth
Telecommunications have primarily accounted for increases in operating revenues.
BellSouth, however, continues to experience an increasing shift in the relative
contributions of its revenue sources.
See "Volumes of Business."
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Local Service........................................ $ 6,577.3 $ 6,236.0 $ 5,846.2 5.5% 6.7%
</TABLE>
Local Service revenues reflect amounts billed to customers for local
exchange services, which include connection to the network and secondary central
office feature services, such as custom calling features and custom dialing
packages. Local Service revenues for 1993 increased $341.3 (5.5%) compared to an
increase of $389.8 (6.7%) in 1992. The 1993 increase was primarily attributable
to an increase of 683,000 access lines since December 31, 1992 and a $42.0
increase from secondary central office services. In addition, as discussed
below, the effects of a $27.9 refund in Florida during 1992 and changes in and
the expansion of local area calling plans, including a plan implemented in
Louisiana in 1992, contributed to the increase in 1993.
The increase in 1992 was attributable to the addition of 614,900 access
lines during the year, revenue shifts from toll to local due to expanded local
area calling plans and an increase in secondary central office services of $51.4
over 1991. The increase in revenues from local area calling plans is primarily
attributable to access line growth. In addition, the implementation of a new
expanded local area calling plan in Louisiana, effective March 1992, positively
impacted 1992 Local Service revenue (see "Toll"). The increase was also due in
part to the inclusion in 1991 of a $63.9 refund in Florida which had previously
been deferred in Other Services revenues. The increase in 1992 was partially
offset by a related refund of $27.9 in 1992 pertaining to amounts set aside in
1991 for disposition by the Florida Public Service Commission. Since these
deferred and set aside amounts were originally accrued in Other Services, there
was no impact on net income.
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Interstate Access.................................... $ 2,991.2 $ 2,945.6 $ 2,858.1 1.5% 3.1%
</TABLE>
Interstate Access revenues result from the provision of access services to
interexchange carriers to provide telecommunications services between states.
Interstate access revenues increased $45.6 (1.5%) compared to an increase of
$87.5 (3.1%) in 1992.
The increase for 1993 reflects increased rates effective July 1, 1993 in
conjunction with BellSouth Telecommunications' selection of a 3.3% productivity
offset factor under the Federal Communications Commission's ("FCC") price cap
plan, growth in minutes of use and increases in end user charges attributable to
growth in the number of access lines in service. The effect of these increases
was substantially offset by decreased net settlements with the National Exchange
Carriers Association and revenue deferrals under the FCC's price cap plan. Since
BellSouth Telecommunications' earnings are currently in the sharing range of the
FCC's price cap plan and because of other factors, significant revenue growth in
this category is not likely.
For 1992, the increase in interstate access revenues was primarily
attributable to growth in minutes of use and an increase in end user charges
attributable to access line growth. The effect of these increases was partially
offset by rate reductions since December 31, 1991, including the implementation
of lower tariff rates, effective July 1, 1992, associated with BellSouth
Telecommunications' selection of a 4.3% productivity offset factor, which
reduced interstate revenues under the FCC's price cap plan.
See "Operating Environment and Trends of the Business."
26
<PAGE>
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Intrastate Access............................. $ 881.9 $ 871.8 $ 866.7 1.2% 0.6%
</TABLE>
Intrastate Access revenues result from the provision of access services to
interexchange carriers which provide telecommunications services between LATAs
within a state. Revenues increased $10.1 (1.2%) in 1993 compared to an increase
of $5.1 (0.6%) in 1992. Both increases, due primarily to growth in minutes of
use over the respective prior year, were substantially offset by rate reductions
in 1993 and 1992.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Toll.......................................... $ 1,219.5 $ 1,248.8 $ 1,373.7 (2.3%) (9.1%)
</TABLE>
Toll revenues are received from the provision of long-distance services
within (but not between) LATAs. These services include intraLATA service beyond
the local calling area; Wide Area Telecommunications Service ("WATS" or "800"
services) for customers with highly concentrated demand; and special services,
such as transport of voice, data and video. Toll revenues decreased $29.3 (2.3%)
in 1993 compared to a decrease of $124.9 (9.1%) in 1992.
The decrease in 1993 reflects rate reductions since December 31, 1992 and a
decline in toll message volumes largely attributable to the expansion of local
area calling plans which have the effect of shifting revenues from Toll to Local
Service. The decrease was partially offset by revenue increases due to optional
calling plans and independent company settlements.
The 1992 decrease resulted from rate reductions since December 31, 1991 and
a decrease in toll messages due to competition and expanded local area calling
plans, including a plan implemented in Louisiana in 1992.
The overall decline in Toll revenues is expected to continue over the long
term.
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Directory Advertising and Publishing.......... $ 1,515.4 $ 1,459.8 $ 1,426.3 3.8% 2.3%
</TABLE>
Directory Advertising and Publishing revenues include revenues derived from
publishing, printing and selling advertising in, and performing related services
concerning, alphabetical and classified telephone directories. Directory
Advertising and Publishing revenues increased $55.6 (3.8%) in 1993 compared to a
$33.5 (2.3%) increase in 1992.
The increase for 1993 was primarily attributable to increases in the prices
and volume of advertising sold. For 1992, the increase was due primarily to
growth in the volume of independent directory contracts.
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Wireless Communications....................... $ 1,553.4 $ 1,195.6 $ 774.5 29.9% 54.4%
</TABLE>
Wireless Communications revenues include the revenues from consolidated
wireless communications businesses (primarily cellular and paging within
BellSouth Enterprises) as well as revenues from interconnections by unaffiliated
cellular carriers with BellSouth Telecommunications. (BellSouth's interests in
the net income or loss of the unconsolidated wireless businesses within
BellSouth Enterprises which are accounted for under the equity method of
accounting are recorded in Other Income.)
27
<PAGE>
Wireless Communications revenues increased $357.8 (29.9%) in 1993, compared
to an increase of $421.1 (54.4%) in 1992. For 1993, the increase resulted from
continued growth of the customer base for wireless services in both domestic and
international markets. The increase in 1992 resulted from growth of the customer
base, acquisitions made in late 1991 and increases in roamer revenues.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Other Services....................................... $ 1,141.6 $ 1,244.0 $ 1,300.0 (8.2%) (4.3%)
</TABLE>
Other Services revenues are principally comprised of revenues from customer
premises equipment sales and maintenance services, billing and collection
services and other nonregulated services (primarily inside wire services)
offered by BellSouth Telecommunications. Other Services revenues decreased
$102.4 (8.2%) in 1993 compared to a decrease of $56.0 (4.3%) in 1992.
The decrease in 1993 was attributable to the effect of reclassifying in 1992
a $27.9 Florida refund to ratepayers from Other Services to Local Service, the
inclusion in 1992 of $52.7 for the settlement of prior year regulatory issues
and the sale of a subsidiary in late 1992. The decrease was partially offset by
increased revenues from nonregulated services due in part to higher demand. In
addition, billing and collection revenues increased due to the effect of
nonrecurring adjustments; however, such revenues are expected to decline over
the long term due to interexchange carriers' assuming more direct billing for
their own services.
The decrease in 1992 was partially attributable to a decrease of $18.6 due
to the dissolution of a business in 1991 and the reclassification in 1991 of a
revenue deferral of $63.9 in Florida, partially offset by certain Florida set
aside amounts totaling $27.9 for prior years which were included as Local
Service rate reductions in 1992; these deferral and set aside amounts were
initially recorded as reductions to Other Services revenues prior to 1992 (see
"Local Service"). Also contributing to the 1992 decrease was a $34.3 decrease in
billing and collection revenues and decreased revenues for certain BellSouth
Enterprises subsidiaries. The decrease was partially offset by the settlement of
prior year regulatory issues not related to the services described above but
which were required to be recorded in Other Services, resulting in a one-time
increase of $52.7.
OPERATING EXPENSES
Operating expenses increased $1,552.3 (12.9%) during 1993 compared to an
increase of $405.1 (3.5%) during 1992. For 1993, the increase was primarily
attributable to a pre-tax charge of $1,136.4 for restructuring of BellSouth's
telephone operations. Adjusted for the effect of the restructuring charge,
operating expenses increased $415.9 (3.5%) during 1993. The increase, as
adjusted, was due to expenses associated with improved business volumes at
BellSouth Telecommunications and in the wireless businesses at BellSouth
Enterprises, higher levels of salaries and wages, a regulatory settlement in
Florida, and expenses attributable to severe weather conditions in the first
quarter of 1993. The increase was partially offset by decreased overtime
compensation and the inclusion in 1992 of expenses related to Hurricane Andrew.
The 1992 increase was due to expenses associated with higher business
volumes, higher levels of salaries and wages, a portion of which resulted from a
new three-year working agreement with the Communications Workers of America
("CWA") in 1992, Hurricane Andrew and remedial actions related to underground
fuel storage tanks. The increase for 1992 was partially offset by the inclusion
in 1991 of expenses associated with an early retirement program and 1992 expense
reductions attributable to salary savings since implementation of that program.
28
<PAGE>
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cost of Services and Products........................ $ 5,865.1 $ 5,681.3 $ 5,739.2 3.2% (1.0%)
</TABLE>
Cost of Services and Products includes operating expenses associated with
network support and maintenance of BellSouth Telecommunications' property, plant
and equipment, material and supplies expense, cost of tangible goods sold and
other expenses associated with the cost of providing services. Cost of Services
and Products increased $183.8 (3.2%) in 1993 compared to a decrease of $57.9
(1.0%) in 1992.
The increase in 1993 was due to increased expenses associated with volume
growth in the wireline, wireless communications and directory businesses,
approximately $40 of expenses related to severe weather conditions during first
quarter 1993, network service improvement activities, higher levels of base
salary and wage expenses resulting from annual increases for management and
craft employees and an increase in employee benefits expense. The increase in
employee benefits expense was driven by the higher overall cost of medical
services and an increase of $38 due to the adoption of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," partially offset by
a $46 decrease in pension expense. Pension expense is expected to decrease
further in 1994 due primarily to the effect of modifying the benefit level under
the recently adopted cash balance pension plan for management employees and
reevaluating certain actuarial assumptions (see Note H). Other postretirement
benefit expenses for 1994 are expected to increase due to the effect of changes
in certain actuarial assumptions. The overall expense increase for 1993 was
partially offset by reduced expenses for overtime compensation, rents, software
license fees, the sale of a subsidiary in late 1992 and expenses related to
Hurricane Andrew reflected in 1992.
For 1992, the decrease was due to the reclassification of $224.0 of expenses
of certain businesses within BellSouth Enterprises to Selling, General and
Administrative. After adjusting for the effect of the reclassification, Cost of
Services and Products increased $166.1 (2.9%) during 1992 compared to 1991. As
adjusted, the 1992 increase was attributable to growth in volumes of business at
BellSouth Telecommunications, growth in the wireless communications customer
base, including the effect of the acquisition of wireless businesses in 1991,
higher levels of salary and wage expenses, a portion of which resulted from a
new three-year working agreement with the CWA in 1992, increased pension and
benefit expenses and approximately $45 of expenses (net of insurance recovery
and state regulatory deferrals) related to Hurricane Andrew. Also contributing
were increased expenses for rents and contracted services. The adjusted increase
was partially offset by expense reductions attributable to salary savings from
implementation of an early retirement program in 1991 and the inclusion in 1991
of $20.1 in inventory write-downs.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Depreciation....................................... $ 3,103.8 $ 3,032.2 $ 2,965.4 2.4% 2.3%
</TABLE>
Depreciation expense increased $71.6 (2.4%) in 1993 compared to a $66.8
(2.3%) increase in 1992.
In 1993, the increase was partially attributable to higher levels of
property, plant and equipment since December 31, 1992 resulting from continued
growth in the customer base and approximately $20 of additional depreciation
expense related to extraordinary property retirements in conjunction with a
regulatory settlement in Florida. Higher intrastate depreciation rates for
Mississippi and higher interstate depreciation rates for Alabama, Kentucky,
Louisiana, Mississippi and Tennessee, all retroactive to January 1, 1993, also
contributed to the increase. The 1993 increase was partially offset by the
continued expiration of inside wire and reserve deficiency amortizations and
reduced depreciation expense in Florida and Alabama resulting from
represcription.
The 1992 increase was also due, in part, to higher levels of property, plant
and equipment since December 31, 1991 resulting primarily from growth in the
customer base. Also contributing to the increase were new interstate
depreciation rates, retroactive to January 1, 1992, for Florida, Georgia, North
Carolina and South Carolina, new intrastate depreciation rates in North Carolina
and South Carolina, both also
29
<PAGE>
retroactive to January 1, 1992, and additional reserve deficiency amortization
approved in North Carolina. The increase for 1992 was partially offset by the
expiration of inside wire and reserve deficiency amortizations.
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Selling, General and Administrative.................. $ 3,487.9 $ 3,327.4 $ 2,931.2 4.8% 13.5%
</TABLE>
Selling, General and Administrative expenses include operating expenses
related to sales activities such as salaries, commissions, benefits, travel,
marketing and advertising expenses. Also included are amortization of
intangibles, research and development costs and provision for uncollectibles.
Selling, General and Administrative increased $160.5 (4.8%) in 1993 and $396.2
(13.5%) in 1992.
The increase in 1993 was primarily attributable to increased expenses
associated with growth in the wireless communications customer base,
approximately $55 for the initial impact of a regulatory settlement in Florida,
higher levels of salaries, wages and taxes other than income taxes and an
increase of $11 due to the adoption of SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The 1993 increase was partially offset by a decrease
in advertising expense at BellSouth Telecommunications.
For 1992, the increase was due to the reclassification of $224 of expenses
of certain businesses within BellSouth Enterprises from Cost of Services and
Products. After adjusting for the effect of the reclassification, Selling,
General and Administrative increased $172.2 (5.9%) during 1992 compared to 1991.
As adjusted, the 1992 increase was attributable to growth in business volumes at
BellSouth Telecommunications, growth in the wireless communications customer
base, including the effect of the acquisition of wireless businesses in 1991,
higher levels of salary and wage expenses, a portion of which resulted from a
new three-year working agreement with the CWA in 1992, increased pension and
benefit expenses and approximately $24.1 of expenses for remedial actions
related to underground fuel storage tanks. The adjusted increase was partially
offset by a decrease in the provision for uncollectibles, the inclusion in 1991
of $68.6 of expenses associated with an early retirement program and expense
reductions in 1992 attributable to salary savings since implementation of that
program.
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Restructuring Charge................................. $ 1,136.4 -- -- -- --
</TABLE>
During 1993, BellSouth recognized a business restructuring charge of
$1,136.4. The restructuring is being undertaken to redesign and streamline the
fundamental processes and work activities in BellSouth Telecommunications'
telephone operations to better respond to an increasingly competitive business
environment. The restructuring is expected to improve overall responsiveness to
customer needs, permit more rapid introduction of new products and services and
reduce costs. As a part of the restructuring, BellSouth plans to consolidate and
centralize its existing operations. BellSouth plans to establish a single point
of contact and accountability for the receipt, analysis and resolution of
customer installation, repair activities and service activation. As a result,
288 existing operations centers will be consolidated into 80 locations. Data
management centers used to support company operations will be reduced from 11 to
6. In addition, customer service processes and systems will be designed to
provide one-number access, specific appointment times, on-line and real-time
access to customer records and immediate service activation where facilities are
already in place.
The material components of the $1,136.4 charge relate to the downsizing of
the existing workforce by 10,200 employees through 1996. These components
include $368.2 for separation payments and relocations of remaining employees,
$342.8 for the consolidation and elimination of certain operations facilities
and $425.4 for enabling changes to information systems, primarily those used to
provide services to existing customers.
BellSouth Telecommunications reduced its overall workforce by approximately
1,300 employees in 1993 following implementation of the restructuring plan.
Workforce reductions for 1994, 1995 and 1996 are expected to be approximately
3,700, 2,900 and 2,300, respectively. BellSouth expects that the restructuring
30
<PAGE>
will result in cost savings beginning in 1994 due to the initial workforce
reductions. The specific future financial impacts on BellSouth's earnings are
uncertain and will depend upon the regulatory treatment of the restructuring
charge and the related cost savings. Once the restructuring is completed, annual
cost savings are expected to be approximately $600 due primarily to reduced
employee-related expenses.
<TABLE>
<CAPTION>
PERCENT CHANGE
-------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Interest Expense.................................... $ 689.0 $ 746.4 $ 802.1 (7.7%) (6.9%)
</TABLE>
Interest Expense includes interest on debt, certain other accrued
liabilities and capital leases, offset by an allowance for funds used during
construction, which is capitalized as a cost of installing equipment and
constructing plant. Interest expense decreased $57.4 (7.7%) in 1993 and $55.7
(6.9%) in 1992. The decreases for 1993 and 1992 were due primarily to declines
in interest rates on borrowings, both short and long term, including the impact
of refinancings of long-term debt at lower interest rates. Both decreases were
partially offset by higher average levels of short-term borrowings. (See Notes E
and L.)
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Other Income, net.................................. $ 7.6 $ 177.6 $ 252.7 (95.7%) (29.7%)
</TABLE>
Other Income includes interest income, dividend income and earnings and
losses from unconsolidated subsidiaries, business ventures and partnerships,
minority interests and gains and losses from the sale of miscellaneous ventures.
Other Income decreased $170.0 (95.7%) during 1993 and $75.1 (29.7%) during
1992. The 1993 decrease resulted in part from a decline of $80.8 in interest and
dividend income due to the inclusion in 1992 of $56.6 attributable to a tax
settlement with the Internal Revenue Service and lower interest rates. Minority
interests contributed $11.6 to the decrease and overall earnings from
unconsolidated affiliates also decreased by $65.7 due primarily to costs and
expenses associated with investments in certain new operations, including a
cellular venture in Germany, a business venture with RAM Broadcasting
Corporation, and Optus Communications Pty. Ltd. For the year 1993, earnings per
share were reduced by approximately $.27 per share as a result of these and
other business ventures.
The decrease in 1992 was attributable to a $55.6 decrease in earnings from
unconsolidated affiliates due in part to investments in several start-up
operations, a $33.8 increase related to minority interests and the inclusion in
1991 of $40.0 in gains from certain directory and wireless operations sold. The
decrease was partially offset by a $46.2 increase in interest and dividend
income which reflects the settlement of an Internal Revenue Service summary tax
assessment that resulted in $56.6 of interest income and lower interest rates.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Provision for Income Taxes......................... $ 571.6 $ 933.5 $ 753.4 (38.8%) 23.9%
</TABLE>
Income tax expense decreased $361.9 (38.8%) in 1993 compared to an increase
of $180.1 (23.9%) in 1992. The decrease in 1993 was due to the impact of the
restructuring charge, which reduced tax expense by $439.8. The decrease was
partially offset by the impact of the Omnibus Budget Reconciliation Act of 1993,
including the increase in the Federal statutory income tax rate for
corporations, which, exclusive of the tax benefit associated with the
restructuring charge, increased tax expense by approximately $45.
BellSouth's effective tax rates were 35.6%, 36.0% and 33.3% in 1993, 1992
and 1991, respectively. A reconciliation of the Federal statutory income tax
rates to these effective tax rates is provided in Note M. A discussion of the
adoption of SFAS No. 109, "Accounting for Income Taxes," also is included
therein.
The increase in 1992 was attributable to an increase in income before income
taxes and higher effective tax rates resulting from decreasing investment tax
credit amortization.
31
<PAGE>
FINANCIAL CONDITION
BellSouth used the net cash generated from its operations and short-term
financing to fund capital expenditures, to pay dividends and to invest in and
operate new business ventures. BellSouth believes that funds provided from
operations, in addition to its readily available sources of external financing,
will be sufficient to meet the needs of its business for the foreseeable future.
Although 1993 net income decreased by 45.6% due primarily to the
restructuring charge, BellSouth's cash flow from operations decreased by only
3.2% in 1993 to $4,786.2 from $4,946.8 in 1992. For 1993, the impact of
restructuring on cash flow from operations was minimal. However, substantially
all of the restructuring charge is expected to require cash payments in future
periods. Exclusive of capital requirements, cash payments related to
restructuring for 1994, 1995 and 1996 are expected to be approximately $500,
$350 and $220, respectively. In addition, future capital expenditures associated
with the overall restructuring are estimated to be approximately $650. The cash
requirements associated with the restructuring activities, including related
capital expenditures, will be provided primarily from BellSouth's operations
and, if necessary, from external sources. BellSouth's primary use of capital
funds continues to be for capital expenditures to support network development
activities. Capital expenditures for all BellSouth companies increased 9.3% to
$3,485.9 from $3,189.3 in 1992. Substantially all funds supporting construction
activity were provided internally and this trend is expected to continue through
1994. Expenditures are projected to be approximately $3,500 in 1994.
Cash used for investments in and advances to unconsolidated affiliates in
1993 decreased to $319.5 from $562.5 in 1992. Approximately 70% of such cash was
invested in ventures with RAM Broadcasting Corporation and Optus Communications
Pty. Ltd.
BellSouth plans to aggressively pursue a corporate strategy of expanding its
offerings beyond traditional businesses. Such new offerings may include
information services, interactive communications and cable television and other
entertainment services. Significant capital would be required in order to
execute this strategy. BellSouth believes that financing for such future
investing activities can be provided from funds generated through internal
operations and from BellSouth's access to external sources.
In an effort to pursue opportunities in interactive programming, television
shopping and other advanced services, BellSouth had agreed to invest
approximately $2,000 in QVC Network, Inc. ("QVC"), contingent on QVC
successfully completing its acquisition of Paramount Communications, Inc.
("Paramount"), and had also received an option to acquire approximately $500 of
QVC stock at a purchase price of $60 per share in the event QVC was unsuccessful
in its proposed acquisition of Paramount. QVC's bid for Paramount was terminated
on February 14, 1994, and BellSouth has six months thereafter to determine
whether to exercise the option.
Cash dividends paid to BellSouth's common shareholders totaled $1,307.4 in
1993 compared to $1,082.5 in 1992. The increase was due to the fact that during
1993, the common shares issued in lieu of cash dividends under the Shareholder
Dividend Reinvestment and Stock Purchase Plan ("DRSPP") were increasingly
purchased on the open market rather than from new issuances by BellSouth. For
1993, new common shares issued in lieu of cash dividends under DRSPP were $66.4
compared to $268.9 for 1992.
During 1993, BellSouth Telecommunications refinanced $2,760 of long-term
debt at more favorable interest rates. As such, BellSouth expects that the
refinancings will have a positive impact on future cash flows. BellSouth's debt
to total capitalization ratio increased to 40.2% at December 31, 1993 compared
to 39.0% at December 31, 1992. The increase was due to higher levels of debt,
primarily short term, and a decrease in Shareholders' Equity.
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS
REGULATORY ENVIRONMENT. In providing telecommunications services, BellSouth
Telecommunications is subject to regulation by both state and federal regulators
with respect to rates, services and other issues. While the states in BellSouth
Telecommunications' service area currently provide for some form of regulation
of earnings, as discussed below, BellSouth believes that the existing regulatory
framework is not appropriate for the increasingly competitive telecommunications
environment. Accordingly, BellSouth's
32
<PAGE>
primary regulatory focus continues to be directed toward modifying the
regulatory process to one that is more closely aligned with changing market
conditions and overall public policy objectives. As an alternative to the
current regulatory process, BellSouth believes that price regulation, whereby
prices of basic local exchange service are directly regulated and prices for
other products and services are based on market factors, is a logical
progression in regulatory flexibility and is fair to consumers. As such,
BellSouth Telecommunications intends to pursue implementation of price
regulation plans through filings with state regulatory commissions or through
legislative initiatives.
STATE REGULATION
Seven of the nine states in which BellSouth Telecommunications operates are
now under some alternative form of regulation other than traditional rate of
return regulation. The seven states are Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi and Tennessee. These state plans are designed to provide
BellSouth Telecommunications with economic incentives to improve cost controls
and general efficiency in the form of shared earnings over benchmark rates of
return. The plans in Georgia and Kentucky are scheduled to expire in 1994.
BellSouth Telecommunications attained the earnings sharing range in Alabama,
Kentucky, Louisiana and Mississippi at certain times during 1993.
For a part of 1993, South Carolina also operated under a form of alternative
regulation. However, in August 1993, the South Carolina Supreme Court ruled that
the South Carolina Public Service Commission (the "SCPSC") lacked the statutory
authority to approve incentive regulation plans of the type under which
BellSouth Telecommunications had been operating since 1992. Legislation has been
proposed in South Carolina which would permit the SCPSC to adopt alternative
forms of regulation including price regulation. In the interim, traditional rate
of return regulation is in effect in South Carolina.
In January 1994, the Florida Public Service Commission approved a settlement
reached by BellSouth Telecommunications and Florida's Office of Public Counsel
related to pending rate proceedings initially filed by BellSouth
Telecommunications in July 1992 and other consolidated matters. This settlement
ended outstanding rate case and consolidated issues in Florida and extended the
incentive regulation plan through at least 1996. Under the terms of the
settlement, BellSouth Telecommunications was required to recognize in 1993
business all remaining deferred expenses related to Hurricane Andrew and to
record expenses associated with extraordinary asset retirements, also related to
Hurricane Andrew. The aggregate impact of these items was approximately $75,
which reduced BellSouth's net income for 1993 by approximately $47 ($.09 per
share). The terms of the settlement also required BellSouth Telecommunications
to reduce rates by $55 in February 1994 and will require reductions of an
additional $60 in July 1994, $80 in October 1995 and $84 in October 1996. The
settlement provides for other changes in service offerings and tariffs including
approximately $21 in revenue reductions or increased expenses. Certain other
service rates have been capped at their current levels through 1997, and
BellSouth Telecommunications has agreed not to propose any local measured
service on a statewide basis through the same time period.
FEDERAL REGULATION
At the national level, BellSouth Telecommunications has been operating under
price cap regulation since January 1, 1991. In contrast to regulation which
limits the rate of return that can be achieved, price cap regulation limits the
prices telephone companies can charge for use of their services. The current FCC
plan allows for the sharing of earnings over a benchmark range of earnings. This
benchmark is dependent upon the productivity offset factor chosen annually by
the carrier. During the price cap plan's annual election period in 1993,
BellSouth Telecommunications selected a productivity offset factor of 3.3% which
increased access rates more than they would otherwise have been had the 4.3%
factor been selected; however, selection of this lower productivity factor
provides for a lower allowed return before sharing is required. As of December
31, 1993, BellSouth's recorded liability for estimated sharing was $45.6.
In February 1994, the FCC initiated its review of the current price cap
plan. Under a notice of proposed rulemaking, the FCC identified for examination
three broad sets of issues including those related to the basic goals of price
cap regulation, the operation of price caps, and the transition of local
exchange services to a fully competitive market. BellSouth believes and will
advocate that a revised price cap plan should be structured to provide increased
pricing flexibility for services as competition evolves in the
telecommunications markets. Any changes to the current plan are expected to be
effective January 1, 1995 or soon thereafter.
33
<PAGE>
ECONOMY. The nine-state region served by BellSouth Telecommunications'
wireline telephone business, as a whole, posted solid economic gains in 1993,
while continuing economic slumps on the West Coast and in the Northeast kept the
national economy sluggish for much of the year. Employment growth averaged 2.1%
in the region in 1993, slower than the 4% annual rate experienced in the 1980's,
but still above the national average of 1.6%. Manufacturing employment in the
region grew slightly during 1993 while the nation lost approximately 180,000
manufacturing jobs. Services employment increased about 4% to lead the region's
growth. Employment growth is expected to improve further in 1994. Residential
construction growth moved back above pre-recession levels with housing starts in
the region up 12% over the year. Housing demand is expected to remain strong in
1994. The region's relatively strong economy along with its attractive climate
have kept net in-migration near 400,000 per year, boosting the demand for
telecommunications services. However, increasing competition being faced by
BellSouth Telecommunications and the growing percentage of revenues from
BellSouth Enterprises makes BellSouth's financial performance more susceptible
to changes in the economy than previously, as its operations reflect the more
competitive environment and greater elasticity in demands for its products and
services.
VOLUMES OF BUSINESS.
Network Access Lines in Service at December 31 (Thousands):
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Residence............................................ 13,691.4 13,298.3 12,914.9 3.0% 3.0%
Business............................................. 5,388.3 5,088.1 4,840.3 5.9% 5.1%
Other................................................ 252.9 263.2 279.5 (3.9%) (5.8%)
---------- ---------- ----------
Total.......................................... 19,332.6 18,649.6 18,034.7 3.7% 3.4%
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The total number of access lines in service increased by 683,000 over 1992,
representing a 3.7% increase, an improvement over the 3.4% rate of increase for
1992 over 1991. The overall increase, led by growth in Florida, Georgia, North
Carolina and Tennessee, was primarily attributable to continued economic
improvement, including expanding employment in BellSouth Telecommunications'
nine-state region and an increase in the number of second lines in residences.
While the overall growth rate for residence lines remained constant, the growth
rate for business lines continued to increase, reaching 5.9% in 1993, compared
to 5.1% in 1992.
Access Minutes of Use (Millions):
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Interstate........................................... 53,345.0 50,546.4 47,255.3 5.5% 7.0%
Intrastate........................................... 15,260.9 13,994.2 13,237.7 9.1% 5.7%
---------- ---------- ----------
Total.......................................... 68,605.9 64,540.6 60,493.0 6.3% 6.7%
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Access minutes of use represent the volume of traffic carried by
interexchange carriers between LATAs, both interstate and intrastate, using
BellSouth Telecommunications' local facilities. Total access minutes of use
increased by 4,065.3 million (6.3%) in 1993 compared to a 6.7% increase in 1992.
The 1993 increase in access minutes of use was partially attributable to access
line growth and also to intraLATA toll competition, which has the effect of
increasing access minutes of use while reducing toll messages carried over
BellSouth Telecommunications' facilities. The growth rate in total minutes of
use continues to be negatively impacted by the effects of bypass and the
migration of interexchange carriers to categories of service (e.g., special
access) that have a fixed charge as opposed to a volume-driven charge and to
high capacity services, which causes a decrease in minutes of use.
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Toll Messages (Millions)............................. 1,251.0 1,280.3 1,387.1 (2.3%) (7.7%)
</TABLE>
Toll messages, comprised of Message Telecommunications Service and Wide Area
Telecommunications Service, decreased 29.3 million (2.3%) compared to a 7.7%
decrease in 1992. The lower rate of decrease for 1993 was attributable to the
inclusion of the impact of the Louisiana area calling plan in both 1992
34
<PAGE>
(beginning in March) and 1993. Competition in the intraLATA toll market and the
effects of expanded local area calling plans continue to have an adverse impact
on toll message volumes. These plans and the effects of competition have the
effect of shifting calls from toll to local service and access, respectively,
but the corresponding revenues are not generally shifted at commensurate rates.
The decline in toll message volumes is expected to continue for the foreseeable
future.
Wireless Customers (Equity Basis):
<TABLE>
<CAPTION>
PERCENT CHANGE
------------------------
1993 VS. 1992 VS.
1993 1992 1991 1992 1991
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Domestic Cellular Customers..................... 1,559,100 1,118,100 774,200 39.4% 44.4%
International Cellular Customers................ 192,200 77,600 26,000 147.7% 198.5%
Domestic Paging Customers....................... 1,232,200 977,200 920,300 26.1% 6.2%
</TABLE>
BellSouth's wireless communications businesses continue to be a significant
contributor to the company's operations, primarily due to the continued
expansion of the customer base for mobile communications services. Domestic
cellular customers increased by 441,000 (39.4%) to 1,559,100 since December 31,
1992. While the rate of increase has declined since 1992, the overall
penetration rate (number of customers as a percentage of the total population in
the service territory) increased from 2.98% at December 31, 1992 to 4.01% at
December 31, 1993. Total minutes of use have also continued to increase,
although average minutes of use per cellular customer have declined since 1992
due to the trend of increased penetration into lower-user market segments. Also,
domestic paging customers increased 255,000 (26.1%) to 1,232,200 since December
31, 1992 due to a successful retail distribution program and aggressive pricing
strategies in the reseller market.
The number of international cellular customers grew to 192,200, an increase
of 114,600 (147.7%) since December 31, 1992. Growth in minutes of use for
international cellular properties remained strong due in part to demand
stimulated by competitive programs, enhanced services and underdeveloped
land-line service.
COMPETITION. Recent developments in the telecommunications marketplace
indicate that a technological convergence is occurring in the telephone, cable
and broadcast television, computer, entertainment and information services
industries. The technologies utilized and being developed in these industries
will enable multiple communications offerings. Several large companies have
recently announced proposed acquisitions or business alliances that, if
consummated, could intensify and expand competition for local communications and
other services currently provided over BellSouth's networks. Other competitors
have announced plans to build local phone connections that would permit business
and residential customers to bypass the facilities of local telephone companies,
including those of BellSouth Telecommunications in certain cities in its service
territory. In addition, legislative activities in Congress could affect
BellSouth's businesses and competitive position. BellSouth has undertaken a plan
to streamline its telephone operations and to improve its overall cost structure
as a part of its competitive strategy (see "Results of Operations").
Notwithstanding the risks associated with increased competition, BellSouth
will have the opportunity to benefit from entry into new business markets.
BellSouth believes that in order to remain competitive in the future, it must
aggressively pursue a corporate strategy of expanding its offerings beyond its
traditional businesses which may include information services, interactive
communications and cable television and other entertainment services. BellSouth
plans to enter such businesses through acquisitions, investments and strategic
alliances with established companies in such industries and through the
development of such capabilities internally. Such transactions, if accomplished,
could initially reduce earnings and require substantial capital. Financing for
such business opportunities will be provided from funds generated through
internal operations and from external sources.
ACCOUNTING UNDER SFAS NO. 71. BellSouth's regulated enterprise, BellSouth
Telecommunications, continues to account for the economic effects of regulation
under SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation."
BellSouth, for strategic and business planning purposes, continuously monitors
and evaluates the impacts of both existing and potential competitive factors.
If, in BellSouth's judgment, changes in the competitive structure of the
telecommunications industry dictate that it could not charge prices to customers
which provide for the recovery of costs, SFAS No. 71 would no longer apply.
BellSouth currently believes that the existing and anticipated levels of
competition still permit prices based
35
<PAGE>
on costs to be charged to and collected from customers. However, the rapid pace
of change in the industry is making it increasingly likely that BellSouth will
be required to discontinue its accounting under SFAS No. 71 in the future.
BellSouth believes that the existing regulatory framework is not appropriate
for the increasingly competitive telecommunications environment. Accordingly,
BellSouth intends to pursue implementation of price regulation plans in all of
its jurisdictions through filings with state regulatory commissions or through
legislative initiatives. Since price regulation plans do not provide for the
recovery of specific costs, SFAS No. 71 would no longer apply. If BellSouth is
successful in altering the existing regulatory framework and achieving price
regulation, BellSouth would be required to discontinue its accounting under SFAS
No. 71.
If BellSouth were to discontinue its accounting under SFAS No. 71 due to the
overall level of competition or to changes in regulatory frameworks, the effect
on BellSouth's financial condition and results of operations would be material.
Specific financial impacts would depend on the timing and magnitude of changes,
both in the marketplace and in the overall regulatory framework.
OTHER MATTERS
ACCOUNTING PRONOUNCEMENTS. Effective January 1, 1993, BellSouth adopted
three new accounting standards issued by the Financial Accounting Standards
Board. SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," requires employers to accrue the cost of providing
postretirement benefits other than pensions during the period employees are
expected to earn the benefit. BellSouth is recognizing the related transition
benefit obligation over 15 years. As a result of the adoption of SFAS No. 106,
operating expenses in 1993 were $38 higher than they would have been using the
former accounting method. Accordingly, net income was reduced by approximately
$23 ($.05 per share) (see Note H).
SFAS No. 109, "Accounting for Income Taxes," requires companies to compute
deferred income taxes using a liability approach rather than the deferred method
previously required under Accounting Principles Board Opinion No. 11. The
adoption of SFAS No. 109 did not materially affect tax expense or net income for
1993 (see Note M).
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," requires
employers to accrue the cost of postemployment benefits provided to former or
inactive employees after employment but before retirement. A one-time charge of
$67.4 ($.14 per share), net of a deferred tax benefit of $42.5, related to the
adoption of SFAS No. 112 was recognized as an accounting change (see Note H).
Other pronouncements have been issued by authoritative accounting bodies but
not yet adopted by BellSouth. The adoption of such standards in future periods,
where required, is not expected to have a material impact on BellSouth's
operating results and financial condition.
ENVIRONMENTAL ISSUES. BellSouth is subject to a number of environmental
matters as a result of the operations of its subsidiaries and shared liability
provisions in the Plan of Reorganization, related to the Modification of Final
Judgment. As a result, BellSouth expects that it will be required to expend
funds to remedy certain facilities, including those Superfund sites for which
BellSouth has been named as a potentially responsible party and also for the
remediation of sites with underground fuel storage tanks and other expenses
associated with environmental compliance. At December 31, 1993, BellSouth's
recorded liability related primarily to remediation of these sites was $35.5.
BellSouth continually monitors its operations with respect to potential
environmental issues, including changes in legally mandated standards and
remediation technologies. BellSouth's recorded liability reflects those specific
issues where remediation activities are currently deemed to be probable and
where the cost of remediation is estimable. BellSouth continues to believe that
expenditures in connection with additional remedial actions under the current
environmental protection laws or related matters will not have a material impact
on BellSouth's operating results or financial condition.
SUBSEQUENT EVENTS. During the first quarter of 1994, BellSouth sold its 36%
interest in the cellular telephone business in Guadalajara, Mexico. As a result,
a gain of $67.5 ($.14 per share) was recognized. In the same period, BellSouth
Communication Systems, Inc., a wholly-owned subsidiary, also entered into an
agreement to sell its customer premise equipment sales and service operations
outside the nine-state region served by BellSouth Telecommunications. The
transaction is expected to close by the end of April 1994.
36
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
To the Shareholders of BellSouth Corporation:
These financial statements have been prepared in conformity with generally
accepted accounting principles and have been audited by Coopers & Lybrand,
independent accountants, whose report is contained herein.
The integrity and objectivity of the data in the financial statements
including estimates and judgments relating to matters not concluded by the end
of the year, are the responsibility of the management of BellSouth. Management
has also prepared all other information included therein unless indicated
otherwise.
Management maintains a system of internal accounting controls which is
continuously reviewed and evaluated. However, there are inherent limitations
that should be recognized in considering the assurances provided by any system
of internal accounting controls. The concept of reasonable assurance recognizes
that the cost of a system of internal accounting controls should not exceed, in
management's judgment, the benefits to be derived. Management believes that
BellSouth's system does provide reasonable assurance that the transactions are
executed in accordance with management's general or specific authorizations and
are recorded properly to maintain accountability for assets and to permit the
preparation of financial statements in conformity with generally accepted
accounting principles. Management also believes that this system provides
reasonable assurance that access to assets is permitted only in accordance with
management's authorizations, that the recorded accountability for assets is
compared with the existing assets at reasonable intervals and that appropriate
action is taken with respect to any differences. Management also seeks to assure
the objectivity and integrity of its financial data by the careful selection of
its managers, by organizational arrangements that provide an appropriate
division of responsibility and by communications programs aimed at assuring that
its policies, standards and managerial authorities are understood throughout the
organization. Management is also aware that changes in operating strategy and
organizational structure can give rise to disruptions in internal controls.
Special attention is given to controls while the changes are being implemented.
Management maintains a strong internal auditing program that independently
assesses the effectiveness of the internal controls and recommends possible
improvements thereto. In addition, as part of its audit of these financial
statements, Coopers & Lybrand completed a review of the accounting controls to
establish a basis for reliance thereon in determining the nature, timing and
extent of audit tests to be applied. Management has considered the internal
auditor's and Coopers & Lybrand's recommendations concerning the system of
internal controls and has taken actions that it believes are cost-effective in
the circumstances to respond appropriately to these recommendations. Management
believes that as of December 31, 1993, the system of internal controls was
adequate to accomplish the objectives discussed herein.
Management also recognizes its responsibility for fostering a strong ethical
climate so that BellSouth's affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is communicated
to all employees through policies and guidelines addressing such issues as
conflict of interest, safeguarding of BellSouth's real and intellectual
properties, providing equal employment opportunities and ethical relations with
customers, suppliers and governmental representatives. BellSouth maintains a
program to assess compliance with these policies and has designated an officer
as Vice President-Corporate Responsibility and Compliance, reporting directly to
the Chairman of the Board.
John L. Clendenin Ronald M. Dykes
CHAIRMAN OF THE BOARD VICE PRESIDENT AND COMPTROLLER
AND CHIEF EXECUTIVE OFFICER
February 3, 1994
37
<PAGE>
AUDIT COMMITTEE CHAIRMAN'S LETTER
Through January 31, 1994, the Audit Committee of the Board of Directors
consisted of four Directors who are neither officers nor employees of BellSouth
Corporation (for a discussion of the reorganization of the committees of the
Board effective February 1, 1994, including the Audit Committee, see BellSouth's
1994 Proxy Statement). Information as to these persons, as well as the scope of
duties of the Audit Committee, is provided in the Proxy Statement. The Audit
Committee met five times during 1993 and reviewed with the Chief Corporate
Auditor, Coopers & Lybrand and management the various audit activities and
plans, together with the results of selected internal audits. The Audit
Committee also reviewed the financial reporting process and the adequacy of
internal controls. The Audit Committee recommends, subject to shareholder
ratification, the appointment of the independent public accountants and
considers factors relating to their independence. The Chief Corporate Auditor
and Coopers & Lybrand met privately with the Audit Committee on occasion to
encourage confidential discussions as to any auditing matters.
Thomas R. Williams
CHAIRMAN, AUDIT COMMITTEE
January 31, 1994
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders
BellSouth Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of BellSouth
Corporation as of December 31, 1993 and 1992, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of BellSouth's management. Our responsibility is to express an
opinion on these financial statements 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 consolidated financial position of BellSouth
Corporation as of December 31, 1993 and 1992, and the consolidated 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.
As discussed in Notes H and M to the consolidated financial statements,
BellSouth changed its method of accounting for postretirement benefits other
than pensions, postemployment benefits, and income taxes in 1993.
Coopers & Lybrand
Atlanta, Georgia
February 3, 1994
38
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Operating Revenues:
Network and Related Services
Local service....................................................... $ 6,577.3 $ 6,236.0 $ 5,846.2
Interstate access................................................... 2,991.2 2,945.6 2,858.1
Intrastate access................................................... 881.9 871.8 866.7
Toll................................................................ 1,219.5 1,248.8 1,373.7
Directory advertising and publishing.................................. 1,515.4 1,459.8 1,426.3
Wireless communications............................................... 1,553.4 1,195.6 774.5
Other services........................................................ 1,141.6 1,244.0 1,300.0
--------- --------- ---------
Total Operating Revenues.......................................... 15,880.3 15,201.6 14,445.5
--------- --------- ---------
Operating Expenses:
Cost of services and products......................................... 5,865.1 5,681.3 5,739.2
Depreciation.......................................................... 3,103.8 3,032.2 2,965.4
Selling, general and administrative................................... 3,487.9 3,327.4 2,931.2
Restructuring charge (Note K)......................................... 1,136.4 -- --
--------- --------- ---------
Total Operating Expenses.......................................... 13,593.2 12,040.9 11,635.8
--------- --------- ---------
Operating Income........................................................ 2,287.1 3,160.7 2,809.7
Interest Expense (Note L)............................................... 689.0 746.4 802.1
Other Income, net (Note L).............................................. 7.6 177.6 252.7
--------- --------- ---------
Income Before Income Taxes, Extraordinary Loss and Cumulative Effect of
Change in Accounting Principle......................................... 1,605.7 2,591.9 2,260.3
Provision for Income Taxes (Note M)..................................... 571.6 933.5 753.4
--------- --------- ---------
Income Before Extraordinary Loss and Cumulative Effect of Change in
Accounting Principle................................................... 1,034.1 1,658.4 1,506.9
Extraordinary Loss on Early Extinguishment of Debt,
net of tax (Note E).................................................... (86.6) (40.7) --
Cumulative Effect of Change in Accounting Principle, net of tax (Note
N)..................................................................... (67.4) -- (35.4)
--------- --------- ---------
Net Income........................................................ $ 880.1 $ 1,617.7 $ 1,471.5
--------- --------- ---------
--------- --------- ---------
Weighted Average Common Shares Outstanding.............................. 496.1 490.8 484.3
Dividends Declared Per Common Share..................................... $ 2.76 $ 2.76 $ 2.76
Earnings Per Share:
Income Before Extraordinary Loss and Cumulative Effect of Change in
Accounting Principle................................................. $ 2.08 $ 3.38 $ 3.11
Extraordinary Loss on Early Extinguishment of Debt,
net of tax........................................................... (.17) (.08) --
Cumulative Effect of Change in Accounting Principle, net of tax....... (.14) -- (.07)
--------- --------- ---------
Net Income........................................................ $ 1.77 $ 3.30 $ 3.04
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
1993 1992
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................................. $ 501.5 $ 265.5
Temporary cash investments................................................................. 49.0 80.6
Accounts receivable, net of allowance for uncollectibles of $149.6 and
$123.0.................................................................................... 2,985.2 2,692.5
Material and supplies...................................................................... 418.7 430.6
Other current assets....................................................................... 364.6 201.8
----------- -----------
4,319.0 3,671.0
----------- -----------
Investments and Advances (Note B)............................................................ 2,039.4 1,087.1
----------- -----------
Property, Plant and Equipment, net (Note C).................................................. 24,667.8 24,272.6
----------- -----------
Deferred Charges and Other Assets............................................................ 512.2 630.2
----------- -----------
Intangible Assets, net....................................................................... 1,334.9 1,801.8
----------- -----------
Total Assets............................................................................. $ 32,873.3 $ 31,462.7
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year (Note E)..................................................... $ 1,838.6 $ 1,634.6
Accounts payable........................................................................... 979.0 1,077.2
Other current liabilities (Note D)......................................................... 2,943.8 2,310.4
----------- -----------
5,761.4 5,022.2
----------- -----------
Long-Term Debt (Note E)...................................................................... 7,380.7 7,359.7
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes.......................................................... 3,465.3 3,715.8
Unamortized investment tax credits......................................................... 515.9 604.3
Other liabilities and deferred credits (Note F)............................................ 2,255.8 962.1
----------- -----------
6,237.0 5,282.2
----------- -----------
Shareholders' Equity:
Common stock, $1 par value (1,100,000,000 shares authorized; 496,086,984 and 493,793,166
shares outstanding at December 31, 1993 and 1992, respectively) (Note G).................. 501.6 493.8
Paid-in capital............................................................................ 8,009.4 7,609.6
Retained earnings.......................................................................... 5,919.3 6,395.4
Shares held in trust (Note G).............................................................. (292.6) --
Guarantee of ESOP debt (Notes G and H)..................................................... (643.5) (700.2)
----------- -----------
13,494.2 13,798.6
----------- -----------
Total Liabilities and Shareholders' Equity............................................... $ 32,873.3 $ 31,462.7
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT
NUMBER OF ---------------------------------------------------------
SHARES SHARES
--------------- HELD GUARANTEE
COMMON TREASURY PAR PAID-IN RETAINED TREASURY IN OF ESOP
STOCK STOCK VALUE CAPITAL EARNINGS STOCK TRUST DEBT
------ ------- ------ -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990....... 481.9 4.7 $486.6 $7,222.8 $5,959.8 $(191.7) $ -- $ (811.1)
Net income......................... 1,471.5
Dividends declared................. (1,336.9)
Shares issued under Shareholder
Dividend Reinvestment and Stock
Purchase Plan..................... 4.5 (3.0) 1.5 96.9 124.5
Shares issued and activity
associated with various employee
benefit plans..................... .3 (.1) .2 6.3 3.6 2.1
Reduction of ESOP debt and other
related activities................ 14.8 54.0
------ ------- ------ -------- -------- ------- ------- --------
Balance at December 31, 1991....... 486.7 1.6 488.3 7,326.0 6,112.8 (65.1) -- (757.1)
Net income......................... 1,617.7
Dividends declared................. (1,356.3)
Shares issued under Shareholder
Dividend Reinvestment and Stock
Purchase Plan..................... 6.3 (1.2) 5.1 262.3 50.2
Shares issued and activity
associated with various employee
benefit plans and other
activities........................ .8 (.4) .4 21.3 6.4 14.9
Reduction of ESOP debt and other
related activities................ 14.8 56.9
------ ------- ------ -------- -------- ------- ------- --------
Balance at December 31, 1992....... 493.8 -- 493.8 7,609.6 6,395.4 -- -- (700.2)
Net income......................... 880.1
Dividends declared................. (1,368.8)
Shares issued under Shareholder
Dividend Reinvestment and Stock
Purchase Plan..................... 1.6 1.6 81.0
Shares issued and activity
associated with various employee
benefit plans and other
activities........................ .7 .7 31.7
Shares issued to grantor trusts.... 5.5 5.5 287.1 (292.6)
Reduction of ESOP debt and other
related activities................ 12.6 56.7
------ ------- ------ -------- -------- ------- ------- --------
Balance at December 31, 1993....... 501.6 -- $501.6 $8,009.4 $5,919.3 $ -- $(292.6) $ (643.5)
------ ------- ------ -------- -------- ------- ------- --------
------ ------- ------ -------- -------- ------- ------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 880.1 $ 1,617.7 $ 1,471.5
Adjustments to net income:
Depreciation................................................... 3,103.8 3,032.2 2,965.4
Amortization of intangibles.................................... 58.4 67.8 50.9
Restructuring Charge........................................... 1,136.4 -- --
Provision for losses on bad debts.............................. 197.8 195.5 197.1
Deferred income taxes and unamortized investment tax credits... (633.2) (138.7) (422.6)
Pension expense in excess of funding........................... 120.7 165.7 143.6
Summary tax assessment settlement.............................. -- 90.9 --
Noncash compensation expense related to ESOP benefits.......... 23.2 27.1 28.5
Undistributed earnings of unconsolidated affiliates............ (11.0) (76.7) (132.3)
Dividends received from unconsolidated affiliates.............. 199.9 124.6 94.9
Extraordinary loss on early extinguishment of debt............. 145.4 70.7 --
Change in accounting principle, net of tax..................... 67.4 -- 35.4
Gain on sale of operations..................................... (6.5) -- (14.0)
Allowance for funds used during construction................... (23.7) (15.3) (18.1)
Net change in accounts receivable.............................. (501.7) (302.4) (288.0)
Net change in material and supplies............................ (98.0) (156.1) (64.5)
Net change in accounts payable and other current liabilities... (13.6) 148.7 31.2
Net change in deferred charges and other assets................ 101.5 139.3 122.6
Net change in other liabilities and deferred credits........... 46.3 29.5 131.2
Other reconciling items, net................................... (7.0) (73.7) 57.1
----------- ----------- -----------
Net cash provided by operating activities.................... 4,786.2 4,946.8 4,389.9
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................. (3,485.9) (3,189.3) (3,102.4)
Proceeds from disposals of property, plant and equipment......... 156.0 139.5 112.7
Proceeds from disposition of short-term investments.............. 147.9 188.5 363.0
Purchase of short-term investments............................... (116.3) (167.5) (286.0)
Investment acquisitions.......................................... -- (53.8) (702.2)
Investment dispositions.......................................... 105.2 -- --
Investments in/advances to unconsolidated affiliates............. (319.5) (562.5) (126.0)
Proceeds from repayment of loans and advances.................... 77.2 178.5 .7
Other investing activities, net.................................. .5 (125.2) (36.2)
----------- ----------- -----------
Net cash used for investing activities....................... (3,434.9) (3,591.8) (3,776.4)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings.............................. 16,289.9 13,541.0 15,285.5
Repayments of short-term borrowings.............................. (15,856.4) (13,770.3) (14,774.3)
Proceeds of long-term debt....................................... 2,963.3 675.0 193.3
Repayment of long-term debt...................................... (3,131.3) (801.3) (169.3)
Payment of call premium.......................................... (99.7) (33.4) --
Payment of capital lease obligations............................. (12.2) (15.5) (20.9)
Proceeds from issuing common and treasury shares................. 38.5 70.2 33.6
Dividends paid................................................... (1,307.4) (1,082.5) (1,124.7)
----------- ----------- -----------
Net cash used for financing activities....................... (1,115.3) (1,416.8) (576.8)
----------- ----------- -----------
Net Increase/(Decrease) in Cash and Cash Equivalents............. 236.0 (61.8) 36.7
Cash and Cash Equivalents at Beginning of Period................. 265.5 327.3 290.6
----------- ----------- -----------
Cash and Cash Equivalents at End of Period....................... $ 501.5 $ 265.5 $ 327.3
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
NOTE A -- ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of BellSouth Corporation ("BellSouth") and subsidiaries in which it has
a controlling financial interest. BellSouth operates predominantly in the
telecommunications service industry. BellSouth Telecommunications, Inc.
("BellSouth Telecommunications"), BellSouth's largest subsidiary, provides
primarily regulated telephone services. Investments in certain partnerships,
joint ventures and subsidiaries are accounted for using the equity method. All
significant intercompany transactions and accounts have been eliminated, except
as otherwise required under generally accepted accounting principles applicable
to regulated entities. Certain amounts in the prior period consolidated
financial statements have been reclassified to conform to the current year's
presentation.
BASIS OF ACCOUNTING. BellSouth's consolidated financial statements have
been prepared in accordance with generally accepted accounting principles,
including the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 71, "Accounting for the Effects of Certain Types of Regulation." Where
appropriate, SFAS No. 71 gives accounting recognition to the actions of
regulators. Such actions can provide reasonable assurance of the existence of an
asset, reduce or eliminate the value of an asset or impose or eliminate a
liability on a regulated entity.
CASH AND CASH EQUIVALENTS. BellSouth considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Investments with an original maturity of over three months to one
year are not considered cash equivalents and are included as temporary cash
investments on the consolidated balance sheets.
PROPERTY, PLANT AND EQUIPMENT. The investment in property, plant and
equipment is stated at original cost. Depreciation is based on the remaining
life method of depreciation and straight-line composite rates determined on the
basis of equal life groups of certain categories of telephone plant acquired in
a given year. Depreciation expense also includes amortization of certain classes
of telephone plant and identified depreciation reserve deficiencies over periods
allowed by regulatory authorities. When depreciable plant is disposed of, the
original cost, less net salvage value, is charged to accumulated depreciation.
The cost of property, plant and equipment other than that of BellSouth
Telecommunications is depreciated using either straight-line or accelerated
methods over the estimated useful lives of the assets. Gains or losses on
disposal of other depreciable property, plant and equipment are recognized in
the year of disposition as an element of other non-operating income.
MATERIAL AND SUPPLIES. New and reusable material is 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.
INVESTMENTS AND ADVANCES. Investments and advances substantially consist of
investments in, and advances to, affiliated companies. Also included in this
caption are other long-term investments.
INTANGIBLE ASSETS. Intangible assets substantially consist of the excess
consideration paid over net assets acquired in business combinations. Also
included in this caption are acquired licenses and customer lists. Intangible
assets are being amortized using the straight-line and sum-of-the-years' digits
methods over periods of benefit. Such periods do not exceed 40 years.
Amortization of such intangibles was $58.4, $67.8 and $50.9, for the years ended
December 31, 1993, 1992 and 1991, respectively. At December 31, 1993 and 1992,
accumulated amortization of intangibles was $169.2 and $197.9, respectively (see
Note B).
MAINTENANCE AND REPAIRS. The cost of maintenance and repairs of plant,
including the cost of replacing minor items not effecting substantial
betterments, is charged to operating expenses.
43
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE A -- ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION. Revenues are recognized when earned. Certain revenues
derived from local telephone and wireless access services are billed monthly in
advance and are recognized the following month when services are provided.
Directory advertising and publishing revenues and related directory costs are
recognized upon publication of directories, except where regulatory authorities
recognize different treatment. Revenues derived from other telecommunications
services, principally network access, toll and cellular airtime usage are
recognized monthly as services are provided.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION. Regulatory authorities allow
BellSouth Telecommunications to accrue interest as a cost of constructing
certain plant and as an item of income (interest charged construction). Such
income is not realized in cash currently but will be realized over the service
life of the related plant as the resulting higher depreciation expense and plant
investment are recovered in the form of increased revenues.
INCOME TAXES. Effective January 1, 1993, BellSouth adopted SFAS No. 109,
"Accounting for Income Taxes." In accordance with the standard, the balance
sheet reflects deferred tax balances associated with the anticipated tax impact
of future income or deductions implicit in the balance sheet in the form of
temporary differences. Temporary differences primarily result from the use of
accelerated methods and shorter lives in computing depreciation for tax
purposes. Prior to 1993, BellSouth accounted for income taxes under the
provisions of Accounting Principles Board Opinion No. 11.
For financial reporting purposes, BellSouth Telecommunications is amortizing
deferred investment tax credits earned prior to the 1986 repeal of the
investment tax credit and also some transitional credits earned after the
repeal. The credits are being amortized as a reduction to the provision for
income taxes over the estimated useful lives of the assets to which the credits
relate.
EARNINGS PER SHARE. Earnings per common share are computed on the basis of
the weighted average number of shares of common stock and common stock
equivalents outstanding during each year.
NOTE B -- INVESTMENTS AND ADVANCES
Investments and Advances consist primarily of BellSouth's investment in
unconsolidated affiliates accounted for under the equity method. The total of
such investments was $1,806.7 and $740.1 at December 31, 1993 and 1992,
respectively. Investments and Advances increased approximately $1,000 from
December 31, 1992 as a result of a reclassification of amounts previously
reported as Intangible Assets and the adoption of SFAS No. 109. Earnings related
to investments accounted for under the equity method totaled $11.0, $76.7 and
$132.3 for the three years ended December 31, 1993, 1992 and 1991, respectively,
and are reported as a component of Other Income. The most significant of these
equity method investments are BellSouth's various domestic cellular properties,
a business venture with RAM Broadcasting Corporation ("RBC"), Optus
Communications Pty. Ltd. ("Optus") and certain investments in international
cellular properties.
DOMESTIC CELLULAR. BellSouth's domestic cellular investments consist
primarily of a 60% non-controlling financial interest in the Los Angeles
Cellular Telephone Company and a 43.75% interest in the Houston Cellular
Telephone Company. At December 31, 1993, BellSouth's investment in the above
mentioned entities exceeded the underlying book value of the investees' net
assets by $965.0. The excess of consideration paid over net assets acquired
along with other intangible assets are being amortized using either straight
line or accelerated methods over periods of benefit which do not exceed 40
years.
RBC. In January 1992, BellSouth and RBC formed a business venture to own
and operate certain mobile data communications networks worldwide as well as
certain cellular and paging operations in the United States. The mobile data
portion of the venture gives BellSouth a 49% interest in the United States
44
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE B -- INVESTMENTS AND ADVANCES (CONTINUED)
mobile data operations, which is operated by RBC, and the following interests in
the foreign mobile data operations of the venture: Australia 90%, The
Netherlands 72%, Belgium 72%, United Kingdom 37.5% and France 11.25%. In
addition, BellSouth has a 50% interest in the domestic paging segment of the
venture.
OPTUS. BellSouth is a 24.5% participant in Optus, an international
consortium which provides a full spectrum of telecommunications services in
Australia, including switched network and enhanced services, wireless and
satellite based services.
INTERNATIONAL CELLULAR. During December 1993, BellSouth increased its
ownership interest in TelCel Cellular C.A. ("TelCel"), a cellular telephone
company providing service to all major cities in Venezuela, from 44% to 53.26%.
BellSouth accounts for its investment in TelCel using the equity method because
the company does not control the requisite voting percentage required to control
Board decisions or the outcome of ordinary matters requiring shareholder
approval. BellSouth is approximately a 21% participant in the E-Plus Mobilfunk
consortium, which, during 1993, became the successful bidder for the second
private German GSM PCN license.
OTHER INVESTMENT ACTIVITY. During 1993 and 1992, BellSouth made several
small acquisitions principally related to its cellular telephone business. The
results of operations have been included in the consolidated financial
statements from their respective dates of acquisition. The effect of these
acquisitions on BellSouth's consolidated results of operations was not
significant. All acquisitions were recorded using the purchase method of
accounting. The purchase price in excess of the underlying fair value of
identifiable net assets acquired will be amortized over a period not to exceed
40 years. In addition, during 1993, BellSouth disposed of minor investments in
various portions of its business. The effect of these dispositions on
BellSouth's consolidated results of operations was not significant. BellSouth
has other investments that are accounted for using the cost method in addition
to various advances to affiliated companies.
In December 1993, BellSouth entered into a credit agreement with Prime South
Diversified, Inc. ("Prime South Diversified"), which indirectly wholly owns
Community Cable TV, a Las Vegas cable operation managed by Prime Cable, to
provide up to $250 in financing. The loan transaction closed in January 1994
with funding of an initial advance of $135. The loan is collateralized by the
stock of Prime South Diversified and its wholly-owned subsidiary, Prime South
Holdings, Inc. ("Prime South Holdings"). The loan, which bears a variable rate
of 10% to 11%, matures in 2001. In connection with the credit agreement,
BellSouth entered into option agreements with the shareholders of Prime South
Diversified to acquire the stock of Prime South Diversified and Prime South
Holdings at various dates over the term of the loan. Concurrent with the credit
agreement, BellSouth Enterprises entered into an agreement to acquire a 22.5%
interest in Prime Cable's management company, which provides management services
to five affiliated cable systems nationwide. Closing of this transaction is
expected in late 1994, subject to regulatory approval. This agreement also
grants BellSouth the option to acquire the remaining interest of the management
company over the loan period.
SUBSEQUENT EVENT. During the first quarter of 1994, BellSouth disposed of
its 36% interest in the cellular telephone business in Guadalajara, Mexico. As a
result, a gain of $67.5 was recognized.
45
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows at December 31:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Outside plant...................................................................... $ 18,595.7 $ 17,813.5
Central office equipment........................................................... 14,668.0 13,893.9
Building and building improvements................................................. 2,954.4 2,785.5
Furniture and fixtures............................................................. 2,362.6 2,211.5
Operating and other equipment...................................................... 2,006.8 1,708.3
Station equipment.................................................................. 631.4 612.9
Plant under construction........................................................... 497.2 516.5
Land............................................................................... 175.9 173.3
Capital leases..................................................................... 62.4 70.0
Other.............................................................................. 20.4 15.5
----------- -----------
41,974.8 39,800.9
Less: Accumulated depreciation................................................. 17,307.0 15,528.3
----------- -----------
Total Property, Plant and Equipment, net....................................... $ 24,667.8 $ 24,272.6
----------- -----------
----------- -----------
</TABLE>
NOTE D -- OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows at December 31:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Restructuring accrual................................................................ $ 513.4 $ --
Taxes accrued........................................................................ 492.1 413.9
Advanced billing and customer deposits............................................... 476.2 470.7
Dividends payable.................................................................... 346.1 340.7
Salaries and wages payable........................................................... 338.3 313.8
Compensated absences................................................................. 332.6 319.5
Interest and rents accrued........................................................... 250.2 293.9
Other................................................................................ 194.9 157.9
---------- ----------
Total Other Current Liabilities.................................................. $ 2,943.8 $ 2,310.4
---------- ----------
---------- ----------
</TABLE>
46
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE E -- DEBT
DEBT MATURING WITHIN ONE YEAR: Debt maturing within one year is summarized
as follows at December 31:
<TABLE>
<CAPTION>
DESCRIPTION 1993 1992 1991
- ------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Notes Payable:
Bank loans............................................................. $ 88.7 $ 196.0 $ 238.7
Commercial paper....................................................... 1,536.1 1,066.6 1,280.4
---------- ---------- ----------
1,624.8 1,262.6 1,519.1
Current maturities of long-term debt..................................... 213.8 372.0 216.4
---------- ---------- ----------
Total................................................................ $ 1,838.6 $ 1,634.6 $ 1,735.5
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Bank Loans:
Maximum amount outstanding during the period........................... $ 191.3 $ 287.6 $ 608.5
Average amount outstanding during the period (a)....................... $ 157.3 $ 223.6 $ 194.1
Weighted average interest rate at end of period........................ 3.77% 4.11% 7.78%
Weighted average interest rate during the period (b)................... 3.85% 5.84% 7.52%
Commercial Paper:
Maximum amount outstanding during the period........................... $ 1,786.9 $ 1,569.5 $ 1,376.0
Average amount outstanding during the period (a)....................... $ 1,332.4 $ 1,049.3 $ 892.6
Weighted average interest rate at end of period........................ 3.30% 3.57% 5.14%
Weighted average interest rate during the period (b)................... 3.20% 3.86% 5.94%
<FN>
- ------------------------
(a) Determined by computing the average face amount of daily ending balances in
each category.
(b) Determined by dividing the average daily face amount described in (a) into
aggregate related interest expense.
</TABLE>
BellSouth has committed credit lines aggregating $1,375.6 with various
banks. There were borrowings under the committed lines totaling $48.4 at
December 31, 1993. BellSouth also maintains uncommitted lines of credit of
$665.0. At December 31, 1993, borrowings under the uncommitted lines totaled
$72.0. There are no significant commitment fees or requirements for compensating
balances associated with any lines of credit.
47
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE E -- DEBT (CONTINUED)
LONG-TERM: Long-term debt consists primarily of debentures and notes issued
by BellSouth Telecommunications. Interest rates and maturities of the amounts
outstanding are summarized as follows at December 31:
<TABLE>
<CAPTION>
INTEREST RATES MATURITIES 1993 1992
------------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
BellSouth Telecommunications Debentures: 3 1/4% - 6 7/8% 1995 - 2033 $ 1,270.0 $ 605.0
7 3/8% - 8 1/4% 1999 - 2033 1,935.0 3,335.0
8 1/2% - 10 3/8% 2001 - 2029 1,400.0 2,375.0
---------- ----------
4,605.0 6,315.0
BellSouth Telecommunications Notes............. 5 1/4% - 7% 1998 - 2008 1,875.0 --
Guarantee of ESOP debt......................... 9.125% - 9.19% 2003 693.9 734.6
BellSouth Capital Funding Corporation Notes.... 4.02% - 9.50% 1994 - 1999 200.9 159.9
Capital leases and other....................... 68.5 203.2
Unamortized discount, net of premium........... (62.6) (53.0)
---------- ----------
Total Long-Term Debt....................... $ 7,380.7 $ 7,359.7
---------- ----------
---------- ----------
</TABLE>
Maturities of long-term debt outstanding at December 31, 1993 are summarized
below:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Maturities........................ $ 213.8 $ 127.8 $ 66.1 $ 141.1 $ 764.2 $ 6,344.1 $ 7,657.1
--------- --------- --------- --------- --------- ---------- ----------
--------- --------- --------- --------- --------- ---------- ----------
</TABLE>
As further discussed in Note H, BellSouth incorporated an Employee Stock
Ownership Plan ("ESOP") feature into certain of its existing savings plans. In
1990, the ESOP trusts (the "Trusts") borrowed $850.0 aggregate principal amount
through the issuance of amortizing notes. Although the obligations are owed by
the Trusts, they are guaranteed by BellSouth and thus are reflected as an
addition to long-term debt and a reduction to shareholders' equity. The Trusts
service the debt with contributions from BellSouth and dividends paid on the
shares held by the Trusts. As the ESOP obligations are repaid, the amount
guaranteed decreases and long-term debt is reduced accordingly.
Notes issued by BellSouth Capital Funding Corporation ("Capital Funding")
are used to finance the businesses of BellSouth Enterprises and the unregulated
subsidiaries of BellSouth Telecommunications. BellSouth has agreed to ensure the
timely payment of principal, premium, if any, and interest on Capital Funding's
debt securities.
During 1993 and 1992, BellSouth Telecommunications refinanced certain
long-term debt issues at more favorable interest rates. As a result of the early
extinguishment of these issues, charges of $86.6 ($.17 per share), net of taxes
of $58.8, and $40.7 ($.08 per share), net of taxes of $30.0, were recognized as
extraordinary losses in 1993 and 1992, respectively.
At December 31, 1993, shelf registration statements had been filed with the
Securities and Exchange Commission by BellSouth Telecommunications and Capital
Funding under which $725.0 and $1,050.3, respectively, additional amount of debt
securities could be offered.
48
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE F -- OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits is summarized as follows at December
31:
<TABLE>
<CAPTION>
1993 1992
---------- ---------
<S> <C> <C>
Restructuring accrual (see Note K)..................................................... $ 570.0 $ --
Accrued pension cost................................................................... 565.5 444.8
Regulatory liability related to income taxes (see Note M).............................. 378.9 --
Compensation related................................................................... 318.5 242.2
Minority interests..................................................................... 123.6 88.4
Postemployment benefits (see Note H)................................................... 121.4 --
Other.................................................................................. 177.9 186.7
---------- ---------
Total Other Liabilities and Deferred Credits....................................... $ 2,255.8 $ 962.1
---------- ---------
---------- ---------
</TABLE>
NOTE G -- SHAREHOLDERS' EQUITY
PREFERRED STOCK AUTHORIZED. BellSouth's Articles of Incorporation authorize
100 million shares of cumulative First Preferred Stock having a par value of $1
per share, of which 30 million shares have been reserved and designated Series A
for possible issuance under BellSouth's Shareholder Rights Plan. As of December
31, 1993, no preferred shares had been issued.
SHAREHOLDER RIGHTS PLAN. In 1989, BellSouth adopted a Shareholder Rights
Plan by declaring a dividend of one right for each share of common stock then
outstanding and to be issued thereafter. Each right entitles shareholders to buy
one one-hundredth of a share of Series A First Preferred Stock for $175 per
share. The rights may be exercised only if a person or group acquires 10% of the
common stock of BellSouth without the prior approval of the Board of Directors
or announces a tender or exchange offer that would result in ownership of 25% or
more of the common stock. If a person or group acquires 10% of BellSouth's stock
without prior Board approval, other shareholders are then allowed to purchase
BellSouth common stock at half price. The rights currently trade with BellSouth
common stock and may be redeemed by the Board of Directors for one cent per
right until they become exercisable, and thereafter under certain circumstances.
The rights expire after ten years.
GUARANTEE OF EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP") DEBT. Financial
reporting practices require that the amount equivalent to BellSouth's guarantee
of the amortizing notes issued by its ESOP trusts be presented as a reduction to
shareholders' equity, as well as an increase to debt. The amount recorded as a
decrease in shareholders' equity represents the value of unallocated BellSouth
common stock purchased with the proceeds of the amortizing notes and the timing
difference resulting from the shares allocated accounting method. As the ESOP
notes are repaid, the amount of debt guaranteed decreases, and Shareholders'
Equity increases accordingly (see Notes E and H).
SHARES HELD IN TRUST. During 1993, BellSouth issued shares to grantor
trusts to provide partial funding for the benefits payable under certain
non-qualified benefit plans. The trusts are irrevocable and assets contributed
to the trusts can only be used to pay such benefits with certain exceptions. At
December 31, 1993, the assets held in the trusts consist of cash and 5,464,920
shares of BellSouth common stock.
The total cost of the BellSouth shares as of the date of funding the trusts
is included in Common Stock and Paid-In Capital; however, because the shares
held in trust are not considered outstanding for financial reporting purposes,
the shares are reflected separately as Shares Held in Trust, a reduction to
Shareholders' Equity. Accordingly, there is no earnings per share impact. As the
plan benefits are paid from the trusts, Shareholders' Equity will increase
accordingly.
49
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE H -- EMPLOYEE BENEFIT PLANS
PENSION PLANS. Substantially all employees of BellSouth are covered by
noncontributory defined benefit pension plans. The plan covering non-represented
employees prior to July 1993, provided a benefit based on years of credited
service and employees' average compensation for a specified period. Effective
July 1993, BellSouth converted this plan to a cash balance plan where the
pension benefit is determined by a combination of compensation-based service and
additional credits, and individual account-based interest credits. The new cash
balance plan is subject to a minimum benefit determined under the prior plan's
formula for employees retiring through 2005. The December 31, 1993 projected
benefit obligation assumes interest and additional credits greater than the
minimum levels specified in the written plan. The conversion of the
non-represented pension plan had no material impact on 1993 pension cost. The
estimated impact on 1994 projected pension cost will be a reduction of $65.
Pension benefits provided for represented employees are based on specified
benefit amounts and years of service. Consistent with past practice, this plan
includes the effect of future bargained-for improvements.
BellSouth's funding policy is to make contributions to trust funds with the
objective of accumulating sufficient assets to pay all pension benefits for
which BellSouth is liable. Contributions are actuarially determined using the
aggregate cost method, subject to ERISA and Internal Revenue Service
limitations. Pension plan assets consist primarily of equity securities and
fixed income investments.
The components of net periodic pension cost are summarized below:
<TABLE>
<CAPTION>
1993 1992 1991
----------- --------- -----------
<S> <C> <C> <C>
Service cost -- benefits earned during the year......................... $ 265.8 $ 262.4 $ 242.9
Interest cost on projected benefit obligation........................... 774.8 751.8 719.8
Actual return on plan assets............................................ (1,734.9) (686.2) (2,200.9)
Net amortization and deferral........................................... 816.0 (160.2) 1,382.0
----------- --------- -----------
Net periodic pension cost........................................... $ 121.7 $ 167.8 $ 143.8
----------- --------- -----------
----------- --------- -----------
</TABLE>
The following table sets forth the funded status of the plans at December
31:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation........................................................ $ 7,705.3 $ 7,123.9
----------- -----------
----------- -----------
Accumulated benefit obligation................................................... $ 8,819.6 $ 8,219.0
----------- -----------
----------- -----------
Projected benefit obligation..................................................... $ 10,644.3 $ 10,271.6
Plan assets at market value........................................................ 13,173.0 11,901.7
----------- -----------
Plan assets in excess of projected benefit obligation.............................. 2,528.7 1,630.1
Unrecognized net gain due to past experience different from assumptions made....... (2,503.2) (1,775.1)
Unrecognized prior service cost.................................................... (398.5) (86.4)
Unrecognized net asset at transition............................................... (192.5) (213.4)
----------- -----------
Accrued pension cost........................................................... $ (565.5) $ (444.8)
----------- -----------
----------- -----------
</TABLE>
The projected benefit obligation for 1993 and 1992 was determined using a
discount rate of 7.5% and 7.75%, respectively, and, for both years an expected
long-term rate of return on plan assets of 8% and a long-term assumed weighted
average rate of compensation increase of 5.7%. Other economic related benefit
assumptions, for both the non-represented and the represented plans, have been
changed to reflect both past experience and management's best estimate of future
benefit increases. In the aggregate, the assumption changes will have the impact
of reducing the projected 1994 pension cost by $20.
50
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
In 1991, BellSouth offered an early retirement option to non-represented
employees. Approximately 3,100 employees elected to retire under this option,
which allowed the employee to accept the present value of their pension benefit
as a lump-sum payment and to receive a special payment equivalent to 5% of base
pay times full years of service (not to exceed 100% of base pay). The retirement
option was accounted for in accordance with SFAS No. 88, "Employers' Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits." BellSouth recognized an expense of $68.6 in 1991 related
to this option.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. BellSouth sponsors defined
benefit postretirement health and life insurance plans for most of its
non-represented and represented employees. Effective January 1, 1993, BellSouth
adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," to account for these plans. BellSouth's transition benefit
obligation of $1,486 will be amortized over 15 years, the average remaining
service period of active plan participants. The accounting for the health care
plan does not anticipate future adjustments to the cost-sharing arrangements
provided for in the written plan. As a result of the adoption of SFAS No. 106,
net income for 1993 was reduced by approximately $23 ($.05 per share).
As of January 1993, the accumulated postretirement health benefit obligation
for non-represented retirees is being funded over the average remaining service
period of currently active non-represented employees. The accumulated
postretirement benefit obligation for pre-January 1, 1990 represented retirees
is being funded over a 10-year period, while the accumulated postretirement
benefit obligation for all other represented retirees is being funded over the
average remaining service period of currently active represented employees.
Postretirement benefit cost for the year ending December 31, 1993 is
composed of the following:
<TABLE>
<CAPTION>
HEALTH LIFE TOTAL
----------- --------- ---------
<S> <C> <C> <C>
Service cost -- benefits earned during the year...................................... $ 30 $ 9 $ 39
Interest on accumulated postretirement benefit obligation............................ 199 32 231
Actual return on plan assets......................................................... (44) (35) (79)
Amortization of transition liability (asset)......................................... 113 (13) 100
Other amortization and deferral, net................................................. (9) (10) (19)
----- --------- ---------
Postretirement benefit cost (income)............................................. $ 289 $ (17) $ 272
----- --------- ---------
----- --------- ---------
</TABLE>
Prior to 1993, BellSouth recognized the cost of providing postretirement
benefits based on funded amounts. The cost of providing health and life benefits
for both active and retired employees was $574.6 and $550.6 for 1992 and 1991,
respectively.
51
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plans' funded status at December 31,
1993:
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
HEALTH LIFE TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Retirees..................................................................... $ 1,910 $ 246 $ 2,156
Fully eligible active plan participants...................................... 350 194 544
Other active plan participants............................................... 631 68 699
--------- --------- ---------
2,891 508 3,399
Plan assets, primarily equity securities, at fair value...................... 785 585 1,370
--------- --------- ---------
Accumulated postretirement benefit obligation in excess of (less than) plan
assets...................................................................... 2,106 (77) 2,029
Unrecognized net losses...................................................... (514) (123) (637)
Unrecognized transition (obligation) asset................................... (1,573) 183 (1,390)
--------- --------- ---------
Accrued (Prepaid) postretirement benefit cost............................ $ 19 $ (17) $ 2
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accrued (prepaid) postretirement benefit costs are included in Other
Liabilities and Deferred Credits and Deferred Charges and Other Assets,
respectively.
For measurement purposes, an 11.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1994; the rate is assumed
to decrease gradually to 5% in 2007 and remains at that level. The health care
cost trend rate assumption significantly affects the amounts reported. A one-
percentage-point increase in the assumed health care cost trend rates for each
future year would increase the accumulated postretirement benefit obligation by
$171 and the estimated aggregate service and interest cost components of the
1993 postretirement benefit cost by $15. For purposes of valuing the
postretirement life insurance obligation, a 5.7% rate of future increase in
compensation at December 31, 1993 was used.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5%. After a 30% tax reduction for the non-represented
employees' trust, the combined expected long-term rate of return on plan assets
used was 8%. The impact of reducing the discount rate from 9% to 7.5% will
increase 1994 postretirement benefit expense by approximately $30.
Most regulatory jurisdictions have accepted BellSouth's SFAS No. 106
implementation plan. However, one state's commission is requiring a 20-year
amortization of the transition benefit obligation and in another state there are
pending issues, the outcome of which are not expected to have a material impact
on recovery.
EFFECT OF RESTRUCTURING ON PENSIONS AND POSTRETIREMENT BENEFITS. As a
result of the restructuring, (see Note K), BellSouth recognized $88 of estimated
net curtailment losses expected to impact BellSouth's pension and postretirement
benefit plans. Of the amount recognized, $16 was realized in 1993.
DEFINED CONTRIBUTION PLANS. BellSouth maintains several contributory
savings plans which cover substantially all employees. The BellSouth Management
Savings and Employee Stock Ownership Plan and the BellSouth Savings and Security
Plan (collectively, the "ESOP Plans") cover the largest portion of the
employees. Effective in 1990, a leveraged ESOP feature was incorporated into the
ESOP plans. The shares that were purchased by the Trusts with proceeds from the
ESOP notes (see Note E) are allocated to participants' accounts throughout the
13-year debt repayment period of the leveraged ESOP program as described below.
52
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
BellSouth matches participants' eligible contributions to the respective
Plans based on defined percentages determined annually by the Board of
Directors. The match consists of BellSouth common shares that were purchased by
the Trusts with proceeds from the ESOP notes, which shares are released for
allocation as loan payments are made in accordance with ESOP guidelines, and
that are purchased by the Trusts on the open market from time to time as
required. BellSouth contributes an amount which, in addition to ESOP dividends,
is sufficient to service the ESOP loan payments and to purchase any additional
shares required to meet the match obligation.
Effective with the incorporation of the ESOP feature into the Plans in 1990,
BellSouth began recognizing expense attributable to the leveraged ESOPs based on
the cost of the shares allocated for the period plus interest incurred, reduced
by the dividends used to service the ESOP debt (Shares Allocated Method).
BellSouth recognized ESOP expense in 1993, 1992 and 1991 as follows:
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Compensation expense......................................................... $ 67.9 $ 71.8 $ 77.1
Interest expense............................................................. $ 39.9 $ 40.5 $ 40.5
Actual interest on ESOP notes................................................ $ 69.5 $ 72.4 $ 74.8
Cash contributions, excluding dividends paid to the Trusts................... $ 84.9 $ 84.3 $ 90.7
Dividends paid to the Trusts, used for debt service.......................... $ 43.6 $ 43.7 $ 43.5
</TABLE>
BellSouth also maintains certain other defined contribution plans for most
other employees not covered by the ESOP plans. Company contributions, which are
not included in the amounts above, were approximately $12.5, $8.8 and $2.0 in
1993, 1992 and 1991, respectively.
POSTEMPLOYMENT BENEFITS. Effective January 1, 1993, BellSouth adopted SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." SFAS No. 112
requires employers to accrue the cost of postemployment benefits provided to
former or inactive employees after employment but before retirement, including
but not limited to worker's compensation, disability, and continuation of health
care benefits. Previously, BellSouth used the cash method to account for such
costs. A one-time charge related to adoption of SFAS No. 112 was recognized as a
change in accounting principle, effective as of January 1, 1993. The charge was
$67.4 ($.14 per share), net of a deferred tax benefit of $42.5. The effect of
the change on BellSouth's 1993 operating results was not material. Future
expense levels are dependent upon actual claim experience, but are not expected
to differ materially from expense recognized under the former accounting method.
NOTE I -- EMPLOYEE STOCK OPTION PLAN
The BellSouth Corporation Stock Option Plan provides for the grant of stock
options and related stock appreciation rights ("SARs") to key employees, as
determined by the Board of Directors, to purchase shares of BellSouth common
stock within prescribed periods at prices equal to the fair market value on the
date of grant. SARs entitle an optionee to surrender unexercised stock options
for cash or stock equal to the excess of the fair market value of the
surrendered shares over the option price of such shares. Of the 3,654,142 shares
covered by outstanding options under the plan at December 31, 1993, 489,590 were
accompanied by SARs.
53
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE I -- EMPLOYEE STOCK OPTION PLAN (CONTINUED)
The following table summarizes the activity for stock options outstanding:
<TABLE>
<CAPTION>
1993 1992 1991
--------------- --------------- ---------------
<S> <C> <C> <C>
Options Outstanding at January 1.................. 3,436,724 3,101,490 2,414,328
Options Granted................................... 840,302 977,978 924,942
Options Exercised................................. (569,508) (590,953) (193,065)
Options Cancelled/Forfeited....................... (53,376) (51,791) (44,715)
Options Outstanding at December 31................ 3,654,142 3,436,724 3,101,490
Option Prices per Common
Share:
Granted......................................... $50.69 - $62.19 $48.38 - $58.25 $39.63 - $58.25
Exercised....................................... $22.76 - $58.25 $22.76 - $45.56 $22.76 - $41.82
Cancelled/Forfeited............................. $32.34 - $58.25 $37.38 - $58.25 $32.34 - $58.25
Outstanding at Year-End......................... $12.99 - $62.19 $12.99 - $58.25 $12.99 - $58.25
Options Exercisable at Year-End................... 1,407,914 1,343,523 1,369,838
Shares Available For Grant at December 31......... 5,015,519 4,937,932 4,866,981
</TABLE>
NOTE J -- LEASES
BellSouth has entered into operating leases for facilities and equipment
used in operations. Rental expenses under operating leases were $300.3, $328.9
and $288.8 for 1993, 1992 and 1991, respectively. Capital leases currently in
effect are not significant.
The following table summarizes the approximate future minimum rentals under
non-cancelable operating leases in effect at December 31, 1993:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Minimum rentals............................. $ 128.1 $ 106.0 $ 80.0 $ 67.8 $ 46.9 $ 339.2 $ 768.0
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
</TABLE>
NOTE K -- RESTRUCTURING CHARGE
The results of operations for the year ended December 31, 1993 include a
$1,136.4 restructuring charge which reduced net income by $696.6. The
restructuring is being undertaken to redesign and streamline the fundamental
processes and work activities in BellSouth Telecommunications' telephone
operations to better respond to an increasingly competitive business
environment. The restructuring is expected to improve overall responsiveness to
customer needs, permit more rapid introduction of new products and services and
reduce costs.
The material components of the charge relate to the downsizing of the
existing workforce by 10,200 employees through 1996. These components include
provisions for separation payments and relocations of remaining employees,
consolidation and elimination of certain operations facilities and enabling
changes to information systems, primarily those used to provide services to
existing customers.
54
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Shares Amounts)
NOTE L -- ADDITIONAL INCOME STATEMENT DATA
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Other Income, net:
Interest and dividend income................................................. $ 42.8 $ 123.6 $ 77.4
Earnings of unconsolidated affiliates........................................ 11.0 76.7 132.3
Minority interests........................................................... (50.9) (39.3) (5.5)
Gain from operations sold, net............................................... 6.5 -- 40.0
Other, net................................................................... (1.8) 16.6 8.5
--------- --------- ---------
Total.................................................................... $ 7.6 $ 177.6 $ 252.7
--------- --------- ---------
--------- --------- ---------
</TABLE>
Interest and dividend income for 1992 includes $56.6 relating to the
settlement of an Internal Revenue Service summary assessment for the tax years
1979 and 1980.
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Interest Expense:
Long-term debt............................................................... $ 577.3 $ 612.9 $ 573.2
Notes payable................................................................ 39.0 37.4 62.8
Other........................................................................ 72.7 96.1 166.1
--------- --------- ---------
Total.................................................................... $ 689.0 $ 746.4 $ 802.1
--------- --------- ---------
--------- --------- ---------
Depreciation of telephone plant as a percentage of average depreciable
telephone plant............................................................... 7.51% 7.67% 7.76%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Revenues from services provided to American Telephone and Telegraph Company,
BellSouth's largest customer, were approximately 14%, 14% and 15% of
consolidated operating revenues for 1993, 1992 and 1991, respectively.
NOTE M -- INCOME TAXES
Effective January 1, 1993, BellSouth adopted SFAS No. 109, "Accounting for
Income Taxes," which applies a balance sheet approach to income tax accounting.
In accordance with the new standard, the balance sheet reflects the anticipated
tax impact of future taxable income or deductions implicit in the balance sheet
in the form of temporary differences. These temporary differences reflect the
difference between the basis in assets and liabilities as measured in the
financial statements and as measured by tax laws using enacted tax rates. The
cumulative effect to January 1, 1993 of the adoption of SFAS No. 109 was
recorded as a $7.8 reduction to income tax expense. As permitted by the new
standard, prior years' financial statements have not been restated.
In accordance with the provisions of SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," BellSouth has, for its regulated
operations, only reflected the balance sheet impact of the adoption of this
statement. Specifically, BellSouth Telecommunications recorded a net regulatory
liability of $538.0 coincidental with the reduction of the deferred tax reserves
from higher historical to lower current tax rates. The balance of such liability
at December 31, 1993, included in Other Liabilities and Deferred Credits, was
$378.9. This regulatory liability will be adjusted as the related temporary
differences reverse.
55
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Shares Amounts)
NOTE M -- INCOME TAXES (CONTINUED)
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- --------- ---------
<S> <C> <C> <C>
Federal:
Current................................................................... $ 1,079.7 $ 918.3 $ 953.6
Deferred, net............................................................. (532.0) (85.9) (242.0)
Investment tax credits, net............................................... (88.3) (87.9) (108.8)
---------- --------- ---------
459.4 744.5 602.8
---------- --------- ---------
State:
Current................................................................... 173.9 163.6 171.9
Deferred, net............................................................. (61.7) 25.4 (21.3)
---------- --------- ---------
112.2 189.0 150.6
---------- --------- ---------
Total provision for income taxes...................................... $ 571.6 $ 933.5 $ 753.4
---------- --------- ---------
---------- --------- ---------
Amortization of investment tax credits...................................... $ 88.3 $ 88.2 $ 105.3
---------- --------- ---------
---------- --------- ---------
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets and (liabilities) at December 31, 1993 are as follows:
<TABLE>
<S> <C>
Restructuring charge.............................................................................. $ 419.5
Pensions.......................................................................................... 240.3
Deferred compensation............................................................................. 112.4
Compensated absences.............................................................................. 89.2
Bad debts......................................................................................... 82.5
Leveraged employee stock ownership plan........................................................... 36.2
Net operating losses.............................................................................. 11.3
Other............................................................................................. 138.1
---------
1,129.5
Valuation Allowance............................................................................... (13.8)
---------
Deferred Tax Assets............................................................................. 1,115.7
---------
Depreciation...................................................................................... (3,636.2)
Equity investment................................................................................. (376.4)
Franchises........................................................................................ (204.3)
Other............................................................................................. (189.7)
---------
Deferred Tax Liabilities........................................................................ (4,406.6)
---------
Net Deferred Tax Liability.................................................................. $(3,290.9)
---------
---------
</TABLE>
The valuation allowance primarily represents federal and state net operating
losses that will not be utilized during the carryforward period. Of the Net
Deferred Tax Liability at December 31, 1993, $174.4 was current and $(3,465.3)
was noncurrent.
Deferred tax expense for 1992 and 1991 resulting from timing differences in
the recognition of revenue and expense items for tax and financial reporting
purposes, were as follows:
<TABLE>
<CAPTION>
1992 1991
--------- ---------
<S> <C> <C>
Property, plant and equipment............................................................ $ 5.5 $ (114.7)
Pension benefits......................................................................... (55.6) (65.3)
Other timing differences................................................................. (10.4) (83.3)
--------- ---------
Total.................................................................................. $ (60.5) $ (263.3)
--------- ---------
--------- ---------
</TABLE>
56
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Shares Amounts)
NOTE M -- INCOME TAXES (CONTINUED)
A reconciliation of the Federal statutory income tax rate to BellSouth's
effective tax rate follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Federal statutory tax rate....................................................... 35.0% 34.0% 34.0%
State income taxes, net of Federal income tax benefit............................ 4.8% 4.8% 4.4%
Amortization of investment tax credits........................................... (5.5%) (3.4%) (4.7%)
Miscellaneous items, net......................................................... 1.3% 0.6% (0.4%)
------ ------ ------
Effective tax rate............................................................. 35.6% 36.0% 33.3%
------ ------ ------
------ ------ ------
</TABLE>
NOTE N -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE
SFAS 112. As more fully discussed in Note H, BellSouth adopted, effective
January 1, 1993, SFAS No. 112, "Employers' Accounting for Postemployment
Benefits." A one-time charge of $67.4 ($.14 per share), net of a deferred tax
benefit of $42.5, related to adoption of this statement was recognized as a
change in accounting principle.
CELLULAR SALES COMMISSIONS. In the third quarter of 1991, BellSouth
Mobility Inc. changed its policy of capitalizing certain third-party cellular
service sales commissions and amortizing them over the average customer lives.
Accordingly, these amounts are expensed in the period in which they are earned
by the agent. BellSouth effected this change to standardize the accounting
treatment of sales commissions throughout its recently consolidated cellular
operations, including those properties acquired in 1991. The effect of the
change in accounting principle on BellSouth's 1991 results of operations was not
material. The cumulative effect of the change was $35.4 ($.07 per share) and is
included in 1991 net income.
NOTE O -- SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental information is presented in accordance with the
provisions of SFAS No. 95, "Statement of Cash Flows":
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES:
Common and Treasury Shares Issued in Lieu of Cash Dividends Under
Shareholder Dividend Reinvestment and Stock Purchase Plan............... $ 66.4 $ 268.9 $ 199.3
---------- ---------- ----------
---------- ---------- ----------
Shares Issued to Grantor Trusts.......................................... $ 292.6 $ -- $ --
---------- ---------- ----------
---------- ---------- ----------
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest................................................................. $ 755.0 $ 738.8 $ 793.2
---------- ---------- ----------
---------- ---------- ----------
Income taxes............................................................. $ 1,145.2 $ 1,053.4 $ 1,048.7
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
57
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Shares Amounts)
NOTE P -- FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is presented in accordance with the provisions of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined using available market information described
below. Since judgment is required to develop the estimates, the estimated
amounts presented herein may not be indicative of the amounts that BellSouth
could realize in a current market exchange.
<TABLE>
<CAPTION>
1993 1992
------------------------ ----------------------
RECORDED RECORDED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents................................. $ 501.5 $ 501.5 $ 265.5 $ 265.5
Temporary cash investments................................ 49.0 49.0 80.6 80.6
Debt Maturing Within One Year:
Bank loans.............................................. 88.7 88.7 196.0 196.0
Commercial paper........................................ 1,536.1 1,536.1 1,066.6 1,066.6
Current maturities of long-term debt.................... 213.8 213.8 372.0 372.0
Long-Term Debt:
BellSouth Telecommunications Debentures................. 4,605.0 4,707.0 6,315.0 6,346.8
BellSouth Telecommunications Notes...................... 1,875.0 1,901.0 -- --
Guarantee of ESOP Debt.................................. 693.9 802.5 734.6 813.1
BellSouth Capital Funding Corporation Notes............. 200.9 223.6 159.9 166.0
</TABLE>
CASH AND CASH EQUIVALENTS/TEMPORARY CASH INVESTMENTS. At December 31, 1993
and 1992, the recorded amounts for cash and cash equivalents and temporary cash
investments, respectively, approximate fair value due to the short-term nature
of these instruments.
DEBT. At December 31, 1993 and 1992, the recorded amounts for Debt Maturing
Within One Year approximate fair value due to the short-term nature of the
liabilities. The estimates of fair value for BellSouth Telecommunications
Debentures and Notes are based on the closing market prices for each issue at
December 31, 1993 and 1992, respectively. Fair value estimates for the Guarantee
of ESOP Debt and BellSouth Capital Funding Corporation Notes are based on quotes
from dealers.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS. BellSouth is party to interest
rate swap agreements, currency swap agreements and forward contracts and other
derivatives in its normal course of business. These financial instruments are
used to mitigate foreign currency and interest rate risks, although to some
extent they expose the company to off-balance-sheet risks and credit risks. The
credit risks associated with interest rate swap agreements and foreign exchange
contracts are controlled through the evaluation and continual monitoring of the
creditworthiness of the counterparties. The net fair value of these off-balance-
sheet financial instruments at December 31, 1993 is not significant.
BellSouth has also issued letters of credit and financial guarantees which
approximate $175 at December 31, 1993. Due to the number and diverse nature of
these instruments, an estimate of fair value could not be practicably
determined.
58
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Shares Amounts)
NOTE Q -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
In the following summary of quarterly financial information, all adjustments
necessary for a fair presentation of each period were included. The results for
first quarter 1993 were restated to reflect the one-time, non-cash charge for
retroactive adoption of SFAS No. 112.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(RESTATED)
1993
Operating Revenues................................ $3,833.7 $3,906.9 $4,014.9 $4,124.8
Operating Income (Loss)........................... $ 804.1 $ 856.4 $ 909.1 $ (282.5)
Income (Loss) Before Extraordinary Loss on Early
Extinguishment of Debt and Cumulative Effect of
Change in Accounting Principle................... $ 411.2 $ 433.1 $ 442.4 $ (252.6)
Extraordinary Loss on Early Extinguishment
of Debt, net of tax.............................. -- (55.4) (7.8) (23.4)
Cumulative Effect of Change in Accounting
Principle, net of tax............................ (67.4) -- -- --
Net Income (Loss)................................. $ 343.8 $ 377.7 $ 434.6 $ (276.0)
-------- -------- -------- --------
Earnings Per Share:
Income (Loss) Before Extraordinary Loss on Early
Extinguishment of Debt and Cumulative Effect of
Change in Accounting Principle................. $ .83 $ .87 $ .89 $ (.51 )
Extraordinary Loss on Early Extinguishment of
Debt, net of tax............................... -- (.11 ) (.01 ) (.05 )
Cumulative Effect of Change in Accounting
Principle, net of tax.......................... (.14 ) -- -- --
Net Income (Loss)............................... $ .69 $ .76 $ .88 $ (.56 )
-------- -------- -------- --------
1992
Operating Revenues................................ $3,738.7 $3,816.8 $3,736.0 $3,910.1
Operating Income.................................. $ 831.6 $ 874.4 $ 750.8 $ 703.9
Income Before Extraordinary Loss on Early
Extinguishment of Debt........................... $ 460.9 $ 458.5 $ 385.6 $ 353.4
Extraordinary Loss on Early Extinguishment of
Debt, net of tax................................. -- -- (40.7) --
Net Income........................................ $ 460.9 $ 458.5 $ 344.9 $ 353.4
-------- -------- -------- --------
Earnings Per Share:
Income Before Extraordinary Loss on Early
Extinguishment of Debt......................... $ .94 $ .94 $ .78 $ .72
Extraordinary Loss on Early Extinguishment of
Debt, net of tax............................... -- -- (.08 ) --
Net Income...................................... $ .94 $ .94 $ .70 $ .72
-------- -------- -------- --------
</TABLE>
59
<PAGE>
SUPPLEMENTARY DATA
BELLSOUTH CORPORATION
DOMESTIC CELLULAR AND PAGING OPERATIONS
PROPORTIONATE OPERATING DATA
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The following table sets forth unaudited, supplemental financial data for
BellSouth's domestic cellular and paging operations reflecting proportionate
consolidation of entities in which BellSouth has an interest. This presentation
differs from the consolidation metholodology used to prepare BellSouth's
principal financial statements in accordance with generally accepted accounting
principles. The proportionate operating data reflect BellSouth's ownership
percentage of entities consolidated for financial reporting purposes and
BellSouth's ownership percentage in the entities which are accounted for on the
equity method for financial reporting purposes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992
------------- -------------
<S> <C> <C>
Cellular Revenue, net (1)....................................................... $ 1,150,288 $ 918,885
Paging and Other Revenue, net (1)............................................... 189,824 175,567
------------- -------------
Total Revenues.............................................................. 1,340,112 1,094,452
------------- -------------
Operating Expenses.............................................................. 820,945 689,454
Depreciation and Amortization................................................... 242,481 184,074
------------- -------------
Total Operating Expenses.................................................... 1,063,426 873,528
------------- -------------
Operating Income................................................................ 276,686 220,924
Other Expenses, net (including interest and taxes).............................. 136,216 125,963
------------- -------------
Net Income...................................................................... $ 140,470 $ 94,961
------------- -------------
------------- -------------
Operating Margins as a Percentage of Revenue:
Including Depreciation and Amortization....................................... 20.65% 20.19%
Excluding Depreciation and Amortization....................................... 38.74% 37.00%
Operational Comparisons:
Proportionate Cellular Population Served...................................... 38,845,000 37,549,000
Proportionate Cellular Customers.............................................. 1,559,100 1,118,100
Proportionate Paging Customers................................................ 1,232,200 977,200
<FN>
- ------------------------
(1) Includes equipment revenue, net of cost.
</TABLE>
60
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No change in accountants or disagreements on the adoption of appropriate
accounting standards or financial disclosure has occurred during the periods
included in this report.
PART III
ITEMS 10 THROUGH 13.
Information regarding executive officers required by Item 401 of Regulation
S-K is furnished in a separate disclosure on page 22 in Part I of this report
since the registrant did not furnish such information in its definitive proxy
statement prepared in accordance with Schedule 14A.
The additional information required by these items will be included in the
registrant's definitive proxy statement dated March 14, 1994 as follows, and is
herein incorporated by reference pursuant to General Instruction G(3):
<TABLE>
<CAPTION>
PAGE(S) IN
DEFINITIVE
ITEM DESCRIPTION PROXY STATEMENT
----- ------------------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
10. Directors and Executive Officers of the Registrant.............................................. 3-8; 18
11. Executive Compensation.......................................................................... 4-5; 14-18
12. Security Ownership of Certain Beneficial Owners and Management.................................. 8
13. Certain Relationships and Related Transactions.................................................. 13
</TABLE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE(S) IN THIS
FORM 10-K
---------------
<C> <C> <S> <C>
a. Documents filed as a part of the report:
(1) Financial Statements:
Report of Independent Accountants........................... 38
Consolidated Statements of Income........................... 39
Consolidated Balance Sheets................................. 40
Consolidated Statements of Shareholders' Equity............. 41
Consolidated Statements of Cash Flows....................... 42
Notes to Consolidated Financial Statements.................. 43-59
(2) Financial Statement Schedules:
II. -- Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other than Related
Parties.............................................. 67-68
V. -- Property, Plant and Equipment......................... 69-70
VI. -- Accumulated Depreciation............................. 71-72
VIII. -- Allowance for Uncollectibles....................... 73
X. -- Supplementary Income Statement Information............ 74
</TABLE>
61
<PAGE>
Financial statement schedules other than those listed above have been
omitted because the required information is contained in the financial
statements and notes thereto or because such schedules are not required or
applicable.
<TABLE>
<C> <C> <S> <C>
(3) Exhibits:
Exhibits identified in parentheses below, on file with the
SEC, are incorporated herein by reference as exhibits
hereto. All management contracts or compensatory plans or
arrangements required to be filed as exhibits to this Form
10-K Report pursuant to Item 14(c) are filed as Exhibits
10a through 10z, inclusive.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
3a Articles of Incorporation of BellSouth Corporation. (Exhibit 3a to Form 10-K for the year ended December 31,
1990, File No. 1-8607).
3b Bylaws of BellSouth Corporation.
4 BellSouth Corporation Shareholder Rights Agreement. (Exhibit 4-b to Form 8-K. Date of report November 27,
1989).
4a No instrument which defines the rights of holders of long and intermediate term debt of BellSouth Corporation
is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, BellSouth
Corporation hereby agrees to furnish a copy of any such instrument to the SEC upon request.
10a BellSouth Corporation Executive Short Term Incentive Plan. (Exhibit 10d to Form 10-K for the year ended
December 31, 1991, File No. 1-8607).
10b BellSouth Corporation Executive Long Term Incentive Plan. (Exhibit 10e to Form 10-K for the year ended
December 31, 1991, File No. 1-8607).
10c BellSouth Corporation Executive Long Term Disability and Survivor Protection Plan. (Exhibit 10dd to Form 10-K
for the year ended December 31, 1985, File No. 1-8607).
10c-1 Amendment dated January 1, 1994 to the BellSouth Corporation Executive Long Term Disability and Survivor
Protection Plan.
10d BellSouth Corporation Executive Transfer Plan. (Exhibit 10ee to Registration Statement No. 2-87846).
10e BellSouth Corporation Death Benefit Program. (Exhibit 10ff to Form 10-K for the year ended December 31, 1989,
File No. 1-8607).
10f BellSouth Corporation Plan For Non-Employee Directors' Travel Accident Insurance. (Exhibit 10ii to
Registration Statement No. 2-87846).
10g BellSouth Corporation Executive Incentive Award Deferral Plan. (Exhibit 10k to Form 10-K for the year ended
December 31, 1992, File No. 1-8607).
10h BellSouth Corporation Stock Option Plan. (Exhibit 10l to Form 10-K for the year ended December 31, 1991, File
No. 1-8607).
10i BellSouth Corporation Nonqualified Deferred Compensation Plan. (Exhibit 10m to Form 10-K for the year ended
December 31, 1992, File No. 1-8607).
10j BellSouth Corporation Supplemental Executive Retirement Plan. (Exhibit 10n to Form 10-K for the year ended
December 31, 1992, File No. 1-8607).
10k BellSouth Management Savings and Employee Stock Ownership Plan as amended and restated effective as of July
1, 1989. (Exhibit 10ll to Form 10-K for the year ended December 31, 1989, File No. 1-8607).
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
10k-1 Amendments dated July 1, 1989, October 18, 1989 and January 1, 1990 to the BellSouth Management Savings and
Employee Stock Ownership Plan. (Exhibit 10ll-1 to Form 10-K for the year ended December 31, 1989, File No.
1-8607).
10k-2 Amendment dated August 22, 1990 to the BellSouth Management Savings and Employee Stock Ownership Plan.
(Exhibit 10ll-2 to Form 10-K for the year ended December 31, 1990, File No. 1-8607).
10k-3 Amendment dated July 17, 1991 to the BellSouth Management Savings and Employee Stock Ownership Plan. (Exhibit
10p-2 to Form 10-K for the year ended December 31, 1991, File No. 1-8607).
10k-4 Amendment dated September 3, 1992 to the BellSouth Management Savings and Employee Stock Ownership Plan.
(Exhibit 10o-4 to Form 10-K for the year ended December 31, 1992, File No. 1-8607).
10k-5 Amendment dated October 26, 1992 to the BellSouth Management Savings and Employee Stock Ownership Plan.
(Exhibit 10o-5 to Form 10-K for the year ended December 31, 1992, File No. 1-8607).
10k-6 Amendment dated July 13, 1993 to the BellSouth Management Savings and Employee Stock Ownership Plan.
10k-7 Amendment dated October 27, 1993 to the BellSouth Management Savings and Employee Stock Ownership Plan.
10l BellSouth Corporation Directors Retirement Plan. (Exhibit 10qq to Form 10-K for the year ended December 31,
1986, File No. 1-8607).
10m BellSouth Corporation Financial Counseling Plan. (Exhibit 10r to Form 10-K for the year ended December 31,
1992, File No. 1-8607).
10n BellSouth Corporation Deferred Compensation Plan for Non-Employee Directors. (Exhibit 10gg to Registration
Statement No. 2-87846).
10o BellSouth Corporation Executive Life Insurance Plan. (Exhibit 10v to Form 10-K for the year ended December
31, 1992, File No. 1-8607).
10p BellSouth Corporation Stock Option Plan for Non-Employee Directors. (Exhibit 10z to Form 10-K for the year
ended December 31, 1991, File No. 1-8607).
10q BellSouth Corporation Executive Shareholder Return Cash Plan. (Exhibit 10x to Form 10-K for the year ended
December 31, 1992, File No. 1-8607).
10r Form of Executive Officer Succession and Retirement Agreement. (Exhibit 10y to Form 10-K for the year ended
December 31, 1992, File No. 1-8607).
10s BellSouth Non-Employee Director's Charitable Contribution Program. (Exhibit 10z to Form 10-K for the year
ended December 31, 1992, File No. 1-8607).
10t BellSouth Personal Retirement Account Pension Plan. (Exhibit 10aa to Form 10-Q for the quarter ended June 30,
1993, File No. 1-8607).
10t-1 Amendment dated August 9, 1993 to the BellSouth Personal Retirement Account Pension Plan. (Exhibit 10aa-1 to
Form 10-Q for the quarter ended September 30, 1993, File No. 1-8607).
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
10t-2 Amendments dated October 15, 1993 and November 12, 1993 to the BellSouth Personal Retirement Account Pension
Plan.
10u BellSouth Corporation Trust Under Executive Benefit Plan(s). (Exhibit 10bb to Form 10-Q for the quarter ended
June 30, 1993, File No. 1-8607).
10v BellSouth Telecommunications, Inc. Trust Under Executive Benefit Plan(s). (Exhibit 10cc to Form 10-Q for the
quarter ended June 30, 1993, File No. 1-8607).
10w BellSouth Corporation Trust Under Board of Directors Benefit Plan(s). (Exhibit 10dd to Form 10-Q for the
quarter ended September 30, 1993, File No. 1-8607).
10x BellSouth Telecommunications, Inc. Trust Under Board of Directors Benefit Plan(s). (Exhibit 10ee to Form 10-Q
for the quarter ended September 30, 1993, File No. 1-8607).
10y BellSouth Enterprises, Inc. Trust Under Executive Benefit Plan(s).
11 Computation of Earnings Per Share.
12 Computation of Ratio of Earnings to Fixed Charges. (Page 24 of this Form 10-K).
21 Subsidiaries of BellSouth.
24 Powers of Attorney.
99a Annual report on Form 11-K for BellSouth Management Savings and Employee Stock Ownership Plan for the fiscal
year ended December 31, 1993 (to be filed as an amendment hereto within 180 days of the end of the period
covered by this report).
99b Annual report on Form 11-K for BellSouth Savings and Security ESOP Plan for the fiscal year ended December
31, 1993 (to be filed as an amendment hereto within 180 days of the end of the period covered by this
report).
99c Annual report on Form 11-K for BellSouth Enterprises Retirement Savings Plan for the fiscal year ended
December 31, 1993 (to be filed as an amendment hereto within 180 days of the end of the period covered by
this report).
</TABLE>
b. Reports on Form 8-K:
BellSouth Corporation -- Third quarter earnings release. Date of Report
October 21, 1993.
64
<PAGE>
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.
BELLSOUTH CORPORATION
/s/ RONALD M. DYKES
--------------------------------------
Ronald M. Dykes
VICE PRESIDENT AND COMPTROLLER
March 28, 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:
John L. Clendenin*
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
PRINCIPAL FINANCIAL OFFICER:
Earle Mauldin*
EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER
PRINCIPAL ACCOUNTING OFFICER:
Ronald M. Dykes*
VICE PRESIDENT AND COMPTROLLER
DIRECTORS:
F. Duane Ackerman*
Reuben V. Anderson*
James H. Blanchard*
Andrew F. Brimmer*
J. Hyatt Brown*
John L. Clendenin*
Armando M. Codina*
Marshall M. Criser*
Gordon B. Davidson*
Phyllis Burke Davis*
William O. McCoy*
John G. Medlin, Jr.*
C. Dixon Spangler, Jr.*
Ronald A. Terry*
Thomas R. Williams*
J. Tylee Wilson*
*By: /s/ RONALD M. DYKES
--------------------------------------
Ronald M. Dykes
(INDIVIDUALLY AND AS
ATTORNEY-IN-FACT)
March 28, 1994
65
<PAGE>
REPORT AND CONSENT OF INDEPENDENT ACCOUNTANTS
Our report on the consolidated financial statements of BellSouth Corporation
is included on page 38 of this Form 10-K. In connection with our audits of the
financial statements, we have also audited the related financial statement
schedules listed in the index on page 61 of this Form 10-K.
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.
/s/ COOPERS & LYBRAND
Atlanta, Georgia
February 3, 1994
We consent to the incorporation by reference in the registration statements
of BellSouth Corporation on Form S-3 (Nos. 33-29411, 33-22785, 33-48929,
33-49461 and 33-51449) and Form S-8 (Nos. 33-38265, 33-38264, 33-38263,
33-30773, 33-30772, 33-26518, 33-12165, 2-94802 and 33-49459) of our reports
dated February 3, 1994, on our audits of the consolidated financial statements
and financial statement schedules of BellSouth Corporation as of December 31,
1993 and 1992, and for the years ended December 31, 1993, 1992 and 1991, which
reports are included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND
Atlanta, Georgia
March 28, 1994
66
<PAGE>
BELLSOUTH CORPORATION
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS BALANCE AT END
BALANCE AT ------------------------ OF PERIOD
BEGINNING (1) (2) ------------------------
OF AMOUNTS AMOUNTS (1) (2)
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1993
Houston Cellular Telephone Company (a).. $ 17.0 1.0 12.4 -- $ 5.6 $ --
Galveston Cellular Telephone Company
(a).................................... $ 1.0 .1 .1 -- $ 1.0 $ --
MCTA.................................... $ .2 .1 .3 -- $ -- $ --
Los Angeles Cellular Telephone Company.. $ .4 2.6 2.0 -- $ 1.0 $ --
CSL 1100 Peachtree Assoc. (b)........... $ 98.9 -- -- -- $ 98.9 $ --
CSL Chastain Assoc. (c)................. $ 23.1 -- 6.3 -- $ 16.8 $ --
CSL Birmingham Assoc. (d)............... $ 103.0 6.6 75.9 -- $ 10.5 $ 23.2
CSL Western Way Assoc. (e).............. $ 5.4 -- 1.0 -- $ 4.4 $ --
CSL Exchange South Assoc. (e)........... $ 8.9 -- 3.6 -- $ 5.3 $ --
CSL 1155 Peachtree Assoc. (f)........... $ 52.1 3.8 3.8 -- $ -- $ 52.1
FOR THE YEAR ENDED DECEMBER 31, 1992
Houston Cellular Telephone Company (a).. $ 14.6 3.4 1.0 -- $ 1.2 $ 15.8
Galveston Cellular Telephone Company
(a).................................... $ -- 1.0 -- -- $ -- $ 1.0
MCTA.................................... $ .1 .2 .1 -- $ -- $ .2
Los Angeles Cellular Telephone Company.. $ .6 2.4 2.6 -- $ 0.4 $ --
CSL 1100 Peachtree Assoc. (b)........... $ 87.4 11.5 -- -- $ 98.9 $ --
CSL Chastain Assoc. (c)................. $ 22.5 .6 -- -- $ 23.1 $ --
CSL Birmingham Assoc. (d)............... $ 102.0 6.9 5.9 -- $ 22.5 $ 80.5
CSL Western Way Assoc. (e).............. $ 5.0 .4 -- -- $ 5.4 $ --
CSL Exchange South Assoc. (e)........... $ 8.6 .3 -- -- $ 8.9 $ --
CSL 1155 Peachtree Assoc. (f)........... $ 52.1 3.8 3.8 -- $ -- $ 52.1
FOR THE YEAR ENDED DECEMBER 31, 1991
Houston Cellular Telephone Company (a).. $ 11.6 5.7 2.7 -- $ 1.1 $ 13.5
MCTA.................................... $ -- .1 -- -- $ .1 $ --
Los Angeles Cellular Telephone Company.. $ .1 2.6 2.1 -- $ .6 $ --
CSL 1100 Peachtree Assoc. (b)........... $ 65.5 21.9 -- -- $ 87.4 $ --
CSL Chastain Assoc. (c)................. $ 21.8 .7 -- -- $ 22.5 $ --
CSL Birmingham Assoc. (d)............... $ 104.4 10.7 13.1 -- $ 21.5 $ 80.5
CSL Western Way Assoc. (e).............. $ 4.0 1.0 -- -- $ 5.0 $ --
CSL Exchange South Assoc. (e)........... $ 7.2 1.4 -- -- $ 8.6 $ --
CSL 1155 Peachtree Assoc. (f)........... $ 52.1 3.9 3.9 -- $ -- $ 52.1
</TABLE>
67
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
NOTES TO SCHEDULE II
<FN>
(a) Amounts receivable include a note due June 1, 1994. Interest at a rate of
Prime + 1% is due monthly. Collateral for the note is a security agreement.
(b) The note is payable on demand and matures April 1, 1994. The interest rate
fluctuates with the Federal Funds rate.
(c) The note is payable on demand. The interest rate fluctuates with the
Federal Funds rate.
(d) Amounts receivable include 1) a note payable on demand and maturing October
1, 1999. The interest rate fluctuates with the Federal Funds rate. 2) a
note due October 1, 1999 with interest at a rate of 8.85% due semiannually.
(e) The note is payable on demand and matures January 1, 1995. The interest
rate fluctuates with the Federal Funds rate.
(f) The note is due January 15, 1998. Interest at a rate of 9.31% is due
semiannually.
</TABLE>
68
<PAGE>
BELLSOUTH CORPORATION
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ----------------------------------------------------------------------------------------------------
BALANCE AT BALANCE
BEGINNING ADDITIONS AT
OF AT COST RETIREMENTS OTHER END OF
CLASSIFICATION PERIOD (A) (B) CHANGES PERIOD
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land & Land Improvements.............. $ 173.3 $ 2.4 $ (0.6) $ 0.8 $ 175.9
Buildings and Building Improvements... 2,548.4 56.8 (11.5) 76.4 2,670.1
Leasehold Improvements................ 237.1 17.6 (7.5) 37.1 284.3
Operating & Other Equipment........... 1,708.3 267.4 (137.0) 168.1 2,006.8
Furniture and Fixtures................ 2,211.5 239.2 (184.7) 96.6 2,362.6
Central Office Equipment.............. 13,893.9 258.3 (820.6) 1,336.4 14,668.0
Outside Plant......................... 17,813.5 643.6(c) (222.3) 360.9 18,595.7
Station Equipment..................... 612.9 63.9 (51.3) 5.9 631.4
Capital Leases........................ 70.0 3.7 (10.6) (0.7) 62.4
Construction in Progress.............. 516.5 2,042.5(d) (6.2) (2,055.6) 497.2
Other Plant........................... 15.5 0.0 0.0 4.9 20.4
----------- --------- ----------- --------- ---------
Total Property, Plant and
Equipment.......................... $ 39,800.9 $ 3,595.4 $ (1,452.3) $ 30.8 $41,974.8
----------- --------- ----------- --------- ---------
----------- --------- ----------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ----------------------------------------------------------------------------------------------------
BALANCE AT BALANCE
BEGINNING ADDITIONS AT
OF AT COST RETIREMENTS OTHER END OF
CLASSIFICATION PERIOD (A) (B) CHANGES PERIOD
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land & Land Improvements.............. $ 176.0 $ 2.0 $ (5.9) $ 1.2 $ 173.3
Buildings and Building Improvements... 2,461.4 28.4 (16.9) 75.5 2,548.4
Leasehold Improvements................ 206.3 32.0 (3.6) 2.4 237.1
Operating & Other Equipment........... 1,483.4 323.4 (184.8) 86.3 1,708.3
Furniture and Fixtures................ 2,141.1 217.5 (262.3) 115.2 2,211.5
Central Office Equipment.............. 13,182.3 166.9 (555.8) 1,100.5 13,893.9
Outside Plant......................... 17,050.8 653.0(c) (194.8) 304.5 17,813.5
Station Equipment..................... 1,267.2 48.4 (708.9) 6.2 612.9
Capital Leases........................ 83.7 5.7 (19.1) (0.3) 70.0
Construction in Progress.............. 325.4 1,763.6(d) (0.8) (1,571.7) 516.5
Other Plant........................... 25.7 24.7 (0.3) (34.6) 15.5
----------- --------- ----------- --------- ---------
Total Property, Plant and
Equipment.......................... $ 38,403.3 $ 3,265.6 $ (1,953.2) $ 85.2 $39,800.9
----------- --------- ----------- --------- ---------
----------- --------- ----------- --------- ---------
</TABLE>
The notes on Page 70 are an integral part of this schedule
69
<PAGE>
BELLSOUTH CORPORATION
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
YEAR ENDED DECEMBER 31, 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ----------------------------------------------------------------------------------------------------
BALANCE AT BALANCE
BEGINNING ADDITIONS AT
OF AT COST RETIREMENTS OTHER END OF
CLASSIFICATION PERIOD (A) (B) CHANGES PERIOD
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land & Land Improvements.............. $ 173.8 $ 1.5 $ (0.4) $ 1.1 $ 176.0
Buildings and Building Improvements... 2,385.5 30.8 (10.1) 55.2 2,461.4
Leasehold Improvements................ 173.4 35.9 (3.9) 0.9 206.3
Operating & Other Equipment........... 1,269.4 299.6 (131.1) 45.5 1,483.4
Furniture and Fixtures................ 2,001.2 189.6 (225.4) 175.7 2,141.1
Central Office Equipment.............. 12,467.9 201.7 (798.6) 1,311.3 13,182.3
Outside Plant......................... 16,340.8 674.2(c) (240.5) 276.3 17,050.8
Station Equipment..................... 1,399.1 52.0 (189.1) 5.2 1,267.2
Capital Leases........................ 116.2 22.7 (55.2) 0.0 83.7
Construction in Progress.............. 459.2 1,683.6(d) (3.2) (1,814.2) 325.4
Other Plant........................... 25.1 0.3 (0.4) 0.7 25.7
----------- --------- ----------- --------- ---------
Total Property, Plant and
Equipment.......................... $ 36,811.6 $ 3,191.9 $ (1,657.9) $ 57.7 $38,403.3
----------- --------- ----------- --------- ---------
----------- --------- ----------- --------- ---------
NOTES TO SCHEDULE V
<FN>
(a) Additions shown include: (1) the original cost (estimated if not known) of
reused material, which is concurrently credited to material and supplies,
and (2) interest charged construction.
(b) Items of telephone plant when retired or sold are deducted from the
property accounts at the amounts at which they are included therein,
estimated if not known.
(c) The material components of additions to Outside Plant are aerial,
underground and buried cable, and conduit systems.
(d) The material components of Construction in Progress are Central Office
Equipment, Outside Plant and Data Processing Equipment.
</TABLE>
70
<PAGE>
BELLSOUTH CORPORATION
SCHEDULE VI -- ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- --------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT
OF EXPENSE OTHER END OF
CLASSIFICATION PERIOD (A) RETIREMENTS CHANGES PERIOD
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land Improvements....................... $ 2.1 $ 0.1 $ (0.1) $ (0.7) $ 1.4
Buildings and Building Improvements..... 632.9 57.3 (21.3) 6.2 675.1
Leasehold Improvements.................. 92.5 27.9 (1.5) (0.7) 118.2
Operating & Other Equipment............. 668.7 198.0 (78.0) (31.4) 757.3
Furniture and Fixtures.................. 1,039.5 329.5 (155.7) (3.6) 1,209.7
Central Office Equipment................ 5,204.9 1,365.2(c) (737.5) (0.4) 5,832.2
Outside Plant........................... 7,380.8 1,018.5(d) (248.1) (0.6) 8,150.6
Station Equipment....................... 349.0 46.8 (40.3) 0.6 356.1
Capital Leases.......................... 34.1 12.9 (10.6) (1.4) 35.0
Depreciation Reserve Imbalance (b)...... 123.8 47.6 0.0 0.0 171.4
----------- ----------- ----------- --------- ---------
Total Accumulated Depreciation........ $ 15,528.3 $ 3,103.8 $ (1,293.1) $ (32.0) $17,307.0
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- --------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT
OF EXPENSE OTHER END OF
CLASSIFICATION PERIOD (A) RETIREMENTS CHANGES PERIOD
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land Improvements....................... $ 2.0 $ 0.1 $ (0.1) $ 0.1 $ 2.1
Buildings and Building Improvements..... 589.7 53.3 (10.0) (0.1) 632.9
Leasehold Improvements.................. 79.1 17.7 (3.1) (1.2) 92.5
Operating & Other Equipment............. 585.7 156.7 (83.4) 9.7 668.7
Furniture and Fixtures.................. 940.2 362.5 (259.9) (3.3) 1,039.5
Central Office Equipment................ 4,406.0 1,354.9(c) (555.8) (0.2) 5,204.9
Outside Plant........................... 6,739.8 835.7(d) (194.8) 0.1 7,380.8
Station Equipment....................... 933.2 124.8 (708.9) (0.1) 349.0
Capital Leases.......................... 32.5 17.4 (15.9) 0.1 34.1
Depreciation Reserve Imbalance (b)...... 36.6 109.2 0.0 (22.0) 123.8
----------- ----------- ----------- --------- ---------
Total Accumulated Depreciation........ $ 14,344.8 $ 3,032.3 $ (1,831.9) $ (16.9) $15,528.3
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
</TABLE>
The notes on Page 72 are an integral part of this Schedule.
71
<PAGE>
BELLSOUTH CORPORATION
SCHEDULE VI -- ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- -------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT
OF EXPENSE OTHER END OF
CLASSIFICATION PERIOD (A) RETIREMENTS CHANGES PERIOD
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land Improvements....................... $ 2.0 $ 0.1 $ (0.1) $ 0.0 $ 2.0
Buildings and Building Improvements..... 550.1 56.4 (12.4) (4.4) 589.7
Leasehold Improvements.................. 59.0 19.8 (4.6) 4.9 79.1
Operating & Other Equipment............. 511.8 168.3 (88.2) (6.2) 585.7
Furniture and Fixtures.................. 802.3 298.2 (163.4) 3.1 940.2
Central Office Equipment................ 4,032.5 1,158.4(c) (784.5) (0.4) 4,406.0
Outside Plant........................... 6,149.8 857.8(d) (267.5) (0.3) 6,739.8
Station Equipment....................... 1,039.2 68.8 (176.0) 1.2 933.2
Capital Leases.......................... 57.3 20.8 (59.5) 13.9 32.5
Depreciation Reserve Imbalance (b)...... (299.1) 273.1 0.0 62.6 36.6
----------- ----------- ----------- ------- ---------
Total Accumulated Depreciation........ $ 12,904.9 $ 2,921.7 $ (1,556.2) $ 74.4 $14,344.8
----------- ----------- ----------- ------- ---------
----------- ----------- ----------- ------- ---------
NOTES TO SCHEDULE VI
<FN>
(a) Depreciation as stated in the statements of income includes certain minor
amounts which are not credited to this account.
(b) Classification authorized by the FCC and state regulatory commissions to
improve capital recovery.
(c) The material components of additions to Central Office Equipment are analog
switching equipment, digital electronic switching equipment and circuit
equipment.
(d) The material components of additions to Outside Plant are aerial,
underground and buried cable, and conduit systems.
</TABLE>
72
<PAGE>
BELLSOUTH CORPORATION
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR UNCOLLECTIBLES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------
BALANCE AT CHARGED TO
BEGINNING OTHER BALANCE AT
OF CHARGED TO ACCOUNTS DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSE (A) (B) PERIOD
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1993 $ 123.0 211.8 131.0 316.2 $ 149.6
1992 $ 121.1 201.3 159.1 358.5 $ 123.0
1991 $ 112.4 198.7 151.0 341.0 $ 121.1
<FN>
- ------------------------
(a) Amounts include increases to this account for anticipated uncollectibles
related to purchased receivables and for recoveries of amounts previously
written off.
(b) Amounts include receivables written off as uncollectible and balances
related to subsidiaries sold.
</TABLE>
73
<PAGE>
BELLSOUTH CORPORATION
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B
- ----------------------------------------------------------- -------------------------------
ITEM CHARGED TO COSTS OR EXPENSES
- ----------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
1993 1992 1991
--------- --------- ---------
Maintenance................................................ $ 2,602.4 $ 2,529.7 $ 2,365.7
--------- --------- ---------
--------- --------- ---------
TAXES, OTHER THAN INCOME AND PAYROLL-RELATED
Property................................................. $ 426.7 $ 414.2 $ 406.7
Gross receipts........................................... 157.7 146.1 138.8
Other.................................................... 25.7 34.1 31.1
--------- --------- ---------
Total Taxes, Other Than Income and Payroll-related..... $ 610.1 $ 594.4 $ 576.6
--------- --------- ---------
--------- --------- ---------
</TABLE>
74
EXHIBIT 3b
Bylaws of BellSouth Corporation
<PAGE>
BELLSOUTH CORPORATION
Incorporated under the Laws
of the State of Georgia
on October l3, l983
Adopted
October 24, l983
BY-LAWS
As Amended
February 28, 1994
Secretary's Department
19A01 Campanile Building
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
<PAGE>
<?
>
CONTENTS
Article I......Shareholders
Article II.....Directors
Article III....Officers
Article IV.....Stock
Article V......Business Combinations
Article VI.....Seal
Article VII....Indemnity
Article VIII...Amendment of By-laws
<PAGE>
BY-LAWS
OF
BELLSOUTH CORPORATION
ARTICLE I
Shareholders
Section l. Annual Meeting. The annual meeting of the
shareholders for the election of Directors and for the
transaction of such other business as may properly come before
the meeting shall be held on such date and at such time and
place as the Board of Directors may by resolution provide.
Notice of any nominations of persons for election to the Board
of Directors or of any other business to be brought before an
annual meeting of shareholders by a shareholder must be
provided in writing to the Secretary of the Corporation not
later than the close of business on the sixtieth (60th) day nor
earlier than the close of business on the one hundred and
twentieth (120th) day prior to the date of the meeting. Such
shareholder's notice shall set forth (a) as to each person whom
the shareholder proposes to nominate for election as a director
all information relating to such person that is required to be
disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named
in the Proxy Statement as a nominee and to serving as a
director if elected, and evidence reasonably satisfactory to
the Company that such nominee has no interests that would
limit their ability to fulfill their duties of office; (b) as
to any other business that the shareholder proposes to bring
before the meeting, a brief description of the business desired
to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such
business of such shareholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the
shareholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (i) the name
and address of such shareholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the
class and number of shares of the Corporation that are owned
beneficially and held of record by such shareholder and such
beneficial owner.
Section 2. Special Meeting. A special meeting of the
shareholders may be called at any time by the Board of
Directors or the Chief Executive Officer and shall be called
upon written request to the Chief Executive Officer or
Secretary, signed by the holders of at least two-thirds of the
outstanding shares entitled to vote at such meeting. Such
written request shall specify the time and purpose of the
proposed meeting.
Section 3. Notice of Meetings of Shareholders. Written notice
of each meeting of shareholders, stating the place and time of
the meeting, shall be mailed to each shareholder entitled to
vote at such meeting at such shareholder's address shown on the
records of the Corporation not less than thirty nor more than
fifty days prior to such meeting. If the notice is for a
special meeting, the notice shall also include the purpose or
purposes for which the special meeting is being called and
shall indicate that the notice is being issued by or at the
direction of the person or persons calling the meeting.
Failure to receive notice of any meeting of shareholders shall
not invalidate the meeting. Notice of any meeting may be given
by or at the direction of the Chairman, the President, the
Secretary or by the person or persons calling such meeting.
Section 4. Quorum; Required Shareholder Vote. A quorum for
the transaction of business at any meeting of the shareholders
shall exist when the holders of forty per centum of the
outstanding shares entitled to vote are represented either in
person or by proxy. At any duly constituted meeting, or at any
adjournment thereof, the affirmative vote of the majority of
the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless
a greater vote is required by law, by the Articles of
Incorporation or by these By-laws. The holders of a majority of
the voting shares represented at a meeting may adjourn such
meeting to another time or place despite the absence of a
quorum.
Section 5. Ballots. All elections by shareholders shall be by
ballot.
Section 6. Proxies. A shareholder may vote either in person
or by a proxy which such shareholder has duly executed in
writing.
Section 7. Inspectors of Elections. The Board of Directors,
in advance of any shareholders' meeting, shall appoint an
Inspector or Inspectors to act at the meeting or any
adjournment, thereof. Any vacancy may be filled by appointment
of the Board in advance of the meeting or at the meeting by the
person presiding thereat.
ARTICLE II
Directors
Section l. Power of Directors. The Board of Directors shall
direct the management of the business and affairs of the
Corporation and may exercise all of the powers of the
Corporation, subject to any restrictions imposed by law, by the
Articles of Incorporation or by these By-laws.
<PAGE>
Section 2. Composition of the Board. The Board of Directors
of the Corporation shall consist of sixteen (16) natural
persons of the age of eighteen years or over. The Directors
shall be divided into three classes (of at least three
directors each), as nearly equal in number of directors as
possible, with the term of each class to be three years. Each
Director shall hold office for the term for which elected,
which term shall end at an Annual Meeting of Shareholders, and
until his successor shall have been elected and qualified, or
until his earlier retirement, resignation, removal from office,
or death. The authorized number of directors may be increased
or decreased from time to time by vote of a majority of the
then authorized number of directors or by the affirmative vote
of the holders of at least 75% of the voting power of all
shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class;
provided, however, that such number shall not be less than
nine.
Section 3. Election of Chairman of the Board and Vice
Chairmen of the Board. The Board of Directors may elect from
among their number a Chairman of the Board, and may also elect
from among their number a Vice Chairman or Vice Chairmen of the
Board (referred to in these By-laws as a "Vice Chairman" or
"Vice Chairmen").
Section 4. Chairman of the Board. The Chairman of the Board
(referred to in these By-laws as the "Chairman") shall preside,
when present, at all meetings of the Board of Directors and
shall have such other powers and duties as may be conferred
upon or assigned to the Chairman by the Board of Directors.
Section 5. Vice Chairmen of the Board. The Vice Chairman (or
if there be more than one Vice Chairman, the Vice Chairman
designated by the Chairman) of the Board, shall preside at
meetings of the Board of Directors in the absence of the
Chairman and at meetings of the Shareholders in the absence of
the Chief Executive Officer, and shall perform such other
duties as the Board or Chairman may assign.
Section 6. Meetings of the Board; Notice of Meetings; Waiver
of Notice. The Annual Meeting of the Board of Directors, for
the purpose of electing officers and transacting such other
business as may be brought before the meeting, shall be held
each year immediately following the Annual Meeting of the
shareholders. Regular meetings shall be held at such times and
places as the Board of Directors or Committees may determine,
and no notice of such regular meetings need be given. Special
meetings of the Board of Directors may be called at any time by
the Chief Executive Officer or by any two members of the
Executive Committee, and shall be called by the Chief Executive
Officer or the Secretary upon request in writing signed by two
or more directors and specifying the purpose or purposes of the
meeting.
<PAGE>
Notice of the time and place of such special meetings shall be
given to each Director, in person or by first class mail,
telegraph, cablegram or telephone, or by any other means
customary for expedited business communications, at least two
(2) days before the meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of
Directors need be stated in the notice of such meeting.
Section 7. Quorum; Vote Requirement. One-third of the number
of Directors fixed in these By-laws at any time shall
constitute a quorum for the transaction of business at any
meeting. When a quorum is present, the vote of a majority of
the Directors present shall be the act of the Board of
Directors, unless a greater vote is required by law, by the
Articles of Incorporation or by these By-laws.
Section 8. Action of Board Without Meeting. Any action
required or permitted to be taken at a meeting of the Board of
Directors or any committee thereof may be taken without a
meeting if written consent, setting forth the action so
taken,is signed by all the Directors or committee members and
filed with the minutes of the proceedings of the Board of
Directors or committee. Such consent shall have the same force
and effect as a unanimous affirmative vote of the Board of
Directors or committee, as the case may be.
Section 9. Committees. The Board of Directors, by resolution
adopted by a majority of all of the Directors, may designate
from among its members an Executive Committee and other
committees, each composed of three (3) or more Directors, and
may fix the quorum thereof. Any committee so designated shall
serve at the pleasure of and may exercise such authority as is
delegated by the Board of Directors, provided that no committee
shall have the authority of the Board of Directors to
(1) approve or propose to shareholders action required to be
approved by shareholders, (2) fill vacancies on the board of
directors or on any of its committees, (3) amend the Articles
of Incorporation, (4) adopt, amend, or repeal By-laws, or
(5) approve a plan of merger not requiring shareholder
approval.
Section l0. Executive Committee. The Executive Committee
shall consist of the Chairman and the President and such other
Directors as are designated from time to time by the Board of
Directors. The Chief Executive Officer may designate an
Alternate Chairman who shall preside during the absence or
disability of the Chief Executive Officer. The Executive
Committee shall, except as otherwise provided herein, by law or
by resolution of the Board of Directors, have all the authority
of the Board of Directors during the intervals between the
meetings of the Board of Directors.
<PAGE>
Section ll. Vacancies. A vacancy occurring in the Board of
Directors by reason of the removal of a Director by the
shareholders shall be filled by the shareholders, or, if
authorized by the shareholders, by the remaining Directors. Any
other vacancy occurring in the Board of Directors, including,
without limitation, any vacancy occurring by reason of an
amendment to these By-laws increasing the number of Directors,
may be filled by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board of
Directors, or, if the vacancy is not so filled, or if no
director remains, by the shareholders. A Director elected to
fill a vacancy shall serve for the unexpired term of his
predecessor in office or, if such vacancy occurs by reason of
an amendment to these By-laws increasing the number of
Directors, until the next election of Directors by the
shareholders and the election and qualification of the
successor.
Section l2. Telephone Conference Meetings. Members of the
Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board or
committee by means of telephone conference or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and
participation in a meeting pursuant to this section shall
constitute presence in person at such meeting.
Section l3. Removal of Directors. Subject to the rights of
the holders of any series of Preferred Stock then outstanding,
any director, or all directors, may be removed from office at
any time, with or without cause, only by the affirmative vote
of the holders of at least 75% of the voting power of all
shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class.
ARTICLE III
Officers
Section l. Executive Structure. The officers of the
Corporation shall be elected by the Board of Directors and
shall consist of a Chairman of the Board, if there be one, a
President, a Vice Chairman or Vice Chairmen of the Board, if
there be any and if elected as an officer or officers of the
Corporation, such number of Executive Vice Presidents and Vice
Presidents as the Board of Directors shall from time to time
determine, a Secretary, a Treasurer, a Comptroller and such
other officers or assistant officers as may be elected or
appointed by the Board of Directors. The Board shall designate
either the Chairman or the President as the Chief Executive
Officer of the Corporation and may designate a Chief Operating
Officer. Each officer shall hold office for the term for which
such officer has been elected or appointed and until such
officer's successor has been elected or appointed and has
qualified, or until such officer's earlier resignation, removal
from office, or death. Any two or more offices may be held by
the same person, except that neither the Chairman nor the
President shall serve as Secretary or Assistant Secretary.
Section 2. Chief Executive Officer. The Chief Executive
Officer shall, under the direction of the Board of Directors,
have responsibility for the general direction of the
Corporation's business, policies and affairs. The Chief
Executive Officer shall preside, when present, at all meetings
of the shareholders and at all meetings of the Executive
Committee. The Chief Executive Officer shall have such other
authority and perform such other duties as usually appertain to
the chief executive office in business corporations or as are
provided by the Board of Directors. The Chief Executive Officer
shall be empowered at any time and from time to time to issue
and promulgate rules, regulations and directives relating to
the conduct of the business and affairs of the Corporation, and
the Secretary of the Corporation shall maintain a record of
such rules, regulations and directives.
Section 3. Chief Operating Officer. If there be one, the
Chief Operating Officer shall, under the direction of the Chief
Executive Officer, have direct superintendence of the
Corporation's business, policies, properties and affairs. The
Chief Operating Officer shall have such further powers and
duties as from time to time may be conferred upon or assigned
to such officer by the Board of Directors or the Chief
Executive Officer. In the absence or disability of the Chief
Executive Officer, the Chief Operating Officer shall perform
the duties and exercise the powers of the Chief Executive
Officer.
Section 4. President. The President shall have such powers
and duties as from time to time may be conferred upon or
assigned to the President by the Board of Directors or the
Chief Executive Officer (if the President is not the Chief
Executive Officer).
Section 5. Vice Presidents. The Executive Vice Presidents, if
any, and Vice Presidents shall have such powers and duties as
from time to time may be conferred upon or assigned to them by
the Board of Directors, the Chairman, or the President. An
Executive Vice President or other officer may be responsible
for the assignment of duties to subordinate Vice Presidents.
Section 6. Secretary. The Secretary shall send all requisite
notices of meetings of the shareholders, the Board of
Directors, and the Executive Committee. The Secretary shall
attend all meetings of the shareholders, the Board of
Directors, and the Executive Committee, and shall keep a true
and faithful record of the proceedings. The Secretary shall
have custody of the seal of the Corporation, and of all
records, books, documents, and papers of the Corporation,
except those required to be in the custody of the Treasurer or
the Comptroller and except such subsidiary records as may be
kept in departmental offices. The Secretary shall sign and
execute all documents which require his signature and
execution, and shall affix the seal of the Corporation thereto
and attest the same when necessary. Assistant Secretaries
shall have such of the authority and perform such of the duties
of the Secretary as may be provided in these By-laws or
assigned to them by the Board of Directors or by the Secretary.
During the Secretary's absence or inability, the Secretary's
authority and duties shall be possessed by such Assistant
Secretary or Assistant Secretaries as the Board of Directors,
or the Secretary with the approval of the Chairman, or the
President may designate.
Section 7. Treasurer. The Treasurer shall receive and have
charge of all funds and securities of the Corporation. The
Treasurer shall deposit the funds to the credit of the
Corporation in such depositories as shall be approved from time
to time by the Chairman, the President, the Executive Vice
President or Vice President responsible for financial matters,
or the Treasurer, and the Treasurer shall disburse the same
only on written approval of the Comptroller or the
Comptroller's duly authorized representative, or under such
other rules and regulations and upon such other disbursement
instruments as the Chairman or the Executive Vice President or
Vice President responsible for financial matters may adopt or
authorize. The Treasurer shall keep full and regular books
showing all the Treasurer's receipts and disbursements.
Assistant Treasurers shall have such of the authority and
perform such of the duties of the Treasurer as may be provided
in these By-laws or assigned to them by the Board of Directors
or by the Treasurer. During the Treasurer's absence or
inability, the Treasurer's authority and duties shall be
possessed by such Assistant Treasurer or Assistant Treasurers
as the Board of Directors, or the Treasurer upon the approval
of the Chairman, the President or the officer responsible for
financial matters, may designate. The Treasurer and each
Assistant Treasurer shall give such security for the faithful
performance of such officer's duties as the Board of Directors
may require.
Section 8. Comptroller. The Comptroller shall be the
principal accounting officer of the Corporation and shall have
custody and charge of all books of account, except those
required by the Treasurer in keeping record of the work of the
Treasurer's office, and shall have supervision over such
subsidiary accounting records as may be kept in departmental
offices. The Comptroller shall have access to all books of
account, including the records of the Secretary and the
Treasurer, for obtaining information necessary to verify or
complete the records of the Comptroller's office. The
Comptroller or a duly authorized representative shall certify
to the authorizations and approvals pertaining to all vouchers;
and no payments from the general cash shall be made by the
Treasurer except on vouchers bearing the written approval of
the Comptroller or an authorized representative, unless the
Board of Directors, the Chairman or other officer responsible
for financial matters provides otherwise. Assistant
Comptrollers shall have such of the authority and perform such
of the duties of the Comptroller as may be provided in these
By-laws or assigned to them by the Board of Directors or by the
Comptroller. During the Comptroller's absence or inability, the
Comptroller's authority and duties shall be possessed by such
Assistant Comptroller or Assistant Comptrollers as the Board of
Directors, or the Comptroller upon the approval of the
Chairman, the President or other officer responsible for
financial matters may designate.
Section 9. Other Duties and Authority. Each officer, employee
and agent of the Corporation shall have such other duties and
authority as may be conferred upon such officer by the Board of
Directors or delegated to such officer by the Chairman, the
President or the responsible officer.
Section 10. Removal of Officers. Any officer may be removed
at any time by the Board of Directors with or without cause,
and such vacancy may be filled by the Board of Directors.
Section ll. Appointed Officers. The Board of Directors, the
Chairman, the President, or the officer responsible for
administrative matters may, from time to time, appoint
individuals to serve in such designated capacities for the
Corporation (such as Vice President, Assistant Vice President,
Assistant Secretary, Assistant Treasurer or Assistant
Comptroller) as may be deemed appropriate. Each appointed
officer shall perform such duties and shall have such authority
as shall be delegated to such officer from time to time by the
officer of the Corporation to whom such appointed officer is
responsible. Any duty or authority delegated to any appointed
officer pursuant to this Section may be withdrawn, with or
without cause, at any time by the Board of Directors, the
Chairman, the President, the officer responsible for
administrative matters or such officer delegating such duty or
authority to the appointed officer.
ARTICLE IV
Stock
Section l. Stock Certificates. The shares of stock of the
Corporation shall be represented by certificates in such form
as may be approved by the Board of Directors, which
certificates shall be signed or signed by facsimile by the
Chairman or President and the Secretary or Treasurer or an
Assistant Secretary or Assistant Treasurer of the Corporation;
and which shall be sealed with the seal of the Corporation or a
facsimile thereof. No share certificate shall be issued until
the consideration for the shares represented thereby has been
fully paid or otherwise provided for.
Section 2. Transfer of Stock. Shares of stock of the
Corporation shall be transferred on the books of the
Corporation upon surrender to the Corporation of certificates
representing the shares to be transferred accompanied by an
assignment in writing of such shares properly executed by the
shareholder of record or such shareholder's duly authorized
attorney-in-fact and with all taxes on the transfer having been
paid. The Corporation may refuse any requested transfer until
furnished evidence satisfactory to it that such transfer is
proper. The Board of Directors may make such rules concerning
the issuance, transfer and registration of stock, the
cancellation of stock and certificates, and requirements
regarding the replacement of lost, destroyed or wrongfully
taken stock certificates (including any requirement of an
indemnity bond prior to issuance of any replacement
certificate) as it deems appropriate.
Section 3. Registered Shareholders. The Corporation may deem
and treat the holder of record of any stock as the absolute
owner for all purposes and shall not be required to take any
notice of any right or claim of right of any other person.
Section 4. Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of
shareholders for any other purpose, the Board of Directors of
the Corporation may fix in advance a date as the record date
for any such determination of shareholders, such date in any
case to be not more than fifty days and, in the case of a
meeting of shareholders, not less than ten days prior to the
date on which the particular action requiring such
determination of shareholders is to be taken.
ARTICLE V
Business Combinations
Section 1. All of the requirements within Article 11 of
Chapter 2 of Title 14 of the Official Code of Georgia
Annotated, in the form enacted and amended by Georgia Laws,
l985, Page 527, shall be applicable to business combinations of
the Corporation.
Section 2. All of the requirements within Article 11A of
Chapter 2 of Title 14 of the Official Code of Georgia Annotated
in the form enacted by Georgia Laws 1988, Page 158, shall be
applicable to business combinations of the Corporation.
<PAGE>
ARTICLE VI
Seal
The common seal of the Corporation shall bear within
concentric circles the words "BellSouth Corporation" with the
word "Seal" in the center. The seal and its attestation may be
by facsimile.
ARTICLE VII
Indemnity
Section 1. Any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (including any action by or in
the right of the Corporation), by reason of the fact that such
person is or was a director or officer of the Corporation, or
is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by the
Corporation against expenses (including reasonable attorney's
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such
action, suit or proceeding, to the maximum extent permitted by,
and in the manner provided by, the Georgia Business Corporation
Code.
Section 2. The Board of Directors is expressly authorized on
behalf of the Corporation to enter indemnity agreements between
the Corporation and any director or officer of the Corporation,
or any person serving at the request of the Corporation as a
director, officer, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan,
trust or enterprise, in form and content acceptable to the
Board and substantially in the form of agreement submitted to
and approved by the shareholders of the Corporation. Such
agreements may provide that the Corporation shall indemnify
such persons and provide for procedural rights intended to
assure that appropriate indemnification is available against
expenses (including reasonable attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by such persons in connection with such action, suit
or proceeding. No indemnification may be made for liability
(i) for any appropriation, in violation of a director's duties,
of any business opportunity of the Corporation, (ii) for acts
or omissions not in good faith or constituting intentional
misconduct or a knowing violation of law, (iii) for the types
of liability set forth in Section 14-2-154 of the Georgia
Business Corporation Code, or (iv) for any transaction from
which the person derived an improper personal benefit.
ARTICLE VIII
Amendment of By-laws
The Board of Directors shall have the power to alter, amend
or repeal the By-laws or adopt new by-laws, but any by-laws
adopted by the Board of Directors may be altered, amended or
repealed and new by-laws adopted by the shareholders. The
shareholders may prescribe that any by-law or by-laws adopted
by them, including, without limitation, a by-law establishing
the number of Directors, shall not be altered, amended or
repealed by the Board of Directors. Action by the Board of
Directors with respect to the By-laws shall be taken by an
affirmative vote of a majority of all of the Directors then in
office. Action by the shareholders with respect to the By-laws
shall be taken by an affirmative vote of a majority of the
shares entitled to vote at an election of Directors.
Notwithstanding the preceding sentence, the affirmative vote
of the holders of at least 75% of the voting power of all
shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall
be required to amend or repeal, or adopt any provision
inconsistent with, Section 2 or l3 of Article II of these By-
laws, or this sentence.
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 10C-1
EXHIBIT 10c-1
Amendment dated January 1, 1994 to the BellSouth Corporation
Executive Long Term Disability and Survivor Protection Plan
<PAGE>
BELLSOUTH
EXECUTIVE LONG TERM
DISABILITY AND SURVIVOR PROTECTION PLAN
11/01/83
Revised 01/01/94
<PAGE>
BELLSOUTH CORPORATION
EXECUTIVE LONG TERM DISABILITY
AND
SURVIVOR PROTECTION PLAN
TABLE OF CONTENTS
Page
Section 1 Definition...........................................1
Section 2 Disability Allowance.................................4
Section 3 Group Life Insurance Benefit........................10
Section 4 Medical Expense Benefit.............................11
Section 5 Claim and Appeals...................................11
Section 6 General Provision...................................11
11/03/83
<PAGE>
BellSouth Corporation
Executive Long Term Disability and
Survivor Protection Plan
Section 1. Definitions
1. "Plan" shall mean the BellSouth Corporation's Executive Long Term
Disability and Survivor Protection Plan.
2. "Company" shall mean the BellSouth Corporation, a Georgia corporation,
or its successors.
3. "Pension Plan" shall mean the BellSouth Personal Retirement Account *
Pension Plan.
4. "Disability Benefit Plan" shall mean the Company's Short Term *
Disability Plan and Long-Term Disability Plan. *
5. "Supplemental Executive Retirement Plan" shall mean the BellSouth
Supplemental Executive Retirement Plan.
6. "Short Term Plan" shall mean the Company's Short Term Incentive Plan.
7. "Committee" shall mean the Employee's Benefit Committee, appointed by
the Company, which shall administer the Plan. *
- -1-
01/01/85
*Revised 01/01/94
<PAGE>
8. (a) "Participant," for purposes of the disability allowance under *
section 2, shall mean an employee on the active rolls of the
Company on or after the effective date of the Plan and who holds a
position that the Company's Board of Directors has designated to
be within the Company's Executive Group.
(b) "Participant," for purposes of the BellSouth Group Life Plan
benefit under Section 3, shall mean a former employee of the *
Company who was a participant under paragraph 8(a) above on the
last day of employment, if such former employee is eligible to
receive a disability allowance under Section 2, or is eligible *
to receive a Minimum Retirement Benefit under the Supplemental
Executive Retirement Plan.
(c) "Participant," for purposes of the medical benefits under Section *
4, shall mean a former employee of the Company who was *
a participant under paragraph 8(a) above on the last day of
employment, if such former employee is eligible to receive a
Disability Allowance under Section 2.
(d) For purposes of paragraphs 8(b), and 8(c), above, a former
employee shall be considered to be eligible to receive Disability
Allowance under Section 2 or a Minimum Retirement Benefit under
the Supplemental Executive Retirement Plan if he has met the
conditions specified in Section 2 or the Supplemental Executive
- -2-
01/01/85
*Revised 01/01/94
<PAGE>
Retirement Plan, even though the receipt of other benefits by such
former employee precludes his receipt of any benefits under
Section 2 or the Supplemental Executive Retirement Plan.
9. "Term of Employment" shall have the same meaning as the meaning
assigned to such expression in the Pension Plan.
10. (a) "Annual Basic Pay," shall mean the participant's annual base
salary rate (including those amounts previously deferred pursuant
to other plans) as determined by the Company on the last day the
participant was on the active payroll plus an amount determined
with reference to the Short Term Incentive Plan, but excluding all
other payments and all cash payments and distributions made under *
the BellSouth Executive Long Term Incentive Plan or Shareholder *
Return Cash Plan. The amount determined with reference to the
Short Term Incentive Plan shall be the lesser of the participant's
standard short term award in effect on the last day the
participant was on the active payroll or 60% of the participant's
annual base salary rate (including those amounts previously
deferred pursuant to other plans) on the last day participant *
was on active payroll.
- -3-
01/01/85
*Revised 01/01/94
<PAGE>
11. The use of personal pronouns of the masculine gender in the Plan is
intended to include both masculine and feminine genders.
Section 2. Disability Allowance
1. (a) A participant shall be considered to be "disabled" at any
time during the first twenty-six week period following the onset *
of a physical or mental impairment, if such impairment prevents
the participant from meeting the performance requirements of the
position held immediately preceding the onset of the physical or
mental impairment.
(b) A participant shall be considered to be "disabled" after the
first twenty-six week period following the onset of a physical or *
mental impairment if such impairment prevents the participant from
meeting the performance requirements of (1) the position held
immediately preceding the onset of the physical or mental
impairment, (2) a similar position, or (3) any appropriate
position within the Company which the participant would otherwise
be capable of performing by reason of the participant's background
and experience.
- -4-
09/30/83
*Revised 01/01/94
<PAGE>
(c) The Committee shall make the determination of whether a
participant is disabled within the meaning of paragraphs (a) and
(b) above and its determinations shall be final and conclusive. *
2. A participant who is disabled during a period described in paragraph
1(a) shall be eligible to receive a monthly disability allowance equal
to 100 percent of the participant's monthly base salary rate
(including those amounts previously deferred pursuant to other plans)
on the last day the participant was on the active payroll, reduced by
any amounts described in paragraph 5(a) of this Section 2 which are
attributable to the period for which benefits are provided under this
paragraph.
3. A participant who is disabled during a period described in paragraph
1(b) shall, prior to his sixty-fifth birthday, be eligible to receive
a monthly disability allowance equal to the greater of (i) sixty *
percent or (ii) the percentage determined by adding ten percentage |
points to participant's income replacement percentage under the basic |
Company-sponsored long-term disability coverage, of the participant's *
monthly base salary rate (including those amounts previously deferred
pursuant to other plans) on the last day the participant was on the
active payroll, reduced by any amounts described in paragraph 5(b) of
this Section 2 which are attributable to the period for which benefits
are provided under this paragraph.
- -5-
09/30/83
*Revised 01/01/94
<PAGE>
4. A participant who is disabled during a period described in paragraph
1(b) shall commencing with his sixty-fifth birthday or the start of
the period described in paragraph 1(b), if later, be eligible to
receive a monthly disability allowance equal to the greater of:
(i) one and one-quarter percent of the participant's annual basic
pay, as defined in paragraph 10 of Section 1, on the last day
the participant was on the active payroll, or
(ii) if the participant's term of employment has been five years
or more, ninety percent of the sum of (a) the monthly pension
the participant would have been entitled to receive
commencing at age sixty-five under the Company's Pension Plan
as in effect on the last day the participant was on the
active payroll, but ignoring any minimum service requirements
for eligibility to a service pension, if the period after the
last day the participant was on the active payroll and prior
to the participant's sixty-fifth birthday had been included
in the participant's term of employment under the Pension *
Plan, plus (b) the monthly pension the participant would have
been entitled to receive commencing at age 65 under the
Supplemental Executive Retirement Plan as in effect on the
last day the participant was on the active payroll, but
ignoring any minimum service requirements for eligibility to
a pension if the period after the last day the participant
was on the
- -6-
01/01/85
*Revised 01/01/94
<PAGE>
active payroll and prior to the participant's sixty-fifth
birthday had been included in the participant's term of
employment under the Supplemental Executive Retirement Plan, *
reduced by any amounts described in paragraph 5(c) of this
Section 2 which are attributable to the period for which
benefits are provided under this paragraph.
5. (a) The disability allowance determined for any period under paragraph
2 of this Section 2 shall be reduced by the sum of the following
benefits received by the participant which are attributable to the
period for which such disability allowance is provided: a
service, deferred vested, or disability pension under the Pension *
Plan or the Supplemental Executive Retirement Plan, a disability *
benefit under the disability benefit plan, any worker's *
compensation benefit, plus any other benefit payments required by
law on account of the participant's disability.
However, no reduction shall be made on account of any pension
under the Pension Plan or the Supplemental Executive Retirement *
Plan at a rate greater than the rate of such pension on the date
the participant first received such pension after his disability.
- -7-
01/01/85
*Revised 01/01/94
<PAGE>
(b) The disability allowance determined for any period under paragraph
3 of this Section 2 shall be reduced by the sum of the following
benefits received by the participant which are attributable to the
period for which such disability allowance is provided: a *
service, deferred vested, or disability pension under the Pension |
Plan or the Supplemental Executive Retirement Plan, a disability |
benefit under the disability benefit plan, any other retirement |
income payments from the Company, any worker's compensation |
benefit, plus any Social Security Insurance Benefit. *
However, no reduction shall be made on account of any pension
under the Pension Plan or the Supplemental Executive Retirement
Plan at a rate greater than the rate of such pension on the date
the participant first received such pension after his disability,
and no reduction shall be made on account of any Social Security
Benefit at a rate greater than the rate which the participant
would have first been eligible to receive after his disability and
as if no other member of his family were eligible for any Social
Security Benefit.
Furthermore, the Board of Directors of the Company, in its
discretion, may reduce the disability allowance by the amount of
outside compensation or earnings of the participant for work
performed by the participant during the period for which such
disability allowance is provided.
- -8-
01/01/85
*Revised 01/01/94
<PAGE>
(c) The disability allowance determined for any period under paragraph
4 of this Section 2 shall be reduced by the sum of the following
benefits received by the participant which are attributable to the
period for which such disability allowance is provided: a *
service, deferred vested, or disability pension under the Pension |
Plan or the Supplemental Executive Retirement Plan, a disability |
benefit under the disability benefit plan, any other retirement |
income payments from the Company, plus any worker's compensation |
benefit. However, no reduction shall be made on account of any |
pension under the Pension Plan or the Supplemental *
Executive Retirement Plan at a rate greater than the rate of such
pension on the date the participant first received such pension
after his disability.
6. For purposes of paragraphs 1(a) and 1(b) of this Section 2, the
measurement of time following the onset of a physical or mental
impairment shall coincide with the measurement of time used to
calculate periods of disability benefits under the disability benefit
plan. Successive periods of physical or mental impairment shall be *
counted together in computing the periods during which the participant
shall be entitled to the benefits provided under paragraph 2 or *
paragraph 3 of this Section 2, except that any disability absence *
after the participant has been continuously engaged in the performance
of duty for thirteen weeks shall be considered to
- -9-
09/30/83
*Revised 01/01/94
<PAGE>
commence a new period of physical or mental impairment under paragraph
1(a), so that such participant shall be entitled during such new
period to the benefits provided under paragraph 2 of this Section 2.
7. With respect to a participant not subject to mandatory retirement at
age 65 under the Age Discrimination in Employment Act *
(29 U.S.C. 6721 et. seq.), the period of eligibility for the *
disability allowance provided in paragraph 3 of this section 2 and the
period of eligibility for the disability allowance provided in
paragraph 4 of this section 2, shall be the period described in
paragraph 3, and the period described in paragraph 4, respectively, or
such other period as is required under the Age Discrimination in
Employment Act or under any applicable governing regulations or
interpretations thereunder.
Section 3 Group Life Insurance Benefit
A participant described in paragraph 8(b) of Section 1 who has not
retired on a service or a disability pension under the Pension Plan, *
shall be entitled to the same rights and benefits under the BellSouth
Group Life Plan as if the employee had retired on a service pension or a
disability pension under the Pension Plan. Benefits provided by this
section shall be in lieu of any other rights to continued coverage *
- -10-
01/01/85
*Revised 01/01/94
<PAGE>
which a participant may have under the BellSouth Group Life
Plan. *
Section 4 Medical Expense Benefits
A participant described in paragraph 8(c) of Section 1 who has not
retired on a service pension or a disability pension under the Pension
Plan, shall be entitled to the same rights and benefits under the
Company's medical plan and dental plan as an employee who retired on a *
service pension or a disability pension under the Pension Plan.
Section 5. Claims and Appeals
Any claim under the Plan by a Participant or anyone claiming through a
Participant shall be presented to the Committee. Any person whose
claim under the Plan has been denied may, within 60 days after receipt
of notice of denial, submit to the Compensation Committee of the
Company's Board of Directors a written request for review of the
decision denying the claim. The Compensation Committee of the
Company's Board of Directors shall determine conclusively for all
parties all questions arising in the administration of the Plan.
Section 6. General Provisions
1. The Plan shall be effective on January 1, 1984.
2. The rights of a participant or his spouse to benefits under the Plan
shall not be subject to assignment or alienation.
- -11-
01/01/85
*Revised 01/01/94
<PAGE>
3. All costs of providing the benefits under the Plan shall be charged to
the operating expense accounts of the Company when and as paid.
4. The Company may from time to time make changes in the Plan and the
Company may terminate the Plan. In addition, the Company's senior *
human resources officer with the concurrence of the Company's general |
counsel shall be authorized to make minor or administrative changes *
to the Plan, as well as changes dictated by the requirements of
federal or state statutes applicable to the Company or authorized or
made desirable by such statutes. Such changes or termination shall
not affect the rights of any participant or surviving spouse, *
without his consent, to any benefit under the Plan to which such |
participant or surviving spouse may have previously become entitled *
as a result of a disability, death or termination of employment which
occurred prior to the effective date of such change or termination.
5. In case of accident resulting in injury to or death of a participant
which entitles the participant or his surviving spouse to benefits
under the Plan, the participant or his surviving spouse may elect to
accept such benefits or to prosecute such claims at law as the
participant or the surviving spouse may have against the Company. If
election is made to accept the benefits under the Plan, such election
shall be in writing and shall release the Company from all claims and
demands which the participant or his surviving spouse may have against
- -12-
11/02/83
*Revised 01/01/94
<PAGE>
it, otherwise than under this Plan or under any other Plan maintained
by the Company, on account of such accident. The Committee, in its
discretion, may require that election described above shall release
any other company connected with the accident, including any company
participating in the Pension Plan. The right of the Participant to a
disability allowance under Section 2 of the Plan shall lapse if
election to accept such benefits, as above provided, is not made
within sixty days after injury, or within such greater time as the
Committee shall, by resolution duly entered on its records, fix for
the making of such election.
6. Should claim other than under this Plan or under any other plan
maintained by the Company be presented or suit brought against the
Company, against any other company participating in the Pension Plan
or against any other company with which arrangements have been made,
directly or indirectly, for interchange of benefit obligations, as
described in the Pension Plan, for damages on account of injury or
death of a participant, nothing shall be payable under this Plan on
account of such injury or death as provided in paragraph 7 of this
Section 6; provided however, that the Committee may, in its discretion
and upon such terms as it may prescribe waive this provision if such
claims be withdrawn or if such suit be discontinued.
- -13-
09/30/83
<PAGE>
7. In case any judgment is recovered against the company or any
settlement is made of any claim or suit on account of the injury or
death of a participant, and the total amount which would otherwise
have been payable under the Plan and under any other Plan maintained
by the Company is greater than the amount paid on account of such
judgment or settlement, the lessor of (1) difference between such two
amounts, or (2) the amount which would otherwise have been payable
under this Plan, may in the discretion of the Committee, be
distributed to the beneficiaries who would have received benefits
under this Plan.
8. All benefits provided under the Plan with respect to a participant
shall be forfeited and canceled in their entirety if the participant,
without the consent of the Company and while employed by the Company
or after termination of such employment, becomes associated with,
becomes employed by or renders services to or owns interest in any
business (other than as a shareholder with a non-substantial interest
in such business) that is competitive with the Company or with any
business with which a subsidiary or affiliated company has a
substantial interest, as determined by the Committee. All benefits *
provided under the Plan with respect to a participant shall be
forfeited and canceled in their entirety if the participant is
discharged by the Company for cause or the participant engages in
misconduct in connection with the participant's employment.
- -14-
01/01/85
Revised 01/01/94
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 10K-6
EXHIBIT 10k-6
Amendment dated July 13, 1993 to the
BellSouth Management Savings and Employee Stock Ownership Plan
<PAGE>
</11480/1
>
AMENDMENT TO THE
BELLSOUTH MANAGEMENT SAVINGS AND
EMPLOYEE STOCK OWNERSHIP PLAN
This Amendment is made to the BellSouth Management Savings
and Employee Stock Ownership Plan (the "Plan"), which was amended
and restated effective as of July 1, 1989, and subsequently
amended from time to time. The BellSouth Savings Plan Committee,
under authority delegated by the Nominating and Compensation
Committee to approve amendments to the Plan, hereby amends the
Plan, effective as of April 1, 1993, as follows:
1.
By deleting the second sentence in Section 5.1(a) and
substituting therefor the following:
For each twelve-month period beginning April 1, such
matching percentage shall be based on the financial
component of the BellSouth Corporation T.E.A.M.
Excellence Award for managers for the preceding
calendar year, as follows:
Financial Performance
(as a percentage of
standard performance) Matching Percentage
0 - 94% 55%
95% - 119% 60%
120% - 149% 65%
150% - 185% 70%
more than 185% 75%
<PAGE>
2.
By deleting the first sentence in Section 5.1(b) in its
entirety and substituting therefor the following:
(b) For so long as ESOP Dividends are deductible for
federal income tax purposes under Code section 404(k)
(as in effect on January 1, 1990) the matching
percentage under Section 5.1(a) for each twelve-month
period commencing April 1 shall be increased in
relation to increases in the per share average price of
BellSouth Corporation common stock, if any, for the
preceding calendar year, as follows:
Annual Stock Percentage Points Added
Price Increase to Matching Percentage
2% or less 4%
3% 6%
4% 8%
5% 10%
6% 12%
7% 14%
8% or more 16%
APPROVED this _____ day of _____________, 1993.
BELLSOUTH SAVINGS PLAN COMMITTEE
_______________________________________
H.C. Henry, Jr.
Executive Vice President - Corporate Relations
Chairman
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 10K-7
[SEGMENT-CONTENT]
EXHIBIT 10k-7
Amendment dated October 27, 1993 to
Bellsouth Management Savings and Employee Stock Ownership Plan
<PAGE>
<- ? -
>
AMENDMENT TO THE
BELLSOUTH MANAGEMENT SAVINGS AND
EMPLOYEE STOCK OWNERSHIP PLAN
This Amendment is made to the BellSouth Management Savings
and Employee Stock Ownership Plan (the "Plan"), which was amended
and restated effective as of July 1, 1989, and subsequently has
been amended from time to time. The BellSouth Savings Plan
Committee, under authority delegated by the Board of Directors to
approve amendments to the Plan, hereby amends the Plan, effective
as of January 1, 1994, as follows:
1.
By deleting Section 4.4 and substituting therefor the
following:
4. Changes. A Participating Employee may elect in
accordance with Committee rules, not more than once in any
calendar month, to change his contribution percentages for
his Before-Tax Basic Contributions, Before-Tax Supplemental
Contributions, After-Tax Basic Contributions and After-Tax
Supplemental Contributions.
2.
By deleting the phrase "in any three consecutive month
period" that begins in the first lines of clauses (1) and (2) of
Section 7.3 and substituting in lieu thereof the phrase "in any
calendar month".
<PAGE>
3.
By deleting Sections 9.1.c and d and substituting therefor
the following:
c. Form of Distribution. The form in which
distributions under the Plan shall be made shall be
determined as follows:
(1) Except as otherwise provided in Paragraph d
below, the payment of any distribution to a
Participating Employee from the Plan shall be in
the form selected by the Participating Employee by
written notice delivered to the Committee, subject
to the terms and limitations set forth in this
Paragraph c. The Participating Employee may
choose between (A) a single lump-sum payment and
(B) equal annual installments (adjusted for
investment earnings and losses between payments)
paid over a term certain.
(2) If the value of the Units in the Participating
Employee's Account is less than or equal to $3,500
at the time the distribution of any portion of the
Units commences, or if the payment constitutes a
withdrawal, payment of the Units shall be made in
the form of a single lump-sum payment without the
consent of the Participating Employee.
<PAGE>
(3) If any distribution is made in the form of a
single lump-sum payment, such distribution shall
include interest on the cash portion of such
distribution (other than the cash representing the
fractional share amount under Section 9.1.a) (A)
for the period which begins on the first day of
the month which immediately follows the date as of
which his Units are valued ("valuation date") for
purposes of such distribution and which ends on
the date of the check which represents the cash
portion (other than the cash representing the
fractional share amount under Section 9.1.a) of
such distribution, or (B) for a 45-day period,
whichever is less. Such interest shall be based
on the yield of 13-week United States Treasury
Bills sold at a discount on the valuation date or
on the immediately previous auction date if there
was no auction on the valuation date.
(4) If a Participating Employee selects payment in
the form of annual installments over a term
certain, the Participating Employee must select
payments over a period of either (A) 10 years or
(B) the life expectancy of such Participating
Employee. Notwithstanding anything herein to the
contrary, distributions from the Plan must satisfy
the requirements of Code section 401(a)(9)(G).
This means that the incidental benefit rules as
described in Treasury Regulation section
1.401(a)(9)-2 shall be satisfied.
(5) If a Participating Employee selects payment in
the form of annual installments over a term
certain, the Participating Employee may later
elect to receive a single lump-sum payment of the
remaining Units in his Account, which payment
shall be made in accordance with the terms of
Paragraph c(3), above.
(6) Upon the death of a Participating Employee,
any Units credited to his Account shall be
distributed in the form of a single lump-sum
payment.
(7) If a Participating Employee is to receive or
begin receiving benefits on or before April 1 of
one calendar year as a result of his attaining age
70? during the preceding calendar year (as
provided in Section 9.5), the distribution shall
be paid in the form of a single lump-sum payment
unless, on or before November 1 of the calendar
year in which the Participating Employee attains
age 70? (or such other date as the Committee may
provide), he elects to commence receiving his
distribution in the form of annual installments as
permitted in Paragraph c(4) above and in Code
section 401(a)(9) and the regulations issued
thereunder.
d. Other Distributions. In the event that the
Committee determines that a form of benefit other than the
single lump-sum payment or installments described in Section
9.1.c is required for a particular Participating Employee by
ERISA, by Code section 409(o) or by any other section of the
Code or by other applicable law, the distribution to such
Participating Employee shall be made in accordance with such
determination; provided, however, that this Section 9.1.d
shall not create any right to an alternate form of benefit
for Participating Employees generally or for any Units
credited to the Account of a particular Participating
Employee which are not subject to such requirements.
4.
By deleting the first two sentences of Section 9.2 and
substituting therefor the following:
Not more than once in any consecutive six-calendar
month period for a Participating or former
Participating Employee, such person may make a
withdrawal as of the last day of a calendar month by
giving notice to the Committee or its designated
representative in the manner prescribed in
administrative rules adopted by the Committee from time
to time. Such notice shall specify the amount to be
withdrawn, which amount may equal all or any portion of
the Units (except to the extent such Units represent
non-vested amounts for a former Participating Employee
whose employment terminated before July 1, 1989)
credited to such person's Account (excluding for this
purpose a Participating Employee's ESOP Account, but
including a former Participating Employee's ESOP
Account); provided, that in the case of a Participating
Employee who is not a former Participating Employee,
who has not attained age 59? or who is not disabled as
of the valuation date with respect to such withdrawal,
no withdrawal may be made with respect to Units in his
Before-Tax Basic Account and Before-Tax Supplemental
Account (except as otherwise provided in Section 9.3).
5.
By deleting Section 9.4.a(2) and substituting therefor the
following:
(2) subject to the terms of Paragraph c below, the
distribution of all of the Units in such Participating
Employee's Account shall be made or commenced as soon as
practicable following the end of the calendar month in which
such separation is effective; provided, however, if the
value of such Units exceeds $3,500, a Participating Employee
may elect in accordance with Committee rules to defer
distribution or the commencement of distributions until a
<PAGE>
future month, but not later than April 1 of the calendar
year following the calendar year in which the Participating
Employee attains age 70?.
6.
By deleting section 9.4.b and substituting therefor the
following:
b. Death. If a Participating Employee dies while an
Employee, all the Units in his Account as of the end of the
calendar month in which he dies shall be distributed
pursuant to Sections 9.1.c and 17. Contributions made by or
on behalf of such Participating Employee under Section 4 for
the calendar month in which he dies will be refunded to his
beneficiary in accordance with Committee rules except to the
extent such contributions are reflected in the value of the
Units distributable to his beneficiary under Sections 9.1.c
and 17.
7.
By adding a new Section 9.4.c that reads as follows:
c. Delay Upon Reemployment. If a Participating
Employee becomes eligible to receive or begins receiving a
benefit payment in accordance with the terms of Paragraph a
above and subsequently is reemployed by an Affiliate or
Subsidiary prior to the time his entire Account has been
distributed, the distribution to such Participating Employee
shall be delayed or cease until such Participating Employee
<PAGE>
again becomes eligible to receive a distribution from the
Plan pursuant to the terms of the Plan.
8.
By deleting the first two sentences of Section 9.5 and
substituting therefor the following:
Unless a Participating Employee elects otherwise under the
provisions of Section 9.4.a(2), distribution of all of the
Units in a Participating Employee's Account shall be made or
commenced to the Participating Employee no later than 60
days after the later of (a) the close of the Plan Year in
which the Participating Employee attains age 65, (b) the
close of the Plan Year in which the Participating Employee
separates form service or (c) such earlier date as required
under Code section 409(o). Distributions in any event shall
begin no later than the April 1 of the calendar year
following the calendar year in which the Participating
Employee attains age 70? even if the Participating Employee
has not retired under this Plan, and, unless a contrary
election is in effect under Section 9.1.c, all of the Units
in a Participating Employee's Account shall be distributed
in a lump sum to the Participating Employee whenever any
distribution (in addition to amounts otherwise
distributable) is required in order to satisfy the minimum
distribution rules under Code section 401(a)(9).
<PAGE>
9.
By deleting clauses (1) and (2) of Section 11.1 and
substituting therefor the following:
(1) for an individual who received a withdrawal under
Section 9.2 or a distribution in the form of a single
lump-sum payment under Section 9.4.a, such individual
makes a lump-sum payment to the Committee in cash
within the time period provided for such payment under
Section 11.2 in an amount equal to the amount of cash
plus the value on the date of withdrawal or
distribution of shares which the Participating Employee
received in the withdrawal or distribution; or
(2) for an individual who terminated employment but who
did not receive a distribution in the form of a single
lump-sum payment under Section 9.4.a, such individual
is reemployed as an Employee before he has five
consecutive Breaks in Service.
10.
By deleting the first sentence of the last paragraph of
Section 21 and substituting therefor the following:
BellSouth shall have the right to completely terminate this
Plan, and, as soon as practicable after the complete
termination of this Plan, all Participating Employees who
are then Employees shall be fully vested and all
Participating Employees shall receive a distribution in the
<PAGE>
form of a single lump-sum payment of all the vested Units in
their Accounts as soon as permissible under Code section
401(k) and Code section 411(a)(11).
APPROVED this day of , 1993
BELLSOUTH SAVINGS PLAN COMMITTEE:
H.C. Henry, Jr.
Executive Vice President - Corporate Relations
Chairman
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 10T-2
EXHIBIT 10t-2
Amendments dated October 15, 1993 and November 12, 1993 to the
BellSouth Personal Retorement Account Pension Plan
<PAGE>
</24179/1
>
AMENDMENT TO THE
BELLSOUTH PERSONAL RETIREMENT ACCOUNT PENSION PLAN
This Amendment is made to the BellSouth Personal Retirement
Account Pension Plan (the "Plan"), which was adopted effective
July 1, 1993, as a restatement and amendment of the BellSouth
Management Pension Plan. The BellSouth Employees' Benefit Claim
Review Committee, acting under authority delegated by the Board
of Directors of BellSouth Corporation, hereby amends the Plan as
follows, effective July 1, 1993:
1.
Amend Section 5 of the Plan by deleting the first paragraph
of Paragraph 5.06 and substituting therefor the following:
Except as provided in this Section, a Participant must file
a written request with the Benefit Committee to have his
pension commence.
2.
Amend Section 7 of the Plan by deleting the third and fourth
sentences of subparagraph 7.02(b) and substituting therefor the
following:
The election must be made during the 30 to 90-day period
(the length of which shall be set by BellSouth) following
receipt of the notification and the election form and may be
revoked at any time during such period by filing a new
election form; provided, however, that a Participant may
<PAGE>
waive such period by appropriately completing and signing
the election form, and his election may not be revoked
following such waiver.
APPROVED this 15th day of October, 1993
EMPLOYEES' BENEFIT CLAIM REVIEW COMMITTEE:
________________________________________________
H. C. Henry, Jr.
Executive Vice President - Corporate Relations,
Chairman
<PAGE>
AMENDMENT TO THE
BELLSOUTH PERSONAL RETIREMENT ACCOUNT PENSION PLAN
This Amendment is made to the BellSouth Personal Retirement
Account Pension Plan (the "Plan"), which was adopted effective
July 1, 1993, as a restatement and amendment of the BellSouth
Management Pension Plan. The BellSouth Employees' Benefit Claim
Review Committee, acting under authority delegated by the Board
of Directors of BellSouth Corporation, hereby amends the Plan
effective as of July 1, 1993, as follows:
1.
Amend Section 5.05 of the Plan by adding the following
immediately prior to the period at the end of the first sentence
thereof:
; provided, however, if such a Participant terminates
employment during the period beginning July 1, 1993, and
ending June 30, 1996, he may Elect to have his pension
payable commencing during such period
2.
Amend Section 7 of the Plan by deleting the third and fourth
sentences of subparagraph 7.02(b) and substituting therefor the
following:
The election must be made during the 90 day period following
receipt of notification and the election form and may be
revoked at any time during such 90-day period by filing a
<PAGE>
new election form; provided, however, that a Participant may
waive the 90-day period by appropriately completing and
signing the election form, and his election may not be
revoked following such waiver.
3.
Amend Section 7 of the Plan by deleting subparagraph 7.08(a)
in its entirety and substituting therefor the following:
(a) The Participants to whom the lump sum settlement
option described in this Paragraph 7.08 apply are the vested
Employees of Participating Companies who retire or terminate
employment during the period beginning July 1, 1993, and
ending June 30, 1996.
4.
Amend Section 7 of the Plan by deleting subparagraph 7.08(d)
in its entirety and substituting therefor the following:
(d) A Participant who wants to Elect to receive a lump
sum settlement as described above must do so in accordance
with the procedures in Paragraph 7.02.
APPROVED this 12th day of November, 1993
EMPLOYEES' BENEFIT CLAIM REVIEW COMMITTEE:
____________________________________________________________
H. C. Henry, Jr.
Executive Vice President - Corporate Relations,
Chairman
<PAGE>
<PAGE>
<PAGE>
<PAGE>
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 10Y
EXHIBIT 10y
BellSouth Enterprises, Inc. Trust Under Executive Benefit Plans
<PAGE>
</23014/2
>
<- ? -
>
BELLSOUTH ENTERPRISES, INC.
TRUST UNDER EXECUTIVE BENEFIT PLAN(S)
This Agreement made this _____ day of _________, 1994, by
and between BellSouth Corporation, a Georgia corporation
(BellSouth), BellSouth Enterprises, Inc., a Georgia corporation
wholly-owned by BellSouth (Company), and Bankers Trust Company, a
New York corporation (Trustee);
(a) WHEREAS, Company has adopted the nonqualified deferred
compensation Plan(s) as listed in Appendix A;
(b) WHEREAS, Company has incurred or expects to incur
liability under the terms of such Plan(s) with respect to the
individuals participating in such Plan(s);
(c) WHEREAS, Company wishes to establish a trust
(hereinafter called "Trust") and to contribute to the Trust
assets that shall be held therein, subject to the claims of
Company's creditors in the event of Company's Insolvency, as
herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in
the Plan(s);
(d) WHEREAS, BellSouth and Trustee on April 25, 1990
executed a trust agreement for the benefit of certain officers
and certain key managers of BellSouth and its affiliates
<PAGE>
(including Company) who participate in the Plan(s) (the
"Predecessor Trust"), and BellSouth and Trustee desire to amend
and restate the Predecessor Trust in all respects, insofar as it
relates to Company's obligations (but not obligations of
subsidiary or other affiliated entities) to pay benefits under
the Plan(s), in the form of this Trust Agreement;
(e) WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and shall not
affect the status of the Plan(s) as an unfunded plan maintained
for the purpose of providing deferred compensation for a select
group of management or highly compensated employees or as an
excess benefit plan for purposes of Title I of the Employee
Retirement Income Security Act of 1974;
(f) WHEREAS, it is the intention of Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan(s);
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
<PAGE>
Section 1. Establishment of Trust
(a) BellSouth, Company and Trustee hereby amend and restate
in all respects the Predecessor Trust in the form of this Trust
Agreement insofar as Predecessor Trust relates to Company's
obligations (but not obligations of subsidiary or other
affiliated entities) to pay benefits under the Plan(s), and no
benefit payments (or any other action or obligation contemplated
by the Predecessor Trust) shall be satisfied hereafter under the
Predecessor Trust with respect to such obligations. Company
hereby deposits with Trustee in trust $ , which,
together with the assets, if any, transferred from the
Predecessor Trust to the Trust, shall become the initial
principal of the Trust to be held, administered and disposed of
by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code
of 1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of Company and
shall be used exclusively for the uses and purposes of Plan
<PAGE>
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan(s) and this Trust
Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets
held by the Trust will be subject to the claims of Company's
general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e)(1) Company, in its sole discretion, may at any
time, or from time to time, make additional deposits of cash
or other property acceptable to Trustee in trust with
Trustee to augment the principal to be held, administered
and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel any such
additional deposits under this subsection (e)(1).
(2) If, as of the last day of a fiscal year of the
Trust, the funding level of the Trust shall be less than
eighty percent (80%) of the Trust's funding level as of the
last day of any of the five (5) most recently preceding
fiscal years (taking into account contributions made under
this Section 1(e)(2) for each such year), BellSouth shall
notify Trustee of such situation and Company shall make an
<PAGE>
additional contribution to the Trust as soon as possible,
but in no event longer than one hundred twenty (120) days
following the last day of the fiscal year. Such additional
contribution shall be in an amount sufficient to bring the
Trust's funding level at least equal to the Trust's funding
level as of the last day of the fiscal year among the five
(5) most recently preceding fiscal years on which the
Trust's funding level was highest. For these purposes,
"funding level" shall mean the ratio that the fair market
value of the assets in the Trust bears to the aggregate
Current Liability (as defined in Section 1(e)(3) hereof)
under the Plan(s). Such funding level shall be determined
by BellSouth; provided, however, that following the
engagement of a Trustee's Contractor, such determination
shall be made by Trustee's Contractor. For purposes of this
Section 1(e)(2), the Trust's funding level shall be
determined as of the last day of each fiscal year, except
that in determining the amount of the required contribution,
(1) the fair market value of the Trust's assets shall be
determined as of the valuation date most recently preceding
the date on which such contribution is made and (2) the
funding level for the fiscal year in which the Trust is
initially funded on more than a nominal level shall not be
less than the funding level of the Trust on the date on
which it is so funded. The Trustee may rely on the accuracy
of all such determinations. In no event shall such
<PAGE>
additional contribution be required if, as of the last day
of the fiscal year, the fair market value of the Trust's
assets is one hundred percent (100%), or greater, of the
aggregate Current Liability of Company under the Plan(s).
(3) For purposes of this Trust, "Current Liability"
shall mean the amount required to pay each Plan participant
or beneficiary the benefits to which Plan participants or
their beneficiaries would be entitled pursuant to the terms
of the Plan(s), to the extent such benefits are obligations
of Company (and not obligations of subsidiary or other
affiliated entities). The Current Liability on any date
with respect to a Plan shall be determined as if the Plan
terminated as of such date using an interest rate equal to
the Pension Benefit Guaranty Corporation valuation interest
rate for immediate annuities as in effect on such date, the
1983 Group Annuity Mortality Table published by the Society
of Actuaries, and reasonable actuarial calculation
principles consistently applied. Current Liability shall be
determined, as of the last day of each fiscal year of the
Trust and at such additional times as are necessary to
implement the provisions of this Trust Agreement, by
BellSouth; provided, however, that following the engagement
of a Trustee's Contractor, such determinations shall be made
by Trustee's Contractor. The Trustee may rely on the
accuracy of all such determinations.
<PAGE>
(f) Upon a Change of Control, BellSouth shall promptly
notify Trustee thereof and, as soon as possible, but in no event
longer than one hundred twenty (120) days following the Change of
Control, as defined herein, Company shall make an irrevocable
contribution to the Trust in an amount that is sufficient to pay
each Plan participant or beneficiary the benefits to which Plan
participants or their beneficiaries would be entitled pursuant to
the terms of the Plan(s), to the extent such benefits are
obligations of Company (and not obligations of subsidiary or
other affiliated entities), as of the date on which the Change of
Control occurred. Such contribution shall be in an amount equal
to the excess, if any, of the aggregate Current Liability as of
the date on which the Change of Control occurred over the fair
market value of the Trust's assets as of the valuation date most
recently preceding the date on which such contribution is made.
Thereafter, Company shall make an additional contribution each
fiscal year to the Trust, as soon as possible, but in no event
longer than one hundred twenty (120) days following the last day
of each such fiscal year, in an amount equal to the excess, if
any, of the aggregate Current Liability under the Plan(s) as of
the last day of the fiscal year over the fair market value of the
Trust's assets as determined on the valuation date most recently
preceding the date on which such contribution is made. The
amount of all such contributions shall be determined by Trustee's
Contractor. The Trustee may rely on the accuracy of all such
determinations.
<PAGE>
(g) If, as of a Distribution Date with respect to
outstanding rights to purchase Series A First Preferred Stock,
under the terms of and as defined in a Rights Agreement between
BellSouth and Chemical Bank, as Rights Agent, under an agreement
originally dated November 27, 1989 (a "Distribution Date"), the
aggregate Current Liability exceeds the fair market value of the
Trust's assets (such fair market value determined as of the
valuation date most recently preceding such Distribution Date),
Company shall be required to make an additional contribution to
the Trust in an amount equal to such excess or, at Company's
option, to obtain a letter of credit, or a series of letters of
credit, adequate to fund such amount as of such Distribution Date
under the Plan(s) and maintain such letter(s) of credit until
such time as the aggregate Current Liability no longer exceeds
the fair market value of the Trust's assets. The determination
of whether the aggregate Current Liability exceeds the fair
market value of the Trust's assets upon a Distribution Date and,
if so, the amount of such excess, shall be made by BellSouth;
provided, however, that following the engagement of a Trustee's
Contractor, such determinations shall be made by Trustee's
Contractor. The Trustee may rely on the accuracy of all such
determinations. Any such letter of credit, or series of letters
of credit, shall be part of the general assets of Company and
shall not be an asset of this Trust and, unless otherwise agreed
to in writing by Trustee, Trustee shall have no responsibility
<PAGE>
whatsoever with respect to the adequacy of, or selection of the
issuer or issuers of, any such letter or letters of credit.
(h) If, in any five (5) consecutive calendar year period,
(i) there are five (5) or more final determinations by courts of
competent jurisdiction that Company has failed to pay (after
reasonable notice and demand for payment) any benefit due under
the terms and conditions of a Plan and that there was no material
issue of fact or law respecting Company's obligation to make such
benefit payment, or (ii) there are two (2) or more final
determinations by courts of competent jurisdiction, in lawsuits
instituted after reasonable notice and demand with respect
thereto, in which the court determines that Company had acted in
bad faith and with a clear and deliberate disregard for Company's
obligations under the Plan(s), there shall be deemed to have
occurred a Change of Control as defined in this Trust Agreement
and BellSouth shall give Trustee prompt written notice of such
event. The term "final determination" means a determination with
respect to which all rights of appeal or to request a review, a
rehearing or redetermination have been exhausted or have lapsed.
Section 2. Payments to Plan Participants and Their
Beneficiaries
(a) BellSouth or the Trustee's Contractor if one shall have
been engaged, shall deliver to Trustee a schedule (the "Payment
<PAGE>
Schedule") that indicates the amounts payable by Company in
accordance with the terms and conditions of the Plan(s) in
respect of each Plan participant (and his or her beneficiaries),
that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which
such amount is to be paid (as provided for or available under the
Plan(s)), and the time of commencement for payment of such
amounts. Except as otherwise provided herein, Trustee shall make
payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan(s)
and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported,
withheld and paid by Company. Payments may be made in cash or,
where called for under the terms of the Plan(s), in Company Stock
(as such term is defined in Section 5(g) hereof).
Notwithstanding the foregoing, if a benefit which is
distributable in the form of Company Stock under the terms of a
Plan becomes payable at a time when there is no (or insufficient)
Company Stock in the Trust with which to satisfy such benefit
obligation, Company agrees to pay the portion of such benefit
which may not be satisfied from the Trust directly pursuant to
subsection (c) of this Section 2; provided, however, that if
Company fails or refuses to pay such benefit within a reasonable
<PAGE>
time after notice from Trustee that it has become so payable,
Trustee shall use other assets of the Trust to acquire Company
Stock, on the open market or otherwise in its discretion,
sufficient to satisfy such benefit obligation.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits payable by Company under the Plan(s)
shall be determined in accordance with the terms of the Plan(s)
by BellSouth (or Company) or such party as it shall designate
under the Plan(s), or the Trustee's Contractor if one shall have
been engaged, and any claim for such benefits shall be considered
and reviewed and paid or not paid under the procedures set out in
the Plan(s). Notwithstanding any Plan provision to the contrary,
if a Trustee's Contractor shall have been engaged, all such
determinations shall be made by the Trustee's Contractor whose
determinations shall be final, conclusive and binding on all
persons. Neither Trustee nor Trustee's Contractor shall have any
obligation for determining whether any Plan participant or
beneficiary has died and shall be entitled to rely upon any
information in this regard furnished by BellSouth or Company.
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the
terms of the Plan(s). In such event, Company shall make
provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect
<PAGE>
to the payment of benefits pursuant to the terms of the Plan(s)
and shall pay amounts withheld to the appropriate taxing
authorities. BellSouth shall notify Trustee of Company's
decision to make payment of benefits directly prior to the time
amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits payable
by Company in accordance with the terms of the Plan(s), Company
shall make the balance of each such payment as it falls due.
Trustee shall notify BellSouth where principal and earnings are
not sufficient.
(d) BellSouth may engage a third party administrator as a
contractor of the Trustee ("Trustee's Contractor"), who shall not
be a Plan participant or beneficiary (but who may be the
Trustee), to perform functions described in this Section 2(d) and
elsewhere in this Trust Agreement which would otherwise be
performed by BellSouth or Company.
(1) Upon engagement of a Trustee's Contractor, as soon
as practicable but in no event longer than thirty (30) days
thereafter, BellSouth shall furnish to the Trustee's
Contractor copies of the Plan documents, employment records
of participants, and other information necessary to
determine the benefits which are or may become payable by
Company to or with respect to each participant in each Plan,
<PAGE>
including any benefits payable after the participant's
death, and the recipient of same and the procedures which
BellSouth has adopted to calculate such benefit payments.
BellSouth shall regularly, at least annually, and upon each
benefit change under the Plan(s) furnish revised, updated
information to the Trustee's Contractor. In the event
BellSouth refuses or neglects to provide updated participant
information as contemplated herein, the Trustee's Contractor
shall be entitled to rely on the most recent information
furnished to it by BellSouth.
(2) In the event of a Change of Control, BellSouth
shall have the duty to engage, as soon as practicable
thereafter, a Trustee's Contractor reasonably acceptable to
the Trustee if there shall at that time be no Trustee's
Contractor then serving. In addition, if as of a
Distribution Date (as such term is defined in Section 1(g)
hereof), there shall be no Trustee's Contractor then
serving, BellSouth shall have the duty to designate on a
stand-by basis a Trustee's Contractor who shall commence to
serve as Trustee's Contractor in the event such Distribution
Date is followed by a Change of Control. After a Change of
Control, BellSouth shall not have any control or authority
with respect to the Trustee's Contractor so engaged or then
serving, or any successor Trustee's Contractor, including
without limitation any rights with respect to the removal or
<PAGE>
replacement of any such Trustee's Contractor or its duties
pursuant to this Trust Agreement.
(3) Unless Trustee agrees to perform the functions of
the Trustee's Contractor described herein, Trustee shall
have no responsibility hereunder for any obligation assigned
to a Trustee's Contractor or (subject to subsection (4)
below) for the performance of a Trustee's Contractor's
duties and responsibilities under this Trust Agreement.
(4) BellSouth may replace or remove any Trustee's
Contractor from time to time serving hereunder, in its sole
discretion, prior to the occurrence of a Change of Control.
Following a Change of Control, Trustee, in its sole
discretion, may remove a Trustee's Contractor engaged by
BellSouth or any successor Trustee's Contractor and shall
remove any such person and engage a successor to such person
if Trustee deems such person's performance as a Trustee's
Contractor unsatisfactory. At all times following a Change
of Control, upon any such removal, or the voluntary
resignation of any such Trustee's Contractor or the
occurrence of any other event which shall result in the
cessation of performance of the Trustee's Contractor's
duties hereunder, Trustee shall use its best efforts to
engage a new Trustee's Contractor (which may be Trustee);
provided, however, Trustee shall perform the duties of the
<PAGE>
Trustee's Contractor during any period for which Trustee is
unable to find a new Trustee's Contractor (so that there
will be no default in payments under the Plan(s) as a result
of the absence of a Trustee's Contractor), and any person
engaged as a Trustee's Contractor shall in the judgment of
Trustee be independent of Company and BellSouth. The person
who removes or replaces a Trustee's Contractor shall be
responsible for assuring that there is a timely and complete
transfer of records from such Trustee's Contractor to such
person's successor.
(5) Except for the records dealing solely with the
assets of the Trust and investment of those assets, which
shall be maintained by the Trustee, if a Trustee's
Contractor shall be engaged, the Trustee's Contractor shall
maintain all Plan participant records contemplated by this
Agreement, including the Payment Schedule. All such records
and copies of the Plan(s) documents and employment records
of the participants in the possession of the Trustee's
Contractor shall be made available promptly upon request of
Trustee, BellSouth or Company. The Trustee's Contractor
shall also prepare and distribute participant statements to
participants and beneficiaries and shall perform such other
duties and responsibilities contemplated under the terms of
this Trust Agreement as BellSouth or Trustee, as the case
<PAGE>
may be, determines is necessary or advisable to achieve the
objectives of this Trust Agreement.
(6) BellSouth and Company shall indemnify and hold
harmless the Trustee's Contractor for any liability or
expenses, including without limitation advances for or
prompt reimbursement of reasonable fees and expenses of
counsel and other agents retained by it, incurred by the
Trustee's Contractor with respect to keeping the records for
participants' benefits, reporting thereon to participants
and beneficiaries, certifying benefit information to
Trustee, determining the status of benefits hereunder and
otherwise carrying out its obligations under this Trust
Agreement, other than those resulting from Trustee's
Contractor's negligence or willful misconduct or its failure
to reasonably calculate and certify the amount of benefits
based on the applicable terms of the Plan documents and
other information and procedures furnished by BellSouth to
the Trustee's Contractor in accordance with this Trust
Agreement. The Trustee's Contractor shall be entitled to
reasonable compensation for services hereunder, the amount
of which shall be agreed upon from time to time by BellSouth
or, following a Change of Control, the Trustee, and the
Trustee's Contractor in writing, and reimbursement for
reasonable expenses incurred in connection with its
performance of such services. Following a Change of
<PAGE>
Control, Trustee's good faith determination of compensation
to be paid to a Trustee's Contractor (including Trustee when
it acts in such capacity) shall be binding on BellSouth and
each other person having an interest in the Trust. All such
compensation and expenses shall be paid by Trustee from the
assets of the Trust. If not so paid, such compensation and
expenses shall be paid by BellSouth or Company.
(7) Except as may be otherwise agreed by the Trustee's
Contractor and BellSouth, or Trustee following a Change of
Control, the Trustee's Contractor's obligations are limited
solely to those explicitly set forth herein and the
Trustee's Contractor shall have no responsibility, authority
or control, direct or indirect, over the maintenance or
investment of the Trust and shall have no obligation in
respect of Trustee or the Trustee's compliance with the
Trustee's Contractor's certifications to Trustee.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) Company is unable to pay its debts as they
<PAGE>
become due, or (ii) Company is subject to a pending proceeding as
a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of Company
under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in
writing of Company's Insolvency. If a person claiming to be
a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine
whether Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of benefits
to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person
claiming to be a creditor alleging that Company is
Insolvent, Trustee shall have no duty to inquire whether
Company is Insolvent. Trustee may in all events rely on
such evidence concerning Company's solvency as may be
furnished to Trustee and that provides Trustee with a
reasonable basis for making a determination concerning
Company's solvency.
<PAGE>
(3) If at any time Trustee has determined that Company
is Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general creditors of
Company with respect to benefits due under the Plan(s) or
otherwise.
(4) Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee has
determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due from Company to Plan
participants or their beneficiaries under the terms of the
Plan(s) for the period of such discontinuance, less the aggregate
amount of any payments made to Plan participants or their
beneficiaries by Company in lieu of the payments provided for
hereunder during any such period of discontinuance.
<PAGE>
Section 4. Payments to Company.
(a) Except as provided in Sections 3, 4(b), 4(c), 5(b) and
12(c) hereof, after the Trust has become irrevocable, neither
BellSouth nor Company shall have the right or power to direct
Trustee to return to Company or to divert to others any of the
Trust assets before all payment of benefits have been made to
Plan participants and their beneficiaries pursuant to the terms
of the Plan(s) to the extent such benefits are obligations of
Company.
(b) If, prior to a Change of Control, within sixty (60)
days following the end of a fiscal year of the Trust, BellSouth
provides a written certification to Trustee, reasonably
acceptable to the Trustee that, as of the last day of the fiscal
year, the fair market value of the assets of the Trust exceeds
one hundred twenty percent (120%) of the aggregate Current
Liability, Trustee shall, at BellSouth's request, distribute to
Company all or part of such excess. No distribution pursuant to
this Section 4(b) may be made following a Change of Control.
(c) Prior to a Change of Control, Trustee shall, if so
instructed by BellSouth in writing within thirty (30) days after
the actual filing of BellSouth's federal income tax return for a
year, reimburse Company from the assets of the Trust for federal,
state or local income taxes, or any part thereof, which BellSouth
<PAGE>
certifies that Company has paid, attributable to income of the
Trust for such year, as determined by BellSouth, within thirty
(30) days after receipt of such request. No reimbursement for
taxes pursuant to this Section 4(c) may be made following a
Change of Control.
(d) Notwithstanding any other provision of this Trust
Agreement, including without limitation Section 1(b) hereof,
prior to a Change of Control Company shall have the right with
respect to each contribution to the Trust to cause the Trustee to
return all or any portion of a contribution and any and all
income on such contribution to Company. Such right shall be
exercised by giving written notice to the Trustee and shall be
exercisable in a nonfiduciary capacity without the approval or
consent of the Trustee or any other person. Such right shall
expire with respect to each contribution to the Trust upon the
earlier of (i) thirty days following the date on which the
contribution is made, (ii) the last day of the taxable year of
Company in which the contribution is made or (iii) a Change of
Control. Company's right under this Section 4(d) shall expire
upon a Change of Control.
Section 5. Investment Authority.
(a) Except as otherwise provided in subsections (c), (d),
(e) and (g) of this Section 5, the assets of the Trust shall be
<PAGE>
invested and reinvested by Trustee, without distinction between
principal and income, at such time or times in such investments
and pursuant to such investment strategies or courses of action
and in such shares and proportions, as Trustee, in its sole
discretion, shall deem advisable. Except as otherwise provided
herein, Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by BellSouth. All
rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no
event be exercisable by or rest with Plan participants.
(b) Company shall have the right, at any time, and from
time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held by the Trust. This
right is exercisable by Company in a nonfiduciary capacity
without the approval or consent of any person in a fiduciary
capacity. In connection with any substitution of assets
described in this Section 5(b), Company Stock may not revert to
Company in kind at any time following a voting record date for
any meeting of BellSouth stockholders and before such meeting,
unless Trustee shall have voted such shares by proxy. Such
reversion may occur immediately following the stockholders'
meeting to which such record date relates. Further, any such
substitution may be made only out of property available to the
Company for the purchase of shares of stock under applicable
state law, as determined by Company.
<PAGE>
(c) Subject to the provisions of Section 5A, investment
authority over the Trust's assets, or any portion thereof, other
than dividends on Company Stock held by the Trust, may be
reserved by BellSouth to itself from time to time in its absolute
discretion, prior to a Change of Control. Any such reservation
of discretionary authority by BellSouth shall be communicated to
Trustee in writing. In this regard, unless BellSouth notifies
Trustee to the contrary, BellSouth shall act through its
Treasurer or any person who such Treasurer authorizes in writing
to act on his behalf or any other person who is authorized to act
on BellSouth's behalf by a resolution of BellSouth's Board of
Directors. BellSouth shall furnish Trustee from time to time
with a list of the names and signatures of all persons authorized
to so act. Notwithstanding anything to the contrary contained
herein, following a Change of Control, BellSouth may not reserve
discretionary authority for the management and control of any
assets of the Trust and any prior reservation then in effect
shall immediately be nullified.
(d) Trustee shall be under no duty or obligation to review
or to question any direction of BellSouth pursuant to authority
reserved under subsection (c) of this Section 5, or to review
securities or any other property so held with respect to prudence
or proper diversification, or to make any suggestions or
recommendation to BellSouth with respect to the retention or
investment of any such assets and shall have no authority to take
<PAGE>
any action or to refrain from taking any action with respect to
any such assets unless and until it is directed to do so by
BellSouth. Notwithstanding anything to the contrary in this
Trust Agreement, BellSouth does hereby discharge indemnify and
hold harmless Trustee, its directors, officers, employees, and
agents, from and against any and all losses, costs, damages,
claims, penalties, expenses (including reasonable attorneys' fees
and expenses) or liabilities arising in connection with Trustee's
administration of the Trust consistent with Section 5(c).
(e) Trustee shall be responsible for assuring the daily
investment of cash balances, unless directed otherwise by
BellSouth pursuant to authority reserved in subsection (c) of
this Section 5, so as to maintain uninvested cash balances at a
minimum.
(f) Without in any way limiting the powers and discretions
conferred upon Trustee by the other provisions of this Trust
Agreement, Trustee (and BellSouth acting pursuant to authority
reserved under subsection (c) of this Section 5) shall be vested
with the following powers and discretions (to be exercised in
light of the nature and purpose of this Trust) with respect to
the assets of the Trust subject to its management and control:
(1) To invest and reinvest in any property, real,
personal or mixed, wherever situated and whether or not
<PAGE>
productive of income or consisting of wasting assets,
including without limitation, common and preferred stocks,
bonds, notes, debentures (including convertible stocks and
securities), leaseholds, mortgages, certificates of deposit
or demand or time deposits (including any such deposits with
Trustee), shares of investment companies and mutual funds,
interests in partnerships and trusts, insurance policies and
annuity contracts, and oil, mineral or gas properties,
royalties, interests or rights, without being limited to the
classes of property in which trustees are authorized to
invest by any law or any rule of court of any state and
without regard to the proportion any such property may bear
to the entire amount of the Trust;
(2) To invest and reinvest all or any portion of the
Trust collectively through the medium of any common,
collective or commingled trust fund that may be established
and maintained by Trustee, to be held and invested subject
to all of the terms and conditions thereof, and such trust
shall be deemed adopted as a part of the Trust to the extent
that assets of the Trust are invested therein;
(3) To retain any property at any time received by the
Trustee;
<PAGE>
(4) To sell or exchange any property held by it at
public or private sale, for cash or on credit, to grant and
exercise options for the purchase or exchange thereof, to
exercise all conversion or subscription rights
pertaining to any such property and to enter into any
covenant or agreement to purchase any property in the
future;
(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other
similar plan relating to property held by it and to consent
to or oppose any such plan or any action thereunder or any
contract, lease, mortgage, purchase, sale or other action by
any person;
(6) To deposit any property held by it with any
protective, reorganization or similar committee, to delegate
discretionary power thereto, and to pay part of the expenses
and compensation thereof and any assessments levied with
respect to any such property so deposited;
(7) To extend the time of payment of any obligation
held by it;
<PAGE>
(8) To hold uninvested any monies received by it,
without liability for interest thereon until such
monies shall be invested, reinvested or disbursed;
(9) To exercise all voting or other rights with
respect to any property held by it and to grant proxies,
discretionary or otherwise;
(10) For the purposes of the Trust, to borrow money
from others, to issue its promissory note or notes therefor,
and to secure the repayment thereof by pledging any property
held by it;
(11) To manage, administer, operate, insure, repair,
improve, develop, preserve, mortgage, lease or otherwise
deal with, for any period, any real property or any oil,
mineral or gas properties, royalties, interests, or rights
held by joining with others, using other Trust assets for
any such purposes, to modify, extend, renew, waive or
otherwise adjust any provision for amortization of the
investment in or depreciation of the value of such property;
(12) To employ suitable agents (including but not
limited to actuarial and employee benefit consulting firms)
and counsel, who may be counsel to BellSouth or Trustee, and
<PAGE>
to pay their reasonable expenses and compensation from the
Trust to the extent not paid by Company or BellSouth;
(13) To register any securities held in the Trust in
the name of a nominee and to hold any investment in bearer
form, and to combine certificates representing such
investments with certificates of the same issue held by the
Trustee in other fiduciary capacities or to deposit or
arrange for the deposit of such securities in a qualified
central depository even though, when so deposited, such
securities may be merged and held in bulk in the name of the
nominee of such depository with other securities deposited
therein by any other person, or to deposit or arrange for
the deposit of any securities issued by the United States
Government, or an agency or instrumentality thereof, with a
federal reserve bank, but the books and records of Trustee
shall at all times show that all such investments are part
of the Trust;
(14) To settle, compromise, or submit to arbitration
any claims, debts, or damages due or owing to or from the
Trust, respectively, to commence or defend suits or legal
proceedings to protect any interest of the Trust, and to
represent the Trust in all suits or legal proceedings in any
court or before any other body or tribunal; provided,
however, Trustee shall not be required to take any such
<PAGE>
action unless it shall have been indemnified by BellSouth or
the Trust to its reasonable satisfaction against liability
and expense it might incur therefrom;
(15) To organize under laws of any state a corporation
or trust for the purpose of acquiring and holding title to
any property which it is authorized to acquire hereunder and
to exercise with respect thereto any or all of the powers
set forth herein; and
(16) Generally, to do all acts consistent with its
duties hereunder, whether or not expressly authorized, that
Trustee may deem necessary or desirable for the protection
of the Trust.
(g) Notwithstanding anything to the contrary contained
herein (other than the provisions of Section 5A hereof), unless
and until directed otherwise by BellSouth, or the occurrence of a
Change of Control, the assets of the Trust (other than dividends
on Company Stock held by the Trust) shall be invested and
reinvested exclusively in the common stock, par value $1.00 per
share, of BellSouth Corporation ("Company Stock") except to the
extent that BellSouth directs otherwise with respect to a portion
of the assets in anticipation of reasonable liquidity needs of
the Trust. Trustee shall purchase from BellSouth any such
Company Stock acquired for the Trust, unless Trustee is
<PAGE>
instructed otherwise by BellSouth in writing. With respect to
assets of the Trust invested in Company Stock, Trustee shall have
no obligation to diversify investments in the Trust, and shall
not be subject to any rule of applicable law which might
otherwise make necessary, require, or in any way deem appropriate
diversification of investments in the Trust, all such rules being
hereby expressly waived. Notwithstanding anything to the
contrary in this Trust Agreement, BellSouth and Company do hereby
discharge, indemnify and hold harmless Trustee, its directors,
officers, employees and agents, from and against any and all
losses, costs, damages, claims, penalties, expenses (including
reasonable attorneys' fees and expenses) or liabilities arising
in connection with such Trustee's administration of the Trust
consistent with this Section 5(g).
(h) Following a Change of Control, Trustee may no longer
invest in Company Stock or any other securities or obligations
issued by BellSouth or Company, and Section 5(g) shall no longer
apply. After a Change of Control, Trustee shall have and
exercise all discretionary authority for the management and
control of Trust assets and shall commence the orderly
disposition of Company Stock, subject to the provisions of
Section 5A hereof to the extent applicable. Trustee may, in its
sole discretion, retain Company Stock acquired prior to a Change
of Control for such period of time as Trustee deems appropriate
and in the best interest of participants and beneficiaries in the
<PAGE>
Plan(s). In no event may Trustee make additional investments in
Company Stock on behalf of the Trust after a Change of Control,
other than (i) amounts held in diversified common investment
vehicles in which Trustee invests, and (ii) through the exercise
of rights to acquire Company Stock attributable to shares held at
the time of the Change of Control, in the Trustee's sole
discretion, if the Trustee deems such exercise appropriate and in
best interest of the participants and beneficiaries in the
Plan(s).
Section 5A. Sale of Company Stock by Trustee
(a) Except as otherwise specifically permitted herein,
Trustee may not sell Company Stock except: (1) as necessary from
time to time to satisfy benefit obligations under the Plan(s)
which are required to be paid by Trustee under this Trust;
(2) pursuant to a tender or exchange offer, by other than
BellSouth, for all or substantially all of the issued and
outstanding Company Stock; or (3) following a Change of Control;
and then only as specifically permitted herein.
(b) Trustee shall provide BellSouth with not less than 30
days prior notice that it proposes to sell any Company Stock,
unless Trustee determines in good faith that such delay would
cause irreparable harm to Trustee or to the Trust, in which event
Trustee shall provide reasonable notice of such proposed sale.
<PAGE>
Notice shall be given by telephone, confirmed promptly by
facsimile or first class mail, postage prepaid. Trustee shall
specify in any event the number of shares proposed to be sold.
(c) Trustee shall make sales of Company Stock pursuant to
an effective registration statement under, or an exemption
(including but not limited to Rule 144) from the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and in compliance with applicable state
securities laws.
(d) Should either BellSouth or Trustee determine in good
faith, with the written advice of counsel delivered to and in
form reasonably acceptable to the other party hereto, that such
proposed sale could not reasonably be made pursuant to an
exemption from the Securities Act, then Trustee may demand in
writing that BellSouth, at BellSouth's option, either purchase
under Section 5A(f) or register under the Securities Act under
Section 5A(e), such number of shares of Company Stock held and
proposed to be sold by Trustee. BellSouth shall promptly notify
Trustee by telephone, confirmed promptly by facsimile or first
class mail, postage prepaid, whether it elects to proceed under
Section 5A(f) or 5A(e).
(e) If BellSouth elects registration pursuant to a demand
under Section 5A(d) above, then:
<PAGE>
(1) As soon as practicable, but in any event within 90
days after receipt of the demand from Trustee, BellSouth
shall:
(i) file with the Securities and Exchange
Commission (the "Commission") a registration statement covering
the shares to be sold and use its reasonable best efforts to have
such registration statement declared effective as promptly as
practicable. BellSouth shall advise Trustee of the progress of
such filing and of any review thereof undertaken by the
Commission, and promptly notify Trustee, and confirm such advice
in writing, (x) when such registration statement becomes
effective, (y) when any post-effective amendment to such
registration statement becomes effective and (z) of any request
by the Commission for any amendment or supplement to such
registration statement or any prospectus relating thereto or for
additional information;
(ii) use its reasonable best efforts to register,
qualify, or effect compliance not later than the
effective date of any registration statement filed
pursuant to this Trust Agreement, the shares of Company
Stock registered thereunder under the blue sky laws of
such states or the District of Columbia as the Trustee
may reasonably request; provided, however, that neither
<PAGE>
BellSouth nor Company shall be obligated to qualify as
a foreign corporation or as a dealer in securities or
to execute or file any general consent to service of
process under the laws of any such jurisdiction where
it is not so subject; and, provided, further, that
BellSouth reserves the right not to register or qualify
shares of Company Stock in any jurisdiction where
registration or qualification of such shares would be
unreasonably burdensome;
(iii) from time to time (x) after BellSouth has
elected to satisfy a demand for sale by means of
registration, immediately advise Trustee of any event
or development, including a material adverse change in
the financial condition, business or affairs of
BellSouth, known to BellSouth (other than events or
developments affecting market or economic conditions
generally), which may have a material adverse impact on
the proposed offering; and (y) within the period of
effectiveness of such registration statement, advise
Trustee of any event or development requiring amendment
or supplement (which amendment or supplement shall be
prepared with reasonable promptness by BellSouth) of
the registration statement or prospectus used in
connection therewith or rendering it inadvisable to use
the prospectus until it is supplemented or amended; and
<PAGE>
(iv) furnish to Trustee such number of copies of
any preliminary and final prospectuses and any
amendments and supplements thereto as Trustee may
reasonably request.
(2) Trustee and BellSouth shall negotiate with an
underwriter selected or approved by BellSouth with regard to the
underwriting of such requested registration. BellSouth shall
enter into an underwriting agreement in customary form with the
underwriter(s) and Trustee in which BellSouth and Trustee (to the
extent applicable based only on such information as is provided
in writing by Trustee) shall provide customary indemnification to
such underwriter(s) and each other.
(3) BellSouth shall have the right to terminate or
withdraw any registration contemplated by it under this Section
5A(e) prior to or following the effectiveness of such
registration for any reason whatsoever, provided that it shall
thereupon be required to purchase shares pursuant to Section
5A(f).
(4) Trustee shall provide all such information and
materials and take all such actions, furnish all such
information, execute all such documents and cooperate with
BellSouth in good faith, all as may be reasonably required
<PAGE>
in order to permit BellSouth to comply with all applicable
requirements of the Commission and all other applicable laws or
regulations and to obtain acceleration of the effective date of
the registration statement.
(5) All expenses incurred in connection with any
registration, qualification or compliance pursuant to this Trust
Agreement, including without limitation, all registration, filing
and qualification fees, printing and engraving expenses, fees and
disbursements of counsel for BellSouth, and expenses of any
special audits or comfort letters incidental to or required by
such registration, shall be borne by BellSouth, provided that
Trustee may pay such expenses and recover same from the Trust if
BellSouth fails to satisfy such expenses in a timely manner.
(f) Notwithstanding any contrary provision of this
Agreement, if BellSouth advises Trustee of any delays in filing
or effectiveness of more than 60 days, if BellSouth and Trustee
are unable despite good faith efforts to agree as to registration
or an exempt sale, or if a registered sale would not permit
Trustee to sell Company Stock expeditiously enough to meet
Trustee's good faith needs, Trustee may demand that BellSouth
purchase, or if BellSouth elects to purchase stock pursuant to
Section 5A(d) or (g), BellSouth shall purchase the Company Stock
desired to be sold at fair market value, which shall be the
<PAGE>
volume weighted average trading price (including only trades
which would meet the time of purchases conditions under Rule
10b-18 under the Securities Exchange Act of 1934, as amended
("Rule 10b-18"), of a share of such security on the New York
Stock Exchange on the day that BellSouth receives such demand or
gives notice of such election. BellSouth and Trustee shall use
their reasonable best efforts to agree as to the prompt
execution, closing and delivery of shares and proceeds therefor.
(g) Until a Change of Control, BellSouth may, on notice of
a proposed sale by Trustee, whether or not exempt, elect to
purchase such Company Stock from Trustee at fair market value, as
defined in Section 5A(f), and with the manner, conditions, and
closing of such sale to be agreed upon by BellSouth and Trustee.
(h) BellSouth shall be entitled to postpone the filing of
any registration statement and any amendment or supplement
thereto otherwise required to be prepared and filed by it, or to
direct that Trustee postpone any sale or put if, at the time it
receives a request for registration or sale, (i) BellSouth
determines, in its reasonable business judgment, that such
filing, registration and offering, or sale, would materially
interfere with the likely success of a proposed purchase or sale
of securities by BellSouth; or (ii) counsel for BellSouth opines
in writing that the filing of such registration statement,
amendment or supplement, or sale or put would have a material
<PAGE>
adverse impact on any material ongoing or pending transaction or
program of BellSouth or any of its subsidiaries or any other
circumstances; provided, that should such delays adversely affect
Trustee's ability to pay benefits as contemplated by this Trust
Agreement, then BellSouth shall advance such funds as may be
reasonably needed by Trustee for such proposed pending sale.
(i) Notwithstanding any provisions above permitting sale by
Trustee of Company Stock, Trustee shall, until a Change of
Control or a tender or exchange offer for all or substantially
all of the issued and outstanding Common Stock, limit sales,
whether registered or exempt (other than sales described in
Section 5A(f)), by reference to the volume limitations for issuer
repurchases within Rule 10b-18; provided, that block sales may
not exceed 25% of the trading volume on the New York Stock
Exchange, Inc. for the 14 day period prior to such sale.
BellSouth shall provide all information reasonably required by
Trustee to make determinations as to the number of shares which
may be sold, and Trustee shall promptly notify BellSouth as to
all sales made other than through a registered public offering.
(j) BellSouth and Trustee shall each cooperate in good
faith and employ their reasonable best efforts in permitting and
effecting any purchase or sale of Company Stock as contemplated
in this Section 5A and each shall comply with all applicable laws
and regulations relating to the foregoing including, without
<PAGE>
limitation, federal and state securities laws, rules and
regulations issued thereunder, and any other governmental or
stock exchange requirements or regulations relating thereto.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between BellSouth and Trustee. Within
forty-five (45) days following the close of each calendar year
and within forty-five (45) days after the removal or resignation
of the Trustee, Trustee shall deliver to BellSouth a written
account of its administration of the Trust during such year or
during the period from the close of the last preceding year to
the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of
such purchases or sales (accrued interest paid or receivable
<PAGE>
being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of
the date of such removal or resignation, as the case may be. In
addition, as of the end of each calendar month (referred to in
this Trust as a "valuation date"), within ten (10) days after
each such month-end, Trustee shall deliver to BellSouth a written
account setting forth the value of the Trust's assets, together
with such other information as shall be agreed upon between
BellSouth and Trustee.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
with like aims, provided, however, that Trustee shall incur no
liability to any person for (i) any action taken pursuant to a
direction, request or approval given by BellSouth, Company or a
Trustee's Contractor which is contemplated by, and in conformity
with, the terms of the Plan(s) or this Trust and is given in
writing by BellSouth, Company or a Trustee's Contractor (other
than Trustee when it acts as Trustee's Contractor), or (ii) the
investment in, or retention of, Company Stock pursuant to the
terms of this Agreement, and no such action shall be considered a
breach of the fiduciary standard herein set forth. In the event
<PAGE>
of a dispute between BellSouth, Company or a Trustee's Contractor
and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising
in connection with this Trust or a Plan (including without
limitation any action to compel funding of the Trust pursuant to
Section 1 hereof, to compel BellSouth or Company to take any
action under the Trust or the Plan(s), or to determine Trustee's
obligations hereunder), Trustee shall be indemnified by the Trust
against Trustee's costs, expenses and liabilities (including,
without limitation, reasonable attorneys' fees and expenses)
relating thereto and the Trust shall be primarily liable for such
payments, other than those arising from Trustee's negligence or
willful misconduct. Trustee shall also be entitled to reasonable
payment from the Trust for the allocation of Trustee's personnel
to the investigation and defense or prosecution thereof, at
Trustee's normal hourly billing rates. If such costs, expenses
and liabilities are not paid from the Trust for any reason
(including without limitation insufficiency of the Trust's assets
to satisfy such obligations) in a reasonably timely manner,
BellSouth and Company agree to indemnify Trustee against such
costs, expense and liabilities. Anything in this subsection (b)
to the contrary notwithstanding, BellSouth and Company shall
indemnify and hold Trustee harmless from and against all costs,
expenses and liabilities arising out of or relating to the
<PAGE>
acquisition, retention or disposition of Company Stock, except
with respect to matters covered by the Trustee's indemnity to be
provided under Section 5A(e)(2).
(c) Trustee may consult with legal counsel (who may also be
counsel for BellSouth generally) with respect to any of its
duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) Trustee shall have, without exclusion, all powers
consistent with the terms hereof conferred on trustees by
applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an
asset of the Trust, Trustee shall have no power to name a
beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person
the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant
to this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
<PAGE>
carrying on a business and dividing the gains therefrom, within
the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 9. Compensation and Expenses of Trustee.
All administrative and Trustee's fees as agreed upon between
Trustee and BellSouth and reasonable expenses actually incurred
by the Trustee in performing its duties hereunder including the
fees and expenses of any third party which provides services
contemplated herein or in the Plan(s) shall be paid by Trustee
from the assets of the Trust and, until so paid, shall constitute
a lien on the assets of the Trust. If not so paid, the fees and
expenses shall be paid by Company or BellSouth.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to
BellSouth, which shall be effective sixty (60) days after receipt
of such notice unless BellSouth and Trustee agree otherwise;
provided that in no event shall any such resignation take effect
prior to the appointment of a successor Trustee.
(b) Trustee may be removed by BellSouth on sixty (60) days
notice or upon shorter notice accepted by Trustee.
<PAGE>
(c) Upon a Change of Control, as defined herein, Trustee may
not be removed by BellSouth for one (1) year. Additionally,
after the expiration of the one (1) year period following a
Change of Control, Trustee may be removed by BellSouth only if
BellSouth first obtains the express written consent to such
removal of more than twenty-five percent (25%) of the
participants in the Plan(s).
(d) If Trustee resigns or is removed within one (1) year of
a Change of Control, as defined herein, Trustee shall select a
successor Trustee in accordance with the provisions of Section
11(b) hereof prior to the effective date of Trustee's resignation
or removal. Additionally, if Trustee resigns or is removed after
expiration of the one (1) year period following a Change of
Control, BellSouth may select a successor Trustee in accordance
with the provisions of Section 11(b) hereof if it shall first
obtain the express written consent to the appointment of the
proposed successor of more than twenty-five percent (25%) of the
participants in the Plan(s). If BellSouth fails to so appoint a
successor Trustee, Trustee shall select a successor Trustee.
Upon the appointment and acceptance by, and transfer of assets
to, a successor Trustee, Trustee shall have no further
responsibilities under this Trust Agreement.
(e) Upon resignation or removal of Trustee and appointment
of a successor Trustee, all assets shall subsequently be
<PAGE>
transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after receipt of notice of
resignation, removal or transfer, unless BellSouth extends the
time limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective
date of resignation or removal under paragraph (a) of this
section. If no such appointment has been made, Trustee may apply
to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed and charged to
the Trust as administrative expenses of the Trust.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with
Section 10(a) or (b) or (c) hereof, BellSouth may, subject to
Section 10(d), appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee
powers under state or federal law, as a successor to replace
Trustee upon resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who shall
have all the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall
<PAGE>
execute any instrument necessary or reasonably requested by
BellSouth or the successor Trustee to evidence the transfer.
(b) If Trustee resigns or is removed pursuant to the
provisions of Section 10(a), (b), (c) or (d) hereof and selects a
successor Trustee pursuant to Section 10(d) hereof, Trustee may
appoint any third party such as a bank trust department or other
party that may be granted corporate trustee powers under state or
federal law. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee. The new
Trustee shall have all the rights and powers of the former
Trustee, including ownership rights in Trust assets. The former
Trustee shall execute any instrument necessary or reasonably
requested by the successor Trustee to evidence the transfer.
(c) A former Trustee shall prepare and deliver to BellSouth
and to the successor Trustee a final accounting unless BellSouth
waives BellSouth's right to such accounting, and such accounting
shall be effective through the date of the former Trustee's
transfer of all assets to its successor. The successor Trustee
need not examine the records and acts of any prior Trustee unless
requested to do so by BellSouth (and, after a Change of Control,
unless the successor Trustee in addition concludes that there is
a reasonable basis for such request by BellSouth) and may retain
or dispose of existing Trust assets, subject to Sections 7 and 8
hereof. Subject to the foregoing, the successor Trustee shall
<PAGE>
not be responsible for and BellSouth shall indemnify and defend
the successor Trustee from any claim or liability resulting from
any action or inaction of any prior Trustee or from any other
past event, or any condition existing at the time it becomes
successor Trustee. The compensation arrangement for the
successor Trustee shall be reasonable in relation to the services
to be performed by the successor Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement (including Appendix A hereto) may
be amended by a written instrument executed by Trustee, BellSouth
and Company. Notwithstanding the foregoing, (i) no such
amendment shall conflict with the terms of the Plan(s) as then in
effect or shall make the Trust revocable after it has become
irrevocable in accordance with Section 1(b) hereof and (ii) the
duties and responsibilities of Trustee shall not be increased
without Trustee's written consent.
(1) Furthermore, notwithstanding anything to the
contrary in this Trust Agreement (except as otherwise
provided in this Section 12), (i) following the expiration
of two (2) years after the effective date of this Trust
Agreement and prior to a Change of Control, no amendment
shall be made to Section 1(d) through (h), Section 2,
Section 4, Section 5(h), Section 10(c), Section 10(d), this
<PAGE>
Section 12(a), Section 13(d), Section 13(g), Section 13(j),
and Section 13(k), and no deletion shall be made in Appendix
A, without the prior written consent of more than twenty-
five percent (25%) of the affected participants in the
Plan(s) unless such amendment would not, in the opinion of
counsel, have a material and adverse effect on the rights or
interests of such participants; (ii) following a Change of
Control, no amendment shall be made to any provision of this
Trust Agreement (including Appendix A hereto) without the
prior written consent of more than twenty-five percent (25%)
of the affected participants in the Plan(s) unless such
amendment would not, in the opinion of counsel, have a
material and adverse effect on the rights or interests of
such participants; and (iii) before the earlier of the
expiration of two (2) years following the effective date of
this Trust Agreement or a Change of Control, no amendment
shall be made to any provision of this Trust Agreement
(including any deletion to Appendix A hereto) unless the
Executive Vice President and General Counsel of BellSouth
Corporation, or his successor, determines in his discretion
that such amendment is consistent with the purposes of the
Trust Agreement.
(2) The limitations contained in Section 12(a)(1)
shall not apply with respect to any amendment which is
reasonably necessary, in the opinion of counsel, to preserve
<PAGE>
the status of the Trust as a grantor trust and the status of
the Plan(s) as unfunded for federal income tax purposes and
for purposes of the Employee Retirement Income Security Act
of 1974, as amended, or to guard against an adverse impact
on Plan participants or beneficiaries and which, in the
opinion of counsel, is drafted primarily to preserve such
status or to reduce or eliminate such adverse impact on such
person or persons.
(3) In each instance in which an opinion of counsel is
contemplated in this Section 12(a) prior to a Change of
Control, such opinion shall be in writing and delivered to
Trustee, rendered by counsel for BellSouth, and in each
instance in which an opinion of counsel is contemplated in
this Section 12(a) after a Change of Control, such opinion
shall be in writing and delivered to Trustee, rendered by
counsel selected by the Trustee's Contractor. A
determination by the Executive Vice President and General
Counsel of BellSouth Corporation, or his successor, under
Section 12(a)(1)(iii) also shall be in writing and delivered
to the Trustee. Trustee may rely on all such opinions and
determinations.
(b) The Trust shall not terminate until the date on which
Plan participants and their beneficiaries are no longer entitled
to benefits from Company pursuant to the terms of the Plan(s).
<PAGE>
Upon termination of the Trust any assets remaining in the Trust
shall be returned to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan(s), BellSouth and Company may terminate this Trust prior to
the time all benefit payments under the Plan(s) have been made.
All assets in the Trust at termination shall be returned to
Company.
(d) Trustee may rely for purposes of this Section 12 on a
certificate furnished by BellSouth prior to a Change of Control,
and by the Trustee's Contractor after a Change of Control,
(i) with respect to any amendment requiring the prior written
consent of more than twenty-five percent (25%) of the affected
participants in the Plan(s) pursuant to subsection (a) of this
Section 12, that such consent has been obtained, (ii) with
respect to subsection (b) of this Section 12, that Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan(s), and (iii) with
respect to subsection (c) of this Section 12, that the written
approval of participants or beneficiaries entitled to payment of
benefits pursuant to the terms of the Plan(s) has been obtained.
<PAGE>
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of New York.
(d) For purposes of this Trust, Change of Control shall
mean: (i) any "person" (as such term is used in Section 13(c)
and 14(d) of the Securities Exchange Act of 1934, as amended),
other than a trustee or other fiduciary holding securities under
an employee benefit plan of BellSouth or Company or other
corporation owned directly or indirectly by the shareholders of
BellSouth in substantially the same proportions as their
ownership of stock of BellSouth, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of BellSouth representing 20% or more
of the total voting power represented by BellSouth's then
<PAGE>
outstanding voting securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of BellSouth and any new
director whose election by the Board of Directors or nomination
for election by BellSouth's shareholders was approved by a vote
of at least two-thirds of the directors who either were directors
at the beginning of the two year period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof. For all purposes of
this Trust Agreement, Trustee shall have no responsibility
whatsoever to determine whether or not a Change of Control has
occurred.
(e)(1) After the execution of this Trust Agreement,
BellSouth shall promptly file with Trustee, and following
the appointment of a Trustee's Contractor, BellSouth shall
promptly file with the Trustee's Contractor, a certified
list of the names and specimen signatures of the officers of
BellSouth and any delegate authorized to act for it. Unless
BellSouth notifies Trustee to the contrary, BellSouth shall
act through its Treasurer or any person who such Treasurer
authorizes in writing to act on his behalf or any other
person who is authorized to act on BellSouth's behalf by a
resolution of BellSouth's Board of Directors. BellSouth
shall promptly notify Trustee and the Trustee's Contractor,
if applicable, of the addition or deletion of any person's
<PAGE>
name to or from such list, respectively. Until receipt by
Trustee and/or the Trustee's Contractor of notice that any
person is no longer authorized so to act, Trustee or the
Trustee's Contractor may continue to rely on the authority
of the person. All certifications, notices and directions
by any such person or persons to Trustee or the Trustee's
Contractor shall be in writing signed by such person or
persons. Trustee and the Trustee's Contractor may rely on
any certification, notice or direction of BellSouth that the
Trustee or the Trustee's Contractor reasonably believes to
have been signed by a duly authorized officer or agent of
BellSouth. Trustee and the Trustee's Contractor shall have
no responsibility for acting or not acting in reliance upon
any notification reasonably believed by Trustee or the
Trustee's Contractor to have been signed by a duly
authorized officer or agent of BellSouth.
(e)(2) After the engagement of a Trustee's Contractor
(other than Trustee), the Trustee's Contractor shall
promptly file with Trustee a certified list of the names and
specimen signatures of the officers of the Trustee's
Contractor and any delegate authorized to act for it.
Trustee's Contractor shall promptly notify Trustee of the
addition or deletion of any person's name to or from such
list. Until receipt by Trustee of notice that any person is
no longer authorized so to act, Trustee may continue to rely
<PAGE>
on the authority of the person. All certifications, notices
and directions by any such person or persons to Trustee
shall be in writing signed by such person or persons.
Trustee may rely on any such certification, notice or
direction of the Trustee's Contractor that Trustee
reasonably believes to have been signed by or on behalf of a
duly authorized officer or agent of the Trustee's
Contractor. Trustee shall have no responsibility for acting
or not acting in reliance upon any notification reasonably
believed by the Trustee to have been signed by a duly
authorized officer or agent of the Trustee's Contractor.
(f) Neither the gender nor the number (singular or plural)
of any word shall be construed to exclude another gender or
number when a different gender or number would be appropriate.
(g)(1) This Trust Agreement shall be binding upon and
inure to the benefit of any successor(s) to BellSouth,
Company and Trustee; provided, that in the event of a
Disposition (as defined in Section 13(g)(4) hereof) of
Company, BellSouth shall cease to be a party to this
Agreement and all rights, duties and obligations of
BellSouth hereunder shall thereafter be rights, duties and
obligations of Company or its successor(s).
<PAGE>
(g)(2)(A) If there is a transfer of any liability for
the payment of any Transferred Benefit (as defined below) to
any individual or entity (the "New Company") as a result of
any transaction, including without limitation any sale of
Company, its business or a portion thereof, merger,
consolidation, reorganization, spin-off, division or
transfer of assets (hereinafter a "corporate transaction")
and there is a "Default" (as defined below) by New Company
with respect to the payment of such benefit, Company shall
(subject to this Section 13(g)(2)) pay such unpaid
Transferred Benefit which is otherwise due and payable (and
such payment may be made on Company's behalf from this Trust
pursuant to Section 2) if (i) this Trust remains in effect
at the time such benefit is payable, (ii) there are
sufficient assets in this Trust to pay such benefit and
(iii) Section 13(g)(3) does not apply to such corporate
transaction.
(g)(2)(B) For purposes of this Section 13(g)(2):
(i) the term "Transferred Benefit" shall mean any
Plan benefit (I) which is attributable to compensation
deferrals made for pay periods ending before the
effective date of such corporate transaction under any
Plan(s) which are plans of deferred compensation and
any interest on such deferrals (at an interest rate no
higher than the rate payable under the terms of the
<PAGE>
Plan as of the date of such transaction) or which was
accrued under any Plan(s) which are supplemental
retirement or pension plans before the effective date
of any such transaction, (II) for which the liability
for payment was transferred to New Company in
connection with such corporate transaction and
(III) which are properly payable under the terms and
conditions of the Plan(s) as in effect as of the date
of such corporate transaction; and
(ii) the term "Default" shall mean a default on
the payment of a Transferred Benefit by the New Company
if (I) the affected participant or beneficiary has
timely and properly made a claim for such benefit and
has exhausted all claims and claims review procedures
properly imposed under the terms of the Plan(s) with
respect to such benefit, (II) such participant or
beneficiary has agreed to provide and timely provides
whatever information Company or a Trustee's Contractor
might request from such person with respect to such
Transferred Benefit and New Company and (III) such
participant or beneficiary promptly takes whatever
action is reasonably requested by Company or the
Trustee's Contractor to enable Company or the Trustee
to be fully subrogated to the extent of any such
payments to all the rights, claims and remedies such
<PAGE>
participant or beneficiary might have against New
Company for the payment of the related Transferred
Benefits. Trustee shall not be required to take any
action with respect to a subrogation claim unless there
are sufficient assets in the Trust to cover the expense
thereof.
(g)(2)(C) The liability of Company under this Section
13(g)(2) shall not exceed the value of the assets of the
Trust as of the date payment is to be made by Company under
this Section 13(g)(2).
(g)(3) The provisions of Section 13(g)(2) shall not
apply to, and Company for purposes of Section 12(b) and each
other provision of this Trust Agreement shall be deemed to
have paid in full and shall have no further obligation to
pay, any Transferred Benefit which is payable following any
corporate transaction (i) which involves a Disposition, if
there is established, or there is imposed on Company's
successor an obligation to establish (or there is otherwise
provided with respect to affected Plan participants and
beneficiaries), with respect to the Transferred Benefit an
irrevocable trust which, in the opinion of counsel, meets
the requirements for a "rabbi trust" as set forth in the
model grantor trust agreement contained in Rev. Proc. 92-64,
1992-2 C. B. 422, or any successor to such Revenue
<PAGE>
Procedure, with a bank as trustee, and which when
established (or, if already in existence, at the effective
date of such corporate transaction) is funded to at least
the funding level of this Trust, or (ii) which does not
involve a Disposition, if (A) there is established, or there
is imposed on Company's successor an obligation to
establish, with respect to the Transferred Benefit a trust
which, in the opinion of counsel, has terms substantially
similar to any one of the Trusts under Executive Benefit
Plan(s) established by BellSouth or a subsidiary on or
before the date hereof, as such trusts are then in effect,
with a bank as trustee, and which when established is funded
to at least the funding level of this Trust; or (B) the
Transferred Benefit becomes covered, as of the effective
date of such corporate transaction, by any trust described
in, or previously established pursuant to, (A) above and
which trust, if such transfer takes place on or after a
Change in Control has occurred, is funded (after taking into
account the Transferred Benefit) to at least the funding
level of this Trust. The determination of whether the
requirements of the preceding sentence have been satisfied
shall be made by BellSouth; provided, however, that
following the engagement of a Trustee's Contractor, such
determinations shall be made by Trustee's Contractor. The
opinions of counsel contemplated in this Section 13(g)(3)
shall be in writing and delivered to Trustee, rendered by
counsel for BellSouth or, following the engagement of a
<PAGE>
Trustee's Contractor, counsel selected by Trustee's
Contractor. Trustee may rely on the accuracy of all such
determinations and opinions. For purposes of this Section
13(g)(3), "funding level" shall have the meaning ascribed to
such term in Section 1(e)(2) hereof, except that (i) in
determining Current Liability of a trust other than this
Trust, reference shall be made to liabilities under the
plan(s) covered by each such trust and (ii) in determining
funding level as of any date other than the last day of any
trust's (including this Trust's) fiscal year, there may be
employed reasonable estimation techniques, consistently
applied.
(g)(4) For purposes of this Trust Agreement, there
shall be a "Disposition" of Company or its business, or a
portion thereof, whenever as a result of any transaction the
Company, successor(s) to Company or its business, or a
portion thereof as the case may be, is not a member of
BellSouth's "controlled group of corporations", as such term
is defined in Section 1563(a) of the Internal Revenue Code
of 1986, as amended, substituting "more than 50 percent" for
the phrase "at least 80 percent" each place it appears in
Section 1563(a)(1).
(h) This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but all of which shall together constitute only one Agreement.
<PAGE>
(i) Communications to Trustee shall be sent to Bankers Trust
Company, 280 Park Avenue, New York, New York 10017 - ATTENTION:
Senior Vice President, Retirement Services Group, or to such
other address as Trustee may specify in writing. No
communication shall be binding upon Trustee until it is received
by Trustee. Communications to BellSouth, Company and the
Trustee's Contractor shall be sent to the principal offices of
BellSouth, Company or the Trustee's Contractor, as the case may
be, or to such other address as BellSouth, Company or the
Trustee's Contractor, as applicable, may specify in writing.
(j) In the event the participants and beneficiaries in one
or more of the Plan(s) are determined generally to be subject to
federal income tax on any amount in the Trust prior to the time
of payment hereunder, the entire amount determined to be so
taxable shall be distributed by Trustee to each affected
participant or beneficiary. Company may, at its option, make
such payments directly to affected participants and
beneficiaries. An amount shall be determined to be subject to
federal income tax upon the earliest of: (a) a final
determination by the United States Internal Revenue Service
addressed to a participant or beneficiary which is not appealed
to the courts; (b) a final determination by the United States Tax
Court or any other federal court affirming any such determination
by the Internal Revenue Service; or (c) an opinion by counsel for
BellSouth acceptable to Trustee addressed to BellSouth and
Trustee, that, by reason of the Treasury Regulations, amendments
<PAGE>
to the Internal Revenue Code, published Internal Revenue Service
rulings, court decisions or other substantial precedent, amounts
hereunder are generally subject to federal income tax prior to
payment; provided, that following a Change of Control, only an
opinion by counsel selected by the Trustee's Contractor may be
accepted by Trustee for purposes of (c). Company shall undertake
at its sole expense to defend any tax claims described herein
which are asserted by the Internal Revenue Service against any
participant or beneficiary and which it determines would affect
participants or beneficiaries generally, including attorneys'
fees and costs of appeal, and shall have the sole authority to
determine whether or not to appeal any determination made by the
Internal Revenue Service or by a lower court. Company also
agrees to reimburse any participant or beneficiary for any
interest or penalties in respect of tax claims hereunder which it
determines would affect participants or beneficiaries generally,
upon receipt of documentation of same. Any distributions from
the Trust to a participant or beneficiary under this Section
13(j) (other than reimbursements of interest or penalties
referred to in the preceding sentence) shall reduce the benefits
payable to such participant and/or beneficiary under the Plan(s).
(k) In the event that Company shall fail to satisfy any
obligation of Company to a Plan participant or beneficiary under
this Trust Agreement, or in one or more of the Plan(s), after
reasonable notice and demand with respect thereto, and one or
more participants or beneficiaries obtains a final determination
<PAGE>
by a court of competent jurisdiction that Company has so failed,
such participant(s) or beneficiary(ies) shall be indemnified by
the Trust against reasonable and appropriate costs and expenses
(including without limitation reasonable attorneys' fees and
expenses) relating thereto and the Trust shall be primarily
liable for such payments. Interest on any Plan benefit payments
which such court determines have been delayed to the extent
interest or similar payments in an equal or greater amount are
not provided in the Plan or by the court or otherwise shall also
be paid from the assets of the Trust. Such interest shall be
calculated using a rate of interest equal to the rate of interest
on ten (10) year United States Treasury obligations, as
determined on the first day of each calendar quarter, compounded
quarterly. If such costs, expenses and interest are not paid
from the Trust for any reason (including without limitations
insufficiency of the Trusts assets to satisfy such obligations)
in a reasonably timely manner, such participant(s) or
beneficiary(ies) may obtain payment from Company.
(l) Nothing herein shall be construed as restricting or
limiting in any way amendment of the Plan(s) in accordance with
the terms of the Plan(s).
(m) Any other provisions of this Trust Agreement to the
contrary notwithstanding, this Trust shall terminate no later
than the twenty-first anniversary of the date of death of the
survivor from among a class consisting of all of the descendants
<PAGE>
of the late Joseph P. Kennedy, the former Ambassador to the Court
of Saint James, who are living on the date of the establishment
of the Trust and, if the Trust is still in existence on such
anniversary date, Trustee shall dispose of the Trust as Company
shall direct.
(n) In case of any conflict or inconsistency between the
terms of this Trust Agreement and any Plan, the terms of this
Trust Agreement shall control.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be
February 18, 1994.
IN WITNESS WHEREOF, the parties hereto have caused the Trust
Agreement to be duly executed and their respective corporate
seals to be hereto affixed on the date set forth on page 1 of the
Trust Agreement.
BELLSOUTH CORPORATION
By:
Title: Vice President, Secretary
and Treasurer
(CORPORATE SEAL)
ATTEST:
Title:
<PAGE>
BELLSOUTH ENTERPRISES, INC.
By:____________________________
Title:
(CORPORATE SEAL)
ATTEST:______________________
Title:_______________________
BANKERS TRUST COMPANY,
as Trustee
By:_____________________________
Title:
CORPORATE SEAL)
ATTEST:______________________
Title:_______________________
<PAGE>
APPENDIX A
o BellSouth Nonqualified Deferred Compensation Plan
o BellSouth Nonqualified Deferred Income Plan
o BellSouth Corporation Supplemental Executive Retirement Plan
o BellSouth Corporation Executive Incentive Award Deferral
Plan
o BellSouth Corporation Section 415 Excess Pension Plan
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 11
EXHIBIT 11
Computation of Earnings Per Share
<PAGE>
EXHIBIT 11
BELLSOUTH CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in Millions, Except Per Share Amounts)
For the Years Ended December 31,
1993 1992 1991
Earnings Per Common Share:
Net Income...................... $ 880.1 $ 1,617.7 $ 1,471.5
Weighted average shares
outstanding................... 495,663,991 490,361,696 483,837,630
Incremental shares from assumed
exercise of stock options and
payment of performance share
awards........................ 423,690 423,862 451,018
Total Shares.................... 496,087,681 490,785,558 484,288,648
Earnings Per Common Share....... $ 1.77 $ 3.30 $ 3.04
Fully Diluted Earnings Per
Common Share:
Net Income...................... $ 880.1 $ 1,617.7 $ 1,471.5
Weighted average shares
outstanding................... 495,663,991 490,361,696 483,837,630
Incremental shares from assumed
exercise of stock options and
payment of performance share
awards........................ 489,935 459,329 480,613
Total Shares.................... 496,153,926 490,821,025 484,318,243
Fully diluted earnings per
common share.................. $ 1.77 $ 3.30 $ 3.04
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 21
EXHIBIT 21
Subsidiaries of BellSouth
<PAGE>
BELLSOUTH ORGANIZATION OF COMPANIES
(As of March 1, 1994)
BELLSOUTH CORPORATION AND AFFILIATES
BellSouth Corporation
BellSouth Capital Funding Corporation
BellSouth Capital Funding-Australia, Ltd.
BellSouth D. C., Inc.
BellSouth Enterprises, Inc. (See Listing Below For Subsidiaries)
BellSouth Foundation, Inc. (nonprofit)
BellSouth Interactive Media Services, Inc.
BellSouth Telecommunications, Inc. (See Listing Below for
Subsidiaries)
Indiana Cellular Corporation
Movicel S.A. (34%)
BELLSOUTH TELECOMMUNICATIONS, INC. AND AFFILIATES
BellSouth Telecommunications, Inc.
BBS Holdings, Inc.
BellSouth Advanced Networks, Inc.
BellSouth Business Systems, Inc.
BellSouth Communication Systems, Inc.
U.C.S., Inc.*
BellSouth Financial Services Corporation
Dataserv, Inc.
Dataserv Computer Maintenance, Inc.
BellSouth Products, Inc.
Bell Communications Research Inc. (14.2857%)
Bellcore Ventures, Inc.
Database Service Management, Inc.
<PAGE>
BELLSOUTH ENTERPRISES, INC. AND AFFILIATES (BY GROUP)
BellSouth Enterprises, Inc.
Advertising and Publishing Group
BellSouth Advertising & Publishing Corporation
InfoVentures (a Partnership)(50%)
InfoVentures of Atlanta (a Partnership)(50%)
BellSouth Marketing Programs, Inc.*
BellSouth National Publishing Incorporated*
Intelligent Media Ventures, Inc.
L. M. Berry and Company
BellSouth Direct Marketing, Inc.
BellSouth Marketing Services, Inc.
Berry Network, Inc.
Berry-Sprint Publishing, Inc.
ITT World Directories, Inc. (20%)
ITT World Directories (U.K.) Ltd. (20%)
Stevens Graphics, Inc.
Oxmoor Press, Inc.*
PrintSouth, Inc.*
Ruralist Press, Inc.*
TechSouth, Inc.*
Corporate Development Group
BellSouth Ventures Corporation
Marketing Communications Networks, Inc.*
Uniquest Incorporated (approximately 4.2%)
<PAGE>
International Group
BellSouth Argentina S.A. (3%)
BellSouth Asia/Pacific Enterprises, Inc.
BellSouth New Zealand (a Partnership) (99%)
BellSouth New Zealand Holdings Limited
BellSouth New Zealand (a Partnership) (1%)
Optus Communications Pty. Limited (24.5%)
Optus Administration Pty. Limited
Optus Mobile Pty. Limited
Optus Networks Pty. Limited
AUSSAT Finance Limited
AUSSAT New Zealand Limited (1%)
AUSSAT New Zealand Limited (99%)
Optus Superannuation Pty. Limited
Optus Systems Pty. Limited
BellSouth Australia, Ltd.
BellSouth Australia Pty. Limited (Trustee of ACA Unit Trust)
Advanced Communications Australasia Unit Trust
Austas Communications Pty. Ltd.*
Austas Holdings Pty. Ltd.*
Austas (S.A.) Unit Trust
Austas (NSW) Pty. Ltd.*
Austas Pty. Ltd. *
Austas (Qld.) Pty. Ltd.*
Instapage Unit Trust*
Capital Paging Pty. Ltd.*
Instapage Joint Venture (NSW Partnership) (29%)
Instapage Pty. Limited*
Instapage Operations Pty. Ltd.*
Instapage Joint Venture (NSW Partnership) (71%)
SkyPage Voicecall Unit Trust
Skypage Pty. Limited
UTAS Pty. Ltd.*
Voice Paging Systems (W.A.) Pty. Ltd.
<PAGE>
BellSouth Brazil, Inc.
BCP Comercio e Participacoes Ltda. (.01%)*
BSB Comercio e Participacoes Ltda. (.01%)*
Telcell S.A. (34.99%)
BSE Comercio e Participacoes Ltda. (.01%)*
Celular Catarinense Comercio e Participacoes Ltda. (10%)
Movicom S.A. (99.98%)
Telefonia Movel do Sul S.A. (99.98%)
BellSouth Chile Holdings, Inc.
BellSouth Chile Inversiones S.A.
Cidcom Larga Distancia S.A.
BellSouth Chile, Inc.
Cidcom S.A.
BellSouth Holding GmbH
Centweight B.V. (49%)
E-Plus Mobilfunk GmbH (21%)
BellSouth International, Inc.
BellSouth Argentina S.A. (97%)
BellSouth China, Inc.
BellSouth International (Asia/Pacific), Inc.
Beijing Ji Tong - BellSouth Communication & Information
Engineering Co., Ltd. (50%)
Skycell Communications Private Limited**
TCIL BellSouth Limited (40%)
BellSouth International Limited
BellSouth International U.K. Trustee Limited
BellSouth Inversora S.A. (0.01%)
B.A. Celular Inversora S.A. (70.655%)
Compania de Radiocomunicaciones
Moviles S.A. (65%)
BellSouth Puerto Rico, Inc.*
BSI Denmark, Inc.
BLS Denmark Associates (40%)
DMT Dansk Mobiltelefon I/S (29%)
Compagnie Financiere pour le Radiotelephone S.A. (4%)
Societe Francaise du Radiotelephone
Datech S.A.
<PAGE>
BellSouth Inversora S.A. (99.99%)
B.A. Celular Inversora S.A. (70.655%)
Compania de Radiocomunicaciones Moviles S.A. (65%)
BellSouth Israel, Inc.
BellSouth Italy, Inc.
BellSouth Mexico, S.A. de C.V.*
BellSouth Mobilfunk GmbH*
BellSouth New Zealand Limited
BellSouth Personal Communications Limited*
PCN One Limited* (25%)
BellSouth Shanghai Centre, Ltd.
BellSouth Venezuela, S.A.
Capco (5%)
Telcel Celular, C.A. (2.47%)
Vencorp. (95%)
Telcel Celular, C.A. (9.26%)
BLS Denmark, Inc.
BLS Denmark Associates (60%)
DMT Dansk Mobiltelefon I/S (29%)
Capco (95%)
Telcel Celular, C.A. (2.47%)
Communication-Developpement S.A. (16.99%)
ROU Celular Inversora S.A. (76.08%)
Abiatar S.A. (46%)
Telcel Celular, C.A. (44%)
UK Holdings, Inc.
Air Call International B.V.
Air Call Communications SA (93.75%)
Vencorp. (5%)
Telcel Celular, C.A. (9.26%)
<PAGE>
Mobile Systems Group
BellSouth Mobile Data, Inc.
Australia New System L.P. (80% GP)
BellSouth Mobile Data Australia Pty Limited
BellSouth Mobile Data Services, Inc.
BellSouth Wireless Data Company L.P. (90% GP)
RAM/BSE Communications L.P. (49%)
Australia New System L.P. (20% LP)
BellSouth Mobile Data Australia Pty Limited
Belgium New System L.P. (20% LP)
RAM Mobile Data Belgium, S.C.S. (79.2% LP)
RAM Mobile Data Belgium SC (80%)
RAM Mobile Data Belgium, S.C.S. (1% GP)
France New System L.P. (20% LP)
France Telecom Mobiles Data, S.A. (12.5%)
Germany New System L.P. (20% LP)
RAM Mobile Data Network GmbH
Honolulu Cellular Telephone Company (49%)
Netherlands New System L.P. (20% LP)
RAM Mobile Data C.V. (79.2% LP)
RAM Mobile Data (Netherlands) B. V. (80%)
RAM Mobile Data C.V. (1% GP)
RAM Mobile Data Limited (55%)
RAM Mobile Data USA Limited Partnership (98%)
RAM Communications Consultants, Inc.
RAM Communications Consultants Limited
RAM Communications Consultants of Australia
Pty. Ltd.
Belgium New System L.P. (80% GP)
RAM Mobile Data Belgium S.P.R.L. (99.6%)
France New System L.P. (80% GP)
France Telecom Mobiles Data, S.A. (12.5%)
Germany New System L.P. (80% GP)
RAM Mobile Data Network GmbH
Netherlands New System L.P. (80% GP)
RAM Mobile Data C.V. (79.2% LP)
RAM Mobile Data (Netherlands) B. V. (80%)
RAM Mobile Data C.V. (1% GP)
<PAGE>
RAM Mobile Data Belgium S.P.R.L. (.4%)
RAM Mobile Data Limited (10%)
RAM/BSE Communications L.P. (1%)
BellSouth Mobile Data, Inc. II
BellSouth Wireless Data Company, L.P. (10% LP)
BSE Mobile Data Company, L.P. (1.025% GP)
RAM/BSE, L.P. (49% GP)
RAM/BSE OpCo Limited Partner Corp.
RAM/BSE Paging Company, L.P. (.001% LP)
RAM/BSE Paging Company, L.P. (99.999% GP)
RAM/BSE, L.P. (1% LP)
BellSouth Mobile Systems, Inc.
BellSouth Cellular Corp.
American Cellular Communications Corporation (76.5%)
ACC of Rockford, Inc.
National Cellular Communications, Inc. (98.98847%)
ACTC-Louisville Corp.*
ACTC-Ventura Corp.*
Anniston-Westel Company, Inc.
Gulf Coast Cellular Telephone Company
(A Partnership)(98.7%)
Atlanta-Athens MSA Limited Partnership (99.9%)
Bakersfield Holdings, Inc.
Bakersfield Cellular Telephone Company
Charisma Communications Corp. of the Southwest
(50%/ACCC; 50%/LIN)
Houston Mobile Cellular Communications Company
(A Partnership)(16%/Charisma; 42% Houston Cellular)
Houston Cellular Telephone Company (A Partnership)
(75%/Houston Mobile; 12.5%/Cellular Systems)
Galveston Mobile Corporation
Galveston Cellular Partnership (10.8526%)
Galveston Cellular Telephone Company
Galveston Mobile Partnership (43.75%)
Galveston Cellular Partnership (56%)
Galveston Cellular Telephone Company
Gary Cellular Corporation
Gary Cellular Telephone Company (A Partnership)(33%)
<PAGE>
Georgia Cellular Holdings, Inc.
Atlanta-Athens MSA Limited Partnership (.1%)
Hawaii Cellular Corporation
Honolulu Cellular Telephone Company (A
Partnership)(51%)
Houston Cellular Corporation
Cellular Systems (A Partnership)(50%)
Houston Cellular Telephone Company (A Partnership)
(12.5%/Cellular Systems; 75%/Houston Mobile)
Houston Mobile Cellular Communications Company
(A Partnership)(42%/Houston Cellular; 16%/Charisma)
Jackson Holdings, Inc.
Jackson Acquisitions Corp. (94%)
Jackson Cellular Corporation
MCTA (A Partnership)(50%)
Los Angeles RCCs, Inc. (85%/ACCC; 15%/LIN)
Los Angeles Cellular Corporation (51%/LA RCCs;
49%/Westel-LA)
Los Angeles Cellular Telephone Company
(A Partnership)(65%)
ACC Cellular
Rochester Cellular Corporation*
San Juan Cellular Corporation*
Westel-Indianapolis Company
Bloomington Cellular Telephone Company
(a Partnership)(92.2762%)
Kokomo Celltelco Partnership (a Partnership)(9.041%)
Muncie Cellular Telephone Company, Inc. (93.4299%)
Terre-Haute Cellular Telephone Company, Inc. (92.4085%)
Westel-Los Angeles Company
Los Angeles Cellular Corporation (49%/Westel-LA;
51%/LA RCCS)
Los Angeles Cellular Telephone Company (A
Partnership)(65%)
ACC Cellular
<PAGE>
Westel-Milwaukee Company, Inc.
Green Bay Cellular Telephone Company
(a Partnership)(99.01%)
Janesville Cellular Telephone Company, Inc. (79.9424%)
Madison Cellular Telephone Company
(a Partnership)(92.5%)
Racine Cellular Telephone Company
(a Partnership)(88.2390%)
Sheboygan Cellular Telephone Company, Inc. (86.3505%)
Westel Richmond, Inc.
RCTC Wholesale Company (A Partnership)(72.73%)
Richmond Cellular Telephone Company
Westel-Tampa Company, Inc. (85%) *
Beeper Marketing of Delaware, Inc.
BellSouth Cellular National Marketing, Inc.
BellSouth Mobility Inc
Acadiana Cellular General Partnership
(RSA's No. 5 & 6)(35%)
Alabama Cellular Service, Inc.
Huntsville MSA Limited Partnership (40%)
American Cellular Communications Corporation (23.5%)
Atlanta-Athens MSA Limited Partnership (99.9%)
Georgia Cellular Holdings, Inc.
Atlanta-Athens MSA Limited Partnership (.1%)
BCP Comercio e Participacoes Ltda. (99.99%)*
BellSouth Holdings B.V.
BellSouth Mobility Communications, Inc.
B-Side Carriers L.P. (9.796%)
BSB Comercio e Participacoes Ltda. (99.99%)*
Telcell S.A. (34.99%)
BSE Comercio e Participacoes Ltda. (99.99%)*
Celular Catarinense Comercio e
Participacoes Ltda. (10%)
Celular Catarinense Comercio e Participacoes Ltda. (90%)
Centel Cellular Company of Hickory (3.4%)
Centel Cellular Company of North Carolina (11.1%)
Centel Cellular Company of Tallahassee (10%)
Century Cellunet of North Louisiana Cellular Limited
Partnership (9%)
<PAGE>
Chattanooga CGSA, Inc.
Chattanooga MSA Limited Partnership (62.695%)
Decatur RSA Limited Partnership (80%)
Florida Cellular Service, Inc.
Jacksonville MSA Limited Partnership (85.76%)
Florida RSA #2B (Indian River) Limited Partnership (71.5%)
Georgia RSA No. 1 Limited Partnership (40%)
Georgia RSA No. 2 Limited Partnership (45.92%)
Georgia RSA No. 3 Limited Partnership (75%)
Jackson Acquisitions Corp. (6%)
Jackson Cellular Corporation
MCTA (A Partnership)(50%)
Kentucky CGSA, Inc.
Lexington MSA Limited Partnership (99.9%)
Lexington MSA Limited Partnership (.1%)
Louisiana CGSA, Inc.
Baton Rouge MSA Limited Partnership (48%)
Lafayette MSA Limited Partnership (51%)
Louisiana RSA No. 7 Cellular General Partnership (66.7%)
Louisiana RSA No. 8 Limited Partnership (50%)
Memphis CGSA, Inc.
Memphis SMSA Limited Partnership (75%)
M-T Cellular, Inc.
Nashville/Clarksville CGSA, Inc.
Nashville/Clarksville MSA Limited Partnership (51%)
North Carolina RSA 15 North Sector Limited
Partnership(11.1%)
Northeastern Georgia RSA Limited Partnership (35%)
Northeast Mississippi Cellular, Inc.
Orlando CGSA, Inc.
Orlando SMSA Limited Partnership (85%)
South Carolina Cellular Service, Inc.
Columbia MSA Limited Partnership (85.5%)
South Carolina RSA No. 4 Cellular General
Partnership (50%)
South Carolina RSA No. 5 Cellular General
Partnership (50%)
South Carolina RSA No. 6 Cellular General
Partnership (50%)
Telcell S.A. (15.01%)
<PAGE>
Cellular Mobile Services of California, Inc.
Cellular Mobile Services of Michigan, Inc.
Cellular Mobile Services of Texas, Inc.
BellSouth Wireless, Inc.
Graphic Cellular Properties, Inc.
Mobile Communications Corporation of America
California Satellite Systems*
Digital Paging Systems of Canada, Inc.
Digital Paging Systems of Maryland/D.C., Inc.
MobileComm Nationwide Operations, Inc.
MobileComm of Florida, Inc.
MobileComm Northeast Holding Co., Inc.*
MobileComm of the MidSouth, Inc.
MobileComm of the Midwest, Inc.
BSE Mobile Data Company, L.P. (98.975% LP)
MobileComm of the Northeast, Inc.
MobileComm of the West, Inc. (11%)
MobileComm of the Southeast, Inc.
MobileComm of the Southeast Private Carrier
Paging Operations, Inc.
MobileComm of the Southwest, Inc.
FWS Radio, Inc. (50%)
MobileComm of the West, Inc. (89%)
MobileComm of Tennessee, Inc.
Selective Paging Corporation*
Skilldex, Inc. (26%)
BellSouth Personal Communications, Inc.
Corporate Enterprises Group
BellSouth Information Systems, Inc. (BIS)
BellSouth Resources, Inc.
Dataserv Financial Services, Inc.
Dataserv International, Inc.
BellSouth Limited*
BellSouth U.K. Properties Limited
Dataserv AG (Swiss Company)*
Dataserv Espana, S.A.*
Dataserv Inc. Scandinavia AB*
Sunlink Corporation
<PAGE>
Shelf Companies
BellSouth Networks, Inc.*
___________________
* Indicates an Inactive Company and/or the name of a company to which
BellSouth Enterprises, Inc. has a contractual right.
** Stock owned by DSS Enterprises Private Ltd. at this time. If
license awarded, stock will be owned by BellSouth International
(Asia/Pacific), Inc.
Unless indicated otherwise, each subsidiary is owned 100% by its
parent company.
[/DOCUMENT]
[DESCRIPTION] EXHIBIT 24
EXHIBIT 24
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ F. Duane Ackerman
F. Duane Ackerman
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ Andrew F. Brimmer
Andrew F. Brimmer
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ Armando M. Codina
Armando M. Codina
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ Marshall M. Criser
Marshall M. Criser
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ Gordon B. Davidson
Gordon B. Davidson
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for her in her name, place and stead in her capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as she might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand on the date
indicated.
/s/ Phyllis Burke Davis
Phyllis Burke Davis
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ William O. McCoy
William O. McCoy
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ John G. Medlin, Jr.
John G. Medlin, Jr.
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ C. Dixon Spangler, Jr.
C. Dixon Spangler, Jr.
Director
March 4, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ Ronald A. Terry
Ronald A. Terry
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ Thomas R. Williams
Thomas R. Williams
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ J. Tylee Wilson
J. Tylee Wilson
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, each of the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each
of them, as attorneys for him in his name, place and stead in each of his
respective capacities in the Company to execute and cause to be filed the said
Annual Report and to execute and cause to be filed any amendment or supplement
thereto (including any Form 11-K) deemed by them to be necessary or desirable,
hereby giving and granting to said attorneys full power and authority (including
substitution and revocation) to do and perform all and every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present at the doing thereof, hereby ratifying and confirming all that said
attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ John L. Clendenin February 28, 1994
John L. Clendenin Date
Chairman of the Board and
Chief Executive Officer
Director
(Principal Executive Officer)
/s/ Earle Mauldin March 7, 1994
Earle Mauldin Date
Executive Vice President -
Chief Financial Officer
(Principal Financial Officer)
/s/ Ronald M. Dykes March 1, 1994
Ronald M. Dykes Date
Vice President and Comptroller
(Principal Accounting Officer)
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ J. Hyatt Brown
J. Hyatt Brown
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ Reuben V. Anderson
Reuben V. Anderson
Director
February 28, 1994
Date
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
WHEREAS, BELLSOUTH CORPORATION, a Georgia corporation (the "Company"),
proposes to file with the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K for
the year ended December 31, 1993.
NOW THEREFORE, the undersigned hereby constitutes and appoints John L.
Clendenin, Ronald M. Dykes, Earle Mauldin and Arlen G. Yokley, and each of them,
as attorneys for him in his name, place and stead in his capacity as a director
of the Company to execute and cause to be filed the said Annual Report and to
execute and cause to be filed any amendment or supplement thereto (including any
Form 11-K) deemed by them to be necessary or desirable, hereby giving and
granting to said attorneys full power and authority (including substitution and
revocation) to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated.
/s/ James H. Blanchard
James H. Blanchard
Director
March 1, 1994
Date
