SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8607
BELLSOUTH CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 58-1533433
(State of Incorporation) (I.R.S. Employer
Identification Number)
1155 Peachtree Street, N. E., Atlanta, Georgia 30309-3610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number 404 249-2000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
___
At April 30, 1997, a total of 991,681,044 common shares were
outstanding.
Table of Contents
Item Page
Part I
1. Financial Statements 3
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Selected Operating Data 9
2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 11
Results of Operations 11
Volumes of Business 12
Operating Revenues 13
Operating Expenses 15
Other Income Statement Items 16
Financial Condition 17
Regulatory Developments and Competition 18
Federal Developments 18
State Developments 19
Other Matters 19
Earnings Per Share Standard 19
Part II
6. Exhibits and Reports on Form 8-K 20
PART I - FINANCIAL INFORMATION
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three
Months Ended
March 31,
1997 1996
Operating Revenues:
Network and related services:
Local service $ 2,104 $ 1,930
Interstate access 917 909
Intrastate access 218 218
Toll 174 207
Wireless communications 765 625
Directory advertising and
publishing 361 318
Other services 306 334
Total Operating Revenues 4,845 4,541
Operating Expenses:
Cost of services and
products 1,422 1,468
Depreciation and
amortization 960 903
Selling, general and
administrative 1,110 987
Total Operating Expenses 3,492 3,358
Operating Income 1,353 1,183
Interest Expense 183 180
Gain on Sale of Paging
Business - 442
Other Income (Expense), net (7) 36
Income Before Income Taxes 1,163 1,481
Provision for Income Taxes 470 511
Net Income $ 693 $ 970
Weighted Average Common
Shares Outstanding 992 994
Dividends Declared Per Common
Share $ .36 $ .36
Earnings Per Share $ .70 $ .98
The accompanying notes are an integral part of these
consolidated financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Per Share Amounts)
March 31, December 31,
1997 1996
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 946 $ 1,178
Temporary cash investments 43 51
Accounts receivable, net of allowance for
uncollectibles of $185 and $180 3,982 4,087
Material and supplies 423 451
Other current assets 547 531
Total Current Assets 5,941 6,298
Investments and Advances 2,821 2,430
Property, Plant and Equipment:
Property, Plant and Equipment 50,727 50,059
Accumulated Depreciation 28,944 28,234
Property, Plant and Equipment, net 21,783 21,825
Deferred Charges and Other Assets 536 610
Intangible Assets, net 1,445 1,405
Total Assets $ 32,526 $ 32,568
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year $ 1,635 $ 2,124
Accounts payable 1,391 1,446
Other current liabilities 3,111 2,871
Total Current Liabilities 6,137 6,441
Long-Term Debt 7,961 8,116
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,872 1,899
Unamortized investment tax credits 262 278
Other liabilities and deferred credits 2,641 2,585
Total Deferred Credits and Other Liabilities 4,775 4,762
Shareholders' Equity:
Common stock, $1 par value 1,009 1,009
Paid-in capital 7,698 7,697
Retained earnings 5,879 5,541
Shares held in trust and treasury (499) (532)
Guarantee of ESOP debt (434) (466)
Total Shareholders' Equity 13,653 13,249
Total Liabilities and Shareholders' Equity $ 32,526 $ 32,568
The accompanying notes are an integral part of these consolidated
financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three
Months Ended
March 31,
1997 1996
Cash Flows from Operating Activities:
Net income $ 693 $ 970
Adjustments to net income:
Depreciation and amortization 960 903
Gain from sale of paging business -- (442)
Net losses and dividends from unconsolidated
affiliates 69 58
Provision for uncollectibles 66 56
Deferred income taxes and unamortized
investment tax credits (10) (2)
Net change in:
Accounts receivable and other current
assets (18) 84
Accounts payable and other current
liabilities 178 (380)
Deferred charges and other assets (70) (73)
Other liabilities and deferred credits (10) 7
Other reconciling items, net 16 (55)
Net cash provided by operating activities 1,874 1,126
Cash Flows from Investing Activities:
Capital expenditures (871) (882)
Proceeds from sale of paging business -- 930
Proceeds from disposition of short-term
investments 63 44
Purchases of short-term investments (55) (30)
Investments in and advances to unconsolidated
affiliates (290) (164)
Other investing activities, net (13) (33)
Net cash used for investing activities (1,166) (135)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings 3,846 5,527
Repayments of short-term borrowings (4,472) (6,433)
Proceeds from long-term debt 28 34
Repayments of long-term debt (9) (499)
Dividends paid (357) (358)
Other financing activities, net 24 15
Net cash used for financing activities (940) (1,714)
Net decrease in Cash and Cash Equivalents (232) (723)
Cash and Cash Equivalents at Beginning of Period 1,178 1,711
Cash and Cash Equivalents at End of Period $ 946 $ 988
The accompanying notes are an integral part of these
consolidated financial
statements.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Millions, Except Per Share Amounts)
Note A -- Preparation of Interim Financial Statements
The consolidated financial statements of BellSouth Corporation
(BellSouth) have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (SEC). Certain
amounts have been reclassified from previous presentations. These
consolidated financial statements include estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities and the amounts of revenues and
expenses. Actual results could differ from those estimates.
In the opinion of BellSouth, these statements include all adjustments
necessary for a fair presentation of the results of all interim
periods reported herein. All adjustments are of a normal recurring
nature unless otherwise disclosed. Certain information and
footnote disclosures prepared in accordance with generally
accepted accounting principles have been either condensed or
omitted pursuant to SEC rules and regulations. However, BellSouth
believes that the disclosures made are adequate for a fair
presentation of results of operations, financial position and cash
flows. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and
accompanying notes included in BellSouth's latest annual report on
Form 10-K.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(In Millions, Except Per Share Amounts)
Note B -- BellSouth Corporation Consolidated Shareholders' Equity
Number of Shares Amount
Shares
Held
Common in Common Paid-in
Stock Trust and Stock Capital
Treasury
(1)
Balance at
December 31,
1996 1,009 (18) $1,009 $7,697
Net Income
Dividends
declared
Shares issued
for
employee
benefit
plans 1 (9)
ESOP
activities and
related tax
benefit
Foreign
currency
translation
adjustment 10
_____ _____ ______ ______
Balance at
March 31, 1997 1,009 (17) $1,009 $7,698
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited) (In Millions, Except Per Share
Amounts)
Note B -- BellSouth Corporation Consolidated Shareholders' Equity
(continued)
Amount
Shares Guarantee
Held of ESOP
Retained in Debt Total
Earnings Trust and
Treasury
(1)
Balance at
December 31,
1996 $5,541 $(532) $(466) $13,249
Net Income 693 693
Dividends
declared (357) (357)
Shares issued
for
employee
benefit
plans 33 24
ESOP activities
and related tax
benefit 2 32 34
Foreign
currency
translation
adjustment 10
______ ______ ______ _______
Balance at
March 31, 1997 $5,879 $(499) $(434) $13,653
(1) Such shares are not considered to be outstanding for
financial reporting purposes. As of March 31, 1997, there were
approximately 15.8 million shares held in trust and 1.1 million
treasury shares held by the company.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued) (Unaudited)
(In Millions, Except Per Share Amounts)
Note C -- Supplemental Cash Flow Information
For the Three
Months Ended
March 31,
1997 1996
Cash Paid For:
Income taxes $ 59 $37
Interest $ 133 $157
Note D -- Sale of Paging Subsidiary
In January 1996, BellSouth sold to MobileMedia
Corporation its paging subsidiary, Mobile Communications
Corporation of America (MCCA), and its two-way nationwide
narrowband personal communications services license for a
total of $930. The pretax gain on such sale was $442.
Note E -- Subsequent Event
In 1994, the South Carolina Public Service Commission ordered
BellSouth Telecommunications to refund approximately $29, plus
interest, based on an investigation of 1992 earnings. The
Commission postponed review of earnings in 1993 and 1994
pending final resolution of the 1992 period. The order with
respect to the 1992 period was substantially affirmed by the
South Carolina Court of Common Pleas in October 1996 and
BellSouth Telecommunications began to pursue further review
of the decision.
On April 29, 1997, BellSouth Telecommunications, the
Commission and other parties to the proceeding agreed on a
settlement to claims of alleged overearnings for the years
1992 through 1994. Under the terms of the settlement,
BellSouth Telecommunications will pay approximately $72 to its
customers. Accordingly, BellSouth will record an after-tax
charge of approximately $.05 per share in the second quarter
of 1997 associated with the settlement.
BELLSOUTH
CORPORATION
SELECTED OPERATING DATA
(Unaudited)
Network Access Lines in Service at March 31 (Thousands)(a):
Percent Change
1997 vs. 1996 vs.
1997 1996 1995
By Type:
Residence 15,394 3.6% 3.5%
Business 6,854 7.6 7.9
Other 266 3.5 0.8
Total Access Lines 22,514 4.8 4.8
By State:
Florida 6,008 5.4 5.1
Georgia 3,840 6.0 6.2
Tennessee 2,583 4.4 4.6
North Carolina 2,256 5.7 5.2
Louisiana 2,211 3.5 3.6
Alabama 1,884 3.6 4.0
South Carolina 1,366 4.0 4.0
Mississippi 1,214 3.2 3.6
Kentucky 1,152 3.3 3.7
Total Access Lines 22,514 4.8 4.8
For the Three Percent Change for
Months Ended the Periods Ended
March 31, 1997 vs. 1996 vs.
1997 1996 1995
Access Minutes of Use
(Millions)(a)(b):
Interstate 17,721 6.4% 10.1%
Intrastate 5,552 8.4 13.0
Total Access Minutes of Use 23,273 6.9 10.8
Toll Messages (Millions)(a) 230 (18.1) (24.1)
(a) Prior period operating data are often revised at later
dates to reflect updated information. The above information
reflects the latest data available for the periods indicated.
(b) Minutes of Use are classified as either interstate or
intrastate based on the percentage interstate usage factor.
This factor is updated periodically.
BELLSOUTH CORPORATION
SELECTED OPERATING DATA
(Continued)
(Unaudited)
Cellular and Personal Communications Service (PCS)
Customers Served at March 31 (Equity basis)(Thousands)(c):
Percent Change
1997 vs. 1996 vs.
1997 1996 1995
Domestic Cellular 3,764 23.6% 31.3%
International Cellular 1,501 75.6 106.0
PCS 49 -- --
(c) Includes customers served based on BellSouth's ownership
percentage in all markets served.
For the Three
Months Ended
March 31,
1997
Ratio of Earnings to Fixed Charges (d) 6.6
(d) For the purpose of this ratio: (i) earnings have been
calculated by adding income before income taxes, gross
interest expense, such portion of rental expense
representative of the interest factor on such rentals and
equity in losses from less than-50%-owned investments
(accounted for under the equity method 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 gross interest expense and such portion of rental expense
representative of the interest factor on such rentals.
BELLSOUTH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in Millions, Except Per Share Amounts)
Management's Discussion and Analysis of Results
of Operations and Financial Condition
(MD&A) should be read in conjunction
with MD&A in BellSouth Corporation's
(BellSouth) latest annual report on Form 10-K.
BellSouth is a holding company headquartered in Atlanta,
Georgia whose operating telephone company subsidiary, BellSouth
Telecommunications, Inc. (BellSouth Telecommunications),
serves, in the aggregate, approximately two-thirds of the
population and one-half of the territory within Alabama,
Florida, Georgia, Kentucky, Louisiana, Mississippi, North
Carolina, South Carolina and Tennessee. BellSouth
Telecommunications primarily provides local exchange and toll
communications services within geographic areas, called Local
Access and Transport Areas (LATAs), and provides network access
services to enable interLATA and intraLATA communications using
the long-distance facilities of interexchange carriers.
Through subsidiaries, other telecommunications services and
products are provided primarily within the nine-state BellSouth
Telecommunications region. BellSouth Enterprises, Inc.
(BellSouth Enterprises), another wholly-owned subsidiary, owns
businesses providing primarily wireless and international
communications services and advertising and publishing
products.
Approximately 70% and 72% of BellSouth's Total Operating
Revenues for each of the three-month periods ended March 31,
1997 and 1996 were from wireline services provided by BellSouth
Telecommunications. Charges for local, access and toll
services for the three-month period ended March 31, 1997
accounted for approximately 62%, 33% and 5%, respectively, of
the wireline revenues discussed above. Revenues from wireless
communications services and directory advertising and
publishing services accounted for approximately 16% and 7%,
respectively, of Total Operating Revenues for the three months
ended March 31, 1997. The remainder of such revenues was
derived principally from sales and maintenance of customer
premises equipment and other nonregulated services provided
by BellSouth Telecommunications.
RESULTS OF OPERATIONS
For the Three
Months Ended
March 31,
1997 1996
Net Income $693 $970
Earnings Per Share $.70 $.98
For the three-month period ended March 31, 1997, Net Income
decreased by $277 (28.6%) when compared to the same 1996
period. Earnings Per Share decreased $.28 (28.6%) when compared
to the same 1996 period. The decreases for the three-month
period resulted primarily from the $344 gain ($.35 per share)
on sale of BellSouth's paging business (see Note D to the
Consolidated Financial Statements) during the first quarter of
1996, partially offset in the first quarter of 1997 by
continued strong growth in key business volumes and expense
savings primarily attributable to employee reductions under
BellSouth Telecommunications' work force reduction plan
initiated in 1995.
Volumes of Business
The total number of access lines in service as of March 31,
1997 increased by approximately 1,022,000 (4.8%) since March
31, 1996 to 22,514,000, consistent with a 4.8% rate of increase
for the same period a year ago. Business and residence access
lines increased by 7.6% and 3.6%, respectively, compared to
growth rates of 7.9% and 3.5% in the same 1996 period. The
increase in residence lines includes additional lines used by
customers for home office purposes, access to on-line computer
services, children's phones and other uses. The number of
additional residence lines increased by 309,000 (22.8%) to
1,662,000 and accounted for approximately 58.4% and 30.2% of
the overall increase in residence access lines and total access
lines, respectively, since March 31, 1996. The growth in all
categories of access lines was primarily attributable to
continued economic improvement in the Southeast and successful
marketing programs.
Access minutes of use represent the volume of traffic carried
by interexchange carriers, both interstate and intrastate,
using BellSouth Telecommunications' local facilities. Total
access minutes of use increased by 1,494 million (6.9%)for the
three month period ended March 31, 1997, compared to an increase
of 10.8% for the same 1996 period. The increase in access
minutes of use was primarily attributable to access line
growth; promotions by the interexchange carriers; and intraLATA
toll competition, which has the effect of increasing access
minutes of use while reducing toll messages carried over
BellSouth Telecommunications' facilities. The growth rate in
total minutes of use continues to be negatively impacted by
competition 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.
Toll messages are comprised of Message Telecommunications
Service and Wide Area Telecommunications Service. For the
three-month period ended March 31, 1997, toll messages
decreased by 51 million (18.1%), compared to a decrease
of 24.1% for the same 1996 period. The decrease in 1997
is primarily attributable to the continuing expansion of
local area calling plans (LACPs) in Florida, Georgia and
North Carolina and also to increasing competition from
interexchange carriers in the intraLATA toll market.
Historically, the primary factor impacting toll message
decline has been the expansion of LACPs. However, as the
planned expansion of significant LACPs has neared
completion, the impact of competition has become and is
expected to continue to be a more significant factor in the
toll message decline.
The expanded LACPs discussed above 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. Expanded
LACPs and the effects of competition result in the transfer of
calls from toll to local service and access categories,
respectively, but the corresponding revenues are not generally
shifted at commensurate rates.
Domestic cellular customers (equity-weighted) increased by
718,000 (23.6%) since March 31, 1996 to 3,764,000 due to
continuing high demand for wireless services. The overall
penetration rate (number of customers as a percentage
of the total population in the service territory) increased
from 7.6% at March 31, 1996 to 9.2% at March 31, 1997. While
total minutes of use have also continued to increase, average
minutes of use per cellular customer have remained essentially
unchanged from first quarter 1996. Average minutes of use per
cellular customer were positively impacted by customer
promotions. However, such impact was substantially offset by
the continuing trend of increased penetration into lower-usage
market segments. Since March 31, 1996, the number of
international cellular customers increased by 646,000 (75.6%)
to 1,501,000. Growth in total minutes of use for international
cellular properties remained strong due to demand stimulated by
market-driven pricing programs, enhanced services and
underdeveloped land-line service. Domestic PCS customers
(equity-weighted) totaled 49,000 at March 31, 1997.
Operating Revenues
Total Operating Revenues increased $304 (6.7%) for the three
month period ended March 31, 1997 when compared to the same
1996 period. The components of Total Operating Revenues were as
follows:
For the Three
Months Ended
March 31,
1997 1996
Local Service $2,104 $1,930
Interstate Access 917 909
Intrastate Access 218 218
Toll 174 207
Wireless Communications 765 625
Directory Advertising and
Publishing 361 318
Other Services 306 334
Total Operating Revenues $4,845 $4,541
Local Service revenues increased $174 (9.0%)for the three-month
period ended March 31, 1997 when compared to the same 1996
period. The increase was due primarily to a 4.8% growth in access
lines in service since March 31, 1996. Also contributing was an
increase of $66 due to higher customer demand for optional services.
Interstate Access revenues increased $8 (0.9%) for the three-
month period ended March 31, 1997 when compared to the same 1996
period. The increase was primarily attributable to growth in
minutes of use of 6.4%, an increase of $19 due to higher demand
for special access services and an increase in end user charges
of $14 attributable to growth in the number of access lines. The
increase was substantially offset by rate reductions which
decreased revenues by $51.
Intrastate Access revenues were unchanged for the three-month
period ended March 31, 1997 when compared to the same 1996
period. For the 1997 period, growth in minutes of use of 8.4% was
substantially offset by rate reductions.
Toll revenues decreased $33 (15.9%) for the three-month period
ended March 31, 1997 when compared to the same 1996 period. The
decrease was primarily attributable to a decline in toll messages
of 18.1% which reflects the expansion of LACPs and increased
competition.
Wireless Communications revenues include revenues from the
consolidated cellular communications and PCS businesses as well
as revenues from interconnections by unaffiliated cellular and
PCS 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 (Expense), net.)
Wireless Communications revenues increased $140 (22.4%) for the
three-month period ended March 31, 1997 when compared to the same
1996 period. The increase was primarily attributable to
continued growth of the customer base in domestic and
international cellular markets.
Directory Advertising and Publishing revenues increased $43
(13.5%) for the three-month period ended March 31, 1997 when
compared to the same 1996 period. The increase primarily
reflects adjustments in the current period related to prior
years' revenues, as well as volume growth and price increases in
1997. The revenue growth rate associated with increases in volume
and pricing was 5.7%.
Other Services revenues are principally comprised of revenues
from customer premises equipment (CPE) sales and maintenance
services and other nonregulated services (primarily inside wire,
billing and collection and voice messaging services) offered by
BellSouth Telecommunications. Other Services revenues decreased
$28 (8.4%) for the three-month period ended March 31, 1997 when
compared with the same 1996 period. The decrease primarily
reflects the effects in 1996 of positive rate impacts, as well as
the sale of a subsidiary which performed computer maintenance.
The decrease was partially offset by increased demand and prices
for non-regulated services and product sales and higher billing
related fees in the 1997 period.
Operating Expenses
Total Operating Expenses increased $134 (4.0%) for the three month
period ended March 31, 1997 when compared to the same 1996
period. The components of Total Operating Expenses were as
follows:
For the Three
Months Ended
March 31,
1997 1996
Depreciation and Amortization $ 960 $ 903
Other Operating Expenses:
Cost of Services and
Products 1,422 1,468
Selling, General and
Administrative 1,110 987
2,532 2,455
Total Operating Expenses $ 3,492 $ 3,358
Depreciation and Amortization increased $57 (6.3%) for the
three month period ended March 31, 1997 compared to the same
1996 period. The increase was due primarily to higher levels of
property, plant and equipment since March 31, 1996 resulting
from continued growth in the customer base for wireless and
wireline services and continued modernization of the networks.
Other Operating Expenses are comprised of Cost of Services and
Products and Selling, General and Administrative. Cost of
Services and Products includes employee and employee-related
expenses associated with network repair and maintenance,
material and supplies expense, cost of tangible goods sold and
other expenses associated with providing services. Selling,
General and Administrative includes expenses related to sales
activities such as salaries, commissions, benefits, travel,
marketing and advertising expenses and administrative expenses.
Other Operating Expenses increased $77 (3.1%) for the three-
month period ended March 31, 1997 when compared to the same
1996 period. The increase for the period was primarily
attributable to increased expenses of $98 related to sustained
growth in the cellular customer base, reflecting additional
marketing and operational costs associated with higher levels
of sales and expanded operations. The increase also reflected
higher expenses associated with the initiation of PCS services.
At BellSouth Telecommunications, Other Operating Expenses
decreased $29 for the three-month period ended March 31, 1997
when compared to the same 1996 period. The increase for the
period was primarily attributable to a reduction of
approximately $29 in employee related costs in the core wireline
business, including expenses for employee benefits. The
decrease in such employee-related costs reflected net employee
reductions in BellSouth Telecommunications' telephone
operations of approximately 6,100 since March 31, 1996,
partially offset by annual compensation increases for
management and represented employees. The employee reductions
were primarily attributable to a previously-disclosed work
force reduction plan. The decrease in other operating expenses
was also attributable to the April 1996 sale of a subsidiary
which performed computer maintenance. These decreases were
partially offset by increased costs in the company's telephone
operations associated with higher business volumes and costs
related to initiatives to compete effectively, including new
service offerings and intensified marketing and advertising.
The overall decline in other operating expenses at BellSouth
Telecommunications is not expected to continue during the
remainder of 1997 as BellSouth Telecommunications intensifies
initiatives related to competition as well as marketing and
advertising efforts.
Other Income Statement Items
For the Three Months
Ended March 31,
1997 1996
Interest Expense $183 $180
Gain on Sale of Paging
Business -- 442
Other Income (Expense), net (7) 36
Provision for Income Taxes 470 511
Gain on Sale of Paging Business represents the pre-tax gain on
the sale of BellSouth's paging business in January 1996.
Other Income (Expense), net decreased $43 for the three-month
period ended March 31, 1997 when compared to the same 1996 period.
The decrease in the three-month period was primarily
attributable to equity in losses of unconsolidated affiliates
and other nonoperating items. The decrease was partially
offset by lower net minority interest deductions.
Equity in losses of unconsolidated affiliates was ($44) in the
first quarter of 1997 compared to ($29) for the same 1996
period. The higher overall losses in unconsolidated affiliates
for 1997 reflect lower earnings from unconsolidated domestic
cellular operations, increased losses from certain
international businesses, principally operations in Australia
(Optus Vision) and the mobile data communications business.
These losses were partially offset by more favorable results
at other unconsolidated international operations, principally
Venezuela.
Provision for Income Taxes decreased $41 (8.0%) for
the three month period ended March 31, 1997 when compared to
the same 1996 period, primarily due to higher tax expense in
1996 from the sale of paging operations. For the three-month
period ended March 31, 1997, BellSouth's effective tax rate
was 40.4% compared to 34.5% for the same period last year.
The lower effective tax rate in 1996 was due primarily to a
higher tax than book basis for the paging business, which
resulted in a lower gain on sale for computing tax expense.
FINANCIAL CONDITION
BellSouth uses the net cash generated from its operations and
external financing to fund capital expenditures, to invest in
and operate its existing operations and new businesses and to
pay dividends. While current liabilities exceed current
assets at both March 31, 1997 and December 31, 1996,
BellSouth's sources of funds -- primarily from operations and,
to the extent necessary, from readily available external
financing arrangements -- are sufficient to meet all current
obligations on a timely basis. In addition, BellSouth
believes such sources of funds will be sufficient to meet the
needs of its business for the foreseeable future.
For the Three
Months Ended
March 31,
1997 1996
Net Cash Provided by Operating Activities $1,874 $1,126
Operating Activities. Net cash provided by operating
activities increased $748 (66.4%) in the three month period
ended March 31, 1997 when compared to the same 1996 period.
The change is primarily due to lower cash expenditures for
accounts payable and other current liabilities. The increase
is also due to a $227 increase in operating income before
depreciation and amortization.
For the Three Months
Ended March 31,
1997 1996
Net Cash Used for Investing Activities $(1,166) $(135)
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 $1,031 in the three
month period ended March 31, 1997 when compared to the same
1996 period. The increase was primarily due to $930 in cash
received during 1996 from the sale of the paging business, as
well as increased investment of $126 in 1997 for unconsolidated
affiliates.
Internal sources provided substantially all cash required for
capital expenditures in the first three months of 1997. For
the remainder of 1997, BellSouth expects to continue to finance
capital expenditures primarily through internally generated
funds, and, to the extent necessary, from external sources.
For the Three Months
Ended March 31,
1997 1996
Net Cash Used for Financing Activities $ (940) $(1,714)
Financing Activities. Net cash used for financing activities
decreased $774 (45.2%) in the three month period ended March
31, 1997 when compared to the same 1996 period. The decrease
reflects lower reductions of $280 in short term debt, as well
as the 1996 repayment of $485 in debentures.
BellSouth's debt to total capitalization ratio decreased to
41.2% at March 31, 1997 from 43.5% at December 31, 1996. The
decrease was primarily caused by an increase in stockholders'
equity and a decrease in total debt since December 1996.
As of April 30, 1997, shelf registration statements were on
file with the Securities and Exchange Commission under which
$1,927 of debt securities could be publicly offered.
REGULATORY DEVELOPMENTS AND COMPETITION
Federal Developments
On May 7, 1997, the Federal Communications Commission (FCC)
adopted orders regarding revisions to the Local Exchange
Carrier (LEC) price cap plan, access charge reform and the
establishment of a universal service fund. The orders on the
LEC price cap plan and access charge reform result in access
rate reductions and affect both per-line and per-minute-of-use
charges. The access charge reductions result primarily from a
FCC-mandated increase in the price cap productivity factor from
5.3% to 6.5% with no sharing. The new rates go into effect
beginning July 1, 1997 and are to be computed as if the 6.5%
productivity factor had been in effect when current rates were
set on July 1, 1996. The FCC estimates that the rate reductions
called for in the order will reduce access charges industry-wide
by $1.7 billion in the first year.
The order also includes increases in subscriber line charges
(SLCs) and the establishment of a presubscribed interexchange
carrier charge (PICC). SLCs remain unchanged for primary
residential and single-line business access lines. SLCs for
additional residential access lines will be permitted to
increase to the lower of cost or $6.00 per line. Multi-line
business SLCs will be permitted to increase to the lower of
cost or $9.00 per line. The SLC increases are to be phased
in beginning in July 1997 through 1999. PICCs are per-line
rates charged to interexchange carriers for recovery of
non-traffic-sensitive costs not covered by SLCs and are
scheduled to begin in 1998.
The universal service order deferred implementation of
any changes to the support mechanisms currently in place
to subsidize the provision of services to high-cost areas
until January 1, 1999. The new support mechanism, when
implemented in 1999, will be based on forward looking
economic costs; however, proposed cost models have yet to
be developed. A new proceeding will be initiated in June
1997 to select a model by the end of 1997 with final FCC
action expected in 1998.
The order also established significant discounts to be
provided to eligible schools, libraries and rural health
care providers for all telecommunications services, internal
connections and internet services. Industry-wide annual
costs of the program are to be capped at $2.65 billion and are
to be funded out of the universal service fund. Local and
interexchange carriers' contributions to the education and
health care fund would be assessed by the administrator of
the fund on the basis of their intrastate and interstate
end-user revenues.
BellSouth is currently analyzing the universal service order.
The price cap order and the access charge reform order are not
yet available. Until these orders can be reviewed and analyzed,
and until any challenges to these orders have been concluded,
it will not be possible to determine the impact that these orders
will have on BellSouth's financial position or annual operating
results or cash flows.
State Developments
See Note E to the Consolidated Financial Statements.
OTHER MATTERS
Earnings Per Share Standard
In February 1997, the Financial Accounting Standards Board
adopted Statement of Financial Accounting Standards (SFAS) No.
128 "Earnings Per Share" which sets forth new rules concerning
the calculation and presentation of earnings per share
information in financial statements. SFAS No. 128 is required
for financial statements issued after December 15, 1997.
Earlier adoption is prohibited. Adoption of the standard by
BellSouth is not expected to materially impact earnings per
share.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
3b Bylaws of BellSouth Corporation
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.
10q-1 Amendment dated April 15, 1997 to the BellSouth
Personal Retirement Account Pension Plan
10w-1 Amendment dated February 18, 1997 to the BellSouth
Retirement Savings Plan
10-z BellSouth Corporation Non-Employee Director Stock Option
Plan as amended and restated effective November 25, 1996
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
Date of Earliest Event Subject
April 21, 1997 First Quarter 1997 Earnings Release,
1997 Financial Projection and
update of South Carolina
Regulatory Matters
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
BELLSOUTH CORPORATION
By /s/ W. Patrick Shannon
W. PATRICK SHANNON
Vice President and Controller
May 13, 1997
EXHIBIT INDEX
Exhibit
Number
3b Bylaws of BellSouth Corporation
10q-1 Amendment dated April 15, 1997 to the BellSouth
Personal Retirement Account Pension Plan
10w-1 Amendment dated February 18, 1997 to the BellSouth
Retirement Savings Plan
10-z BellSouth Corporation Non-Employee Director Stock Option
Plan as amended and restated effective November 25, 1996
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
BELLSOUTH CORPORATION
Incorporated under the Laws
of the State of Georgia
on October l3, l983 Adopted
October 24, l983
BY-LAWS
As Amended
April 28, 1997
Secretary Department
19A01 Campanile Building
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
CONTENTS
Article I......Shareholders
Article II.....Directors
Article III....Officers
Article IV.....Stock
Article V......Business Combinations
Article VI.....Seal
Article VII....Indemnity
Article VIII...Amendment of By-laws
BYLAWS
OF
BELLSOUTH CORPORATION
ARTICLE I
Shareholders
Section l. Annual Meeting. The annual meeting of the
shareholders for the election of Directors and for the
transaction of such other business as may properly come before
the meeting shall be held on such date and at such time and
place as the Board of Directors may by resolution
provide. Notice of any nominations of persons for election to
the Board of Directors or of any other business to be
brought before an annual meeting of shareholders by a
shareholder must be provided in writing to the Secretary
of the Corporation not later than the close of business on
the sixtieth (60th) day nor earlier than the close of
business on the one hundred and twentieth (120th) day prior
to the date of the meeting. Such shareholder's notice shall
set forth (a) as to each person whom the shareholder proposes
to nominate for election as a director all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being
named in the Proxy Statement as a nominee and to serving
as a director if elected, and evidence reasonably
satisfactory to the Company that such nominee has no
interests that would limit their ability to fulfill their
duties of office; (b) as to any other business that the
shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the
meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the
shareholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination or proposal is made (i)
the name and address of such shareholder, as they
appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the
Corporation that are owned beneficially and held of record
by such shareholder and such beneficial owner.
Section 2. Special Meeting. A special meeting of
the shareholders may be called at any time by the Board of
Directors or the Chief Executive Officer and shall be called
upon written request to the Chief Executive Officer or
Secretary, signed by the holders of at least two-thirds of
the outstanding shares entitled to vote at such meeting.
Such written request shall specify the time and purpose of
the proposed meeting.
Section 3. Notice of Meetings of Shareholders. Written
notice of each meeting of shareholders, stating the place and
time of the meeting, shall be mailed to each shareholder
entitled to vote at such meeting at such shareholder's
address shown on the records of the Corporation not less than
thirty nor more than fifty days prior to such meeting. If
the notice is for a special meeting, the notice shall
also include the purpose or purposes for which the special
meeting is being called and shall indicate that the notice
is being issued by or at the direction of the person or
persons calling the meeting. Failure to receive notice of
any meeting of shareholders shall not invalidate the
meeting. Notice of any meeting may be given by or at the
direction of the Chairman, the President, the Secretary or by
the person or persons calling such meeting.
Section 4. Quorum; Required Shareholder Vote. A quorum
for the transaction of business at any meeting of the
shareholders shall exist when the holders of forty per
centum of the outstanding shares entitled to vote are
represented either in person or by proxy. At any duly
constituted meeting, or at any adjournment thereof, the
affirmative vote of the majority of the shares represented
at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders, unless a
greater vote is required by law, by the Articles of
Incorporation or by these By-laws. The holders of a majority
of the voting shares represented at a meeting may adjourn
such meeting to another time or place despite the absence
of a quorum.
Section 5. Ballots. All elections by shareholders shall be by
ballot.
Section 6. Proxies. A shareholder may vote either in person
or by a proxy which such shareholder has duly executed in
writing.
Section 7. Inspectors of Elections. The Board of
Directors, in advance of any shareholders' meeting,
shall appoint an Inspector or Inspectors to act at
the meeting or any adjournment, thereof. Any vacancy
may be filled by appointment of the Board in advance of the
meeting or at the meeting by the person presiding thereat.
ARTICLE II
Directors
Section l. Power of Directors. The Board of Directors
shall direct the management of the business and affairs
of the Corporation and may exercise all of the powers
of the Corporation, subject to any restrictions imposed by law,
by the Articles of Incorporation or by these By-laws.
Section 2. Composition of the Board. The Board of
Directors of the Corporation shall consist of twelve (12)
natural persons of the age of eighteen years or over. The
Directors shall be divided into three classes (of at least
three directors each), as nearly equal in number of
directors as possible, with the term of each class to be
three years. Each Director shall hold office for the term for
which elected, which term shall end at an Annual Meeting of
Shareholders, and until his successor shall have been
elected and qualified, or until his earlier retirement,
resignation, removal from office, or death. The
authorized number of directors may be increased or decreased
from time to time by vote of a majority of the then
authorized number of directors or by the affirmative vote of
the holders of at least 75% of the voting power of all
shares of the Corporation entitled to vote
generally in the election of directors, voting together
as a single class; provided, however, that such number
shall not be less than nine.
Section 3. Election of Chairman of the Board and
Vice Chairmen of the Board. The Board of Directors may elect
from among their number a Chairman of the Board, and may also
elect from among their number a Vice Chairman or Vice Chairmen
of the Board (referred to in these By-laws as a "Vice
Chairman" or "Vice Chairmen").
Section 4. Chairman of the Board. The Chairman of the
Board (referred to in these By-laws as the "Chairman") shall
preside, when present, at all meetings of the Board of
Directors and shall have such other powers and duties as
may be conferred upon or assigned to the Chairman by the
Board of Directors.
Section 5. Vice Chairmen of the Board. The Vice Chairman
(or if there be more than one Vice Chairman, the Vice
Chairman designated by the Chairman) of the Board, shall
preside at meetings of the Board of Directors in the
absence of the Chairman and at meetings of the Shareholders
in the absence of the Chief Executive Officer, and shall
perform such other duties as the Board or Chairman may
assign.
Section 6. Meetings of the Board; Notice of Meetings;
Waiver of Notice. The Annual Meeting of the Board of Directors,
for the purpose of electing officers and transacting such other
business as may be brought before the meeting, shall be held
each year immediately following the Annual Meeting of the
shareholders. Regular meetings shall be held at such times
and places as the Board of Directors or Committees may
determine, and no notice of such regular meetings need be
given. Special meetings of the Board of Directors may be
called at any time by the Chief Executive Officer or by any
two members of the Executive Committee, and shall be called
by the Chief Executive Officer or the Secretary upon request
in writing signed by two or more directors and specifying the
purpose or purposes of the meeting. Notice of the time and
place of such special meetings shall be given to each
Director, in person or by first class mail, telegraph,
cablegram or telephone, or by any other means customary for
expedited business communications, at least two (2) days
before the meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of the
Board of Directors need be stated in the notice of such
meeting.
Section 7. Quorum; Vote Requirement. One-third of the
number of Directors fixed in these By-laws at any time shall
constitute a quorum for the transaction of business at any
meeting. When a quorum is present, the vote of a majority of
the Directors present shall be the act of the Board of
Directors, unless a greater vote is required by law, by
the Articles of Incorporation or by these Bylaws.
Section 8. Action of Board Without Meeting. Any action
required or permitted to be taken at a meeting of the
Board of Directors or any committee thereof may be taken
without a meeting if written consent, setting forth the
action so taken,is signed by all the Directors or committee
members and filed with the minutes of the proceedings of
the Board of Directors or committee. Such consent shall have
the same force and effect as a unanimous affirmative vote
of the Board of Directors or committee, as the case may be.
Section 9. Committees. The Board of Directors, by
resolution adopted by a majority of all of the Directors,
may designate from among its members an Executive
Committee and other committees, each composed of three (3)
or more Directors, and may fix the quorum thereof. Any
committee so designated shall serve at the pleasure of and
may exercise such authority as is delegated by the Board of
Directors, provided that no committee shall have the
authority of the Board of Directors to (1) approve or
propose to shareholders action required to be approved
by shareholders, (2) fill vacancies on the board of
directors or on any of its committees, (3) amend the
Articles of Incorporation, (4) adopt, amend, or repeal By-
laws, or (5) approve a plan of merger not requiring
shareholder approval.
Section l0. Executive Committee. The Executive Committee
shall consist of the Chairman and the President and such
other Directors as are designated from time to time by the
Board of Directors. The Chief Executive Officer may
designate an Alternate Chairman who shall preside during
the absence or disability of the Chief Executive Officer. The
Executive Committee shall, except as otherwise provided herein,
by law or by resolution of the Board of Directors, have all the
authority of the Board of Directors during the intervals
between the meetings of the Board of Directors.
Section ll. Vacancies. A vacancy occurring in the Board
of Directors by reason of the removal of a Director by
the shareholders shall be filled by the shareholders, or,
if authorized by the shareholders, by the remaining Directors.
Any other vacancy occurring in the Board of Directors,
including, without limitation, any vacancy occurring by
reason of an amendment to these By-laws increasing the
number of Directors, may be filled by the affirmative vote
of a majority of the remaining Directors, though less than a
quorum of the Board of Directors, or, if the vacancy is not
so filled, or if no director remains, by the shareholders.
A Director elected to fill a vacancy shall serve for the
unexpired term of his predecessor in office or, if such
vacancy occurs by reason of an amendment to these By-laws
increasing the number of Directors, until the next
election of Directors by the shareholders and the
election and qualification of the successor.
Section l2. Telephone Conference Meetings. Members of the
Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board or
committee by means of telephone conference or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and
participation in a meeting pursuant to this section shall
constitute presence in person at such meeting.
Section l3. Removal of Directors. Subject to the rights
of the holders of any series of Preferred Stock then outstanding,
any director, or all directors, may be removed from office at
any time, with or without cause, only by the affirmative vote
of the holders of at least 75% of the voting power of all
shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class.
ARTICLE III
Officers
Section l. Executive Structure. The officers of
the Corporation shall be elected by the Board of Directors
and shall consist of a Chairman of the Board, if there be
one, a President, a Vice Chairman or Vice Chairmen of the
Board, if there be any and if elected as an officer or
officers of the Corporation, such number of Executive Vice
Presidents and Vice Presidents as the Board of Directors
shall from time to time determine, a Secretary, a Treasurer,
a Controller and such other officers or assistant officers
as may be elected or appointed by the Board of Directors.
The Board shall designate either the Chairman or the
President as the Chief Executive Officer of the Corporation
and may designate a Chief Operating Officer. Each officer shall
hold office for the term for which such officer has been
elected or appointed and until such officer's successor has
been elected or appointed and has qualified, or until such
officer's earlier resignation, removal from office, or death.
Any two or more offices may be held by the
same person, except that neither the Chairman nor the
President shall serve as Secretary or Assistant Secretary.
Section 2. Chief Executive Officer. The Chief Executive
Officer shall, under the direction of the Board of Directors,
have responsibility for the general directionof the
Corporation's business, policies and affairs. The Chief
Executive Officer shall preside, when present, at all meetings
of the shareholders and at all meetings of the
Executive Committee. The Chief Executive Officer shall have
such other authority and perform such other duties as usually
appertain to the chief executive office in business
corporations or as are provided by the Board of Directors.
The Chief Executive Officer shall be empowered at any time
and from time to time to issue and promulgate rules, regulations
and directives relating to the conduct of the business and
affairs of the Corporation, and the Secretary of the Corporation
shall maintain a record of such rules, regulations and
directives.
Section 3. Chief Operating Officer. If there be one,
the Chief Operating Officer shall, under the direction of the Chief
Executive Officer, have direct superintendence of the
Corporation's business, policies, properties and affairs. The
Chief Operating Officer shall have such further powers and
duties as from time to time may be conferred upon or assigned
to such officer by the Board of Directors or the Chief
Executive Officer. In the absence or disability of the Chief
Executive Officer, the Chief Operating Officer shall perform
the duties and exercise the powers of the Chief Executive
Officer.
Section 4. President. The President shall have such
powers and duties as from time to time may be conferred upon or
assigned to the President by the Board of Directors or the
Chief Executive Officer (if the President is not the Chief
Executive Officer).
Section 5. Vice Presidents. The Executive Vice Presidents,
if any, and Vice Presidents shall have such powers and duties
as from time to time may be conferred upon or assigned to them
by the Board of Directors, the Chairman, or the President. An
Executive Vice President or other officer may be responsible
for the assignment of duties to subordinate Vice Presidents.
Section 6. Secretary. The Secretary shall send all requisite
notices of meetings of the shareholders, the Board
of Directors, and the Executive Committee. The Secretary shall
attend all meetings of the shareholders, the Board of
Directors, and the Executive Committee, and shall keep a true
and faithful record of the proceedings. The Secretary shall
have custody of the seal of the Corporation, and of all
records, books, documents, and papers of the Corporation,
except those required to be in the custody of the Treasurer or
the Controller and except such subsidiary records as may be
kept in departmental offices. The Secretary shall sign and
execute all documents which require his signature and
execution, and shall affix the seal of the Corporation thereto
and attest the same when necessary. Assistant Secretaries
shall have such of the authority and perform such of the
duties of the Secretary as may be provided in these By
laws or assigned to them by the Board of Directors or by the
Secretary. During the Secretary's absence or inability, the
Secretary's authority and duties shall be possessed by
such Assistant Secretary or Assistant Secretaries as the Board
of Directors, or the Secretary with the approval of the Chairman,
or the President may designate.
Section 7. Treasurer. The Treasurer shall receive and
have charge of all funds and securities of the Corporation. The
Treasurer shall deposit the funds to the credit of the
Corporation in such depositories as shall be approved from time
to time by the Chairman, the President, the Executive Vice
President or Vice President responsible for financial matters,
or the Treasurer, and the Treasurer shall disburse the same
only on written approval of the Controller or the Controller's
duly authorized representative, or under such other rules and
regulations and upon such other disbursement instruments as the
Chairman or the Executive Vice President or Vice President
responsible for financial matters may adopt or authorize. The
Treasurer shall keep full and regular books showing all the
Treasurer's receipts and disbursements. Assistant Treasurers
shall have such of the authority and perform such of the
duties of the Treasurer as may be provided in these By
laws or assigned to them by the Board of Directors or by the
Treasurer. During the Treasurer's absence or inability, the
Treasurer's authority and duties shall be possessed by
such Assistant Treasurer or Assistant Treasurers as the Board
of Directors, or the Treasurer upon the approval of the
Chairman, the President or the officer responsible for
financial matters, may designate. The Treasurer and each
Assistant Treasurer shall give such security for the
faithful performance of such officer's duties as the Board
of Directors may require.
Section 8. Controller. The Controller shall be the principal
accounting officer of the Corporation and shall have custody
and charge of all books of account, except those required by
the Treasurer in keeping record of the work of the Treasurer's
office, and shall have supervision over such subsidiary
accounting records as may be kept in departmental offices. The
Controller shall have access to all books of account, including
the records of the Secretary and the Treasurer, for obtaining
information necessary to verify or complete the records of the
Controller's office. The Controller or a duly authorized
representative shall certify to the authorizations
and approvals pertaining to all vouchers; and no payments from the
general cash shall be made by the Treasurer except on vouchers
bearing the written approval of the Controller or an authorized
representative, unless the Board of Directors, the Chairman or
other officer responsible for financial matters provides
otherwise. Assistant Controllers shall have such of
the authority and perform such of the duties of the Controller as
may be provided in these By-laws or assigned to them by
the Board of Directors or by the Controller. During
the Controller's absence or inability, the Controller's authority
and duties shall be possessed by such Assistant Controller
or Assistant Controllers as the Board of Directors, or
the Controller upon the approval of the Chairman, the
President or other officer responsible for financial matters
may designate.
Section 9. Other Duties and Authority. Each officer,
employee and agent of the Corporation shall have such other
duties and authority as may be conferred upon such officer by the Board
of Directors or delegated to such officer by the Chairman,
the President or the responsible officer.
Section 10. Removal of Officers. Any officer may be removed
at any time by the Board of Directors with or without
cause, and such vacancy may be filled by the Board of
Directors.
Section ll. Appointed Officers. The Board of Directors, the
Chairman, the President, or the officer responsible for
administrative matters may, from time to time, appoint
individuals to serve in such designated capacities for the
Corporation (such as Vice President, Assistant Vice President,
Assistant Secretary, Assistant Treasurer or Assistant
Controller) as may be deemed appropriate. Each appointed
officer shall perform such duties and shall have such
authority as shall be delegated to such officer from time to
time by the officer of the Corporation to whom such
appointed officer is responsible. Any duty or authority
delegated to any appointed officer pursuant to this Section
may be withdrawn, with or without cause, at any time by
the Board of Directors, the Chairman, the President, the
officer responsible for administrative matters or such officer
delegating such duty or authority to the appointed officer.
ARTICLE IV
Stock
Section l. Stock Certificates. The shares of stock of the
Corporation shall be represented by certificates in such form
as may be approved by the Board of Directors, which
certificates shall be signed or signed by facsimile by the
Chairman or President and the Secretary or Treasurer or an
Assistant Secretary or Assistant Treasurer of the
Corporation; and which shall be sealed with the seal of the
Corporation or a facsimile thereof. No share certificate
shall be issued until the consideration for the shares
represented thereby has been fully paid or otherwise provided
for.
Section 2. Transfer of Stock. Shares of stock of the
Corporation shall be transferred on the books of the
Corporation upon surrender to the Corporation of certificates
representing the shares to be transferred accompanied by
an assignment in writing of such shares properly executed by
the shareholder of record or such shareholder's duly
authorized attorney-in-fact and with all taxes on the transfer
having been paid. The Corporation may refuse any requested
transfer until furnished evidence satisfactory to it that
such transfer is proper. The Board of Directors may make
such rules concerning the issuance, transfer and registration
of stock, the cancellation of stock and certificates, and
requirements regarding the replacement of lost, destroyed or
wrongfully taken stock certificates (including any requirement
of an indemnity bond prior to issuance of any replacement
certificate) as it deems appropriate.
Section 3. Registered Shareholders. The Corporation may
deem and treat the holder of record of any stock as the absolute
owner for all purposes and shall not be required to take any
notice of any right or claim of right of any other person.
Section 4. Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a
determination of shareholders for any other purpose, the
Board of Directors of the Corporation may fix in advance a
date as the record date for any such determination of
shareholders, such date in any case to be not more than
fifty days and, in the case of a meeting of shareholders,
not less than ten days prior to the date on which the
particular action requiring such
determination of shareholders is to be taken.
ARTICLE V
Business Combinations
Section 1. All of the requirements within Article 11 of
Chapter 2 of Title 14 of the Official Code of Georgia
Annotated, in the form enacted and amended by Georgia Laws,
l985, Page 527, shall be applicable to business combinations
of the Corporation.
Section 2. All of the requirements within Article 11A of
Chapter 2 of Title 14 of the Official Code of Georgia
Annotated in the form enacted by Georgia Laws 1988, Page
158, shall be applicable to business combinations of the
Corporation.
ARTICLE VI
Seal
The common seal of the Corporation shall bear within
concentric circles the words "BellSouth Corporation" with the
word "Seal" in the center. The seal and its attestation may
be by facsimile.
ARTICLE VII
Indemnity
Section 1. Any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (including any action by or in
the right of the Corporation), by reason of the fact that
such person is or was a director or officer of the
Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall
be indemnified by the Corporation against expenses (including
reasonable attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, to
the maximum extent permitted by, and in the manner provided
by, the Georgia Business Corporation Code.
Section 2. The Board of Directors is expressly authorized
on behalf of the Corporation to enter indemnity agreements
between the Corporation and any director or officer of the
Corporation, or any person serving at the request of the
Corporation as a director, officer, trustee, agent or
fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or enterprise, in form
and content acceptable to the Board and substantially in
the form of agreement submitted to and approved by the
shareholders of the Corporation. Such agreements may
provide that the Corporation shall indemnify such persons
and provide for procedural rights intended to assure that
appropriate indemnification is available against expenses
(including reasonable attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably
incurred by such persons in connection with such action,
suit or proceeding. No indemnification may be made for
liability (i) for any appropriation, in violation of a
director's duties, of any business opportunity of the
Corporation, (ii) for acts or omissions not in good faith
or constituting intentional misconduct or a knowing violation
of law, (iii) for the types of liability set forth in
Section 14-2-154 of the Georgia Business Corporation Code,
or (iv) for any transaction from which the person derived an
improper personal benefit.
ARTICLE VIII
Amendment of By-laws
The Board of Directors shall have the power to alter,
amend or repeal the By-laws or adopt new by-laws, but any
by-laws adopted by the Board of Directors may be altered,
amended or repealed and new by-laws adopted by the
shareholders. The shareholders may prescribe that any bylaw
or by-laws adopted by them, including, without limitation,
a by-law establishing the number of Directors, shall not be
altered, amended or repealed by the Board of Directors.
Action by the Board of Directors with respect to the By-
laws shall be taken by an affirmative vote of a majority of
all of the Directors then in office. Action by the
shareholders with respect to the By-laws shall be taken by
an affirmative vote of a majority of the shares entitled to
vote at an election of Directors.
Notwithstanding the preceding sentence, the affirmative
vote of the holders of at least 75% of the voting power
of all shares of the Corporation entitled to vote
generally in the election of directors, voting together as
a single class, shall be required to amend or repeal, or
adopt any provision inconsistent with, Section 2 or l3 of
Article II of these By-
laws, or this sentence.
Page 3 of 3
AMENDMENT TO THE BELLSOUTH PERSONAL
RETIREMENT ACCOUNT PENSION PLAN
This Amendment is made to the BellSouth Personal Retirement
Account Pension Plan (the "Plan"), which was amended and
restated effective July 1, 1996. The Chairman of the
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 3 of the Plan by deleting Paragraph 3.04
in its entirety and substituting therefor the following:
3.04 Interest Credit. Except as otherwise
provided in this Paragraph, as of the last day of each Plan
Year, each Participant's account shall be credited with an
interest credit equal to the Participant's account balance
on the first day of the Plan Year multiplied by 5.2 percent
in 1997 and 4.0 percent for each year after 1997. If at any
time in the 1997 Plan Year a Participant is not actively
employed, the 5.2 percent interest credit rate shall apply
for the month(s) in which the Participant was actively
employed during such Plan Year, and a 4.0 percent interest
credit rate shall apply for the remainder of such Plan Year
that precedes the Participant's Pension Commencement Date,
if applicable. However, the prior year's interest rate (4.6
percent) shall apply to any account balance for a
Participant who terminates in January or February, 1997. In
addition, if a Participant has attained or will first attain
(assuming continuous service) 35 years of Vesting Service
Credit after April 1, 1994, and before January 1, 1998, the
4.0 percent interest credit rate shall apply to the account
for the entire 1997 Plan Year.
2.
Amend Section 3 of the Plan by deleting Subparagraph
3.05(a) in its entirety and substituting therefor the
following:
(a) Additional Credit. The Board has approved an
additional credit for the 1997 Plan Year equal to the
Participant's Compensation multiplied by 2 percent, and this
additional credit shall be credited to each Participant's
account as of the last day of such Plan Year.
3.
Effective July 1, 1993, amend Paragraph 6.05,
Limitation of Benefit Amount, by adding the following
sentence as the third sentence of Paragraph 6.05:
If such portion is not to be paid as a lump sum
settlement pursuant to Subparagraph 7.08(a), it shall
be paid (i) if the Participant has not elected to
receive a lump sum settlement of his pension, in the
same form in which the Participant is to receive his
pension, subject to the same reduction for payment in
the form of a joint and 50% survivor annuity as
provided in Subparagraph 7.01(a)(1), or (ii) if the
Participant has elected to receive a lump sum
settlement of his pension, in the form of annuity
elected by the Participant in accordance with rules
established by the Plan Administrator, subject to the
same reduction for payment in the form of a joint and
50% survivor annuity as provided in Subparagraph
7.01(a)(1).
APPROVED this 15th day of April, 1997.
EMPLOYEES' BENEFIT CLAIM REVIEW COMMITTEE
/s/ H.C. Henry, Jr.
H. C. Henry, Jr.
Executive Vice President - Corporate Relations
Chairman
AMENDMENT TO THE BELLSOUTH RETIREMENT SAVINGS PLAN
This amendment is made to the BellSouth Retirement Savings
Plan (the "Plan"), which was amended and restated effective as of
July 1, 1996. The BellSouth Savings Plan Committee, under
authority delegated by the Nominating and Compensation Committee
to approve amendments to the Plan, hereby amends the Plan, as
follows:
I.
By amending the introductory clause in the second sentence of
Section 4.2.a.(i)(B) to read as follows:
"The Committee shall determine such percentages, and
the BellSouth senior officer responsible for human
resources shall amend Schedule B, as necessary, for
each 12 month period beginning on April 1, according to
the following formula:"
2.
By amending the text of Section 4.2.a.(i)(B)(III) to read as
follows:
"Notwithstanding the above, the BellSouth senior
officer responsible for human resources may determine
and set out on Schedule B a match percentage for such
Participating Company for any period which is less than
the match percentage which otherwise would apply for
such period under the formula above and shall be
responsible for determining and setting out on Schedule
B the appropriate line of business for each
Participating Company. Furthermore, the BellSouth
Board of Directors, in its sole discretion, may provide
for an increase in the percentages otherwise determined
under Paragraph (A) and/or (B) above for one or more
Participating Companies for any period if the Board
deems it advisable in light of participation levels,
the price of BellSouth Shares or other factors. The
BellSouth senior officer responsible for human
resources shall revise Schedule B, as necessary, to
reflect any such increased percentages declared by the
Board of Directors.
3.
By amending the parenthetical phrase in Section 7.2.b and 7.2.c.
to read as follows:
(as designated by the BellSouth senior officer
responsible for human resources on Schedule A)
4.
By amending the second sentence of Section 7.4.c. to read as
follows:
These Participating Companies shall be designated by
the BellSouth senior officer responsible for human
resources on Schedule A , as amended from time to time.
This amendment shall be effective retroactive to July 1, 1996.
APPROVED this 18th day of February, 1997.
BELLSOUTH SAVINGS PLAN COMMITTEE
/s/ H.C. Henry, Jr.
BY: H.C. Henry, Jr.
Executive Vice President - Corporate Relations
Chairman
TO: H. C. (Buddy) Henry, Jr.
Executive Vice President - Corporate Relations
FROM: Susan K. Cooper
Senior Human Resources Executive
SUBJECT: Approval of BellSouth Corporation Non-Employee
Director Stock Plan Amendments
The attached restatement of the BellSouth Corporation Non
Employee Director Stock Plan reflects changes made by the
BellSouth Board of Directors in resolutions adopted on
November 25, 1996 regarding the grant of stock payments
beginning May 1, 1997 and regarding option transferability.
Article VIII, amended effective May 1, 1997, eliminates a
non employee director's ability to elect to have all or 50%
of director fees paid in the form of BellSouth shares.
Instead, 50% of each non-employee director's retainer
automatically will be paid in the form of BellSouth shares.
Each nonemployee director also will receive outside of the
Plan a special grant of 200 BellSouth shares on each May 1
pursuant to the November 25, 1997
resolution.
Article IX, amended effective November 25, 1996, allows non
employee directors to transfer future and outstanding
nonqualified stock options and tandem SARs to or on behalf
of specified family members subject to limitations
established by the Board.
Finally, Plan annual grant numbers and aggregate limits have
been updated to reflect the November 8, 1995 two-for-one
stock split pursuant to Article X of the Plan and applicable
September 25, 1995 BellSouth Board of Directors resolutions.
Pursuant to the specific authority granted to the officers
of BellSouth Corporation in the applicable BellSouth Board
of Directors resolutions to reflect the changes made in
those resolutions and described above, your approval of the
restatement of the BellSouth Corporation NonEmployee
Director Stock Plan is requested.
Recommended: /s/ Susan K. Cooper 4/25/97
Senior Human Resources Executive Date
Concurred: /s/ W. H. Alford 4/29/97
Executive Vice President Date
and General Counsel
Approved: /s/ H.C. Henry, Jr. 4/28/97
Executive Vice President - Date
Corporate Relations
BELLSOUTH CORPORATION
NONEMPLOYEE DIRECTOR STOCK PLAN
EFFECTIVE APRIL 24, 1995
AS AMENDED
ARTICLE I. PURPOSE
The purpose of this Plan is to promote the interest
of BellSouth by granting Options and Stock Appreciation
Rights to Non-Employee Directors, and providing Non-
Employee Directors an election to receive compensation in
the form of Stock Payments, in order
(1) to attract and retain Non-Employee Directors,
(2) to provide Non-Employee Directors with long term
financial incentives to increase the value of BellSouth,
and
(3) to provide each Non-Employee Director with a
stake in the future of BellSouth which corresponds to the
stake of each of BellSouth's shareowners.
Only Non-Employee Directors shall be eligible for Awards
under this Plan.
ARTICLE II. DEFINITIONS
2.1 Definitions.
Each term set forth in this Article II shall have the
respective meaning set forth opposite such term for
purposes of this Plan, and when the defined meaning is
intended the term is capitalized.
"Additional Option" means an Option granted to a Non
Employee Director pursuant to Section 6.2 based upon his
or her level of Stock ownership.
"Agreement" means the written agreement which sets
forth the Option Price, grant date, expiration date, and
number of Shares with respect to an Option and an SAR
granted in tandem with such Option to a Non-Employee
Director under this Plan and which contains such other
terms and conditions not inconsistent with this Plan as
the Committee determines are appropriate.
"Award" means an Option, SAR or Stock Payment.
"BellSouth" means BellSouth Corporation, a Georgia
corporation.
"Basic Option" means an Option granted to a Non-
Employee Director pursuant to Section 6.1.
"Beneficiary" means the person entitled to receive
any payments or exercise any rights following the death of
a Non Employee Director as determined pursuant to Section
9.2.
"Board" means the Board of Directors of BellSouth.
"Change in Control" means the occurrence of either of
the following: (i) any "person" (as such term is used in
Section 13(c) and 14(d) of the Exchange Act), other than a
trustee or other fiduciary holding securities under an employee
benefit plan of BellSouth or a corporation owned directly
or indirectly by the shareholders of BellSouth in
substantially the same proportions as their ownership of
stock of BellSouth, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of BellSouth
representing 20% or more of the total voting power
represented by BellSouth's then outstanding voting
securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period
constitute the Board and any new director whose election
by the Board or nomination for election by BellSouth's
shareholders was approved by a vote of at least two-thirds
of the directors who either were directors at the
beginning of the two-year period or whose election or
nomination for election was previously so approved, cease
for any reason to constitute a majority thereof.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" means the Nominating and Compensation
Committee of the Board, or any successor committee which
administers this Plan as provided in Article V.
"Compensation" means all cash compensation payable to
a NonEmployee Director for service to BellSouth as a
director, other than reimbursement for expenses, including
retainer fees for service on, and fees for attendance at
meetings of, the Board and any committees thereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
"Fair Market Value" for any day means the average of
the high and low daily sale prices of a Share on the New
York Stock Exchange for that day or, if there are no sales
on such day, for the most recent prior day on which a
Share was sold on the New York Stock Exchange.
"Non-Employee Director" means a member of the Board
who is not an officer or employee of BellSouth or its
affiliates.
"Option" means an option granted under this Plan to
purchase Stock, which shall constitute a nonqualified or
nonstatutory stock option and not an incentive stock
option satisfying the requirements of Code section 422.
"Option Price" means the price determined in
accordance with Section 6.3 which shall be paid to
purchase one Share upon the exercise of an Option granted
under this Plan.
"Plan" means this BellSouth Corporation Non-Employee
Director Stock Plan as effective April 24, 1995 and as
thereafter amended from time to time.
"Prior Plan" means the BellSouth Corporation Non-Employee
Director Stock Option Plan.
"Rule 16b-3" means Rule 16b-3 of the Securities and
Exchange Commission under the Exchange Act, as from time
to time in effect (including its successor).
"SAR" or "Stock Appreciation Right" means the contractual
right granted to a Non-Employee Director to receive a
payment upon the exercise of such right which reflects the
appreciation in the Fair Market Value of the number of Shares for which
such right was granted.
"SAR Exercise Date" means the date on which the
exercise of an SAR occurs under the related Agreement.
"SAR Exercise Price" means the Fair Market Value of a
Share on the SAR Exercise Date.
"SAR Grant Price" means the Option Price for the related
Option.
"Share" means a share of Stock.
"Stock" means the $1.00 par value common stock of
BellSouth.
"Stock Payment" means payment to a Non-Employee
Director in the form of Shares pursuant to Article VIII.
2.2 Gender and Number.
All pronouns are masculine, solely for ease of reading,
and should be read as feminine where applicable. Unless
the context clearly requires otherwise, the singular shall
include the plural and the plural shall include the
singular.
ARTICLE III. SHARES SUBJECT TO PLAN
The aggregate number of Shares with respect to which the
grant of Options, including Options in tandem with SARs,
(collectively referred to as "Grants" in this Article III)
may be made shall be 600,000. Any Shares subject to a
Grant after the exchange, cancellation, forfeiture or
expiration of such Grant thereafter shall again become
available for use under this Article III as if such Shares
had never been subject to a Grant. The aggregate number of
Shares with respect to which Stock Payments may be made
shall be 350,000. The limitations of this Article III
shall be subject to adjustment pursuant to Article X.
BellSouth shall reserve from time to time Shares for use
under this Plan, and such Shares shall be reserved to the
extent BellSouth deems appropriate from authorized but
unissued Shares and from Shares which have been reacquired
by BellSouth.
ARTICLE IV. EFFECTIVE DATE AND DURATION
4.1 Effective Date.
The effective date of this Plan shall be April 24, 1995.
This Plan will become effective only if approved by the
shareholders of BellSouth on such date.
4.2 Prior Plan.
This Plan is a successor to the Prior Plan. No
further grants of stock options or stock appreciation
rights shall be made under the Prior Plan beginning on
April 24, 1995, subject to this Plan becoming effective.
Options and stock appreciation rights outstanding under
the Prior Plan shall continue to be governed by the terms
of the Prior Plan; provided, that, effective on and after
November 25, 1996, terms of this Plan shall constitute an
amendment to the terms of a Prior Plan, and to the terms
of outstanding
grants under a Prior Plan where applicable, when expressly
so provided in
this Plan.
4.3 Duration.
This Plan shall terminate on December 31, 2004, unless
earlier terminated by the Board pursuant to Article XI.
No Option or SAR shall be granted, and no Stock Payment
shall be made, after the date this Plan terminates. The
applicable terms of this Plan, and any terms and
conditions as applicable to Options or SARs granted prior
to such date, shall survive the termination of the Plan
and continue to apply to such Option and SARs.
ARTICLE V. ADMINISTRATION
5.1 Committee.
The Plan shall be administered by the Committee. The
Committee shall consist of two or more disinterested
directors of BellSouth, who shall be appointed by the
Board. A member of the Board shall be deemed to be
"disinterested" only if he or she satisfies such
requirements as the Securities and Exchange Commission may
establish for disinterested administrators acting under
plans intended to qualify for exemption under Rule 16b-3.
A Non-Employee Director shall not fail to be
"disinterested" solely because he or she receives an
Option or SAR grant or Stock Payments. 5.2
Committee Responsibilities.
The Committee shall (a) make all grants of Options,
SARs and Stock Payments as provided in this Plan, (b)
determine the terms and conditions of grant Agreements,
and all election and other forms, which terms and
conditions shall not be inconsistent with this Plan, (c)
interpret the Plan and (d) make all other decisions
relating to the operation of the Plan. The Committee may
adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
5.3 Determinations.
All actions taken and all interpretations and
determinations made by the Committee in good faith shall
be final and binding upon the Non-Employee Directors,
BellSouth and all other interested persons. No member of
the Committee shall be personally liable for any action,
determination, or interpretation made in good faith with
respect to the Plan or Awards. All members of the
Committee shall be fully protected by BellSouth, to the
fullest extent permitted by applicable law, in respect of
any such action, determination or interpretation.
ARTICLE VI. OPTIONS
6.1 Grant of Basic Options.
On the date of each BellSouth annual shareholders'
meeting, beginning with and including the 1995 annual
shareholders' meeting, each individual who is at that time
serving as a NonEmployee Director, whether or not such
individual is first elected as a Board member at that
meeting or whether or not such individual is standing for
reelection as a Board member at that meeting, shall
automatically be granted an Option to purchase 2,000
Shares. Each grant of such an Option, referred to in this
Plan as a Basic Option, will include the grant of a tandem
SAR as provided in Article VII and will be evidenced by an
Agreement which shall reflect the terms and conditions of
Options and tandem SARs as provided in this Plan and such
additional terms and conditions, not inconsistent with
this Plan, as are determined by the Committee.
6.2 Grant of Additional Options.
(a) Each Non-Employee Director who receives a
grant of a Basic Option under Section 6.1 on the
date of an annual shareholders' meeting shall be
granted an Additional Option on such date if (i)
the number of Shares owned by such Non-Employee
Director (as determined under paragraph (b)
below) as of the immediately preceding December
31 exceeds (ii) the sum of (A) the number of
Shares determined by dividing five times the
amount of the annual retainer for Board members
in effect on such December 31 by the
representative Share price on such December 31
(as determined under paragraph (c) below) and
(B) the number of Shares subject to Additional
Options previously granted to such Non Employee
Director under this Section 6.2 (whether or not
any such previously granted Additional Option
has been exercised or has expired and adjusted
as appropriate to reflect the November 8, 1995
two-for-one Share split). Such Additional
Option shall be for the number of Shares equal
to one-half (rounded to the next highest whole
number) of the number by which (i) exceeds (ii)
above, limited to a maximum annual grant of
2,000 Shares. Each grant of such an Additional
Option will include the grant of a tandem SAR as
provided in Article VII and will be evidenced by
an Agreement which shall reflect the terms and
conditions of Options and tandem SARs as
provided in this Plan and such additional terms
and conditions, not inconsistent with this Plan,
as are determined by the Committee.
(b) For purposes of this Section 6.2 only, a
Non Employee Director shall be deemed to "own"
the number of Shares equal to the sum of (i)
those Shares, whether registered in the owner's
name or in nominee name, which (A) are owned by
the Non Employee Director or his spouse (or
jointly) or (B) are owned by a trust with
respect to which the NonEmployee Director or his
spouse (or both) contributed the Shares (or the
money or other property used by the trustee to
purchase the Shares) and also holds the power to
vote and dispose of the Shares, and (ii) the
number of stock units (i.e., bookkeeping units
which reflect the price changes and dividends on
a Share) credited to the Non-Employee Director
pursuant to any deferred compensation plan
maintained by BellSouth. (c) For purposes of
this Section 6.2 only, the representative price
of a Share on any December 31 will equal the
average of the Fair Market Value of a Share for
the last five trading
days on the New York Stock Exchange for the year
ending that December 31 and the first five such
trading days in the next succeeding year.
6.3 Option Price; Form of Payment.
The Option Price for each Share subject to an Option
shall be the greater of (i) the par value of a Share or
(ii) the Fair Market Value of a Share on the date the
Option is granted.
6.4 Date Exercisable.
An Option shall become exercisable on the first
anniversary of the Grant Date; provided, however, in the
event that, prior to such first anniversary, (A) the Non
Employee Director terminates his service on the Board by
reason of (i) death, (ii) disability, or (iii) retirement
(which shall mean termination of service on the Board
after the Non-Employee Director has attained age 55 and
completed at least 5 years of service as a director on the
Board), or (B) a Change in Control shall occur, then an
Option shall become immediately exercisable upon the
occurrence of such event or, if later, the expiration of
the six-month period following the Grant Date. Subject to
the foregoing, an Option shall be exercisable at any time
in whole or in part (but if in part, in an amount equal to
at least 100 Shares or, if less, the number of Shares
remaining to be exercised under the Option) on any
business day of BellSouth before the date such Option
expires under Section 6.5.
6.5 Expiration.
An Option shall expire on the earlier of
(a) the first date on or after the Grant Date and
prior to a Change in Control on which the
NonEmployee Director (i) resigns from or is not
reelected to the Board prior to being eligible
for retirement under clause B(iii) of Section
6.4; (ii) resigns for the purpose of accepting,
or retires and subsequently accepts, a
directorship or employment, or becomes
associated with, employed by or renders service
to, or owns an interest in (other than as a
shareholder with a less than 5% interest in a
publicly traded company) any business that is
competitive with any BellSouth company or with
any other business in which any of the BellSouth
companies have a substantial direct or indirect
interest; or (iii) resigns as a result of an
interest or affiliation which would prohibit
continued service as a director;
(b) the date the Option (or a tandem SAR) has been
exercised in full; or
(c) one day after the expiration of the 10-year period
which begins on the Option Grant Date or, in the
case of a Non-Employee Director who dies within
six months prior to such day, the last day of
the 6-month period which begins on the date of the NonEmployee
Director's death.
6.6 Method of Exercise.
An Option may be exercised by properly completing and
actually delivering to BellSouth an exercise form
prescribed by the Committee for this purpose, together
with payment in full of the Option Price for the shares of
Stock the Non Employee Director desires to purchase
through such exercise in the manner specified in the
exercise form. Payment may be made in the form of cash or
shares of Stock, or a combination of cash and shares of
stock. Any shares of Stock
which are tendered shall be valued at their Fair Market
Value on the date as of which the exercise is
effective.
ARTICLE VII. STOCK APPRECIATION RIGHTS
7.1 Grant of SARs.
SARs shall be granted to Non-Employee Directors in tandem
with the grant of Basic Options and Additional Options.
Each such grant shall be evidenced by the same Agreement
as the Option which is granted in tandem with such SAR and such
SAR shall relate to the same number of Shares as such
Option. An SAR shall be exercisable only if and to the
extent the tandem Option is exercisable.
7.2 Payment at Exercise.
An SAR may be exercised by properly completing and
actually delivering to BellSouth an exercise form
prescribed by the Committee for this purpose. Upon the
exercise of an SAR the NonEmployee Director shall receive
a payment equal to the excess, if any, of the SAR Exercise
Price for the number of Shares of the SAR being exercised
at that time over the SAR Grant Price for such Shares.
Such payment shall be made in whole Shares. Such Shares
shall be valued for this purpose at the SAR Exercise Price
on the date the SAR is exercised, and any payment for a
fractional Share automatically shall be paid in cash based
on such valuation. 7.3 Special Terms and Conditions.
An SAR shall be exercisable only when the tandem
Option is exercisable. The Non-Employee Director's right
to exercise an SAR shall be forfeited to the extent that
he exercises the tandem Option and the right to exercise
the tandem Option shall be forfeited to the extent he
exercises the tandem SAR, but any such forfeiture shall
not count as a forfeiture for purposes of making the
Shares subject to such Option and SAR again available for
use under Article III.
ARTICLE VIII. STOCK PAYMENTS
For each date that a retainer payment otherwise is
due to a Non-Employee Director, BellSouth shall pay such
Non Employee Director a Stock Payment for the number of
Shares equal to 50% of such retainer payment based upon
the average of the high and low daily sales prices of a
Share on the New York Stock Exchange ("NYSE") for the
period of five trading days ending on such retainer
payment date (or the period of five trading days
immediately preceding such date if the NYSE is closed on
such date.) Such Stock Payment will be made in lieu of
the cash payment of such 50% of the retainer. Certificates
or other evidence of all whole Shares will be delivered
promptly following each Stock Payment. Any payment for a
fractional Share automatically will be made in cash. The
above changes to this Article VIII will be effective
beginning on May 1, 1997.
ARTICLE IX. TRANSFERABILITY
9.1 Transferability During Lifetime.
(a) General Rule. During the lifetime of a
Participant to whom an Award is granted, only
the Participant (or such Participant's legal
representative) may exercise or receive payment
of an Award. No Award (other than Stock
Payments upon receipt) may be sold, assigned,
transferred (except as provided in the sentence above),
exchanged, or otherwise encumbered or made subject to any
creditor's process, whether voluntary, involuntary or by
operation of law, and any attempt to do so shall be of no
effect. This Section 9.1(a) shall apply to all Awards
except as provided in Sections 9.1(b) and 9.1(c) below.
(b) Limited Exception for Certain NQSOs and SARs. Unless
the terms of the applicable grant Agreement for an Option
specifically provide that this Section 9.1(b) shall not
apply, a Non-Employee Director may transfer such Non
Employee Director's rights under any Option Agreement
granted on or after November 25, 1996 by properly
completing and delivering to the executive compensation
group at BellSouth headquarters a Nonqualified Stock
Option Assignment Form and satisfying such other
conditions as BellSouth may impose, provided that such
transfer is without consideration and to (i) one or more of
the Non-Employee Director's spouse, parents, spouse's
parents, siblings, siblings' lineal descendants, children,
and children's lineal descendants, including in all cases
legally adopted individuals, or (ii) a trust, partnership or
similar entity for the benefit solely of one or more of the
family members described above. The rights of any such
transferee thereafter shall be nontransferrable except that
such transferee, where applicable under the terms of the
transfer by the NonEmployee Director, shall have the right
previously held by the Non-Employee Director to designate a
Beneficiary. A Non-Employee Director may make such a
transfer of the Non-Employee Director's rights with respect
to less than all of the total number of Shares subject to an
Option Agreement provided that each such transfer shall
apply to at least 20% of the total number of Shares
initially subject to such Agreement. Notwithstanding Section
12.5 or the terms of any Agreement, BellSouth shall not
withhold any amount attributable to any tax liability of a
Non-Employee Director from any payment of cash or Shares to
a transferee or transferee's Beneficiary under this Section
9.1(b) upon exercise of a transferred NQSO or SAR by such
person, but may require the payment of an amount equal to
any BellSouth withholding tax obligation as a condition to
such exercise or as a condition to the release of cash or
Shares upon such exercise.
(c) Outstanding Non-qualified Stock Options and SARs.
Effective November 25, 1996, Section 9.1(b) also shall
apply to all non-qualified stock options and tandem
stock appreciation rights outstanding under the Plan
and also to all outstanding non-qualified stock options
and tandem stock appreciation rights issued under the
Prior Plan. This Section 9.1(c) (and related Plan
provisions on transferability) shall constitute an
amendment to the Prior Plan, and to all outstanding non
qualified stock option and tandem stock appreciation right
grant agreements under this Plan and the Prior Plan, to the
extent necessary to effect this change to such outstanding
nonqualified stock options and tandem stock appreciation
rights. The election by a NonEmployee Director (including
for this purpose a nonemployee director under the Prior
Plan) to transfer any such non-qualified stock option and
tandem stock appreciation right pursuant to this Section
9.1(c) shall constitute any required consent by the
NonEmployee Director to such amendment.
9.2 Transfers to Death Beneficiary.
In the event of a Non-Employee Director's death, all
of such person's outstanding Options and tandem SARs and
his or her rights to receive any accrued but unpaid Stock
Payments will transfer to the maximum extent permitted by
law to such person's Beneficiary (except to the extent a
permitted transfer of an Option and tandem
SAR previously was made pursuant to Section 9.1.) Each Non
Employee Director may name, from time to time, any
beneficiary or beneficiaries (which may be named
contingently or successively) as his or her Beneficiary for
purposes of this Plan. Each designation shall be on a form
prescribed by the Committee, will be effective only when
delivered to BellSouth and when effective will revoke all
prior designations by the NonEmployee Director. If a Non-
Employee Director dies with no such beneficiary designation
in effect, such person's Beneficiary shall be his or her
estate and such person's Awards will be transferable by
will or pursuant to laws of descent and distribution
applicable to such person.
ARTICLE X. ADJUSTMENTS
In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash,
Shares, or other property), recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin
off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects Shares such
that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of Non-Employee
Directors under this Plan, then the Committee, in such
manner as it may deem equitable, shall adjust any or all of
(i) the number and kind of shares which may thereafter be
delivered in connection with Awards, (ii) the number and
kind of shares that may be delivered or deliverable in
respect of outstanding Awards, (iii) the number and kind of
shares with respect to which Awards may be granted as set
forth in Article III, and (iv) the exercise price, grant
price, or purchase price relating to any Award, or, if
deemed appropriate, make provision for a cash payment with
respect to any outstanding Award. Any such adjustment made
by the Committee, including any cancellation of an
outstanding Award made as part of such adjustment, will be
final and binding.
ARTICLE XI. AMENDMENTS AND TERMINATION
The Board shall have the right to amend, modify, suspend
or terminate the Plan at any time for any purpose; provided
that, following the approval of the Plan by BellSouth
shareholders (i) this Plan may not be amended more than once
every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, or the
rules thereunder and (ii), except with the further approval
of shareholders, this Plan may not be amended with respect
to the amount, timing, Option Price or method for
determining Fair Market Value of Shares, and related
provisions with respect to tandem SARs, or in any way to (a)
extend the maximum life of the Plan under Section 4.3,(b)
change the class of persons eligible for Awards or to
otherwise materially modify (within the meaning of Rule 16b-
3 of the Exchange Act) the requirements as to eligibility
for participation in this Plan, or (c) otherwise materially
increase (within the meaning of Rule 16b-3 of the Exchange
Act) the benefits accruing under this Plan. No enactment,
modification, suspension or termination of the Plan shall
alter or impair any Awards previously granted under this
Plan without the consent of the holder thereof, unless
otherwise required by law. It is conclusively presumed for
this purpose that any adjustment for changes in
capitalization pursuant to Article X of this Plan does not
affect any right of the holder of an Award. Notwithstanding
approval by shareholders, the Board may amend this Plan
without further shareholder approval to add provisions
required or enabled by changes to Rule 16b3.
ARTICLE XII. GENERAL PROVISIONS
12.1 Stock Restrictions.
BellSouth shall have the right under this Plan to
restrict or otherwise delay the issuance of any Shares
purchased or paid under this Plan until the requirements of
any applicable laws or regulations and any stock exchange
requirements have been in BellSouth's judgment satisfied in
full. Furthermore, any Shares which are issued as a result
of purchases or payments made under this Plan shall be
issued subject to such restrictions and conditions on any
resale and any other disposition as BellSouth shall deem
necessary or desirable under any applicable laws or
regulations or in light of any stock exchange requirements.
12.2 Term of Service.
The granting of an Award to a Non-Employee Director under
this Plan shall not obligate BellSouth to provide that
NonEmployee Director upon the termination of his or her
service on the Board with any benefit whatsoever except as
provided under the terms and conditions of that Award or
obligate the NonEmployee Director to remain a member of the
Board.
12.3 No Shareholder Rights.
No Award shall confer on any Non-Employee Director, or
anyone claiming on his behalf, any of the rights of a
stockholder of BellSouth unless and until Shares are duly
issued or transferred on the books of BellSouth in
accordance with the terms and conditions of the Award.
12.4 Unfunded Plan.
This Plan shall be unfunded and BellSouth shall not be
required to segregate any assets that may at any time be
represented by Awards under this Plan. Neither BellSouth,
its affiliates, the Committee, nor the Board shall be deemed
to be a trustee of any amounts to be paid under this Plan
nor shall anything contained in this Plan or any action
taken pursuant to its provisions create or be construed to
create a fiduciary relationship between any such party and a
Non-Employee Director or anyone claiming on his or her behalf. To the
extent a NonEmployee Director or any other person acquires a
right to receive payment pursuant to an Award under this
Plan, such right shall be no greater than the right of an
unsecured general creditor of BellSouth.
12.5 Taxes.
BellSouth shall withhold from any payment of cash or
Shares to a Non-Employee Director or other person under this
Plan an amount sufficient to cover any withholding taxes
which may become required with respect to such payment or
shall take any other action as it deems necessary to satisfy
any income or other tax withholding requirement as a result
of the grant or exercise of any Award under this Plan.
BellSouth shall have the right to require the payment of any
such taxes and require that any person furnish information
deemed necessary by BellSouth to meet any tax reporting
obligation as a condition to exercise or before making any
payment pursuant to an Award.
12.6 Binding Effect.
The provisions of this Plan, and any applicable
Agreement, election, Beneficiary designation or other
related document, shall be binding upon each Non-Employee
Director and any of his Beneficiaries, transferees, heirs,
assignees, distributees, executors, administrators, personal
representatives or any other person claiming any rights
under this Plan. Any such person claiming any rights under
this Plan shall be subject to the terms and conditions of
this Plan and all such documents and such other terms and
conditions, not inconsistent with this Plan, as the
Committee may impose pursuant to Article V.
12.7 Choice of Law and Venue.
This Plan and all related documents shall be governed by,
and construed in accordance with, the laws of the State of
Georgia (except to the extent provisions of federal law may
be applicable.) Acceptance of an Award shall be deemed to
constitute consent to the jurisdiction and venue of the
Superior Court of Fulton County, Georgia and the United
States District Court for the Northern District of Georgia
for all purposes in connection with any suit, action, or
other proceeding relating to such Award, including the
enforcement of any rights under this Plan or any Agreement
or other document, and shall be deemed to constitute consent
to any process or notice of motion in connection with such
proceeding being served by certified or registered mail or
personal service within or without the State of Georgia,
provided a reasonable time for appearance is allowed.
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share
For the Three Month
Periods Ended
March 31,
1997 1996
Earnings Per Common Share:
Net Income $ 693 $ 970
Weighted
average shares
outstanding 992 994
Earnings Per
Common Share $ .70 $ .98
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share (continued)
For the Three Month
Periods Ended
March 31,
1997 1996
Primary Earnings Per Common Share:
Net Income $ 693 $ 970
Weighted
average shares
outstanding 992 994
Incremental
shares from
assumed
exercise of
stock options
and payment of
performance
share awards 2 3
Total Shares 994 997
Earnings Per
Common Share $ .70 $ .97
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share (continued)
For the Three Month
Periods Ended
March 31,
1997 1996
Fully Diluted Earnings Per Common Share:
Net Income $ 693 $ 970
Weighted
average shares
outstanding 992 994
Incremental
shares from
assumed
exercise of
stock options
and payment of
performance
share awards 2 3
Total Shares 994 997
Earnings Per
Common Share $ .70 $ .97
EXHIBIT 12 BellSouth Corporation
Computation Of Earnings To Fixed Charges
(Dollars In Millions)
For the Three
Months Ended
March 31, 1997
1. Earnings
(a) Income from continuing operations $1,346
before deductions for taxes and interest
(b) Portion of rental expense 21
representative of interest factor
(c) Equity in losses from less-than-50% 28
owned investments (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 mehtod of accounting) (16)
TOTAL $1,379
2. Fixed Charges
(a) Interest $ 187
(b) Portion of rental expense
representative of interest factor 21
TOTAL $ 208
Ratio (1 divided by 2) 6.6
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
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