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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, 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
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BELLSOUTH CORPORATION
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<S> <C>
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 of New York Stock Exchange
BellSouth Capital Funding Corporation
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None.
At March 1, 1995, 496,323,789 shares of Common Stock and Preferred Stock
Purchase Rights were outstanding.
At March 1, 1995, the aggregate market value of the voting stock held by
non-affiliates was $29,221,063,077.
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 13,
1995, issued in connection with the 1995 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
General............................................................................................. 1
Modification of Final Judgment...................................................................... 1
Business Operations................................................................................. 2
Telephone Company Operations........................................................................ 2
Other Telecommunications Business Operations........................................................ 8
Competition......................................................................................... 12
Research and Development............................................................................ 16
Licenses and Franchises............................................................................. 16
Employees........................................................................................... 17
2. Properties.......................................................................................... 17
General............................................................................................. 17
Property Additions.................................................................................. 18
Environmental Matters............................................................................... 19
3. Legal Proceedings................................................................................... 19
4. Submission of Matters to a Vote of Shareholders..................................................... 19
Additional Information -- Description of BellSouth Stock....................................................... 19
Executive Officers............................................................................................. 23
PART II
5. Market and Dividend Data............................................................................ 24
6. Selected Financial and Operating Data............................................................... 25
7. Management's Discussion and Analysis of Results of Operations and Financial Condition............... 26
Results of Operations............................................................................... 26
Volumes of Business................................................................................. 27
Operating Revenues.................................................................................. 29
Operating Expenses.................................................................................. 31
Other Income Statement Items........................................................................ 33
Financial Condition................................................................................. 33
Operating Environment and Trends of the Business.................................................... 35
Other Matters....................................................................................... 37
8. Consolidated Financial Statements and Supplementary Data............................................ 40
Report of Management................................................................................ 40
Audit Committee Chairman's Letter................................................................... 41
Report of Independent Accountants................................................................... 42
Consolidated Statements of Income................................................................... 43
Consolidated Balance Sheets......................................................................... 44
Consolidated Statements of Shareholders' Equity..................................................... 45
Consolidated Statements of Cash Flows............................................................... 46
Notes to Consolidated Financial Statements.......................................................... 47
Supplementary Data -- Domestic Cellular Proportionate Operating Data................................ 65
9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure................. 66
PART III
*10. Directors and Executive Officers of the Registrant.................................................. 66
*11. Executive Compensation.............................................................................. 66
*12. Security Ownership of Certain Beneficial Owners and Management...................................... 66
*13. Certain Relationships and Related Transactions...................................................... 66
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................... 66
Signatures..................................................................................................... 70
Consent of Independent Accountants............................................................................. 71
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*Included in BellSouth Corporation's definitive proxy statement dated March 13,
1995 and incorporated herein by reference.
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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's other businesses (primarily
wireless and international communications services and advertising and
publishing products) 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, now AT&T Corp. (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 including, South Central Bell and Southern Bell, that were formerly
part of the 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
on a city or other identifiable community of interest.
The MFJ limits the telecommunications-related scope of the post-divestiture
business activities of the operating telephone companies and their successors
(the Operating Telephone Companies), and the D. C. District Court retained
jurisdiction over construction, implementation, modification and enforcement of
the MFJ*. 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 telecommunications. A
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*The provisions of the MFJ are applicable also to the Holding Companies.
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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 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 a party to
litigation and is advocating legislation intended to remove or relax the MFJ
restrictions. (See "Competition -- BellSouth Competitive Strategy.")
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 72%, 73% and 74% of BellSouth's operating revenues for the
years ended December 31, 1994, 1993 and 1992, respectively, and a greater
portion of net income were from wireline telecommunications services provided by
BellSouth Telecommunications. The remainder was principally from cellular and
paging operations, directory advertising and publishing, CPE sales and
maintenance, billing and collection services and other nonregulated services.
(See "Other Telecommunications Business Operations.") Revenues from services
provided to AT&T, BellSouth's largest customer, comprised approximately 11%, 14%
and 14% of 1994, 1993 and 1992 operating revenues, respectively.
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. BellSouth experienced an
increase in access lines of approximately 887,400 during 1994, resulting in a
total of 20,220,000 lines at December 31, 1994. The overall increase of 4.6% was
primarily attributable to continued economic improvement in BellSouth
Telecommunications' nine-state service region and an increase in the number of
second residential lines. Second residential lines accounted for approximately
23% of the overall increase in access lines since December 31, 1993. (See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Volumes of Business.")
At December 31, 1994, approximately 76% of access 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,
1994. BellSouth Telecommunications does not furnish local exchange, access or
toll services in the areas served by such companies.
LOCAL AND TOLL SERVICES
Charges for local services for each of the years ended December 31, 1994,
1993 and 1992 accounted for approximately 41% 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
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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 secondary central office features.
Secondary central office features may be purchased by access line
subscribers for a charge in addition to the basic monthly fee. They include
Custom Calling service (including Call Waiting, 3-Way Calling, Call Forwarding
and Speed Dialing services) and Touchtone service. During 1994, revenues from
secondary central office features comprised approximately 17% of local service
revenues.
In addition to secondary central office features, BellSouth
Telecommunications offers certain enhanced services through its network.
Enhanced services differ from basic services and secondary central office
features in that they employ computer processing applications to alter the
subscriber's transmitted information; provide the subscriber additional,
different or restructured information; or involve subscriber interaction with
stored information. The terms of enhanced service offerings are not regulated
under the rules of the Federal Communications Commission (FCC), but the FCC
prescribes the method by which such services may be provided (for example,
through structurally separated subsidiaries or arrangements providing access to
competitive providers). Such offerings include voice messaging and storage
services, such as MemoryCall-Registered Trademark- voice messaging service.
BellSouth Telecommunications provides intraLATA toll services within, but
not between, its 38 LATAs. Such toll services provided approximately 7%, 8% and
8% of BellSouth's operating revenues for the years ended December 31, 1994, 1993
and 1992, 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 one 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 that may be retained
under some plans depend upon attaining mandated service standards, certain
productivity improvement provisions or both. Some sharing plans have a maximum
point above which all earnings must be returned to customers. 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, Florida,
Kentucky and Louisiana in 1994.
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Another form of regulation focuses on the prices that can be charged for
telecommunications services. While such a plan limits the amount of increase for
specified services, it enhances the company's ability to adjust prices and
service options to more effectively respond to changing market conditions and
competition. For these reasons, BellSouth Telecommunications is focusing its
regulatory and legislative efforts on replacing existing plans with price
regulation. The Florida, Georgia, North Carolina and Tennessee legislatures are
considering bills that would provide for or allow price regulation and/or local
exchange competition. (See "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Operating Environment and Trends of the
Business.")
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% or drop below 11.65%, sharing with
customers may range from 50% to 100%, 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 $15.7 million.
As a result of the first, second and third quarter filings under the plan in
effect, the Alabama Commission accepted rate reductions of $13.1 million in
April 1994, $16.4 million in July 1994 and $8.9 million in October 1994.
In February 1995, BellSouth Telecommunications filed a proposed price
regulation plan with the Alabama Commission. The proposal includes provisions
that basic rates for residential and business customers would not increase for
five years, intrastate switched access prices would be capped at the interstate
level for five years and the company would reduce rates by $30 million.
FLORIDA
From 1988 through 1992, the Florida incentive plan provided for a return on
equity* of 11.5% to 16%, with earnings above 14% to be shared 40% by BellSouth
Telecommunications and 60% by customers with an after-sharing cap of 16%. 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
provided 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 provided 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.
The agreement established a 1994 return on equity sharing level of 12% with
an after-sharing cap of 14%, increasing in 1995 to a 12.5% sharing level with an
after-sharing 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.
Financial results for 1994 include an accrual for BellSouth
Telecommunications' estimated sharing obligation of $38 million.
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*As defined in the plan for this state.
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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 a 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. Effective January 1, 1994, the Georgia Public Service Commission
extended the plan for six months and modified the return on equity at which
sharing would occur from 14% to 13%. BellSouth Telecommunications has yet to
attain the sharing level under the Georgia plan. However, a proceeding is
pending regarding this issue and several parties assert that some sharing for
the six-month period ending June 30, 1994 may be required; no accrual has been
made for sharing during this period.
In August 1994, the Georgia Commission approved a staff recommendation to
implement a sharing plan on an interim basis, effective September 1994, until
pending decisions regarding ongoing regulation of the Company are finalized.
Earnings between 13.5% and 15.5% would be shared 50/50 by BellSouth
Telecommunications and its customers.
In June 1994, BellSouth Telecommunications filed with the Georgia Commission
a proposed price regulation plan. The proposal includes provisions that basic
rates for residential and single-line business customers would not increase for
five years and intrastate switched access would not increase for three years.
The rates, terms and conditions for interconnection and non-basic services would
be set by BellSouth Telecommunications based on market considerations. Hearings
have been held, and a decision is pending.
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% or below 10.99% are subject to sharing with customers on
either a 50/50 or 25/75 basis depending upon the actual rate of return achieved.
BellSouth Telecommunications achieved the sharing level during 1993 and 1994 and
reduced rates by $4.2 million in June 1993, $2.2 million in July 1993, $2.7
million in January 1994 and $1.2 million in June 1994.
BellSouth Telecommunications filed with the Kentucky Public Service
Commission in March 1994 a proposed price regulation plan. The proposal includes
provisions that basic residential rates would not increase for three years,
residential touch-tone charges would be eliminated over a four-year period,
intrastate switched access charges would be reduced to interstate levels and
prices for non-basic services would be based on market factors. Hearings are
scheduled for April 1995.
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 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 $13.8 million in February and $7.8 million
in August 1993, reflecting its sharing obligation under the new plan.
Additionally, effective March 1994, BellSouth Telecommunications was ordered
to reduce rates by $47 million annually and refund approximately $14.6 million
for prior periods. This rate adjustment
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*As defined in the plan for this state.
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and refund was associated with the November 1993 expiration of the company's
reserve deficiency amortization. Based on 1994 data, BellSouth
Telecommunications reduced rates by $11.1 million, effective February 1, 1995,
reflecting its sharing obligation under the plan.
In January 1994, BellSouth Telecommunications filed a petition with the
Louisiana Commission requesting a price regulation plan. In November 1994, the
Louisiana Commission rejected the company's price regulation plan as filed. The
company intends to continue seeking such a plan.
In its February 1995 meeting, the Louisiana Commission extended the current
incentive plan pending further regulatory action. The authorized return on
investment was changed to a range of 9.98% to 10.98% with sharing of earnings
between 10.98% and 11.98% to reflect the change in the capital structure and the
cost of debt since inception of the plan. The authorized cost of equity was not
changed. The change in the revenue requirement associated with the lower
authorized return on investment will be offset by the recovery of debt
refinancing cost and an increase of approximately $9 million in annual
intrastate depreciation expense.
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. Effective November 1,
1994, rates were increased by $8.9 million to provide recovery of the costs
associated with a February 1994 ice storm.
In response to an order issued by the Mississippi Commission, BellSouth
Telecommunications filed in September 1994 a model price regulation plan. The
proposal includes provisions that basic exchange and intrastate switched access
rates will not increase for three years and the rates for interconnection
services and other services (as defined in the model plan) would be set by
BellSouth Telecommunications based on market considerations, subject to certain
defined limitations. Hearings are scheduled during the second quarter of 1995.
On December 1, 1994, BellSouth Telecommunications filed for an increase in
rates of $5.1 million pursuant to the terms of the incentive plan. The increase
was suspended by the Mississippi Commission while they consider the matter.
NORTH CAROLINA
In 1989, legislation was enacted in North Carolina authorizing the North
Carolina Utilities Commission to consider alternative forms of regulation. No
specific proposal has been approved or is pending. The North Carolina Commission
reviews BellSouth Telecommunications' rates on an ongoing basis under its
traditional rate of return plan.
In November 1993, the North Carolina Commission approved one-time
depreciation reserve deficiency amortizations of $28.5 million and $25 million
for 1993 and 1994, respectively. In December 1994, the Commission approved an
additional one-time depreciation reserve deficiency amortization of $20.4
million for 1994.
SOUTH CAROLINA
In August 1991, the South Carolina Public Service Commission authorized
implementation of an incentive plan, but in August 1993, the South Carolina
Supreme Court ruled that the South Carolina
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*As defined in the plan for this state.
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Commission lacked the statutory authority to approve incentive regulation plans.
In April 1994, the South Carolina Legislature enacted a law which permits the
South Carolina Commission to adopt alternative forms of regulation.
In December 1994, the South Carolina Commission issued an order requiring
that rates be reduced prospectively by approximately $26 million. The Company
was also ordered to refund approximately $28.6 million through a one-time credit
to all residential and business customers for 1992. This order has been appealed
to the courts. Any consideration of earnings for 1993 and 1994 has been delayed
pending resolution of the appeal. In establishing rates prospectively, the South
Carolina Commission retained a 13% return on equity* as the allowed return under
traditional rate of return regulation.
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%.
In December 1994, the Tennessee Commission adopted rules that provide that
local exchange carriers (LECs), such as BellSouth Telecommunications, could
elect to operate under price regulation no earlier than January 1, 1996.
Following implementation of price regulation, local basic service rates would be
capped for four years, after which a formula would 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. Such approval has not yet
been granted.
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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.
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%, 24% and 25% of BellSouth's operating
revenues for the years ended December 31, 1994, 1993 and 1992, 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
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 LECs, including BellSouth Telecommunications. 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
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*As defined in the plan for this state.
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the FCC. Price cap regulation provides 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%.
LECs that 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, 1994 through June 30, 1995.
In February 1994, the FCC initiated its review of the price cap plan
described above. 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 advocates that a revised price cap
plan should be structured to provide increased pricing flexibility for services
as competition evolves in the telecommunications markets and that sharing be
eliminated from the plan. Any changes to the plan are not expected to be
effective until mid-1995.
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.
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 approximately 9% of BellSouth's total operating
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revenues for each of the years ended December 31, 1994, 1993 and 1992. Two of
these companies also provide publishing and related products and services to
other directory publishers. During 1994, these companies published approximately
450 directories for BellSouth Telecommunications and contracted with more than
170 nonaffiliated companies to sell advertising space in more than 450
publications of such nonaffiliated companies.
Approximately one-half 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 comprised approximately 12%, 10% and 8% of BellSouth's total
operating revenues for the years ended December 31, 1994, 1993 and 1992,
respectively. In addition, BellSouth Enterprises owns minority interests in a
number of wireless businesses whose revenues are not reflected in operating
revenues because of the method of accounting required for such investments.
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, each of which transmits 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 arrangements
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, 1994, businesses in which BellSouth had an equity interest
provided cellular service to a total of approximately 3.0 million domestic
customers in 16 states. BellSouth's proportionate share of such total customers,
based on its percentage ownership interests of such businesses, was
approximately 2.2 million customers. (See "Consolidated Financial Statements and
Supplementary Data -- Domestic Cellular 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, Virginia. BellSouth's proportionate interest in the
aggregate population served by its domestic cellular systems is approximately
39.2 million persons.
As described under "Other Wireless Operations," BellSouth is bidding for
several broadband licenses to provide personal communications services (PCS),
and if it is successful, it must divest operating control of cellular businesses
it owns in the same areas. In December 1994, BellSouth reached agreement with
ALLTEL Corporation (ALLTEL) to dispose of all or controlling interests in
cellular properties serving the Carolinas, contingent upon its being awarded a
PCS license for that
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area. BellSouth would retain a minority interest in most of such properties
through participation in a limited partnership to be controlled and managed by
ALLTEL, to which ALLTEL would also contribute certain of its cellular interests.
The rates charged by cellular carriers are not regulated by the FCC or, with
certain exceptions discussed below, the states in which BellSouth's cellular
operations are located. Pursuant to a federal statute enacted into law in 1993,
state governments are generally preempted from regulating the rates charged by
cellular carriers. However, states which had any regulation concerning rates in
effect on June 1, 1993 could apply to the FCC for approval to continue
exercising authority over such rates. Three states in which BellSouth provides
cellular services -- California, Louisiana and Hawaii -- have sought such
approval. This matter is currently being litigated before the FCC. A final
decision on this matter is required by law to be issued by the FCC by August 10,
1995.
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, Israel, New Zealand, Uruguay and
Venezuela. Through a wholly-owned subsidiary, BellSouth holds a license for a
cellular telephone system in Chile. At December 31, 1994, such systems provided
cellular service to a total of approximately 1,014,000 international customers.
BellSouth's proportionate share of such customers, based on its percentage
ownership interests in such systems, was approximately 361,300 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, Germany, Israel, 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.") During 1994, BellSouth disposed of interests in cellular telephone
businesses in France and Mexico. BellSouth's international cellular systems
operate in areas with an aggregate population of approximately 51.4 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 or a per message fee after a set number of free messages.
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-Registered Trademark- service mark. As of December 31, 1994,
BellSouth had approximately 1,614,100 pagers in service. In July 1994, BellSouth
acquired RAM Broadcasting Corporation's (RBC's) 50% interest in the paging
segment of the investment formerly jointly owned by BellSouth and RBC, thereby
giving BellSouth a 100% interest in this entity.
During second quarter 1994, BellSouth was the successful bidder, at $47.5
million, for a 10-year license for nationwide narrowband spectrum, which it
plans to use for two-way communications.
OTHER WIRELESS OPERATIONS
BellSouth and RBC have formed a business (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
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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, France and
Germany, where BellSouth has 37.5%, 11.25% and 6% ownership interests,
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. In addition, BellSouth is a
partner in mobile data businesses being developed in Australia, Belgium, France,
Germany, The Netherlands, Singapore and the United Kingdom that use the RAM
technology. BellSouth's domestic and foreign mobile data operations are in the
developmental stage and are not yet profitable.
Personal communications services (PCS) are anticipated to provide a wide
range of wireless communications services. The FCC is currently auctioning
licenses for spectrum for broadband PCS. BellSouth is bidding on licenses for
the Carolinas and eastern Tennessee major trading areas, and is considering
bidding for other selected licenses in basic trading areas. BellSouth has
conducted several trials of PCS-like services under experimental licenses from
the FCC. Substantial capital will be required to acquire licenses and to
construct and develop PCS systems.
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.
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 have been placed. Approximately 70% of the population
currently has access to the long distance service provided on the Optus network.
Optus also offers a limited number of local business services such as data
services via its terrestrial and satellite facilities.
Optus had over 540,000 cellular customers at December 31, 1994. 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 and
is continuing the build-out in other areas. 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.
In July 1994, Optus agreed to form a business (Optus Vision) with Australian
and U.S. companies to develop a high capacity broadband network in Australia.
The network services are expected to include cable and pay television,
interactive services and local telecommunications services. Optus and
Continental Cable will each initially own 47.5% of Optus Vision. A television
station will initially own 5% with an option to increase its ownership interest
to 20%. BellSouth expects to invest up to $200 million over the next three years
in this business.
In January 1994, BellSouth entered into an agreement with Ji Tong Company,
an operating unit within the Chinese government, to invest up to $30 million in
communications projects in China. Under the agreement, its 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 business will perform
software and hardware systems integration, development and production.
In October 1994, BellSouth and China Unicom signed a memorandum of
understanding to develop telephone networks in two major Chinese cities.
BellSouth will provide China Unicom with assistance and consultation in the
development of network plans for cellular, wireless, and long distance networks.
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BellSouth has received a license to operate a competing domestic and
international long distance concession in Chile. It began service in late 1994.
BROADBAND SERVICES
In August 1992, the FCC issued an order allowing the LECs to offer video
dial tone for transmitting video services. In February 1995, the FCC approved
BellSouth Telecommunications' application to conduct a trial of video dial tone
services. BellSouth Telecommunications will construct the network in Chamblee,
Georgia, a suburb of Atlanta, that will provide for 70 analog channels and over
200 digital channels to deliver video programming and interactive services, most
of which will be offered by various programming service providers. The new
services will 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.
In September 1994, the U.S. District Court for the Northern District of
Alabama declared unconstitutional a provision of the Cable Communications Policy
Act of 1984 that prohibits BellSouth and its affiliates from providing cable
television programming in the areas served by BellSouth Telecommunications. As a
result of the Court's decision, which was rendered in response to a suit filed
by BellSouth in 1993 and is now pending appeal by the United States, BellSouth
and its affiliates, including BellSouth Telecommunications, may seek the
appropriate governmental authorizations to provide video programming directly to
consumers throughout its service area.
SELLING AND MAINTAINING EQUIPMENT
BellSouth sells and maintains customer premises equipment (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. In April 1994, BellSouth Communications Systems, Inc., a
wholly-owned subsidiary, disposed of its customer premises equipment sales and
service operations outside the nine-state region served by BellSouth
Telecommunications.
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 that may offer them. Increasingly, this competition is from large
companies which have substantial capital, technological and marketing resources.
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 and integrated forms of communications
offerings.
Current policies of federal and state legislative and regulatory bodies
strongly favor lowering legal 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.
Legislative or regulatory initiatives are pending or expected in a number of
BellSouth Telecommunications' jurisdictions.
NETWORK AND RELATED SERVICES
LOCAL SERVICE
Many services traditionally provided exclusively by the LECs have been
opened for competition. For example, some carriers and other customers with
concentrated, high usage characteristics are
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utilizing shared tenant services, private branch exchange (PBX) systems (which
are owned by customers and provide internal switching functions), 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 networks of some cable television
systems will be capable of carrying two-way interactive data messages and will
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.
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.
In January 1994, MCI Communications Corporation 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. MCI has applied for local telecommunications licenses
in the eight states that have significantly deregulated local service. As states
in BellSouth Telecommunications' wireline region adopt legislation or
regulations enabling multiple local service providers, AT&T, MCI and other
carriers are expected to seek licenses to compete.
In 1994, AT&T acquired 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 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 probable that BellSouth Telecommunications will face competition
within its region from the other Holding Companies through their cable
television venture arrangements.
In July 1994, U S West and Time Warner announced plans to upgrade certain of
their cable TV systems to full-service networks which would support new
interactive and telephone services that would compete with the incumbent LECs.
The first of these full-service networks is being built in Orlando, Florida and
a limited trial of the services has begun. Tele-Communications, Inc. has
announced plans to offer similar services in South Florida and Louisville,
Kentucky. Time Warner and U S West have made major cable system acquisitions
that are expected to provide voice and video competition in BellSouth
Telecommunications' service areas. In December 1994, U S West acquired Atlanta's
two largest cable operators.
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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 is required to permit competitive carriers
and customers to terminate their transmission facilities in its central office
buildings through virtual collocation arrangements. The effects of the rules are
to increase competition for access transport.
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 facilities of such
Interexchange Carriers. The Kentucky and Florida Commissions have concluded that
competing carriers should be allowed to provide intraLATA toll presubscribed
calling with a single digit access code (1+ or 0+) and are 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. Directory listings are now offered in electronic
data bases through telephone company and third party networks. As such offerings
expand and are enhanced through interactivity and other features, BellSouth will
experience heightened competition in its directory advertising and publishing
businesses.
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. In many markets,
competing cellular service is provided by businesses owned or controlled by a
Holding Company, AT&T or a major telephone company. In addition, in July 1994, U
S West and AirTouch Communications announced that they plan to merge their
cellular businesses.
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. For example, in Germany there are two competitors.
These competing cellular service providers are generally supported by partners
who are 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. 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.
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BellSouth's RAM mobile data business 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 wholly-owned subsidiary of 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
features of automatic, seamless nationwide roaming. Success of RAM 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 once the systems are built. ESMR became available
commercially in Los Angeles during second quarter of 1994 in competition with
BellSouth's cellular telephone partnership.
The FCC's PCS licensing process will allow multiple new competitors for
BellSouth's wireless businesses. Licenses to provide PCS services are being
sought by AT&T, Holding Company consortiums and other large and well-capitalized
companies. It is also anticipated that in 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 is not yet apparent, but it is
anticipated that some competitive systems could be in place by mid-1996.
BELLSOUTH COMPETITIVE STRATEGY
REGULATORY AND LEGISLATIVE CHANGES, LITIGATION
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 is pursuing 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. Bills are
being developed in Congress that would provide the opportunity for the Holding
Companies to engage in interLATA long distance and cable and other video
businesses, subject to various conditions and delays. The interexchange
carriers, other competitors and interest groups with substantial resources
oppose many of these initiatives. The ultimate outcome and timing of any relief
obtained cannot be predicted with certainty, but it is unlikely that meaningful
opportunities to engage in interLATA business can be obtained through
legislation without the local and intraLATA toll businesses being opened to
competition.
BellSouth, NYNEX Corporation and SBC Communications Inc. are involved in
litigation in the D.C. District Court seeking relief from the remaining
provisions of the MFJ. BellSouth believes that
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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.
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. Such rates will be represcribed in
Florida, Georgia, North Carolina and South Carolina in 1995 and in Alabama,
Kentucky, Louisiana, Mississippi and Tennessee in 1996. (See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Operating Environment and Trends of the Business -- Accounting Under SFAS No.
71.")
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 and markets. These offerings may include information
services, interactive communications and cable television and other
entertainment services. BellSouth has and will continue to enter such businesses
through acquisitions, investments, and strategic alliances with established
companies in such industries and through the development of such capabilities
internally. BellSouth intends to pursue foreign telecommunications licenses as
they are offered.
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. This activity is expected to
improve overall responsiveness to customer needs and reduce costs. For a
discussion of the restructuring begun in 1993, see "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Other Matters --
Restructuring of Telephone Operations."
RESEARCH AND DEVELOPMENT
The majority of BellSouth's research and development 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. MCI Communications
Corporation and U S West have announced plans to pursue approval to provide
local telephone service, thereby challenging the exclusivity of BellSouth
Telecommunications' franchise for local service in certain states.
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The domestic cellular, paging and mobile data systems in which BellSouth has
an interest 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 license. The licenses are generally issued for up to 10-year periods. At
the end of the license period, a renewal application must be filed. For the
paging and mobile data licenses, BellSouth believes renewal will generally be
granted on a routine basis 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, including the award of a "renewal expectancy" that effectively
eliminates the need to consider competing applicants when the incumbent meets
specified criteria.
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 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, 1994, 1993 and 1992 BellSouth and its subsidiaries employed
approximately 92,100, 95,100 and 97,100 persons, respectively. Of these amounts
at these dates, approximately 76,700, 81,400 and 82,900 were employees of
BellSouth Telecommunications. About 63% of BellSouth's employees at December 31,
1994 were represented by the Communications Workers of America (the CWA), which
is affiliated with the AFL-CIO. BellSouth's and BellSouth Telecommunications'
collective bargaining agreements with the CWA are scheduled to terminate on
August 5, 1995. Negotiations with the CWA over the terms of the new agreements
will begin early in June 1995. The outcome of these negotiations cannot be
determined at this time.
In November 1993, BellSouth Telecommunications announced a plan 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. For the years ended December 31, 1994 and 1993, total employee
reductions under this plan were 3,900 and 1,300, respectively. (See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Other Matters -- Restructuring of Telephone Operations.")
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, 93% of which is held by BellSouth Telecommunications, consists of the
following at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Outside Plant.................................................... 44% 44%
Central Office Equipment......................................... 35 35
Land and Buildings............................................... 7 7
Furniture and Fixtures........................................... 6 6
Operating and Other Equipment.................................... 7 6
Other............................................................ 1 2
---- ----
100% 100%
---- ----
---- ----
</TABLE>
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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.
BellSouth currently self-insures a substantial amount of its outside plant
against casualty losses. Central office equipment consists of analog switching
equipment, digital electronic switching equipment and circuit equipment. Land
and buildings are occupied principally by central offices. Operating and other
equipment consists of embedded intrasystem wiring, substantially all of which is
on the premises of customers, motor vehicles and equipment.
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.
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.
The total investment in telephone plant has increased from approximately
$34,820 million at January 1, 1990 to approximately $44,200 million at December
31, 1994, not including deductions of accumulated depreciation. Significant
additions to property, plant and equipment will be required to meet the demand
for telecommunications services and to further modernize and improve such
services to meet 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's capital expenditures for 1990 through 1994 were as follows:
<TABLE>
<CAPTION>
MILLIONS
---------
<S> <C>
1994.......................... $ 3,600
1993.......................... 3,486
1992.......................... 3,189
1991.......................... 3,102
1990.......................... 3,191
</TABLE>
BellSouth projects capital expenditures for BellSouth Telecommunications to
be approximately $3,000 million during 1995. BellSouth projects that during 1995
it will invest approximately $1,200 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 cellular systems which are
operating at or near capacity with analog technology.
In 1994, BellSouth generated substantially all of its funds for capital
expenditures internally. In 1995, such capital expenditures are expected to be
financed primarily through internally generated funds and, to the extent
necessary, from external sources.
18
<PAGE>
ENVIRONMENTAL MATTERS
BellSouth is subject to a number of environmental matters as a result of its
operations and the shared liability provisions in the Plan of Reorganization
(POR). 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, for the remediation
of sites with underground fuel storage tanks and other expenses associated with
environmental compliance. At December 31, 1994, BellSouth's recorded liability
related primarily to remediation of these sites was $35.8 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 to its
financial position.
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 environmental liabilities,
rates, taxes, contracts and torts (including business torts, such as alleged
violations of the antitrust laws). Contingent liabilities attributable to
pre-divestiture events have been 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.
The Operating Telephone Companies have agreed among themselves to disengage
from the sharing of most categories of contingent liabilities formerly subject
to the POR sharing mechanism. Sharing under the POR would continue for matters
for which notice was given as of May 23, 1994 and certain pre-divestiture
environmental claims. The sharing of liabilities for pre-divestiture claims
between AT&T and one or more Operating Telephone Companies are not affected by
this agreement.
BellSouth and its subsidiaries are subject to claims and proceedings arising
in the ordinary course of business involving allegations of personal injury,
breach of contract, anti-competitive conduct and other matters. 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
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, 1994.
------------------------
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
19
<PAGE>
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 (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.
20
<PAGE>
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, 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.
21
<PAGE>
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.
22
<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 60 Chairman of the Board and Chief Executive Officer 1983 1984
F. Duane Ackerman 52 Vice Chairman of the Board and Chief Operating Officer 1983 1995
Walter H. Alford 56 Executive Vice President and General Counsel 1983 1988
John F. Beasley 55 Vice President and Associate General Counsel 1985 1993
C. Sidney Boren 51 Senior Vice President -- Strategic Planning 1984 1995
Ronald M. Dykes 48 Vice President, Chief Financial Officer and Comptroller 1988 1995
Mark L. Feidler 38 Vice President -- Corporate Development 1993 1993
J. Robert Fitzgerald 55 Vice President -- Corporate Responsibility and Compliance 1983 1994
H. C. Henry, Jr. 50 Executive Vice President -- Corporate Relations 1984 1993
David J. Markey 54 Vice President -- Governmental Affairs 1986 1993
Charles C. Miller, III 42 President -- International 1990 1995
Arlen G. Yokley 57 Vice President, Secretary and Treasurer 1984 1989
</TABLE>
The following officers of the companies indicated may be deemed to be
executive officers of BellSouth Corporation:
<TABLE>
<S> <C> <C> <C> <C>
Jere A. Drummond 55 President and Chief Executive Officer -- BellSouth 1982 1995
Telecommunications, Inc.
Earle M. Mauldin 54 President -- BellSouth Enterprises, Inc. 1987 1995
</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.
23
<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, 1995, there were
1,183,629 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 1992 through 1994 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>
1994
First Quarter................................................................... $61 1/2 $53 $ .69
Second Quarter.................................................................. 63 1/2 55 1/2 .69
Third Quarter................................................................... 63 1/2 54 5/8 .69
Fourth Quarter.................................................................. 56 1/8 50 1/2 .69
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
</TABLE>
STOCK TRANSFER AGENT AND REGISTRAR
Chemical Bank is BellSouth's stock transfer agent and registrar.
24
<PAGE>
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating Revenues.................................... $ 16,845 $ 15,880 $ 15,202 $ 14,445 $ 14,345
Operating Expenses (1)................................ 12,787 13,593 12,041 11,636 11,318
---------- ---------- ---------- ---------- ----------
Operating Income...................................... 4,058 2,287 3,161 2,809 3,027
Interest Expense...................................... 666 689 746 802 774
Other Income, net..................................... 11 8 178 253 157
Provision for Income Taxes............................ 1,243 572 934 753 778
Extraordinary Loss, net of tax........................ -- (87) (41) -- --
Accounting Change, net of tax......................... -- (67) -- (35) --
---------- ---------- ---------- ---------- ----------
Net Income.......................................... $ 2,160 $ 880 $ 1,618 $ 1,472 $ 1,632
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings Per Share.................................... $ 4.35 $ 1.77 $ 3.30 $ 3.04 $ 3.38
Dividends Declared Per Common Share................... $ 2.76 $ 2.76 $ 2.76 $ 2.76 $ 2.68
Book Value Per Share.................................. $ 28.95 $ 27.20 $ 27.94 $ 26.93 $ 26.28
Return to Average Common Equity....................... 15.4% 6.3% 11.9% 11.3% 12.8%
Weighted Average Common Shares Outstanding............ 496.6 496.1 490.8 484.3 482.4
Return on Average Total Capital....................... 11.5% 6.1% 9.8% 9.4% 10.4%
Total Assets.......................................... $ 34,397 $ 32,873 $ 31,463 $ 30,942 $ 30,207
Capital Expenditures.................................. $ 3,600 $ 3,486 $ 3,189 $ 3,102 $ 3,191
Long-Term Debt........................................ $ 7,435 $ 7,381 $ 7,360 $ 7,677 $ 7,781
Debt Ratio at End of Period........................... 39.3% 40.2% 39.0% 41.3% 40.7%
Ratio of Earnings to Fixed Charges (2)................ 5.34 2.98 4.00 3.47 3.68
Total Employees....................................... 92,121 95,084 97,112 96,084 101,945
Telephone Employees (3)............................... 73,764 77,958 79,453 79,743 85,967
Telephone Employees per 10,000 Access Lines........... 36.5 40.3 42.6 44.1 49.1
Business Volumes (In Millions): (4)
Network Access Lines in Service:
Residence........................................... 14.2 13.7 13.3 12.9 12.6
Business............................................ 5.8 5.4 5.1 4.8 4.6
Other............................................... .2 .2 .2 .3 .3
---------- ---------- ---------- ---------- ----------
Total............................................. 20.2 19.3 18.6 18.0 17.5
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Access Minutes of Use:
Interstate.......................................... 57,778.1 53,345.0 50,546.4 47,255.3 44,903.3
Intrastate.......................................... 16,887.8 15,260.9 13,994.2 13,237.7 12,119.5
Toll Messages......................................... 1,558.6 1,511.4 1,462.2 1,504.1 1,496.4
Cellular Customers (In Thousands): (5)
Domestic............................................ 2,155.8 1,559.1 1,118.1 774.2 498.3
International....................................... 361.3 192.2 77.6 26.0 5.1
---------- ---------- ---------- ---------- ----------
Total............................................. 2,517.1 1,751.3 1,195.7 800.2 503.4
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<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, 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
of accounting) less the excess of earnings over distributions from
less-than-50%-owned investments (accounted for under the equity method of
accounting); (ii) fixed charges are comprised of total interest expense and
such portion of rental expense representative of the interest factor on such
rentals.
(3) Effective in 1994, telephone employees exclude those employees in BellSouth
Telecommunications' subsidiaries which are unrelated to telephone
operations; prior years have been restated.
(4) 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.
(5) Equity Basis.
</TABLE>
25
<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 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 wireless and international communications services and
advertising and publishing products.
Approximately 72%, 73% and 74% of BellSouth's Total Operating Revenues for
the years ended December 31, 1994, 1993 and 1992, respectively, and a greater
portion of net income were from wireline services provided by BellSouth
Telecommunications. Charges for local service, access services and toll for the
year ended December 31, 1994 accounted for approximately 57%, 33% and 10%,
respectively, of the wireline revenues discussed above. Revenues from wireless
communications services and directory advertising and publishing services
accounted for approximately 12% and 9%, respectively, of Total Operating
Revenues for the year ended December 31, 1994. The remainder of such revenues
was derived principally from other nonregulated services provided by BellSouth
Telecommunications.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Income........................ $ 2,159.8 $ 880.1 $ 1,617.7 145.4% (45.6%)
Earnings Per Share................ $ 4.35 $ 1.77 $ 3.30 145.8 (46.4)
</TABLE>
Net Income and Earnings Per Share for 1994 increased $1,279.7 and $2.58,
respectively, compared to 1993. The increases were attributable in part to
revenue growth, driven by continued growth of access lines and the cellular
customer base; cost control measures at BellSouth Telecommunications, including
salary and wage savings attributable to the restructuring plan implemented in
1993; and gains of $67.5 ($.14 per share) and $40.1 ($.08 per share) related to
the sale of two international cellular investments. The increases were also due
to the effect of charges in 1993 which, in the aggregate, reduced Net Income and
Earnings Per Share by $938.2 and $1.88, respectively, for that year. The 1993
charges include $696.6 ($1.40 per share) for restructuring of BellSouth's
telephone operations (see Note K); $86.6 ($.17 per share) for the refinancing of
certain long-term debt issues at lower interest rates by BellSouth
Telecommunications (see Note E); $67.4 ($.14 per share) for the retroactive
adoption of Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits" (see Note N); $47 ($.09 per
share) for the initial impact of a regulatory settlement in Florida;
approximately $25 ($.05 per share) associated with severe 1993 winter weather
conditions; and $15.6 ($.03 per share) related to the federal income tax
legislation enacted in 1993.
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
the impact of the restructuring and other charges, as discussed above; an
additional charge of approximately $30 ($.06 per share) related to the
26
<PAGE>
1993 federal income tax legislation; and the inclusion of gains in 1992's
results of $39.5 ($.08 per share) and $32.9 ($.07 per share), respectively, from
the settlements of a federal income tax matter and prior year regulatory issues.
The 1993 decreases were partially offset by overall growth of operating
revenues, reflecting improvement in key business volumes, and the effect of
charges in 1992 of $40.7 ($.08 per share) for the refinancing of certain
long-term debt issues at lower interest rates by BellSouth Telecommunications
(see Note E) and approximately $28 ($.06 per share) associated with Hurricane
Andrew.
VOLUMES OF BUSINESS
Network Access Lines in Service at December 31 (Thousands):
<TABLE>
<CAPTION>
PERCENT CHANGE
----------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
By Type:
Residence.................................... 14,195.2 13,691.4 13,298.3 3.7% 3.0%
Business..................................... 5,770.5 5,388.3 5,088.1 7.1 5.9
Other........................................ 254.3 252.9 263.2 0.6 (3.9)
---------- ---------- ----------
Total...................................... 20,220.0 19,332.6 18,649.6 4.6 3.7
---------- ---------- ----------
---------- ---------- ----------
By State:
Florida...................................... 5,349.7 5,096.6 4,901.0 5.0 4.0
Georgia...................................... 3,353.6 3,166.7 3,040.2 5.9 4.2
Tennessee.................................... 2,337.0 2,236.0 2,149.3 4.5 4.0
Louisiana.................................... 2,037.3 1,963.3 1,917.9 3.8 2.4
North Carolina............................... 1,993.8 1,896.2 1,821.5 5.1 4.1
Alabama...................................... 1,726.4 1,668.3 1,610.2 3.5 3.6
South Carolina............................... 1,243.5 1,199.8 1,168.2 3.6 2.7
Mississippi.................................. 1,118.4 1,076.6 1,040.8 3.9 3.4
Kentucky..................................... 1,060.3 1,029.1 1,000.5 3.0 2.9
---------- ---------- ----------
Total...................................... 20,220.0 19,332.6 18,649.6 4.6 3.7
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The rate of growth in access lines continued to be particularly strong, 4.6%
in 1994, compared to a 3.7% rate of increase in 1993. The number of access lines
in service since December 31, 1993 increased by approximately 887,400. The
overall increase, led by growth in Georgia, North Carolina 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. Second residential lines accounted for
approximately 40.2% and 22.8% of the overall increases in residence access lines
and total access lines, respectively, since December 31, 1993. The growth rates
in 1994 for total residence and business lines of 3.7% and 7.1%, respectively,
improved compared to growth rates of 3.0% and 5.9%, respectively, in 1993.
Access Minutes of Use (Millions):
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Interstate..................................... 57,778.1 53,345.0 50,546.4 8.3% 5.5%
Intrastate..................................... 16,887.8 15,260.9 13,994.2 10.7 9.1
---------- ---------- ----------
Total........................................ 74,665.9 68,605.9 64,540.6 8.8 6.3
---------- ---------- ----------
---------- ---------- ----------
</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. In 1994, total access minutes of
use increased by 6,060.0 million (8.8%) compared to an increase of 6.3% in
27
<PAGE>
1993. The 1994 increase in access minutes of use was 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' network. 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
--------------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Toll Messages (Millions)........................... 1,558.6 1,511.4 1,462.2 3.1% 3.4%
</TABLE>
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. The pricing of services provided under OCPs has
stimulated volume growth. Accordingly, the trend of declining toll message
volumes in prior periods has been reversed by the inclusion of messages
completed under these plans.
Toll messages increased by 47.2 million (3.1%) compared to a restated
increase of 3.4% in 1993. The 1994 increase, attributable in part to the growth
of messages completed under OCPs and stimulation resulting from access line
growth, was partially offset by the effect of optional extended area calling
plans which, based on a customer's election, provide for a wider toll-free
calling area.
In September 1994, South Carolina implemented an expanded local area calling
plan. While the South Carolina plan's impact on 1994 toll message volumes was
negligible, this plan and future implementation of other such plans in BellSouth
Telecommunications' service region, coupled with competition in the intraLATA
toll market, will adversely impact future toll message volumes. Local area and
optional extended area calling 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.
Wireless Customers (Equity Basis):
<TABLE>
<CAPTION>
PERCENT CHANGE
-------------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Domestic Cellular......................... 2,155,800 1,559,100 1,118,100 38.3% 39.4%
International Cellular.................... 361,300 192,200 77,600 88.0 147.7
Domestic Paging Customers................. 1,614,100 1,232,200 977,200 31.0 26.1
</TABLE>
The wireless communications businesses have become a significant contributor
to BellSouth's operations, primarily due to the continued expansion of the
customer base for mobile communications services. Domestic cellular customers
increased by 596,700 (38.3%) since December 31, 1993. While the rate of increase
has declined since 1993, the overall penetration rate (number of customers as a
percentage of the total population in the service territory) increased from
4.01% at December 31, 1993 to 5.50% at December 31, 1994. Total minutes of use
have also continued to increase, although average minutes of use per cellular
customer declined slightly due to the trend of increased penetration into
lower-usage market segments.
The number of international cellular customers increased by 169,100 (88.0%)
since December 31, 1993. Growth in total minutes of use for international
cellular properties remained strong due to demand stimulated by competitive
programs, underdeveloped land-line service and the development of operations in
Australia and Denmark.
28
<PAGE>
Domestic paging customers increased by 381,900 (31.0%) since December 31,
1993 due primarily to the acquisition of the remaining 50% ownership interest in
a paging business, effective August 1, 1994, and also to continued success of
the retail distribution program and aggressive pricing strategies in the
reseller market. Of the overall growth, approximately 210,000 customers were
attributable to the acquisition. Excluding the effect of the acquisition,
domestic paging customers increased by approximately 171,900 (14.0%) since
December 31, 1993.
OPERATING REVENUES
Total Operating Revenues increased $964.2 (6.1%) compared to an increase of
$678.7 (4.5%) during 1993. The increases resulted from growth in revenues from
BellSouth's wireline telephone businesses, coupled with a significant increase
in revenues from wireless communications businesses. Traditionally, local,
access and toll services offered by BellSouth Telecommunications have primarily
accounted for increases in operating revenues. BellSouth, however, continues to
experience a gradually increasing shift in the relative contributions of its
revenue sources toward wireless services.
The components of Total Operating Revenues were as follows:
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Local Service.................. $ 6,863.1 $ 6,577.3 $ 6,236.0 4.3% 5.5%
Interstate Access.............. 3,127.2 2,991.2 2,945.6 4.5 1.5
Intrastate Access.............. 908.3 881.9 871.8 3.0 1.2
Toll........................... 1,190.1 1,219.5 1,248.8 (2.4) (2.3)
Directory Advertising and
Publishing.................... 1,556.0 1,515.4 1,459.8 2.7 3.8
Wireless Communications........ 2,066.3 1,553.4 1,195.6 33.0 29.9
Other Services................. 1,133.5 1,141.6 1,244.0 (0.7) (8.2)
----------- ----------- -----------
Total Operating Revenues..... $ 16,844.5 $ 15,880.3 $ 15,201.6 6.1 4.5
----------- ----------- -----------
----------- ----------- -----------
</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 1994 increased $285.8 (4.3%) compared to an
increase of $341.3 (5.5%) in 1993.
The increase in 1994 was due primarily to an increase of 887,400 access
lines since December 31, 1993. Also contributing to the increase was growth
attributable to optional extended area calling plans. The increase in 1994 was
partially offset by rate reductions, principally in Louisiana and also in
Florida and Alabama.
The 1993 increase was primarily attributable to an increase of 684,600
access lines since December 31, 1992, growth from optional extended area calling
plans and a $42.0 increase from secondary central office services. In addition,
the effects of a $27.9 refund in Florida during 1992 and changes in and the
expansion of local area calling plans, primarily a plan implemented in Louisiana
in 1992, contributed to the increase in 1993.
INTERSTATE ACCESS revenues result from the provision of access services to
interexchange carriers to provide telecommunications services between states.
Interstate Access revenues increased $136.0 (4.5%) in 1994 compared to an
increase of $45.6 (1.5%) in 1993.
The 1994 increase was attributable to growth in minutes of use, additional
end user charges due primarily to access line growth and the effect of billing
and other adjustments recorded in 1993, which reduced revenues for that period
by approximately $20. The increases were partially offset by the
29
<PAGE>
effect of rate reductions effective in July 1994 and October 1994, additional
revenue deferrals under the Federal Communications Commission's (FCC) price cap
plan and decreased net settlements with the National Exchange Carriers
Association.
The increase for 1993 reflects increased rates effective in July 1993,
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, revenue deferrals under the FCC's price cap plan and
billing adjustments, which reduced revenues by approximately $20.
See "Operating Environment and Trends of the Business."
INTRASTATE ACCESS revenues result from the provision of access services to
interexchange carriers which provide telecommunications services between LATAs
within a state. In 1994, Intrastate Access revenues increased $26.4 (3.0%)
compared to an increase of $10.1 (1.2%) in 1993. For 1994, the increase was
attributable to growth in minutes of use and the reclassification in 1994 of
independent company settlements in certain states, which would have previously
reduced revenues, to operating expenses. The increase was partially offset by
the impact of rate reductions, primarily in Alabama and Florida. The increase in
1993, due primarily to growth in minutes of use, was substantially offset by
rate reductions in most states served by BellSouth Telecommunications.
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 $29.4 (2.4%)
in 1994 compared to a decrease of $29.3 (2.3%) in 1993.
The 1994 decrease was primarily attributable to several settlements with
independent companies, the reclassification of certain settlements to Intrastate
Access revenue, net rate reductions since December 31, 1993 and the impact of
optional extended area calling plans. The decrease was partially offset by
growth in toll message volumes, reflecting improvements related in part to OCPs.
The decrease in 1993 resulted from rate reductions since December 31, 1992
and the impacts of optional extended area calling plans and the expansion of
local area calling plans. The decrease was partially offset by revenue increases
attributable to independent company settlements and growth in toll message
volumes.
The overall decline in Toll revenues is expected to continue over the long
term.
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 $40.6 (2.7%) in 1994 compared to a
$55.6 (3.8%) increase in 1993. Both increases were primarily attributable to
increases in the volume and prices of advertising sold.
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' 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 $512.9 (33.0%) in 1994, compared
to an increase of $357.8 (29.9%) in 1993. The increases for both years resulted
from continued growth of the customer base for wireless services in domestic and
international markets. Consistent with anticipated growth in the overall
cellular industry, BellSouth's wireless communications revenues are expected to
continue to increase. However, the rate of growth of such revenues could be
adversely affected by
30
<PAGE>
competitive pressures on service pricing and market penetration, the effect of a
more diversified customer base with lower average usage and the development of
new technologies, such as personal communications service (PCS).
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. Other Services revenues decreased $8.1
(0.7%) in 1994 compared to a decrease of $102.4 (8.2%) in 1993.
The slight decrease in 1994 was primarily attributable to increased revenue
deferrals related to potential sharing under certain state regulatory plans and
the sale in April 1994 of BellSouth Telecommunications' out-of-region CPE sales
and service operations. The decrease was substantially offset by higher demand
for unregulated products and services, including CPE for residential customers,
voice messaging and inside wire services, and the effects of adjustments and
reclassifications related to services under certain state regulatory plans and
billing and collection services. Revenues derived from billing and collection
are expected to decline over the long term due to interexchange carriers'
assuming more direct billing for their own services.
The decrease in 1993 was attributable to the effect of reclassifying in 1992
a $27.9 Florida refund 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.
OPERATING EXPENSES
Primarily as a result of the effect of the 1993 restructuring charge, Total
Operating Expenses decreased $806.5 (5.9%) in 1994 compared to an increase of
$1,552.3 (12.9%) in 1993. The components of Total Operating Expenses were as
follows:
<TABLE>
<CAPTION>
PERCENT CHANGE
---------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
----------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Depreciation and Amortization $ 3,258.7 $ 3,162.2 $ 3,100.0 3.1% 2.0%
----------- ----------- -----------
Other Operating Expenses:
Cost of Services and Products....... 6,043.2 5,865.1 5,681.3 3.0 3.2
Selling, General and
Administrative..................... 3,484.8 3,429.5 3,259.6 1.6 5.2
Restructuring Charge................ -- 1,136.4 -- (100.0) --
----------- ----------- -----------
9,528.0 10,431.0 8,940.9 (8.7) 16.7
----------- ----------- -----------
Total Operating Expenses............ $ 12,786.7 $ 13,593.2 $ 12,040.9 (5.9) 12.9
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
DEPRECIATION AND AMORTIZATION increased $96.5 (3.1%) in 1994 compared to a
$62.2 (2.0%) increase in 1993.
The increase in 1994 was due to higher levels of property, plant and
equipment since December 31, 1993 resulting from continued growth in the
customer base for wireless and wireline services, continued modernization of the
networks and a special reserve deficiency amortization of $20.4 in North
Carolina. The increase for the period was partially offset by the expiration of
reserve deficiency amortizations in Louisiana and, as discussed below, the
inclusion in 1993 of the $20 impact of the Florida regulatory settlement.
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
31
<PAGE>
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 expiration of
inside wire and reserve deficiency amortizations and reduced depreciation
expense in Florida and Alabama resulting from represcription.
OTHER OPERATING EXPENSES are comprised of Cost of Services and Products,
Selling, General and Administrative and, in 1993, a Restructuring Charge. 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 and administrative expenses. Other Operating Expenses
decreased $903.0 (8.7%) in 1994 compared to an increase of $1,490.1 (16.7%) in
1993. Excluding the $1,136.4 restructuring charge in 1993, Other Operating
Expenses increased $233.4 (2.5%) in 1994 and $353.7 (4.0%) in 1993.
As adjusted, the 2.5% increase in 1994 was primarily attributable to
increased expenses related to sustained growth in the wireless communications
customer base, including additional marketing and operational costs associated
with higher levels of sales and expanded operations. Also contributing to the
increase were additional expenses for software license fees and materials,
related both to volume growth and network modernization in the wireline
business, the effect of reclassifying settlements with independent telephone
companies in certain states from Intrastate Access revenues to operating
expenses in 1994 and, to a lesser extent, volume growth in the directory
advertising and publishing businesses. Total employee-related costs also
increased, reflecting annual compensation increases for management and
represented employees, increased overtime attributable to volume growth and
network service activities and higher expenses for employee benefits, partially
offset by salary and wage savings from employee reductions attributable to the
restructuring plan begun in 1993 at BellSouth Telecommunications and a reduction
in pension expense (see Note H). The adjusted expense increase in 1994 was
partially offset by the sale in 1994 of the out-of-region CPE sales and service
operations and the inclusion in 1993 of approximately $55 and $40, respectively,
related to a regulatory settlement in Florida and severe 1993 weather
conditions.
As adjusted, the 4.0% 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 represented employees and an increase in employee benefits
expense. The increase in employee benefits expense was driven by the higher
overall cost of medical services, an increase of $38 due to the adoption of SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and an increase of $11 due to the adoption of SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," partially offset by a $46
decrease in pension expense. The adjusted 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 $45 of expenses (net of insurance recovery
and state regulatory deferrals) related to Hurricane Andrew reflected in 1992.
32
<PAGE>
OTHER INCOME STATEMENT ITEMS
<TABLE>
<CAPTION>
PERCENT CHANGE
---------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Interest Expense............................... $ 666.1 $ 689.0 $ 746.4 (3.3%) (7.7%)
Other Income, net.............................. 11.0 7.6 177.6 44.7 (95.7)
Provision for Income Taxes..................... 1,242.9 571.6 933.5 117.4 (38.8)
</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 $22.9 (3.3%) in 1994 and $57.4
(7.7%) in 1993. The decrease for 1994 resulted primarily from interest savings
attributable to refinancings in 1993 of long-term debt at lower interest rates.
The decrease was partially offset by higher average levels of short-term
borrowings at higher average interest rates.
The decrease in 1993 was 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.)
OTHER INCOME, NET includes earnings and losses from unconsolidated
subsidiaries, businesses and partnerships; gains and losses from the sale of
operations; interest and dividend income; and minority interests. Other Income,
net increased $3.4 (44.7%) in 1994 and decreased $170.0 (95.7%) in 1993.
The increase in 1994 reflects an aggregate gain of $107.6 from the sale of
two international cellular investments and a $21.7 increase in interest income.
The increase was partially offset by a $29.1 increase in income attributable to
minority interests. Equity in earnings (losses) of unconsolidated affiliates was
($109.8) in 1994 compared to $11.0 in 1993. The overall 1994 loss reflects
increased losses attributable to developing operations, principally the mobile
data communications businesses and, to a lesser extent, the cellular business in
Germany and the long distance telecommunications business in Chile. Such
increased losses were partially offset by an improvement in earnings from other
unconsolidated domestic and international wireless businesses. (See Note B.)
The 1993 decrease resulted in part from a decline of $80.8 in interest
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 developing operations, including the
mobile data communications businesses, the German cellular business and Optus
Communications Pty. Ltd. in Australia.
PROVISION FOR INCOME TAXES increased $671.3 (117.4%) in 1994 and decreased
$361.9 (38.8%) in 1993. BellSouth's effective tax rates were 36.5%, 35.6% and
36.0% in 1994, 1993 and 1992, respectively. A reconciliation of the statutory
Federal 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.
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 businesses. 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.
33
<PAGE>
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Cash Provided by Operating Activities.......... $ 5,172.3 $ 4,686.5 $ 4,913.4 10.4% (4.6%)
</TABLE>
OPERATING ACTIVITIES. Net cash provided by operating activities increased
$485.8 (10.4%) in 1994 and decreased $226.9 (4.6%) in 1993. The increase in
1994, attributable in part to a higher level of net income, was partially offset
by cash expenditures, exclusive of capital, of $390.2 related to the
restructuring plan begun in 1993.
The decrease in 1993 was due in part to a timing difference in the
collection of accounts receivable, the inclusion in 1992 of $90.9 related to a
tax settlement with the Internal Revenue Service and a slight decline in net
income, as adjusted to exclude the impact of the non-cash restructuring charge.
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Cash Used for Investing Activities $ (3,935.6) $ (3,434.9) $ (3,591.8) 14.6% (4.4%)
</TABLE>
INVESTING ACTIVITIES. BellSouth's primary use of capital resources
continues to be for capital expenditures to support development of the wireline
and wireless networks. Net cash used for investing activities increased $500.7
(14.6%) in 1994 and decreased $156.9 (4.4%) in 1993. The increase in 1994 was
attributable to increases in cash investments and advances to unconsolidated
affiliates and capital expenditures. Cash used for investments and advances to
unconsolidated affiliates increased by $390.5 (122.2%) to $710.0. Of such total,
approximately 42% was for investments and advances to the mobile data
communications businesses and the German and Venezuelan cellular businesses and
26% was loaned to Prime South Diversified, Inc. which indirectly wholly owns
Community Cable TV, a Las Vegas cable operation managed by Prime Cable. The
remainder was invested in other businesses in which BellSouth has an interest.
Capital expenditures for all consolidated BellSouth companies increased by
$114.4 (3.3%) to $3,600.3 including approximately $203.6 related to
restructuring activities. Substantially all cash required for capital
expenditures in 1994 was provided internally. In 1995, such capital expenditures
are expected to be financed primarily through internally generated funds and, to
the extent necessary, from external sources. Capital expenditures are projected
to be approximately $4,200 in 1995.
The decrease in 1993 reflected declines in investments and advances to
unconsolidated affiliates and other investing activities, partially offset by an
increase of $296.6 (9.3%) in capital expenditures to support network development
activities.
<TABLE>
<CAPTION>
PERCENT CHANGE
--------------------
1994 VS. 1993 VS.
1994 1993 1992 1993 1992
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Cash Used for Financing Activities $ (1,131.7) $ (1,015.6) $ (1,383.4) 11.4% (26.6%)
</TABLE>
FINANCING ACTIVITIES. Net cash used for financing activities increased
$116.1 (11.4%) in 1994 and decreased $367.8 (26.6%) in 1993. The increase in
1994 was attributable to increases of $61.5 in cash dividends paid to
shareholders and $3,447.1 for debt repayments, primarily short-term borrowings.
The effect of these increases was substantially offset by an increase of
$3,426.0 in proceeds from all borrowings.
The decrease in 1993 was attributable to an increase of $5,037.2 in proceeds
from all borrowings, partially offset by an increase in debt repayments of
$4,416.1 and an increase of $224.9 in cash dividends paid to shareholders. Such
higher levels of proceeds and repayments of borrowings in 1993 reflect the
refinancing of $2,760 of long-term debt at lower interest rates by BellSouth
Telecommunications. The increase in cash dividends in 1993 was due to the use of
higher levels of common shares, newly issued by BellSouth, during 1992 as
payment in lieu of cash dividends under the Shareholder Dividend Reinvestment
and Stock Purchase Plan.
BellSouth's debt to total capitalization ratio decreased from 40.2% at
December 31, 1993 to 39.3% at December 31, 1994.
34
<PAGE>
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. Other than in North Carolina
and South Carolina, where it is subject to traditional rate of return
regulation, BellSouth Telecommunications is operating under some form of
incentive regulation plan at the state and federal levels whereby earnings above
certain levels within a given range must be shared with customers in the form of
credits, refunds or prospective rate reductions. These plans provide incentives
to reduce costs and retain a portion of earnings above the sharing point, and in
some cases, all earnings above the top of the range must be returned to
customers. Since BellSouth Telecommunications' earnings fell close to or within
the sharing range in its incentive plans during 1994, its ability to increase
its earnings over the long run under these plans, even through productivity
enhancements, is constrained. At December 31, 1994, BellSouth
Telecommunications' estimated sharing obligation related to interstate access
services was $141.6. Furthermore, its ability to change rates to more
effectively respond to competition is limited under the current regulatory
plans, which require, in general, that rates be charged as provided in tariff
filings.
Accordingly, BellSouth's primary regulatory focus is 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 processes, BellSouth believes that price
regulation, whereby prices of basic local exchange services are directly
regulated, irrespective of rate of return tests, and prices for other products
and services are based on market factors, is a logical progression to
competitive fairness and provides advantages for consumers. While no such local
regulatory plan has been implemented in the nine-state service area, the
Tennessee Public Service Commission, subject to certain governmental
authorizations and the enactment of enabling legislation, adopted rules to allow
local exchange competition, including a provision whereby BellSouth
Telecommunications could elect to operate under a price regulation plan. In
addition, proposed plans filed by BellSouth Telecommunications in Kentucky,
Georgia, Mississippi and Alabama are currently under review by the respective
commissions in those states. The Florida, Georgia, North Carolina and Tennessee
legislatures are considering bills that would provide for or allow price
regulation and/or local exchange competition. A proposed plan filed with the
Louisiana Public Service Commission was rejected in November 1994. The FCC is
reviewing its regulatory plan; any changes to the plan are not expected to be
effective until mid-1995. BellSouth Telecommunications will continue to pursue
implementation of price regulation plans in Louisiana, other states and at the
federal level through filings with regulatory commissions and through
legislative initiatives.
ECONOMY. The nation's gross domestic product grew 4% in 1994, which was the
strongest annual growth of the current economic expansion. Employment in nonfarm
businesses grew 2.6% during the year as the unemployment rate dropped to 5.6% by
the fourth quarter. Growth in the nine-state region served by BellSouth
Telecommunications was even stronger. The number of jobs in nonfarm businesses
grew at a 3.0% annual rate, unemployment also dropped to 5.6% by the fourth
quarter and real income expanded by an estimated 4.4%. Net in-migration added
450,000 to the region's population during 1994, with every state except
Louisiana recording a gain. Four states, Florida, Georgia, North Carolina and
Tennessee, were among the top ten nationally in 1994 numerical population gains.
The demand for telecommunications services reflected the strength of the
economic and population growth in the region. Higher interest rates in 1995 may
dampen residential construction and durable goods manufacturing, but projected
net in-migration near 400,000 would help to keep the regional demand for
telecommunications services rising. However, the increasing competition faced by
BellSouth Telecommunications and the growing percentage of revenues from
BellSouth Enterprises make BellSouth's financial performance more susceptible to
changes in the economy than previously, as its operations reflect the more
competitive business environment and the greater elasticities for its products
and services.
35
<PAGE>
COMPETITION. Developments in the telecommunications marketplace continue to
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 are able to provide multiple and integrated communications
offerings. A number of large companies, including AT&T Corp. and the other major
interexchange carriers, other Bell Holding Companies and cable and other video
and entertainment companies, have completed acquisitions and entered into
business alliances that will ultimately intensify and expand competition for
local and toll communications and other services currently provided over
BellSouth's networks. Other competitors have announced plans to build, and in
certain locations have begun construction of, local phone connections and
private networks 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. Legislative,
regulatory and judicial developments will further facilitate competition in
local, long distance and video markets.
Notwithstanding the risks associated with increased competition, BellSouth
will have opportunities in 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. As a part of this strategy,
BellSouth has been granted permission by the FCC to conduct a trial of video
dial tone services; acquired in auction one of the nationwide narrowband PCS
licenses; participated in the ongoing FCC auction for broadband PCS licenses in
the Carolinas and eastern Tennessee; and formed business alliances and
partnerships, both domestically and internationally, related to the provision of
interactive and traditional video programming services as well as wireless and
wireline communications services. As another part of its competitive strategy,
BellSouth has undertaken a plan to streamline its telephone operations and to
improve its overall cost structure (see "Other Matters -- Restructuring of
Telephone Operations"). Coincident with the existing restructuring plan,
BellSouth Telecommunications is continuing to seek additional ways to better
enhance customer service and productivity and to further improve its cost
structure. As a result of these ongoing efforts, additional changes to
fundamental business processes and work activities, as well as further employee
reductions, are expected.
BellSouth may consider acquisitions of, investments in and strategic
alliances with established companies that provide information services,
interactive communications and cable television and other entertainment services
and the development of such services and 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."
Where appropriate, the provisions of SFAS No. 71 give recognition to the effect
of actions of regulators, which can provide reasonable assurance of the
existence of an asset, reduce or eliminate the value of an asset or impose or
eliminate a liability of a regulated entity. As a result of such actions by
regulators, BellSouth's balance sheet at December 31, 1994 reflects net deferred
charges (regulatory assets) of $186.5 related primarily to compensated absences
and unamortized issuance costs for debt that has been refinanced, and net
deferred credits (regulatory liabilities) of $304.0 related to income tax
issues. Virtually all of the current regulatory assets and liabilities arose in
connection with the incorporation of new accounting standards into the
ratemaking process, and are transitory in nature. The magnitude of the
regulatory assets and liabilities is decreasing over time due to the ongoing
amortization prescribed as a part of the adoption in 1988 of the FCC's current
Uniform System of Accounts. Additional regulatory assets and liabilities may
arise in the future as long as BellSouth Telecommunications remains subject to
the provisions of SFAS No. 71.
36
<PAGE>
Various forms of earnings-based regulation remain in effect at the federal
level and in all nine states served by BellSouth Telecommunications. However,
recent legislative and regulatory initiatives suggest that fully competitive
markets for telecommunications services will eventually be established. During
1994, the United States Congress considered legislation designed specifically to
open all telecommunications services to full competition. Although no such
legislation was enacted into law, Congress is again considering legislation of
this type, and similar initiatives are also emerging at the state level.
Furthermore, in the regulatory arena, BellSouth Telecommunications continues to
pursue modification of the existing regulatory framework. Price regulation
plans, whereby prices of basic local exchange service are directly regulated and
prices for other telecommunications products and services are based on market
factors, have been proposed for implementation and are under review in several
states in the service area and by the FCC.
BellSouth Telecommunications would be required to discontinue accounting
under SFAS No. 71 if the existing and anticipated levels of competition no
longer allow for service and product pricing that provides for the recovery of
costs. Additionally, SFAS No. 71 would no longer apply if BellSouth
Telecommunications is successful in altering the existing regulatory framework
and achieving price regulation since such plans do not provide for the recovery
of specific costs. While accounting under SFAS No. 71 is currently appropriate,
it is increasingly likely that BellSouth Telecommunications will discontinue
accounting under SFAS No. 71 due to the effect of one or both of these
conditions. In that event, the impact on BellSouth's financial position and
results of operations would be material. Under such circumstances, BellSouth
Telecommunications would be required to reduce the recorded value for telephone
plant and equipment in recognition of amounts that would not be recoverable or
that would be overstated due to longer regulator-prescribed asset lives.
BellSouth Telecommunications' overall depreciation reserve at December 31, 1994
was approximately 44% of its total depreciable plant. Broad industry analysis of
other telecommunications companies who have recently discontinued accounting
under SFAS No. 71 indicates that unregulated telecommunications enterprises
similar to BellSouth Telecommunications have an overall depreciation reserve
ratio that approximates 52% to 57% of total depreciable plant. If BellSouth
Telecommunications were required to discontinue SFAS No. 71 and to revalue its
telephone plant using similar assumptions and methodology, the net recorded book
value of its telephone plant would be reduced by about $4,000 to $6,000. In
addition, BellSouth Telecommunications would be required to eliminate its
regulatory assets and liabilities, adjust the level of its unamortized
investment tax credits and fully adopt issue basis accounting for its directory
publishing fees. Specific financial impacts of discontinuing SFAS No. 71 would
depend on the timing and magnitude of changes, both in the marketplace and in
the overall regulatory framework.
OTHER MATTERS
RESTRUCTURING OF TELEPHONE OPERATIONS. As previously reported, during 1993
BellSouth Telecommunications recognized a $1,136.4 restructuring charge in
connection with a plan to redesign, consolidate and streamline the fundamental
processes and work activities in its telephone operations. The restructuring is
being undertaken in response to an increasingly competitive business
environment. Upon completion, restructuring of the telephone operations is
expected to improve overall responsiveness to customer needs and reduce costs.
As a part of the restructuring, BellSouth Telecommunications is
consolidating and centralizing its existing operations. BellSouth
Telecommunications is establishing a single point of contact and accountability
for the receipt, analysis and resolution of customer installation, repair
activities and service activation. The efforts involve redesign of key work
processes and designing new processes that facilitate the consolidation of
service functions and the reduction of 10,200 employees.
37
<PAGE>
The projected costs by year for each component of the charge were as
follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 TOTAL
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Consolidation and Elimination of Operations........ $ 14.7 $ 185.2 $ 87.0 $ 55.9 $ 342.8
Systems............................................ -- 185.5 155.5 84.4 425.4
Employee Separation................................ 38.3 142.7 105.2 82.0 368.2
--------- --------- --------- --------- ----------
Total............................................ $ 53.0 $ 513.4 $ 347.7 $ 222.3 $ 1,136.4
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
</TABLE>
Through December 31, 1994, BellSouth Telecommunications was substantially on
plan with respect to projected expenditures and employee reductions. See
"PROGRESS UNDER THE PLAN."
CONSOLIDATION AND ELIMINATION OF OPERATIONS. Approximately $342.8 of the
charge consisted of costs associated with consolidating and eliminating
operations as a result of re-engineering the way service is delivered to
customers. During the restructuring period, 288 existing operations centers are
being consolidated into 73 locations. Data management centers used to support
company operations are being reduced from 11 to 6. Comptrollers offices are
being reduced from 48 to 11. Collection process improvements are being made to
reduce operating costs and uncollectibles. Redundancies are being eliminated and
the number of steps decreased in the product planning and provisioning process.
In addition, customer service processes and systems are being 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.
SYSTEMS. Approximately $425.4 of the charge was for systems development.
The information management systems in use prior to the restructuring effort were
inadequate to deal with increased competition and changing technology.
Accordingly, as an integral part of the restructuring plan, a major redesign of
information systems throughout BellSouth Telecommunications is being undertaken
to attain a systems framework that both facilitates the targeted employee
reductions and correlates to the increasingly competitive business environment.
This effort entails significant changes to the overall computing platform,
architecture and corporate systems structure.
EMPLOYEE SEPARATION. Approximately $368.2 of the charge was for separation
costs for employees leaving BellSouth Telecommunications through 1996 and for
relocation of certain employees. BellSouth Telecommunications' targeted employee
reduction of 10,200 employees by the end of the restructuring period will result
in future cost savings and, as a result, is expected to improve BellSouth
Telecommunications' competitive position.
The projected work force reductions by year under the plan were as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Management............................................... 280 1,000 1,600 1,500 4,380
Represented.............................................. 1,020 2,700 1,300 800 5,820
--------- --------- --------- --------- ---------
Total.................................................. 1,300 3,700 2,900 2,300 10,200
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Employee separation costs include severance payments, health care coverage,
education benefits, and costs of relocating employees to new job locations, as
well as net curtailment expenses. The severance payments, health care coverage
and education benefits costs for management employees are paid under the
provisions of current BellSouth management separation plans. The severance
payments, health care coverage and education benefit costs for craft employees
are paid under the provisions of collective bargaining agreements. Relocation
costs are the costs to move personnel to different locations as a result of work
center consolidations. These charges are paid under BellSouth
Telecommunications' relocation guidelines and the terms of collective bargaining
agreements. Net curtailment expenses are charged in accordance with the
provisions of accounting pronouncements SFAS Nos. 88 and 106.
38
<PAGE>
PROGRESS UNDER THE PLAN. Since inception of the restructuring plan in
fourth quarter 1993, cumulative employee reductions were 5,200 (1,300 in 1993
and 3,900 in 1994) and total amounts charged against the restructuring liability
were $521.7.
A summary of the costs incurred through December 31, 1994 under the plan is
as follows:
<TABLE>
<CAPTION>
1993 1994 TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Consolidation and Elimination of Operations............................... $ 14.7 $ 164.6 $ 179.3
Systems................................................................... -- 170.3 170.3
Employee Separation....................................................... 38.3 133.8 172.1
--------- --------- ---------
Total................................................................... $ 53.0 $ 468.7 $ 521.7
--------- --------- ---------
--------- --------- ---------
</TABLE>
For the year ended December 31, 1994, cash expenditures related to the
ongoing implementation of the restructuring plan were approximately $390.2.
Non-cash expenses were primarily comprised of pension curtailments and charges
related to elimination of certain business operations of subsidiaries. Capital
expenditures for 1994 related to restructuring were approximately $203.6; such
expenditures are not reflected in the above tables.
The remaining restructuring liability at December 31, 1994 was approximately
$614.7, all of which was classified as current. During 1995, BellSouth
Telecommunications plans to accelerate restructuring activities such that
employee reductions and expenditures as originally projected under the plan will
be substantially completed by the end of 1995. Accordingly, employee reductions
in 1995 under the plan are projected to be approximately 5,000 and capital
expenditures, which are not reflected in the above tables, are projected to be
about $300.
The cumulative reduction in employees as of December 31, 1994 resulted in an
estimated $100 reduction in 1994 operating expenses and is currently projected
to result in about a $300 to $400 reduction in 1995 operating expenses. Once the
restructuring plan is completed, annual cost savings are expected to be
approximately $600 due primarily to reduced employee-related expenses.
39
<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
L.L.P., 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 L.L.P. 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 L.L.P.'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, 1994, 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 our ethical standards
through its Vice President -- Corporate Responsibility and Compliance,
designated as the ombudsman/ethics officer reporting directly to the Chairman of
the Board.
<TABLE>
<S> <C>
/s/ John L. Clendenin /s/ Ronald M. Dykes
CHAIRMAN OF THE BOARD VICE PRESIDENT, CHIEF FINANCIAL
AND CHIEF EXECUTIVE OFFICER OFFICER AND COMPTROLLER
</TABLE>
February 3, 1995
40
<PAGE>
AUDIT COMMITTEE CHAIRMAN'S LETTER
The Audit Committee of the Board of Directors consists of four members who
are neither officers nor employees of BellSouth Corporation. Information as to
these persons, as well as their duties, is provided in the Proxy Statement. The
Audit Committee met six times during 1994 and reviewed with the Chief Corporate
Auditor, Coopers & Lybrand L.L.P. and management current audit activities, plans
and the results of selected internal audits. The Audit Committee also reviewed
the objectivity of the financial reporting process and the adequacy of internal
controls. The Audit Committee recommended, subject to shareholder ratification,
the appointment of the independent accountants and considered factors relating
to their independence. In addition, the Audit Committee provided guidance in
matters regarding ethical considerations and business conduct, reviewed the
operations of political action committees and monitored compliance with laws
affecting external involvement. The Chief Corporate Auditor and Coopers &
Lybrand L.L.P. each met privately with the Audit Committee on occasion to
encourage confidential discussions as to any auditing matters.
/s/ Marshall M. Criser
CHAIRMAN, AUDIT COMMITTEE
February 3, 1995
41
<PAGE>
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, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1994. 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, 1994 and 1993, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes H, M and N to the consolidated financial statements,
BellSouth changed its method of accounting for postretirement benefits other
than pensions, income taxes and postemployment benefits in 1993.
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
February 3, 1995
42
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Operating Revenues:
Network and related services
Local service....................................................... $ 6,863.1 $ 6,577.3 $ 6,236.0
Interstate access................................................... 3,127.2 2,991.2 2,945.6
Intrastate access................................................... 908.3 881.9 871.8
Toll................................................................ 1,190.1 1,219.5 1,248.8
Directory advertising and publishing.................................. 1,556.0 1,515.4 1,459.8
Wireless communications............................................... 2,066.3 1,553.4 1,195.6
Other services........................................................ 1,133.5 1,141.6 1,244.0
--------- --------- ---------
Total Operating Revenues.......................................... 16,844.5 15,880.3 15,201.6
--------- --------- ---------
Operating Expenses:
Cost of services and products......................................... 6,043.2 5,865.1 5,681.3
Depreciation and amortization......................................... 3,258.7 3,162.2 3,100.0
Selling, general and administrative................................... 3,484.8 3,429.5 3,259.6
Restructuring charge (Note K)......................................... -- 1,136.4 --
--------- --------- ---------
Total Operating Expenses.......................................... 12,786.7 13,593.2 12,040.9
--------- --------- ---------
Operating Income........................................................ 4,057.8 2,287.1 3,160.7
Interest Expense (Note L)............................................... 666.1 689.0 746.4
Other Income, net (Note L).............................................. 11.0 7.6 177.6
--------- --------- ---------
Income Before Income Taxes, Extraordinary Loss and Cumulative Effect of
Change in Accounting Principle......................................... 3,402.7 1,605.7 2,591.9
Provision for Income Taxes (Note M)..................................... 1,242.9 571.6 933.5
--------- --------- ---------
Income Before Extraordinary Loss and Cumulative Effect of Change in
Accounting Principle................................................... 2,159.8 1,034.1 1,658.4
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) --
--------- --------- ---------
Net Income........................................................ $ 2,159.8 $ 880.1 $ 1,617.7
--------- --------- ---------
--------- --------- ---------
Weighted Average Common Shares Outstanding.............................. 496.6 496.1 490.8
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................................................. $ 4.35 $ 2.08 $ 3.38
Extraordinary Loss on Early Extinguishment of Debt,
net of tax........................................................... -- (.17) (.08)
Cumulative Effect of Change in Accounting Principle, net of tax....... -- (.14) --
--------- --------- ---------
Net Income........................................................ $ 4.35 $ 1.77 $ 3.30
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................................. $ 606.5 $ 501.5
Temporary cash investments................................................................. 50.8 49.0
Accounts receivable, net of allowance for uncollectibles of $154.1 and $149.6.............. 3,126.6 2,985.2
Material and supplies...................................................................... 490.0 418.7
Other current assets....................................................................... 453.9 364.6
----------- -----------
4,727.8 4,319.0
----------- -----------
Investments and Advances (Note B)............................................................ 2,531.5 2,039.4
Property, Plant and Equipment, net (Note C).................................................. 25,162.4 24,667.8
Deferred Charges and Other Assets............................................................ 535.4 512.2
Intangible Assets, net....................................................................... 1,439.9 1,334.9
----------- -----------
Total Assets............................................................................. $ 34,397.0 $ 32,873.3
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year (Note E)..................................................... $ 2,018.7 $ 1,838.6
Accounts payable........................................................................... 1,378.3 979.0
Other current liabilities (Note D)......................................................... 3,101.1 2,943.8
----------- -----------
6,498.1 5,761.4
----------- -----------
Long-Term Debt (Note E)...................................................................... 7,435.1 7,380.7
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes.......................................................... 3,646.9 3,465.3
Unamortized investment tax credits......................................................... 443.3 515.9
Other liabilities and deferred credits (Note F)............................................ 2,006.3 2,255.8
----------- -----------
6,096.5 6,237.0
----------- -----------
Shareholders' Equity:
Common stock, $1 par value (1,100,000,000 shares authorized; 496,242,732 and 496,086,984
shares outstanding at December 31, 1994 and 1993, respectively)........................... 502.5 501.6
Paid-in capital............................................................................ 8,064.2 8,009.4
Retained earnings.......................................................................... 6,721.1 5,919.3
Shares held in trust (Note G).............................................................. (336.2) (292.6)
Guarantee of ESOP debt (Notes G and H)..................................................... (584.3) (643.5)
----------- -----------
14,367.3 13,494.2
----------- -----------
Total Liabilities and Shareholders' Equity............................................. $ 34,397.0 $ 32,873.3
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<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, 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)
Net income......................... 2,159.8
Dividends declared................. (1,369.5)
Shares issued and activity
associated with various employee
benefit plans and other
activities........................ .1 .1 6.5
Shares issued to grantor trusts.... .8 .8 42.8 (43.6)
Reduction of ESOP debt and other
related activities................ 11.5 59.2
Foreign currency translation
adjustment........................ 5.5
------ ------- ------ -------- -------- ------- ------- --------
Balance at December 31, 1994....... 502.5 -- $502.5 $8,064.2 $6,721.1 $ -- $(336.2) $ (584.3)
------ ------- ------ -------- -------- ------- ------- --------
------ ------- ------ -------- -------- ------- ------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 2,159.8 $ 880.1 $ 1,617.7
Adjustments to net income:
Depreciation................................................... 3,206.1 3,103.8 3,032.2
Amortization of intangibles.................................... 52.6 58.4 67.8
Provision for losses on bad debts.............................. 175.4 197.8 195.5
Deferred income taxes and unamortized investment tax credits... (19.1) (633.2) (138.7)
Pension expense in excess of funding........................... 28.0 120.7 165.7
Noncash compensation expense related to ESOP benefits.......... 18.5 23.2 27.1
Losses (earnings) of unconsolidated affiliates................. 109.8 (11.0) (76.7)
Dividends received from unconsolidated affiliates.............. 121.5 199.9 124.6
(Gains) losses on sale of operations........................... (107.6) 10.0 --
Allowance for funds used during construction................... (19.7) (23.7) (15.3)
Restructuring charge........................................... -- 1,136.4 --
Payment of call premium........................................ -- (99.7) (33.4)
Extraordinary loss on early extinguishment of debt............. -- 145.4 70.7
Change in accounting principle, net of tax..................... -- 67.4 --
Summary tax assessment settlement.............................. -- -- 90.9
Change in accounts receivable.................................. (509.6) (501.7) (302.4)
Change in material and supplies................................ (204.3) (98.0) (156.1)
Change in accounts payable and other current liabilities....... (187.1) (13.6) 148.7
Change in deferred charges and other assets.................... (60.6) 101.5 139.3
Change in other liabilities and deferred credits............... 437.4 46.3 29.5
Other reconciling items, net................................... (28.8) (23.5) (73.7)
----------- ----------- -----------
Net cash provided by operating activities.................... 5,172.3 4,686.5 4,913.4
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................. (3,600.3) (3,485.9) (3,189.3)
Proceeds from disposals of property, plant and equipment......... 137.5 156.0 139.5
Proceeds from disposition of short-term investments.............. 106.5 147.9 188.5
Purchase of short-term investments............................... (108.2) (116.3) (167.5)
Investment acquisitions.......................................... -- -- (53.8)
Investment dispositions.......................................... 197.5 105.2 --
Investments in and advances to unconsolidated affiliates......... (710.0) (319.5) (562.5)
Proceeds from repayment of loans and advances.................... 41.4 77.2 178.5
Other investing activities, net.................................. -- .5 (125.2)
----------- ----------- -----------
Net cash used for investing activities....................... (3,935.6) (3,434.9) (3,591.8)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings.............................. 22,488.6 16,289.9 13,541.0
Repayments of short-term borrowings.............................. (22,306.2) (15,856.4) (13,770.3)
Proceeds from long-term debt..................................... 190.6 2,963.3 675.0
Repayments of long-term debt..................................... (128.6) (3,131.3) (801.3)
Payment of capital lease obligations............................. (14.7) (12.2) (15.5)
Proceeds from issuing common and treasury shares................. 7.5 38.5 70.2
Dividends paid................................................... (1,368.9) (1,307.4) (1,082.5)
----------- ----------- -----------
Net cash used for financing activities....................... (1,131.7) (1,015.6) (1,383.4)
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents............. 105.0 236.0 (61.8)
Cash and Cash Equivalents at Beginning of Period................. 501.5 265.5 327.3
----------- ----------- -----------
Cash and Cash Equivalents at End of Period....................... $ 606.5 $ 501.5 $ 265.5
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<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 of a regulated entity.
As a result of such actions by regulators, the consolidated balance sheets
at December 31, 1994 and 1993 reflect net deferred charges (regulatory assets)
of $186.5 and $235.9, respectively, related primarily to compensated absences
and unamortized issuance costs for debt that has been refinanced. Net deferred
credits (regulatory liabilities) included in the consolidated balance sheets
were $304.0 and $378.9, respectively, related to income tax issues.
Telephone plant and equipment has been depreciated using
regulator-prescribed asset lives. Other telecommunications companies have
recently discontinued accounting under SFAS No. 71 and have revalued their
telephone plant. If BellSouth Telecommunications were to revalue its telephone
plant using similar assumptions and methodology, the net recorded book value of
its telephone plant would be reduced by approximately $4,000 to $6,000.
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.
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 consist primarily of
investments in, and advances to, unconsolidated affiliated companies accounted
for under the equity method.
PROPERTY, PLANT AND EQUIPMENT. The investment in property, plant and
equipment is stated at original cost. For plant dedicated to providing regulated
telecommunications services, 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 telephone plant is disposed
of, the original cost, less net salvage value, is charged to accumulated
depreciation. The cost of other property, plant and equipment 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.
INTANGIBLE ASSETS. Intangible assets consist of the excess consideration
paid over net assets acquired in business combinations, acquired licenses and
customer lists. Intangible assets are being amortized using the straight-line
and accelerated methods over periods of benefit. Such periods do not exceed 40
years. The carrying value of intangible assets is periodically reviewed on the
basis of whether such intangibles are fully
47
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE A -- ACCOUNTING POLICIES (CONTINUED)
recoverable from projected, discounted net cash flows of the related business
unit. Amortization of such intangibles was $52.6, $58.4 and $67.8 for the years
ended December 31, 1994, 1993 and 1992, respectively. At December 31, 1994 and
1993, accumulated amortization of intangibles was $212.1 and $169.2,
respectively.
DERIVATIVE FINANCIAL INSTRUMENTS. BellSouth manages risk arising from
fluctuations in interest rates and currency exchange rates by using derivative
financial instruments, such as foreign exchange forward contracts, currency
swaps and interest rate swaps.
Foreign exchange forward contracts are carried at fair value in the
consolidated balance sheets. Gains and losses on foreign exchange forward
contracts used as currency hedges of existing assets or liabilities are deferred
and offset the deferred losses and gains of the underlying asset or liability.
The net effect is ultimately recognized in income as the underlying transaction
matures. Gains and losses related to qualifying hedges of firm commitments also
are deferred and are recognized in income or as adjustments of carrying amounts
when the hedged transaction occurs.
Currency swap contracts entered into as hedges of existing assets and
liabilities are carried at fair value in the consolidated balance sheets. Gains
and losses on currency swaps are deferred and offset against the deferred
currency losses and gains of the underlying asset or liability. The net effect
is ultimately recognized in income as the underlying transaction matures.
Interest rate swap agreements are treated as off-balance sheet financial
instruments. Receipts or payments resulting from these instruments are
recognized as adjustments to interest expense as received or paid.
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.
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.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION. Regulatory authorities allow
BellSouth Telecommunications to recognize the cost of capital (debt and equity
components) associated with the construction of certain plant as income. 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.
48
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE B -- INVESTMENTS AND ADVANCES
Investments and Advances as of December 31 consist of the following:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Investments accounted for under the equity method.......................... $ 1,715.9 $ 1,806.7
Advances to and notes receivable from affiliates........................... 729.1 146.0
Other investments.......................................................... 86.5 86.7
---------- ----------
Total Investments and Advances......................................... $ 2,531.5 $ 2,039.4
---------- ----------
---------- ----------
</TABLE>
BellSouth's equity method investments primarily include various partnerships
in domestic cellular properties, mobile data communications, investments in
international cellular properties and other international communications
consortiums. Earnings (losses) related to investments accounted for under the
equity method were $(109.8), $11.0 and $76.7 for the three years ended December
31, 1994, 1993 and 1992, respectively, and are included as a component of Other
Income.
DOMESTIC CELLULAR. BellSouth's domestic cellular investments consist
primarily of a 60.0% non-controlling financial interest in the Los Angeles
Cellular Telephone Company and a 43.8% interest in the Houston Cellular
Telephone Company. At December 31, 1994, BellSouth's aggregate investment in
these entities exceeded the underlying book value of the investees' net assets
by $934.7. 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.
MOBILE DATA COMMUNICATIONS. In January 1992, BellSouth and RAM Broadcasting
Corporation (RBC) formed an investment 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 investment gives
BellSouth a 49% interest in the United States mobile data operations, which is
operated by RBC, and various interests in foreign mobile data operations ranging
from 5.4% to 90%. In July 1994, BellSouth acquired RBC's 50% interest in the
paging segment of the investment giving BellSouth a 100% interest in this
entity. BellSouth had a note receivable from and advances to mobile data
affiliates totaling $134.6 and $43.0 at December 31, 1994 and 1993,
respectively. These receivables bear interest at the rate of the three-month
LIBOR, plus 3 1/2%. The instruments are collateralized by assets of the
affiliates.
INTERNATIONAL COMMUNICATIONS. BellSouth has equity investments in
international cellular operations in Latin America, Europe, the Asia-Pacific
region and other international markets with ownership ranging from 21.4% to
53.3%. The largest of these investments, Telcel Cellular C.A. (TelCel), in which
BellSouth has a non-controlling 53.3% interest, provides cellular telephone
service in Venezuela. BellSouth is a 21.4% participant in the E-Plus Mobilfunk
consortium which provides cellular telephone service in Germany.
In January 1994, BellSouth disposed of its 36.4% interest in a cellular
telephone business in Mexico. In November 1994, BellSouth sold its 4% interest
in a company providing cellular service in France. As a result of these
dispositions, BellSouth recognized gains of $67.5 and $40.1, respectively, both
of which are included in Other Income.
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.
OTHER INVESTMENT ACTIVITY. BellSouth has non-controlling financial
interests ranging from 70% to 80% in the CSL Ventures and 1155 Peachtree
Associates real estate partnerships. BellSouth had notes receivable from and
advances to these partnerships totaling $186.1 and $208.1 (of which $135.8 was
included in current assets) at December 31, 1994 and 1993, respectively. The
notes bear interest at rates ranging from 7.88% to 9.31% while the advances bear
interest at the federal funds rate plus .30%. Principal amounts outstanding at
December 31, 1994 are due and payable to BellSouth between December 31, 1996 and
August 8, 2002. The instruments require periodic payments of interest and are
collateralized by various real estate holdings.
49
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE B -- INVESTMENTS AND ADVANCES (CONTINUED)
In December 1993, BellSouth entered into a credit agreement with Prime South
Diversified, Inc. (Prime) to provide up to $250 in financing, of which $185.0
had been borrowed by Prime as of December 31, 1994. The loan is collateralized
by the stock of Prime South Diversified, which indirectly wholly owns Community
Cable TV in Las Vegas, and its wholly-owned subsidiary Prime South Holdings,
Inc. The loan bears a variable rate of 10% to 11% and matures in 2001.
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows at December 31:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Outside plant...................................................................... $ 19,291.5 $ 18,595.7
Central office equipment........................................................... 15,443.5 14,668.0
Building and building improvements................................................. 3,113.9 2,954.4
Furniture and fixtures............................................................. 2,535.3 2,362.6
Operating and other equipment...................................................... 2,346.6 2,006.8
Station equipment.................................................................. 601.0 631.4
Plant under construction........................................................... 616.3 497.2
Land............................................................................... 181.7 175.9
Other.............................................................................. 69.0 82.8
----------- -----------
44,198.8 41,974.8
Less: Accumulated depreciation................................................... 19,036.4 17,307.0
----------- -----------
Total Property, Plant and Equipment, net....................................... $ 25,162.4 $ 24,667.8
----------- -----------
----------- -----------
</TABLE>
Depreciation of telephone plant and equipment as a percentage of average
depreciable telephone plant was 7.20%, 7.51% and 7.67% for 1994, 1993 and 1992,
respectively.
NOTE D -- OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows at December 31:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Restructuring accrual (see Note K)................................................... $ 614.7 $ 513.4
Advanced billing and customer deposits............................................... 499.9 476.2
Taxes accrued........................................................................ 374.6 492.1
Dividends payable.................................................................... 346.7 346.1
Salaries and wages payable........................................................... 343.5 338.3
Compensated absences................................................................. 332.8 332.6
Interest and rents accrued........................................................... 278.1 250.2
Other................................................................................ 310.8 194.9
---------- ----------
Total Other Current Liabilities.................................................. $ 3,101.1 $ 2,943.8
---------- ----------
---------- ----------
</TABLE>
50
<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 1994 1993
- ------------------------------------------------------------------------- -------- --------
<S> <C> <C>
Short-term notes payable:
Bank loans............................................................. $ 45.1 $ 88.7
Commercial paper....................................................... 1,838.5 1,536.1
-------- --------
1,883.6 1,624.8
Current maturities of long-term debt..................................... 135.1 213.8
-------- --------
Total................................................................ $ 2,018.7 $ 1,838.6
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION
- -------------------------------------------------------------------------
<S> <C> <C>
Weighted average interest rate at end of period:
Bank loans............................................................. 6.39% 3.77%
Commercial paper....................................................... 5.82% 3.30%
</TABLE>
BellSouth has committed credit lines aggregating $1,493.4 with various
banks. Borrowings under the committed lines totaled $16.1 at December 31, 1994.
BellSouth also maintains uncommitted lines of credit of $675.0. At December 31,
1994, there were no borrowings under the uncommitted lines. There are no
significant commitment fees or requirements for compensating balances associated
with any lines of credit.
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>
CONTRACTUAL
INTEREST RATES MATURITIES 1994 1993
------------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
BellSouth Telecommunications Debentures: 3 1/4% - 6 3/4% 1995 - 2033 $ 1,270.0 $ 1,270.0
7 3/8% - 8 1/4% 2010 - 2033 1,935.0 1,935.0
8 1/2% - 8 3/4% 2024 - 2029 1,400.0 1,400.0
---------- ----------
4,605.0 4,605.0
BellSouth Telecommunications Notes............. 5 1/4% - 7% 1998 - 2008 1,875.0 1,875.0
Guarantee of ESOP debt......................... 9.125% - 9.19% 2003 693.9 734.6
BellSouth Capital Funding Corporation Notes.... 3.91% - 9.50% 1994 - 1999 374.5 299.9
Other.......................................... 82.6 142.6
Unamortized discount, net of premium........... (60.8) (62.6)
---------- ----------
7,570.2 7,594.5
Current maturities............................. (135.1) (213.8)
---------- ----------
Total Long-Term Debt....................... $ 7,435.1 $ 7,380.7
---------- ----------
---------- ----------
</TABLE>
Maturities of long-term debt outstanding (face amounts) at December 31, 1994
are summarized below:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Maturities........................ $ 135.1 $ 77.3 $ 158.7 $ 774.4 $ 249.4 $ 6,236.1 $ 7,631.0
--------- --------- --------- --------- --------- ---------- ----------
--------- --------- --------- --------- --------- ---------- ----------
</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
51
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE E -- DEBT (CONTINUED)
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, 1994, shelf registration statements had been filed with the
Securities and Exchange Commission by BellSouth Telecommunications and Capital
Funding under which $725.0 and $1,027.3, respectively, of debt securities could
be offered.
NOTE F -- OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits is summarized as follows at December
31:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accrued pension cost................................................................. $ 568.2 $ 565.5
Compensation related................................................................. 341.7 318.5
Regulatory liability related to income taxes (see Note M)............................ 304.0 378.9
Minority interests................................................................... 207.8 123.6
Sharing accrual under FCC price cap plan............................................. 141.6 41.7
Postemployment benefits.............................................................. 140.6 121.4
Restructuring accrual (see Note K)................................................... -- 570.0
Other................................................................................ 302.4 136.2
---------- ----------
Total Other Liabilities and Deferred Credits..................................... $ 2,006.3 $ 2,255.8
---------- ----------
---------- ----------
</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, 1994, 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 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 cost of unallocated BellSouth common stock purchased with the
proceeds of the
52
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE G -- SHAREHOLDERS' EQUITY (CONTINUED)
amortizing notes and the timing difference resulting from the shares allocated
accounting method. All ESOP shares are considered outstanding for financial
reporting purposes and, as such, are included in the computation of earnings per
share. 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 and 1994, 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, 1994 and 1993, the assets held in the trusts consist of cash and
6,262,087 and 5,464,920 shares, respectively, 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.
NOTE H -- EMPLOYEE BENEFIT PLANS
PENSION PLANS. Substantially all employees of BellSouth are covered by
noncontributory defined benefit pension plans. Principal plans are discussed
below; other plans are not significant individually or in the aggregate.
The plan covering non-represented employees is a cash balance plan which
provides pension benefits determined by a combination of compensation-based
service and additional credits and individual account-based interest credits.
The cash balance plan is subject to a minimum benefit determined under a plan in
existence for non-represented employees prior to July 1, 1993 which provided
benefits based upon credited service and employees' average compensation for a
specified period. The minimum benefit under the prior plan is applicable to
employees retiring through 2005. Both the 1994 and 1993 projected benefit
obligations assume interest and additional credits greater than the minimum
levels specified in the written plan. Pension benefits provided for represented
employees are based on specified benefit amounts and years of service and
includes the projected 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>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Service cost -- benefits earned during the year....................... $ 272.1 $ 265.8 $ 262.4
Interest cost on projected benefit obligation......................... 778.2 774.8 751.8
Actual loss (return) on plan assets................................... 135.9 (1,734.9) (686.2)
Net amortization and deferral......................................... (1,158.2) 816.0 (160.2)
----------- ----------- -----------
Net periodic pension cost......................................... $ 28.0 $ 121.7 $ 167.8
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Effective January 1, 1994, the non-represented cash balance plan was divided
from one into four cash balance plans which allowed for costs to be accounted
for more precisely based upon specific company demographic information. The plan
division had no material impact on BellSouth in 1994. The decrease in 1994
pension expense is primarily the result of a reduction in assumed benefit levels
partially offset by the decrease in the discount rate assumption. The
consolidated net pension expense amounts reflected above are exclusive of
curtailment gains reflected in the restructuring activities discussed below.
53
<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 funded status of the plans at December
31:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation........................................................ $ 7,431.4 $ 7,705.3
----------- -----------
----------- -----------
Accumulated benefit obligation................................................... $ 8,404.0 $ 8,819.6
----------- -----------
----------- -----------
Projected benefit obligation..................................................... $ 10,115.1 $ 10,644.3
Plan assets at market value........................................................ 12,343.1 13,173.0
----------- -----------
Plan assets in excess of projected benefit obligation.............................. 2,228.0 2,528.7
Unrecognized net gain due to past experience different from assumptions made....... (2,263.9) (2,503.2)
Unrecognized prior service cost.................................................... (360.9) (398.5)
Unrecognized net asset at transition............................................... (171.4) (192.5)
----------- -----------
Accrued pension cost............................................................. $ (568.2) $ (565.5)
----------- -----------
----------- -----------
</TABLE>
The significant actuarial assumptions at December 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Weighted average discount rate............................................................. 8.25% 7.5%
Weighted average rate of compensation increase............................................. 5.7% 5.7%
Expected long-term rate of return on plan assets........................................... 8.0% 8.0%
</TABLE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. BellSouth sponsors
postretirement health and life insurance welfare 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 is being amortized over 15 years, the average remaining service
period of active plan participants at adoption. The accounting for the health
care plan does not anticipate future adjustments to the cost-sharing
arrangements provided for in the written plan for employees who retire after
December 31, 1991.
BellSouth's funding policy is to make contributions to trust funds with the
objective of accumulating sufficient assets to pay all health and life benefits
for which BellSouth is liable. Contributions are actuarially determined using
the aggregate cost method, subject to ERISA and Internal Revenue Service
limitations. Assets in the health and life plans consist primarily of equity
securities and fixed income investments.
Postretirement benefit costs for the years ending December 31, 1994 and
1993, respectively, were composed of the following:
<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
HEALTH LIFE HEALTH LIFE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Service cost -- benefits earned during the year............................ $ 34.8 $ 13.3 $ 29.9 $ 8.7
Interest on accumulated postretirement benefit obligation.................. 211.0 37.4 199.4 32.4
Actual loss (return) on plan assets........................................ 14.1 (12.4) (43.5) (35.0)
Amortization of transition liability (asset)............................... 112.3 (13.1) 112.9 (13.1)
Other amortization and deferral, net....................................... (65.6) (30.6) (9.1) (9.5)
--------- --------- --------- ---------
Postretirement benefit cost (income)..................................... $ 306.6 $ (5.4) $ 289.6 $ (16.5)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
54
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
The consolidated net postretirement benefit cost amounts reflected above are
exclusive of curtailment losses reflected in the restructuring activities
discussed below. 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 for 1992.
The following table sets forth the plans' funded status at December 31, 1994
and 1993, respectively:
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
HEALTH LIFE HEALTH LIFE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................... $ 1,835.4 $ 249.1 $ 1,909.8 $ 245.5
Fully eligible active plan participants................ 303.9 68.5 350.6 193.7
Other active plan participants......................... 506.8 132.3 630.9 68.2
----------- ----------- ----------- -----------
2,646.1 449.9 2,891.3 507.4
Plan assets at fair value................................ 883.1 583.0 785.3 584.5
----------- ----------- ----------- -----------
Accumulated postretirement benefit obligation in excess
of (less than) plan assets.............................. 1,763.0 (133.1) 2,106.0 (77.1)
Unrecognized net losses.................................. (219.6) (60.3) (514.0) (123.4)
Unrecognized transition (obligation) asset............... (1,425.3) 170.3 (1,572.8) 183.4
----------- ----------- ----------- -----------
Accrued (prepaid) postretirement benefit cost............ $ 118.1 $ (23.1) $ 19.2 $ (17.1)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The significant actuarial assumptions at December 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Weighted average discount rate.......................................................... 8.75% 7.5%
Weighted average rate of compensation increase.......................................... 5.7% 5.7%
Health care cost trend rate (1)......................................................... 11.0% 11.5%
Expected long-term rate of return on plan assets (2).................................... 8.0% 8.0%
<FN>
- ------------------------
(1) Trend rate to decrease gradually to 5% in 2007
(2) Rate net of an estimated 30% tax reduction for the non-represented
employees' trust for both 1994 and 1993
</TABLE>
The health care cost trend rate assumption 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 $108 at December 31, 1994 and the estimated aggregate service and
interest cost components of the 1994 postretirement benefit cost by $14.
Most regulatory jurisdictions have accepted BellSouth's SFAS No. 106
implementation plan. However, two states are requiring a 20-year and 30-year
amortization of the transition benefit obligation, the impact of which is not
material to BellSouth.
EFFECT OF RESTRUCTURING ON PENSIONS AND POSTRETIREMENT BENEFITS. As a part
of the restructuring charge in 1993 (see Note K), BellSouth recorded a liability
of $88 for estimated net curtailment losses expected to impact BellSouth's
pension and postretirement benefit plans. Of the amount recognized, $32 and $16
were realized and charged against the restructuring liability in 1994 and 1993,
respectively.
DEFINED CONTRIBUTION PLANS. BellSouth maintains several contributory
savings plans which cover substantially all employees. The BellSouth Savings and
Employee Stock Ownership Plan and the BellSouth Savings and Security Plan
(collectively, the ESOP Plans) are tax-qualified employee stock ownership plans
which cover the largest portion of the employees. Assets of the plans are held
by two trusts (the Trusts),
55
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE H -- EMPLOYEE BENEFIT PLANS (CONTINUED)
which, in turn, are part of the BellSouth Master Savings Trust. In 1990, a
leveraged ESOP feature was incorporated into the ESOP Plans. With proceeds from
the ESOP notes (see Note E), the Trusts purchased shares of BellSouth common
stock in the open market which will be used, in part, to fulfill BellSouth's
matching contribution obligation over the 13-year debt repayment period of the
leveraged ESOP program.
Employee participants contribute part of their annual compensation, via
payroll deductions, to the ESOP Plans, a portion of which is matched by
BellSouth. The matching amount, stated in percentage terms and applied to
certain eligible amounts, is determined annually by the Board of Directors. The
match consists of shares of BellSouth common stock that were purchased by the
Trusts with proceeds from the ESOP Notes, or that are purchased by the Trusts in
the market from time to time should there be insufficient shares available from
the Trust. The shares are allocated to each participant's account based on the
market price of the shares at the time of allocation. Shares are released for
allocation as each semi-annual loan payment is made. None of the shares held by
the ESOP Plans is subject to repurchase.
BellSouth makes annual contributions to the Trusts to fund the ESOP's debt
service, plus that amount required to purchase any additional shares allocated
to participant accounts, less dividends received by the Trusts. All dividends
received by the Trusts are used for debt service.
In 1993, new authoritative guidance became effective which created new
accounting requirements for certain ESOPs, and was elective for all others.
BellSouth has elected to continue the existing accounting guidance and has
adopted the new disclosure requirements applicable to all ESOPs. As a leveraged
ESOP, BellSouth recognizes expense using the shares allocated accounting method,
which combines the cost of the shares allocated for the period plus interest
incurred, reduced by the dividends used to service the ESOP debt. Dividends on
all ESOP shares are recorded as a reduction to retained earnings and all ESOP
shares are included in the computation of earnings per share.
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Compensation cost................................................ $76.6 $67.9 $71.8
Interest expense................................................. $38.6 $39.9 $40.5
Actual interest on ESOP Notes.................................... $66.2 $69.5 $72.4
Cash contributions, excluding dividends paid to the Trusts....... $99.8 $84.9 $84.3
Dividends paid to the Trusts, used for debt service.............. $42.3 $43.6 $43.7
Shares allocated to participants................................. 4,810,517 3,671,657 2,555,175
Shares committed to be released.................................. -- -- --
Shares unallocated............................................... 11,078,845 12,217,705 13,334,187
</TABLE>
BellSouth also maintains certain defined contribution plans for most other
employees not covered by the ESOP Plans. BellSouth's contributions were
approximately $15.3, $12.7 and $9.3 in 1994, 1993 and 1992, respectively.
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 either a price equal to the fair market value
on the date of grant or, as a heightened incentive, at a price in excess of the
stock price 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.
Options granted in 1994 become vested only at the end of the five-year vesting
period, as determined from the date of grant. Of the 5,172,962 shares covered by
outstanding options under the plan at December 31, 1994, 352,096 were
accompanied by SARs.
56
<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>
1994 1993 1992
---------------- ---------------- ----------------
<S> <C> <C> <C>
Options outstanding at January 1................................. 3,654,142 3,436,724 3,101,490
Options granted.................................................. 1,762,861 840,302 977,978
Options exercised................................................ (130,498) (569,508) (590,953)
(113,543) (53,376) (51,791)
Options cancelled/forfeited......................................
-------- -------- --------
5,172,962 3,654,142 3,436,724
Options outstanding at December 31...............................
-------- -------- --------
-------- -------- --------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Option prices per common share:
Granted........................................................ $50.69 - $84.43 $50.69 - $62.19 $48.38 - $58.25
Exercised...................................................... $12.99 - $58.25 $22.76 - $58.25 $22.76 - $45.56
Cancelled/forfeited............................................ $32.34 - $84.43 $32.34 - $58.25 $37.38 - $58.25
Outstanding at year-end........................................ $32.34 - $84.43 $12.99 - $62.19 $12.99 - $58.25
Options exercisable at year-end.................................. 2,333,631 1,407,914 1,343,523
Shares available for grant at December 31........................ 5,025,048 5,015,519 4,937,932
</TABLE>
NOTE J -- LEASES
BellSouth has entered into operating leases for facilities and equipment
used in operations. Rental expense under operating leases was $311.3, $300.3 and
$328.9 for 1994, 1993 and 1992, 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, 1994:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Minimum rentals..................... $ 144.7 $ 119.9 $ 101.0 $ 77.6 $ 66.6 $ 547.3 $ 1,057.1
--------- --------- --------- --------- --------- ----------- ----------
--------- --------- --------- --------- --------- ----------- ----------
</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 and reduce costs.
The material components of the charge related to the reduction of the
workforce by 10,200 employees. Through December 31, 1994, cumulative employee
reductions related to the restructuring plan were 5,200, consisting of 1,300 in
1993 and 3,900 in 1994. The components of the charge consisted of provisions of
$368.2 for separation payments and relocations of remaining employees, $342.8
for 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.
At December 31, 1994, the remaining liability associated with the
restructuring plan was $614.7, all of which was current.
57
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE L -- ADDITIONAL INCOME STATEMENT DATA
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Interest Expense:
Long-term debt.............................................................. $ 532.2 $ 577.3 $ 612.9
Short-term notes payable.................................................... 61.9 50.7 61.7
Other....................................................................... 72.0 61.0 71.8
--------- --------- ---------
Total..................................................................... $ 666.1 $ 689.0 $ 746.4
--------- --------- ---------
--------- --------- ---------
Other Income, net:
Interest and dividend income................................................ $ 64.5 $ 42.8 $ 123.6
Earnings (losses) of unconsolidated affiliates.............................. (109.8) 11.0 76.7
Minority interests.......................................................... (80.0) (50.9) (39.3)
Gains (losses) from operations sold, net.................................... 107.6 (10.0) --
Other, net.................................................................. 28.7 14.7 16.6
--------- --------- ---------
Total..................................................................... $ 11.0 $ 7.6 $ 177.6
--------- --------- ---------
--------- --------- ---------
</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.
Revenues from services provided to AT&T Corp., BellSouth's largest customer,
were approximately 11%, 14% and 14% of consolidated operating revenues for 1994,
1993 and 1992, 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.
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 SFAS No.
109. Specifically, BellSouth Telecommunications in 1993 recorded a net
regulatory liability of $538.0 to correspond to the net reduction in deferred
tax liabilities; the reduction resulted from changes in tax rates and from
temporary differences which were previously flowed through. The balance of such
net liability at December 31, 1994, included in Other Liabilities and Deferred
Credits, was $304.0. This net regulatory liability is adjusted as the related
temporary differences reverse.
58
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE M -- INCOME TAXES (CONTINUED)
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Federal:
Current................................................................ $ 1,081.9 $ 1,079.7 $ 918.3
Deferred, net.......................................................... 33.6 (532.0) (85.9)
Investment tax credits, net............................................ (72.6) (88.3) (87.9)
---------- ---------- ----------
1,042.9 459.4 744.5
---------- ---------- ----------
State:
Current................................................................ 180.1 173.9 163.6
Deferred, net.......................................................... 19.9 (61.7) 25.4
---------- ---------- ----------
200.0 112.2 189.0
---------- ---------- ----------
Total provision for income taxes..................................... $ 1,242.9 $ 571.6 $ 933.5
---------- ---------- ----------
---------- ---------- ----------
Amortization of investment tax credits................................... $ 72.6 $ 88.3 $ 88.2
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax
assets and (liabilities) at December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Pensions............................................................................ $ 274.8 $ 240.3
Restructuring charge................................................................ 238.1 419.5
Deferred compensation............................................................... 126.7 112.4
Compensated absences................................................................ 99.7 89.2
Regulatory sharing accruals......................................................... 92.3 21.3
Bad debts........................................................................... 88.6 82.5
Leveraged employee stock ownership plan............................................. 43.3 36.2
Other............................................................................... 159.1 128.1
----------- -----------
1,122.6 1,129.5
Valuation allowance................................................................. (7.3) (13.8)
----------- -----------
Deferred Tax Assets............................................................... 1,115.3 1,115.7
----------- -----------
Depreciation........................................................................ (3,731.1) (3,636.2)
Equity investments.................................................................. (367.1) (376.4)
Franchises.......................................................................... (194.3) (204.3)
Other............................................................................... (237.4) (189.7)
----------- -----------
Deferred Tax Liabilities.......................................................... (4,529.9) (4,406.6)
----------- -----------
Net Deferred Tax Liability...................................................... $ (3,414.6) $ (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, 1994 and 1993, $232.3 and $174.4,
respectively, was current and $(3,646.9) and $(3,465.3), respectively, was
noncurrent.
Prior to 1993, deferred tax expense resulted from timing differences in the
recognition of revenue and expense items for tax and financial reporting
purposes, as follows:
<TABLE>
<CAPTION>
1992
---------
<S> <C>
Property, plant and equipment....................................................................... $ 5.5
Pension benefits.................................................................................... (55.6)
Other timing differences............................................................................ (10.4)
---------
Total........................................................................................... $ (60.5)
---------
---------
</TABLE>
59
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE M -- INCOME TAXES (CONTINUED)
A reconciliation of the Federal statutory income tax rate to BellSouth's
effective tax rate follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Federal statutory tax rate........................................................... 35.0% 35.0% 34.0%
State income taxes, net of Federal income tax benefit................................ 4.0 4.8 4.8
Amortization of investment tax credits............................................... (2.1) (5.5) (3.4)
Miscellaneous items, net............................................................. (0.4) 1.3 0.6
--------- --------- ---------
Effective tax rate............................................................... 36.5% 35.6% 36.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE N -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE
BellSouth adopted, effective January 1, 1993, 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 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. The effect of the change on BellSouth's 1993 operating results was
not material.
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>
1994 1993 1992
---------- ---------- ----------
<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
---------- ---------- ----------
---------- ---------- ----------
Shares Issued to Grantor Trusts.......................................... $ 43.6 $ 292.6 $ --
---------- ---------- ----------
---------- ---------- ----------
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest................................................................. $ 665.4 $ 755.0 $ 738.8
---------- ---------- ----------
---------- ---------- ----------
Income Taxes............................................................. $ 1,375.3 $ 1,145.2 $ 1,053.4
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
60
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share 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>
1994 1993
------------------------ ----------------------
RECORDED ESTIMATED RECORDED ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE SHEET FINANCIAL INSTRUMENTS
Assets (Liabilities):
Cash and cash equivalents......................... $ 606.5 $ 606.5 $ 501.5 $ 501.5
Temporary cash investments........................ 50.8 50.8 49.0 49.0
Bank loans........................................ (45.1) (45.1) (88.7) (88.7)
Commercial paper.................................. (1,838.5) (1,838.5) (1,536.1) (1,536.1)
Long-Term Debt:
BellSouth Telecommunications Debentures......... (4,605.0) (4,176.8) (4,605.0) (4,707.0)
BellSouth Telecommunications Notes.............. (1,875.0) (1,670.0) (1,875.0) (1,901.0)
Guarantee of ESOP Debt.......................... (693.9) (716.8) (734.6) (849.5)
BellSouth Capital Funding Corporation Notes..... (374.5) (362.9) (299.9) (323.6)
Foreign Exchange Forward Contracts:
Contract amount receivable...................... 67.7 67.7 24.4 24.4
Contract amount payable......................... (66.9) (66.9) (23.7) (23.7)
Currency Swap..................................... 11.8 11.8 -- --
OFF BALANCE SHEET FINANCIAL INSTRUMENTS
Interest Rate Swaps:
With unrealized gains........................... -- 1.1 -- --
With unrealized losses.......................... -- (3.4) -- (8.8)
</TABLE>
CASH AND CASH EQUIVALENTS/TEMPORARY CASH INVESTMENTS. At December 31, 1994
and 1993, 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, 1994 and 1993, the recorded amounts for bank loans
and commercial paper approximate fair value due to the short-term nature of the
liabilities. The estimates of fair value for BellSouth Telecommunications
Debentures and Notes are estimated based on the closing market prices for each
issue at December 31, 1994 and 1993, respectively. Fair value estimates for the
Guarantee of ESOP Debt and BellSouth Capital Funding Corporation Notes are based
on quotes from dealers.
OTHER FINANCIAL INSTRUMENTS. BellSouth is party to foreign exchange forward
contracts, currency swap agreements and interest rate swap agreements in its
normal course of business for purposes other than trading. These financial
instruments are used to mitigate foreign currency and interest
61
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE P -- FINANCIAL INSTRUMENTS (CONTINUED)
rate risks, although to some extent they expose the company to market risks and
credit risks. The credit risks associated with these instruments are controlled
through the evaluation and continual monitoring of the creditworthiness of the
counterparties. In the event that a counterparty fails to meet the terms of a
contract or agreement, BellSouth's exposure is limited to the currency rate or
interest rate differential. Such contracts and agreements have been executed
with creditworthy financial institutions. As such, BellSouth considers the risk
of nonperformance to be remote.
FOREIGN EXCHANGE FORWARD CONTRACTS. Foreign exchange forward contracts are
contracts for delivery or purchase of foreign currencies at specified future
dates. The fair values of such contracts are estimated based on quotes from
brokers. BellSouth enters into foreign exchange forward contracts primarily as
hedges relating to identifiable currency exposures. These financial instruments
are designed to minimize exposure and reduce risk from exchange rate
fluctuations in the normal course of business.
Summarized below by major currency are the contractual amounts of
BellSouth's foreign exchange forward contracts in U.S. dollars. Foreign currency
amounts are translated at rates as of December 31, 1994 and 1993, respectively.
The "Buy" amounts represent the U.S. dollar equivalent of commitments to
purchase foreign currencies; the "Sell" amounts represent the U.S. dollar
equivalent of commitments to sell foreign currencies.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1994 1993
-------------------- --------------------
BUY SELL BUY SELL
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
German Mark......................................................... $ -- $ 66.9 $ 3.0 $ --
Australian Dollar................................................... -- -- 20.3 --
Dutch Guilder....................................................... -- -- 1.1 --
--------- --------- --------- ---------
$ -- $ 66.9 $ 24.4 $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
CURRENCY SWAP. Currency swap contracts provide for the exchange of defined
cash flows between two currencies at specified times. The fair value of the
currency swap is estimated based on quotes from brokers. BellSouth entered into
a currency swap in 1994 to hedge European Currency Units (ECU) 125,000,000 debt
issued by Capital Funding. The currency swap matures in February 1999.
At December 31, 1994, the net currency swap receivable was $11.3 and the
related net interest receivable was $0.5, both of which are included in accounts
receivable in the consolidated balance sheet at December 31, 1994. The interest
rate on the ECU debt is 5.25%. The currency swap effectively converts the
interest rate on such ECU debt from 5.25% payable in ECUs to 5.247% payable in
U.S. dollars.
INTEREST RATE SWAPS. Interest rate swap agreements require counterparties
to exchange interest cash flows on a specified amount of debt for a defined
period. The fair values of interest rate swap agreements are estimated based on
quotes from dealers. In order to manage exposure to interest rate changes,
BellSouth enters into interest rate swap agreements to exchange fixed and
variable rate interest payment obligations without the exchange of the
underlying principal amounts. These agreements have been used to adjust interest
on certain fixed and variable rate obligations.
62
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share Amounts)
NOTE P -- FINANCIAL INSTRUMENTS (CONTINUED)
Summarized below are the types of interest rate swaps outstanding and the
related weighted-average interest rates. Such swaps mature in either 1996 or
2002.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
Pay Fixed Rate/Receive Variable Rate
Notional amount.......................................................... $95.4 $60.8
Average rate paid........................................................ 6.97% 5.93 %
Average rate received.................................................... 5.08% 3.52 %
Pay Variable Rate/Receive Fixed Rate
Notional amount.......................................................... $75.0 $ --
Average rate paid........................................................ 5.36% --
Average rate received.................................................... 4.86 % --
</TABLE>
OTHER. BellSouth has also issued letters of credit and financial guarantees
which approximate $157 at December 31, 1994. Since there is no market for the
instruments, it is not practicable to estimate their fair value.
CONCENTRATIONS OF CREDIT RISK. Financial instruments which potentially
subject BellSouth to credit risk consist principally of trade accounts
receivable. Concentrations of credit risk with respect to these receivables are
limited due to the composition of the customer base, which includes a large
number of individuals and businesses. At December 31, 1994, approximately $448
of trade accounts receivable were from interexchange carriers.
63
<PAGE>
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions, Except Per Share 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. The results for fourth quarter 1993
include a restructuring charge of $1,136.4, which reduced net income by $696.6.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
1994
Operating Revenues................................ $ 4,124.3 $ 4,127.9 $ 4,197.7 $ 4,394.6
Operating Income.................................. $ 1,012.2 $ 1,001.6 $ 993.7 $ 1,050.3
Net Income........................................ $ 585.3 $ 516.5 $ 499.5 $ 558.5
Earnings Per Share................................ $ 1.18 $ 1.04 $ 1.01 $ 1.12
<CAPTION>
FIRST
QUARTER
----------
(RESTATED) SECOND THIRD FOURTH
QUARTER QUARTER QUARTER
--------- --------- ---------
<S> <C> <C> <C> <C>
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)
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
64
<PAGE>
SUPPLEMENTARY DATA
BELLSOUTH CORPORATION
DOMESTIC CELLULAR
PROPORTIONATE OPERATING DATA
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The following table sets forth unaudited, supplemental financial data for
BellSouth's domestic cellular 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,
----------------------------
1994 1993
------------- -------------
<S> <C> <C>
Cellular Revenue, net (1)................................................. $ 1,465,090 $ 1,150,288
Operating Expenses........................................................ 833,652 667,027
Depreciation and Amortization............................................. 234,125 201,605
------------- -------------
Total Operating Expenses.............................................. 1,067,777 868,632
------------- -------------
Operating Income.......................................................... 397,313 281,656
Other Expenses, net (including interest and taxes)........................ 164,117 137,867
------------- -------------
Net Income................................................................ $ 233,196 $ 143,789
------------- -------------
------------- -------------
Operating Margins as a Percentage of Revenue:
Including Depreciation and Amortization................................. 27.12% 24.49%
Excluding Depreciation and Amortization................................. 43.10% 42.01%
Operational Comparisons:
Proportionate Cellular Population Served................................ 39,206,000 38,845,000
Proportionate Cellular Customers........................................ 2,155,800 1,559,100
</TABLE>
- ------------------------
(1) Includes equipment revenue, net of cost.
65
<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 23 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 13, 1995 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........................................ 3-7; 31-32
11. Executive Compensation.................................................................... 4; 20-24
12. Security Ownership of Certain Beneficial Owners and Management............................ 7
13. Certain Relationships and Related Transactions............................................ 25
</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........................... 42
Consolidated Statements of Income........................... 43
Consolidated Balance Sheets................................. 44
Consolidated Statements of Shareholders' Equity............. 45
Consolidated Statements of Cash Flows....................... 46
Notes to Consolidated Financial Statements.................. 47-64
</TABLE>
(2) Financial statement schedules 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.
66
<PAGE>
(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 10aa inclusive.
<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. (Exhibit 3b to Form 10-Q for the quarter ended September 30, 1994,
File No. 1-8607).
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. (Exhibit 10c-1 to Form 10-K for the year ended December 31, 1993, File No.
1-8607).
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 as amended and restated on November 28,
1994.
10j BellSouth Corporation Supplemental Executive Retirement Plan as amended and restated on November 28,
1994.
10k BellSouth Management Savings and Employee Stock Ownership Plan as amended and restated effective as of
January 1, 1994.
10l BellSouth Corporation Directors Retirement Plan. (Exhibit 10qq to Form 10-K for the year ended December
31, 1986, File No. 1-8607).
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
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.
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).
10t-2 Amendments dated October 15, 1993 and November 12, 1993 to the BellSouth Personal
Retirement Account Pension Plan. (Exhibit 10t-2 to Form 10-K for the year ended
December 31, 1993, File No. 1-8607).
10t-3 Amendment dated April 22, 1994 to the BellSouth Personal Retirement Account
Pension Plan. (Exhibit 10t-3 to Form 10-Q for the quarter ended June 30, 1994,
File No. 1-8607).
10t-4 Amendment dated December 5, 1994 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). (Exhibit 10y to
Form 10-K for the year ended December 31, 1993, File No. 1-8607).
10z BellSouth Corporation Financial Services Plan. (Exhibit 10z to Form 10-Q for the
quarter ended March 31, 1994, File No. 1-8607).
10aa BellSouth Corporation Nonqualified Deferred Income Plan. (Exhibit 10aa to Form
10-Q for the quarter ended September 30, 1994, File No. 1-8607).
11 Computation of Earnings Per Share.
12 Computation of Ratio of Earnings to Fixed Charges.
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
21 Subsidiaries of BellSouth.
24 Powers of Attorney.
27 Restated Financial Data Schedule.
99a Annual report on Form 11-K for BellSouth Management Savings and Employee Stock
Ownership Plan for the fiscal year ended December 31, 1994 (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, 1994 (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, 1994 (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:
October 20, 1994 -- BellSouth Corporation Third Quarter 1994 Earnings
Release.
January 23, 1995 -- BellSouth Corporation Fourth Quarter 1994 Earnings
Release.
69
<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, CHIEF FINANCIAL
OFFICER
AND COMPTROLLER
March 6, 1995
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 AND
PRINCIPAL ACCOUNTING OFFICER:
Ronald M. Dykes*
VICE PRESIDENT, CHIEF
FINANCIAL OFFICER AND COMPTROLLER
DIRECTORS:
F. Duane Ackerman* Gordon B. Davidson*
Reuben V. Anderson* Phyllis Burke Davis*
James H. Blanchard* John G. Medlin, Jr.*
Andrew F. Brimmer* Robin B. Smith*
J. Hyatt Brown* C. Dixon Spangler, Jr.*
John L. Clendenin* Ronald A. Terry*
Armando M. Codina* Thomas R. Williams*
Marshall M. Criser* J. Tylee Wilson*
*By: /s/ RONALD M. DYKES
--------------------------------------
Ronald M. Dykes
(INDIVIDUALLY AND AS ATTORNEY-IN-FACT)
March 6, 1995
70
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
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 report
dated February 3, 1995, on our audits of the consolidated financial statements
of BellSouth Corporation as of December 31, 1994 and 1993, and for the years
ended December 31, 1994, 1993 and 1992, which report is included in this Annual
Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
March 6, 1995
71
<PAGE>
BELLSOUTH NONQUALIFIED DEFERRED
COMPENSATION PLAN
(As Amended and Restated on November 28, 1994)
<PAGE>
BELLSOUTH NONQUALIFIED DEFERRED COMPENSATION PLAN
BellSouth Corporation ("BellSouth") hereby establishes this first (1st) day of
January, 1985, the BellSouth Nonqualified Deferred Compensation Plan ("Plan")
for certain executive employees and all Nonemployee Directors of BellSouth and
its adopting subsidiaries.
ARTICLE 1
DEFINITIONS
1.1 "Base Salary" means the gross salary paid to executive employees, not
including Nonemployee Directors, plus the amount of any before-tax basic
and supplemental contributions to the BellSouth Management Savings and
Employee Stock Ownership Plan and the amount of any other deferrals from
gross salary under any nonqualified deferred compensation plans which may
be maintained by an Employer from time to time.
1.2 "Board" means the Board of Directors of BellSouth.
1.3 "Code" means the Internal Revenue Code of 1986, as amended.
1.4 "Compensation" means Net Monthly Salary or Net Directors Fees and
Retainers.
1.5 "Compensation Rate" means the cash compensation of an Employee
Participant, including (i) annual Base Salary rate in effect on the date
the Deferral Agreement is executed and (ii) the standard short-term award
amount in effect on the date the Deferral Agreement is executed for an
Employee Participant who is an officer in the executive compensation
group or lump sum payments under incentive compensation programs received
for performance rendered during the calendar year preceding the year in
which the Deferral Agreement is executed for an Employee Participant
other than an officer in the executive compensation group.
1.6 "Deferral Agreement" means an agreement pursuant to which deferral
elections under this Plan are made and includes a standard Fixed Benefit
Agreement for Nonemployee Directors, substantially in the form of Exhibit
A hereto, a standard Fixed Benefit Agreement for Employee Participants,
substantially in the form of Exhibit B hereto, a standard Deferral
Agreement which allows Nonemployee Directors to select between a Fixed
Benefit Agreement and a Stock Unit Agreement, substantially in the form
of Exhibit C hereto; a Deferral Agreement for deferral of certain lump
sum payments by Employee Participants, substantially in the form of
Exhibit D hereto; and includes any modifications to such agreements or
such other agreements as are approved from time to time for use in
connection with this Plan as described in Article 2.
1.7 "Designated Beneficiary" means the beneficiary designated by a
Participant as provided in Section 6.1.
1.8 "Disability" means for an Employee Participant disability as defined in
Section 5.4.
<PAGE>
1.9 "Eligible Person" means an executive employee of an Employer or
Nonemployee Director who is authorized by the Board to participate in
this Plan and is presented a Deferral Agreement for execution.
1.10 "Employee Participant" means an Eligible Person other than a Nonemployee
Director.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974 as
amended.
1.12 Fixed Benefit Agreement" means a Deferral Agreement which provides for a
fixed benefit at Retirement under Section 5.1.
1.13 "Employer" means (i) BellSouth and (ii) any subsidiary of BellSouth, at
least eighty percent (80%) of the capital stock of which is owned by
BellSouth or by one or more subsidiaries of BellSouth if the Board of
Directors of that subsidiary adopts the Plan and if that subsidiary's
adoption of the Plan is approved by the Board or its designee.
1.14 "Interim Distribution" means a distribution specified as an Interim
Distribution in a Deferral Agreement.
1.15 "Net Credited Service" means an Employee Participant's net credited
service as defined in the BellSouth Corporation Personal Retirement
Account Pension Plan, except that it shall include only the portion of an
Employee Participant's net credited service as is attributable to service
with BellSouth, an Employer or any other corporation which is a member of
the same controlled group of corporations, within the meaning of Code
Section 414(b), as BellSouth and any trade or business (whether or not
incorporated) which is under common control with BellSouth, within the
meaning of Code Section 414(c).
1.16 "Net Monthly Salary" or "Net Directors Fees and Retainers" means the
amount of a Participant's Base Salary or Directors Fees and Retainers
which actually is paid to him or her in any month net of all withholding,
allotments, and deductions other than any reduction as a result of
participation in this Plan.
1.17 "Nonemployee Director" means a member of the Board, or a member of the
Board of Directors of any other Employer, who is not concurrently a
common law employee of an Employer.
1.18 "Participant" means an Eligible Person who has executed a Deferral
Agreement which is accepted by an Employer under Article 4.
1.19 "Plan Year" means (i) February 1, 1985, through December 31, 1985, and
(ii) each and every calendar year thereafter.
2
<PAGE>
1.20 "Retirement" means (1) any termination of employment by a Nonemployee
Director and (2) any termination of employment by an Employee Participant
who is eligible for a pension, other than a deferred vested pension,
under the terms and conditions of the BellSouth Personal Retirement
Account Pension Plan, as amended from time to time, or comparable plan
maintained by the Employer employing such Participant. Additionally,
"Retirement" means any termination at employment by an Employee
Participant who has attained age 62 or older and whose Net Credited
Service is ten years or more at the time of employment termination.
1.21 "Retirement Benefit" means a benefit specified as a Retirement Benefit in
a Deferral Agreement.
1.22 "Share" means a share of $1.00 par value common stock of BellSouth.
1.23 "Stock Unit" means a bookkeeping entry representing the equivalent of one
Share credited to a Participant as described in Section 4.5.
1.24 "Stock Unit Agreement" means a Deferral Agreement which provides a
benefit at Retirement under Section 5.1 based upon Stock Units.
ARTICLE 2
TERM; AMENDMENT
This Plan is effective on the date hereof and shall be effective until
terminated by the Board. This Plan currently provides for Plan Years 1985
through 1998 with Plan specifications and applicable interest rates being
approved by the Board for each separate Plan Year. This Plan may be amended,
renewed, restated or extended for additional Plan Years by the Board and the
Board may in its sole discretion, on the basis of financial or other
considerations, not authorize the execution of Deferral Agreements by Eligible
Persons prospectively deferring Compensation for any given Plan Year. The Board
may also establish the maximum number of deferrals for which Eligible Persons
are eligible under this Plan. Notwithstanding the foregoing, no contractual
right created by and under any Deferral Agreement on the date of termination or
amendment shall be abrogated by the termination or amendment of this Plan unless
the Participant who executed such Deferral Agreement consents. Participants
have no other right or interest in the continuance of this Plan in any form.
ARTICLE 3
ADMINISTRATION; INTERPRETATION
The Board shall have the exclusive responsibility and complete discretionary
authority to control the operation and administration of the Plan, with all
powers necessary to properly carry out such responsibility, including without
limitation, the full and exclusive power to (i) interpret the terms and
conditions of this Plan and any Deferral Agreement, including the power to
construe ambiguous or uncertain terms, (ii) to establish reasonable procedures
with which Participants must comply to exercise any right established hereunder
or any contractual right established under the Deferral Agreement, (iii) to
determine status coverage, eligibility for and the amount of benefits, and all
3
<PAGE>
questions arising in correction therewith, (iv) to resolve all questions that
arise in the operation and administration of this plan, and (v) to delegate its
responsibilities or duties hereunder to any person or entity. The rights and
duties of Participants and other persons and entities are subject to, and
governed by, such acts of administration, interpretations, procedures, and
delegations. The Board (or its delegates) shall review all claims for benefits
under the Plan and the Deferral Agreements. Any claim for benefits hereunder
which is denied, in whole or in part, shall be subject to the review and appeals
procedures adopted by BellSouth for executive and senior manager benefits. All
actions or determinations of the Board (or its delegates) under this Article 3
shall be final, conclusive and binding on all persons.
ARTICLE 4
DEFERRAL AGREEMENT
4.1 ELECTION TO DEFER.
(a) As hereinafter provided and subject to acceptance by an Employer,
(i) an Eligible Person may elect to reduce the amount of Compensation
which will be paid to him or her during any Plan Year by executing and
delivering to his or her Employer in a timely fashion a standard Deferral
Agreement substantially in the form of Exhibit A, Exhibit B or Exhibit C
hereto, as presented to such Eligible Person, and (ii) an Employee
Participant may elect to reduce the amount of a lump-sum payment to which
he or she may become entitled in connection with separation under a
severance arrangement approved by the Board as applicable to this Plan by
executing and delivering to his or her Employer in a timely fashion a
Deferral Agreement substantially in the form of Exhibit D hereto, as
presented to such Employee Participant.
(b) The Board shall determine who is an Eligible Person under the
Plan for each Plan Year and the terms and conditions of Deferral
Agreements to be presented to such Eligible Persons, including the
maximum amount of Compensation subject to deferral under Section 4.4, the
interest rate approved for calculating Retirement Benefits for Fixed
Benefit Agreements under Section 4.2, the timing and number of
Retirement Benefit payments under Section 5.1 and of any Interim
Distributions under Section 5.2, and elections available in the case of a
Recalculation Event under Section 6.3. The Board may limit the number of
deferrals by any Eligible Person and may vary the terms and conditions of
Deferral Agreements applicable to Eligible Persons based upon the number
of an Eligible Person's previous deferrals, the classification and/or
Employer of an Eligible Person or for any other reasons. Only
Nonemployee Directors of BellSouth shall be offered Stock Unit Agreements
under the Plan.
4.2 CREATION OF CONTRACTUAL OBLIGATION. An Employer which accepts a properly
executed and timely delivered Deferral Agreement for a Plan Year, as
evidenced by the execution of such Deferral Agreement (including by
facsimile signature) by an officer of such Employer or by an officer of
BellSouth on behalf of such Employer, agrees to pay to the Participant or
to his or her Designated Beneficiary the benefits described in Article 5,
which shall be calculated based upon (i) the amount deferred by each
4
<PAGE>
Participant, (ii) either (A) interest rates established for such
Deferral Agreement by the Board or its delegate and applied to
that amount quarterly for the time which elapses between the Plan
Year and the date of benefit payments, or (B) in the case of Stock
Unit Agreements, share price and dividend performance as described
in Section 4.5, and (iii) other factors established in this Plan
and by the Board or its delegate.
4.3 TIMING OF ELECTION. An Eligible Person may execute and deliver to his or
her Employer a standard Deferral Agreement, substantially in the form of
Exhibit A, B or C hereto, on or before November 30 of any calendar year
(or on or before December 16, 1994 in the case of BellSouth Nonemployee
Director elections for Plan Year 1995), to reduce the Eligible Person's
Compensation only for the next subsequent Plan Year. In addition, an
Employee Participant may execute and deliver to his or her Employer a
Deferral Agreement, substantially in the form of Exhibit D hereto, in
connection with a lump-sum payment described in Section 4.1(b) of this
Plan within the time period prescribed by his or her Employer, but in no
event later than the day preceding the day on which he or she enters into
a separation agreement with the Employer. Notwithstanding any other
provisions of this Plan or any Deferral Agreement, no deferral Agreement
shall be effective to defer Compensation (or other amount) which is
earned by any Eligible Person on or before the date upon which the
Deferral Agreement is properly executed and timely delivered to the
Participant's Employer.
4.4 AMOUNT OF DEFERRAL.
(a) An Employee Participant may elect to defer during any Plan Year a
dollar amount which is less than or equal to a specified percentage of
his or her Compensation Rate applicable to the Plan Year rounded to the
next highest one thousand dollars. The Board shall establish the
specified percentage of the Compensation Rate applicable to each Plan
Year. A Nonemployee Director may elect to defer any dollar amount which
is less than or equal to one hundred percent (100%) of his or her
Compensation during the Plan Year to which the Deferral Agreement
applies. Notwithstanding any provision of any Deferral Agreement or this
Plan to the contrary, the Deferral Agreement of a Participant shall be
modified automatically if necessary such that all actual reductions
pursuant to his or her Deferral Agreement are made from his or her Net
Monthly Salary or his or her Net Directors Fees and Retainers.
(b) An Employee Participant may elect to defer a portion of a lump-sum
payment to which he or she may become entitled as described in Section
4.1(b) in an amount not to exceed (i) a dollar amount which is less than
or equal to the maximum deferral, if any, which such Employee Participant
could elect under paragraph (a) of this Section 4.4 at the time of
election, and (ii) the dollar amount by which any election of deferrals
under paragraph (a) of this Section 4.4 for the Plan Year in which the
Employee Participant terminates employment have not been satisfied at the
time of termination of employment, except as may be otherwise approved by
the Board.
5
<PAGE>
4.5 STOCK UNITS.
(a) Benefits paid to or on behalf of a Participant with respect to a
Stock Unit Agreement for a Plan Year will be based upon the value of the
Stock Units in such Participant's Stock Unit account for such Plan Year
except as otherwise specifically provided in this Plan. An Employer
shall credit Stock Units to such Participant's account during the Plan
Year for which a Stock Unit Agreement is in effect for each date that
Compensation otherwise would be paid to such Participant equal to the
amount of such Compensation elected to be deferred under the Stock Unit
Agreement divided by the average of the high and low sales price of a
Share on the New York Stock Exchange ("NYSE") on such date (or the
immediately preceding trading day if the NYSE is closed on such date.)
An Employer shall further credit to such Participant's Stock Unit account
with respect to such Stock Unit Agreement for each dividend payment date
an amount of additional Stock Units equal to the dividends that would
have been paid on the number of Shares equivalent to the Stock Units in
such account as of such dividend payment date divided by the average of
the daily high and low sales prices of a Share on the New York Stock
Exchange ("NYSE") for the period of five trading days ending on such
dividend payment date (or the period of five trading days immediately
preceding such date if the NYSE is closed on such date).
(b) Payments from a Participant's Stock Unit account for a Stock Unit
Agreement shall be based upon the value of the Stock Units in such
account as of the January 1st, first day of a quarter, or other date as
of which payment is scheduled to be made. In the case of a Stock Unit
Agreement that provides for the payment of a Retirement benefit in
installments, the payment for any such installment shall be based on the
value of the number of Stock Units equal to the total number of Stock
Units in the Participant's Stock Unit account for such Agreement as of
the close of the day for which such installment payment is scheduled to
be made divided by the number of remaining installments on such day
(including the installment scheduled to be paid on such day.) The value
of each Stock Unit for payment purposes shall equal the average of the
high and low sales price of a Share on the NYSE on the date for which the
payment is scheduled to be made (or the next succeeding trading day if
the NYSE is closed on such scheduled payment date.) The number of Stock
Units corresponding to any Retirement Benefit payment will be cancelled
upon such payment as of the scheduled payment date. Furthermore, the
Stock Unit account of a Participant shall be immediately cancelled upon
the scheduled payment date for a lump sum payment under Section 5.3A,
5.4, 5.5 or 6.1 or upon the scheduled payment date for the first
installment of a payment, if applicable, under Section 5.5.
(c) In the event of any change in outstanding Shares by reason of any
stock dividend or split, recapitalization, merger, consolidation, spin-
off, combination or exchange of shares or other similar corporate change,
the Board shall make such adjustment, if any, that it deems appropriate
in the Stock Units credited to Participant's accounts. Any and all
adjustments shall be conclusive and binding upon all parties concerned.
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ARTICLE 5
PAYMENT OF BENEFITS
5.1 RETIREMENT BENEFIT.
(a) If a Participant terminates employment with his or her Employer and
is not immediately reemployed by another Employer and such termination
constitutes a Retirement, then the Employer shall pay to the Participant
the Retirement Benefits stated in each of his or her Deferral Agreements
as soon as administratively practicable after those dates specified for
this purpose in each Deferral Agreement. The Employer also shall make
any such Retirement Benefit payment to a Participant who has remained
employed with the Employer (or with another Employer) through the date
specified for such payment in his or her Deferral Agreement. The number
of Retirement Benefit payments and the date upon which Retirement Benefit
payments begin shall be established for each Plan Year by the Board or
its delegate and stated in the Deferral Agreement executed by the
Participant for each Plan Year.
(b) If a Participant or becomes a proprietor, officer, partner, or
employee of, or otherwise is or becomes affiliated with (i) any business
that is in competition with any Employer or (ii) any government agency
having regulatory jurisdiction over the business activities of any
Employer, then, upon that date, no further benefit payments shall be made
to the Participant, or any other person with respect to the Participant's
participation in this Plan, under any provision or Section of this Plan,
except that, the Participant shall be paid in a lump sum as soon as
administratively practicable after the first (1st) day of January
following that date an amount with respect to each of the Participant's
Deferral Agreements equal to (i) the amount deferred pursuant to such
Deferral Agreement, (ii) plus interest on such amount (adjusted to be
take into account all payments described in (iii) immediately below)
credited separately at a rate equal to the rate paid on ten (10) year
United States Treasury obligations on each date for which interest is
credited, compounded quarterly, for each Plan Year between the Plan Year
to which the Deferral Agreement applies and the Plan Year in which the
act occurs or status is first attained, inclusive, (iii) minus the amount
of all Interim Distributions and Retirement Benefits, if any, paid to the
Participant or to which the Participant is entitled on or before the date
the act occurs or status is first attained with respect to such Deferral
Agreement; provided that (x), if the above calculation results in a
negative amount, the result shall be deemed to be zero and such negative
amount shall not be collected from, or enforced against, the Participant
as a claim by his or her Employer, and (y) the amount paid with respect
to a Deferral Agreement that is a Stock Unit Agreement will be the value
of such Participant's Stock Unit account for such Deferral Agreement as
determined under Section 4.5(b) for such January 1st scheduled payment
date if such value is less than the amount otherwise determined by
applying (i), (ii) and (iii) immediately above to such Deferral
Agreement.
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5.2 INTERIM DISTRIBUTIONS. A Participant shall be paid the Interim
Distributions stated in each of his or her Deferral Agreements as soon as
administratively practicable after those dates stated in that Deferral
Agreement. However, no Interim Distribution shall be stated in a
Deferral Agreement or paid to any Participant as a result of the Deferral
Agreement if the Participant is age fifty-five (55) or older on any day
during the Plan Year to which the Deferral Agreement applies. No Interim
Distribution shall be paid to a Participant on or after the date upon
which the Participant or his or her Designated Beneficiary receives any
benefit or payment under any other Section of this Plan or any paragraph
of his or her Deferral Agreement providing benefits other than Interim
Distributions. Notwithstanding the foregoing, with respect to any Plan
Year or selected deferrals in any Plan Year, the Board may specify
alternative Interim Distribution schedules. No Interim Distribution
shall be paid in connection with any Stock Unit Agreement or any Fixed
Benefit Agreement which does not specifically provide for such benefits.
5.3 PRE-RETIREMENT, PRE-DISABILITY ELIGIBILITY DEATH BENEFIT FOR PLAN YEAR
1985. Regarding deferrals for Plan Year 1985, if a Participant dies on
or before the date upon which he or she is first entitled to receive a
benefit under Section 5.1 or Section 5.4, then his or her Designated
Beneficiary shall be paid in a lump sum as soon as administratively
practicable after the first (1st) day of January following his or her
date of death an amount equal to: (i) the amount of Compensation
deferred pursuant to his or her Deferral Agreement for Plan Year 1985,
(ii) plus interest on such amount (adjusted to take into account all
payments described in (iii) immediately below) credited separately at the
rate approved for and applicable to his or her participation for Plan
Year 1985, such rate to be compounded quarterly for each Plan Year
between Plan Year 1985 and the Plan Year in which his or her death
occurs, inclusive, (iii) minus the amount of all Interim Distributions
with respect to such Deferral Agreement, if any, paid to the Participant
or to which the Participant is entitled on or before the date of his or
her death. If the above calculation results in a negative amount, the
result shall be deemed to be zero and such negative amount shall not be
collected from, or enforced against the Participant as a claim by his or
Participant's Employer.
If the Participant's Designated Beneficiary receives or is entitled to
receive a benefit hereunder, then no person or persons shall receive or
be entitled to receive any benefit or payment with respect to such
Participant's deferral for Plan Year 1985 under any other Section of this
Plan or under any Deferral Agreement, notwithstanding any other provision
of this Plan or any Deferral Agreement.
5.3A PRE-RETIREMENT ELIGIBILITY DEATH BENEFIT FOR PLAN YEARS AFTER 1985.
Regarding deferrals for any Plan Year after 1985, if an Employee
Participant dies before the date upon which he or she would have been
eligible for Retirement (assuming a termination of employment), then his
or her Designated Beneficiary shall be paid in a lump sum as soon as
administratively practicable after the first (1st) day of January
following his or her date of death an amount with respect to each of the
Participant's Deferral Agreements for Plan Years after 1985 equal to (i)
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the amount deferred pursuant to such Deferral Agreement, (ii) plus
interest on such amount (adjusted to take into account all payments
described in (iii) immediately below) credited separately at the rate
approved for and applicable to his or her participation for the Plan Year
for such Deferral Agreement, such rate to be compounded quarterly for
each Plan Year between the Plan Year to which the Deferral Agreement
applies and the Plan Year in which his or her death occurs, inclusive,
(iii) minus the amount of all Interim Distributions and Retirement
Benefits, if any, paid to the Participant or to which the Participant is
entitled on or before the date of his or her death with respect to such
Deferral Agreement; provided, that if the above calculation results in a
negative amount, such result shall be deemed to be zero and such negative
amount shall not be collected from, or enforced against, the Participant
as a claim by his or her Employer.
If a Nonemployee Director dies, or if an Employee Participant dies on or
after the date upon which he or she is eligible for Retirement, whether
or not he or she has in fact terminated employment, and in either case if
such death occurs prior to the Participant having commenced receipt of
benefits or prior to have received all benefits, as the case may be,
payable in accordance with a Deferral Agreement under this Plan for Plan
Year after 1985, except as provided under Section 5.4, then his or her
Designated Beneficiary shall receive all benefits, or continue to receive
the remaining benefits, as the case may be, in accordance with that
Deferral Agreement; provided, however, that each Participant shall have
the right to elect, or to revoke any such election or make a new
election, at any time prior to his or her death, to have the death
benefit described in this sentence paid to his or her Designated
Beneficiary in a lump sum as soon as administratively practicable after
the first day of January following the year in which the Participant
died. A lump sum payment made pursuant to an election by a Participant
in accordance with the preceding sentence shall be in an amount with
respect to each of the Participant's Deferral Agreements for Plan Years
after 1985 equal to: (i) the amount deferred pursuant to such Deferral
Agreement, (ii) plus interest on such amount (adjusted to take into
account all payments described in (iii) immediately below) credited
separately at the rate approved for and applicable to his or her
participation for the Plan Year for such Deferral Agreement, such rate to
be compounded quarterly for each Plan Year between the Plan Year to which
the Deferral Agreement applies and the Plan Year in which his or her
death occurs, inclusive, (iii) minus the amount of all Interim
Distributions and Retirement Benefits, if any, paid to the Participant or
to which the Participant is entitled on or before the date of his or her
death with respect to such Deferral Agreement; provided that (x), if the
above calculation results in a negative amount, such result shall be
deemed to be zero and such negative amount shall not be collected from,
or enforced against, the estate of the Participant as a claim by the
Participant's Employer, and (y) the amount paid with respect to a
Deferral Agreement that is a Stock Unit Agreement will be the value of
the Participant's Stock Unit account for such Deferral Agreement as
determined under Section 4.5(b) for such January 1st scheduled payment
date instead of the amount determined by applying (i), (ii) and (iii)
immediately above to such Deferral Agreement.
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If the Participant's Designated Beneficiary receives or is entitled to
receive a benefit hereunder, then no person or persons shall receive or
be entitled to receive any benefit or payment with respect to such
Participant's deferral for Plan Years after 1985 under any other Section
of this Plan or under any Deferral Agreement, notwithstanding any other
provision of this Plan or any Deferral Agreement.
5.4 PRE-RETIREMENT ELIGIBILITY DISABILITY BENEFIT. If an Employee
Participant suffers a Disability or becomes Disabled, as those terms are
defined in the BellSouth Executive Long Term Disability and Survivor
Protection Plan and the BellSouth Long Term Disability Plan for Salaried
Employees, as amended from time to time before the date upon which he or
she would have been eligible for Retirement (assuming a termination of
employment), then he or she shall be paid by the Employer in a lump sum
as soon as administratively practicable after the first (1st) day of
January following the Plan Year in which the disability occurs an amount
with respect to each of the Participant's Deferral Agreements equal to
(i) the amount deferred pursuant to such Deferral Agreement, (ii) plus
interest on each amount (adjusted to take into account all payments
described in (iii) immediately below) credited separately at the rate
approved for and applicable to his or her participation for the Plan Year
for such Deferral Agreement, such rate to be compounded quarterly for
each Plan Year between the Plan Year to which the Deferral Agreement
applies and the Plan Year in which his or her Disability occurs,
inclusive, (iii) minus the amount of all Interim Distributions and
Retirement Benefits, if any, paid to the Participant or to which the
Participant is entitled on or before the date of onset of Disability with
respect to such Deferral Agreement; provided that if the above
calculation results in a negative amount, such result shall be deemed to
be zero and such negative amount shall not be collected from, or enforced
against, the Participant as a claim by his or her Employer. If the
Participant receives or is entitled to receive a benefit hereunder, then
no person or persons shall receive or be entitled to receive any benefit
or payment under any other Section of this Plan or under any Deferral
Agreement, notwithstanding any other provisions of this Plan or any
Deferral Agreement.
5.5 TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT OR DISABILITY. If an
Employee Participant terminates employment with his or her Employer, and
is not immediately reemployed by another Employer, prior to Death,
Disability or Retirement, then a benefit amount shall be paid to the
Participant, either in lump sum or in five (5) annual installments, at
the election of the Board, as soon as administratively practicable after
the first (1st) day of January following his or her date of termination
(and anniversaries thereof in case of installments), which amount with
respect to each of the Participant's Deferral Agreements shall be equal
to (i) the amount deferred pursuant to such Deferral Agreement, (ii) plus
interest on such amount (adjusted to take into account all payments
described in (iii) immediately below) credited separately at a rate equal
to the rate on ten (10) year United States Treasury obligations on each
date for which interest is to be credited, compounded quarterly, for each
Plan Year between the Plan Year to which the Deferral Agreement applies
and the Plan Year in which the termination occurs, inclusive, (iii) minus
the amount of all Interim Distributions and Retirement Benefits, if any,
paid to the
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Participant or to which the Participant is entitled on or before the date
of his or her termination with respect to such Deferral Agreement;
provided that if the above calculation results in a negative amount, such
result shall be deemed to be zero and such negative amount shall not be
collected from, nor enforced against, the Participant as a claim by his
or her Employer. If the Participant receives or is entitled to receive a
benefit hereunder, then no person or persons shall then or thereafter
receive any benefit or payment under any other Section of this Plan or
any Deferral Agreement, notwithstanding any other provision of this Plan
or any Deferral Agreement.
ARTICLE 6
MISCELLANEOUS
6.1 BENEFICIARY DESIGNATION. If a Participant dies and, on the date of his
or her death, any benefit or benefits remain to be paid to the
Participant under the terms and conditions of this Plan, the remaining
benefit or benefits shall be paid to that person or persons designated by
the Participant ("Designated Beneficiary") on the form provided from time
to time to the Participant by his or her Employer in accordance with the
Deferral Agreement. If the Designated Beneficiary dies prior to
completion of all payments under the Deferral Agreement, the estate of
the Designated Beneficiary shall be paid by the Employer a lump sum with
respect to each of the Participant's Deferral Agreements for Plan Years
after 1985 as soon as administratively practicable after the first (1st)
day of January following the year in which the Designated Beneficiary
died. The amount of the lump sum with respect to each such Deferral
Agreement will be equal to (i) the amount deferred pursuant such Deferral
Agreement, (ii) plus interest on each amount (adjusted to take into
account all payments described in (iii) immediately below) credited
separately at the rate approved for and applicable to the Participant's
participation for the Plan Year for which he or she executed such
Deferral Agreement, such rate to be compounded quarterly for each Plan
Year between the Plan Year to which the Deferral Agreement applies and
the Plan Year in which the Designated Beneficiary's death occurs,
inclusive, (iii) minus the amount of all Interim Distributions and
Retirement Benefits, if any, paid to the Participant or Designated
Beneficiary with respect to such Deferral Agreement; provided that (x),
if the above calculation results in a negative amount, such result shall
be deemed to be zero and such negative amount shall not be collected
from, or enforced against, the estate of the Designated Beneficiary, and
(y) the amount paid with respect to a Deferral Agreement that is a Stock
Unit Agreement will be the value of the Participant's Stock Unit account
for such Deferral Agreement as determined under Section 4.5(b) for such
January 1st scheduled payment date instead of the amount otherwise
determined by applying (i), (ii) and (iii) immediately above to such
Deferral Agreement. If no Designated Beneficiary has been chosen by the
Participant or if the Designated Beneficiary is not living on the date of
the Participant's death, the estate of the Participant shall be paid by
the Employer in a lump sum with respect to each of the Participant's
Deferral Agreements for Plan Years after 1985 as soon as administratively
practicable after the first (1st) day of January following the year in
which the Participant died. The
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amount of the lump sum shall be determined in the manner described in the
immediately preceding sentence of this Section 6.1. In the case of a
Deferral Agreement for Plan Year 1985, any Plan benefit payable following
the death of the Participant will be paid to the estate of the
Participant if no Designated Beneficiary is in existence on the scheduled
payment date.
6.2 OBLIGATIONS OF EMPLOYERS NOT THE OBLIGATIONS OF BELLSOUTH. The duties
and obligations of each Employer hereunder are several but not joint,
each Employer is only liable to its own employees and Nonemployee
Directors who are Participants hereunder, and BellSouth is not liable for
the actions, omissions, duties or obligations of any other Employer
hereunder.
6.3 RECALCULATION EVENTS; TREATMENT OF THIS PLAN UNDER APPLICABLE FEDERAL
INCOME TAX LAWS. The adoption and maintenance of the Plan is strictly
conditioned upon (i) the applicability of Code Section 451(a) to the
Participant's recognition of gross income as a result of his or her
participation, (ii) the fact that Participants will not recognize gross
income as a result of participation in this Plan until and to the extent
that benefits are received, (iii) the applicability of Code Section
404(a)(5) to the deductibility of the amounts paid to Participants
hereunder, (iv) the fact that an Employer will not receive a deduction
for amounts credited to any accounting reserve created as a result of
this Plan until and only to the extent that benefits are paid, and (v)
the inapplicability of Parts 2, 3, and 4 of Title I of ERISA to this Plan
by reason of the exemptions set forth in ERISA Sections 29(a), 39(a) and
49(a) and Part 1 of ERISA by reason of the exemption set forth in Section
252c.104-23 at applicable United States Department of Labor resolutions.
If the Internal Revenue Service, the Department of Labor or any court
determines or finds as a fact or legal conclusion that any of the above
conditions is untrue and issues or intends to issue an assessment,
determination, opinion or report stating such, or if the opinion of the
legal counsel of BellSouth based upon legal authorities then existing is
that any of the above assumptions is incorrect, then, if the Board so
elects within one year of such finding, determination, or opinion, a
Recalculation Event shall be deemed to have occurred.
If a Recalculation Event occurs under this or any other section of this
Plan, then each Participant who has not attained the age of fifty-five
(55) years on the date on which the Board takes official action to elect
the occurrence of a Recalculation Event shall thereafter be paid benefits
in accordance with the election made irrevocably in connection therewith
in his or her Fixed Benefit Agreements. For each such Participant the
amount of the Retirement Benefit under each Fixed Benefit Agreement shall
be recalculated and restated using a rate of interest equal to the rate
of interest on ten (10) year United States Treasury obligations on each
date upon which interest should have been or will be calculated,
compounded quarterly, instead of the interest rate assumed in originally
calculating the benefit, as referenced in Section 4.2.
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Notwithstanding anything to the contrary contained in this Plan or a
Deferral Agreement, the benefits payable with respect to any Participant
who shall have either (i) attained the age of fifty-five (55) years, or
(ii) died, on or prior to the date on which the Board takes official
action to elect the occurrence of a Recalculation Event under either
Sections 6.3 or 6.4 of this Plan, shall not be recalculated and restated
in the manner described above or in any other way affected by such
action. If the Participant or Designated Beneficiary receives or is
entitled to receive a benefit under this Section 6.3 under a Deferral
Agreement as a result of the occurrence of a Recalculation Event, then no
person or persons shall receive or be entitled to receive any benefit or
payment under that Deferral Agreement under any other Section of this
Plan or that Deferral Agreement, notwithstanding any other provision of
this Plan or the Deferral Agreement.
6.4 CHANGES IN THE INTERNAL REVENUE CODE OF 1954. The adoption and
maintenance of this Plan also is strictly conditioned upon the existence
and continuation of the percentage tax rates for corporations stated in
Code Section 11(b) of the Internal Revenue Code of 1954, as amended
through August 13, 1981 but not thereafter (the "1954 Code"). In
particular, the adoption and maintenance of this Plan is strictly
conditioned upon the rate of tax stated in Section 11(b)(5) of the 1954
Code, that is, "46 percent of so much of the taxable income as exceeds
$100,000." If (1) 1954 Code Section 11(b) is deleted or amended or a
surtax or other addition to tax is imposed hereafter and, as a result
thereof, the rate of federal income tax imposed on taxable income of
corporations in excess of One Hundred Thousand Dollars ($100,000) is
reduced below such rate in effect immediately before reduction and is
less than forty percent (40%), (2) a tax is imposed by the federal
government on income, sales, consumption, or the value of goods and
services which is not currently contained in the Code, or (3) the Code is
amended or restated so extensively that in the opinion of the legal
counsel of BellSouth the tax treatment of this Plan to the Employer has
materially changed to the detriment of the Employer, then, if the Board
so elects within one year after the enactment of the legislation causing
such event, a Recalculation Event shall be deemed to have occurred and a
benefit will be payable only as described in Section 6.3.
6.5 GOVERNING LAW. This Plan and the Deferral Agreements shall be construed
in accordance with the laws of the State of Georgia to the content such
laws are not preempted by ERISA.
6.6 SUCCESSORS, MERGERS, CONSOLIDATIONS. The terms and conditions of this
Plan and each Deferral Agreement shall inure to the benefit of and bind
BellSouth, the other Employers, the Participants, their successors,
assigns, and personal representatives. If substantially all of the
assets of any Employer are acquired by another corporation or entity or
if an Employer is merged into, or consolidated with, another corporation
or entity, then the obligations created hereunder and as a result of the
Employer's acceptance of Deferral Agreements shall be obligations of the
successor corporations or entity.
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6.7 DISCHARGE OF EMPLOYER'S OBLIGATION. The payment by the Employer of the
benefits due under each and every Deferral Agreement to the Participant
or to the person or persons specified in Section 6.1 or Section 6.1A
discharges the Employer's obligations hereunder, and the Participant has
no further rights under this Plan or the Deferral Agreements upon receipt
by the appropriate person of all benefits.
In addition, (i) if any payment is made to a Participant or his or her
Designated Beneficiary with respect to benefits described in this Plan
from any source arranged by the Employer including, without limitation,
any fund, trust, insurance arrangement, bond, security device, or any
similar arrangement, such payment shall be deemed to be in full and
complete satisfaction of the obligation of the Employer under this Plan
and the Deferral Agreements to the extent of such payment as if such
payment had been made directly by the Employer; and (ii) if any payment
from a source described in clause (i) above shall be made, in whole or in
part, prior to the time payment would be made under the terms of this
Plan and the Deferral Agreement, such payment shall be deemed to satisfy
the Employer's obligation to pay Plan benefits beginning with the benefit
which would next become payable under the Plan and the Deferral Agreement
and continuing in the order in which benefits are so payable, until the
payment from such other source is fully recovered. In determining the
benefits satisfied by a payment described in clause (ii), Plan benefits,
as they become payable, shall be discounted to their value as of the date
such actual payment was made using an interest rate equal to the
valuation interest rate for deferred annuities as last published by the
Pension Benefit Guaranty Corporation prior to the date of such actual
payment. If the benefits which actually become payable under this Plan,
after applying the discount described in the preceding sentence, are less
than the amount of the payment(s) described in clause (ii), any such
shortfall shall not be collected from or enforced against the Participant
as a claim by the Employer.
6.8 SOCIAL SECURITY AND INCOME TAX WITHHOLDING. Each Participant agrees as a
condition of participation hereunder that his or her Employer may
withhold federal, state, and local income taxes and Social Security taxes
from any distribution or benefit paid hereunder.
6.9 NOTICE; DELIVERY OF DEFERRAL AGREEMENT. Any notice required to be
delivered hereunder and any Deferral Agreement is properly delivered to
Employer when personally delivered to, or actually received from the
United States mail, postage prepaid, by Executive Compensation Matters
Group, Room 13J08, BellSouth Corporation, 1155 Peachtree St., N.E.,
Atlanta, Georgia 30309-3610.
6.10 NATURE OF OBLIGATIONS CREATED HEREUNDER. The Participants agree as a
condition of participation hereunder that:
(a) Participants have the status of general, unsecured creditors of the
Employer and the Plan, and the Deferral Agreements constitute the mere
promise by the Employer to make benefit payments in the future;
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(b) Nothing contained in this Plan or any Deferral Agreement shall
create or be construed to create a trust of any kind between
BellSouth, any Employer, and any Participant.
(c) Benefits payable, and rights to benefits under, this Plan and
Deferral Agreements may not be anticipated, sold, assigned (either at law
or in equity), transferred, pledged, encumbered or subject to attachment,
garnishment, levy, execution or other legal or equitable process.
The Plan is intended to be unfunded for purposes of ERISA and the Code.
6.11 NO MODIFICATION OF EMPLOYMENT AGREEMENT. Neither this Plan nor any
Deferral Agreement constitutes a modification of the employment agreement
of any Participant, and no right to continued employment is created by
this Plan or the Deferral Agreement.
6.12 LIABILITY OF EMPLOYERS FOR INDIVIDUAL PARTICIPANTS EMPLOYED BY MORE THAN
ONE EMPLOYER; APPLICABILITY OF DEFERRAL AGREEMENT FILED WITH ONE EMPLOYER
TO SUBSEQUENT EMPLOYERS. Any Deferral Agreement which is timely executed
and delivered to an Employer shall be effective to defer Compensation
earned by the Participant from that Employer or any other Employer during
the period in which the Deferral Agreement is effective. The execution
and delivery of a Deferral Agreement by a Participant constitutes an
election by the Participant to defer Compensation earned from any
Employer under the terms of this Plan. A Participant who timely executes
and delivers a Deferral Agreement to one Employer and who subsequently
transfers to another Employer or otherwise terminates employment and
becomes employed by another Employer shall have the Compensation which is
paid to him or her by both Employers reduced under the terms of the
Deferral Agreement and this Plan as if the transfer or termination and
reemployment had not occurred. The Employer which accepts an executed,
timely delivered Deferral Agreement is liable to the Participant for all
benefits which may be payable under, and as a result of, that Deferral
Agreement notwithstanding the transfer of a Participant to or from
another Employer, or the termination and reemployment of a Participant by
another Employer. If a Participant timely executes and delivers Deferral
Agreements to more than one Employer, each Employer is singly and not
jointly liable for the Deferral Agreement or Deferral Agreements which it
accepted. Any provision of this Plan which refers to a benefit or
payment which is payable as a result of more than one (1) Deferral
Agreement shall be construed to apply only to the Deferral Agreements
delivered by that Participant and accepted by each separate Employer of
that Participant, and not to all Deferral Agreements executed and timely
delivered by one Participant or all Participants to all Employers, each
Deferral Agreement which incorporates the terms of this constituting a
separate contractual obligation of a single Employer.
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EXHIBIT A
Page 1 of 2
DEFERRAL AGREEMENT
FOR THE BELLSOUTH NONQUALIFIED DEFERRED COMPENSATION PLAN
(for Nonemployee Directors)
1. AMOUNT OF DEFERRAL. I, _________________________________________________
(___-__-___), hereby agree to participate in the BellSouth Nonqualified Deferred
Compensation Plan ("Plan"). I have read the Plan in its entirety and agree to
its terms and conditions, which are incorporated herein by reference. Pursuant
to the terms of the Plan, I elect to defer from my compensation to be paid to me
in Plan Year 19__ ___% of my compensation. (Choose amount less than or equal to
100% of Compensation.) I understand that the Compensation which ordinarily would
be paid to me in that Plan Year will be reduced by the amount of my deferral and
that such reduction will be made only from my retainer and fees as a director.
I further understand that the amount of directors' fees which will be paid to me
depends on the full performance of my obligations as a director for the entire
year and that the total amount of directors' fees paid to me during the year
will be decreased from the amount normally paid to directors if I fail to attend
any scheduled meetings of the Board of Directors or the committees upon which I
serve.
2. RETIREMENT BENEFITS. In consideration for my deferral, the Employer shall
pay to me the following benefits determined in accordance with the terms and
conditions of the Plan:
3. INTERIM DISTRIBUTIONS. In consideration for my deferral, the Employer shall
pay to me the following benefits on the dates specified, if I am entitled to
these benefits under the terms and conditions of the Plan:
4. RECALCULATION EVENT. If a Recalculation Event applicable to me occurs, the
Employer shall pay to me benefits in an amount determined in accordance with the
terms and conditions of paragraph 6.3 of the Plan paid in accordance with the
terms elected below. The undistributed balance of the recalculated amount will
continue to accumulate at the reduced rate specified in paragraph 6.3 of the
Plan.
/ / Recalculated amount paid in a lump sum on the first day of
the year following the date of the Recalculation Event.
/ / Recalculated amount paid in four annual payments beginning on the
first day of the year following the date of the Recalculation Event.
/ / Recalculated amount paid in same number of payments beginning on the
same date as specified in paragraph 2 of this Agreement.
5. This election is irrevocable after November 30 immediately preceding the
Plan Year to which this Agreement pertains.
<PAGE>
Page 2 of 2
6. PRIMACY OF PLAN. I recognize that I am entitled to benefits hereunder
and that this Agreement is subject to the terms and conditions of the Plan.
/ / I decline to participate in Plan Year 19__.
_________________________________ _______________________________________
Director Signature Employer Signature
_________________________________ _______________________________________
Date Date
<PAGE>
EXHIBIT B
Page 1 of 2
DEFERRAL AGREEMENT
FOR THE BELLSOUTH NONQUALIFIED DEFERRED COMPENSATION PLAN
(for officers and selected executive employees)
1. AMOUNT OF DEFERRAL. I, ________________________________, hereby agree to
participate in the BellSouth Nonqualified Deferred Compensation Plan ("Plan").
I have read the Plan in its entirety and agree to its terms and conditions,
which are incorporated herein by reference. Pursuant to the terms of the Plan,
I elect to defer from my compensation to be paid to me in Plan Year 19__ the sum
of ________Dollars. (Choose amount less than or equal to 35% of Compensation
Rate rounded to the next higher thousand dollars). I understand that my
Compensation which ordinarily would be paid to me in that Plan Year will be
reduced by the amount of my deferral, and that such reduction will be made only
from my gross monthly salary, not from my bonus or incentive award which may be
payable to me.
2. RETIREMENT BENEFITS. In consideration for my deferral, the Employer shall
pay to me the following benefits on the dates specified, if I am entitled to
these benefits under the terms and conditions of the Plan:
3. INTERIM DISTRIBUTIONS. In consideration for my deferral, the Employer shall
pay to me the following benefits on the dates specified, if I am entitled to
these benefits under the terms and conditions of the Plan:
4. RECALCULATION EVENT. If a Recalculation Event applicable to me occurs, the
Employer shall pay to me benefits in an amount determined in accordance with the
terms and conditions of paragraph 6.3 of the Plan paid in accordance with the
terms elected below. The undistributed balance of the recalculated amount will
continue to accumulate at the reduced rate specified in paragraph 6.3 of the
Plan.
/ / Recalculated amount paid in a lump sum on the first day of the
year following the date of the Recalculation Event.
/ / Recalculated amount paid in four annual payments beginning on the
first day of the year following the date of the Recalculation
Event.
/ / Recalculated amount paid in same number of payments beginning on
the same date as specified in paragraph 2 of this Agreement.
5. This election is irrevocable after November 30 immediately preceding the
Plan Year to which this Agreement pertains.
<PAGE>
Page 2 of 2
6. PRIMACY OF PLAN. I recognize that I am entitled to benefits hereunder
and that this Agreement is subject to the terms and conditions of the Plan.
/ / I decline to participate in Plan Year 19__.
_________________________________ _______________________________________
Employee Signature Employer Signature
_________________________________ _______________________________________
Date Date
<PAGE>
BELLSOUTH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AS AMENDED AND RESTATED NOVEMBER 28, 1994)
<PAGE>
BELLSOUTH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
SECTION 1. STATEMENT OF PURPOSE . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Active Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ADEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BellSouth Corporation; Company . . . . . . . . . . . . . . . . . . . . . . . . 1
Chairman of the Board; President; Board of Directors; Board. . . . . . . . . . 1
Claim Review Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Former Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Included Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Interchange Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Interchange Company Committee. . . . . . . . . . . . . . . . . . . . . . . . . 2
Lump Sum Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Mandatory Retirement Age . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Net Credited Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participating Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Participating Company Claim Review Committee . . . . . . . . . . . . . . . . . 2
Participating Company Committee. . . . . . . . . . . . . . . . . . . . . . . . 2
Pension Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Pension Commencement Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Predecessor Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Short Term Incentive Award . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Standard Annual Incentive Award. . . . . . . . . . . . . . . . . . . . . . . . 3
Standard Short Term Incentive Award; Standard Award. . . . . . . . . . . . . . 3
Vesting Service Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4. BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Mandatory Retirement Age . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Service Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Deferred Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Disability Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Benefit Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Computation of Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(i)
<PAGE>
Benefit Formula. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Special Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Included Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Alternative VEER Benefit Formula . . . . . . . . . . . . . . . . . . . . . . . 9
Minimum Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Early Retirement Discount. . . . . . . . . . . . . . . . . . . . . . . . . . .10
Deferred Benefit Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Automatic Survivor Annuity . . . . . . . . . . . . . . . . . . . . . . . . . .11
Minimum Survivor Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Special Increases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Monthly Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Duration of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Treatment During Subsequent Employment . . . . . . . . . . . . . . . . . . . .13
SECTION 5. DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . .13
Eligibility and Administration . . . . . . . . . . . . . . . . . . . . . . . .13
Source of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 6. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . .14
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Rights to Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Involuntary Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Assignment or Alienation . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Determination of Eligibility . . . . . . . . . . . . . . . . . . . . . . . . .15
Option During Disability . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Break in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Leaves of Absence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Special Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Method of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Amounts Accrued Prior to Death . . . . . . . . . . . . . . . . . . . . . . . .16
Payments to Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Claims Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Damage Claims or Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Judgment or Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Payment Under Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Plan Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 7. INTERCHANGE OF BENEFIT OBLIGATION. . . . . . . . . . . . . . . .17
SECTION 8. PLAN MODIFICATION. . . . . . . . . . . . . . . . . . . . . . . .18
(ii)
<PAGE>
BELLSOUTH CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SECTION 1. STATEMENT OF PURPOSE
The purpose of the BellSouth Corporation Supplemental Executive Retirement Plan
is to provide supplementary pension payments, commencing January 1, 1984, to
Executives and certain other employees of BellSouth Corporation and certain
subsidiaries of BellSouth Corporation, hereinafter referred to as Participants,
who retire or terminate from service, or in the event of death, to their
annuitant. These pension and death benefits are predicated on a percent of the
Participant's Included Earnings, offset by retirement benefits payable from the
Pension Plan and actual Primary Social Security benefits.
SECTION 2. DEFINITIONS
1. The term "ACTIVE SERVICE" shall mean active employment but includes any
time the Participant was absent on account of disability and receiving
sickness or accident disability benefits under his or her Company's or any
Participating Company's Sickness and Accident Disability Plan.
2. The term "ADEA" shall mean the Age Discrimination in Employment Act of
1967, as amended from time to time.
3. The word "AFFILIATE" shall mean any corporation, other than BellSouth
Corporation (or a Participating Company), which is a member of the same
controlled group of corporations (within the meaning of Code Section
414(b)) as BellSouth Corporation and any trade or business (whether or not
incorporated) which is under common control with BellSouth Corporation
within the meaning of Code Section 414(c).
4. The words "BELLSOUTH CORPORATION" and "COMPANY" shall mean BellSouth
Corporation, a Georgia corporation, or its successors.
5. The words "CHAIRMAN OF THE BOARD", "PRESIDENT" and "BOARD OF DIRECTORS" or
"BOARD" shall mean the Chairman of the Board of Directors, President and
Board of Directors, respectively, of the Company.
6. The term "CLAIM REVIEW COMMITTEE" shall have the same meaning as is
attributed to such term under the Pension Plan.
7. The word "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
8. The word "COMMITTEE" shall mean the Employees' Benefit Committee appointed
by the Company to administer the Pension Plan.
9. The term "EXECUTIVE" shall mean an employee on the active roll of any
Participating Company on or after January 1, 1984 who holds a position that
a Participating Company's Board of Directors has designated to be within
that company's executive compensation group.
<PAGE>
10. The term "FORMER AFFILIATE" shall have the same meaning as is attributed to
such term under the Pension Plan.
11. The term "INCLUDED EARNINGS" shall have the meaning ascribed to such term
in Section 4.4(a)(ii) of this Plan.
12. The term "INTERCHANGE COMPANY" shall have the same meaning as is attributed
to such term under the Pension Plan.
13. The term "INTERCHANGE COMPANY COMMITTEE" shall mean the Employees' Benefit
Committee appointed by the Interchange Company to administer the
Interchange Company Management Pension Plan.
14. The term "LUMP SUM PAYMENTS" shall mean those lump sum payments and other
special payments paid annually to a Participant other than an Executive
which are included in the calculation of pension benefits under the Pension
Plan.
15. The term "MANDATORY RETIREMENT AGE" shall have the same meaning as is #
attributed to such term under the Pension Plan. #
16. The term "NET CREDITED SERVICE", except as expressly limited or %
otherwise provided in this Plan, shall have the same meaning as is |
attributed to such term under the Pension Plan and shall be interpreted %
in the same manner as that term is interpreted for purposes of the Pension
Plan.
17. The term "PARTICIPANTS" shall mean all Executives as defined herein, as
well as all other employees designated by the Chief Executive Officer of *
BellSouth Corporation or his or her delegated representative. *
18. The term "PARTICIPATING COMPANY" shall mean BellSouth Corporation, and each
subsidiary of BellSouth Corporation which shall have determined with the
concurrence of the Committee to participate in the Plan.
19. The term "PARTICIPATING COMPANY CLAIM REVIEW COMMITTEE" shall mean a
committee appointed by a Participating Company, other than BellSouth
Corporation, having the powers and authorities of the Claim Review
Committee with respect to Participants from such Participating Company.
20. The term "PARTICIPATING COMPANY COMMITTEE" shall mean the Employees'
Benefit Committee appointed by each Participating Company, other than
BellSouth Corporation, to administer the Pension Plan in such Participating
Company in accordance with the provisions of Section 3.
*Text Revised 04/11/86
#Text Revised 08/12/88
%Text Added 11/28/94
2
<PAGE>
21. The words "PENSION ACT" shall mean the Employee Retirement Income Security
Act of 1974 (ERISA) as it may be amended from time to time.
22. The term "PENSION COMMENCEMENT DATE" shall have the same meaning as is *
attributed to such term under the Pension Plan. *
23. The term "PENSION PLAN" shall mean the BellSouth Personal Retirement
Account Pension Plan.
24. The word "PLAN" shall mean this BellSouth Corporation Supplemental
Executive Retirement Plan.
25. The term "PREDECESSOR PLAN" shall mean the Bell System Senior Management
Non Qualified Pension Plan as such Plan existed prior to January 1, 1984.
26. The term "SHORT TERM INCENTIVE AWARD" shall mean the award made annually to
an Executive pursuant to his or her company's Short Term Incentive Plan or
comparable or successor plan.
27. The term "STANDARD ANNUAL INCENTIVE AWARD" shall mean an amount determined
periodically for each Participant (other than an Executive) upon which an
actual annual team award, or award under a comparable or successor program,
is based.
28. The terms "STANDARD SHORT TERM INCENTIVE AWARD" and "STANDARD AWARD" shall
mean an amount determined periodically for each Executive upon which an
actual Short Term Incentive Award is based.
29. The term "VESTING SERVICE CREDIT", except as expressly limited or *
otherwise provided in this Plan, shall have the same meaning as is |
attributed to such term under the Pension Plan and shall be interpreted *
in the same manner as that term is interpreted for purposes of the
Pension Plan.
30. The use in this Plan of personal pronouns of the masculine gender is
intended to include both the masculine and feminine genders.
SECTION 3. ADMINISTRATION
1. The Company shall be the Plan Administrator and the Plan Sponsor of the
Plan as those terms are defined in the Pension Act. The Company may
allocate all or any part of its responsibilities for the operation and
administration of the Plan, except to the extent expressly prohibited by
the Plan's terms, including allocation of all or any part of its
responsibilities to Participating Companies, Participating Company
Committees or Participating Company Claim Review Committees. The Company
may designate in writing other persons to carry out its responsibilities
under the Plan, and may employ persons to advise it with regard to such
responsibilities. The Company, acting through the Committee, the Claim
Review Committee, a Participating Company, a Participating Company
Committee, a Participating Company Claim Review Committee or any other
*Text Added 11/28/94
3
<PAGE>
person designated by the Company, as applicable, shall have the exclusive
responsibility and complete discretionary authority to interpret the terms
of the Plan (including the power to construe ambiguous or uncertain terms),
to control the operation and administration of the Plan and to resolve all
questions in connection therewith, with all powers necessary to enable it
to properly carry out such responsibilities, including without limitation
the powers and responsibilities set forth in this Section 3, and its
determinations shall be final, conclusive and binding on all persons.
2. (a) The procedures for the adoption of by-laws, and rules of procedure,
for the employment of a Secretary and assistants, and for the
appointment of Participating Company Committees with authority with
respect to claims of employees, both within the Company and the
Participating Companies, shall be the same as are set forth in the
Pension Plan.
(b) The Committee and each Participating Company Committee shall have the
power to determine status, coverage, eligibility for and the amount of
benefits under the Plan and all questions arising in connection
therewith, to grant or deny claims for benefits under the Plan with
respect to employees of each Participating Company, respectively, and
shall have the power to authorize disbursements according to this
Plan. Adequate notice, pursuant to applicable law and prescribed
Participating Company practices, shall be provided in writing to any
Participant or beneficiary whose claim has been denied, setting forth
the specific reasons for such denial.
3. The review and appeal procedures for Participants and beneficiaries whose
claims have been denied shall be the procedures set forth in the summary
plan description for Pension Plan and shall be administered and interpreted
in accordance with Section 503 of the Pension Act and procedures in effect
under the Pension Plan.
4. The expenses of the Committee in administering the Plan shall be borne by
the Company and the expenses of each Participating Company Committee shall
be borne by the related Participating Company.
5. The Company, the Committee, each Participating Company and each
Participating Company Committee are each a named fiduciary as that term is
used in the Pension Act with respect to the particular duties and
responsibilities herein provided to be allocated to each of them.
6. Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.
SECTION 4. BENEFITS
1. PARTICIPATION
All persons included in the definition of the term "Participants" are deemed
participants in this Plan. In addition, each individual who has participated in
this Plan but who has ceased to be included in the definition of "Participants",
whether due to demotion, termination or otherwise, shall continue to be a
Participant in this Plan, except for purposes of accruing additional benefits
4
<PAGE>
under Section 4.4, and shall be entitled to a benefit under this Plan if, at the
time such individual ceased to be included in the definition of "Participants",
he or she had satisfied the service requirements for a deferred vested pension
under the Pension Plan. Each such individual shall receive a benefit under the
terms of the Plan as in effect immediately prior to the effective date of such
demotion, termination or other event, the amount of such benefit to be
calculated as if the individual retired (or otherwise terminated employment) on
such date, it being the Company's intent that any such demotion, termination or
other event removing individuals from the definition of "Participants" shall not
adversely affect entitlement to such benefits.
2. MANDATORY RETIREMENT AGE
Each Participant, whether or not eligible for benefits under this Plan, shall
cease to be eligible for continued employment no later than the last day of the
month in which such Participant attains the Mandatory Retirement Age.
3. ELIGIBILITY
(a) SERVICE BENEFIT
An individual who is both a Participant in this Plan and who
is eligible for a service pension pursuant to the terms of
the Pension Plan at the time of employment termination is
eligible for a service benefit pursuant to this Plan, which
shall commence immediately following his or her retirement. *
Additionally, each Participant who has attained age 62 or |
older and whose Net Credited Service is ten years or more |
at the time of employment termination is eligible for a |
service benefit under this Plan. For purposes of the |
preceding sentence, "Net Credited Service" shall include |
only the portion of a Participant's Net Credited Service |
as is attributable to service with the Company, a |
Participating Company, or other Affiliates. *
Each Participant, other than an Executive, whose #
employment terminates between October 1, 1992 and |
December 31, 1995, inclusive, is also eligible for |
a service benefit under this Plan, if at the time of |
employment termination (A) plus (B) equals or exceeds |
sixty-five (65), where (A) is the Participant's attained |
age as of his or her most recent birthday and (B) is the |
number of full years of the Participant's Net Credited |
Service. #
(b) DEFERRED BENEFIT
(i) Except as otherwise specified in Paragraph 7 of this
Section 4, any individual not described in Paragraph
3(a) of this Section 4 who is a Participant in this
Plan at the time of voluntary employment termination is
eligible for a deferred vested pension pursuant to this
Plan, provided he is eligible for a deferred vested
pension pursuant to the Pension Plan.
*Text Added 05/25/90
#Text Added 10/01/92
5
<PAGE>
(ii) A Participant who leaves the service of a Participating
Company and who has elected to have his or her deferred
vested pension payable early in reduced amounts,
pursuant to the terms and conditions of the Pension
Plan, shall be deemed to have elected to have his or
her deferred benefit under this Plan payable early in
reduced amounts under the same terms and conditions.
In the event of such an election, the amount of
deferred benefit otherwise payable at Mandatory
Retirement Age under this Plan to such person shall be
reduced in accordance with the same formula set forth
in the Pension Plan for the discounting of the deferred
vested pension.
(iii) The Committee or Participating Company Committee, as
appropriate, shall notify each Participant who leaves the
employ of such Participating Company (except to take
employment without a break in service with another
Participating Company, Affiliate or Interchange Company) of
his or her eligibility, if any, for a deferred benefit by
mailing, within a reasonable time after his or her leaving,
a notice to his or her last known address as shown on the
Participating Company's records.
(iv) When an eligible individual has filed a written request
for a deferred vested pension pursuant to the requirements
of the Pension Plan, he shall be deemed to have filed a
request for the deferred benefit for which he may be
eligible hereunder.
(c) DISABILITY PENSION
An individual who while a Participant in this Plan has become
eligible for a disability pension pursuant to the terms of the
Pension Plan shall be eligible for a disability pension hereunder,
calculated as follows: the amount is determined in accordance with
Paragraph 4 of this Section 4 calculated to one year after date of
disability (pro-rata if less than 20 years of service) with no
reduction factor. Should the disability pension be discontinued
pursuant to the terms of the Pension Plan, the disability pension
hereunder shall be discontinued as well.
4. BENEFIT AMOUNTS
(a) COMPUTATION OF BENEFIT
(i) (A) BENEFIT FORMULA:
The aggregate annual benefit of each Participant *
payable as provided in the Plan shall be determined by |
adding the sum of two percent (2%) of Included |
Earnings for each year of the Participant's Vesting |
Service Credit for the first twenty years, plus one |
and one-half percent (1.5%) of Included Earnings for |
each year of the Participant's Vesting Service Credit |
for the next ten years, plus one percent (1%) of |
Included Earnings for each year of the Participant's |
of Vesting Service Credit for each additional year up |
to the month in which *
*Text Revised 9/23/91
6
<PAGE>
the Participant retires LESS (1) 100% of the retirement
benefit (unreduced for survivor annuity) payable from
the Pension Plan and (2) 100% of the Primary Social
Security benefit payable at age 65. There is no #
reduction in the amount of this benefit in connection
with electing a post-retirement survivor annuity
under the Pension Plan. *
(B) SPECIAL RULES
(1) In the case of each Participant who elects under #
the terms of the Pension Plan to receive his retirement |
benefit under the Pension Plan in the form of a |
single lump sum payment, the benefit reduction to be |
applied pursuant to Section 4.4(a)(i)(A)(1) above for |
the retirement benefit payable from the Pension Plan |
shall be the total amount of the retirement benefit |
(unreduced for survivor annuity) which would have been |
payable to such individual from the Pension Plan had |
such election not been made. #
(2) In the case of each Participant who is eligible %
for a service pension under the Pension Plan, the |
benefit reduction to be applied pursuant to Section |
4.4(a)(i)(A)(1) above for the retirement benefit |
payable from the Pension Plan shall be the amount of |
such benefit payable at such Participant's Pension |
Commencement Date and shall first be applied at such |
Pension Commencement Date. |
(3) In the case of each Participant who is not |
eligible for a service pension under the Pension Plan, |
the benefit reduction to be applied pursuant to Section |
4.4(a)(i)(A)(1) above for the retirement benefit |
payable from the Pension Plan shall be the amount of |
the deferred vested pension payable from the Pension |
Plan at age 65 and shall first be applied in the month |
commencing on or next following his or her sixty-fifth |
birthday (regardless of the Participant's actual |
Pension Commencement Date under the Pension Plan). %
(4) In the case of any Executive (i) who has attained *
the age of sixty-two (62) (or more) or who is deceased, |
(ii) who was previously employed by a Former Affiliate, |
(iii) who serves or has served as an officer (as such |
term is used in the employment practices and policies |
of the relevant company) of BellSouth Corporation or an |
Affiliate, and (iv) whose service with a Former |
Affiliate is disregarded in determining the Executive's |
Vesting Service Credit under the Pension Plan, for |
purposes of this Section 4.4(a), the Executive's |
Vesting Service Credit shall be increased by |
(x) the Executive's Vesting Service Credit with the|
Former Affiliate(s) (determined under the rules of |
the Pension Plan as if the Executive had been |
employed by BellSouth Corporation during such |
period and had no other service covered under the |
Pension Plan), MULTIPLIED by |
(y) a fraction, the numerator of which is the |
number of whole years (not to (not to exceed ten |
(10) of such Executive's Net Credited Service as |
an officer of BellSouth Corporation or an |
Affiliate and the denominator of which is ten (10).|
#Text Revised 5/24/91
*Text Added 9/23/91
%Text Revised 11/28/94
7
<PAGE>
Notwithstanding the foregoing, no Executive's Vesting |
Service Credit, for purposes of this Section 4.4(a), |
shall be increased for service with a Former Affiliate |
to the extent that any such service would otherwise be |
considered, directly or indirectly, in determining such |
Executive's benefits under this Plan by virtue of the |
terms of any other agreement, plan or arrangement. *
(5) In the case of any Participant whose Vesting %
Service Credit includes a period of service with an |
employer with respect to which the Participant is |
entitled to any retirement benefit payable from defined |
benefit pension plan(s) (including qualified plans and |
nonqualified plans such as excess benefit and |
supplemental executive retirement plans), including any |
Executive whose Vesting Service Credit under this Plan |
is increased pursuant to Section 4.4(a)(i)(B)(4) |
preceding, the benefit reduction described in Section |
4.4(a)(i)(A)(1) above for the retirement benefit |
payable from the Pension Plan shall include any such |
retirement benefit payable by such employer. The |
determination of the benefit reduction for any such |
benefit shall be made using approaches which approximate|
as nearly as practicable the approaches used in making |
such determinations with respect to benefits payable |
under the Pension Plan, as described above in this |
Section 4.4(a)(i). In the case of any Executive |
whose Vesting Service Credit under this Plan is |
increased pursuant to %
paragraph (B)(4) of Section 4.4(a)(i), the benefit
payable by such employer shall first be multiplied by
the fraction described in that paragraph and the product
thereof shall be the amount of the benefit reduction.
(ii) INCLUDED EARNINGS
Included Earnings shall equal the 12 month average of the
sum of (1) the last sixty months of base pay, plus (2) the
Short Term Incentive Awards and Lump Sum Payments received
during or after that sixty month period. In the calculation
of benefits as of December 31, 1990 in accordance with the #
BellSouth Corporation Voluntary Enhanced Early Retirement |
Program, Included Earnings for a Participant other than an |
Executive shall include the standard MTIA amount for |
which the Participant was eligible in 1990. #
The amounts of base pay and other payments used to determine
Included Earnings as described above include all amounts
during the specified period including those amounts
previously deferred pursuant to other plans.
If a Participant terminates employment eligible for a
benefit under this Plan and %
thereafter receives compensation of the types described |
in clause (ii)(2) of this Section 4.4(a), his or her |
benefit shall be increased to reflect the additional |
Included Earnings effective as of the date such additional |
compensation is paid. %
* Text Added 9/23/91
#Text Added 12/1/90
%Text Added 11/28/94
8
<PAGE>
(iii) ALTERNATIVE VEER BENEFIT FORMULA #
(1) In accordance with the BellSouth Corporation Voluntary |
Enhanced Early Retirement Program (VEER) effective |
December 1, 1990, in the case of each Participant who, on |
December 31, 1990, was a regular, full-time employee, |
actively at work (or on a departmental leave not exceeding |
thirty days), having five or more years of service (as |
such term was defined in the Pension Plan at that time), |
the benefit determined under the benefit formula described |
in Paragraph 4(a)(i) of this Section 4, prior to reduction |
for the retirement benefit payable from the Pension Plan |
and the Primary Social Security Benefit, shall be the |
greater of (A) and (B), where: #
(A) is such benefit calculated as of December 31, #
1990 (i) adding five years to the Participant's age |
and Vesting Service Credit and (ii) if the Participant |
has a term of employment of thirty or more years as of |
such date (excluding the years added in (a)(i) above), |
disregarding any otherwise applicable age discounts; |
and |
(B) is such benefit calculated without giving effect |
to the terms of clause (A). |
(2) For purposes of calculating a Participant's benefit |
under this Plan as of December 31, 1990 under clause (A) |
of Paragraph 4(a)(iii)(1) above: |
(A) the five years added under clause (A)(i) of |
Paragraph (4)(a)(iii)(1) shall not be counted in |
determining a Participant's eligibility for a service |
benefit under Section 4.3(a) of this Plan; |
(B) the five years of age added under clause (A)(i) of |
Paragraph (4)(a)(iii)(1) shall be counted in applying |
the early retirement discount rules described in |
Paragraph (4)(c) of this Section 4, with respect to |
each Participant who is eligible for a service pension |
under the Pension Plan on December 31, 1990; |
(C) if the Participant becomes eligible for a service |
pension under the Pension Plan during the five year |
period beginning on January 1, 1991, and retires after |
becoming service pension eligible, the early retirement |
discount rules described in Paragraph 4(c) of this |
Section 4, applicable to Participants retiring eligible |
for a service benefit in 1990, shall apply (on the |
basis of the Participant's age on December 31, 1990, |
counting the five years of age added under clause (A) |
(i) of Paragraph 4(a)(iii)(1)); and |
(D) the reduction in the benefit under Section |
4(a)(i)(A) for the retirement benefit payable from the |
Pension Plan shall be an amount equal to the greater of |
(i) 100% of the retirement benefit (unreduced for |
survivor annuity) actually payable from the Pension |
Plan, and (ii) 100% of the retirement benefit |
(unreduced for survivor annuity) which would be |
payable from the Pension Plan if the additional years |
of age and service in the Pension Plan amendments |
made in connection with VEER were applicable to the |
alternative pension benefit formula under the Pension |
Plan (described on pages 14 and 15 of the summary plan |
description for the Pension Plan dated June 1990) |
taking into account all rules applicable to that |
formula under the Pension Plan. |
#Text Added 12/1/90
9
<PAGE>
(3) A Participant who is on a rotational assignment with |
Bellcore on December 31, 1990, but who is otherwise |
eligible to have his or her pension calculated in |
accordance with this Section shall have his or her pension |
so calculated if he returns to regular, full-time, active |
employment immediately following such rotational |
assignment. #
(b) MINIMUM BENEFIT
In no event shall a Participant, whose Vesting Service
Credit has been five years or more, who terminates
employment on or after his or her sixty-second birthday, or
who is retired on a service or disability pension under the
Pension Plan, receive a total annual retirement benefit from
the Company of less than 15% of the employee's annual base
salary plus Standard Award for Executives or Standard Annual
Incentive Award for other Participants in effect on the
employee's last day on the active payroll.
(c) EARLY RETIREMENT DISCOUNT
The service benefit allowance, determined in accordance with
the provisions of this Paragraph 4, for each Participant who
is granted a service benefit for reasons other than total
disability as a result of sickness or injury, shall be
reduced as follows: *
The pension benefit shall be reduced by one-half percent |
(0.5%) for each calendar month or part thereof by which the|
employee's Pension Effective Date precedes his or her 56th |
birthday, except that each employee retired with thirty |
(30) or more years of service shall receive a pension |
benefit reduced by one-quarter percent (0.25%) for each |
calendar month or part thereof by which such employee's |
Pension Effective Date precedes his or her 56th birthday. *
The age before which an employee's pension benefit is
reduced as provided above due to early retirement shall be
increased from age 56 as specified above to the age in the
right column as of the date in the left column of the
following schedule:
<TABLE>
<S> <S>
JANUARY 1 OF RETIREMENT PRIOR TO AGE
<C> <C>
1991 57
1994 58
1997 59
2000 60
2003 61
2006 62
</TABLE>
Provided, however, that each employee who retires prior
to his or her birthday during a transition year in the
above table shall be deemed to have reached his or her
birthday as of January 1 of such year for the purpose
of calculating his or her pension discount only.
# Text Added 12/1/90
* Text Revised 5/1/89
10
<PAGE>
(d) DEFERRED BENEFIT AMOUNT
The benefit allowance for each Participant eligible for a
deferred benefit under the provisions of Paragraph 3(b) of
this Section 4 shall be calculated exclusively in accordance
with the provisions specified as applicable to those
receiving a benefit under Paragraph 3(a) or 3(c) of this
Section 4 effective as of the date such Participant leaves
the service of a Participating Company other than for
reasons of transfer to another Participating Company,
Affiliate or an Interchange Company, or the date which is
the last day of the month in which he reaches the Mandatory
Retirement Age, whichever is earlier, and, in any case, as
if such Participant had retired on such date and, except as
provided in Section 4.4(a)(ii), no recomputation of the
benefit shall be made after such date or as a result of
amendments made to this Plan subsequent to such date.
(e) AUTOMATIC SURVIVOR ANNUITY
In the event of the death of an active Participant who at
the time of death was eligible for a deferred benefit under
this Plan and who leaves a surviving spouse, such surviving
spouse shall automatically receive a survivor annuity for
life in the amount of 50% of the Participant's net benefit
under this Plan, after offsets, which would have been
payable had such Participant retired with a service benefit,
regardless of his or her actual eligibility therefor, on the
date of his or her death. For purposes of the automatic
survivor annuity provided in this Paragraph 4(e), the early
retirement discount in Paragraph 4(c) shall not apply. If
an Executive Participant dies *
prior to retirement, has a surviving spouse, and does not |
meet the service eligibility requirements for the automatic|
survivor annuity under this Plan, the death benefit as |
specified under Section 5, Paragraph 1 of this Plan will be|
increased to include an amount equal to twice the |
Participant's annual base salary at the time of death. *
In the case of a pensioner or former employee, who at the
time of his or her death leaves a surviving spouse, such
surviving spouse shall automatically receive a survivor
annuity for life in the amount of 50% of the net retirement
benefit received by such Participant under this Plan, after
offsets.
(f) MINIMUM SURVIVOR BENEFIT
In no event shall the surviving spouse of a Participant,
entitled to a minimum retirement benefit or disability
allowance under the long term disability plan which applies
to such Participant, receive a total benefit from the
Company of less than 15% of the deceased Participant's
annual base salary plus Standard Award for Executives or
Standard Annual Incentive Award for other Participants in
effect on the employee's last day on the active payroll.
*Text Added 04/11/86
11
<PAGE>
(g) SPECIAL INCREASES
Service and disability benefit payments, as determined *
under this Paragraph 4(a) and (b) of this Section 4, of *
retired Participants shall be *
increased by the same percentage and pursuant to the same
terms and conditions as are set forth in the Pension
Plan.
5. MONTHLY PAYMENTS
Benefits shall normally be paid in monthly disbursements or at such other
periods as the Committee or a Participating Company Committee as applicable, may
determine in each case. Notwithstanding the foregoing, if at the time of *
employment termination, the present value of the benefit of a Participant, |
whether payable as a service benefit, a deferred benefit, or a survivor's |
benefit, is less than $20,000, such benefit shall be paid in the form of a |
single lump sum payment which is the actuarial equivalent of the benefit |
otherwise payable. Present value and the amount of each lump sum payment *
shall be determined using (i) an interest rate based on the Pension Benefit
Guaranty Corporation interest rate for valuing a participant's vested benefit
in a trusteed single employer plan applicable on the first day of the plan year
in which the distribution is or would be made and (ii) mortality rates equal to
the unisex rates published in the Unisex Pension Mortality Table - 1984
(UP-1984).
6. DURATION OF PAYMENTS
Except for the reasons specified below, benefits granted under this Plan shall
commence on the day following the date of retirement, either at the Mandatory
Retirement Age, or at such other time as is herein provided for payment of a
deferred benefit or disability benefit, and shall continue to the death of the
retiree.
*Text Added 10/01/92
12
<PAGE>
7. TREATMENT DURING SUBSEQUENT EMPLOYMENT
Where a Participant's period of service includes service in more than one
Participating Company or in a company that is not a Participating Company, the
last Participating Company to employ him or her immediately prior to his or her
retirement or termination of employment with entitlement to a benefit hereunder
shall be responsible for the full benefit under this Plan. Employment with any
Participating Company, Affiliate, or with Bellcore, pursuant to a
BellSouth/Bellcore Interchange Agreement, for which a Participant is an eligible
employee, subsequent to retirement or termination of employment with entitlement
to any type of benefits described heretofore shall result in the permanent
suspension of the benefit for the period of such employment or reemployment.
SECTION 5. DEATH BENEFITS
1. ELIGIBILITY AND ADMINISTRATION
All Participants shall be eligible for death benefits under this Plan. Death %
benefits described herein are in addition to death benefits payable under the |
Pension Plan but shall be subject to the same terms and conditions of, and |
administered in the same manner as, corresponding death benefit provisions of |
the Pension Plan. For an Executive, the benefit equals the annual base salary |
plus two times the Standard Award. The above stated amounts of base salary and%
Standard Award are those amounts in effect at the earlier of retirement or death
including those amounts previously deferred pursuant to other plans. For all
other Participants, the benefit equals the Standard Annual Incentive Award in
effect at the earlier of retirement or death. In addition, the death benefit
for all Participants will include the amount of death benefit, if any, that
would otherwise have been payable under the Pension Plan had there been no
deferral of compensation under any plan of the Company. The benefit amount *
will also include the amount of death benefit, if any, that would otherwise |
have been payable under the Pension Plan had the restriction on the amount of |
compensation that may be taken into account under Code Section 401(a)(17) not |
been applicable. If a Participant is eligible for a service benefit |
under this Plan but is not eligible for a service pension under the Pension |
Plan, the death benefit under this Plan will include the amount of death *
benefit that would have been payable under the Pension Plan had the Participant
been eligible for a service pension thereunder.
2. SOURCE OF PAYMENTS
All death benefits payable pursuant to this Section 5 of the Plan shall be paid
from Company or Participating Company's operating expenses, or through the
purchase of insurance from an Insurance Company as the Company may determine.
* Test Added 09/01/88
% Text Revised 11/28/94
13
<PAGE>
SECTION 6. GENERAL PROVISIONS
1. EFFECTIVE DATE
This Plan is effective January 1, 1984.
2. RIGHTS TO BENEFIT
There is no right to any benefit under this Plan except as may be provided by
the Company or each Participating Company. Participants have the status of
general, unsecured creditors of the Participating Company and the Plan
constitutes a mere promise by the Participating Company to make benefit payments
in the future. A Participant shall have only a contractual right to receive the
benefits provided for hereunder if and when he complies with all of the
conditions set forth herein. Nothing contained in this Plan and no action taken
pursuant to the provisions of this Plan shall create or be construed to create a
trust of any kind. The Plan is intended to be "unfunded" for purposes of the
Pension Act and the Code.
If any payment is made to a Participant, his or her surviving spouse or other #
beneficiary with respect to benefits described in this Plan from any source |
arranged by the Company or a Participating Company including, without |
limitation, any fund, trust, insurance arrangement, bond, security device, or |
any similar arrangement, such payment shall be deemed to be in full and |
complete satisfaction of the obligation of the Company or Participating |
Company under this Plan to the extent of such payment as if such payment had |
been made directly by the Company or Participating Company; and (ii) if any |
payment from a source described in clause (i) above shall be made, in whole or |
in part, prior to the time payment would be made under the terms of this |
Plan, such payment shall be deemed to satisfy the obligation of the Company or |
Participating Company to pay Plan benefits beginning with the benefit which |
would next become payable under the Plan and continuing in the order in which |
benefits are so payable, until the payment from such other source is fully |
recovered. In determining the benefits satisfied by a payment described in |
clause (ii), Plan benefits, as they become payable, shall be discounted to |
their value as of the date such actual payment was made using an interest rate |
equal to the valuation interest rate for deferred annuities as last published |
by the Pension Benefit Guaranty Corporation prior to the date of such actual |
payment. If the benefits which actually become payable under this Plan, after |
applying the discount described in the preceding sentence, are less than the |
amount of the payment described in clause (ii), any such shortfall shall not |
be collected from or enforced against the Participant as a claim by the Company|
or Participating Company. #
3. INVOLUNTARY TERMINATION
In the event that a Participant's employment is terminated involuntarily prior
to his or her becoming eligible for a deferred benefit under this Plan, other
than for cause, such Participant shall nevertheless be entitled to a deferred
benefit hereunder, based upon the Participant's Vesting Service Credit at his or
her date of termination.
# Text Added 5/25/90
14
<PAGE>
4. GOVERNING LAW
The Company intends that this Plan be an unfunded deferred compensation plan
maintained primarily for a select group of management and highly compensated
employees exempt from Parts 2, 3 and 4 of Title I of the Pension Act by reason
of the exemptions set forth in Sections 201(a), 301(a) and 401(a) of the Pension
Act and from Part 1 of the Pension Act by reason of the exemption set forth in
Section 2520.104-23 of applicable United States Department of Labor regulations.
This Plan shall be interpreted and administered accordingly. This Plan shall be
construed in accordance with the laws of the State of Georgia to the extent such
laws are not preempted by the Pension Act.
5. ASSIGNMENT OR ALIENATION
Benefits payable, and rights to benefits, under this Plan may not in any manner
be anticipated, sold, transferred, assigned (either at law or in equity),
alienated, pledged, encumbered or subject to attachment, garnishment, levy,
execution or other legal or equitable process.
6. Nothing contained in this Plan shall be construed as conferring upon a
Participant the right to continue in the employ of the Company.
7. DETERMINATION OF ELIGIBILITY
In all questions relating to age and service for eligibility for any benefit
hereunder, or relating to a Participant's period of service and rates of pay for
determining benefits, any decision of the Claim Review Committee or a
Participating Company Claim Review Committee, as applicable, based upon this
Plan and upon the records of the Participating Company last employing such
individual shall be final, conclusive and binding on all persons.
8. OPTION DURING DISABILITY
If a Participant who has left the service of a Participating Company has elected
to continue receiving disability benefits which he had been receiving prior to
his or her termination and to defer receiving pension payments under the Pension
Plan to which he is eligible, benefits under this Plan shall be deferred until
such time as the Participant begins to receive payments under the Pension Plan.
9. BREAK IN SERVICE
For purposes of this Plan, a break in service shall be defined and treated in
the same manner as is set forth in the Pension Plan.
10. LEAVES OF ABSENCE
For purposes of this Plan, a leave of absence shall be defined and administered
in the same manner as is set forth in the Pension Plan.
*Text Deleted 6/22/92
15
<PAGE>
11. SPECIAL CLASSIFICATION
For purposes of this Plan, the determination of those causes of death not
classed as due to accident shall be accomplished in the same manner as is set
forth in the Pension Plan.
12. METHOD OF PAYMENT
Payments under this Plan shall be made in the same manner as is set forth under
the Pension Plan.
13. AMOUNTS ACCRUED PRIOR TO DEATH
Benefit amounts accrued but not actually paid at the time of death of a former
employee or pensioner shall be paid in accordance with the standards and
procedures set forth in the Pension Plan.
14. PAYMENTS TO OTHERS
Benefits payable to a former employee or retiree unable to execute a proper
receipt may be paid to other person(s) in accordance with the standards and
procedures set forth in the Pension Plan.
15. CLAIMS RELEASE
In case of accident resulting in the death of a Participant which entitles his
or her beneficiaries or his or her annuitants to benefits under this Plan, such
beneficiaries or annuitants shall, prior to the payment of any such benefits,
sign a release, releasing the Company or other Participating Companies,
Affiliates or Interchange Companies, as applicable, from all claims and demands
which the Participant had, and his or her beneficiaries or his or her annuitant
may have against them, otherwise than under this Plan, on account of such
accident. If any persons, other than the beneficiaries under this Plan might
legally assert claims against a Participating Company, Affiliate or Interchange
Company on account of the death of the Participant, no part of the death benefit
under this Plan shall be due or payable until there have also been delivered to
the Committee or Participating Company Committee, the Affiliate or Interchange
Company Committee, as applicable, good and sufficient releases of all claims,
arising from or growing out of the death of the Participant, which such other
persons might legally assert against any Participating Company, Affiliate or
Interchange Company. The Committee or Participating Company Committee, as
applicable, in its discretion, may require that the releases above described
shall release any other company, connected with the accident, including the
Company or any other Participating Company, Affiliate or Interchange Company, as
applicable. This requirement of a release shall not apply in the case of
survivor annuities under Section 4 of the Plan.
16. DAMAGE CLAIMS OR SUITS
Should a claim, other than under the Plan, be presented or suit brought against
the Company or any Participating Company, Affiliate or Interchange Company for
damages on account of the death of a Participant, nothing shall be payable under
the Plan on account of such death except as provided in Paragraph 15 of this
Section 6; provided, however, that the Committee, Participating Committee, or
the Affiliate, as applicable, 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, and provided further that this provision shall not preclude the
payment of survivor annuities under Section 4.
16
<PAGE>
17. JUDGMENT OR SETTLEMENT
In case any judgment is recovered against any Participating Company, Affiliate
or Interchange Company or any settlement is made of any claim or suit on account
of the death of a Participant, and the amount paid to the beneficiaries who
would have received benefits under the Plan is less than what would otherwise
have been payable under the Plan, the difference between the two amounts may, in
the discretion of the Company, Participating Company Committee, or Affiliate, as
applicable, be distributed to such beneficiaries.
18. PAYMENT UNDER LAW
In case any benefit, which the Committee, Participating Company Committee, or
Affiliate, as applicable, 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 Participant of a Participating Company, to his or her
beneficiaries or to his or her annuitant under such law, the excess only, if
any, of the amount prescribed by law shall be payable under the Plan; provided,
however, that no benefit payable under this Plan shall be reduced by reason of
any governmental benefit or pension payable on account of military service. In
those cases where, because of differences in the beneficiaries, or differences
in the time or methods of payment, or otherwise, whether or not there is such
excess is not ascertainable by mere comparison but adjustments are necessary,
the Committee or Participating Company Committee, as applicable, has discretion
to determine whether or not in fact any such excess exists and 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.
19. PLAN TERMINATION
Subject to the limitations described below, the Company retains the right to *
terminate, in whole or in part, and each Participating Company retains the |
right to withdraw from this Plan, at any time, for any reason, with or without |
notice. The Company will continue to make payments, in accordance with the |
terms and conditions of the Plan, to all Participants who were either retired |
or terminated prior to Plan termination, and will also continue to recognize |
its obligation to the surviving spouse of the aforementioned individuals. |
Additionally, Participants who have satisfied the service requirements for a |
deferred vested pension under the Pension Plan on the date of Plan termination |
shall receive benefits under the terms of the Plan as in effect immediately |
prior to its termination, the amount of such benefit to be calculated as if the|
Participant retired (or otherwise terminated employment) on the termination |
date of the Plan, it being the Company's intent that termination of the Plan |
shall not adversely affect any entitlement to such benefits and any amendment, |
modification or termination of this Plan inconsistent with this expression of |
intent shall be null and void. *
SECTION 7. INTERCHANGE OF BENEFIT OBLIGATION
The same transfer of service credit provisions contained in interchange
agreements presently in existence under the Pension Plan, or as they may be
amended from time to time, between the Company, on behalf of all Participating
Companies, with any Interchange Company shall apply to the transfer of service
credit for purposes of this Plan.
* Text Added 08/12/88
17
<PAGE>
SECTION 8. PLAN MODIFICATION
The Company may in its sole discretion from time to time make any changes in the
Plan as it deems appropriate, provided, however, such modifications shall not *
result in a reduction of benefits to either: (i) those participants or their |
surviving spouses already receiving benefits under this Plan, or (ii) those |
participants who have satisfied the service requirements for a *
deferred vested pension under the Pension Plan. Specifically, no Plan
modification shall have the effect of reducing a Participant's benefits under
the Plan to which he or she would be entitled under the terms of the Plan as in
effect in immediately prior to its modification, the amount of such benefit to
be calculated as if the Participant retired (or otherwise terminated
employment) on the date the Plan was modified, it being the Company's intent *
that any modification of the Plan shall not adversely affect any entitlement to|
such benefits and any amendment, modification or termination of this Plan |
inconsistent with this expression of intent shall be null and void. *
In addition, the Company may authorize the execution of agreements providing
retirement benefits subject generally to the terms and conditions of the Plan
and benefits under such agreements shall be deemed provided hereunder.
* Text Added 08/12/88
18
<PAGE>
BELLSOUTH MANAGEMENT SAVINGS AND
EMPLOYEE STOCK OWNERSHIP PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1994
<PAGE>
BELLSOUTH MANAGEMENT SAVINGS AND
EMPLOYEE STOCK OWNERSHIP PLAN
This Plan is an amendment and restatement of the BellSouth Management Savings
Plan as adopted effective April 1, 1985 and subsequently amended from time to
time. Except as otherwise provided herein or by applicable law, the effective
date of this amendment and restatement is January 1, 1994.
This Plan consists of two parts--(1) a profit sharing plan which includes
qualified cash or deferred arrangement and which is intended to qualify as such
under Code sections 401(a) and 401(k) and related sections of the Code and (2)
an employee stock ownership plan which is designed as a stock bonus plan to
invest primarily in BellSouth Shares and which is intended to qualify as such
under Code sections 401(a) and 4975(e)(7) and related sections of the Code.
Further, this Plan is intended to comply with the applicable provisions of the
Code and ERISA and accordingly will be interpreted in accordance with those
provisions, including any official reports, announcements or temporary or final
regulations issued thereunder, and will be amended retroactively, if necessary,
to satisfy such provisions as of their effective dates.
<PAGE>
TABLE OF CONTENTS
Section 1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Definitions; Construction . . . . . . . . . . . . . . . . . . 2
Section 3. Participation . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4. Contributions from Eligible Compensation . . . . . . . . . . . 14
Section 5. Employing Company Contributions . . . . . . . . . . . . . . . 16
Section 6. Limitation Rules . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7. Investment Directions . . . . . . . . . . . . . . . . . . . . 24
Section 8. Maintenance and Valuation of Accounts; ESOP Loan Allocations . 26
Section 9. Distribution; Withdrawal . . . . . . . . . . . . . . . . . . . 29
Section 10. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 11. Restorals of Forfeited Amounts . . . . . . . . . . . . . . . . 39
Section 12. Administration By Trustee . . . . . . . . . . . . . . . . . . 40
Section 13. Election to Voluntarily Suspend Contributions . . . . . . . . 41
Section 14. Leave of Absence; Layoff; Absence on Account of
Sickness or Disability . . . . . . . . . . . . . . . . . . . . 42
Section 15. Effect of Suspension of Contributions . . . . . . . . . . . . 43
Section 16. Change to Non-Management Employee; Transfer to
Another Employing Company; Transfer to an
Affiliate or Subsidiary Not an Employing Company;
Other Interchange Employees . . . . . . . . . . . . . . . . . 44
Section 17. Designation of Beneficiaries; Spousal Consent;
Definition of Spouse; Distributions upon Death . . . . . . . . 46
Section 18. Benefits Not Assignable; Qualified Domestic Relations Orders . 48
Section 19. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 20. Modification or Merger of Plan . . . . . . . . . . . . . . . . 50
Section 21. Termination of Contributions under Plan; Liquidation of the
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 22. Notices to Participating Employees; Administrative Notices . . 53
Section 23. Adoption of the Plan by an Employing Company . . . . . . . . . 54
Section 24. Administration and Interpretation of Plan . . . . . . . . . . 55
Section 25. Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . 57
Section 26. Special Rules Applicable In Event of Certain Natural
Disasters . . . . . . . . . . . . . . . . . . . . . . . . . . 59
<PAGE>
SECTION 1. PURPOSE.
The purpose of this BellSouth Management Savings and Employee Stock Ownership
Plan is to provide a convenient way for Management Employees of Employing
Companies, first, to save for their retirement on a regular and long-term basis
and, second, to acquire an ownership interest in BellSouth. This Plan is not a
contract of employment. Thus, participation in this Plan shall not give any
person either the right to be retained as an Employee or, upon his termination
of employment, the right to any interest in the Trust Fund other than his
interest as expressly set forth in this Plan.
<PAGE>
SECTION 2. DEFINITIONS; CONSTRUCTION.
1. DEFINITIONS. For purposes of this Plan, the following terms shall have the
following meanings:
"ACCOUNT" shall mean the separate account maintained for each Participating
Employee which represents his total proportionate interest in the Trust Fund as
of the end of any month. Each Participating Employee's Account shall consist of
an After-Tax Basic Account, an After-Tax Supplemental Account, a Before-Tax
Basic Account, a Before-Tax Supplemental Account, an Employing Company Account,
an ESOP Account and a Rollover Account, all as described in this Plan, as
applicable, and such other subaccounts as the Committee shall deem necessary or
appropriate for the proper administration of this Plan.
"ACP" shall mean for each Plan Year the average contribution percentage as
calculated under Code section 401(m)(3) and, generally, means as to (1) the
group of Eligible Employees who are Highly Compensated Employees for such Plan
Year and (2) the group of all other Eligible Employees for such Plan Year, the
average (expressed as a percentage) of the Contribution Percentages of the
Eligible Employees in each such group.
"ACP LIMIT" shall mean for each Plan Year the same as the ADP Limit except
such limit shall be applied subject to the regulations under Code sections
401(k) and 401(m) regarding the multiple use of the alternative limitations and
the term ACP shall be substituted for ADP in such definition.
"ACTUAL DEFERRAL PERCENTAGE" shall mean for each Plan Year the ratio
(expressed as a percentage) of Before-Tax Contributions made on behalf of an
Eligible Employee for such Plan Year to the Eligible Employee's Compensation for
such Plan Year. For purposes of determining the Actual Deferral Percentage of
an Eligible Employee who is a Highly Compensated Employee described in Code
section 414(q)(6)(A), the Before-Tax Contributions and Compensation of the
Eligible Employee shall include the Before-Tax Contributions and Compensation of
his family members (as defined in Code section 414(q)(6)(B)), and such family
members shall not be taken into account in determining the ADP for Eligible
Employees who are not Highly Compensated Employees except to the extent required
by the regulations under Code section 401(k).
"ADP" shall mean for each Plan Year the average actual deferral percentage
as calculated under Code section 401(k)(3) and, generally, means as to (a) the
group of Eligible Employees who are Highly Compensated Employees and (b) the
group of all other Eligible Employees for such Plan Year, the average (expressed
as a percentage) of the Actual Deferral Percentages of the Eligible Employees in
each such group.
"ADP LIMIT" shall mean for each Plan Year that
(1) the ADP for Eligible Employees who are Highly Compensated
Employees
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for such Plan Year does not exceed 125% of the ADP for all other
Eligible Employees for such Plan Year, or
(2) the excess of the ADP for Eligible Employees who are Highly
Compensated Employees for such Plan Year over the ADP for all other
Eligible Employees for such Plan Year is not more than two percentage
points, and the ADP for Eligible Employees who are Highly Compensated
Employees for such Plan Year is not more than twice the ADP for all other
Eligible Employees for such Plan Year.
"AFFILIATE" shall mean at any time (1) BellSouth, (2) any corporation which
at such time is a member of a controlled group of corporations as defined in
Code section 414(b) which includes BellSouth, (3) any trade or business, whether
incorporated or unincorporated, which at such time is considered to be under
common control as defined in Code section 414(c) with BellSouth, (4) any person
or organization which at such time is a member of an affiliated service group as
defined in Code section 414(m) with BellSouth and (5) any other entity required
to be aggregated with BellSouth pursuant to regulations under Code
section 414(o).
"AFTER-TAX BASIC ACCOUNT" shall mean the subaccount established to account
for the After-Tax Basic Contributions made by a Participating Employee and the
investment earnings and losses on such contributions.
"AFTER-TAX BASIC CONTRIBUTIONS" shall mean the contributions made by a
Participating Employee under Section 4.2.a of this Plan.
"AFTER-TAX CONTRIBUTIONS" shall mean the After-Tax Basic Contributions and
the After-Tax Supplemental Contributions made by a Participating Employee.
"AFTER-TAX SUPPLEMENTAL ACCOUNT" shall mean the subaccount established to
account for the After-Tax Supplemental Contributions made by a Participating
Employee and the investment earnings and losses on such contributions.
"AFTER-TAX SUPPLEMENTAL CONTRIBUTIONS" shall mean the contributions made by
a Participating Employee under Section 4.2.b of this Plan.
"BEFORE-TAX BASIC ACCOUNT" shall mean the subaccount established to account
for the Before-Tax Basic Contributions made on behalf of a Participating
Employee and the investment earnings and losses on such contributions.
"BEFORE-TAX BASIC CONTRIBUTIONS" shall mean the Contributions made by an
Employing Company on behalf of a Participating Employee under Section 4.1.a of
this Plan.
"BEFORE-TAX CONTRIBUTIONS" shall mean the Before-Tax Basic Contributions
and the Before-Tax Supplemental Contributions made on a Participating Employee's
behalf.
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<PAGE>
"BEFORE-TAX SUPPLEMENTAL ACCOUNT" shall mean the subaccount established to
account for the Before-Tax Supplemental Contributions made on behalf of a
Participating Employee and the investment earnings and losses on such
contributions.
"BEFORE-TAX SUPPLEMENTAL CONTRIBUTIONS" shall mean the contributions made
by an Employing Company on behalf of a Participating Employee under Section
4.1.b of this Plan.
"BELLSOUTH" shall mean BellSouth Corporation, a Georgia corporation, and
any successor to BellSouth Corporation.
"BELLSOUTH SHARES" shall mean shares of the common stock of BellSouth.
"BELLSOUTH SHARES FUND" shall mean the investment fund described in the
Trust Agreement consisting of BellSouth Shares other than the ESOP Fund.
"BREAK IN SERVICE" shall mean (1) for eligibility purposes, any
12-consecutive month period beginning on an Employee's employment commencement
date or an anniversary of such employment commencement date during which the
Employee does not complete more than 500 Hours of Service and (2) for purposes
of Section 11, (a) each Plan Year beginning after December 31, l988 during which
an Employee does not complete more than 500 Hours of Service and (b) each Plan
Year beginning before January 1, 1989 during which (i) class year vesting was in
effect under this Plan and (ii) an Employee was not performing services for an
Affiliate or Subsidiary on the last day of such Plan Year. Solely for purposes
of determining whether an Employee has incurred a Break in Service after
December 31, 1988, each Employee will be credited with 45 Hours of Service for
each week during an absence from work for any period by reason of
(A) the Employee's pregnancy,
(B) the birth of the Employee's child,
(C) the placement of a child with the Employee in connection with the
adoption of such child by the Employee, or
(D) caring for such child for a period beginning immediately
following such birth or placement;
provided, no hours will be credited for such absence unless such Employee timely
furnishes to the Committee such evidence of the nature and duration of such
absence as may be required by the Committee. The hours to be credited for a
such child related absence shall be credited (to the extent of such absence in
such Plan Year or 12-consecutive month eligibility period) exclusively to the
Plan Year, with respect to Section 11, or to the 12-consecutive month
eligibility period, with respect to eligibility, in which the absence from work
begins, but only to the extent such
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<PAGE>
credit is needed to prevent such Employee from incurring a Break in Service in
such period under the rules set forth as part of this definition, or, if no such
credit is needed to prevent a Break Service in that period, the hours to be
credited for such a child related absence shall be credited (to the extent of
such absence in such immediately following Plan Year or 12-consecutive month
eligibility period) exclusively to such immediately following Plan Year or
12-consecutive month eligibility period, as the case may be.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" shall mean the Savings Plan Committee described in Section 24.2
of this Plan.
"COMPENSATION" shall mean, with respect to a Participating Employee, the
lesser of the amounts described in clauses (1) and (2), as follows: (1) the
total of (a) all of the Participating Employee's wages, as defined in Code
section 3401(a), that are reportable by BellSouth and the other Affiliates for
federal income tax purposes on IRS Form W-2, plus (b) all before-tax, salary
deferral or reduction contributions made to the Plan and other Code section
401(k) and section 125 plans of the Affiliates on behalf of the Participating
Employee for such Plan Year (including any contributions made under Code section
402(e)(3), 402(h) or 403(b)); provided, on a plan year-by-plan year basis, the
Committee may elect to use any other definition of "Compensation" that satisfies
the nondiscrimination requirements of Code section 414(s); and (2) for Plan
Years (or other applicable periods) beginning after December 31, 1993, $150,000
($200,000 for Plan Years beginning after December 31, 1988 and prior to January
1, 1994), as adjusted by the Secretary of the Treasury under Code section
401(a)(17) for cost-of-living increases. In determining the Compensation of a
Participating Employee for purposes of the $150,000 (or $200,000, as applicable)
limitation, the rules of Code section 414(q)(6) shall apply; provided, for
purposes of applying said rules, the term "family" shall include only the spouse
of the Participating Employee and lineal descendants of the Participating
Employee who have not attained age 19 before the close of the year.
"CONTRIBUTION PERCENTAGE" shall mean for each Plan Year the ratio
(expressed as a percentage) of After-Tax Contributions and Employing Company
Contributions (and, if elected by the Committee under Code section 401(m)(3),
Before-Tax Contributions) made by or on behalf of an Eligible Employee for such
Plan Year to the Eligible Employee's Compensation for such Plan Year. For
purposes of determining the Contribution Percentage of an Eligible Employee who
is a Highly Compensated Employee described in Code section 414(q)(6)(A), the
contributions and Compensation of the Eligible Employee shall include the
contributions and Compensation of his family members (as defined in Code section
414(q)(6)(B)), and such family members shall not be taken into account in
determining the ACP for Eligible Employees who are not Highly Compensated
Employees except to the extent required by the regulations under Code section
401(m).
5
<PAGE>
"ELIGIBLE COMPENSATION" shall mean for each Eligible Employee of an
Employing Company the sum of such Employee's base salary, lump sum merit awards
and incentive compensation (other than awards under any long or short term
incentive plan for senior management) received from the Employing Company as
determined from the Employing Company's payroll records prior to any deferrals
under Section 4.1 of this Plan, excluding shift differentials and other premium
pay; provided, however, the Eligible Compensation which is taken into account
under this Plan for any Plan Year beginning after December 31, 1993 shall not
exceed $150,000 ($200,000 for Plan Years beginning after December 31, 1988 and
prior to January 1, 1994), as adjusted in accordance with the family
attribution rules under Code section 401(a)(17) and for cost of living increases
in accordance with Code section 401(a)(17).
"ELIGIBLE EMPLOYEE" shall mean a Management Employee (1) who is a regular
Employee in the active service of an Employing Company (on a full-time or
part-time basis) and (2) who has at least one Year of Eligibility Service with
one, or more than one, Affiliate or Subsidiary, or an Interchange Company (if
the applicable Interchange Agreement covers such Employee and provides that this
Plan shall recognize such Employee's service with that Interchange Company). A
Management Employee shall be deemed an Eligible Employee for the purpose of
participation in this Plan if, (a) at any time prior to January 1, 1984, such
Employee was eligible to participate in the Bell System Savings Plan for
Salaried Employees or the Bell System Savings and Security Plan, or (b) at any
time prior to the adoption of this Plan by the Employee's Employing Company,
such Employee was eligible to participate in a Predecessor Plan or any other
qualified defined contribution plan sponsored by the Employee's Employing
Company and he is an Employee of such Employing Company immediately before its
adoption of this Plan. Notwithstanding the foregoing, a Management Employee
shall not be an Eligible Employee if he is (i) a "leased employee" within the
meaning of Code section 414(n), (ii) otherwise paid by a leasing organization
rather than by an Employing Company, (iii) treated as an independent contractor
by his Employing Company, (iv) a nonresident alien employed outside the United
States who receives no U.S. source income, (v) included in a unit of employees
covered by a collective bargaining agreement between employee representatives
and an Affiliate or Subsidiary unless a contract between the Employing Company
and the agent representing such unit provides that such Management Employee is
eligible to participate in this Plan, or (vi) a Non-Management Employee who has
become a Management Employee for a period of 30 days or less.
"EMPLOYEE" shall mean any person employed as an employee by an Affiliate or
Subsidiary, including an individual who is a "leased employee" within the
meaning of Code section 414(n).
"EMPLOYING COMPANY" shall mean BellSouth and each Affiliate or Subsidiary
which shall have determined by resolution of its Board of Directors or
equivalent governing body to adopt this Plan pursuant to Section 23.
6
<PAGE>
"EMPLOYING COMPANY ACCOUNT" shall mean the subaccount established to
account for the Employing Company Contributions made on behalf of a
Participating Employee and the investment earnings and losses on such
contributions which are not allocable to his ESOP Account pursuant to Section 5.
"EMPLOYING COMPANY CONTRIBUTIONS" shall mean contributions to this Plan
made in cash or BellSouth Shares by each Employing Company on behalf of each
Participating Employee under Section 5 of this Plan.
"ENROLLMENT DATE" shall mean the first day of calendar month .
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ESOP" shall mean the part of this Plan which is intended to qualify as an
employee stock ownership plan under Code sections 401(a) and 4975(e)(7) and
related sections of the Code.
"ESOP ACCOUNT" shall mean the subaccount established to account for each
Participating Employee's interest in the ESOP Fund.
"ESOP DIVIDENDS" shall mean the cash dividends on BellSouth Shares which
are applied to repay an ESOP Loan.
"ESOP FUND" shall mean the investment fund which consists of BellSouth
Shares which have been released from the ESOP Loan Suspense Account for periods
beginning after June 30, 1989 or which otherwise have been purchased with
Employing Company Contributions for periods beginning after December 31, l989,
or both, the investment earnings on such BellSouth Shares and any cash set aside
to purchase BellSouth Shares and the investment earnings thereon, for periods
beginning after December 31, 1989.
"ESOP LOAN" shall mean a loan or other extension of credit to the Trustee
which satisfies the requirements of Code section 4975(d)(3), ERISA section
408(b)(3) and the regulations related to such sections, the proceeds of which
are used by the Trustee (1) to purchase BellSouth Shares for the ESOP, (2) to
refinance another ESOP Loan or (3) to repay another ESOP Loan.
"ESOP LOAN SUSPENSE ACCOUNT" shall mean a separate fund within the Trust
Fund established by the Trustee which consists of the BellSouth Shares acquired
with the proceeds of an ESOP Loan which have not been released to the ESOP Fund
and the income other than ES0P Dividends) on such shares.
"EXCESS AGGREGATE CONTRIBUTIONS" shall mean for each Plan Year the excess
of (1) the
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<PAGE>
aggregate amount of After-Tax Contributions and Employing Company
Contributions (and, if elected by the Committee under Code section 401(m)(3),
Before-Tax Contributions) paid into this Plan for such Plan Year and allocated
to the Accounts of Highly Compensated Employees over (2) the maximum amount that
could be allocated to the Accounts of Highly Compensated Employees for such Plan
Year without violating the ACP Limit, all as described in Code section
401(m)(2).
"EXCESS CONTRIBUTIONS" shall mean for each Plan Year the excess of (1) the
aggregate amount of Before-Tax Contributions paid into the Plan for such Plan
Year and allocated to the Accounts of Highly Compensated Employees over (2) the
maximum amount of Before-Tax Contributions that could be allocated to the
Accounts of Highly Compensated Employees for such Plan Year without violating
the ADP Limit, all as described in Code section 401(k)(3).
"HIGHLY COMPENSATED EMPLOYEE" shall mean for each Plan Year each Eligible
Employee who is a member of the group of highly compensated individuals as
defined in Code section 414(q) and the regulations promulgated thereunder. The
determination of who is a Highly Compensated Employee shall be made pursuant to
the "snapshot" method described in Revenue Procedure 93-42.
"HOUR OF SERVICE" shall mean each hour for which an Employee is entitled to
credit in accordance with Section 2530.200b-2(a) of the U.S. Department of Labor
Rules and Regulations for Minimum Standards for Employee Pension Benefit Plans
for working and nonworking hours for which he is paid as determined in
accordance with Section 2530.200b-2(b) and (c) of such rules and regulations.
For example:
(1) An Hour of Service shall be each hour for which an Employee
is paid, or entitled to payment, for the performance of duties for the
Affiliate or Subsidiary during the applicable computation period;
(2) An Hour of Service shall be each hour for which an Employee
is paid, or entitled to payment, by the Affiliate or Subsidiary on
account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated)
due to holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence. Notwithstanding the
preceding sentence, (a) no more than 501 Hours of Service are required
to be credited under this clause (2) to an Employee on account of any
single continuous period during which the Employee performs no duties
(whether or not such period occurs in a single computation period);
(b) an hour for which an Employee is directly or indirectly paid, or
entitled to payment, on account of a period during which no duties are
performed is not required to be credited to the Employee if such
payment is made or due under a plan maintained solely for the purpose
of complying with applicable workmen's compensation or unemployment
compensation or disability insurance laws; and (c) Hours of Service
are not
8
<PAGE>
required to be credited for a payment which solely reimburses
an Employee for medical or medically related expenses incurred by the
Employee; and
(3) An Hour of Service is each hour for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to
by the Affiliate or Subsidiary. The same Hours of Service shall not
be credited both under Paragraph (1) or Paragraph (2), as the case may
be, and under this Paragraph (3).
In lieu of actually recording each Hour of Service which is completed by an
Employee whose hours are not required to be counted and reported under any
Federal law, such as the Fair Labor Standards Act, each Employee will be
credited with 45 Hours of Service for each week in which he completes at least
one Hour of Service.
"INTERCHANGE AGREEMENT" shall mean any agreement between an Employing
Company and an Interchange Company which provides for the interchange of benefit
obligations between the Employing Company and such Interchange Company.
"INTERCHANGE COMPANY" shall mean a company, other than an Employing
Company, which is a party to an Interchange Agreement and any affiliate or
subsidiary of such company identified in that Interchange Agreement.
"MANAGEMENT EMPLOYEE" shall mean an Employee (1) who is classified as a
"salaried employee" under the personnel policies and practices of BellSouth or
the Affiliate or Subsidiary which employs such individual, (2) whose pay is
determined based on a monthly or annual rate, and (3) whose position is not
subject to automatic wage progression.
"NON-MANAGEMENT EMPLOYEE" shall mean an Employee (1) who is not classified
as a "salaried employee" under the personnel policies and practices of BellSouth
or the Affiliate or Subsidiary which employs such individual, (2) whose pay is
not determined based on a monthly or annual rate or (3) whose position is
subject to automatic wage progression.
"NORMAL RETIREMENT AGE" for each Eligible Employee shall mean age 65.
"PARTICIPATING EMPLOYEE" shall mean each individual (l)(i) who is an
Eligible Employee (or former Eligible Employee) who has elected to participate
in this Plan, (ii) who is an Employee (or former Employee) on whose behalf
amounts held in a Predecessor Plan shall have been transferred to an Account in
this Plan under Section 3.2, or (iii) solely for purposes of Sections 9.2, 9.3,
10 and 16, who is an employee of Bell Communications Research, Inc. and (2)
whose Account has not been fully distributed.
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<PAGE>
"PLAN" shall mean this BellSouth Management Savings and Employee Stock
Ownership Plan as in effect from time to time and, where the context requires,
the Plan or Predecessor Plan as previously in effect.
"PLAN YEAR" shall mean the calendar year.
"PREDECESSOR PLAN" shall mean (1) the BellSouth Savings Plan for Salaried
Employees and (2) any Qualified Savings Plan sponsored by an Employing Company,
the assets of which are transferred to this Plan in accordance with Committee
rules as a result of the acquisition of the Employing Company by BellSouth, an
Affiliate or a Subsidiary or as a result of the Employing Company's adoption of
this Plan.
"QUALIFIED SAVINGS PLAN" shall mean a defined contribution plan qualified
under Code section 401(a) whose trust or other funding arrangement is exempt
from tax under Code section 501, and which is acceptable to the Committee, in
its discretion, for purposes of the transfer of assets from such plan to this
Plan or the transfer of assets from this Plan to such plan.
"ROLLOVER ACCOUNT" shall mean the subaccount established to account for the
rollover contributions made by a Participating Employee under Section 3.4 of
this Plan and the investment earnings and losses on such rollover contributions.
"SUBSIDIARY" shall mean any corporation (other than an Affiliate) of which
more than 50% of the voting stock is owned directly or indirectly by BellSouth.
"TRUST AGREEMENT" shall mean the trust agreement between BellSouth and the
Trustee referred to in Section 12 of this Plan, or any successor to such
agreement.
"TRUSTEE" shall mean the trustee or trustees serving from time to time
under the Trust Agreement.
"TRUST FUND" shall mean the assets of every kind and description held under
the Trust Agreement.
"TRUST-TO-TRUST TRANSFER" shall mean a transfer made in accordance with
procedures approved by the Committee of assets or cash proceeds from the sale of
assets, other than amounts deemed to be accumulated deductible employee
contributions within the meaning of Code section 72(o)(5), (1) from the trust or
other funding arrangement of a Qualified Savings Plan or the BellSouth Employee
Stock Ownership Plan to the Trust Fund, which assets shall be held under this
Plan in the name of the Participating Employee whose interest is being
transferred, or (2) from the Trust Fund to the trust or other funding
arrangement of a Qualified Savings Plan, which assets thereafter shall be held
under the terms of such Qualified Savings Plan.
"UNITS" shall mean the Units referred to in Section 8.2 of this Plan.
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<PAGE>
"YEAR OF ELIGIBILITY SERVICE" for purposes of determining whether an
Employee has satisfied the service requirement to become an Eligible Employee
shall mean (1) a 12-consecutive month period beginning with an Employee's
employment commencement date during which the Employee completes at least 1,000
Hours of Service or (2) any succeeding 12-consecutive month period, beginning on
the anniversaries of the Employee's employment commencement date, during which
the Employee completes at least 1,000 Hours of Service. For purposes of
determining an Employee's employment commencement date under this definition,
(a) if an Employee who has not completed one Year of Eligibility Service
has one Break in Service on or before December 31, 1984 under the Predecessor
Plan, then the first day on which such Employee completes an Hour of Service
following such Break in Service shall be treated as his new employment
commencement date from which the period or periods for determining a Year of
Eligibility Service; and
(b) if an Employee who has not completed one Year of Eligibility Service
has five or more consecutive Breaks in Service, then the first day on which such
Employee completes an Hour of Service following such Breaks in Service shall be
treated as his new employment commencement date from which the period or periods
for determining a Year of Eligibility Service.
2. CONSTRUCTION. Unless the context clearly requires otherwise, the
masculine pronoun whenever used shall include the feminine and neuter pronoun,
and the singular shall include the plural and the plural shall include the
singular. Section headings are included for convenience of reference and are
not intended to add to or subtract from the terms of the Plan. All references
to Sections and to Paragraphs shall be to Sections and Paragraphs of this Plan
unless another reference is specified.
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SECTION 3. PARTICIPATION.
1. ELECTION TO PARTICIPATE.
a. An Eligible Employee may elect in advance to become a Participating
Employee in this Plan effective on any Enrollment Date by authorizing
contributions under Section 4 and directing the investment of such contributions
under Section 7 in accordance with Committee rules.
b. An Eligible Employee who, immediately prior to becoming an Eligible
Employee, actively participated in the BellSouth Enterprises Retirement Savings
Plan, or the successor to such plan, automatically shall be a Participating
Employee in this Plan. Each such Eligible Employee's authorized contributions
and investment directions as in effect under such plan immediately prior to his
becoming an Eligible Employee shall remain in effect for this Plan until
changed.
2. TRANSFERS FROM A PREDECESSOR PLAN. An individual with respect to whom
amounts held in a Predecessor Plan shall have been transferred to an Account in
this Plan shall become a Participating Employee in this Plan upon such transfer
with respect to such transferred amounts; however, no such individual shall be
eligible to elect contributions under Section 4 or to receive an allocation of
contributions under Section 5 unless he is also an Eligible Employee and he
satisfies the requirements for such elections and allocations. A Participating
Employee's vested interest in such transferred amounts shall be determined in
accordance with the terms of this Plan or such Predecessor Plan, whichever is
more favorable.
3. TRUST-TO-TRUST TRANSFERS.
a. CHANGE FROM NON-MANAGEMENT TO MANAGEMENT STATUS. An Eligible
Employee who was a participant in the BellSouth Savings and Security Plan and
who becomes a Management Employee shall have the value of his account in such
plan, if any, automatically transferred to this Plan in accordance with the
terms of such plan and Committee rules through a Trust-to-Trust Transfer.
b. TRANSFER FROM INTERCHANGE COMPANY, AFFILIATE OR SUBSIDIARY NOT AN
EMPLOYING COMPANY. An Eligible Employee who commences employment with an
Employing Company within a period of 30 days following his termination of
employment with an Interchange Company or an Affiliate or Subsidiary which is
not an Employing Company and who has elected to participate in this Plan in
accordance with Section 3.1 may further elect a Trust-To-Trust Transfer to this
Plan from a Qualified Savings Plan maintained by such Interchange Company,
Affiliate or Subsidiary, and any such election shall be effective if made in
accordance with Committee rules and any Interchange Agreement which may be
applicable. A Participating Employee's vested interest in such transferred
amounts shall be determined in accordance with the terms of this Plan unless
otherwise specified in any applicable Interchange Agreement.
12
<PAGE>
c. TRANSFER FROM PAYSOP. A Participating Employee who is a participant
in the BellSouth Employee Stock Ownership Plan may, upon his termination of
employment with an Employing Company, elect a Trust-to-Trust Transfer to this
Plan from the BellSouth Employee Stock Ownership Plan of not less than the
entire amount credited to his account under such plan, and any such election
shall be effective if made in accordance with Committee rules.
4. ROLLOVER CONTRIBUTIONS. A Participating Employee may contribute in
accordance with Committee rules the following amounts to the Plan:
(1) part or all of a distribution, or the cash proceeds from the
sale of distributed property, acceptable to the Trustee which qualifies as
an "eligible rollover distribution" within the meaning of Code section
402(c)(4) or 403(a)(4), either from a trust described in Code section
401(a) and exempt from tax under Code section 501 or from a Code section
403(a) annuity plan, less any amounts considered to be after-tax employee
contributions or accumulated deductible employee contributions; or
(2) a distribution from an individual retirement account or annuity
or the redemption of retirement bonds, the entire amount of which
distribution or redemption is from a source described in subparagraph (1)
of this Section 3.4.
Such contribution must be paid to this Plan on or before the 60th day after
receipt by the Participating Employee of the distribution. Amounts so
contributed thereafter shall be held in the Trust Fund under this Plan as a
completely separate Rollover Account in accordance with procedures approved by
the Committee. Such Rollover Account shall at all times be fully vested and
nonforfeitable. No contributions made under this Section 3.4 shall be taken
into account to determine an Employing Company's obligation to make
contributions under Section 5.
5. TRANSFERS FROM A QUALIFIED SAVINGS PLAN. From time to time the Plan
may accept the transfer of assets (and the corresponding benefit liabilities)
from any Qualified Savings Plan sponsored by any entity or division or
subdivision thereof which becomes a part of an Employing Company in accordance
with Committee rules. An individual with respect to whom amounts held in a
Qualified Savings Plan shall have been transferred to an Account in this Plan
shall become a Participating Employee in this Plan upon such transfer with
respect to such transferred amounts; however, no such individual shall be
eligible to elect contributions under Section 4 or to receive an allocation of
contributions under Section 5 unless he is also an Eligible Employee and he
satisfies the requirements for such elections and allocations. A Participating
Employee's vested interest in such transferred amounts shall be determined in
accordance with the most favorable terms of this Plan and such Qualified Savings
Plan, the vested interest to be determined at each relevant point in time by
reference to the terms of the plan which, at that point in time, would provide
the greater vested percentage; provided, however, if the transfer is intended to
satisfy the elective transfer rules of Code section 411(d)(6), then such
Participating Employee shall be fully vested in the amounts transferred to this
Plan.
13
<PAGE>
SECTION 4. CONTRIBUTIONS FROM ELIGIBLE COMPENSATION.
1. BEFORE-TAX CONTRIBUTIONS.
a. BEFORE-TAX BASIC CONTRIBUTIONS. An Eligible Employee who becomes a
Participating Employee in accordance with Section 3.1 may elect Before-Tax Basic
Contributions on his behalf in 1% increments for 2% to 6% of his Eligible
Compensation.
b. BEFORE-TAX SUPPLEMENTAL CONTRIBUTIONS. If a Participating Employee's
Before-Tax Basic Contributions for any period equals 6% of his Eligible
Compensation, he may further elect, in accordance with Committee rules, that his
Employing Company make Before-Tax Supplemental Contributions on his behalf for
that same period in 1% increments from 1% to 6% of his Eligible Compensation.
The sum of a Participating Employee's Before-Tax Basic Contributions and
Before-Tax Supplemental Contributions elected for any period shall not exceed
12% of his Eligible Compensation.
c. DESCRIPTION. An election of Before-Tax Contributions shall mean that
the Participating Employee has entered into a "qualified cash or deferred
arrangement" as described in Code section 401(k)(2) so that such contributions
made on a Participating Employee's behalf by an Employing Company are not
currently includable in his gross income by reason of the application of Code
section 402(e)(3).
2. AFTER-TAX CONTRIBUTIONS.
a. AFTER-TAX BASIC CONTRIBUTIONS. A Participating Employee may elect,
in accordance with Committee rules, to make After-Tax Basic Contributions in 1%
increments from 1% to 6% of his Eligible Compensation. However, the sum of a
Participating Employee's Before-Tax Basic Contributions elected under Section
4.1.a and his After-Tax Basic Contributions elected under this Section 4.2.a for
any period shall be at least 2% and shall not exceed 6% of his Eligible
Compensation for such period.
b. AFTER-TAX SUPPLEMENTAL CONTRIBUTIONS. If the sum of a
Participating Employee's Before-Tax Basic Contributions and After-Tax Basic
Contributions elected for any period equals 6% of his Eligible Compensation, he
may further elect, in accordance with Committee rules, to make After-Tax
Supplemental Contributions for the same period in 1% increments from 1% to 9% of
his Eligible Compensation. However, a Participating Employee's total combined
Before-Tax Contributions elected under Section 4.1 and After-Tax Contributions
elected under this Section 4.2 for any period may not exceed 15% of his Eligible
Compensation for such period. Moreover, a Participating Employee's actual
combined Before-Tax Contributions and After-Tax Contributions for any period may
not exceed 15% of his Eligible Compensation.
c. DESCRIPTION. After-Tax Contributions shall mean contributions which
are includable when made in the Participating Employee's compensation which is
required to be
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<PAGE>
reported by his Employing Company to the Internal Revenue Service
for inclusion as taxable wages on the Participating Employee's Form W-2.
3. EFFECTIVE DATE. Contributions will begin with respect to Eligible
Compensation paid for the first full payroll period which begins after the
Enrollment Date on which the Eligible Employee begins his participation in this
Plan under Section 3 and elects that contributions be made on his behalf under
this Section 4. Any change in contribution percentages elected by a
Participating Employee under Section 4.4 shall be effective for Eligible
Compensation otherwise payable on paydays which come after the date such
election is made.
4. CHANGES. A Participating Employee may elect, in accordance with
Committee rules, not more than once in each 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.
5. CREDITING TO ACCOUNTS. Contributions from a Participating Employee's
Eligible Compensation made for each payday during a calendar month shall be
credited to his Account as of the last day of such month. Contributions shall
be remitted by each Employing Company to the Trustee as soon as practicable
after the end of the calendar month which includes the payday for which such
contributions were made.
6. VESTING. Subject to the limitations in Section 6, net investment
gains or losses and any other proper charges and credits to the Trust Fund, a
Participating Employee's Before-Tax Contributions and After-Tax Contributions
shall be nonforfeitable.
7. PAYROLL DEDUCTIONS. A Participating Employee shall make
contributions to this Plan under this Section 4 only through payroll deductions
and such contributions shall come only from his Eligible Compensation.
8. INSUFFICIENT ELIGIBLE COMPENSATION. No contributions under this
Section 4 shall be made for a payday for a Participating Employee if his
Eligible Compensation is insufficient (after all deductions required by law and
authorized deductions for insurance and loan repayments under Section 10 of this
Plan) to permit the making of the full amount of such contributions for such
payday; provided, however, such an event shall not be treated as a voluntary
suspension under Section 13 and such Participating Employee's Contributions
under this Section 4 shall resume as soon as his Eligible Compensation is
sufficient to make the full amount of such contributions.
15
<PAGE>
SECTION 5. EMPLOYING COMPANY CONTRIBUTIONS.
1. AMOUNT.
(a) Each Participating Employee's Before-Tax Basic Contributions and
After-Tax Basic Contributions made under Section 4 from his Eligible
Compensation from each Employing Company for each calendar month shall be
matched as of the last day of such calendar month in accordance with this
Section 5.1 in Units representing an investment in BellSouth Shares which Units
have a fair market value as of the last day of such calendar month equal to the
matching percentage of such contributions for his Employing Company. For each
twelve-month period beginning April 1, such matching percentage shall be based
on the financial component of the BellSouth Corporation Team Excellence Award
for Managers (T.E.A.M.) for the preceding calendar year, as follows:
<TABLE>
<CAPTION>
FINANCIAL PERFORMANCE
(AS A PERCENTAGE OF
STANDARD PERFORMANCE) MATCHING PERCENTAGE
<S> <C>
0% - 94% 55%
95% - 119% 60%
120% - 149% 65%
150% - 185% 70%
more than 185% 75%
</TABLE>
Such match in Units representing an investment in BellSouth Shares shall be
made to the ESOP Fund (1) through a release of BellSouth Shares to such Fund
from the ESOP Loan Suspense Account(s) as a result of payments made on any ESOP
Loan(s) from any combination of Employing Company Contributions and ESOP
Dividends (and the income thereon) and any income on ESOP Loan proceeds pending
investment in BellSouth Shares, as provided in Section 8.3, and (2) from
Employing Company Contributions to such Fund that constitute top up
contributions under Section 5.5 (and the income thereon).
(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:
16
<PAGE>
<TABLE>
<CAPTION>
ANNUAL STOCK PERCENTAGE POINTS ADDED
PRICE INCREASE TO MATCHING PERCENTAGE
<S> <C>
2% or less 4%
3% 6%
4% 8%
5% 10%
6% 12%
7% 14%
8% or more 16%
</TABLE>
The per share average price change for each calendar year shall be the
average of the daily closing share price of BellSouth Corporation common stock
on the New York Stock Exchange for each trading day of the year compared to such
average of the daily closing share prices for the immediately preceding year.
The per share average price may be adjusted administratively by the Committee in
its sole discretion to reflect changes in the capitalization of BellSouth
Corporation, including without limitation stock dividends, stock splits,
mergers, consolidation, reorganization, division, and sales of assets.
2. CREDITING TO ACCOUNTS. The Units representing an investment in
BellSouth Shares which are released from an ESOP Loan Suspense Account to the
ESOP Fund shall be credited to each eligible Participating Employee's ESOP
Account as set forth in Section 8.3(d). Units representing an investment in
all other BellSouth Shares which are attributable to Employing Company
Contributions made on behalf of a Participating Employee shall be credited to
the Participating Employee's Employing Company Account or ESOP Account, as
provided under Section 5.1(a), as of the last day of the calendar month for
which such contributions were made.
3. VESTING. Subject to the limitations in Section 6, the net investment
gains and losses and any other proper charges and credits to the Trust Fund, a
Participating Employee's interest in his ESOP Account shall be nonforfeitable
and, if he is an Employee on July 1, 1989, his interest in his Employing Company
Account shall be nonforfeitable after June 30, 1989.
4. LIMITATION. No Employing Company Contributions shall be made, or
matching Units of any kind granted, with respect to Before-Tax Supplemental
Contributions or After-Tax Supplemental Contributions.
5. TOP UP CONTRIBUTIONS. If Units representing an investment in
BellSouth Shares which are released from the ESOP Loan Suspense Account(s) from
the application of Employing Company Contributions and ESOP Dividends (and the
income thereon) and any income on ESOP Loan proceeds pending investment in
BellSouth Shares, as provided in Section 8.3(b), are insufficient to satisfy the
allocation requirements under Section 8.3(c) and the matching requirements
described in Section 5.1, additional contributions shall be made by each
Employing Company to the extent the Committee determines necessary to satisfy
both such requirements.
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<PAGE>
6. REFUND OF CONTRIBUTIONS. Notwithstanding that no part of the Trust
Fund shall be used for or diverted to purposes other than the exclusive benefit
of the Participating Employees and their beneficiaries, Employing Company
Contributions to the Trust Fund may be refunded to the Employing Company under
the following circumstances and subject to the following limitations:
(a) PERMITTED REFUNDS. If and to the extent permitted by the Code
and other applicable laws and regulations thereunder, upon the Employing
Company's request, a contribution which is (i) made by a mistake in fact, (ii)
conditioned upon initial qualification of the Plan with the Plan receiving an
adverse determination even though the application for determination is submitted
to the Internal Revenue Service for review within the remedial amendment period
respecting the Plan, or (iii) conditioned upon the deductibility of the
contribution under Code section 404, shall be returned to the Employing Company
making the contribution within one (1) year after the payment of the
contribution, the denial of the qualification, or the disallowance of the
deduction (to the extent disallowed), whichever is applicable.
(b) PAYMENT OF REFUND. If any refund is paid to an Employing Company
hereunder, such refund shall be made without interest or other investment gains,
shall be reduced by any investment losses attributable to the refundable amount
and shall be apportioned among the Accounts of the Participating Employees as an
investment loss, except to the extent that the amount of the refund can be
attributed to one or more specific Participating Employees (for example, as in
the case of certain mistakes of fact), in which case the amount of the refund
attributable to each such Participating Employee's Account shall be charged
directly to such Account.
(c) LIMITATION ON REFUND. No refund shall be made to an Employing
Company as to a Participating Employee's Account if such refund would cause the
balance in such Participating Employee's Account to be less than the balance
would have been had the refunded contribution not been made to the Plan.
4. ERRORS AND OMISSIONS IN ACCOUNTS. If an error or omission is
discovered in the Account of a Participating Employee or beneficiary, the
Committee shall cause appropriate, equitable adjustment to be made as of the
valuation date coinciding with or immediately following the discovery of such
error or omission.
18
<PAGE>
SECTION 6. LIMITATION RULES.
1. GENERAL RULE. Contributions described in Section 4 and Section 5
shall be made subject to the limitations of this Section 6. The Committee may
reduce under this Section 6 any distributions otherwise required in order to
satisfy such limitations in any manner it deems necessary or appropriate to
satisfy tax withholding obligations.
2. SECTION 415 LIMITS.
(a) GENERAL LIMIT. The Plan shall comply with the limits of Code section
415, taking into account all applicable transitional rules, which section hereby
is incorporated in full in this Section 6.2 by this reference. The "limitation
year" for this purpose shall be the calendar year.
(b) COMBINED PLAN LIMITATION. If an Employee is a Participating Employee
in the Plan and any one or more defined benefit plans, welfare benefit funds (as
defined in Code section 419(d)) or individual medical accounts (as defined in
Code section 415(1)(2)), maintained by an Affiliate, and any corrective
adjustments in any Participating Employee's benefits are required to comply with
this section, such adjustments first shall be made under any such defined
benefit plans. If an Employee is a Participating Employee in the Plan and any
one or more other defined contribution plans maintained by an Affiliate and a
corrective adjustment in such Participating Employee's benefits is required to
comply with this section, such adjustment shall be made under this Plan.
(c) CORRECTION OF EXCESS ANNUAL ADDITIONS. If, as a result of either the
allocation of forfeitures to an Account, a reasonable error in estimating a
Participating Employee's Compensation, Eligible Compensation or elective
deferrals, or such other occurrences as the Internal Revenue Service permits to
trigger this subsection, the annual addition (within the meaning of Code section
415(c)(2)) made on behalf of a Participating Employee exceeds the limitations as
incorporated by this section, the Committee shall direct the Trustee to take
such of the following actions as such Committee shall deem appropriate,
specifying in each case the amount of contributions involved:
(i) A Participating Employee's annual addition first shall be reduced
by reducing his After-Tax Contributions to the extent of any such excess,
up to the total amount of After-Tax Contributions made on behalf of such
Participating Employee, and the amount of the reduction (plus any
investment earnings thereon) shall be returned to such Participating
Employee. In addition, any Employing Company Contributions (and earnings
thereon) attributable to the returned After-Tax Contributions shall be
forfeited and allocated to a suspense account as described in Paragraph
(iii) of this Section 6.2(c).
(ii) If further reduction is necessary, a Participating Employee's
annual addition shall be reduced by reducing his Before-Tax Contributions
to the extent of any such excess, up to the total amount of Before-Tax
Contributions made on behalf of such
19
<PAGE>
Participating Employee, and the amount of the reduction (plus any
investment earnings thereon) shall be returned to such Participating
Employee. In addition, any Employing Company Contributions (and earnings
thereon) attributable to the returned Before-Tax Contributions shall be
forfeited and allocated to a suspense account as described in Paragraph
(iii) of this Section 6.2(c).
(iii) Amounts allocated to a suspense account pursuant to
Paragraphs (i) or (ii) of this Section 6.2(c), shall be applied to reduce
permissible contributions in each successive year until such amounts are
fully allocated; provided, so long as any suspense account is maintained
pursuant to this section: (A) no contributions shall be made to the Plan
which would be precluded by this section; (B) investment gains and losses
of the Trust Fund shall not be allocated to such suspense account; and (C)
amounts in the suspense account shall be allocated in the same manner as
contributions as of the earliest date possible, until such suspense account
is exhausted. If, at the time that this Plan terminates, any amount that
cannot then be allocated remains in such suspense account, such amount
shall automatically revert to the Employing Company.
3. CODE SECTION 402(g) LIMIT ON BEFORE-TAX CONTRIBUTION.
(a) MAXIMUM ELECTIVE DEFERRALS UNDER AFFILIATES' PLANS. The aggregate
amount of a Participating Employee's elective deferrals made for any
calendar year under the Plan and any other plans, contracts or arrangements
with the Affiliates shall not exceed $7,000 (as adjusted from time to time
in accordance with Code section 402(g)(5)) (the "maximum deferral amount").
To the extent that the amount of a Participating Employee's Before-Tax
Contributions made for a calendar year would exceed the maximum deferral
amount if such Before-Tax Contributions are continued, then, to the extent
determined by the Committee, those Before-Tax Contributions will be deemed
to be After-Tax Contributions and will be treated as if such Participating
Employee elected to make such After-Tax Contributions in accordance with,
and subject to the terms and limitations of, Section 4.2. If the Committee
permits, such Participating Employee may modify his election form to change
from Before-Tax Contributions, and such modifications shall not count as a
change in contribution percentage under Section 4.
(b) RETURN OF EXCESS BEFORE-TAX CONTRIBUTIONS. If the aggregate
amount of a Participating Employee's Before-Tax Contributions made for any
calendar year, when considered alone, exceed the maximum deferral amount,
the Participating Employee shall be deemed to have notified the Committee
of such excess, and the Committee shall cause the Trustee to distribute to
such Participating Employee, on or before April 15 of the next succeeding
calendar year, the total of (i) the amount by which such Before-Tax
Contributions exceed the maximum deferral amount, plus (ii) any earnings
allocable thereto. In addition, Company Matching Contributions made on
behalf of the Participating Employee which are attributable to the
distributed Before-Tax Contributions shall be forfeited.
20
<PAGE>
(c) RETURN OF EXCESS ELECTIVE DEFERRALS PROVIDED BY OTHER AFFILIATE
ARRANGEMENTS. If after the reduction described in Section 6.3(b), a
Participating Employee's aggregate before-tax contributions under plans,
contracts and arrangements with Affiliates (or, if applicable, a Subsidiary
and its affiliates) still exceed the maximum deferral amount, the
Participating Employee shall be deemed to have notified the Committee of
such excess, and, unless the Committee directs otherwise, such excess shall
be reduced by distributing to the Participating Employee before-tax
contributions that were made for the calendar year under such plans,
contracts and/or arrangements with Affiliates other than the Plan.
However, if the Committee decides to make any such distributions from
Before-Tax Contributions made to the Plan, such distributions (including
forfeiture of Employing Company Contributions) shall be made in a manner
similar to that described in Section 6.3(b).
(d) DISCRETIONARY RETURN OF ELECTIVE DEFERRALS. If after the
reductions described in Sections 6.3(b) and (c), (i) a Participating
Employee's aggregate before-tax contributions made for any calendar year
under the Plan and any other plans, contracts or arrangements with
Affiliates and any other employers still exceed the maximum deferral
amount, and (ii) such Participating Employee submits to the Committee, on
or before March 1 following the end of such calendar year, a written
request that the Committee distribute to such Participating Employee all or
a portion of his remaining Before-Tax Contributions made for such calendar
year, and any earnings attributable thereto, then the Committee may, but
shall not be required to, cause the Trustee to distribute such amount to
such Participating Employee on or before the following April 15. However,
if the Committee decides to make any such distributions from Before-Tax
Contributions made to the Plan, such distributions (including the
forfeiture of Employing Company Contributions shall be made in a manner
similar to that described in Section 6.3(b).
(e) RETURN OF EXCESS ANNUAL ADDITIONS. Any Before-Tax Contributions
returned to a Participating Employee to correct excess annual additions
shall be disregarded for purposes of determining whether the maximum
deferral amount has been exceeded.
4. CODE SECTION 401(k) AVERAGE ACTUAL DEFERRAL PERCENTAGE LIMIT. If at
any time during the Plan Year the Committee determines that Highly Compensated
Employees' Before-Tax Contributions elections as then in effect possibly could
cause Highly Compensated Employees' Before-Tax Contributions for such Plan Year
to exceed the ADP Limit for such Plan Year, the Committee shall have the right
to reduce or cease Highly Compensated Employees' future Before-Tax Contributions
for such Plan Year or to convert such future contributions to After-Tax
Contributions to the extent it deems necessary or appropriate to keep such
contributions from exceeding the ADP Limit; provided that, in making such
reductions, cessations or conversions, all similarly situated Highly Compensated
Employees shall be treated the same and the Committee may take into account any
adjustments required by other limits of this Section 6.
21
<PAGE>
If the Committee determines that Highly Compensated Employees' Before-Tax
Contributions actually paid into this Plan for the Plan Year, if allowed to
remain in such Highly Compensated Employees' Accounts, would cause this Plan to
exceed the ADP Limit for such Plan Year, then the Excess Contributions made on
behalf of Highly Compensated Employees for such year shall be distributed in
accordance with the rules set forth in this Section 6.4.
The amount of the Excess Contributions and the Highly Compensated Employees
to whom Excess Contributions will be distributed under this Section 6.4 shall be
determined by reducing the Before-Tax Contributions of Highly Compensated
Employees in the order to their Actual Deferral Percentages beginning with the
highest Actual Deferral Percentages, until such contributions no longer exceed
the ADP Limit. Any such Excess Contributions (together with any income
allocable to such contributions) shall be distributed to the affected Highly
Compensated Employees on the basis of the respective portions of the Excess
Contributions attributable to each such Highly Compensated Employee as required
by Code section 401(k)(8). In addition, any Employing Company Contributions
that are made on behalf of a Highly Compensated Employee and that are
attributable to the distributed Before-Tax Contributions shall be forfeited.
Such distributions shall be made before the end of the Plan Year following the
Plan Year for which the Excess Contributions were made in accordance with
procedures established by the Committee; provided, however, if so elected by the
Committee, no distribution shall be made to the extent such Excess Contributions
may be recharacterized to After-Tax Contributions in accordance with regulations
under Code section 401(k).
5. CODE SECTION 401(m) AVERAGE CONTRIBUTION PERCENTAGE LIMIT. If at any
time during the Plan Year the Committee determines that Highly Compensated
Employees' elections of After-Tax Contributions (and, if elected by the
Committee under Code section 401(m)(3), Before-Tax Contributions) together with
Employing Company Contributions as then in effect possibly could cause Highly
Compensated Employees' allocations for such Plan Year to exceed the ACP Limit
for such Plan Year, the Committee shall have the right to automatically reduce
Highly Compensated Employees' elected future contributions for such Plan Year to
the extent it deems necessary or appropriate to keep such contributions from
exceeding the ACP Limit. Any such reduction shall be made first to Highly
Compensated Employees' After-Tax Supplemental Contributions, then to Highly
Compensated Employees' After-Tax Basic Contributions, then to Highly Compensated
Employees' Before-Tax Supplemental Contributions, and finally to Highly
Compensated Employees' Before-Tax Basic Contributions provided, that, in making
such reductions, all similarly situated High Compensated Employees shall be
treated the same and the Committee may take into account any adjustments
required by other limits of this Section 6.
22
<PAGE>
If the Committee determines that Highly Compensated Employees' After-Tax
Contributions and Employing Company Contributions (and, if elected by the
Committee under Code section 401(m)(3), Before-Tax Contributions) actually paid
into this Plan for the Plan Year, if allowed to remain in such Employees'
Accounts, would cause this Plan to exceed the ACP Limit for such Plan Year, then
the Excess Aggregate Contributions made by or on behalf of Highly Compensation
Employees for such year shall be forfeited or distributed in accordance with the
rules set forth in this Section 6.5.
The amount of the Excess Aggregate Contributions and the Highly Compensated
Employees who have forfeitable or distributable Excess Aggregate Contributions
shall be determined by reducing the contributions of Highly Compensated
Employees in the order of their Contribution Percentages, beginning with the
highest Contribution Percentages, until such contributions no longer exceed the
ACP Limit. Any such Excess Aggregate Contributions (together with any income
allocable to such contributions) shall be distributed to (or, if forfeitable,
forfeited by) the affected Highly Compensated Employees on the basis of the
respective portion of the Excess Aggregate Contributions attributable to each
such Highly Compensated Employee as required by Code section 401(m). In
addition, any Employing Company Contributions that are made on behalf of a
Highly Compensated Employee and that are attributable to the distributed Before-
Tax Contributions shall be forfeited. Such distributions (or if applicable,
forfeitures) shall be made before the end of the Plan Year following the Plan
Year for which the Excess Aggregate Contributions were made in accordance with
procedures established by the Committee, and any such forfeitures shall offset
the Employing Company's obligation to make Employing Company Contributions under
this Plan until such forfeitures have been exhausted through such offsets, but
in no event shall such forfeitures be allocated to Highly Compensated Employees
whose contributions have been reduced under this Section 6.5.
23
<PAGE>
SECTION 7. INVESTMENT DIRECTIONS.
1. INVESTMENT OF PARTICIPATING EMPLOYEE CONTRIBUTIONS. Each
Participating Employee shall have the right to direct that contributions under
Section 3 and Section 4 by the Participating Employee, or on the Participating
Employee's behalf, be invested in any then permitted combination in the
investment funds described in the Trust Agreement as in effect from time to
time, subject to the rules set forth in this Section 7. New investment
directions shall become effective monthly in accordance with rules set by the
Committee.
2. INVESTMENT OF EMPLOYING COMPANY CONTRIBUTIONS. All Employing Company
Contributions to this Plan under Section 5 made on behalf of a Participating
Employee shall be made in, or invested directly in, BellSouth Shares in the ESOP
Fund or shall be applied by the Trustee to the extent required under an ESOP
Loan to make principal and interest payments on such ESOP Loan when such
payments are due in order to release BellSouth Shares to the ESOP Fund.
3. CHANGES IN INVESTMENT DIRECTION. Any investment direction made by a
Participating Employee shall continue in effect until changed by the
Participating Employee. A Participating Employee may make the following changes
in accordance with Committee rules:
(a) Not more than once in any calendar month, a Participating Employee may
change an investment direction as to future contributions under Section 4 by
directing that such contributions be invested in one of the other investment
funds or any then permitted combination of such funds.
(b) Not more than once in any calendar month period, a Participating
Employee may direct that all or a portion of the Units credited to his Account
(excluding for this purpose an active Participating Employee's ESOP Account, but
including a former Participating Employee's ESOP Account) in any one or more of
the investment funds be transferred in accordance with such rules as set from
time to time by the Committee to any one or more of the other investment funds
in any then permitted combination, based on the value of Units representing each
such investment funds at the end of the effective month; provided, that no such
transfer shall result in amounts being transferred to and from the same fund.
4. ESOP ACCOUNT DIVERSIFICATION. Each Participating Employee may elect
within 90 days after the close of the Plan Year in which he first is at least
age 55 and has completed at least ten years of participation in the ESOP part of
this Plan, and within 90 days after the close of each of the immediately
following four Plan Years, that (1) 25% of the BellSouth Shares credited to his
ESOP Account be transferred to any one, or more that one, of the investment
funds available under Section 7.1, based on the value of the Units representing
each such investment fund at the end of the calendar month for which such
transfer is made or, if there are less than three such funds, that (2) 25% of
the BellSouth Shares credited to his ESOP Account be distributed to him. After
the end of such five consecutive Plan Year period such an Eligible Employee
shall have
24
<PAGE>
one additional Plan Year, the Plan Year which immediately follows the
end of such five year period, to make such an election, and the percentage for
such election shall be 50%. All elections, transfers and distributions required
under this section shall be made in accordance with Committee rules intended to
satisfy the requirements under Code section 401(a)(28).
5. MUTUAL FUND WINDOW.
(a) EFFECTIVE DATE. Effective July 15, 1994, each Participating Employee
may direct, subject to the rules set forth in this Section 7.5, that amounts
credited to his Account (other than his ESOP Account) in any one or more of the
investment funds be transferred to one or more of the mutual funds described in
the Trust Agreement as in effect from time to time. For purposes of this
Section 7.5, the investment funds in effect from time to time shall be referred
to as the "core funds," and the mutual funds in effect from time to time shall
be referred to as the "mutual funds."
(b) TRANSFERS TO, AMONG AND FROM THE MUTUAL FUNDS. Amounts may be
invested in the mutual funds (other than via transfers among mutual funds) only
via transfers from the core funds. A Participating Employee shall designate the
amount to be transferred from the core funds to the mutual funds in dollars with
the minimum transferred amount being $1,000.00, subject to such other
requirements as may be imposed by the mutual fund managers. A Participating
Employee may transfer up to 80% of the amount credited to his Account in any
core fund (other than his ESOP Account) except that a Participating Employee may
transfer up to 100% of the amount credited to his Account in the Interest Income
Fund (as described in the Trust Agreement), both being determined as of the end
of the month in which the transfer is initiated. Transfers from the core funds
to the mutual funds shall be effective as of the end of the month in accordance
with Committee rules. Transfers among mutual funds shall be processed more
frequently in accordance with procedures established by the mutual fund managers
and Charles Schwab & Co., Inc. Transfers from the mutual funds to the core
funds shall be processed on the day received, with a holding account being
established to hold the proceeds of the sale of mutual fund shares until the end
of the month, at which time the amount in the holding account shall be credited
to the core funds designated by the Participating Employee.
(c) DISTRIBUTIONS, WITHDRAWALS AND LOANS. Notwithstanding anything in
Sections 9 and 10 to the contrary, the amounts available to a Participating
Employee for distribution, withdrawal and loan under the Plan shall include only
the amounts credited to the Participating Employee's Account that are invested
in the core funds.
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SECTION 8. MAINTENANCE AND VALUATION OF ACCOUNTS; ESOP LOAN ALLOCATIONS.
1. MAINTENANCE OF SEPARATE ACCOUNTS. Each Participating Employee shall
be furnished a statement of his Account at least annually and as soon as
practicable after any investment transfer, distribution, withdrawal or restoral
or at such other time as may be determined by the Committee. Such statement
shall be considered to reflect accurately the status of a Participating
Employee's Account for all purposes under this Plan.
2. VALUATION OF ACCOUNTS. The interest of a Participating Employee's
Account in each investment fund shall be represented by Units. The Value of a
Unit in each investment fund shall be determined as of the end of each calendar
month by dividing the total number of Units in each investment fund credited to
the Accounts of all Participating Employees immediately prior to the end of such
month into the excess of the then value of all the assets then held by the
Trustee with respect to such investment fund over the dollar amount of
additional contributions credited to such fund for such month.
Following such determination of the value of the Units in each investment
fund, the Account of each Participating Employee who has selected such
investment fund shall be credited, as of the end of the calendar month as of
which the determination is made, with a number of Units in such investment fund
determined by dividing the value of such a Unit into the amount of additional
contributions initially credited to his Account as of the last day of such month
in such investment fund.
The ESOP Fund for recordkeeping purposes shall be divided into a subfund
for BellSouth Shares attributable to top up contributions as described in
Section 5.5 and a separate subfund for BellSouth Shares released from each ESOP
Loan Suspense Account as described in Section 8.3(b). A separate Unit value
shall be maintained for each such subfund. The value of Units for a subfund for
BellSouth Shares released from an ESOP Loan Suspense Account shall be determined
under this Section 8.2 without regard to Employing Company Contributions and
ESOP Dividends (or the earnings thereon) to be used to repay the applicable ESOP
Loan, and such Units shall be credited to Participating Employees' ESOP
Accounts as provided in Section 8.3(c) and 8.3(d). All such subfunds shall
start with an initial Unit value of 1.0.
All investment funds shall be invested and valued in the manner set forth
in the Trust Agreement.
3. ESOP LOAN ALLOCATIONS.
(a) ESOP LOAN PAYMENT. The repayment of principal and interest on each
ESOP Loan shall be made by the Trustee when due in accordance with directions
from BellSouth.
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(b) RELEASE FROM ESOP LOAN SUSPENSE ACCOUNT. The total number of
BellSouth Shares released from an ESOP Loan Suspense Account as a result of a
principal and interest payment made on an ESOP Loan shall equal the number of
BellSouth Shares held in the ESOP Loan Suspense Account with respect to such
ESOP Loan multiplied by a fraction. The numerator of such fraction shall be the
amount of such principal and interest payment. The denominator of such fraction
shall be the sum of the numerator plus the principal and interest remaining to
be paid on such ESOP Loan under the amortization schedule for such ESOP Loan.
The number of future payments under such ESOP Loan must be definitely
ascertainable and shall be determined without taking into account any possible
extensions or renewal periods. If the effective interest rate under the ESOP
Loan is variable, the interest to be paid in future periods shall be computed
for purposes of determining such fraction by using the interest rate then in
effect. The BellSouth Shares which are released from the ESOP Loan Suspense
Account in accordance with the rules in this Section 8.3(b) shall be transferred
to the ESOP Fund, and Units representing an investment in such BellSouth Shares
shall be allocated to Participating Employees' individual ESOP Accounts in the
manner specified in subparagraphs (c) and (d) of this Section 8.3.
(c) ESOP ACCOUNT DIVIDEND ALLOCATION. If ESOP Dividends on BellSouth
Shares credited to a Participating Employee's ESOP Account are used to make a
principal or interest payment on an ESOP Loan, Units representing the value of
the BellSouth Shares released as a result of such payment from the ESOP Loan
Suspense Account and transferred to the ESOP Fund first shall be credited to
such Participating Employee's ESOP Account. The Units so credited shall be
determined by dividing the ESOP Dividends from such Participating Employee's
ESOP Account used to make such principal or interest payment by the fair market
value of a BellSouth Share on the date as of which the credit is made in a
manner which satisfies the requirements of Code section 404(k).
(d) MATCH ALLOCATION. After the requirements of paragraph (c) of this
Section 8.3 have been satisfied with respect to an ESOP Loan payment made in
whole or in part with ESOP Dividends, Units representing an investment in all
remaining BellSouth Shares that have been released from the ESOP Loan Suspense
Account to the ESOP Fund as a result of such payment shall be allocated to the
ESOP Account of each Participating Employee as of such dates and in such amounts
as specified in Section 5.1.
(e) LEVERAGED ESOP PROTECTIONS. No BellSouth Shares acquired with the
proceeds of an ESOP Loan shall be subject to a put, call or other option or
other similar arrangement while held by and when distributed from this Plan
except to the extent permissible under Code section 4975, and BellSouth shall
have no right to amend this Section 8.3(e) absent the receipt of a favorable
determination letter from the Internal Revenue Service with respect to such
amendment. Similarly, BellSouth Shares are traded on the New York Stock
Exchange, and this Plan contemplates that such shares will continue to be traded
on such exchange or in some other established stock exchange. If purchases and
sales of BellSouth Shares through an established stock exchange stop (other than
temporarily), this Plan shall be amended as of the date such
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trading stops to satisfy the requirements under the Code for an employee stock
ownership plan which invests in stock which is not readily tradable on an
established market or is not registered under Section 12 of the Securities
Exchange Act of 1934, as amended.
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SECTION 9. DISTRIBUTION; WITHDRAWAL.
1. METHOD OF PAYMENT. Any distribution from a Participating Employee's
Account under this Section 9 shall be made effective as of the end of a calendar
month and payment to the Participating Employee shall be made as soon as
practicable after the end of such month. Any distribution under Section 9.2,
Section 9.3 or Section 9.4 shall be made in accordance with the following
paragraphs.
(a) BELLSOUTH SHARES. With respect to Units representing investments in
the ESOP Fund and in the BellSouth Shares Fund, payment shall be made at the
Participating Employee's election either completely in BellSouth Shares or in
cash; except that, in the case of any fraction of a BellSouth Share, payment
shall be in cash on the basis of the value per share at the end of the calendar
month as of which distribution is made. For the purposes of distributions there
shall be deemed to be in a Participating Employee's Account at the end of the
calendar month as of which distribution is made a number of BellSouth Shares
determined by dividing the total value of the Units representing investment in
BellSouth Shares in such Participating Employee's Account at the end of such
month by the value per share of BellSouth Shares at the end of such month.
(b) OTHER INVESTMENTS. With respect to Units representing investments
other than in the ESOP Fund and the BellSouth Shares Fund, payment shall be made
at the Participating Employee's election either completely in BellSouth Shares
or in cash; except that, in the case of any fraction of a BellSouth Share,
payment shall be in cash on the basis of the value per share at the end of the
calendar month as of which distribution is made. For the purposes of
distributions in BellSouth Shares, there shall be deemed to be in a
Participating Employee's Account at the end of the calendar month as of which
distribution is made a number of BellSouth Shares determined by dividing the
total value of the Units in such Participating Employee's Account at the end of
such month by the value per share of BellSouth Shares at the end of such month.
(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) Unless the value of the Units in the Participating Employee's
Account exceeds (or at the time of any prior distribution exceeded)
$3,500, or if the payment constitutes a withdrawal, payment of the
Units shall be made in the form
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of a single lump-sum payment without the consent of the Participating
Employee.
(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. If a distribution is to be
made to a Participating Employee in the form of annual installments
payable over his life expectancy, the life expectancy of such
Participating Employee shall be calculated at the time distributions
commence and shall not thereafter be recalculated. The Committee, in
its sole discretion, shall decide whether the Plan shall make the
installment payments directly from the Trust Fund or by purchasing an
annuity contract that is distributed to the 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 1/2 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 1/2
(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)
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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 the Code (including Code section 409(o) or 411(d)(6)) or by any
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.
2. WITHDRAWALS WITHOUT HARDSHIP. Not more than once in any consecutive
six-calendar month period, a Participating Employee (including a Participating
Employee who is a former Employee) 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 nonvested amounts for a Participating Employee who
is a former Employee whose employment terminated before July 1, 1989) credited
to such person's Account (excluding for this purpose the ESOP Account of a
Participating Employee who is an Employee, but including the ESOP Account of a
Participating Employee who is a former Employee); provided, that in the case of
a Participating Employee who is an Employee, who has not attained age 59-1/2, 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).
(a) If the value of all Units with respect to which a withdrawal may be
made is less than $500.00, no withdrawal less than the full amount available for
withdrawal shall be permitted.
(b) If a Participating Employee makes more than one withdrawal pursuant to
this section 9.2 in any Plan Year, Employing Company Contributions on behalf of
such Participating Employee shall be suspended for a three-calendar month period
commencing on the first day of the month following the valuation date of such
subsequent withdrawal. Such three month period of suspension of Employing
Company Contributions shall not constitute a period of suspension for purposes
of Section 13.
3. HARDSHIP WITHDRAWALS OF BEFORE-TAX CONTRIBUTIONS. A Participating
Employee who is an Employee and who has not reached age 59-1/2 and is not
disabled may request a cash withdrawal, effective as of the end of any calendar
month, of his Before-Tax Contributions and the earnings applicable to his
Before-Tax Contributions credited to his Account through December 31, 1988 only
if the withdrawal is because of a financial hardship. A request for a
withdrawal for a financial hardship will be granted only if the Committee
determines (on the
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basis of all the relevant facts and circumstances and in accordance with the
regulations under Code section 401(k)) that the withdrawal is necessary to
satisfy an "immediate and heavy financial" need of the Participating Employee.
An "immediate and heavy financial" need shall mean:
(1) the payment of expenses for medical care described in Code section
213(d) incurred by the Participating Employee, his spouse, or his
dependents (as defined in Code section 152) or amounts necessary for
those persons to obtain such medical care,
(2) the purchase (excluding mortgage payments) of a principal residence
for the Participant,
(3) the payment of tuition and related educational fees for the next 12
(twelve) months of post-secondary education for the Participating
Employee, his spouse, his children or his dependents (as defined in
Code section 152),
(4) the prevention of the eviction of the Participating Employee from his
principal residence or foreclosure on the mortgage on the
Participating Employee's principal residence, or
(5) the need to meet such other conditions as set forth in the Code or as
the Internal Revenue Service officially states is permissible under
Code section 401(k).
A withdrawal generally shall be determined to be necessary to satisfy such
immediate and heavy financial need only if the Participating Employee
demonstrates to the Committee that the need cannot be relieved:
(a) through reimbursement or compensation by insurance or
otherwise,
(b) by reasonable liquidation of the Participating Employee's
assets and the assets of the Participating Employee's spouse and minor
children which are reasonably available to the Participating Employee,
to the extent such liquidation would not in itself cause an immediate
and heavy financial need,
(c) by cessation of the Participating Employee's contributions
under Section 4,
(d) by other distributions or nontaxable loans (at the time the
loans are made) from this Plan and all other plans maintained by his
Employing Company or any other employer, or
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(e) by borrowing from commercial sources on reasonable
commercial terms.
The Committee in its discretion may rely on the participating Employee's
representation that such resources are not available in lieu of independently
ascertaining such facts.
A request for a withdrawal shall be submitted to the Committee or its
delegate in accordance with Committee rules and shall be accompanied or
supplemented by such evidence as it may reasonably require. If the Committee
grants a request for a hardship withdrawal, such withdrawal shall be made first
from the Participating Employee's Before-Tax Supplemental Account and thereafter
from his Before-Tax Basic Account to the extent that the Committee deems
necessary to relieve such hardship.
The amount of such withdrawal may include any amounts necessary to pay any
federal, state or local income taxes or penalties reasonably anticipated to
result from such withdrawal.
4. DISTRIBUTION ON TERMINATION OF EMPLOYMENT.
(a) RETIREMENT OR OTHER TERMINATION OF EMPLOYMENT EXCEPT DEATH OR
TRANSFER. If a Participating Employee separates from service as an Employee for
any reason other than death:
(1) no Units in his Account shall be forfeited;
(2) subject to the terms of paragraph 4(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 (or at the
time of any prior distribution exceeded) three thousand five
hundred dollars ($3,500.00), a Participating Employee may elect
in accordance with Committee rules to defer distribution until a
future month, but not later than April 1 of the calendar year
following the calendar year in which the Participating Employee
attains age 70-1/2; and
(3) contributions made by or on behalf of a Participating Employee
under Section 4 during the calendar month in which such
Participating Employee retires or separates from service shall be
refunded to him in accordance with Committee rules except to the
extent such contributions are reflected in the value of Units
distributable to him under Section 9.4(a)(2).
(b) DEATH. If a Participating Employee dies while an Employee, all of 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
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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.
(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 again becomes eligible to receive a distribution from the Plan pursuant
to the terms of the Plan. Notwithstanding the foregoing, if a Participating
Employee's benefit payments have commenced in the form of installment payments
for which an annuity contract has been purchased and distributed, payments under
such annuity contract shall not cease but shall continue during the period of
his reemployment.
5. REQUIRED DISTRIBUTION. 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 (1) 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 from 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 70-1/2 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 (other than Units representing nonvested
amounts) 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). Notwithstanding anything to the contrary in this Plan,
(a) all distributions under this Plan will be made in accordance with
applicable regulations issued under Code section 401(a)(9), including without
limitation any applicable regulation interpreting Code section 401(a)(9)(G), and
Code section 409(o);
(b) any distribution required under the minimum incidental death benefit
requirements of Code section 401(a)(9)(G) shall be treated as a distribution
required under this Section 9.5; and
(c) the provisions of this Section 9.5 will control in the event that any
distribution required under Section 9.1(d) is inconsistent with Code section
401(a)(9) or Code section 409(o).
6. UNDELIVERABLE AMOUNTS. In the event the Committee is unable to locate
a Participating Employee or, in the case of a deceased Participating Employee,
the designated beneficiary, surviving Spouse, or beneficiary of the
Participating Employee's estate, as the case may be, after written notice to the
last known mailing address of the payee and such additional
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effort, if any, as the Committee deems reasonable under the circumstances, and
no claim is filed for the amount so payable within a reasonable time after the
payments are to commence to such missing payee, the amount so payable may be
treated as abandoned. The amount of such abandoned Account shall be applied to
reduce future top up Employing Company Contributions by an Employing Company as
described in Section 11 of the Plan. Notwithstanding the foregoing, the amount
of such abandoned Account shall be reinstated and paid to such Participating
Employee, designed beneficiary, surviving Spouse or beneficiary of the
Participating Employee's estate, as the case may be, in the event that such
person thereafter files a claim for the benefit while the Plan is in effect and
demonstrates to the satisfaction of the Committee that such person is in fact
the missing payee. Notwithstanding anything to the contrary contained herein,
such reinstatement and payout shall be made prior to any reduction of Employing
Company Contributions under Section 11 of the Plan and shall be made first from
forfeitures, if any, next from Plan earnings and, if such amounts are
insufficient to satisfy the reinstatement required by this Section, from current
top up Employing Company Contributions, if any.
7. PARTICIPATING EMPLOYEE CONSENTS. Effective as of the date of a
determination letter first issued by the Internal Revenue Service stating that
the Plan, as amended by this Section 9.7, is qualified under Code section
401(a), any written notice, election or consent requirement applicable to
distributions and withdrawals under this Section 9 shall be deemed satisfied if
a Participating Employee uses a personal identification number in conjunction
with a telephonic request for a distribution or withdrawal and follows such
other procedures (which shall not include the requirement of a written
application or any other form of written consent within the 90-day period
preceding the day on which the loan is made) as are established by the
Committee.
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SECTION 10. LOANS.
A Participating Employee who is a party in interest (as defined in Section
3(14) of ERISA) with respect to the Plan may request a loan from the Plan in
accordance with such procedures as the Committee establishes from time to time.
The Committee shall grant all such loan requests on a reasonably equivalent
basis, subject to the following conditions:
(1) The principal amount of a loan made under this Section 10 (when added
to the outstanding balance of all other loans from the Plan) to a
Participating Employee shall not exceed the lesser of (a) $50,000 as
reduced by the excess, if any, of (i) the highest outstanding balance
of loans from the Plan during the one-year period ending on the day
before the date as of which such loan is made over (ii) the
outstanding balance of loans from the Plan on the date as of which
such loan is made, or (b) 50% of the sum of the Participating
Employee's Before-Tax Basic Account, Before-Tax Supplemental Account
and Rollover Account at the time the loan is made (where, for purpose
of this Section 10(1), this Plan and all other plans described in Code
section 401 which are maintained by an Affiliate or a Subsidiary shall
be treated as one plan).
(2) The loan is secured by no more than 50% of the Participating
Employee's nonforfeitable interest in his Account immediately after
the origination of the loan.
(3) The loan provides for the repayment (which for a Participating
Employee who is an active Employee shall be made only through payroll
deductions unless otherwise approved by the Committee in accordance
with rules established by the Committee) of principal and interest in
substantially level installments not less frequent than quarterly over
a period of at least two years but no more than five years.
Prepayment of the loan in a lump-sum amount may be made after the
initial one year installment period. The payroll deductions for loan
repayments to the Plan shall be made prior to the collection of any
contributions.
(4) The interest rate for the loan shall be the base rate on corporate
loans at large U.S. money center commercial banks ('Prime Rate') as
reported in the Wall Street Journal for the last business day of the
calendar quarter immediately preceding the calendar quarter in which
the loan is granted plus any premium and minus any discount which the
Committee deems appropriate and commercially reasonable under the
circumstances and consistent with applicable law. The Committee's
determination of the applicable interest rate shall be final.
(5) The loan, if made to a Participating Employee who is an Employee,
shall become due and payable in full in the event that the
Participating Employee's employment terminates for any reason other
than a transfer (which does not involve a Trust-to-
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Trust Transfer or a distribution) in accordance with Section 16 prior
to the complete repayment of such loan and, further, the Trustee shall
have the right to deduct any amount due under the loan from any amount
which becomes distributable under this Plan to, or on behalf of, the
Participating Employee.
(6) The principal amount of the loan is at least $1,000.00.
(7) The administrative expenses for the loan shall be paid by the
Participating Employee.
(8) If a Participating Employee with an outstanding loan balance requests
a withdrawal under Section 9.3, the Committee shall grant such
withdrawal in accordance with the terms of Section 9, provided such
withdrawal does not result in the Participating Employee's outstanding
loan balance exceeding his remaining Before-Tax Basic Account and
Before-Tax Supplemental Account balances in the aggregate, or, to the
extent not prohibited by Code section 401(k)(2)(B), the Committee may
reduce the Participating Employee's outstanding loan balance by
designating such reduction as a distribution if the Committee deems it
advisable to meet the financial needs of the Participating Employee
and, in such event, no limitation on prepayment shall apply.
(9) A Participant may have no more than two outstanding loans from the
Plan at any time.
(10) If required under the Code or ERISA, the Participating Employee and,
if applicable, his spouse (at the time the loan is made) must consent
in writing to such loan. Such written consent shall be made in
accordance with such procedures as the Committee establishes from time
to time. Effective as of the date of a determination letter first
issued by the Internal Revenue Service stating that the Plan, as
amended by this sentence, is qualified under Code section 401(a), this
written consent requirement shall be deemed satisfied if a
Participating Employee uses a personal identification number in
conjunction with a telephonic request for a loan and follows such
other procedures (which shall not include the requirement of a written
application or any other form of written consent within the 90-day
period preceding the day on which the loan is made) as are established
by the Committee.
(11) The loan shall become due and payable in full if the Participating
Employee's obligation to repay the loan has been discharged through a
bankruptcy or any other legal process or action which did not actually
result in payment in full.
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(12) The loan shall be in default at such time as the Participating
Employee (a) fails to make three consecutive months' loan repayments;
(b) fails to repay the loan in full either (i) before the end of the
five-year maximum loan period set forth in Section 10(3) or (ii) at
such earlier time as the loan becomes due and payable under this
Section 10; or (c) satisfies any other default condition set forth in
the terms and conditions of the promissory note that accompanies the
loan. Upon default of the loan, the Trustee shall foreclose on such
loan and exercise the Plan's security interest in the Participating
Employee's Account by reducing the balance in such Account by the
principal amount of the loan plus any accrued but unpaid interest due
at the time of the default (as determined without regard to whether
the loan is discharged through bankruptcy or any other legal process
or action which does not actually result in payment in full);
provided, however, that foreclosure on such loan shall not occur and
the Trustee shall not exercise the Plan's security interest in such
Account until a distributable event occurs under this Plan.
(13) The Participating Employee agrees to such other terms and conditions
as the Committee deems appropriate under the circumstances.
If a loan is authorized, the Committee, at its discretion, shall direct the
transfer as of the last day of a calendar month of the principal amount of such
loan from the Participating Employee's subaccounts proportionately from the
investments of each subaccount, to a special loan Account for such Participating
Employee, in accordance with a procedure which the Committee deems appropriate
under the circumstances. The loan shall be made from such loan Account, and
principal and interest payments on the loan shall be credited when made to such
loan Account. Payments so credited on or before the last day of a month shall
be transferred as of such date back to the Participating Employee's Account in
such a manner as the Committee deems appropriate under the circumstances and
shall be reinvested in the same manner as a current contribution in accordance
with the Participating Employee's current investment election.
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SECTION 11. RESTORALS OF FORFEITED AMOUNTS.
1. HOW RESTORED. If there was a forfeiture of Units representing
nonvested amounts in a Participating Employee's Account for an Employee or a
former Employee, the amount forfeited shall subsequently be restored to such
Account, subject to the conditions of this Section 11, through contributions of
the Employing Company if:
(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.
2. DEADLINE FOR REPAYMENT. Any repayment made under this Section 11.2
must be made at a time when the individual is an Eligible Employee in the active
service of an Employing Company and on or before the earlier of (1) five years
after the first date on which the individual is subsequently reemployed by an
Employing Company, (2) the end of a period of five consecutive Breaks in Service
commencing after the distribution, if the Employee separates from service (for
any reason other than transfer in accordance with Section 16) following the
withdrawal or distribution, or (3) in the case of a withdrawal under Section
9.2, five years after the date of such withdrawal.
3. HOW REPAYMENTS AND RESTORALS ARE INVESTED AND CREDITED. Repaid
amounts and restored amounts shall be nonforfeitable and shall be invested
according to the Participating Employee's investment direction in effect at the
time of the repayment or restoral. The number of Units credited to the
Participating Employee's Account through the investment of the repaid amounts
and restored amounts shall be based on the value of the Units representing each
type of investment as of the end of the month in which such repayment or
restoral is made.
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SECTION 12. ADMINISTRATION BY TRUSTEE.
1. TRUST AGREEMENT. BellSouth has entered into the Trust Agreement with
the Trustee, and the Trust Agreement shall be a part of this Plan. The Trust
Agreement shall provide, among other things, that all funds received by the
Trustee thereunder will be held by the Trustee or an insurance company or
companies, or by other financial institutions, and that no part of the corpus or
income of the Trust Fund held by the Trustee shall be used for, or diverted to,
purposes other than for the exclusive benefit of Participating Employees or
their beneficiaries and shall set forth the rules on how BellSouth Shares shall
be voted and, if there is a tender offer for such shares, how such shares shall
be tendered. BellSouth shall have authority to remove such Trustee or any
successor Trustee, and any Trustee or any successor Trustee may resign. Upon
removal or resignation of a Trustee, BellSouth shall appoint a successor
Trustee. BellSouth also shall have authority to direct that there shall be more
than one Trustee under the Trust Agreement and to determine the portion of the
assets under the Trust Agreement to be held by each such Trustee. If such a
direction is given, BellSouth shall appoint the additional Trustee or Trustees,
and each Trustee shall hold and administer and keep records with respect to the
portion of such assets held by it. BellSouth also shall have such other powers
and duties under the Trust Agreement as set forth from time to time in such
agreement.
2. COMMINGLED TRUST. The Trustee may, but shall not be required to,
commingle, hold and invest as one trust all contributions made by all Employing
Companies under this Plan and other qualified plans of Affiliates or
Subsidiaries.
3. AUDIT. BellSouth shall select a firm of independent certified public
accountants to examine and report on the financial position and the results of
operation of the Trust Fund.
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SECTION 13. ELECTION TO VOLUNTARILY SUSPEND CONTRIBUTIONS.
1. VOLUNTARY SUSPENSION OF CONTRIBUTIONS. A Participating Employee may
elect to voluntarily suspend contributions under Section 4 in accordance with
Committee rules.
2. LIMITATIONS ON VOLUNTARY SUSPENSION. A Participating Employee may
voluntarily suspend contributions under Section 4 only once in any Plan Year and
no suspension shall be for a period of less than three months. These
limitations shall not apply in case of a suspension in the event the
Participating Employee is absent on account of sickness or disability in
accordance with Section 14.
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SECTION 14. LEAVE OF ABSENCE; LAYOFF; ABSENCE ON ACCOUNT OF SICKNESS OR
DISABILITY.
1. LEAVE OF ABSENCE. If a Participating Employee is granted a paid leave
of absence by his Employing Company, there shall be no contributions made under
Section 4 from any compensation paid during the period of such leave, and
contributions automatically shall be deemed to be suspended during such period.
2. LAYOFFS. If a Participating Employee is laid off, there shall be no
contributions made under Section 4 from any compensation paid during such period
of layoff, and contributions automatically shall be deemed to be suspended
during such period. If at the end of 12 months the Participating Employee has
not returned as an Eligible Employee in active service, then, notwithstanding
any other provision of this Plan, his employment shall be deemed to have been
terminated for purposes of distribution under this Plan, and such Participating
Employee's Account shall become nonforfeitable at such time; provided, however,
no distribution of such Participating Employee's Account shall be made until
otherwise permissible under Code section 401(k). The layoff of the
Participating Employee in accordance with any comparable provisions of a
Predecessor Plan shall be considered as a layoff for the purposes of the
provisions of this Section 14.2.
3. ABSENCES ON ACCOUNT OF SICKNESS OR DISABILITY.
a. If a Participating Employee is absent on account of sickness or
disability and is receiving short-term sickness payments or disability benefit
payments under his Employing Company's short term disability plan or anticipated
disability program, contributions under Section 4 will be made from such
payments to the extent such payments constitute Eligible Compensation, and
reference to contributions from compensation in this Plan shall include
contribution from such payments. The Participating Employee may at any time
elect to suspend contributions from such payments without penalty in accordance
with Section 13 and Committee rules.
b. Contributions from Eligible Compensation may be resumed following the
end of the period during which the Participating Employee is absent (in
accordance with Section 14.3.a) on account of sickness or disability in
accordance with Committee rules.
c. If immediately following the end of the period during which a
Participating Employee is absent on account of sickness or disability the
Participating Employee is not in active service or on a leave of absence, his
employment shall be deemed to have been terminated for purposes of distribution
under this Plan, and such Participating Employee's Account shall become
nonforfeitable at such time; provided, however, no distribution of such
Participating Employee's Account shall be made until otherwise permissible under
Code section 401(k).
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SECTION 15. EFFECT OF SUSPENSION OF CONTRIBUTIONS.
Whenever the making of contributions under Section 4 is suspended for a
Participating Employee for any period, the related Employing Company
Contributions, if applicable, for such Participating Employee also shall be
suspended for such period. If an event causing suspension occurs during a
period when a suspension is already in effect, the second period of suspension
shall run concurrently with the first, except that a period of suspension
pursuant to Section 9.2 shall not run concurrently with, but shall be added to,
any other period of suspension under this Plan, whether or not such other period
of suspension also was under Section 9.2. When all suspensions are ended,
unless the participation of the Participating Employee has been terminated,
contributions may be resumed with the first Enrollment Date after all
suspensions have ended, and Employing Company Contributions shall also be
resumed. There shall be no makeup of contributions with respect to a period of
suspension.
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SECTION 16. CHANGE TO NON-MANAGEMENT EMPLOYEE; TRANSFER TO ANOTHER EMPLOYING
COMPANY; TRANSFER TO AN AFFILIATE OR SUBSIDIARY NOT AN EMPLOYING
COMPANY; OTHER INTERCHANGE EMPLOYEES.
1. CHANGE TO NON-MANAGEMENT EMPLOYEE. If a Participating Employee ceases
to be an Eligible Employee as a result of a change in status from Management
Employee to Non-Management Employee for a period of more than thirty days,
contributions by or on behalf of such Participating Employee under Section 4
shall be suspended during such period. If such Participating Employee remains a
Non-Management Employee, he may elect within the six-calendar month period
beginning with the end of the month in which he became a Non-Management Employee
and in accordance with Committee rules, a Trust-To-Trust Transfer from this Plan
to the BellSouth Savings and Security Plan except for his ESOP Account. If such
Participating Employee remains a Non-Management Employee, he may elect, within
the six-calendar month period beginning with the end of the month in which he
because a Non-Management Employee and in accordance with Committee rules, a
Trust-To-Trust Transfer (other than amounts in his ESOP Account) from this Plan
to the BellSouth Savings and Security Plan. If no such election is made within
such six-month period, the Committee shall automatically transfer the value of
his Account in this Plan (other than amounts in his ESOP Account) to such plan
as soon as practicable after the end of such six-month period in accordance with
the terms of such plan.
2. TRANSFER TO ANOTHER EMPLOYING COMPANY. The effect under this Plan of
a transfer of a Participating Employee from one Employing Company to another
Employing Company shall be determined under Committee rules and Interchange
Agreements, if any, which address such transfers.
3. TRANSFER TO AN AFFILIATE OR SUBSIDIARY NOT AN EMPLOYING COMPANY. A
Participating Employee who terminates employment with an Employing Company and
who within a period of 30 days from the date of such termination commences
employment with an Affiliate or a Subsidiary which is not an Employing Company
shall be deemed to have transferred to such Affiliate or Subsidiary in
accordance with this Section 16 and may elect (1) that the Participating
Employee's Account remain in this Plan until his employment with such Affiliate
or Subsidiary terminates, (2) that a Trust-To-Trust Transfer be made (except for
his ESOP Account) from this Plan to a Qualified Savings Plan maintained by such
Affiliate or Subsidiary, or (3) that his Account in this Plan be immediately
distributed without forfeiture, provided such distribution is permissible under
Code section 401(k) and the rules respecting the ESOP. Such elections shall be
made in accordance with Committee rules and the provisions of any applicable
Interchange Agreement.
4. OTHER INTERCHANGE EMPLOYEES. Unless Section 16.2 or Section 16.3
applies, a Participating Employee covered by an Interchange Agreement who
terminates employment with an Employing Company and within a period of 30 days
from the date of such termination commences employment with an Interchange
Company shall be deemed under this Section 16 to
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have transferred to the Interchange Company and such Participating Employee's
Account shall remain in this Plan during the three-month period beginning with
the effective date of such transfer to the Interchange Company, and at the end
of such three-month period, the distribution of the Participating Employee's
Account shall be made as soon as practicable after such distribution is
permissible under Code section 401(k) and the rules respecting the ESOP.
Notwithstanding the preceding sentence, the Participating Employee may within
such three-month period elect a Trust-To-Trust Transfer (except for his ESOP
Account) from this Plan to a Qualified Savings Plan maintained by the
Interchange Company. Such transfer shall be made in accordance with Committee
rules and only if such a transfer is specifically provided for by the applicable
Interchange Agreement.
5. VALUE TRANSFERRED. If a Participating Employee elects a Trust-To-
Trust Transfer from this Plan to a Qualified Savings Plan in accordance with the
provisions of this Section 16, the Trustee shall transfer assets or cash equal
to the value of his Account to the trustee of such plan as soon as practicable
after such value has been determined. Such determination shall be made in
accordance with the rules for determining distributions. The value credited to
the Participating Employee's account in the Qualified Savings Plan shall be the
same as the value credited to the Participating Employee's Account in this Plan
immediately prior to the transfer; provided, however, that notwithstanding
anything to the contrary, the Participating Employee's account in such Qualified
Savings Plan shall thereafter be governed entirely by the terms and conditions
of such Qualified Savings Plan.
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SECTION 17. DESIGNATION OF BENEFICIARIES; SPOUSAL CONSENT; DEFINITION OF
SPOUSE; DISTRIBUTIONS UPON DEATH.
1. DESIGNATION OF BENEFICIARIES.
a. Except as provided in Section 17.1(b) and Section 17.2, a
Participating Employee may designate a beneficiary or beneficiaries to receive
all or part of the Participating Employee's Account in case of his death, and
may change or revoke such designation at any time in accordance with Committee
rules.
b. If the Participating Employee's beneficiary designation includes
a trust or other person (other than an individual) as either the primary or a
contingent beneficiary, the Committee shall have the right at its discretion to
disregard such designation for purposes of this Plan.
c. A beneficiary designation in effect under the comparable
provisions of a Predecessor Plan shall be accepted by the Committee if no
designation has been made under this Plan and if such designation satisfies the
requirements of applicable law.
2. SPOUSAL CONSENT. Notwithstanding Section 17.1, if a Participating
Employee has a surviving "Spouse" (as defined in Section 17.3) at his death, his
surviving Spouse shall be deemed to be his designated beneficiary for the entire
nonforfeitable amount in this Account, unless:
(1) such Spouse has consented (or consents) in writing as to the
designation of a specific person or persons (including a trust) as
beneficiary of all or part of the Participating Employee's Account, and
such consent is witnessed by a notary public and acknowledges the effect of
such designation; or
(2) the Participating Employee before his death has established to
the satisfaction of the Committee that such consent may not be obtained
because there is no Spouse, the Spouse cannot be located or because of any
other circumstances as may be described in regulations under Code section
417 under which spousal consent is not required.
3. DEFINITION OF SPOUSE. For purposes of this Section 17, the term
"Spouse" shall mean the individual who the Committee determines, in accordance
with the laws of the state of which the Participating Employee was a resident on
the date of his death, is the Participating Employee's lawful husband or wife on
the date of the Participating Employee's death, which determination shall be
final and binding on all parties.
4. DISTRIBUTION UPON DEATH. In case of the death of a Participating
Employee, the amount in the Participating Employee's Account with respect to
which a designation of
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beneficiary has been made (to the extent it is valid and enforceable under
applicable law) shall be distributed in accordance with this Plan to the
designated beneficiary or beneficiaries. If no beneficiary is so designated or
no such designated beneficiary survives the Participating Employee, the amount
in the Participating Employee's Account distributable upon his death shall be
distributed to the Participating Employee's surviving Spouse, if any, or, if
there is no surviving Spouse, to the Participating Employee's estate. If the
Committee determines that there is any bona fide question as to the legal right
of any beneficiary to receive a distribution under this Plan, the amount in
question may be paid to the surviving Spouse, if any, or, if there is no
surviving Spouse, to the estate of the Participating Employee, or in
either case to a court of competent jurisdiction, in which event the Trustee,
BellSouth and the Employing Company shall have no further liability to anyone
with respect to such amount.
5. FORFEITURE OF BENEFITS BY KILLERS.
Notwithstanding anything to the contrary in the Plan, no distribution of
benefits shall be made under any provision of the Plan to any individual who
kills the Participating Employee in the Plan with respect to whom such
distribution would otherwise be payable. An individual shall be deemed to have
killed a Participating Employee for purposes of this Section 17.5 if, by virtue
of such individual's involvement in the death of the Participating Employee,
such individual's entitlement to an interest in assets of the deceased could be
denied (whether or not there is in fact any such entitlement) under any
applicable law, state or federal, including without limitation laws governing
intestate succession, wills, jointly-owned property, bonds, and life insurance.
For purposes of the Plan, any such killer shall be deemed to have predeceased
the Participating Employee. The Committee may withhold distribution of benefits
otherwise payable under the Plan for such period of time as is necessary or
appropriate under the circumstances to make a determination with regard to the
application of this Section 17.5.
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SECTION 18. BENEFITS NOT ASSIGNABLE; QUALIFIED DOMESTIC RELATIONS ORDERS.
1. BENEFITS NOT ASSIGNABLE. Except as otherwise provided by law and
Section 18.2, no benefit, payment or distribution under this Plan shall be
subject either to the claim of any creditor of a Participating Employee or
beneficiary or to attachment, garnishment, levy, execution or other legal or
equitable process by any creditor of such person, and no such person shall have
any right to alienate, commute, anticipate or assign (either at law or equity)
all or any portion of any benefit, payment or distribution under this Plan.
2. QUALIFIED DOMESTIC RELATIONS ORDERS.
a. Notwithstanding Section 18.1, this Plan shall provide for payment
of benefits in accordance with the applicable requirements of a "qualified
domestic relations order" as that term is defined in Code section 414(p). The
Committee, in accordance with uniform and nondiscriminatory procedures
established by the Committee, shall determine the qualified status of such order
and administer any distributions under this Plan pursuant to such order in
accordance with the rules set forth in Code section 414(p), and any such
determination or payment shall be final and binding on all parties.
b. If any payments were being made under a Predecessor Plan on
January 1, 1985 pursuant to a domestic relations order, such order shall be
treated for all purposes under this plan as a qualified domestic relations order
within the meaning of Code section 414 (p) with respect to that portion of an
Account subject to such order.
c. Any interest in a Participating Employee's Account which is
payable to an alternate payee (as described in Code section 414(p)) under a
qualified domestic relations order before the date such interest is payable
under Section 9.4 to such Participating Employee nevertheless shall be payable
under this Section 18.2 to such alternate payee in accordance with the terms of
such order without regard to the distribution events described in Section 9.4.
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SECTION 19. EXPENSES.
Expenses of administering the Plan shall be payable as specified in the
Trust Agreement. Brokerage fees, transfer taxes and other expenses incident to
the purchase or sale of securities by the Trustee shall be deemed to be part of
the cost of such securities or deducted in computing the proceeds therefrom, as
the case may be. Transfer taxes in connection with distribution of BellSouth
Shares to Participating Employees or their beneficiaries shall be borne by the
Employing Company which last employed the Participating Employee on whose behalf
the distribution was made. Taxes, if any, or income received on any assets held
by the Trustee shall be charged appropriately against the Accounts of a
Participating Employee as the Committee shall determine.
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SECTION 20. MODIFICATION OR MERGER OF PLAN.
1. MODIFICATION. BellSouth by action of its Board of Directors or its
delegate may modify this Plan, provided that no part of the corpus or income
attributable to any funds received by the Trustee for the purposes of this Plan
shall be used for, or diverted to, purposes other than for the exclusive benefit
of Participating Employees or their beneficiaries, and no modification shall
eliminate an optional form of benefit or deprive a Participating Employee of the
nonforfeitable percentage of his Account balance accrued to the date of such
modification except to the extent permissible under Code section 411(d)(6).
BellSouth by action of its Board of Directors may delegate authority to the
Committee with respect to the modification of this Plan. Any modification shall
be effective at such date as BellSouth or the Committee, whichever is
applicable, may determine, except that no such modification may apply to any
period prior to the adoption of the modification by BellSouth or the Committee,
whichever is applicable, unless, in the opinion of BellSouth or Committee,
whichever is applicable, such modification is necessary or advisable in order to
comply with the provisions of the Code (including any rulings thereunder)
relating to the qualification of this Plan or relating to the income tax
exemption of the Trust Fund and would not adversely affect the rights of
Participating Employees in respect of this Plan. Notice of any modification of
this Plan shall be given to the Trustee and to all Employing Companies and,
except for changes which the Committee determines to be of a minor nature and,
in the Committee's judgment, which do not adversely affect their interests and
which are not required to be disclosed under the Code or ERISA, shall also be
given to all Participating Employees. A modification may affect current
Participating Employees as well as future Participating Employees.
2. MERGER OR CONSOLIDATION. There shall be no merger or consolidation of
this Plan with, or transfer of assets or liabilities of this Plan to, any other
plan unless such Participating Employee would (if such other plan then
terminated) receive a benefit immediately after such merger, consolidation or
transfer which is equal to or greater than the benefit the Participating
Employee would have been entitled to receive immediately before such merger,
consolidation or transfer (if this Plan had then terminated).
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SECTION 21. TERMINATION OF CONTRIBUTIONS UNDER PLAN; LIQUIDATION OF THE PLAN.
BellSouth, by action of its Board of Directors, may at any time terminate
contributions under Section 4 for all Participating Employees and all
contributions under Section 5 by all Employing Companies. BellSouth may
terminate an Employing Company's participation in this Plan. Furthermore, if an
Employing Company ceases to be a Subsidiary or an Affiliate (other than through
a merger or consolidation into another Employing Company), such Employing
Company's participation in this Plan shall terminate. Any such termination of
an Employing Company's participation in this Plan shall not be deemed to be a
termination or partial termination of this Plan except to the extent required
under the Code. No termination shall have the effect of diverting the amounts
held by the Trustee to purposes other than as provided in this Plan.
Upon a termination of all contributions by an Employing Company, this Plan
shall nevertheless remain in effect as to such Employing Company in other
respects, except that (1) no Participating Employee under this Plan as adopted
by such Employing Company shall thereafter forfeit any amounts in his Account
and (2) instead of the withdrawal and distribution rights specified in Section
9, each such Participating Employee shall, by giving written notice on a form to
be provided for this purpose and delivered to the Committee or its designated
representative prior to a termination of his Employing Company's participation
in this Plan, elect either (a) to leave all Units credited to the Participating
Employee's Account in the Trust Fund held by the Trustee and distributed in a
single distribution upon the Participating Employee's separation from service,
death, disability, attainment of age 59-1/2, or other permissible distribution
events under Code section 401(k), whichever occurs first, or (b) to have all
Units credited to the Participating Employee's Account, excluding the
Participating Employee's Before-Tax Accounts, distributed in a single
distribution as soon as practicable after the last date for making such an
election and to have all Units credited to a Participating Employee's Before-Tax
Accounts distributed in a single sum distribution upon the Participating
Employee's separation from service, death, disability, attainment of age 59-1/2
or other permissible distribution events under Code section 401(k), whichever
occurs first.
Notwithstanding the foregoing, following such a termination of all
contributions by an Employing Company, such Employing Company may, at any time
after such termination, determine that this Plan and the Trust Fund shall be
liquidated as to such Employing Company, in which event distribution shall be
made as soon as permissible under Code section 401(k) and Code section
411(a)(11) to each of its Participating Employees (or any other person or
persons entitled to such distribution under this Plan) of all Units in each such
Participating Employee's Account.
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 form of a single
lump-sum payment of all the vested Units in their Accounts as soon as
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permissible under Code section 401(k) and Code section 411(a)(11). BellSouth
also shall have the right to make the ESOP part of this Plan a separate and
distinct plan for Participating Employees and, if BellSouth exercise that right,
this Plan shall continue without interruption and the ESOP shall continue
without interruption as separate and distinct plans within this documents or, at
BellSouth's option, in separate documents.
Effective January 1, 1992, contributions under Section 4 by Participating
Employees and contributions under Section 5 by the Employing Companies (other
than contributions made with respect to the Plan Year ending December 31, 1991)
shall cease with respect to the following Employing Companies:
BellSouth Enterprises, Inc.
BellSouth Information Systems, Inc.
BellSouth International, Inc.
BellSouth Resources, Inc.
Sunlink Corporation
BellSouth Advertising & Publishing Corporation
BellSouth Mobility Inc.
(such Employing Companies being sometimes referred to as the "BSE Employing
Companies").
No employee of the BSE Employing Companies shall become a Participating
Employee in this Plan after December 31, 1991. Thereafter, contributions shall
be made in accordance with and participation shall be governed by the terms of
the plans of the BSE Employing Companies into which this Plan shall have been
amended and restated. The Before-Tax Basic Account, Before-Tax Supplemental
Account, After-Tax Basic Account, After-Tax Supplemental Account, Employing
Company Account and Rollover Account of each Employee of the BSE Employing
Companies shall be transferred, as soon as administratively practicable after
the adoption of this amendment, to the plan of each such BSE Employing Company
into which this Plan shall have been amended and restated. The ESOP Account of
each such Employee shall be retained and continue to be administered in
accordance with the terms of this Plan.
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SECTION 22. NOTICES TO PARTICIPATING EMPLOYEES; ADMINISTRATIVE NOTICES.
1. NOTICES TO PARTICIPATING EMPLOYEES. Notices, reports and statements
to be given, made or delivered to Participating Employees shall be deemed duly
given, made or delivered when addressed to them and delivered by ordinary mail,
or by company mail, to their last known business or home address.
2. ADMINISTRATIVE NOTICES. Authorizations, designations, directions,
elections or other administrative notices required by this Plan shall be made to
the Savings Plan Administrators (as described in Section 24.3 of this Plan) or
their designated representative or to the Committee or its designated
representative in accordance with Savings Plan Administrator rules or Committee
rules, whichever are applicable under the circumstances.
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SECTION 23. ADOPTION OF THE PLAN BY AN EMPLOYING COMPANY.
1. Any Affiliate or Subsidiary may, by action of its Board of Directors
or equivalent governing body and with the consent of BellSouth, adopt this Plan
and the Trust Agreement by delivering notice of such adoption to the Committee,
BellSouth and the Trustee.
2. Each Employing Company which is not an Affiliate shall maintain this
Plan as a separate and distinct plan for the exclusive benefit of its Employees.
The contributions made by such Employing Company and any forfeiture attributable
to such contributions shall not be used for the benefit of Employees of any
other Employing Company. The disqualification of any such separate plan shall
not affect the qualified status of any other separate plan adopted hereunder or
the tax-exempt status of the trust created by the Trust Agreement.
3. Any modification to this Plan by BellSouth or its delegate
automatically shall be effective as to each Employing Company without any
further action by any Employing Company.
4. All actions and decisions by the Committee automatically shall be
binding upon any Employing Company.
5. Any Employing Company shall be allowed to discontinue participation in
this Plan upon sixty (60) days written notice to BellSouth, the Committee and
the Trustee.
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SECTION 24. ADMINISTRATION AND INTERPRETATION OF PLAN.
1. PLAN ADMINISTRATOR AND PLAN SPONSOR. BellSouth shall be the plan
administrator as that term is defined in ERISA and, exclusively for reporting
and disclosure purposes, shall be the sponsor of this Plan.
2. SAVINGS PLAN COMMITTEE. BellSouth shall appoint a Savings Plan
Committee which shall have such powers as may be necessary to enable it to
administer all claims for Plan benefits for all Employing Companies, except for
powers expressly vested in BellSouth, the Trustee or any investment managers
appointed under the terms of the Trust Agreement. BellSouth shall adopt rules
for operation of the Committee. BellSouth and the Committee may each employ
persons to render advice or to perform administrative or recordkeeping services
with regard to any of its responsibilities under this Plan. The Committee shall
have the exclusive right and authority to determine benefits under the Plan and
to interpret the provisions of the Plan, and its determinations and
interpretations shall be final and conclusive.
3. SAVINGS PLAN ADMINISTRATORS. BellSouth and the Committee may delegate
authority with respect to certain matters to officers or employees of BellSouth
and the other Employing Companies. The Committee shall provide for the
appointment of one or more persons to be known as the "Savings Plan
Administrators", each of whom shall have such authority to grant or deny claims
for benefits under this Plan as delegated to him by the Committee.
4. COMMITTEE RULES. The Committee shall establish such reasonable
nondiscriminatory rules and procedures as it deems appropriate under the
circumstances for the proper administration of this Plan and such rules and
procedures shall be communicated to all affected Participating Employees and
beneficiaries.
5. CLAIMS AND CLAIM PROCESSING. Claims will be processed in accordance
with ERISA and regulations thereunder and the claims processing procedures (as
set forth in the summary plan description for this Plan) shall include, but not
be limited to, the following:
(1) Claims shall be presented to the Savings Plan Administrator who
shall either arrange for payment of the claim or deny the claim. Adequate
and timely notice shall be provided in writing to any person whose claim
has been denied by the Savings Plan Administrator, setting forth the
specific reasons for such denial.
(2) Any person whose claim for benefits has been denied may, within
60 days after receipt of notice of denial, submit a written request for
review of the decision denying the claim to the Committee. In such case,
the Committee shall make a full and fair review of such decision within 60
days (or such longer period of time as is allowed by applicable
regulations) after receipt of a request for review and notify the claimant
in writing of the review decision, specifying the reasons for such
decision.
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6. NAMED FIDUCIARIES. BellSouth and the Committee are each a named
fiduciary, as that term is used in ERISA, with respect to their particular
duties and responsibilities set forth in this Plan. Any person, any group of
persons or any entity may serve in more than one fiduciary capacity with respect
to this Plan (including service both as a trustee and as an administrator).
BellSouth and the Committee may allocate any of their respective
responsibilities for the operation and administration of this Plan consistent
with this Plan's terms, including allocation of responsibilities to an Employing
Company and the Employing Company's Savings Plan Administrator. Named
fiduciaries may delegate any of their responsibilities under this Plan by
designating in writing other persons to carry out any such responsibilities
(other than trustee responsibilities, the delegation of which may be limited by
law) under this Plan, and may employ persons to advise them with regard to any
such responsibilities.
7. COMMUNICATIONS TO THE COMMITTEE; SERVICE OF PROCESS. Communications
to the Committee should be addressed to BellSouth Corporation, Secretary,
Savings Plan Committee, at BellSouth Corporation's primary business address, or
to such other person or address as set forth in the summary plan description for
this Plan. The Secretary of the Committee is hereby designated as agent for
service of legal process with respect to any claims arising under this Plan.
8. APPLICABLE LAW. This Plan shall be governed by the applicable laws of
the state of Georgia to the extent not preempted by applicable Federal law.
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SECTION 25. TOP-HEAVY PROVISIONS.
In the event that the Plan is a "Top-Heavy Plan" as defined in this Section
25 with respect to any Plan Year, the following provisions shall apply with
respect to such Plan Year, notwithstanding any other plan provisions to the
contrary:
1. MINIMUM BENEFITS. Employing Company Contributions under Section 5
allocated to the Account of each "Non-Key Employee" for each Plan Year in which
the Plan is "Top-Heavy" shall equal the lesser of (1) 3% of the "Non-Key
Employee's" compensation (within the meaning of Code section 415) for such Plan
Year or (2) the largest percentage of compensation (within the meaning of Code
section 415) provided through Before-Tax Contributions under Section 4 and
Employing Company Contributions under Section 5 on behalf of any "Key Employee"
for such Plan Year. For this purpose, a "Non-Key Employee" shall mean any
Employee of an Employing Company who is not a "Key Employee" (as defined in Code
section 416(i)), and who is an Eligible Employee on the last day of such Plan
Year.
The preceding paragraph shall not apply to any "Non-Key Employee" who is
also covered by any other defined contribution plan or a defined benefit plan
sponsored by an Employing Company during a Plan Year in which this Plan is "Top-
Heavy" if such Employee is entitled for such Plan Year to a minimum contribution
or minimum benefit accrual under such other defined contribution plan or defined
benefit plan in accordance with Code section 416(c)(1).
If a Non-Key Employee participates in both a defined benefit plan or plans
and a defined contribution plan or plans maintained by BellSouth or any of its
Affiliates, the minimum contribution or minimum benefit required under Code
section 416 (c)(1) shall be provided in the first of the following plans in
which the Non-Key Employee participates:
(1) BellSouth Personal Retirement Account Pension Plan;
(2) BellSouth Pension Plan;
(3) any other defined benefit plan maintained by an Affiliate;
(4) BellSouth Management Savings and Employee Stock Ownership Plan;
(5) BellSouth Savings and Security Plan;
(6) BellSouth Employee Stock Ownership Plan;
(7) any other defined contribution plan maintained by an Affiliate.
2. SECTION 415 LIMITS. If the Plan does not satisfy the provisions of
Code section 416(h)(2), the defined benefit plan fraction and the defined
contribution plan fraction for
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purposes of Code section 415(e) shall be calculated using a factor of 1.0 rather
than 1.25.
3. TOP-HEAVY DETERMINATION. This Plan shall be deemed a "Top-Heavy Plan"
only with respect to any Plan Year in which, as of the "Determination Date", the
aggregate of the Accounts of "Key Employees" under the Plan exceeds 60% of the
aggregate of the Accounts of all Participating Employees under the Plan.
For purposes of this Section 25, the term "Determination Date" shall mean,
with respect to any Plan Year, the last day of the preceding Plan Year. In
determining whether or not this Plan is a "Top-Heavy Plan" with respect to any
Plan Year, the term "Key Employee" shall have the meaning assigned to such term
under Code section 416(i). For purposes of determining the amount of the
Account of any Participating Employee, such amount shall be increased by the
aggregate distributions (if any) made with respect to such Participating
Employee under this Plan during the five-year period ending on the
"Determination Date."
4. AGGREGATION. Each plan of an Employing Company required to be
included in an "Aggregation Group" shall be treated as a "Top-Heavy Plan" if
such group is a "Top-Heavy Group."
For purposes of this Section 25.4, "Aggregation Group" shall mean: (1)
each plan of an Employing Company in which a "Key Employee" is a participant and
(2) each other plan of an Employing Company which enables the plan or plans
described in clause (1) to meet the requirements of Code sections 401(a)(4) or
410. Any plan of an Employing Company that is not required to be included in an
"Aggregation Group" may be treated as part of such group if such group would
continue to meet the requirements of Code sections 401(a)(4) or 410.
For purposes of this Section 25.4, "Top-Heavy Group" means any "Aggregation
Group" if the sum (as of the "Determination Date") of the present value of the
cumulative accrued benefits (as determined under Code section 414 (g)) for "Key
Employees" under all defined benefit plans included in such group and the
aggregate of the accounts of "Key Employees" under all defined contribution
plans included in such group exceeds 60% of a similar sum determined for all
Employees.
5. TRANSFERS. If a distribution made from this Plan is deemed an
"Unrelated Transfer", such distribution shall be recognized pursuant to the
final sentence of Section 25.4. If a distribution made from this Plan is deemed
a "Related Transfer", such distribution shall not be recognized pursuant to the
final sentence of Section 25.5 of this Section 25. For purposes of this Section
25, an "Unrelated Transfer" shall mean a plan-to-plan transfer that is both (1)
initiated by the Employee and (2) made from a plan maintained by one employer to
a plan maintained by another employer. A "Related Transfer" shall mean a plan-
to-plan transfer that is either (a) not initiated by the Employee or (b) is made
to a plan maintained by the same employer. For purposes of determining whether
the employer is the same employer, all employers aggregated under Code section
414(b), (c) and/or (m) shall be treated as the same employer.
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SECTION 26. SPECIAL RULES APPLICABLE IN EVENT OF CERTAIN NATURAL DISASTERS.
1. IN GENERAL.
a. In the event that the President of the United States declares
that an area in which Participating Employees reside warrants assistance by the
Federal Government under the Disaster Relief Act of 1974, Pub. L. No. 93-288, as
amended, the Committee shall have the authority to declare this Section 26
effective. Upon such declaration by the Committee, the special rules and
procedures hereinafter described in this Section 26 shall apply with respect to
each Participating Employee whose principal residence is located within an area
covered by the President's declaration (hereinafter referred to as "Designated
Participating Employees").
b. A Designated Participating Employee may request a withdrawal, a
hardship withdrawal, and/or a loan, as the case may be, in the manner
established for this purpose from time to time and communicated to Designated
Participating Employees. In order to facilitate payments to Designated
Participating Employees, any such withdrawal or loan shall be made based on the
most recent Valuation Date for which processing has been completed on the date
payment is to be made. Actual payment of amounts distributable to a Designated
Participating Employee shall be made as soon as practicable.
c. The special rules and procedures of this Section 26 shall remain
in effect for such period of time as is specified by the Committee, which may be
for any period the Committee deems appropriate not to exceed one hundred eighty
(180) days. If the Committee, having declared this Section 26 effective, fails
to specify the period of time for which it shall remain in effect, these special
rules shall remain in effect for one hundred eighty (180) days from the date of
such declaration.
2. WITHDRAWALS WITHOUT HARDSHIP. Notwithstanding the limitations of
Section 9.2, a Designated Participating Employee may make one (1) withdrawal in
an amount equal to all or any portion of the Units (except to the extent such
Units represent nonvested amounts for a former Participating Employee whose
employment terminated before July 1, 1989) credited to such person's Account
(excluding for this purpose a Designated Participating Employee's ESOP Account);
provided, that in the case of a Designated Participating Employee who has not
attained age 59-1/2 and who is not disabled as of the date of 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
and 26.3. A withdrawal hereunder shall not be taken into account for purposes
of applying the limitations of Section 9.2.
3. HARDSHIP WITHDRAWALS OF BEFORE-TAX CONTRIBUTIONS. In the case of a
Designated Participating Employee, the definition of "immediate and heavy
financial" need shall include, in addition to the items specified in Section
9.3., damages to the Designated Participating Employee's principal residence
(and the contents thereof) attributable to the disaster referred to in Section
26.1(a).
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4. LOANS. In the case of a Designated Participating Employee who is a
party in interest (as defined in Section 3 (14) of ERISA) with respect to the
Plan and who suffers damage to his principal residence (and the contents
thereof) attributable to the disaster referred to in Section 26.1(a), the rules
contained in Section 10 relating to Plan loans shall be modified as follows:
(a) Section 10(1)(b) shall be modified to read: "the lesser of (i)
50% of the Designated Participating Employee's nonforfeitable interest in
the Plan (where, for purposes of this Section 10(1), this Plan and all
other plans described in Code section 401 which are maintained by an
Affiliate or a Subsidiary shall be treated as one plan), or (ii) the sum of
the Designated Participating Employee's Before-Tax Basic Account and
Before-Tax Supplemental Account at the time the loan is made in his
Account"; and
(b) loans shall be available to Designated Participating Employees
hereunder notwithstanding the limitation of Section 10(9).
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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 employed by the Company, or a subsidiary or
affiliate of the Company (each, a "BellSouth Company"), and has been assigned
to a Band [A] [AA] 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 and resign
from any position Executive holds with the Company and any BellSouth Company on
a date (the "Retirement Date") selected by the Executive which occurs during the
calendar year in which the Executive's sixtieth (60th) 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
calendar year 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 amount of 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, less withholdings, 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, any other qualified cash
or deferred arrangement sponsored by the Company or a BellSouth 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 or a BellSouth Company, and (ii) the terms "Standard
Award" and "Award Year" shall have the meanings ascribed to such terms under
STIP.
<PAGE>
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. 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.
5. 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
5 shall be subject to all other terms and conditions of SOP and SRCP,
respectively. For purposes of this Section 5, the terms "Options" and "Units"
shall have the meanings ascribed to such terms in SOP and SRCP, respectively.
6. 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 6 shall be subject to all other terms and
conditions of the Financial Counseling Plan.
7. COMPANY AUTOMOBILE. The Executive may, at his election, purchase from
the Company (or BellSouth 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.
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8. 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.
9. TERMINATION OF EMPLOYMENT. If the Executive's employment with the
Company and each BellSouth 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 9 shall not apply if, upon termination of employment, the
Executive is transferred to or immediately reemployed by the Company or any
BellSouth Company.
10. 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 or any BellSouth 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
10, 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.
11. 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 or any BellSouth 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.
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By entering into the Agreement, the Executive agrees to waive, discharge,
and release any and all claims and demands 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 the Company or a BellSouth Company, including specifically the Executive's
decision to terminate employment under the Agreement, that the Executive might
have pursued against the Company, or other BellSouth Company, their past,
current, or future subsidiaries, divisions and affiliates, and their directors,
officers, employees, attorneys, and agents (both in their personal and official
capacities), whether under common law, state law, federal law, including but not
limited to the Age Discrimination in Employment Act of 1967, as amended, or
otherwise. This paragraph is not intended to affect benefits to which Executive
may be entitled under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") or any pension or benefit plan in which Executive is a participant.
12. 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 or a BellSouth 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.
13. 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.
14. 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.
15. 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.
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16. 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.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with laws of the State of Georgia.
18. 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:
______________________________ By: ______________________________
Signature Signature
______________________________ __________________________________
Name Title
5
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 deleting Paragraph 1.02 in its entirety and
substituting therefor the following:
1.02 "AFFILIATE" means, with respect to a Participating
Company, (a) any corporation included with such Participating
Company in a controlled group of corporations as determined under
Section 414(b) of the Code, (b) any trade or business under
common control with such Participating Company as determined
under Section 414(c) of the Code, (c) any member of any
"affiliated service group" as such term is defined in Section
414(m) of the Code which includes as one of its members an entity
described in (a) or (b) above, and (d) any trade or business
which is otherwise aggregated with such Participating Company
under Section 414(o) of the Code but only during the period such
corporation, trade or business, or member is, as applicable, in a
controlled group of corporations with such Participating Company,
under common control
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with such Participating Company, or included in the affiliated service
group or otherwise aggregated.
2.
Amend Section 1 of the Plan by inserting "or Companies" after "Company" in
the second line of Paragraph 1.09.
3.
Amend Paragraph 1.09 of the Plan by replacing clause (d) therein with the
following:
(d) team awards, awards to officers under short term
incentive plans and equivalents, and
4.
Amend Paragraph 1.09 of the Plan by adding the following two paragraphs to
the end thereof:
For purposes of performing discrimination testing to ensure
compliance with Code SECTION 401(a)(4), the definition of
"Compensation" as set forth above in this Paragraph 1.09 generally
shall be used; provided, on a plan year-by- plan year basis, the
Benefit Committee may elect to use as the definition of "Compensation"
any definition that satisfies the nondiscrimination requirements of
Code SECTION 414(s).
If a Participant retires or terminates employment and receives any
Compensation of the type described in clause (d) hereof after the
Participant's Pension Commencement Date, his accrued benefit shall be
increased to reflect such Compensation effective as of the date such
Compensation is paid.
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5.
Amend Section 1 of the Plan by deleting the first sentence of Paragraph
1.10 and substituting therefor the following:
"EFFECTIVE DATE" means July 1, 1993, which is the effective
date of the amended and restated Plan as described herein, unless
another Effective Date is noted with respect to a Participating
Company in Schedule 1.
6.
Amend Section 1 of the Plan by adding "of BellSouth" after "Affiliate"
wherever it appears in Paragraph 1.17.
7.
Amend Section 1 of the Plan by deleting Paragraph 1.23 in its entirety and
substituting therefor the following:
1.23 "PARTICIPATING COMPANY" means BellSouth, any entity
which participated in the Plan as of July 1, 1993, and any entity
which elects to participate in the Plan in accordance with
Section 16.
8.
Amend Section 1 of the Plan by deleting Paragraph 1.26 in its entirety and
substituting therefor the following:
1.26 "PENSION FUND" means the trust established by BellSouth
separate from its assets and the assets of any Participating
Company or
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Affiliate for the payment of certain Plan benefits and includes any
allocable interest in the Telephone Real Estate Equity Trust.
9.
Amend Section 1 of the Plan by deleting Paragraph 1.27 in its entirety and
substituting therefor the following:
1.27 "PLAN" means the BellSouth Personal Retirement Account
Pension Plan as maintained by one or more Participating Companies
for the benefit of their Eligible Employees.
10.
Amend Section 1 of the Plan by deleting Paragraph 1.29 in its entirety and
substituting therefor the following:
1.29 "PRIOR PLAN" means the Plan, if any, as in effect
immediately prior to its amendment and restatement as of the
Effective Date.
11.
Amend Section 2 of the Plan by deleting Paragraph 2.01 in its entirety and
substituting therefor the following:
2.01 PARTICIPATION. Each Eligible Employee is a Participant
in the Plan on the later of the Effective Date or his date of
hire.
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12.
Amend Section 3 of the Plan by deleting "July 1, 1993" wherever it appears
in Paragraph 3.08 and substituting therefor "the Effective Date."
13.
Amend Section 3 of the Plan by replacing the first sentence of the second
paragraph of Paragraph 3.08 with the following:
If an Eligible Employee retires or terminates employment
(other than pursuant to a transfer of employment between
Affiliates that is described in Subparagraph 11.05(a) or (b)) on
or after the Effective Date, his account shall continue to be
maintained, and credited with interest, until (a) he receives or
is deemed to receive a lump sum settlement of his entire accrued
benefit, or (b) his pension commences to be paid.
14.
Amend Section 5 of the Plan by deleting the first sentence of Paragraph
5.05 and substituting therefor the following:
If a Participant terminates employment with the
Participating Company, all other Participating Companies and all
Affiliates after becoming vested and before becoming eligible to
retire under Paragraph 4.01, he may Elect to have his pension
payable commencing on or after the birthday on which he would
have become eligible to retire under Paragraph 4.01 if he were an
Eligible Employee on such birthday; provided, however, if such
Participant terminates employment as
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described above before July 1, 1996, he may Elect to have his pension
payable commencing on or before July 1, 1996.
15.
Amend Section 6 of the Plan by replacing the second paragraph of
subparagraph 6.02(a) with the following:
The amount of the annuity actually payable to a Participant may be
reduced in accordance with subparagraph 7.01(a)(1) and may be increased in
accordance with the last paragraph of Paragraph 1.09.
16.
Amend Section 7 of the Plan by replacing subparagraph 7.08(a) therein with
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, with a
pension commencement date on or before July 1, 1996.
17.
Amend Section 9 of the Plan by deleting subparagraph 9.07(a) in its
entirety and substituting therefor the following:
(a) The death benefits payable under this Section 9 are in
addition to any pre-retirement surviving spouse benefits payable
under Section 8 and any survivor annuity payable under Section 7.
In no event,
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however, shall more than one death benefit described in this Section 9
be payable upon the death of any Participant or Pensioner, nor shall
any such death benefit be payable from more than one Plan. If a
Participant or Pensioner who has been a Participant in more than one
Plan becomes eligible for a death benefit under this Section 9, such
death benefit shall be payable from the Plan of the Participating
Company that last employed the Participant or Pensioner.
18.
Amend Section 10 of the Plan by replacing the second sentence of Paragraph
10.02 with the following:
Net Credited Service shall include service creditable
pursuant to Paragraph 11.05 of the Plan or under the provisions
of an Interchange Agreement or acquisition or merger agreement.
19.
Amend Section 10 of the Plan by replacing the second sentence of Paragraph
10.03 with the following:
Vesting Service Credit shall include service creditable pursuant
to Paragraph 11.05 of the Plan or under the provisions of an
Interchange Agreement or acquisition or merger agreement.
20.
Amend Section 10 of the Plan by adding the following new sentence after the
second sentence of Paragraph 10.08:
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Vesting Eligibility Years also shall include years creditable pursuant to
Paragraph 11.05 of the Plan.
21.
Amend the title of Section 11 in its entirety to read as follows:
Interchange of Benefit Obligations and Transfers Among Affiliates.
22.
Amend Section 11 of the Plan by adding the following new Paragraph 11.05:
11.05 Transfers Between Certain Affiliates.
This Paragraph 11.05 is intended to apply only to a Participant
who transfers employment between Participating Companies or who
transfers employment from an Affiliate that sponsors a defined
benefit pension plan in which the Participant is an active
participant to a Participating Company. In all other transfer of
employment situations, the Participant shall be treated as a new
hire as of the effective date of transfer except as may otherwise
be provided in the Plan (e.g., with respect to Vesting
Eligibility Years). For purposes of this Paragraph 11.05, a
Participant shall be deemed to transfer employment if his
termination of employment with one Affiliate is followed
immediately by his employment with another Affiliate such that,
counting employment with both Affiliates, his employment is
continuous.
(a) If a Participant transfers employment from a
Participating Company that maintains a PRA Plan (for purposes of
this subparagraph, the "Former Plan") to a Participating Company
that maintains another
8
<PAGE>
PRA Plan (for purposes of this Paragraph, the "Successor Plan"), the
Participant's accrued benefit under the Former Plan and an amount of
assets with respect to such accrued benefit as determined in
accordance with Code section 414(1) shall be transferred to the
Successor Plan, and an account shall be established, effective the
first day of the month following the effective date of the
Participant's transfer, in an amount equal to his account balance
under the Former Plan as calculated under Section 3.06. For the Plan
Year in which the transfer occurs, the Participant's account shall be
credited with an interest credit equal to the product of (i) and (ii),
where (i) is the Participant's account balance under the Former Plan
as of the first day of the Plan Year multiplied by the interest credit
rate under the Successor Plan, and (ii) is a fraction of the numerator
of which is the number of months for which the Participant has an
account under and is an active participant in the Successor Plan for
the Plan Year of transfer and the denominator of which is 12. The
Participant's Basic Service Credit, Additional Credit and Supplemental
Credit, if any, for the year of transfer shall be based on his post-
transfer Compensation. The Participant's Vesting Service Credit, Net
Credited Service and Vesting Eligibility Years under the Former Plan
immediately prior to his transfer shall carry over to the Successor
Plan.
(b) If (i) a Participant transfers employment from an
Affiliate that is not a Participating Company but that maintains
a defined benefit pension plan (for purposes of this
subparagraph, the "Former Pension Plan") in which the Participant
is an active participant as of the date of
9
<PAGE>
transfer to a Participating Company, and (ii) the Former Pension Plan
provides for the transfer of (A) the Participant's accrued benefit and
(B) an amount of assets with respect to such accrued benefit as
determined in accordance with Code section 414(1) to the Successor
Plan, an account shall be established for the Participant under the
Successor Plan effective as of the first day of the month in which the
Participant's transfer occurs, with an opening account balance
determined in accordance with Paragraph 5 of Appendix A. Effective as
of the date of transfer, the Participant's Vesting Service Credit, Net
Credited Service and Vesting Eligibility Years shall equal the number
of years of service, however defined, with which the Participant was
credited for benefit accrual, pension eligibility and vesting
purposes, respectively, under the Former Pension Plan immediately
prior to such transfer.
(c) If a Participant transfers employment more than once in
a Plan Year and more than one such transfer is covered under the
provisions of this Paragraph 11.05, the provisions of this
Paragraph 11.05 shall be applied successively to each such
transfer.
23.
Amend Section 12 of the Plan by deleting Paragraph 12.01 in its entirety
and substituting therefor the following:
12.01 PLAN ADMINISTRATOR. BellSouth is the Plan
Administrator for each Plan hereunder, and the sponsor of the
Plan for its Eligible Employees, as those terms are defined in
ERISA. The plan sponsor of each other Plan shall be set forth on
Schedule 1.
10
<PAGE>
24.
Amend Section 14 of the Plan by replacing the language in parentheses in
the first sentence of Paragraph 14.01 with the following:
other than excess plan benefits described in Paragraph 6.05,
disability pension payments before January 1, 1994, payments to mandatory
beneficiaries payable on account of the deaths of disability pensioners
before October 1, 1994, and certain death benefits under Section 9, all of
which are paid by the Participating Company that last employed the
individuals with respect to whom the benefits are due
25.
Amend Section 14 of the Plan by adding the following new Paragraph 14.05:
14.05 SEPARATE PLAN ACCOUNTING. Notwithstanding any
other provision to the contrary, the assets of each Plan
shall be accounted for separately under the Pension Fund,
and only the assets allocable to a Plan shall be available
to pay the benefits of the Participants and beneficiaries of
that Plan. Unless assets are specifically segregated and
allocated to a Plan, each Plan shall have a proportionate
undivided interest in the Pension Fund. If assets of a Plan
are segregated, any earnings, losses or other adjustments
attributable to such assets shall be allocable to that Plan.
11
<PAGE>
26.
Amend Section 15 of the Plan by replacing the first three paragraphs of
paragraph 15.01 with the following:
The Claim Review Committee may, from time to time,
amend the Plan so long as such amendment (i) is not of a
material nature or is required by or advisable in order to
comply with the provisions of ERISA, the Code or other
applicable law, and (ii) does not materially increase the
required contribution of a Participating Company. The
Directors' Nominating and Compensation Committee of the
Board must authorize or consent to any amendment that the
Claim Review Committee is not authorized to make under the
above rule.
27.
Amend the Plan by adding the following new Section 16:
SECTION 16
ADOPTION OF THE PLAN BY A PARTICIPATING COMPANY
16.01 ADOPTION AGREEMENT. Any entity may, by action
of its board of directors or comparable governing body and
with the consent of the Claim Review Committee or its
delegate, adopt this Plan and the Pension Fund as a
Participating Company on behalf of such entity, or one or
more divisions or subdivisions thereof, by executing an
adoption agreement and by delivering such adoption agreement
to BellSouth. The name of such Participating Company and
the Effective Date of its adoption of the Plan shall be set
out on Schedule 1.
12
<PAGE>
Such Participating Company may elect to modify the terms of
the Plan as such terms apply to the Participating Company and its
employees with the consent of the Claim Review Committee or its
delegate and, to the extent the terms of the Plan are so
modified, such modifications (a) shall be set out on a schedule
to the adoption agreement and on Schedule 1 to the Plan and (b)
shall control as to the Plan of such Participating Company.
16.02 SEPARATE PLANS. Except as may otherwise be provided
in an adoption agreement, each adoption agreement shall create a
separate and distinct plan within the meaning of Code Section
414(l) for the exclusive benefit of the Eligible Employees of the
Participating Company or Companies with respect to which such
Plan is adopted, and each such Plan shall be set forth on
Schedule 1, as it may be amended from time to time. The assets
of each Plan shall be used only for the benefit of Participants
and beneficiaries under that Plan, and any forfeitures under a
Plan shall reduce the contributions, if any, only of the
Participating Company or Companies under that Plan.
16.03 AMENDMENT. Any amendment of the Plan automatically
shall be effective as to each Participating Company without any
further action by a Participating Company.
28.
Amend Appendix D of the Plan by deleting the first four lines of the fourth
paragraph of the Appendix in their entirety and substituting therefor the
following:
13
<PAGE>
The monthly pension allowance of a Participant who elects to
commence a service pension prior to age 65 shall be reduced as
follows:
29.
Amend Appendix E of the Plan by deleting Appendix E in its entirety and by
substituting therefor the attached pages designated "Appendix E."
This Amendment shall be effective as of July 1, 1993 for Paragraphs 4 as to
the first subparagraph, 16, and 28; shall be effective as of January 1, 1994 for
Paragraphs 1, 2, 5-12, 14, 17, 23, 25, 27, and 29; shall be effective as of
October 1, 1994 for Paragraph 24; shall be effective as of the date of this
Amendment for Paragraphs 13 and 18-22; and shall be effective as of January 1,
1995 for Paragraphs 3, 4 as to the second subparagraph, 15 and 26.
Approved this 5th day of December , 1994.
---- -------------
EMPLOYEES' BENEFIT CLAIM REVIEW COMMITTEE:
/s/ H. C. Henry, Jr.
-------------------------------------------
H. C. Henry, Jr.
Executive Vice President - Corporate Relations,
Chairman
14
<PAGE>
EXHIBIT 11
BELLSOUTH CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Earnings Per
Common Share:
Income Before
Extraordinary Loss
and Cumulative
Effect of Change in
Accounting Principle 2,159.8 1,034.1 1,658.4
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax -- (86.6) (40.7)
Cumulative Effect of
Change in
Accounting Principle,
net of tax -- (67.4) --
----------- ----------- -----------
Net Income $2,159.8 $ 880.1 $1,617.7
----------- ----------- -----------
----------- ----------- -----------
Weighted average
shares outstanding 496,185,157 495,663,991 490,361,696
Incremental shares
from assumed
exercise of stock
options and payment
of performance
share awards 420,702 423,690 423,862
----------- ----------- -----------
Total Shares 496,605,859 496,087,681 490,785,558
----------- ----------- -----------
----------- ----------- -----------
Earnings Per
Common Share:
Income before
Extraordinary Loss
and Cumulative Effect
of Change in
Accounting
Principle $4.35 $2.08 $3.38
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax -- (.17) (.08)
Cumulative Effect of
Change in
Accounting Principle,
net of tax -- (.14) --
----------- ----------- -----------
Earnings per
Common Share $4.35 $1.77 $3.30
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
EXHIBIT 11
BELLSOUTH CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Fully Diluted
Earnings Per
Common Share:
Income Before
Extraordinary Loss
and Cumulative Effect
of Change in Accounting
Principle 2,159.8 1,034.1 1,658.4
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax -- (86.6) (40.7)
Cumulative Effect of
Change in Accounting -- (67.4) --
Principle, net of tax
----------- ----------- -----------
Net Income $2,159.8 $ 880.1 $1,617.7
----------- ----------- -----------
----------- ----------- -----------
Weighted average
shares oustanding 496,185,157 495,663,991 490,361,696
Incremental shares
from assumed
exercise of stock
options and payment
of performance
share awards 420,702 489,935 459,329
----------- ----------- -----------
Total Shares 496,605,859 496,153,926 490,821,025
----------- ----------- -----------
----------- ----------- -----------
Fully Diluted
Earnings Per
Common Share:
Income before
Extraordinary Loss
and Cumulative
Effect of Change
in Accounting
Principle $4.35 $2.08 $3.38
Extraordinary Loss on
Early Extinguishment
of Debt, net of tax -- (.17) (.08)
Cumulative Effect of
Change in Accounting
Principle, net of tax -- (.14) --
Fully Diluted
Earnings per ----------- ----------- -----------
Common Share $4.35 $1.77 $3.30
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
BELLSOUTH CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
Year Ended December 31,
-----------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1. Earnings
(a) Income from continuing operations before deductions for taxes and interest $4,068.8 $2,318.2 $3,353.6 $3,086.1 $3,179.4
(b) Portion of rental expense representative of interest factor 100.4 103.4 104.1 92.5 94.0
(c) Equity in losses from less-than-50%-owned investments 78.9 45.4 23.4 - -
(accounted for under the equity method of accounting)
(d) Excess of earnings over distributions of less-than-50%-owned investments
(accounted for under the equity method of accounting) (53.1) (37.4) (15.4) - -
-------- --------- -------- -------- --------
TOTAL $4,195.0 $2,429.6 $3,465.7 $3,178.6 $3,273.4
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
2. Fixed Charges
(a) Interest $685.8 $712.3 $761.3 $824.6 $796.0
(b) Portion of rental expense representative of interest factor 100.4 103.4 104.1 92.5 94.0
-------- -------- -------- -------- --------
TOTAL $786.2 $815.7 $865.4 $917.1 $890.0
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio (1 divided by 2) 5.34 2.98 4.00 3.47 3.68
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
<PAGE>
BELLSOUTH ORGANIZATION OF COMPANIES
(As of February 1, 1995)
BELLSOUTH CORPORATION AND AFFILIATES
BellSouth Corporation
BellSouth Capital Funding Corporation
BellSouth Capital Funding-Australia, Limited
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%)
1155 Peachtree Associates (80%)
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>
INTERNAITONAL GROUP
BellSouth Argentina S.A. (3%)
BellSouth Asia/Pacific Enterprises, Inc.
BellSouth New Zealand (A Partnership) (79.2% Voting)
BellSouth New Zealand Holdings Limited
BellSouth New Zealand (A Partnership) (.8% Voting)
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%)
<PAGE>
SkyPage Voicecall Unit Trust
Skypage Pty. Limited
UTAS Pty. Ltd.*
Voice Paging Systems (W.A.) Pty. Ltd.
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 Comunicaciones S.A.
BellSouth Chile S.A.
BellSouth Chile, Inc.
BellSouth Celular S.A.
Compania de Telecomunicaciones Comtal Limitada (99%)
BellSouth China Holdings, Inc.
BellSouth Colombia, Inc.
EGP Comunicaciones Ltda.
Cedetal Ltda.
Latinoamericana de Telecomunicaciones Ltda.
Movicom Colombia S.A. (94%)
BellSouth Holding GmbH
E-Plus Mobilfunk GmbH (21.375%)
BellSouth Holdings, Inc.
BellSouth Worldwide Holdings B.V.
BellSouth Spain Holdings B.V.
<PAGE>
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%)
BellSouth India, Inc.
Skycell Communications Private Limited (25%)**
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. (65.32%)
Compania de Radiocomunicaciones
Moviles S.A. (65%)
R.A. Celular Inversora S.A. (51%)
CTM S.A. (65%)
BellSouth Southern Cone, Inc.
BSI Denmark, Inc.
BLS Denmark Associates (40%)
DMT Dansk Mobiltelefon I/S (29%)
PCN One Limited* (25%)
BellSouth Inversora S.A. (99.99%)
B.A. Celular Inversora S.A. (65.32%)
Compania de Radiocomunicaciones Moviles S.A. (65%)
R.A. Celular Inversora S.A. (51%)
CTM S.A. (65%)
BellSouth Israel, Inc.
BellSouth Italy, Inc.
Fundmaster Limited
BellSouth Mexico, Inc.
BellSouth Mexico, S.A. de C.V.*
BellSouth Mobilfunk GmbH*
<PAGE>
BellSouth Netherlands Holdings, Inc.
BellSouth Netherlands B.V.
MobiNed B.V. (30%)
BellSouth Personal Communications Limited*
BellSouth Shanghai Centre, Ltd.
BellSouth Venezuela, S.A.
Capco (5%)
Telcel Celular, C.A. (2.47%)
Promociones 4222, S.A.
Vencorp. (95%)
Telcel Celular, C.A. (9.26%)
Promociones 4222, S.A.
BLS Denmark, Inc.
BLS Denmark Associates (60%)
DMT Dansk Mobiltelefon I/S (29%)
BSNZ Wireless Holdings Limited
BellSouth New Zealand Limited (80%)
BellSouth New Zealand (A Partnership)
(100%/Pref. Non-Voting)
Capco (95%)
Telcel Celular, C.A. (2.47%)
Promociones 4222, S.A.
ROU Celular Inversora S.A. (76.08%)
Abiatar S.A. (46%)
Telcel Celular, C.A. (44%)
Promociones 4222, S.A.
UK Holdings, Inc.
Vencorp. (5%)
Telcel Celular, C.A. (9.26%)
Promociones 4222, S.A.
<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.
RAM/BSE Communications L.P. (49% GP; 1% LP)
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
GFD Gesellschaftfuer Datanfunk GmbH (6%)
Honolulu Cellular Telephone Company (49%)
Netherlands New System L.P. (20% LP)
RAM Mobile Data C.V. (65.34% LP)
RAM Mobile Data (Netherlands) B. V. (66%)
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.C.S. (79.2% LP)
RAM Mobile Data Belgium SC (80%)
RAM Mobile Data Belgium, S.C.S. (1% GP)
<PAGE>
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
GFD Gesellschaftfuer Datanfunk GmbH (6%)
Netherlands New System L.P. (80% GP)
RAM Mobile Data C.V. (65.34% LP)
RAM Mobile Data (Netherlands) B. V. (66%)
RAM Mobile Data C.V. (1% GP)
RAM Mobile Data Limited (10%)
ST Mobile Data Pte. Ltd. (40%)
BellSouth Mobile Systems, Inc.
BellSouth Cellular Corp.
American Cellular Communications
Corporation (76.5111%)
ACC of Rockford, Inc.
National Cellular Communications,
Inc. (99.99%)
Anniston-Westel Company, Inc.
Gulf Coast Cellular Telephone Company
(A Partnership) (98.6827%)
Atlanta-Athens MSA Limited Partnership (99.9%)
<PAGE>
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 (11.0377%)
Galveston Cellular Telephone Company
Galveston Mobile Partnership (43.75%)
Galveston Cellular Partnership (57.1904%)
Galveston Cellular Telephone Company
Gary Cellular Corporation
Gary Cellular Telephone Company
(A Partnership)(33%)
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)
Houston Cellular Telephone Company
(A Partnership)(76%/Houston Mobile;
12.5%/Cellular Systems)
<PAGE>
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%)
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%)
Westel-Milwaukee Company, Inc.
Green Bay CellTelCo (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)(88.3109%)
Sheboygan Cellular Telephone
Company, Inc. (86.3505%)
<PAGE>
Westel Richmond, Inc.
RCTC Wholesale Company (A Partnership)(72.73%)
RCTC Wholesale Corporation
Richmond Cellular Telephone Company
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 (23.4889%)
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.
Centweight B.V. (49%)
Tele-Man Ltd. (50%)
CellCom Israel Ltd. (67%)
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%)
Cellular Radio of Chattanooga (A Partnership)(25%)
Chattanooga MSA Limited Partnership (29.54%)
Centel Cellular Company of Hickory (3.4%)
Centel Cellular Company of North Carolina (11.1%)
Centel Cellular Company of Tallahassee (10%)
<PAGE>
Century Cellunet of North Louisiana Cellular
Limited Partnership (9%)
Chattanooga CGSA, Inc.
Chattanooga MSA Limited Partnership (55.31%)
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.
<PAGE>
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%)
Cellular Mobile Services of California, Inc.
Cellular Mobile Services of Indiana, Inc.
BellSouth Wireless, Inc.
Mobile Communications Corporation of America
Digital Paging Systems of Canada, Inc.
MobileComm Nationwide Operations, Inc.
MobileComm of Florida, Inc.
MobileComm of Tennessee, Inc.
MobileComm of the MidSouth, Inc.
MobileComm of the Northeast, Inc.
MobileComm of the West, Inc. (11%)
MobileComm of the Southeast, Inc.
MobileComm of the Southeast Private Carrier
Operations, Inc.
MobileComm of the Southwest, Inc.
FWS Radio, Inc. (50%)
MobileComm of the West, Inc. (89%)
Skilldex, Inc. (26%)
BellSouth Personal Communications, Inc.
BellSouth Carolinas PCS, L.P. (66.9842% GP)
<PAGE>
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
CSL Associates (70%)
CSL Chastain Associates (70%)
CSL Colonnade Associates (70%)
CSL Exchange South Associates (70%)
CSL Twelfth Street Associates (70%)
CSL Western Way Associates (70%)
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 will either be owned by BellSouth International
(Asia/Pacific), Inc. or BellSouth India, Inc.
Unless indicated otherwise, each subsidiary is owned 100% by
its parent company.
<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, 1994.
NOW THEREFORE, each of the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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 2/27/95
- ----------------------------------- -------------------------------
John L. Clendenin Date
Chairman of the Board and
Chief Executive Officer
Director
(Principal Executive Officer)
/s/ Ronald M. Dykes 3/2/95
- ----------------------------------- --------------------------------
Ronald M. Dykes Date
Vice President, Chief Financial Officer
and Comptroller
(Principal Financial Officer and 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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
3/1/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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
2/27/95
- ---------------------
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, 1994.
NOW THEREFORE, the undersigned hereby constitutes and appoints
John L. Clendenin, Ronald M. Dykes 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/ Robin B. Smith
- ------------------
Robin B. Smith
Director
2/27/95
- ---------------------
Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 607
<SECURITIES> 51
<RECEIVABLES> 3,091
<ALLOWANCES> 154
<INVENTORY> 490
<CURRENT-ASSETS> 4,728
<PP&E> 44,199
<DEPRECIATION> 19,036
<TOTAL-ASSETS> 34,397
<CURRENT-LIABILITIES> 6,498
<BONDS> 7,435
<COMMON> 503
0
0
<OTHER-SE> 13,865
<TOTAL-LIABILITY-AND-EQUITY> 34,397
<SALES> 523
<TOTAL-REVENUES> 16,845
<CGS> 593
<TOTAL-COSTS> 9,302
<OTHER-EXPENSES> 3,485
<LOSS-PROVISION> 175
<INTEREST-EXPENSE> 666
<INCOME-PRETAX> 3,403
<INCOME-TAX> 1,243
<INCOME-CONTINUING> 2,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,160
<EPS-PRIMARY> 4.35
<EPS-DILUTED> 4.35
</TABLE>
