SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 20, 1997
BELLSOUTH CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 1-8607 58-1533433
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
1155 Peachtree Street, N. E., Atlanta, Georgia 30309-3610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(404) 249-2000
Item 5. Other Events
Third Quarter 1997 Earnings
On October 20, 1997, BellSouth announced earnings for the third
quarter of 1997. See Exhibit 99 for a complete copy of the
related press release.
1997-1998 Earnings Growth
BellSouth believes that normalized earnings growth could be in
the low double digits through 1998. This forward-looking
statement is based on a number of assumptions including, but not
limited to: (1) economic growth and demand for wireline and
wireless communications services continues in BellSouth's service
territories; (2) BellSouth Telecommunications, Inc. is successful
in furthering its cost reduction efforts; (3) the final
resolution of the access reform and universal service orders of
the FCC is reasonably revenue neutral; (4) local service
competition does not have a significant adverse impact on
earnings through 1998; and (5) the current level of economic,
monetary and political stability continues in foreign countries
in which BellSouth does business. Any developments significantly
deviating from these assumptions could cause actual results to
differ materially from those in the above forward-looking
statements.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No.
99 Press Release - Third Quarter 1997 Earnings
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
October 20, 1997
ATLANTA - BellSouth Corporation (NYSE: BLS) reported record
third quarter earnings per share (EPS) of 71 cents before one-
time gains, an increase of 12.7 percent compared with 63 cents in
the same quarter of 1996. Including the gains, reported EPS in
the three months ended September 30, 1997 was $1.19.
Net income was $705 million before the one-time gains, compared
with $631 million in the third quarter of 1996. The gains in
1997 related to the sale of BellSouth's investments in
Australia's Optus Communications ($352 million after tax, or 35
cents per share) and ITT World Directories ($128 million, 13
cents).
BellSouth's third quarter revenues increased 7.5 percent compared
with the same quarter of 1996. More than half the gain came from
the company's U.S. and international wireless operations. Total
operating expenses increased 6.0 percent, reflecting growth in
cellular operations, and development of new businesses such as
BellSouth.net(SM) Internet service and BellSouth Mobility DCS
digital wireless service. Operating expenses in BellSouth's
telephone operations were up just 2.1 percent.
BellSouth said successful marketing spurred solid volume growth
across the board in the third quarter. Total access lines
increased 4.7 percent, additional residential lines were up 27
percent, U.S. wireless customers passed the 4 million milestone,
and international wireless customers more than doubled.
"Our growth comes from matching BellSouth's strengths in voice,
data, Internet and wireless communications with our customers'
needs for reliable service, innovative applications and
competitive prices," said Duane Ackerman, president and chief
executive officer.
"This is our 19th consecutive quarter of improved operating
results," Ackerman said. "Along with this consistent earnings
growth, our plan to repurchase up to $1 billion of BellSouth
stock demonstrates our strong commitment to delivering superior
shareholder returns."
Total access lines increased 250,000 during July, August and
September, the highest number for any third quarter in
BellSouth's history. This included 86,000 new additional lines
that households are using for Internet access, fax machines and
children's phones. Residential lines in total increased at an
annual rate of 4.2 percent, the fastest growth rate for any
quarter in the company's history.
Sales of BellSouth's calling features continued to grow rapidly.
Revenues from services such as Call Waiting and MemoryCall(r)
service voice messaging were $348 million in the third quarter of
1997, up 22 percent from the same three months of 1996.
BellSouth has expanded the market for calling features by making
its most popular ones available on a Per Use basis. So far in
1997, customers have keyed in the Per Use codes for Call Return,
Three-way Calling and Repeat Dialing more than 130 million times.
Rapid growth continued in BellSouth's wireless communications
businesses, with total wireless revenues in the third quarter of
1997 up 28 percent compared with the same quarter a year earlier.
The company's U.S. wireless operations surpassed 4 million
customers in the third quarter, an annual growth rate of 21
percent. BellSouth Mobility DCS, launched in 1996 by BellSouth
and its partners, now has a total of more than 126,000 customers
in the Carolinas and Eastern Tennessee.
In BellSouth's international markets, customer growth exploded,
from 800,000 a year ago, excluding Optus, to more than 1.6
million in September 1997, an increase of 103 percent. With the
1997 acquisitions of telecommunications companies in Peru,
Nicaragua and Ecuador, BellSouth now serves wireless markets in
13 countries with 170 million potential customers. On top of
that, during the third quarter, groups headed by BellSouth were
awarded licenses in Brazil to operate wireless services in Sao
Paulo, the third largest city in the world with 18 million
people, and in Region 10, with a population of more than 26
million.
BellSouth is a $19 billion communications services company. It
provides telecommunications, wireless communications, directory
advertising and publishing, video, Internet and information
services to more than 28 million customers in 20 countries
worldwide.
NOTE: For more information about BellSouth Corporation, visit
the BellSouth Web page at http://www.bellsouth.com. BellSouth
news releases dating back one year are available by fax at no
charge by calling 1-800-758-5804 ext. 095650.
PRELIMINARY
October 20, 1997
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Millions, Except Per Share Amounts)
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
1997 1996 1997 1996
Operating Revenues:
Network and related
services
Local service $ 2,143 $ 2,061 $ 6,315 $ 6,012
Interstate access 916 892 2,761 2,672
Intrastate access 197 207 601 627
Toll 189 195 549 600
Wireless communications 929 723 2,509 2,039
Directory advertising
and publishing 466 415 1,227 1,100
Other services 353 336 999 940
Total Operating Revenues 5,193 4,829 14,961 13,990
Operating Expenses:
Cost of services and
products 1,566 1,516 4,524 4,483
Depreciation and
amortization 1,002 940 2,939 2,760
Selling, general and
administrative 1,279 1,172 3,575 3,175
Total Operating Expenses 3,847 3,628 11,038 10,418
Operating Income 1,346 1,201 3,923 3,572
Interest Expense 195 177 565 531
Gain on Sale of
Operations 787 -- 787 442
Other Income, net 20 32 46 84
Income Before Income
Taxes 1,958 1,056 4,191 3,567
Provision for Income
Taxes 773 425 1,659 1,337
Net Income $ 1,185 $ 631 $ 2,532 $ 2,230
Weighted Average Common
Shares Outstanding 992 994 992 994
Dividends Declared Per
Common Share $ .36 $ .36 $ 1.08 $ 1.08
Earnings Per Share $ 1.19 $ .63 $ 2.55 $ 2.24
PRELIMINARY
October 20, 1997
BELLSOUTH CORPORATION
EARNINGS SUMMARY
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
1997 1996 1997 1996
Net Income
Reported Net Income $ 1,185 $ 631 $ 2,532 $ 2,230
Gain on Sale of Optus
Communications(a) (352) -- (352) --
Gain on Sale of ITT
World Directories(b) (128) -- (128) --
South Carolina Regulatory
Settlement(c) -- -- 47 --
Gain on Sale of
Paging Subsidiary(d) -- -- -- (344)
Adjusted Net Income $ 705 $ 631 $ 2,099 $ 1,886
Earnings Per Share
Reported Earnings Per
Share $ 1.19 $ .63 $ 2.55 $ 2.24
Gain on Sale of Optus
Communications(a) (.35) -- (.35) --
Gain on Sale of ITT
World Directories(b) (.13) -- (.13) --
South Carolina Regulatory
Settlement(c) -- -- .05 --
Gain on Sale of
Paging Subsidiary(d) -- -- -- (.35)
Adjusted Earnings Per
Share (e) $ .71 $ .63 $ 2.12 $ 1.90
(a) Represents the after-tax gain on the sale of Optus
Communications. The pre-tax gain on the sale was $578.
(b) Represents the after-tax gain on the sale of ITT World
Directories. The pre-tax gain on the sale was $209.
(c) Represents the after-tax effect of a regulatory settlement
in South Carolina which occurred in second quarter 1997.
(d) Represents the after-tax gain on the sale of BellSouth's
paging business which occurred in first quarter 1996. The pre-
tax gain on the sale was $442.
(e) Adjusted earnings per share for the nine months ended
September 30, 1996 does not sum due to rounding.
PRELIMINARY
October 20, 1997
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Per Share Amounts)
September 30, December 31,
1997 1996
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 2,084 $ 1,178
Temporary cash investments 18 51
Accounts receivable, net of
allowance for uncollectibles
of $223 and $180 4,192 4,087
Material and supplies 358 451
Other current assets 451 531
Total Current Assets 7,103 6,298
Investments and Advances 3,033 2,430
Property, Plant and Equipment:
Property, Plant and Equipment 52,320 50,059
Accumulated Depreciation 30,113 28,234
Property, Plant and
Equipment, Net 22,207 21,825
Deferred Charges and Other
Assets 800 610
Intangible Assets, net 1,622 1,405
Total Assets $ 34,765 $ 32,568
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year $ 2,333 $ 2,124
Accounts payable 1,373 1,446
Other current liabilities 3,242 2,871
Total Current Liabilities 6,948 6,441
Long-Term Debt 7,873 8,116
Deferred Credits and Other
Liabilities:
Accumulated deferred income
taxes 2,061 1,899
Unamortized investment tax
credits 228 278
Other liabilities and
deferred credits 2,840 2,585
Total Deferred Credits and
Other Liabilities 5,129 4,762
Shareholders' Equity:
Common stock, $1 par value 1,010 1,009
Paid-in capital 7,775 7,697
Retained earnings 7,008 5,541
Shares held in trust and
treasury (575) (532)
Guarantee of ESOP debt (403) (466)
Total Shareholders' Equity 14,815 13,249
Total Liabilities and
Shareholders' Equity $ 34,765 $ 32,568
PRELIMINARY
October 20, 1997
BELLSOUTH FINANCIAL HIGHLIGHTS
SELECTED DATA
(UNAUDITED)
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
Earnings per share $ 1.19(a) $ .63
Return on average common 32.3%(b) 19.3%
equity (annualized)
Return on average total
capital(annualized) 21.6%(c) 13.4%
Weighted average common shares
outstanding (millions) 992 994
Dividends per share $ .36 $ .36
Property additions (millions) $ 1,250 $ 1,043
At September 30,
1997 1996
Common shares outstanding
(millions) 992 994
Debt ratio 40.7% 43.5%
Total employees 82,298 82,331
(a) Includes after-tax gains of $352 ($.35 per share) and $128
($.13 per share) from sale of Optus Communications and ITT World
Directories, respectively.
(b) After adjusting net income for the impact of the gains on
sales of Optus Communications and ITT World Directories, Return
on average common equity was 19.2%.
(c) After adjusting net income for the impact of the gains on
sales of Optus Communications and ITT World Directories, Return
on average total capital was 13.9%.
PRELIMINARY
October 20, 1997
BELLSOUTH FINANCIAL HIGHLIGHTS
SELECTED DATA
(UNAUDITED)
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
Earnings per share $ 2.55(a) $ 2.24(b)
Return on average common
equity (annualized) 24.0%(c) 23.5%(e)
Return on average total
capital (annualized) 16.5%(d) 15.6%(f)
Weighted average common shares
outstanding (millions) 992 994
Dividends per share $ 1.08 $ 1.08
Property additions (millions) $3,265 $3,224
(a) Includes after-tax gains of $352 ($.35 per share) and $128
($.13 per share) from sales of Optus Communications and ITT World
Directories, respectively and an after-tax charge of $47 ($.05
per share) related to a regulatory settlement in South Carolina.
(b) Includes an after-tax gain of $344 ($.35 per share) from
sale of paging business.
(c) After adjusting net income for the gains on sales of Optus
Communications and ITT World Directories and the impact of the
South Carolina regulatory settlement, Return on average common
equity was 19.9%.
(d) After adjusting net income for the gains on sales of Optus
Communications and ITT World Directories and the impact of the
South Carolina regulatory settlement, Return on average total
capital was 14.1%.
(e) After adjusting net income for the gain on sale of
BellSouth's paging business, Return on average common equity was
19.9%.
(f) After adjusting net income for the gain on sale of
BellSouth's paging business, Return on average total capital was
13.6%.
PRELIMINARY
October 20, 1997
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Millions)
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Operating Revenues:
Local service $ 2,143 $ 2,061 $ 6,315 $ 6,012
Interstate access 916 892 2,761 2,672
Intrastate access 197 207 601 627
Toll 189 195 549 600
Other 428 405 1,206 1,149
Total Operating Revenues 3,873 3,760 11,432 11,060
Operating Expenses:
Cost of services and
products 1,319 1,310 3,816 3,854
Depreciation and
amortization 837 820 2,482 2,427
Selling, general and
administrative 731 699 2,015 1,921
Total Operating Expenses 2,887 2,829 8,313 8,202
Operating Income 986 931 3,119 2,858
Interest Expense 133 136 401 410
Other Income, net 3 -- 4 17
Income Before Income
Taxes 856 795 2,722 2,465
Provision for Income
Taxes 320 298 1,022 919
Net Income $ 536 $ 497 $ 1,700 $ 1,546
PRELIMINARY
October 20, 1997
BELLSOUTH TELECOMMUNICATIONS FINANCIAL HIGHLIGHTS
SELECTED DATA
(UNAUDITED)
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
Property additions (millions) $ 963 $ 744
Access minutes of use
(millions):
Interstate 18,524 16,966
Intrastate 5,964 5,348
IntraLATA toll messages 224 252
(millions)
At September 30,
1997 1996
Debt ratio 47.5% 49.8%
Telephone employees 61,455 64,860
Network access lines in
service (thousands) 22,968 21,943
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
Property additions (millions) $2,539 $2,442
Access minutes of use
(millions):
Interstate 54,797 50,473
Intrastate 17,389 15,701
IntraLATA toll messages
(millions) 686 791
PRELIMINARY
October 20, 1997
BELLSOUTH CORPORATION
CELLULAR OPERATING INFORMATION (UNAUDITED) (7)
($ THOUSANDS) Third Third
Quarter Quarter
NOTES 1997 1996 % Change
DOMESTIC OPERATIONS
Cellular (1), (4) $ 658,989 $ 606,783 8.6%
Revenues, net
Operating (1) 318,048 330,428 -3.7%
Expenses
Depreciation (1) 98,471 76,261 29.1%
Expense
Amortization of
Intangibles (1) 18,281 16,358 11.8%
(including
goodwill)
Total (1) 434,800 423,047 2.8%
Operating
Expenses
Operating (1) 224,189 183,736 22.0%
Income
Other Expenses (1) 91,090 78,522 16.0%
(includes
interest
and taxes)
Net Income (1) $ 133,099 $ 105,214 26.5%
Operating Cash (1), (6) $ 340,941 $ 276,355 23.4%
Flow
Cash Operating (6) 51.74% 45.54% 13.6%
Margin
DOMESTIC CELLULAR DATA
Population Served:
Control Basis (2) 52,196,000 51,978,000 .42%
Equity Basis (3) 41,021,000 40,526,000 1.2%
Customers Served:
Control Basis (2), (8) 4,860,000 4,142,000 17.3%
Equity Basis (3), (8) 3,967,000 3,333,000 19.0%
Average Monthly (5) $ 51 $ 55 -7.3%
Service Revenue
per Customer
Penetration Rate (3) 9.67% 8.22% 17.6%
Property, plant (1) $3,538,673 $2,919,079 21.2%
and equipment
PRELIMINARY
October 20, 1997
BELLSOUTH CORPORATION
CELLULAR OPERATING INFORMATION (UNAUDITED) (7)
($ THOUSANDS) Third Third
Quarter Quarter
NOTES 1997 1996 % Change
DOMESTIC PCS DATA
Population Served:
Control Basis (2),(9) 24,032,000 12,226,000 96.6%
Equity Basis (3),(9) 19,428,000 8,063,000 141.0%
Customers Served:
Control Basis (2) 126,000 12,000 950.0%
Equity Basis (3) 77,000 8,000 862.5%
SELECTED INTERNATIONAL OPERATING DATA (10),(11)
Cellular Revenues (1) $ 357,328 $ 193,133 85.0%
Population Served:
Control Basis (2) 68,900,000 46,800,000 47.2%
Equity Basis (3) 88,014,000 53,280,000 65.2%
Cellular Customers (3) 1,624,000 800,000 103.0%
Served - Equity
Basis
Penetration Rate (3),(11) 2.34% 1.50% 56.0%
SELECTED LATIN AMERICA INFORMATION (11)
Cellular Revenues (1) $ 206,488 $ 109,287 88.9%
Net Earnings from (1) 5,724 13,539 -57.7%
Operations
Operating Cash (1), (6) 53,160 42,845 24.1%
Flow
Cash Operating (6) 25.74% 39.20% -34.3%
Margin
Population Served (3) 61,522,000 27,988,000 119.8%
- Equity Basis
Customers Served (3) 884,000 405,000 118.3%
- Equity Basis
Average Monthly
Service Revenue (5) $ 80 $ 82 -2.4%
Per Customer
Penetration Rate (3),(11) 2.06% 1.45% 42.1%
PRELIMINARY
October 20, 1997
BELLSOUTH CORPORATION
CELLULAR OPERATING INFORMATION (UNAUDITED) (7)
($ THOUSANDS) Year-to-Date Year-to-Date
NOTES 1997 1996 % Change
DOMESTIC OPERATIONS
Cellular (1), (4) $1,872,874 $1,704,599 9.9%
Revenues, net
Operating (1) 1,020,866 960,990 6.2%
Expenses
Depreciation (1) 280,370 215,957 29.8%
Expense
Amortization of (1) 55,119 48,906 12.7%
Intangibles
(including
goodwill)
Total (1) 1,356,355 1,225,853 10.6%
Operating
Expenses
Operating (1) 516,519 478,746 7.9%
Income
Other Expenses (1) 225,154 203,315 10.7%
(includes
interest
and taxes)
Net Income (1) $ 291,365 $ 275,431 5.8%
Operating Cash (1), (6) $ 852,008 $ 743,609 14.6%
Flow
Cash Operating (6) 45.49% 43.62% 4.3%
Margin
DOMESTIC CELLULAR DATA
Average Monthly
Service Revenue (5) $ 52 $ 57 -8.8%
per Customer
SELECTED INTERNATIONAL OPERATING DATA (10),(11)
Cellular Revenues (1) $ 941,434 $ 536,162 75.6%
SELECTED LATIN AMERICA INFORMATION (11)
Cellular Revenues (1) $ 534,011 $ 323,138 65.3%
Net Earnings from (1) 34,144 48,642 -29.8%
Operations
Operating Cash (1),(6) 160,845 128,684 25.0%
Flow
Cash Operating (6) 30.12% 39.82% -24.3%
Margin
Average Monthly (5) $ 82 $ 86 -4.6%
Service Revenue
Per Customer
PRELIMINARY
October 20, 1997
NOTES
(1) The presentation of selected income statement and balance
sheet information is based on BellSouth's ownership percentage
for all domestic and international cellular subsidiaries and
affiliates, whether or not consolidated for financial statement
presentation purposes. Gains/losses from the sale of properties
and other unusual items are not included in net income.
Financial information for Domestic Cellular Operations does not
include PCS.
(2) Includes 100% of population/customers served in markets
where BellSouth has operating control and/or BellSouth ownership
exceeds 50%; excludes population/customers served for markets
where BellSouth does not have operating control and ownership is
less than 50%.
(3) Includes population/customers served based on BellSouth's
ownership percentage in all markets served.
(4) Included in revenues is equipment revenue net of cost.
(5) Includes local service revenue, which consists of charges
for cellular air-time service, long distance, and access billed
by a carrier for services in its market. Excluded are roaming
charges, toll charges, taxes on service revenues, equipment
sales, installation and repair revenues.
(6) Operating cash flow represents operating income before
depreciation and amortization.
(7) The income statement and balance sheet information are for
the periods ended August 31, 1997 and 1996. The domestic
customer numbers presented above are as of September 30, 1997 and
1996 and international customer numbers are as of August 31, 1997
and 1996.
(8) As information, domestic cellular customers served on a
control basis for the periods ended August 31, 1997 and 1996 were
4,846,000 and 4,108,000 respectively. On an equity basis,
domestic cellular customers served for the same periods were
3,924,000 and 3,307,000 respectively.
(9) For Domestic PCS, third quarter 1997 population served,
control and equity basis, includes 11,806,000 (based on 1990
information) for Basic Trading Area licenses won at auction in
January 1997.
(10) BellSouth sold its investment in Optus during the third
quarter of 1997. No financial or customer data for this
investment is reflected in third quarter 1997. Previously
reported data for 1997 and 1996 has been restated to exclude
Optus.
(11) Population served for third quarter 1997 includes 18,553,000
(equity basis) for recently acquired licenses in Brazil. No
financial or customer information is reflected in the third
quarter or year-to-date totals. The calculation of the
international penetration rates excludes the population for this
market.
