SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
_
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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
BELLSOUTH CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 58-1533433
(State of (I.R.S. Employer
Incorporation) Identification Number)
1155 Peachtree Street, N. E., Atlanta, Georgia 30309-3610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number 404 249-2000
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 .
At August 9, 1994, a total of 496,221,934 common shares were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
Operating Revenues: (Restated)
Network and Related Services
Local service $1,709.7 $1,624.6 $3,389.4 $3,243.0
Interstate access 765.0 718.5 1,567.4 1,467.9
Intrastate access 230.4 217.7 460.5 433.2
Toll 300.4 300.0 600.6 605.1
Directory advertising
and publishing 396.3 394.4 741.1 724.3
Wireless communications 494.4 379.0 948.3 731.6
Other services 231.7 272.7 544.9 535.5
Total Operating Revenues 4,127.9 3,906.9 8,252.2 7,740.6
Operating Expenses:
Cost of services and products 1,492.3 1,467.5 2,984.6 2,958.3
Depreciation and amortization 800.7 770.9 1,599.1 1,538.5
Selling, general
and administrative 833.3 812.1 1,654.7 1,583.3
Total Operating Expenses 3,126.3 3,050.5 6,238.4 6,080.1
Operating Income 1,001.6 856.4 2,013.8 1,660.5
Interest Expense 154.0 180.8 318.9 360.8
Other Income (Expense), net (11.7) 16.8 47.8 25.7
Income before Income Taxes,
Extraordinary Loss and
Cumulative Effect of Change
in Accounting Principle 835.9 692.4 1,742.7 1,325.4
Provision for Income Taxes 319.4 259.3 640.9 481.1
Income Before Extraordinary
Loss and Cumulative Effect
of Change in Accounting
Principle 516.5 433.1 1,101.8 844.3
Extraordinary Loss on Early
Extinguishment of Debt,
net of tax - (55.4) - (55.4)
Cumulative Effect of Change
in Accounting Principle,
net of tax - - - (67.4)
Net Income $ 516.5 $ 377.7 $1,101.8 $ 721.5
<PAGE>
Weighted Average Common
Shares Outstanding 496.6 496.1 496.6 495.8
Dividends Declared
Per Common Share $ .69 $ .69 $ 1.38 $ 1.38
Earnings Per Share:
Income Before Extraordinary
Loss and Cumulative Effect of
Change in Accounting Principle $ 1.04 $ .87 $ 2.22 $ 1.70
Extraordinary Loss on Early
Extinguishment of Debt,
net of tax - (.11) - (.11)
Cumulative Effect of Change
in Accounting Principle,
net of tax - - - (.14)
Net Income $ 1.04 $ .76 $ 2.22 $ 1.45
The accompanying notes are an integral part of these financial statements.
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions)
June 30, December 31,
1994 1993
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 777.6 $ 501.5
Temporary cash investments 38.7 49.0
Accounts receivable, net of allowance for
uncollectibles of $145.2 and $149.6 2,837.2 2,985.2
Material and supplies 389.1 418.7
Other current assets 357.1 364.6
4,399.7 4,319.0
Investments and Advances 2,427.6 2,039.4
Property, Plant and Equipment, net 24,747.6 24,667.8
Deferred Charges and Other Assets 569.4 512.2
Intangible Assets, net 1,319.0 1,334.9
Total Assets $33,463.3 $32,873.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year $ 1,902.5 $ 1,838.6
Accounts payable 1,115.7 979.0
Other current liabilities 2,626.2 2,943.8
5,644.4 5,761.4
Long-Term Debt 7,488.5 7,380.7
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 3,479.6 3,465.3
Unamortized investment tax credits 481.0 515.9
Other liabilities and deferred credits 2,442.4 2,255.8
6,403.0 6,237.0
Shareholders' Equity:
Common stock, $1 par value 502.5 501.6
Paid-in capital 8,028.9 8,009.4
Retained earnings 6,342.3 5,919.3
Shares held in trust (336.2) (292.6)
Guarantee of ESOP debt (610.1) (643.5)
13,927.4 13,494.2
Total Liabilities and Shareholders' Equity $33,463.3 $32,873.3
The accompanying notes are an integral part of these financial statements.
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
For the Six Months
Ended June 30,
1994 1993
(Restated)
Cash Flows from Operating Activities:
Net income...........................................$ 1,101.8 $ 721.5
Adjustments to net income:
Depreciation...................................... 1,572.7 1,507.5
Amortization of intangibles....................... 26.4 31.0
Dividends received from unconsolidated affiliates. 53.4 77.7
Losses/(earnings) of unconsolidated affiliates.... 27.5 (15.7)
Write-off of unamortized debt issuance costs
due to early extinquishment of debt.............. - 32.8
Provision for losses on bad debts................. 88.0 95.5
Deferred income taxes and unamortized
investment tax credits........................... (82.9) (111.5)
Change in accounting principle, net of tax........ - 67.4
Gain on sale of operations........................ (64.7) -
Allowance for funds used during construction...... (8.8) (12.2)
Change in accounts receivable..................... (138.9) (185.8)
Change in material and supplies................... (55.3) (28.1)
Change in accounts payable and
other current liabilities........................ (142.1) (341.1)
Change in deferred charges and other assets....... (57.2) (35.6)
Change in other liabilities and
deferred credits................................. 245.3 95.6
Other reconciling items, net...................... 41.3 5.1
Net cash provided by operating activities...... 2,606.5 1,904.1
Cash Flows from Investing Activities:
Capital expenditures................................. (1,625.5) (1,597.5)
Proceeds from disposals of property, plant
and equipment....................................... 49.6 54.1
Proceeds from disposition of short-term
investments......................................... 46.6 69.0
Purchase of short-term investments................... (42.4) (44.3)
Investment dispositions.............................. 132.1 30.3
Investments in/advances to unconsolidated
affiliates.......................................... (385.0) (173.1)
Proceeds from repayment of loans and advances........ 14.6 14.9
Other investing activities, net...................... - .1
Net cash (used for) investing activities....... (1,810.0) (1,646.5)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings.................. 11,357.5 7,571.8
Repayments of short-term borrowings.................. (11,243.9) (7,216.7)
Proceeds of long-term debt........................... 139.4 1,897.2
Repayment of long-term debt.......................... (78.9) (1,544.8)
Payment of call premium.............................. - (38.7)
Payments of capital lease obligations................ (7.0) (6.6)
Proceeds from issuing common shares.................. 5.2 26.1
Dividends paid....................................... (692.7) (616.4)
Net cash provided by/(used for) financing
activities....................................... (520.4) 71.9
<PAGE>
Net Increase in Cash and Cash Equivalents............... 276.1 329.5
Cash and Cash Equivalents at Beginning of Period........ 501.5 265.5
Cash and Cash Equivalents at End of Period..............$ 777.6 $ 595.0
The accompanying notes are an integral part of these financial statements.
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Millions)
(Unaudited)
(a) Preparation of Interim Financial Statements
The consolidated financial statements of BellSouth Corporation ("BellSouth")
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC"). Certain amounts have been
reclassified from previous presentations. In the opinion of BellSouth, these
statements include all adjustments necessary for a fair presentation of the
results of all interim periods reported herein. All adjustments are of a
normal recurring nature. Certain information and footnote disclosures prepared
in accordance with generally accepted accounting principles have been either
condensed or omitted pursuant to SEC rules and regulations. However, BellSouth
believes that the disclosures made are adequate for a fair presentation of
results of operations, financial position and cash flows. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and accompanying notes included in BellSouth's latest
annual report on Form 10-K and previous quarterly report on Form 10-Q.
(b) BellSouth Corporation Consolidated Shareholders' Equity
Common Paid-In Retained Shares Held Guarantee of
Stock Capital Earnings in Trust ESOP Debt
Balance at December 31,
1993..................... $501.6 $8,009.4 $5,919.3 $(292.6) $(643.5)
Net income................ 1,101.8
Dividends................. (684.6)
Shares issued in
connection with various
employee benefit plans... .1 3.4
Shares issued to grantor
trusts................... .8 42.8 (43.6)
Reduction of ESOP debt and
other related activity... 5.8 33.4
Foreign currency translation
adjustment............... (26.7)
Balance at
June 30, 1994............ $502.5 $8,028.9 $6,342.3 $(336.2) $(610.1)
BellSouth has issued shares to several 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 June 30, 1994, the
assets held in the trusts consist of cash and 6,262,087 shares of BellSouth
Common Stock.
The total dollar value 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.
<PAGE>
(c) Supplemental Cash Flow Information
The following supplemental information is presented in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 95,
"Statement of Cash Flows":
For the Six Months
Ended June 30,
1994 1993
Cash paid during the period for:
Income taxes.................................... $788.5 $645.4
Interest........................................ $314.6 $401.0
Schedule of Noncash Investing and
Financial Activities:
Common shares issued in lieu of cash dividends
under the Shareholder Dividend Reinvestment
and Stock Purchase Plan....................... $ - $ 66.4
Shares issued to grantor trusts................... $ 43.6 $253.1
(d) Extraordinary Item
During second quarter 1993, BellSouth Telecommunications, Inc., a wholly-owned
subsidiary of BellSouth, issued $1,450.0 of Notes and Debentures to redeem and
refinance $1,335.0 aggregate principal amount of eight outstanding Debenture
issues. As a result, an extraordinary loss on early extinguishment of debt of
$55.4 (net of taxes of $38.5), or $.11 per share, was recognized for call
premiums, unamortized debt discount, premium and issuance costs related to
these transactions.
(e) SFAS No. 112, "Employers' Accounting for Postemployment Benefits"
In the fourth quarter of 1993, BellSouth adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." The cumulative effect of the change
in accounting principle was $67.4 ($.14 per share). Because the change in
accounting was retroactive to January 1, 1993, the consolidated financial
statements at June 30, 1993 and for the six months then ended have been
restated to reflect the adoption of the accounting standard.
<PAGE>
BELLSOUTH CORPORATION
SELECTED OPERATING DATA
(Unaudited)
Network Access Lines in Service at June 30 (In Thousands)(a):
Percentage
Gain/(Loss) for the
Periods Ended
June 30,
1994 vs. 1993 vs.
1994 1993 1992
By Category:
Residence 13,923.9 3.35 2.79
Business 5,569.8 6.56 5.59
Other 252.6 (1.83) (5.13)
Total Access Lines 19,746.3 4.16 3.43
By State:
Alabama 1,694.0 3.51 3.34
Florida 5,206.1 4.44 3.65
Georgia 3,255.8 4.98 4.65
Kentucky 1,045.3 2.88 2.87
Louisiana 2,001.5 3.26 1.89
Mississippi 1,098.1 3.71 2.44
North Carolina 1,937.9 4.86 4.01
South Carolina 1,223.5 3.02 2.36
Tennessee 2,284.1 4.51 3.52
Total Access Lines 19,746.3 4.16 3.43
Percentage
Gain/(Loss) for the
Periods Ended
1994 vs. 1993 vs.
1994 1993 1992
Access Minutes of Use (In Millions)(a)(b):
Interstate:
Three months ended March 31 14,050.8 7.94 5.55
Three months ended June 30 14,422.3 7.59 6.03
Six months ended June 30 28,473.1 7.77 5.79
Intrastate:
Three months ended March 31 4,005.6 11.39 6.74
Three months ended June 30 4,175.0 9.90 8.79
Six months ended June 30 8,180.6 10.63 7.78
Total Minutes of Use:
Three months ended March 31 18,056.4 8.69 5.80
Three months ended June 30 18,597.3 8.10 6.63
Six months ended June 30 36,653.7 8.39 6.22
Toll Messages (In Millions)(a)(c)
Three months ended March 31 386.6 5.28 (2.40)
Three months ended June 30 397.2 2.12 7.14
Six months ended June 30 783.8 3.66 2.28
(a) Prior period operating data are often revised at later dates to reflect
the most current information. The above information reflects the
latest data available for the periods indicated.
<PAGE>
(b) Minutes of Use are classified as either interstate or intrastate based
on the percentage interstate usage factor. This factor is updated
periodically.
(c) Effective in 1994, toll messages include messages completed under
optional calling plans. Prior period toll message volumes have been
restated to reflect this change. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition - Business
Volumes."
<PAGE>
BELLSOUTH CORPORATION
SELECTED OPERATING DATA - (Continued)
Cellular and Paging Customers Served at June 30 (Equity Basis (d)):
Percentage Gain
1994
1994 vs. 1993
Domestic Cellular.......................... 1,803,800 39.8
International Cellular..................... 264,600 127.9
Domestic Paging............................ 1,323,800 18.0
(d) Includes customers served based on BellSouth's ownership percentage in all
markets served.
For the Six
Months Ended
June 30, Year Ended December 31,
1994 1993 1992 1991 1990 1989
Ratio of Earnings to Fixed Charges (e) 5.67 2.98 4.00 3.47 3.68 3.85
(e) For the purpose of this ratio: (i) earnings have been calculated by adding
income before income taxes, gross interest expense, such portion of rental
expense representative of the interest factor on such rentals and equity in
losses from less-than-50%-owned investments (accounted for under the equity
method) less the excess of earnings over distributions from
less-than-50%-owned investments (accounted for under the equity method);
(ii) fixed charges are comprised of gross interest expense and such portion
of rental expense representative of the interest factor on such rentals.
Sources of Revenues
Approximately 73% and 74% of BellSouth's Total Operating Revenues for the six
month periods ended June 30, 1994 and 1993, respectively, and a greater portion
of net income were from wireline services provided by BellSouth
Telecommunications. Charges for local service, access services and toll
messages for the six months ended June 30, 1994 accounted for approximately 56%,
34%, and 10%, respectively, of the wireline revenues discussed above. Revenues
from wireless communications services and directory advertising and publishing
services accounted for approximately 11% and 9%, respectively, of Total
Operating Revenues for the six months ended June 30, 1994. The remainder of
such revenues was derived principally from other nonregulated services provided
by BellSouth Telecommunications.
<PAGE>
BELLSOUTH CORPORATION
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 service and toll communications services
within court-defined geographic areas, called Local Access and Transport Areas
("LATAs"), and provides network access services to enable interLATA
communications using the long-distance facilities of interexchange carriers.
Through subsidiaries, other telecommunications services and products are
provided both inside and outside the nine-state BellSouth Telecommunications
region. BellSouth Enterprises, Inc. ("BellSouth Enterprises"), another
wholly-owned subsidiary, owns businesses providing domestic and international
wireless communications services and advertising and publishing products.
Results of Operations
For the Three For the Six
Months Ended June 30, Months Ended June 30,
1994 1993 1994 1993 _
Net Income $516.5 $377.7 $1,101.8 $721.5
Earnings Per Share $ 1.04 $ .76 $ 2.22 $ 1.45
Net Income increased $138.8 (36.7%) and $380.3 (52.7%) for the three and six
month periods ended June 30, 1994, respectively, when compared to the same prior
year periods; Earnings Per Share increased $.28 (36.8%) and $.77 (53.1%). The
increases for both periods were attributable to revenue growth, driven by
improvement in key business volumes, cost control efforts at BellSouth
Telecommunications, including expense savings attributable to the restructuring
plan implemented in 1993, and the effect of a second quarter 1993 charge of
$55.4 ($.11 per share), net of tax, for the refinancing of certain long-term
debt issues at lower interest rates by BellSouth Telecommunications. The
increase for the six month period was also due in part to a $67.5 ($.14 per
share) gain in first quarter 1994 on the sale of BellSouth's interest in the
cellular telephone business in Mexico and the effect of charges in first quarter
1993 of $67.4 ($.14 per share) for the retroactive adoption of Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits," and approximately $25 ($.05 per share) associated with
severe 1993 winter weather conditions. After adjusting for the effect of the
unusual items in 1994 and 1993, net income for the three and six month periods
ended June 30, 1994 increased $83.4 (19.3%) and $165.0 (19.0%), respectively,
when compared to the same periods last year; Earnings Per Share, as adjusted,
increased $.17 (19.5%) and $.33 (18.9%).
<PAGE>
Business Volumes
Growth in access lines was particularly strong. The number of access lines in
service since June 30, 1993 increased by approximately 789,000, or 4.16%, to
19,746,300, compared to a 3.43% rate of increase for the same prior year period.
The overall increase, led by growth in Georgia, North Carolina, Tennessee and
Florida, was primarily attributable to continued economic improvement, including
expanding employment in BellSouth Telecommunications' nine-state region and an
increase in the number of second residential lines. The growth rates in 1994 for
residence and business lines of 3.35% and 6.56%, respectively, improved compared
to growth rates of 2.79% and 5.59%, respectively, in 1993.
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
1,394.0 million (8.10%) and 2,837.5 million (8.39%) for the three and six month
periods ended June 30, 1994, respectively, compared to increases of 6.63% and
6.22% for the same periods last year. The increases in access minutes of use
were partially attributable to access line growth, promotions by the
interexchange carriers and 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.
Toll messages are comprised of Message Telecommunications Service and Wide Area
Telecommunications Service. Also, effective in 1994, toll messages include
messages completed under Optional Calling Plans ("OCPs"), which provide reduced
rates for toll calls within a LATA. Prior period toll message volumes have been
restated to reflect this change. Service pricing under OCPs has resulted in
volume growth. Accordingly, the trend of declining toll message volumes in
prior periods has been mitigated to some extent by the inclusion of messages
completed under these plans.
For the three and six month periods ended June 30, 1994, toll messages increased
by 8.3 million (2.12%) and 27.6 million (3.66%), respectively, compared to
restated increases of 7.14% and 2.28% for the corresponding periods in 1993.
The increases were attributable in part to the growth of messages completed
under OCPs. While no new significant local area calling plans have been
implemented since 1992, future implementation of such plans in BellSouth
Telecommunications' service region, coupled with competition in the intraLATA
toll market, will adversely impact future toll message volumes. These plans and
the effects of competition result in the transfer of calls from toll to local
service and access categories, respectively, but the corresponding revenues are
not generally shifted at commensurate rates.
Domestic cellular customers (equity-weighted) increased by 513,200 (39.8%) since
June 30, 1993 to 1,803,800. The overall penetration rate (number of customers
as a percentage of the total population in the service territory) increased from
3.33% at June 30, 1993 to 4.63% at June 30, 1994. Total minutes of use have
also continued to increase, although average minutes of use per cellular
customer remained essentially constant for the three month period and declined
for the six month period due to the trend of increased penetration into
lower-usage market segments.
<PAGE>
Since June 30, 1993, the number of international cellular customers expanded to
264,600, an increase of 148,500 (127.9%). Growth in total 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.
Domestic paging customers increased by 202,000 (18.0%) to 1,323,800 since June
30, 1993 due to continued success of the retail distribution program and
aggressive pricing strategies in the reseller market.
See "Selected Operating Data."
Operating Revenues
Total Operating Revenues increased $221.0 (5.7%) and $511.6 (6.6%) for the three
and six month periods ended June 30, 1994, respectively, when compared to the
corresponding 1993 periods. The components of Total Operating Revenues were as
follows:
For the Three For the Six
Months Ended June 30, Months Ended June 30,
1994 1993 1994 1993
Local Service $1,709.7 $1,624.6 $3,389.4 $3,243.0
Interstate Access 765.0 718.5 1,567.4 1,467.9
Intrastate Access 230.4 217.7 460.5 433.2
Toll 300.4 300.0 600.6 605.1
Directory Advertising
and Publishing 396.3 394.4 741.1 724.3
Wireless Communications 494.4 379.0 948.3 731.6
Other Services __ 231.7 272.7 544.9 535.5
Total Operating
Revenues $4,127.9 $3,906.9 $8,252.2 $7,740.6
Local Service revenues increased $85.1 (5.2%) and $146.4 (4.5%) for the three
and six month periods ended June 30, 1994, respectively, as compared to the same
1993 periods. Both increases were attributable to an increase in access lines
in service since June 30, 1993. In addition, growth in revenues from local area
calling plans, which shift revenues from Toll to Local Service, contributed to
the increase for both periods. The increases were partially offset by the
effect of net rate reductions since June 30, 1993, principally in Louisiana.
<PAGE>
Interstate Access revenues increased $46.5 (6.5%) and $99.5 (6.8%) for the
three
and six month periods ended June 30, 1994, respectively, as compared to the same
prior year periods. The increase for both periods was attributable to higher
rates effective July 1, 1993, growth in minutes of use, increases from end user
charges due primarily to access line growth and, for the six month period, the
effect of billing adjustments recorded in first quarter 1993, which reduced
revenues for that period. The increases were partially offset by revenue
deferrals under the Federal Communications Commission's ("FCC") price cap plan
and decreased net settlements with the National Exchange Carriers Association.
Since BellSouth Telecommunications' earnings remain in the sharing range of the
FCC's current price cap plan and because of other factors, it is unlikely that
significant revenue growth in this category can be sustained over the long term.
Intrastate Access revenues increased $12.7 (5.8%) and $27.3 (6.3%) for the three
and six month periods ended June 30, 1994, respectively, from the comparable
1993 periods. The increases were due to growth in minutes of use, increased net
settlements with independent telephone companies and, for the six month period,
the effect of billing adjustments recorded in first quarter 1993, which reduced
revenues for that period. The increases were partially offset by rate
reductions since June 30, 1993.
Toll revenues for the three and six month periods ended June 30, 1994,
respectively, were essentially unchanged when compared to the same prior year
periods. Increases attributable to growth in toll message volumes, reflecting
improvements related in part to optional calling plans, were offset by rate
reductions since June 30, 1993, including the impact of local area calling plans
which shift revenues to Local Service.
Directory Advertising and Publishing revenues increased $1.9 (0.5%) and $16.8
(2.3%) for the three and six month periods ended June 30, 1994, respectively,
when compared to the same prior year periods. Growth due to increases in
volumes and prices of advertising sold for both the three and six month periods
was partially offset by a change in the issue date of certain Yellow Pages
directories.
Wireless Communications revenues include revenues from the consolidated wireless
communications businesses (primarily cellular and paging within BellSouth
Enterprises) as well as revenues from interconnections by unaffiliated cellular
carriers with BellSouth Telecommunications' network. (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.)
Wireless Communications revenues increased $115.4 (30.4%) and $216.7 (29.6%) for
the three and six month periods ended June 30, 1994, respectively, when compared
to the same periods last year. The increases were attributable to continued
growth of the customer base and demand for wireless services in domestic and
international markets.
Other Services revenues are principally comprised of revenues from customer
premises equipment ("CPE") sales and maintenance services, billing and
collection services and other nonregulated services (primarily inside wire
services) offered by BellSouth Telecommunications.
<PAGE>
Other Services revenues decreased $41.0 (15.0%) and increased $9.4 (1.8%) for
the three and six month periods ended June 30, 1994, respectively, when compared
to the corresponding 1993 periods. The decrease for the three month period was
primarily attributable to increased intrastate sharing accruals and the sale in
April 1994 of BellSouth Telecommunications' out-of-region CPE sales and service
operations. The decrease was partially offset by higher demand for voice
messaging and inside wire services and the effect of nonrecurring adjustments,
related primarily to billing and collection services. For the six month period,
the increase was due to higher demand for the unregulated services, the effect
of the nonrecurring adjustments and volume growth in the CPE businesses,
partially offset by the disposal of the out-of-region CPE operations and
increased intrastate sharing accruals.
See "Business Volumes."
Operating Expenses
The components of Total Operating Expenses are Depreciation and Amortization,
Cost of Services and Products and Selling, General and Administrative. Cost of
Services and Products includes employee and employee-related expenses associated
with network repair and maintenance, material and supplies expense, cost of
tangible goods sold and other expenses associated with providing services.
Selling, General and Administrative includes expenses related to sales
activities such as salaries, commissions, benefits, travel, marketing and
advertising expenses. Total Operating Expenses increased $75.8 (2.5%) and
$158.3 (2.6%) for the three and six month periods ended June 30, 1994,
respectively, compared to the same periods in 1993, the components of which were
as follows:
For the Three For the Six
Months Ended June 30, Months Ended June 30,
1994 1993 1994 1993
Depreciation and
Amortization $ 800.7 $ 770.9 $1,599.1 $1,538.5
Other Operating Expenses:
Cost of Services
and Products 1,492.3 1,467.5 2,984.6 2,958.3
Selling, General and
Administrative 833.3 812.1 1,654.7 1,583.3
2,325.6 2,279.6 4,639.3 4,541.6
Total Operating
Expenses $3,126.3 $3,050.5 $6,238.4 $6,080.1
Depreciation and Amortization increased $29.8 (3.9%) and $60.6 (3.9%) for the
three and six month periods ended June 30, 1994, respectively, compared to the
same periods in 1993. The increases were due to higher levels of property,
plant and equipment since June 30, 1993 resulting from continued growth in the
customer base for wireless and wireline services and continued modernization of
<PAGE>
the networks. In addition, higher depreciation rates in certain jurisdictions
contributed to the increase. The effect of the expiration of inside wire and
reserve deficiency amortizations partially offset the increase for the period.
Other Operating Expenses increased $46.0 (2.0%) and $97.7 (2.2%) due primarily
to increased expenses related to growth in the wireless communications customer
base, including additional marketing costs associated with higher levels of
sales, and, to a small extent, volume growth in the advertising and publishing
businesses. The overall increases for the three and six month periods were
partially offset by slight decreases in Other Operating Expenses at BellSouth
Telecommunications. The decreases were attributable to a reduction of
approximately 3,000 employees since June 30, 1993, reduced expenses for rents
and materials and, for the six month period, the inclusion in 1993 of
approximately $40 of expenses related to severe weather conditions, partially
offset by annual compensation increases for management and craft employees and
increased expenses for overtime compensation and other expenses, including
right-to-use fees. Of the overall reduction in employees at BellSouth
Telecommunications since June 30, 1993, approximately 2,100 were attributable to
the restructuring plan announced in the fourth quarter of 1993 and approximately
750 resulted from the sale in April 1994 of the out-of-region CPE sales and
service operations.
For the Three For the Six
Months Ended June 30, Months Ended June 30,
1994 1993 1994 1993
Interest Expense $154.0 $180.8 $318.9 $360.8
Other Income
(Expense), net (11.7) 16.8 47.8 25.7
Provision for
Income Taxes 319.4 259.3 640.9 481.1
Interest Expense decreased $26.8 (14.8%) and $41.9 (11.6%) for the three and six
month periods ended June 30, 1994, respectively, compared to the same periods
last year. The decreases were due primarily to a decline in interest rates on
indebtedness, which resulted from refinancings of long-term debt at lower
interest rates.
Other Income, net decreased $28.5 and increased $22.1 (86.0%) for the three and
six month periods ended June 30, 1994, respectively, compared to the
corresponding periods in 1993. The decrease for the three month period was due
primarily to higher costs and expenses related to new and start-up operations,
principally the business venture with RAM Broadcasting Corporation ("RAM"), and,
to a lesser extent, higher income attributable to minority interests. The
decrease was partially offset by an overall increase in income from BellSouth's
investments in other unconsolidated domestic and international wireless
businesses. The increase for the six month period was attributable to the $67.5
gain on sale of BellSouth's interest in the cellular telephone business in
Mexico, partially offset by an overall decrease in income from unconsolidated
businesses, including the venture with RAM, and higher income attributable to
minority interests.
<PAGE>
Provision for Income Taxes increased $60.1 (23.2%) and $159.8 (33.2%) for the
three and six month periods ended June 30, 1994 over the comparable 1993
periods. The increases were due primarily to higher levels of pre-tax income
and, to a lesser extent, the one percent increase in the Federal statutory
income tax rate for corporations. In addition, the increase for the six month
period was due in part to the effect of the $7.8 transition adjustment related
to the implementation of SFAS No. 109, "Accounting for Income Taxes" in first
quarter 1993, which reduced tax expense for that period.
Financial Condition
BellSouth uses the net cash generated from its operations and external financing
to fund capital expenditures, pay dividends and invest in and operate its
existing operations and new business ventures. BellSouth believes that funds
provided from operations and from its readily available sources of external
financing will be sufficient to meet the needs of its business for the
foreseeable future.
BellSouth's cash flow from operations increased 36.9% to $2,606.5 for the first
six months of 1994, compared to the same period in 1993. The increase was due
in part to the improvement in net income and also to the impact of expenditures
attributable to Hurricane Andrew in the first six months of 1993, which reduced
cash flow for that period. Expenditures for the construction and purchase of
plant and equipment to support network development activities, which is
BellSouth's primary use of capital funds, totaled $1,625.5 during the first six
months of 1994, compared to $1,597.5 for the same period last year.
Substantially all funds supporting construction activity were provided
internally and this trend is expected to continue through 1994.
Cash used for investments in and advances to unconsolidated affiliates increased
from $173.1 in 1993 to $385.0 in 1994. Approximately 35% of such cash in 1994
was loaned to Prime South Diversified, Inc., which indirectly wholly owns
Community Cable TV, a Las Vegas cable operation managed by Prime Cable.
Approximately 42% of the cash used was for investments and advances to the
business venture with RAM and the German and Venezuelan cellular businesses.
The remainder was invested in other business ventures in which BellSouth has an
interest.
Cash dividends paid to BellSouth's common shareholders totaled $692.7 during the
first six months of 1994, compared to $616.4 during the first six months of
1993. The increase was due to the use of $66.4 of common shares, newly issued
by BellSouth, during the first six months of 1993 as payment in lieu of cash
dividends under the Shareholder Dividend Reinvestment and Stock Purchase Plan.
No such newly-issued shares were used for that purpose during the first six
months of 1994.
BellSouth's debt to total capitalization ratio increased from 39.4% at June 30,
1993 to 39.9% at June 30, 1994. The increase was due to a small decrease in
Shareholders' Equity, attributable primarily to the restructuring charge
recorded in the fourth quarter of 1993, and a slight increase in the level of
debt.
<PAGE>
Other Matters
Restructuring of Telephone Operations
Since implementation in fourth quarter 1993 of BellSouth Telecommunications'
overall plan to redesign and streamline its telephone operations by the end of
1996, the workforce has been reduced by approximately 2,100 employees,
including 200 and 600 during the first and second quarters of 1994,
respectively. BellSouth Telecommunications expects to reduce the workforce by
an additional 2,900 employees by the end of 1994 as a part of the restructuring
plan. Cash expenditures through June related to the ongoing implementation of
the restructuring plan were approximately $115. The levels of restructuring
activities and cash expenditures related to this plan are expected to increase
over the restructuring period. At June 30, 1994, the recorded liability
associated with the restructuring plan was $957.
Business Developments
Proposed Interactive Media Services Trial. In June, BellSouth applied to the
FCC for permission to conduct a trial to deliver cable television service and
video dial tone services over the same network. BellSouth plans to undertake
this trial to better position the company to respond to the increasingly
competitive telecommunications market. If approved by the FCC, BellSouth
Telecommunications would construct the network in Chamblee, Georgia and begin
service as early as 1995, providing 60 analog channels for cable television
service and 300 digital channels for interactive services, most of which would
be offered by unaffiliated programming service providers. Specific services
expected to be provided and tested over the network include broadcast
entertainment, interactive video services, such as video games, enhanced
personal computer and communications services, including electronic mail,
transactional services, such as home shopping and banking, and customer-choice
video services, such as movies-on-demand.
Narrowband PCS License Auction. BellSouth has been advised by the FCC that it
won, in auction, one of the nationwide narrowband PCS licenses. BellSouth bid
$47.5 for a 10-year license for a 50 kHz channel paired with a 12.5 kHz channel
for two-way communications.
Cellular Investment in Israel. In May, a consortium in which BellSouth has an
approximate one-third ownership interest was awarded the license to build and
operate Israel's second cellular network. Service in selected areas of Israel
is expected to begin late in 1994; over a 15-month period, the network will be
expanded to cover the entire country. The consortium expects to invest
approximately $300 over a three-year period.
<PAGE>
Regulatory Environment
Accounting Under SFAS No. 71
BellSouth's rate 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. Additionally, if BellSouth is successful in altering the existing
regulatory framework and achieving price regulation, the accounting under SFAS
No. 71 would be discontinued since such plans do not provide for the recovery
of specific costs.
BellSouth currently believes that the existing and anticipated levels of
competition still permit prices based 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. If the accounting under SFAS No.
71 were to be discontinued 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.
Legislative Update
In June, the U.S. House of Representatives passed two bills, H.R. 3626 and H.R.
3636, which could, if enacted into law, significantly affect BellSouth's and
BellSouth Telecommunications' business operations and opportunities. Among
other things, the provisions of H.R. 3626 would allow Bell Holding Companies,
including BellSouth, to transmit and connect cellular telephone and other
wireless transmissions, cable television signals and certain information
services, whether local or long distance. In addition, H.R. 3626 mandates new
federal and state approval processes for the provision of interLATA services
over the traditional wireline network. H.R. 3636 provides a regulatory
framework for opening cable television and local exchange telecommunications
markets to competition. Telecommunications bills are also under consideration
in the U.S. Senate. The outcome of this legislation is uncertain.
Modification of Final Judgment
In July, BellSouth and three other Bell Holding Companies jointly filed a
motion in the U.S. District Court for the District of Columbia seeking relief
from the remaining provisions of the Modification of Final Judgment ("MFJ"),
which restricts Bell Holding Companies from providing certain services and
entering certain lines of business, such as the provision of interLATA services
and the manufacture of telecommunications equipment and CPE. BellSouth
believes that the MFJ restrictions are contrary to the public interest in that
they impair the effectiveness of competitive markets, harm consumers
economically and undermine the efficient development of new technology. Final
resolution of this motion is not expected in the near term.
<PAGE>
Federal Communications Commission
In June, the United States Court of Appeals for the District of Columbia
Circuit overturned the physical collocation requirement of the FCC that would
have enabled competitive access providers and other third parties ("CAPs") to
establish their interconnection equipment in the central offices of BellSouth
Telecommunications and the other local exchange carriers ("LECs"). On remand,
the FCC ordered LECs who do not voluntarily continue physical collocation
arrangements to offer "virtual collocation" to CAPs whereby the LECs will
themselves provide equipment designated by and dedicated exclusively to the
CAPs for use by the CAPs in providing competitive local communications
services.
South Carolina
In May, BellSouth Telecommunications filed with the South Carolina Public
Service Commission a petition to reinstate incentive regulation for the period
January 1, 1994 through December 31, 1995. The petition was filed in response
to legislation enacted into law in April 1994 which permits the South Carolina
Commission to adopt alternative forms of regulation. Traditional rate of
return regulation is currently in effect. An earnings review by the South
Carolina Commission is currently underway.
Tennessee
In June, the Tennessee Public Service Commission proposed rules to allow local
exchange competition in Tennessee. Under the proposal, qualified service
providers other than traditional telephone companies could compete in the local
exchange telecommunications market. The company has taken the position that
competing carriers can not be qualified in BellSouth Telecommunications'
service area absent amendment of a state statute that prohibits certification
of another network unless the existing network is inadequate. The proposal
also provides that traditional telephone companies, such as BellSouth
Telecommunications, could elect to operate under price regulation. Following
implementation of price regulation, local basic service rates will be capped
for four years, after which a formula will be used to change basic rates. All
other service prices will not increase for a minimum period of two years after
the effective date of price regulation and universal service will be preserved.
Hearings on the proposal are scheduled for August 1994.
Georgia
In June, BellSouth Telecommunications filed with the Georgia Public Service
Commission a proposed price regulation plan. Under the proposed plan, the
regulatory focus would shift from the company's earnings to rates that
customers pay for services. The proposal includes provisions that basic rates
for residential and single-line business customers will not increase for five
years and the rates, terms and conditions for interconnection services and
non-basic services would be set by BellSouth Telecommunications based on market
considerations.
<PAGE>
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The BellSouth Newsletter to Shareholders for the second quarter of 1994
presented the results of the voting on election of directors and ratification
of auditors at the annual meeting of shareholders of BellSouth on April 25,
1994. No other issues were submitted to shareholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibits identified in parentheses below, on file with
the SEC, are incorporated herein by reference as
exhibits hereto.
Exhibit
Number
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.
10r-1 Form of Executive Officer Succession and
Retirement Agreement.
10t-3 Amendment dated April 22, 1994 to the
BellSouth Personal Retirement Account Pension
Plan.
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed
Charges. (Page 11 of this Form 10-Q.)
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELLSOUTH CORPORATION
By /s/ Ronald M. Dykes
RONALD M. DYKES
Vice President and Comptroller
(Principal Accounting Officer)
August 11, 1994
<PAGE>
EXHIBIT INDEX
Exhibit
Number
10r-1 Form of Executive Officer Succession and Retirement Agreement.
10t-3 Amendment dated April 22, 1994 to the BellSouth Personal
Retirement Account Pension Plan.
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed
Charges. (Page 11 of this Form 10-Q.)
EXHIBIT 10r-1
AGREEMENT
THIS AGREEMENT is made this _____ day of ____________, 19__,
by and between BellSouth Corporation (the "Company") and
_______________ (the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Company
and assigned to a Band A executive compensation level or
comparable level as defined in the Company's compensation
guidelines; and
WHEREAS, the Executive elects to retire under the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the above premises and
the mutual covenants and agreements contained herein, the parties
hereto agree as follows:
1. Retirement Date. The Executive shall terminate
employment with the Company on a date (the "Retirement Date")
selected by the Executive which occurs during the period beginning
on the Executive's sixtieth (60th) birthday and ending on the last
day of the calendar year in which the Executive's sixty-first
(61st) birthday occurs. The Executive shall give written notice
to the Company of the Retirement Date so selected. If the
Executive fails to give such notice to the Company on or before
the date one hundred twenty (120) days prior to the last day of
the period in which the Retirement Date may occur, the Retirement
Date shall be the date selected by the Chief Executive Officer of
the Company as the Executive's Retirement Date.
2. Separation Allowance. On the Executive's Retirement
Date, or as soon thereafter as is reasonably practicable, the
Company shall pay to the Executive as a separation allowance a
single lump-sum cash payment equal to the sum of (1) twice the
Executive's Base Salary in effect on the Retirement Date plus (2)
twice the Standard Award applicable to the Executive under the
BellSouth Corporation Short Term Incentive Plan ("STIP") for the
Award Year in which his Retirement Date occurs, or so much of such
sum as shall not be the subject of a deferral agreement between
the parties hereto. For purposes of this Agreement, (i) "Base
Salary" shall refer to the gross annual base salary payable to the
Executive including the amount of any before-tax contributions
made by the Executive from such salary to the BellSouth Management
Savings and Employee Stock Ownership Plan, the BellSouth
Enterprises Retirement Savings Plan, any other qualified cash or
deferred arrangement sponsored by the Company, or a successor to
any such plan, as the case may be, and the amount of any other
deferrals of such salary under any nonqualified deferred
compensation plans maintained by the Company, and (ii) the terms
"Standard Award" and "Award Year" shall have the meanings ascribed
to such terms under STIP.
3. Short Term Incentive Award. The Executive shall be
entitled to an award under the STIP based on performance results
for the Award Year in which the Executive's Retirement Date
occurs, prorated to the Executive's Retirement Date. The payment
described in this Section 3 shall be subject to all other terms
and conditions of STIP.
4. Long Term Incentive Plan. The Executive shall be
entitled to distributions with respect to Units granted to the
Executive under the BellSouth Corporation Executive Long Term
Incentive Plan ("LTIP") at the end of each Performance Period as
if the executive's employment with the Company had not terminated.
Benefits described in this Section 4 shall be subject to all other
terms and conditions of LTIP. For purposes of this Section 4,
the terms "Units" and "Performance Period" shall have the meanings
ascribed to such terms in LTIP.
5. Supplemental Executive Retirement Plan. The Executive
shall be entitled to benefits under the BellSouth Corporation
Supplemental Executive Retirement Plan ("SERP") equal to the
greater of (a) the benefits to which such Executive would be
entitled under SERP without regard to this Agreement, and (b) the
benefits to which such Executive would be entitled under SERP with
the following adjustments:
(i) the aggregate annual benefit being based on seventy
percent (70%) of Included Earnings (as such term
is defined in SERP) instead of the formula
described in section 4(a)(i) of SERP; and
(ii) the benefit so determined being reduced by the
retirement benefit (unreduced for survivor annuity)
payable to the Executive under any tax-qualified
defined benefit pension plan maintained by any
prior employer of the Executive, in addition to the
reductions described in section 4(a)(i) of SERP.
6. Stock Options/Shareholder Return Cash Plan. The
Executive shall be entitled to (i) a grant of Options to purchase
shares of Stock under the BellSouth Corporation Stock Option Plan
("SOP") and (ii) a grant of Units under the BellSouth Corporation
Executive Shareholder Return Cash Plan ("SRCP"), as of the
Executive's Retirement Date, equal to twice the number of Options
and twice the number of Units, respectively, granted to the
Executive as part of the grant most recently preceding his
Retirement Date. Benefits described in this Section 6 shall be
subject to all other terms and conditions of SOP and SRCP,
respectively. For purposes of this Section 6, the terms "Options"
and "Units" shall have the meanings ascribed to such terms in SOP
and SRCP, respectively.
<PAGE>
7. Financial Counseling. The Executive shall be entitled to
benefits described in the BellSouth Corporation Financial
Counseling Plan through his sixty-seventh (67th) birthday, such
benefits to be provided by the Company as if eligibility therefor
extended to such date under the terms of such plan. Benefits
described in this Section 7 shall be subject to all other terms
and conditions of the Financial Counseling Plan.
8. Company Automobile. The Executive may, at his election,
purchase from the Company any Company-owned automobile provided to
him for its wholesale price determined by the Company as of his
Retirement Date, if the Executive notifies the Company of his
intention to do so within thirty (30) days of his Retirement Date.
9. Death of Executive. If the Executive shall die prior to
the Executive's Retirement Date, this Agreement shall be null and
void and neither the Executive nor his estate or other successors
shall be entitled to any of the benefits described herein.
10. Termination of Employment. If the Executive's employment
with the Company is terminated for any reason prior to the
Executive's Retirement Date, this Agreement shall be null and void
and the Executive shall be entitled to none of the benefits
described herein; provided, that this Section 10 shall not apply
if, upon termination of employment, the Executive is transferred
to or immediately reemployed by a BellSouth subsidiary, division
or affiliate (a "BellSouth Company").
11. Nondisclosure. The Executive represents and agrees that
he will keep the existence of this Agreement, and all of the terms
hereof, completely confidential and that he will not disclose any
information concerning this Agreement to anyone, other than his
immediate family, investment advisor, tax advisor, accountant or
attorney, provided that they agree to keep this information
confidential; provided that these restrictions on disclosure shall
not apply to the extent that the existence of this Agreement and
the terms hereof are disclosed by the Company as part of its
periodic public filings and disclosures or otherwise. In the
event the Executive breaches or violates any of the terms or
provisions of this Section 11, all payments under this Agreement
and further right to benefits described in this Agreement will
cease. The Executive shall thereafter be entitled only to such
benefits as are payable under the plans referred to herein without
regard to this Agreement. In addition to all other remedies
provided at law or in equity for damages or otherwise, the Company
shall be entitled to a temporary restraining order and a permanent
injunction to prevent a breach of any of the terms or provisions
of this Section.
12. Release. Prior to signing this Agreement, the Executive
has had a period of at least twenty-one (21) days in which to
review this document. At the outset of that 21-day period, the
Executive was advised to discuss the terms of the Agreement with
an attorney. The Executive acknowledges that he has had a
sufficient opportunity to do so or, alternatively, to confer with
individuals of his choice who are not associated with the Company.
The Executive further acknowledges that the separation
incentives that are provided under the terms of the Agreement
represent valuable consideration in addition to other forms of
compensation or benefits to which he presently is entitled. The
Executive fully understands the binding nature of the Agreement,
and affirms that his decision to enter into the Agreement has been
made voluntarily.
By entering into the Agreement, the Executive agrees to
waive, discharge, and release any and all claims of whatever
nature, known or unknown, that existed prior to the date of the
Agreement (other than the Executive's right to enforce the terms
of the Agreement or the Executive's entitlement to benefits not
expressly waived in the Agreement), arising out of his employment
with BellSouth Corporation or a BellSouth Company, including
specifically the Executive's decision to terminate employment
under the Agreement, that the Executive might have pursued against
BellSouth Corporation, or other BellSouth Company, their past,
current, or future subsidiaries, divisions and affiliates, and
their directors, officers, employees, attorneys, and agents,
including but not limited to, claims under the Age Discrimination
in Employment Act of 1967, as amended; the Civil Rights Act of
1964, as amended; the Civil Rights Act of 1866, as amended; the
Employee Retirement Income Security Act of 1974, as amended;
Executive Orders 11246 and 11141; and all other federal, state,
and local statutory or common laws.
13. Employment Rights. The Company and the Executive
understand that this Agreement constitutes a binding commitment to
provide the benefits set forth herein upon the Executive's
retirement. The Agreement does not constitute, and should not be
construed as an employment contract. The Executive acknowledges
that he is and shall remain an employee at will who may be
terminated by the Company for any reason and at any time prior to
the Retirement Date. Similarly, the Company acknowledges that the
Executive may resign for any reason at any time prior to his
Retirement Date, subject to forfeiting the benefits described in
the Agreement. The Executive understands that he, like any other
employee, has been and will be subject to the Company's
performance standards as well as its disciplinary rules.
14. Severability. In the event one or more of the
provisions of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, the same shall
not affect any other provisions of this Agreement, but this
Agreement shall be construed as if such invalid or illegal or
unenforceable provisions had never been contained herein.
15. Entire Agreement. This Agreement embodies the entire
agreement of the parties hereto relating to the subject matter
hereof. No amendment or modification of this Agreement shall be
valid or binding upon the parties unless made in writing and
signed by the parties hereto.
16. Responsibility; Binding Effect. The Company shall be
responsible for all payments and benefits described in this
Agreement; provided that, if at the Executive's Retirement Date,
the Executive is not employed by the Company but is employed by a
BellSouth Company, such BellSouth Company shall be responsible for
all payments and benefits described in this Agreement and
thereafter all references in this Agreement to the "Company" shall
be deemed to be references to such BellSouth Company. This
Agreement shall be binding upon the parties hereto and their
respective heirs, representatives, successors, transferees and
assigns.
17. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original and
all of which, when taken together, shall constitute one agreement.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with laws of the State of Georgia.
19. Revocation. The Executive may revoke the Agreement by giving
written notice to the Company within seven (7) calendar days
following the Executive's execution of the Agreement. The
Agreement will become binding and irrevocable following the
expiration of that time period.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date set forth above.
EXECUTIVE: COMPANY:
Signature Signature
Name Title
EXHIBIT 10t-3
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 Nominating and Compensation Committee of the Board of
Directors of BellSouth Corporation, hereby amends the Plan as follows:
1.
Amend Section 1 of the Plan by substituting "$150,000" for "$200,000" in
Paragraph 1.09.
2.
Amend Section 3 of the Plan by deleting Paragraph 3.04 in its entirety and
substituting therefor the following:
3.04 Interest Credit. Except as otherwise provided in this
Paragraph, on the last day of each Plan Year each Participant's
account shall be credited with an interest credit equal to the
Participant's account balance on the first day of the Plan Year
multiplied by 4.7 percent in 1994 and 4.0 percent each year after
1994. If at any time in the 1994 Plan Year a Participant is not
actively employed, the 4.7 percent interest credit rate shall apply
for the month(s) in which the Participant was actively employed during
such Plan Year, and a 4.0 percent interest credit rate shall apply for
the remainder of such Plan Year that precedes the Participant's
Pension Commencement Date, if applicable. In addition, if a
Participant will first attain (assuming continuous service) 35 years
of Vesting Service Credit after April 1, 1994 and before January 1,
1995, the 4.0 percent interest credit rate shall apply to his account
for the entire 1994 Plan Year.
3.
Amend Section 3 of the Plan by substituting "1994" for "1993" in
subparagraph 3.05(a).
<PAGE>
4.
Amend Section 6 of the Plan by adding the following paragraph at the end
of Paragraph 6.04:
In case any benefit or pension, which the Claim Review Committee
shall determine to be of the same general character as a payment
provided by the Plan, shall be payable under any law now in force or
hereafter enacted to any employee of a Participating Company, to his
beneficiaries or to his annuitant under such law, the excess only, if
any, of the amount prescribed in the Plan above the amount of such
payment prescribed by law shall be payable under the Plan; provided,
however, that no benefit or pension payable under this Plan shall be
reduced by reason of any governmental benefit or pensions payable on
account of military service or by reason of any benefit which the
recipient would be entitled to receive under the Social Security Act.
In those cases where, because of differences in the beneficiaries, or
differences in the time or methods of payment, or otherwise, whether
there is such excess or not is not ascertainable by mere comparison
but adjustments are necessary, the claim Review Committee in its
discretion is authorized to determine whether or not in fact any such
excess exists, and in case of such excess, to make the adjustments
necessary to carry out in a fair and equitable manner the spirit of
the provision for the payment of such excess.
5.
Amend Section 6 of the Plan by adding to Paragraph 6.05 the following
subparagraph (h):
(h) This Paragraph 6.05 is intended to comply with Code Section
415 and should be interpreted to limit benefits only to the extent
required by that Code section. Accordingly, the limits of this
Paragraph 6.05 shall be applied by considering all plans maintained by
a Participating Company and its Affiliates [(as defined in this
subparagraph 6.05(h)], in which a Participant participates or has
participated, but without combining plans maintained by Participating
Companies that are not Affiliates. For purposes of this Paragraph
6.05, "Affiliate" shall have the same meaning as in Paragraph 1.02,
except that the provisions of subparagraphs 1.02(a) and 1.02(b) shall
be applied by substituting the phrase "more than 50 percent" for the
phrase "at least 80 percent" each place it appears in Code Section
1563(a)(1).
6.
Amend Section 7 of the Plan by deleting the third sentence 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.
<PAGE>
7.
Amend Section 9 of the Plan by adding "or disability" after "service" in
the second line of Paragraph 9.06.
8.
Amend Appendix C of the Plan by deleting said Appendix in its entirety and
by substituting therefor the attached pages that are designated "Appendix C."
9.
Amend Appendix D of the Plan by adding the following after the word "less"
at the end of clause 2) of the second paragraph of said Appendix:
; provided, however, that if a Participant had compensation in excess
of $150,000 in any pre-1994 plan year that is taken into account under
the integrated formula (the "Formula") in this subparagraph 2), his
accrued benefit will be the sum of (i) his accrued benefit under the
Formula frozen as of December 31, 1993, plus (ii) his benefit under
the Formula using his annual adjusted career income after 1993 and his
total service (not in excess of 35 years) minus his service as of
December 31, 1993.
10.
Amend Appendix D of the Plan by adding the following after the word
"employment" in the definition of "annual adjusted career income":
; provided, however, that if a Participant had compensation in excess
of $150,000 in any pre-1994 plan year that is taken into account under
the Formula, his "annual adjusted career income after 1993" for
purposes of clause (ii) of the Formula shall be his adjusted career
income after 1993 (determined in accordance with Code Section
401(a)(17)) divided by (b)(i) his total service minus (ii) his service
as of December 31, 1993.
The amendments made in paragraphs 4 and 5 of this Amendment shall be
effective as of July 1, 1993, and the amendments made in paragraphs 1, 3, 6, 7,
9 and 10 of this Amendment shall be effective as of January 1, 1994. The first
two sentences of the amendment made in paragraph 2 of this Amendment shall be
effective January 1, 1994, and the last sentence of such amendment shall be
effective as of April 1, 1994. The amendment made in paragraph 8 of this
Amendment shall be effective April 1, 1994, but only for Participants who
have not attained age 65 as of such date.
Approved this 22nd day of April, 1994.
EMPLOYEES' BENEFIT CLAIM REVIEW COMMITTEE:
/s/ H. C. Henry, Jr.
Executive Vice President-Corporate Relations,
Chairman
EXHIBIT 11
BELLSOUTH CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in Millions, Except Per Share Amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
Earnings Per
Common Share:
Income Before
Extraordinary Loss
and Cumulative
Effect of Change in
Accounting Principle 516.5 433.1 1,101.8 844.3
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax - (55.4) - (55.4)
Cumulative Effect of
Change in
Accounting Principle,
net of tax - - - (67.4)
Net Income $ 516.5 $ 377.7 $ 1,101.8 $ 721.5
Weighted average
shares outstanding 496,168,530 495,758,875 496,141,208 495,348,548
Incremental shares
from assumed
exercise of stock
options and payment
of performance
share awards 463,125 387,140 418,228 470,649
Total Shares 496,631,655 496,146,015 496,559,436 495,819,197
Earnings Per
Common Share:
Income before
Extraordinary Loss
and Cumulative Effect
of Change in
Accounting
Principle $ 1.04 $ .87 $ 2.22 $ 1.70
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax - (.11) - (.11)
Cumulative Effect of
Change in
Accounting Principle,
net of tax - - - (.14)
Earnings per
Common Share $ 1.04 $ .76 $ 2.22 $ 1.45
<PAGE>
BELLSOUTH CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in Millions, Except Per Share Amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
Fully Diluted
Earnings Per
Common Share:
Income Before
Extraordinary Loss
and Cumulative Effect
of Change in Accounting
Principle 516.5 433.1 1,101.8 844.3
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax - (55.4) - (55.4)
Cumulative Effect of
Change in Accounting
Principle, net of tax - - - (67.4)
Net Income $ 516.5 $ 377.7 $ 1,101.8 $ 721.5
Weighted average
shares outstanding 496,168,530 495,758,875 496,141,208 495,348,548
Incremental shares
from assumed
exercise of stock
options and payment
of performance
share awards 529,546 417,022 546,427 496,070
Total Shares 496,698,076 496,175,897 496,687,635 495,844,618
Fully Diluted
Earnings Per
Common Share:
Income before
Extraordinary Loss
and Cumulative
Effect of Change
in Accounting
Principle $ 1.04 $ .87 $ 2.22 $ 1.70
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax - (.11) - (.11)
Cumulative Effect of
Change in Accounting
Principle, net of tax - - - (.14)
Fully Diluted
Earnings per
Common Share $ 1.04 $ .76 $ 2.22 $ 1.45
