SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 1998
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 July 31, 1998, 983,704,294 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
Consolidated Statements of Shareholders' Equity
and Comprehensive Income 6
Notes to Consolidated Financial Statements 8
Selected Operating Data 11
2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 13
Results of Operations 14
Volumes of Business 14
Operating Revenues 16
Operating Expenses 18
Other Income Statement Items 19
Financial Condition 20
Regulatory Developments and Competition 21
State Developments 21
Other Matters 22
Safe Harbor Statement 24
Part II
4. Submission of Matters to a Vote of Security Holders 25
6. Exhibits and Reports on Form 8-K 25
PART I - FINANCIAL INFORMATION
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Operating Revenues:
Network and related services:
Local service $ 2,345 $ 2,068 $ 4,607 $ 4,172
Interstate access 960 928 1,905 1,845
Intrastate access 200 186 406 404
Toll 177 186 352 360
Wireless communications 1,173 815 2,289 1,580
Directory advertising and
publishing 419 400 781 761
Other services 390 340 750 646
Total Operating Revenues 5,664 4,923 11,090 9,768
Operating Expenses:
Cost of services and
products 1,743 1,536 3,410 2,958
Depreciation and
amortization 1,074 977 2,117 1,937
Selling, general and
administrative 1,413 1,186 2,675 2,296
Total Operating Expenses 4,230 3,699 8,202 7,191
Operating Income 1,434 1,224 2,888 2,577
Interest Expense 203 187 393 370
Gain on Sale of Operations -- -- 155 --
Other Income, net 118 33 146 26
Income Before Income Taxes 1,349 1,070 2,796 2,233
Provision for Income Taxes 531 416 1,086 886
Net Income $ 818 $ 654 $ 1,710 $ 1,347
Weighted-Average Common
Shares Outstanding:
Basic 989 992 990 992
Diluted 995 994 996 994
Dividends Declared Per Common
Share $ .36 $ .36 $ .72 $ .72
Earnings Per Share:
Basic $ .83 $ .66 $ 1.73 $ 1.36
Diluted $ .82 $ .66 $ 1.72 $ 1.36
The accompanying notes are an integral part of these
consolidated financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Per Share Amounts)
June 30, December 31,
1998 1997
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,222 $ 2,570
Temporary cash investments 94 17
Accounts receivable, net of allowance for
uncollectibles of $263 and $246 4,167 4,750
Material and supplies 423 393
Other current assets 483 387
Total Current Assets 7,389 8,117
Investments and Advances 2,762 2,675
Property, Plant and Equipment:
Property, plant and equipment 56,182 53,828
Accumulated depreciation 32,705 30,967
Property, Plant and Equipment, net 23,477 22,861
Deferred Charges and Other Assets 936 702
Intangible Assets, net 2,957 1,946
Total Assets $ 37,521 $ 36,301
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year $ 3,082 $ 3,706
Accounts payable 1,665 1,825
Other current liabilities 3,345 3,252
Total Current Liabilities 8,092 8,783
Long-Term Debt 8,535 7,348
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,048 2,023
Unamortized investment tax credits 190 213
Other liabilities and deferred credits 2,813 2,769
Total Deferred Credits and Other
Liabilities 5,051 5,005
Shareholders' Equity:
Common stock, $1 par value 1,010 1,010
Paid-in capital 7,783 7,714
Retained earnings 8,383 7,382
Accumulated other comprehensive income 5 36
Shares held in trust and treasury (968) (575)
Guarantee of ESOP debt (370) (402)
Total Shareholders' Equity 15,843 15,165
Total Liabilities and Shareholders' Equity $ 37,521 $ 36,301
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 Six Months
Ended June 30,
1998 1997
Cash Flows from Operating Activities:
Net income $ 1,710 $ 1,347
Adjustments to net income:
Depreciation and amortization 2,117 1,937
Gain on sale of operations (155) -
Net losses (earnings) and dividends from
unconsolidated affiliates 62 147
Provision for uncollectibles 153 125
Deferred income taxes and unamortized
investment tax credits (7) 14
Net change in:
Accounts receivable and other current assets 259 (126)
Accounts payable and other current liabilities (240) 200
Deferred charges and other assets (216) (151)
Other liabilities and deferred credits 58 (2)
Other reconciling items, net (43) 3
Net cash provided by operating activities 3,698 3,494
Cash Flows from Investing Activities:
Capital expenditures (2,480) (1,978)
Purchases of licenses and other intangible
assets (466) (192)
Proceeds from sale of operations 155 -
Proceeds from disposition of short-term
investments 21 145
Purchases of short-term investments (98) (152)
Investments in and advances to unconsolidated
affiliates (474) (341)
Other investing activities, net 66 61
Net cash used for investing activities (3,276) (2,457)
Cash Flows from Financing Activities:
Net repayments of short-term borrowings (379) (163)
Proceeds from long-term debt 1,453 30
Repayments of long-term debt (737) (19)
Dividends paid (714) (713)
Purchase of trust and treasury shares (452) (69)
Other financing activities, net 59 27
Net cash used for financing activities (770) (907)
Net (Decrease) Increase in Cash and Cash
Equivalents (348) 130
Cash and Cash Equivalents at Beginning of Period 2,570 1,178
Cash and Cash Equivalents at End of Period $ 2,222 $ 1,308
The accompanying notes are an integral part of these consolidated
financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)
(In Millions)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998
Number of Shares Amount
---------------- ------------------------------------------------------------
Shares Shares
Held Accum. Held
In Other In Guaran-
Trust Compre- Trust tee of
Common and Common Paid-in Retained hensive and ESOP
Stock Treasury Stock Capital Earnings Income Treasury Debt Total
(a) (a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1,010 (18) $1,010 $7,714 $7,382 $36 $(575) $(402) $15,165
1997
Net income 1,710 1,710
Other compre-
hensive
income,
net of tax:
Foreign
currency
translation (31) (31)
adjustment
Total comprehen-
sive income (b) 1,679
Dividends
declared (712) (712)
Share issuances
for employee
benefit plans 1 (23) 56 33
Acquisition-
related
transactions 1 92 33 125
Purchase of
treasury
stock (8) (452) (452)
Purchase of
stock by
grantor trust (1) (30) (30)
ESOP activities
and related
tax benefit 3 32 35
----- ---- ------ ------ ------ --- ------ ------ ---------
Balance at June
30, 1998 1,010 (25) $1,010 $7,783 $8,383 $5 $(968) $(370) $15,843
====== ==== ====== ====== ====== === ====== ====== =========
</TABLE>
(a) Such shares are not considered to be outstanding for financial
reporting purposes. As of June 30, 1998 there were approximately 17.7
million shares held in trust and 6.9 million treasury shares held by
the company.
(b) Total comprehensive income for the three-month period ended June 30,
1998 was $783.
The accompanying notes are an integral part of these consolidated
financial statements.
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)
(In Millions)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1997
Number of
Shares Amount
----------------- ---------------------------------------------------------------
Shares Shares
Held Accum. Held
In Other In Guaran-
Trust Compre- Trust tee of
Common and Common Paid-in Retained hensive and ESOP
Stock Treasury Stock Capital Earnings Income Treasury Debt Total
(a) (a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1996 1,009 (18) $1,009 $7,672 $5,541 $25 $(532) $(466) $13,249
Net income 1,347 1,347
Other compre-
hensive income,
net of tax:
Foreign
currency
translation 8 8
adjustment
Total comprehen-
sive income (b) 1,355
Dividends (714) (714)
declared
Share issuances
for:
Employee
benefit 1 (12) 40 28
plans
Grantor 1 (1) 1 60 (61) -
Trusts
Acquisition-
related
transactions 2 8 89 97
Purchase of
treasury
stock (1) (69) (69)
ESOP activities
and related tax 4 33 37
benefit
----- ---- ------ ------ ------ --- ------ ----- -------
Balance at June
30, 1997 1,010 (17) $1,010 $7,728 $6,178 $33 $(533) $(433) $13,983
===== ==== ====== ====== ====== === ====== ===== =======
</TABLE>
(a) Such shares are not considered to be outstanding for financial
reporting purposes. As of June 30, 1997 there were approximately 17
million shares held in trust and 400 thousand treasury shares held by
the company.
(b) Total comprehensive income for the three-month period ended June
30, 1997 was $652.
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. BellSouth believes, however, that
the disclosures made are adequate for a fair presentation
of results of operations, financial position and cash
flows.
Beginning in 1998, BellSouth adopted Statement of
Financial Accounting Standards (SFAS) No. 130,
"Comprehensive Income". The calculation of comprehensive
income is included in the accompanying Consolidated
Statements of Shareholders' Equity and Comprehensive
Income.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and
accompanying notes included in BellSouth's latest annual
report on Form 10-K and previous quarterly report on Form
10-Q.
Note B -- Earnings per Share
In 1997, BellSouth adopted SFAS No. 128, "Earnings per
Share," which requires the presentation of both basic and
diluted earnings per share. Basic earnings per share is
computed based on the weighted-average number of common
shares outstanding during each year. Diluted earnings per
share is based on the sum of the weighted-average number
of common shares outstanding plus common stock equivalents
arising out of employee stock options and other benefit
plans. Earnings per share information for the prior
period has been restated to conform to the requirements of
the standard. Common stock equivalents included in the
calculation of diluted earnings per share were
approximately 6 million for the three- and six-month
periods ended June 30, 1998 and approximately 2 million
for the three- and six-month periods ended June 30, 1997.
BellSouth's earnings, used for per share calculations,
are the same for both the basic and diluted methods.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In Millions, Except Per Share Amounts)
Note C -- Supplemental Cash Flow Information
For the Six Months
Ended June 30,
1998 1997
Cash Paid For:
Income taxes $ 881 $ 830
Interest $ 383 $ 350
In January 1998, BellSouth began consolidating certain
operations which had previously been accounted for under
the equity method. Such consolidation resulted in an
increase in assets of $519 (net of a $228 decrease in
investments and advances) and a corresponding increase in
liabilities.
Note D -- Gain on Sale of Operations
In July 1997, BellSouth sold its 20% interest in ITT World
Directories (ITTWD) to ITT Corporation (ITT). The sale
agreement contained certain provisions which called for
additional sales proceeds to be paid to BellSouth in the
event that ITT subsequently resold ITTWD above a certain
price. As a result of ITT's subsequent sale of ITTWD,
BellSouth received additional proceeds which resulted in a
pretax gain of $155 ($96 after tax) in the first quarter
of 1998.
Note E -- South Carolina Regulatory Settlement
In April 1997, BellSouth Telecommunications, the South
Carolina Public Service Commission and other parties
agreed on a settlement to claims of alleged overearnings
for the years 1992 through 1994. Under the terms of the
settlement, BellSouth Telecommunications paid $72 to its
customers in 1997. Accordingly, in the second quarter of
1997, BellSouth reduced operating revenues by $72 ($47 or
$.05 per share after tax) in connection with the
settlement.
BELLSOUTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In Millions, Except Per Share Amounts)
Note F -- Issuance of Debt
In June 1998, BellSouth Telecommunications issued $500 of
6 3/8% Debentures, due June 1, 2028 and $500 of 6% Reset
Put Securities, due June 15, 2012. The purpose of these
issues was to refinance $500 aggregate principal amount of
BellSouth Telecommunications' 5 1/4% Notes, which matured
on June 8, 1998, and to provide for general corporate
purposes, including the refinancing of commercial paper.
In conjunction with the issuance of the 6% Reset Put
Securities, BellSouth Telecommunications entered into an
interest rate swap agreement. Under the agreement,
BellSouth Telecommunications will pay a variable rate which
is based on LIBOR and will receive a fixed rate of 6% in
return. The LIBOR-based rate in effect at June 30, 1998 was
5.782%. The agreement calls for periodic interim settlements
and expires June 15, 2002.
BELLSOUTH CORPORATION
SELECTED OPERATING DATA
(Unaudited)
Percent Change
1998 vs. 1997 vs.
1998 1997 1996
Network Access Lines in Service
at June 30 (Thousands)(a):
By Type:
Residence 16,182 4.3% 3.8%
Business 7,204 3.9 6.4
Other 274 1.5 3.1
Total Access Lines 23,660 4.2 4.6
By State:
Florida 6,363 4.9 5.5
Georgia 4,086 5.1 5.0
Tennessee 2,658 2.0 4.2
North Carolina 2,394 4.8 6.0
Louisiana 2,317 4.1 3.5
Alabama 1,948 2.9 3.4
South Carolina 1,432 4.1 3.8
Mississippi 1,266 3.8 3.1
Kentucky 1,196 3.2 3.2
Total Access Lines 23,660 4.2 4.6
Percent Change for
the Periods Ended
1998 vs. 1997 vs.
1998 1997 1996
Access Minutes of Use (Millions)(a)(b):
Interstate:
Three months ended March 31 18,998 7.2% 6.4%
Three months ended June 30 19,804 6.8 10.1
Six months ended June 30 38,802 7.0 8.3
Intrastate:
Three months ended March 31 6,084 9.6 8.4
Three months ended June 30 6,436 9.6 12.2
Six months ended June 30 12,520 9.6 10.3
Total Access Minutes of Use:
Three months ended March 31 25,082 7.8 6.9
Three months ended June 30 26,240 7.4 10.6
Six months ended June 30 51,322 7.6 8.8
Toll Messages (Millions)(a):
Three months ended March 31 201 (12.4) (18.1)
Three months ended June 30 201 (13.3) (10.5)
Six months ended June 30 402 (12.8) (14.5)
BELLSOUTH CORPORATION
SELECTED OPERATING DATA (Continued)
(Unaudited)
(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.
Cellular and Personal Communications Service (PCS)
customers served at June 30(Equity basis)(Thousands)(c):
Percent Change
1998 vs. 1997 vs.
1998 1997 1996
Domestic Cellular 4,400 12.8% 20.7%
International Cellular (d) 2,390 34.0% 82.8%
PCS 129 98.5% --
(c) Includes customers served based on BellSouth's
ownership percentage in all markets served.
(d) Excluding the customers of Optus Communications, which
was sold in July 1997, from all periods, the growth rates
would have been 68.9% for 1998 compared to 1997 and 105.1%
for 1997 compared to 1996.
For the Six
Months Ended
June 30,
1998
Ratio of Earnings to Fixed Charges (e) 7.20
(e) For the purpose of this ratio: (i) earnings have been
calculated by adding income before income taxes, gross
interest expense, such portion of rental expense
representative of the interest factor on such rentals and
equity in losses from less-than-50%-owned investments
(accounted for under the equity method 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 and previous
quarterly report on Form 10-Q.
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 66% and 69% of BellSouth's Total Operating
Revenues for the six-month periods ended June 30,
1998 and 1997, respectively, were from wireline services
provided by BellSouth Telecommunications. Charges for
local, access and toll services for the six-month period
ended June 30, 1998 accounted for approximately 63%, 32%
and 5%, respectively, of the wireline revenues discussed
above. Revenues from wireless communications services and
directory advertising and publishing services accounted
for approximately 21% and 7%, respectively, of Total
Operating Revenues for the six months ended June 30, 1998.
The remainder of such revenues was derived principally
from sales and maintenance of customer premises equipment
(CPE) and other nonregulated services provided by
BellSouth Telecommunications.
RESULTS OF OPERATIONS
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1998 1997 1998 1997
Net Income $ 818 $ 654 $ 1,710 $ 1,347
Earnings Per Share:
Basic $ .83 $ .66 $ 1.73 $ 1.36
Diluted $ .82 $ .66 $ 1.72 $ 1.36
For the three- and six-month periods ended June 30, 1998, Net Income
increased by $164 (25.1%) and $363 (26.9%), respectively, when compared
to the same 1997 periods. Basic Earnings Per Share increased $.17
(25.8%) and $.37 (27.2%), respectively, and Diluted Earnings Per Share
increased $.16 (24.2%) and $.36 (26.5%), respectively, when compared to
the same 1997 periods.
The increases for the three- and six-month periods were primarily
attributable to continued strong growth in key business volumes in
BellSouth's wireline and wireless businesses. In addition, the
increase for the six-month period was also due to an after-tax gain of
$96 ($.10 per share) resulting from additional proceeds received in
connection with the sale of ITT World Directories (see Note D to the
Consolidated Financial Statements). Net Income during 1997 was reduced
by an after-tax charge of $47 ($.05 per share) related to a regulatory
settlement in South Carolina (see Note E to the Consolidated Financial
Statements).
Volumes of Business
The total number of access lines in service as of June 30, 1998
increased by approximately 943,000 (4.2%) since June 30, 1997 to
23,660,000, compared to a 4.6% rate of increase for the same 1997
period. The growth in access lines continues to reflect economic growth
in the Southeast and successful marketing programs. Business and
residence access lines increased by 3.9% and 4.3%, respectively,
compared to growth rates of 6.4% and 3.8% in the same 1997 period. The
decrease in the growth rate for business lines was primarily due to the
migration of business customers from traditional business line services
to high-capacity service arrangements which are not included in business
line counts. To a lesser degree, the growth rate for business lines was
also affected by the increased presence of facilities-based competition.
In addition to strong economic growth in the region, the growth rate for
residential access lines reflects demand related to home office
purposes, access to on-line computer services and children's phones.
The number of such additional residence lines included in total
residence lines increased by 286,000 (16.0%) to 2,070,000 and accounted
for approximately 42.6% and 30.3% of the overall increase in residence
access lines and total access lines, respectively, since June 30,
1997.
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 1,815 million (7.4%) and 3,624 million (7.6%) for the three-
and six-month periods ended June 30, 1998 compared to increases of 10.6%
and 8.8% for the same 1997 periods. The increases in total access
minutes of use were 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).
However, 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 such as high-capacity
data and digital transmission services.
Toll messages are comprised of Message Telecommunications Service and
Wide Area Telecommunications Service. For the three- and six-month
periods ended June 30, 1998, toll messages decreased by 31 million
(13.3%) and 59 million (12.8%) compared to decreases of 10.5% and
14.5% for the same 1997 periods. The decreases in 1998 are
primarily attributable to continuing competition from
interexchange carriers in the intraLATA toll market as
well as the continuing expansion of local area calling
plans (LACPs).
Effects of competition and the expansion of LACPs result
in the transfer of calls from toll to access and local
service categories, respectively, but the corresponding
revenues are not generally shifted at commensurate rates.
Competition in the intraLATA toll market will adversely
impact future toll message volumes.
Domestic cellular customers (equity-weighted) increased by
499,000 (12.8%) since June 30, 1997 to 4,400,000. The
decline in the customer growth rate primarily reflects the
impact of increased competition. BellSouth's penetration
rate (number of equity-basis customers as a percentage of
the equity-basis population in the service territory)
increased from 9.6% at June 30, 1997 to 10.8% at June 30,
1998. Average revenue per proportionate cellular customer
decreased from $52 to $46 for each of the three- and six-
month periods ended June 30, 1998. Such decreases were
primarily attributable to the continuing trends of
increased penetration into lower-usage market segments and
expanded offering of lower-priced usage plans for high-
usage customers. BellSouth expects these trends to
continue.
International cellular customers (equity-weighted)
increased by 606,000 (34.0%) since June 30, 1997 to
2,390,000. Such growth reflects increased demand for
wireless services in the international markets which
BellSouth serves and the impact of the acquisitions of
cellular properties in Nicaragua, Ecuador and Peru,
partially offset by the sale of Optus Communications.
Excluding the customers of Optus Communications from all
periods, the number of international cellular customers
(equity-weighted) increased by 975,000 (68.9%) in 1998
compared to 1997 and 725,000 (105.1%) in 1997 compared to
1996.
Growth in equity-weighted customers and total minutes of
use for international cellular properties remained strong,
primarily due to demand stimulated by successful marketing
programs such as prepaid cellular service, enhanced
services and underdeveloped land-line service. However,
average minutes of use per international customer declined
due to the addition of customers in lower-usage market
segments.
Domestic PCS customers (equity-weighted) increased 98.5%
since June 30, 1997 to 129,000 at June 30, 1998. PCS
service was initiated in selected markets in BellSouth's
territory beginning in mid-1996.
Operating Revenues
Total Operating Revenues increased $741 (15.1%) and $1,322
(13.5%) for the three- and six-month periods ended June
30, 1998 when compared to the same 1997 periods. Such
increases include revenues from certain of BellSouth's
operations which had been accounted for under the equity
method in 1997 and were consolidated in 1998. If these
operations had been consolidated in 1997, and excluding
the effect of the South Carolina regulatory settlement in
1997, Total Operating Revenues for the three and six
months ended June 30, 1998 would have increased
approximately 10.1% and 9.7%, respectively. The
components of Total Operating Revenues were as follows:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1998 1997 1998 1997
Local Service $2,345 $ 2,068 $4,607 $ 4,172
Interstate Access 960 928 1,905 1,845
Intrastate Access 200 186 406 404
Toll 177 186 352 360
Wireless Communications 1,173 815 2,289 1,580
Directory Advertising and
Publishing 419 400 781 761
Other Services 390 340 750 646
Total Operating Revenues $ 5,664 $ 4,923 $11,090 $ 9,768
Local Service revenues increased $277 (13.4%) and $435
(10.4%) for the three- and six-month periods ended June
30, 1998, as compared to the same 1997 periods. The
increases for the three- and six-month periods were due
primarily to a 4.2% growth in access lines in service
since June 30, 1997, an increase of $59 and $116,
respectively, due to higher customer demand for optional
services, such as custom calling features, and an increase
in revenues from the provision of data and digital
services. Also contributing to the overall increase in
revenues for the three- and six-month periods were net
rate impacts of $87 and $74, respectively. Such rate
impacts were due primarily to a non-recurring revenue
reduction of $64, related to the local service portion of
the regulatory settlement in South Carolina, which was
recorded during second quarter 1997.
Interstate Access revenues increased $32 (3.4%) and $60
(3.3%) for the three- and six-month periods ended June 30,
1998 as compared to the same 1997 periods. The increases
were primarily due to increases of $42 and $82 in special
access revenues and increases in end-user charges
attributable to increases in access lines. Special access
charges are comprised primarily of revenues from the
provision of data and digital services. These increases
were partially offset by rate reductions which decreased
revenues by $25 and $53 for the three- and six-month
periods, respectively.
Intrastate Access revenues increased $14 (7.5%) and $2
(0.5%) for the three- and six-month periods ended June 30,
1998 compared to the same 1997 periods. The increases were
primarily due to growth in minutes of use of 9.6% for both
the three- and six-month periods. The increases were
partially offset by rate reductions of $2 and $39,
respectively.
Toll revenues decreased $9 (4.8%) and $8 (2.2%) for the
three- and six-month periods ended June 30, 1998 when
compared to the same 1997 periods. The decreases were
primarily attributable to a decline in toll messages of
13.3% and 12.8%, respectively. Such decreases were
partially offset by charges to interexchange carriers,
beginning in the second quarter of 1997, for toll messages
originating on BellSouth's public telephones as well as
increased revenues from the provision of digital
transmission services.
Wireless Communications revenues increased $358 (43.9%)
and $709 (44.9%) for the three- and six-month periods
ended June 30, 1998 when compared to the same 1997
periods. Such increases include revenues from certain of
BellSouth's operations which had been accounted for under
the equity method in the 1997 periods and were
consolidated in the 1998 periods. If these operations had
been consolidated in 1997, Wireless Communications
revenues for the three and six months would have increased
approximately 22.1% and 24.0%, respectively. These
increases were primarily attributable to continued growth
of the customer base in international and domestic
wireless markets and the acquisition in 1997 of various
international wireless operations.
Directory Advertising and Publishing revenues increased
$19 (4.8%) and $20 (2.6%) for the three- and six-month
periods ended June 30, 1998 when compared to the same 1997
periods. The increases primarily reflect volume growth
and price increases partially offset by the effect of book
shifts and, in the six-month period, one-time adjustments
in 1997. The revenue growth rates associated with
increases in volume and pricing for the three- and six-
month periods ended June 30, 1998 were 9.5% and 7.8%,
respectively.
Other Services revenues are principally comprised of
revenues from customer premises equipment (CPE) sales,
maintenance services and other services (primarily inside
wire, billing and collection and voice messaging services)
offered by BellSouth Telecommunications. Other Services
revenues increased $50 (14.7%) and $104 (16.1%) for the
three- and six-month periods ended June 30, 1998 when
compared with the same 1997 periods. The increases
primarily reflect increased demand and prices for
nonregulated services.
Operating Expenses
Total Operating Expenses increased $531 (14.4%) and $1,011
(14.1%) for the three- and six-month periods ended June
30, 1998 compared to the same 1997 periods. Such increases
include expenses from certain of BellSouth's operations
which had been accounted for under the equity method in
1997 and were consolidated in 1998. If these operations
had been consolidated in 1997, Total Operating Expenses
would have increased approximately 9.8% and 9.9%,
respectively. The components of Total Operating Expenses
were as follows:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1998 1997 1998 1997
Depreciation and Amortization $ 1,074 $ 977 $ 2,117 $ 1,937
Other Operating Expenses:
Cost of Services and
Products 1,743 1,536 3,410 2,958
Selling, General and
Administrative 1,413 1,186 2,675 2,296
3,156 2,722 6,085 5,254
Total Operating Expenses $ 4,230 $ 3,699 $ 8,202 $ 7,191
Depreciation and Amortization increased $97 (9.9%) and
$180 (9.3%) for the three- and six-month periods ended
June 30, 1998 compared to the same periods in 1997. The
increases were due primarily to the first-time
consolidation of certain operations in 1998 which were
treated as equity investments in 1997. Depreciation and
amortization for such operations were $57 and $107 for the
three- and six-month periods, respectively. The overall
increases were also due to higher levels of property,
plant and equipment since June 30, 1997 resulting from
continued growth in the customer base and continued
modernization of the networks utilized in the wireless
businesses.
Other Operating Expenses increased $434 (15.9%) and $831
(15.8%) for the three- and six-month periods ended June
30, 1998 when compared to the same 1997 periods. Such
increases include $172 and $341 in expenses from certain
of BellSouth's operations which had been accounted for
under the equity method in 1997 and were consolidated in
1998. The increases for the periods were also attributable
to increased expenses in international wireless operations
of $45 and $111 related to sustained growth in the
international cellular customer bases. Such increases
reflect additional marketing and operational costs
associated with higher levels of sales and expanded
operations.
At BellSouth Telecommunications, Other Operating Expenses
increased $175 (9.0%) and $311 (8.2%) for the three- and
six-month periods ended June 30, 1998 when compared to the
same 1997 periods. The increases were primarily
attributable to increased labor costs, other increased
costs in the BellSouth Telecommunications' telephone
operations associated with higher business volumes,
payments to the Universal Service Fund and costs related
to compliance with the Telecommunications Act of 1996.
Other Income Statement Items
The other income statement components were as follows:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
1998 1997 1998 1997
Interest Expense $203 $187 $393 $370
Gain on Sale of Operations - - 155 -
Other Income, net 118 33 146 26
Provision for Income Taxes 531 416 1,086 886
Interest Expense increased $16 (8.6%) and $23 (6.2%) for
the three- and six-month periods ended June 30, 1998
compared to the same 1997 periods. The increases were
primarily attributable to higher average debt balances and
interest rates on short-term borrowings, partially offset
by an increase in interest capitalized for investments
being developed. The increase in average short-term debt
balances and related interest expense primarily reflects
the consolidation of several international operations
which had been accounted for under the equity method prior
to 1998.
Gain on Sale of Operations for the six-month period ended
June 30, 1998 represents additional proceeds received from
the sale of ITT World Directories (see Note D to the
Consolidated Financial Statements).
Other Income, net improved $85 and $120 for the three- and
six-month periods ended June 30, 1998 compared to the same
1997 periods. The increases were primarily attributable to
improved equity in earnings of unconsolidated affiliates
and an increase in interest income, partially offset in
the six-month period by higher net minority interest
deductions.
Equity in earnings of unconsolidated affiliates was $36
and $48 for the three- and six-month periods ended June
30, 1998 compared to equity in losses of ($26) and ($69)
for the same 1997 periods. The improvement in overall
equity in earnings primarily reflects (i) the first-time
consolidation in 1998 of the mobile data communications
business; (ii) more favorable results at other
unconsolidated international operations; and (iii) the
cessation of losses incurred by Optus following its sale
in 1997. The improvement was partially offset by
development expenses associated with the start-up
operations in Brazil in 1998.
Provision for Income Taxes for the three- and six-month
periods ended June 30, 1998 increased $115 (27.6%) and
$200 (22.6%) when compared to the same 1997 periods. For
the three- and six-month periods ended June 30, 1998,
BellSouth's effective tax rates were 39.4% and 38.8%
compared to 38.9% and 39.7% for the same 1997 periods.
FINANCIAL CONDITION
BellSouth uses the net cash generated from its operations
and external financing to fund capital expenditures, pay
dividends and invest in and operate its existing
operations and new businesses. On occasion, BellSouth's
current liabilities exceed current assets. However,
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 Six Months
Ended June 30,
1998 1997
Net Cash Provided by Operating Activities $3,698 $3,494
Operating Activities. Net cash provided by operating
activities increased $204 (5.8%) in the six-month period
ended June 30, 1998 when compared to the same 1997 period.
The change is primarily due to a $491 increase in
operating income before depreciation and amortization and
increased net receipts of accounts receivable. The
increase was partially offset by increased cash
expenditures for accounts payable and other current
liabilities.
For the Six Months
Ended June 30,
1998 1997
Net Cash Used for Investing Activities $(3,276) $(2,457)
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 $819
(33.3%) in the six-month period ended June 30, 1998 when
compared to the same 1997 period. The increase was
primarily due to capital expenditures for and investments
in BellSouth's consolidated and unconsolidated Latin
American affiliates, including the purchase of an
additional ownership interest in BellSouth's wireless
operations in Venezuela in June 1998.
Internal sources provided substantially all cash required
for capital expenditures and international investments in
the six-month period ended June 30, 1998. For the
remainder of 1998, BellSouth expects to continue to
finance capital expenditures and international investments
primarily through internally generated funds and, to a
lesser extent, from external sources.
For the Six Months
Ended June 30,
1998 1997
Net Cash Used for Financing Activities $(770) $(907)
Financing Activities. Net cash used for financing
activities decreased $137 (15.1%) in the six-month period
ended June 30, 1998 compared to the same 1997 period. The
decrease is primarily due to higher net borrowings of debt
of $489, substantially offset by an increase in purchases
of treasury shares of $383.
In June 1998, BellSouth Telecommunications issued $500 of
6 3/8% Debentures, due June 1, 2028 and $500 of 6% Reset
Put Securities, due June 15, 2012. The purpose of these
issues was to refinance $500 aggregate principal amount of
BellSouth Telecommunications' 5 1/4% Notes, which matured
on June 8, 1998, and to provide for general corporate
purposes, including the refinancing of commercial paper.
BellSouth's debt to total capitalization ratio remained
flat at 42.2% at June 30, 1998 compared to 42.1% at
December 31, 1997.
As of July 31, 1998, shelf registration statements were on
file with the Securities and Exchange Commission under
which $927 of debt securities could be publicly offered.
In September 1997, BellSouth announced a plan to
repurchase up to $1 billion of its Common Stock through
1998. Treasury share purchases under this plan totaled
$452 for the six months ended June 30, 1998.
REGULATORY DEVELOPMENTS AND COMPETITION
State Developments
Reciprocal Compensation for Internet Traffic. Numerous
Competitive Local Exchange Carriers (CLECs) claim
entitlement from Incumbent Local Exchange Carriers
(ILECs), including BellSouth Telecommunications, for
reciprocal compensation to the CLECs for calls originating
on the ILEC's networks and connecting with internet
service providers served by the CLEC's networks. The
CLECs have asserted that such reciprocal compensation is
provided for in interconnection agreements between the
CLECs and the ILECs. The ILECs have denied any liability
for this form of compensation. The courts and state
commissions that have considered the matter have ruled
against the ILECs with respect to calls to internet
service providers. The FCC is considering the underlying
jurisdictional issue and is expected to issue a decision.
It is too early to assess the impact of the ultimate
resolution of these issues on the results of operations,
financial position and cash flows of BellSouth.
Tennessee. In 1995, BellSouth Telecommunications elected
price regulation under an incentive regulation plan
whereby prices for basic services and Call Waiting
services are to be capped for four years, after which
prices may be changed in accordance with an inflation-
based formula.
As a condition to implementing price regulation, the
Tennessee Public Service Commission ordered BellSouth
Telecommunications to reduce prices by approximately $56
on an annual basis. BellSouth Telecommunications appealed
to the Tennessee Court of Appeals. In October 1997, the
court vacated the order requiring the rate reduction and
remanded the case to the Tennessee Regulatory Authority
(TRA) (the successor to the Tennessee Public Service
Commission) with instructions to approve the price
regulation plan. In January 1998, the TRA and the Consumer
Advocate filed an application for permission to appeal to
the Tennessee Supreme Court. In June 1998, the Tennessee
Supreme Court denied the application for appeal.
BellSouth Telecommunications' application for price
regulation is currently pending before the TRA.
In early 1998, a bill was introduced in the Tennessee
legislature that would impose significant new restrictions
on companies electing price regulation. The bill included
proposals to require companies to make substantial refunds
to customers prior to operating under price regulation and
to have initial rates for price regulation purposes
established by means of a traditional rate of return
earnings investigation. Efforts to adopt such a bill
failed in committee.
OTHER MATTERS
Accounting for Derivative Instruments and Hedging
Activities. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The standard
requires that all derivative instruments (1) be recognized
as assets or liabilities and (2) be adjusted to fair value
each period. SFAS No. 133 requires adoption by BellSouth
no later than January 1, 2000. BellSouth is currently
assessing the impact that adoption of SFAS No. 133 will
have on its results of operations and financial condition
and is undecided as to the date the standard will be
adopted.
Year 2000 Compliance. BellSouth has initiated a company-
wide program to identify and address issues associated
with the ability of its date-sensitive information,
telephony and business systems as well as certain
equipment to properly recognize the Year 2000 in order to
avoid interruption of the operation of these systems as a
result of the century change on January 1, 2000. The
program is also designed to assess the impact on BellSouth
of the readiness of other entities with which BellSouth
does business.
Inability to reach substantial Year 2000 compliance in
BellSouth's systems and integral third party systems could
result in interruption of telecommunications services,
interruption or failure of BellSouth's customer billing,
operating and other information systems and failure of
certain date-sensitive equipment. Such failures could
result in substantial claims by customers and/or loss of
revenue due to service interruption, delays in
BellSouth's ability to bill its customers accurately and
timely, and increased expenses associated with litigation,
stabilization of operations following such failures or
execution of contingency plans.
The Year 2000 program is being conducted by a management
team that is coordinating the efforts of internal
resources as well as third party network providers and
vendors in identifying and making necessary changes to
BellSouth's systems hardware, software and date-sensitive
equipment. The program also includes the international and
domestic companies in which BellSouth holds an interest.
Some of the changes necessary in BellSouth's operations
are being made as a part of ongoing systems upgrades.
BellSouth plans to have all Year 2000 compliance
conversion and initial testing for its most critical
systems used in its domestic operations completed by the
end of 1998 and to complete intersystem testing and
deployment by mid-1999. The status of Year 2000 compliance
efforts for international entities is less advanced than
that for domestic operations. However, Year 2000
conversion, testing and deployment for these systems is
expected to be completed by late 1999.
Over the years, BellSouth has developed numerous
contingency plans for conducting its business operations
in the event of crises including system outages or natural
disasters. As a part of its Year 2000 compliance efforts,
it is reviewing its contingency plans to ensure they
adequately address Year 2000 issues that might arise.
BellSouth's operational systems, such as billing,
accounting, etc., are also being addressed in the
endeavor. BellSouth is a member, together with other
large telecommunications companies, in an industry group
which is addressing the Year 2000 issue and related
contingency plans.
Some of the costs associated with BellSouth's Year 2000
compliance efforts were incurred in 1997, and the
remainder has been or will be incurred during 1998 and
1999. BellSouth estimates the costs of these efforts will
be between $100 to $200 over the life of the project.
BellSouth intends to continually reassess the estimated
costs and status of Year 2000 remediation efforts.
BellSouth currently anticipates that the mission critical
systems that it controls in its domestic and international
operations will be Year 2000 compliant by January 1, 2000.
However, no assurance can be given that unforeseen
circumstances will not arise during the performance of the
testing and deployment phases which would adversely affect
the Year 2000 compliance of BellSouth's systems.
Furthermore, the Year 2000 compliance status of integral
third party networks is not yet fully known. As a result,
BellSouth is unable to determine the impact that any
system interruption would have on BellSouth's results of
operations, financial position and cash flows.
CWA Working Agreement. On August 8, 1998, BellSouth
reached a tentative agreement with the Communications
Workers of America (CWA) on new three-year contracts
covering approximately 48,000 employees. The contracts,
which are subject to ratification by CWA members, include
basic wage increases totaling 12.39% over the three years
covered by the contracts. In addition, the agreement
provides for a standard award of between 2% and 2.5% of base
salary and overtime compensation which is subject to adjustment
based on company performance measures for plan years 1999 and
2000. Other terms of the agreement include pension band
increases and pension plan cash balance improvements for
active employees.
SAFE HARBOR STATEMENT
Statements that do not address historical performance are
"forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and are
based on a number of assumptions, including but not
limited to: (1) continued economic growth and demand for
BellSouth's services; (2) continued monetary, regulatory
and political stability where BellSouth conducts its
international operations; (3) the reasonable accuracy of
BellSouth's expectations of costs and recoveries with
respect to access reform, universal service and
interconnection; (4) the reasonable accuracy of
BellSouth's estimate of regulatory authorization to
provide wireline long distance services and the impact of
competition in its markets; and (5) satisfactory
identification and completion of Year 2000 software and
hardware revisions by BellSouth and entities with which it
does business. Any developments significantly deviating
from these assumptions could cause actual results to
differ materially from those forecast or implied in the
aforementioned forward-looking statements.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
BellSouth has published the information called for by
this item in its "Second Quarter 1998 Report to
Shareholders" which was distributed to shareholders on or
about May 1, 1998. Shareholders can request a copy of
this report by calling BellSouth Shareholder Services on 1-
800-631-6001.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
4a No instrument which defines the rights of
holders of long- and intermediate-term debt of
BellSouth Corporation is filed herewith pursuant
to Regulation S-K, Item 601(b)(4)(iii)(A).
Pursuant to this regulation, BellSouth
Corporation hereby agrees to furnish a copy of
any such instrument to the SEC upon request.
10m BellSouth Corporation Executive Life
Insurance Plan as amended and restated as the
BellSouth Split-Dollar Life Insurance Plan
effective January 1, 1998.
10cc BellSouth Supplemental Life Insurance Plan
effective January 1, 1998.
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed
Charges.
27 Financial Data Schedule as of June 30, 1998.
(b) Reports on Form 8-K:
Date of Event Subject
July 21, 1998 Second quarter 1998 Earnings Release
and 1998 Financial Projection
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
(Principal Accounting Officer)
August 12, 1998
EXHIBIT INDEX
Exhibit
Number
10m BellSouth Corporation Executive Life
Insurance Plan as amended and restated as the
BellSouth Split-Dollar Life Insurance Plan
effective January 1, 1998.
10cc BellSouth Supplemental Life Insurance Plan
effective January 1, 1998.
11 Computation of Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed
Charges.
27 Financial Data Schedule as of June 30, 1998.
Plan Document
This section includes a general information summary (first 3
pages) and the plan document for the BellSouth Split-Dollar Life
Insurance Plan. The plan document and the general information
summary together are intended to serve as both the full text of
the BellSouth Split-Dollar Life Insurance Plan as well as a
summary plan description of such plan.
General Information About The BellSouth
Split-Dollar Life Insurance Plan
NAME OF PLAN
BellSouth Split-Dollar Life Insurance Plan
NAME AND ADDRESS OF EMPLOYER
Various BellSouth companies participate in this Plan.
BellSouth Corporation's address is:
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309
EMPLOYER IDENTIFICATION NUMBER
58-1533433
PLAN NUMBER
547
TYPE OF PLAN
This Plan is a welfare benefit plan in which participants
are given the opportunity to receive life insurance coverage
purchased with a combination of employer and employee
contributions.
TYPE OF ADMINISTRATION
Benefits are provided through insurance contracts purchased
under the terms of the Plan. The Plan is administered by
BellSouth Corporation.
CLAIMS PROCEDURE
Claims for insurance benefits under the Plan are handled by
and should be directed to the Plan Administrator.
PLAN YEAR
The Plan Year is the period beginning each January 1 and
ending each December 31 during which the Plan is in effect.
END OF YEAR FOR FISCAL YEAR PURPOSES
December 31.
NAME, BUSINESS ADDRESS AND TELEPHONE NUMBER OF
PLAN ADMINISTRATOR
BellSouth Corporation
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
Attn.: Director Executive Benefits
(404) 249-2228
SERVICE OF LEGAL PROCESS
Service of legal process may be made upon the Plan
Administrator.
EFFECTIVE DATE
The Effective Date of the Plan is January 1, 1998.
PARTICIPANT'S RIGHTS UNDER ERISA
Participants in the Plan are entitled to certain rights and
protections under the Employee Retirement Income Security
Act of 1974 ("ERISA"). ERISA provides that each Plan
participant may:
(1) Examine, without charge, all Plan documents, and
copies of all documents files by the Plan with the U.S.
Department of Labor, such as detailed annual reports
and Plan descriptions, if applicable.
(2) Obtain copies of all Plan documents and other Plan
information upon written request to the Plan
Administrator. The Administrator may make a reasonable
charge for copies;
(3) Receive a summary of the Plan's annual financial
report. The Plan Administrator is required by law to
furnish each participant with a copy of this summary
annual report;
You should also be aware of the following protections
afforded by ERISA:
(1) The people who operate the Plan, called
"fiduciaries," must act prudently and in the interest
of you and other Plan participants and beneficiaries.
(2) No one may interfere with the exercise of any
rights which you have under the Plan or ERISA.
(3) If your claim for a benefit is denied in whole or
in part, you must receive a written explanation of the
reason for denial.
(4) You have the right to have the Plan Administrator
review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the
above rights. If you request materials from the Plan and do
not receive them within 30 days, you may choose to file suit
in a federal court. If the court finds that you are
entitled to receive those materials, it may require the Plan
Administrator to provide the materials and pay you a daily
penalty until you receive them. However, if the documents
were not sent because of reasons beyond the control of the
Plan Administrator, he will not be penalized. If you have a
claim for benefits which is denied or ignored, in whole or
in part, you may choose to file suit in a state or federal
court. If it should happen that Plan fiduciaries misuse the
Plan's money, or if you are discriminated against for
asserting your rights, you may seek assistance from the U.
S. Department of Labor, or you may file suit in a federal
court. The court will decide who should pay court costs and
legal fees. If you lose, the court may order you to pay
these costs and fees, if, for example, it finds your claim
frivolous.
If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area
Office of the U.S. Labor - Management Services
Administration Department of Labor.
BellSouth Split-Dollar Life Insurance Plan
1. PURPOSE
The purpose of the BellSouth Split-Dollar Life Insurance
Plan (the "Plan") is to provide a split-dollar insurance
arrangement under which BellSouth Corporation and its
subsidiaries and affiliates can assist key employees in
acquiring and financing life insurance coverage. This Plan
incorporates the provisions of the BellSouth Corporation
Executive Life Insurance Plan and the BellSouth Corporation
Senior Manager Life Insurance Plan, as amended as of the
effective date of this Plan (the "Prior Plans"), and, as of
such effective date, shall be deemed to constitute a
complete restatement of both Prior Plans, as amended (except
to the extent otherwise specifically provided in Section
3.01 of this Plan).
2. DEFINITIONS
For purposes of this Plan, the following terms have the
meanings set forth below:
2.01 "Agreement" means the agreement executed between the
Employer and a Participant implementing the terms of this Plan,
substantially in the form attached hereto as Exhibit "A".
2.02 "Assignment" means the collateral assignment executed by the
Policy Owner, substantially in the form attached hereto as
Exhibit "B".
2.03 "Coverage Amount" means the face amount of the insurance
death benefit provided to a Participant under the Plan, as
specified in the Participant's Agreement.
2.04 "Disability" means that the Participant is receiving
disability benefits under any long-term disability plan sponsored
by the Employer or an affiliated entity.
2.05 "Effective Date" means the effective date of the Plan, which
is January 1, 1998.
2.06 "Employee" means an employee or former employee of the
Employer who is eligible to participate in the Plan.
2.07 "Employer" means BellSouth Corporation and any subsidiary or
affiliate of BellSouth Corporation which is authorized by the
Plan Administrator to participate in this Plan.
2.08 "Employer Account" means, with respect to a Participant's
Policy, a bookkeeping entry maintained by the Employer pursuant
to Section 6 of the Plan, equal to the lesser of (1) the cash
value of the Policy, or (2) the amount of Policy premiums paid by
the Employer (and not collected from the Participant). With
respect to a Replacement Policy, the amount of Policy premiums
paid by the Employer shall be deemed to include the total of all
such premiums paid on the Replacement Policy and the Replaced
Policy, reduced by an amount equal to that portion of the
Replaced Policy Cash Value, if any, paid to the Employer at the
time the Replacement Policy is issued.
2.09 "Employer Premium" means, with respect to a Participant's
Policy, the total Policy premium payable for the Policy Year by
the Company as specified in the Participant's Agreement, less the
portion of the premium to be paid by the Participant pursuant to
Section 5.01 of the Plan.
2.1 "Enrollment Age" means the Participant's age at the time of
enrollment in the Prior Plans as to the Participant's initial
Coverage Amount, and it means the Participant's age at a
subsequent enrollment for an increased Coverage Amount as to the
increased Coverage Amount; provided, however, that with respect
to a Replacement Policy, the age at enrollment shall mean the age
at the time of enrollment for the Replaced Policy.
2.2 "Insurance Cost" means, with respect to a Participant, the
annual cost for the Participant's Coverage Amount determined
pursuant to the Insurance Cost schedule maintained by the Plan
Administrator. The Insurance Cost for a Participant shall be
determined as of the time of the Participant's enrollment in the
Prior Plan(s), based on the Participant's Coverage Amount and
Enrollment Age, and shall not change thereafter. A smoker rate
shall be used to determine the Insurance Cost for any Participant
who smoked cigarettes at any time during the twelve month period
immediately preceding the Participant's enrollment; a nonsmoker
rate shall be used for all other Participants. However,
notwithstanding the previous sentence, if a Replacement Policy is
issued for a Participant and the Participant qualifies as a
nonsmoker for the Replacement Policy, the nonsmoker rate shall
thereafter be used to determine the Insurance Cost for the
Participant.
If a Participant's coverage is in effect for a period of
less than twelve (12) months during any Policy Year,
the Participant's Insurance Cost for that year shall be
determined by multiplying the annual cost as determined
from the insurance cost schedule by a fraction, the
numerator of which is the number of full months that
the coverage is in effect and the denominator of which
is twelve (12).
2.3
"Insurer" means, with respect to a Participant's Policy, the
insurance company issuing the insurance policy or group
policy certificate on the Participant's life (or on the
joint lives of the Participant and the Participant's
spouse) pursuant to the provisions of the Plan.
2.4 "Participant" means an Employee who is participating in the
Plan.
2.5 "Participant Account" means, with respect to a Participant's
Policy, a bookkeeping entry maintained by the Employer pursuant
to Section 6 of the Plan, equal to the excess, if any, of the
cash value of the Policy over the Employer Account.
2.6 "Participant Premium" means, with respect to each Policy
Year (or portion thereof) for a Participant, the greater of (1)
the Participant's Insurance Cost; or (2) the one year term cost
for the Policy Year (or portion thereof) determined based on the
Participant's age at the beginning of the Policy Year, the
Insurer's published one year term rates in effect at the
beginning of the Policy Year, and the Participant's Coverage
Amount under the Plan. The one year term cost amount shall be
determined pursuant to the guidelines set forth in Revenue Ruling
66-110, 1966-1 C.B. 12, and Revenue Ruling 67-154, 1967-1 C.B.
11, and shall be conclusively determined by the Plan
Administrator.
2.7 "Permanent Policy" means a Participant's Policy having cash
values which are projected to be sufficient to continue to
provide death benefit coverage at least equal to the
Participant's Coverage Amount until the policy maturity date
specified in the Participant's Policy (determined without regard
to any Policy rider which extends the maturity date beyond the
originally scheduled policy maturity date), and which is
projected to have a cash accumulation value equal to at least
ninety-five percent (95%) of the Policy Coverage Amount at the
maturity date specified in such Policy, with no further premium
payments, following a withdrawal by the Employer of all amounts
to which it is entitled pursuant to Section 8.02e or Section
8.03. A determination as to whether a Policy is at a given time
a Permanent Policy shall be made by the Plan Administrator, and
shall be based on Policy projections provided by the Insurer or
its agent utilizing the Policy's then current mortality rates and
Policy expenses, and the following Policy interest crediting
rates. For the Policy Year of the Employer withdrawal made
pursuant to Section 8.02e or Section 8.03, the projections shall
reflect the actual Policy interest crediting rate in effect for
such year (or, if such rate is not known when the determination
is made, the actual rate in effect for the preceding Policy
Year). For each of the ten (10) succeeding Policy Years, the
projections shall reflect that rate decreased ratably such that
the rate in the tenth Policy Year following the Policy Year in
which the Employer withdrawal occurs will be five percent (5%).
For all successive Policy Years, the projections shall reflect a
five percent (5%) Policy interest crediting rate.
Notwithstanding the foregoing, if the actual Policy interest
crediting rate in effect when the determination is made is less
than five percent (5%), the projections shall reflect such lower
rate for the Policy Year of the Employer withdrawal and all
subsequent Policy Years.
2.8 "Plan" means the BellSouth Split-Dollar Life Insurance Plan.
Except as otherwise provided in Section 3.01, with respect to
each Participant who participated in the BellSouth Corporation
Executive Life Insurance Plan, the Plan shall be construed and
interpreted as a restatement of the provisions of such plan, as
amended; and, with respect to each Participant who participated
in the BellSouth Corporation Senior Manager Life Insurance Plan,
the Plan shall be construed and interpreted as a restatement of
such plan, as amended.
2.9 "Plan Administrator" means the Chief Executive Officer of
BellSouth Corporation and any individual or committee he
designates to act on his behalf with respect to any or all of his
responsibilities hereunder; provided, the Board of Directors of
BellSouth Corporation may designate any other person or committee
to serve in lieu of the Chief Executive Officer as the Plan
Administrator with respect to any or all of the administrative
responsibilities hereunder.
2.10 "Policy" means the life insurance coverage acquired on the
life of the Participant (or on the joint lives of the Participant
and the Participant's spouse) by the Participant or other Policy
Owner, which may be issued as a separate insurance policy or a
certificate under a group policy.
2.11 "Policy Owner" means the Participant or that person or
entity to whom the Participant has assigned his interest in the
Policy. In the case of a Replacement Policy issued to replace a
Policy for which the Policy Owner is other than the Participant,
the Policy Owner of the Replacement Policy shall be the same as
the Policy Owner of the Policy being replaced, unless elected
otherwise by such Policy Owner.
2.12 "Policy Year" means the twelve month period (and each
successive twelve month period) beginning on the effective date
of the Agreement.
2.13 "Premium Payment Years" means, with respect to a
Participant's Policy, the number of consecutive Policy Years
(including, for a Replacement Policy, the number of Policy Years
during which the Replaced Policy was in force), beginning with
the first Policy Year, during which the Employer is required to
pay a Policy premium, as specified in the Participant's
Agreement.
2.14 "Replaced Policy" means a Policy which has been replaced by
a Replacement Policy. If a Participant's Policy has been
replaced more than one time, then the term Replaced Policy shall
include all prior Policies.
2.15 "Replaced Policy Cash Value" means the cash value of the
Replaced Policy on the Effective Date.
2.16 "Replacement Policy" means a Policy issued to replace a
Policy previously issued under the Plan.
2.17 "Retirement" means a termination of the Participant's
employment with the Employer under circumstances where the
Participant is immediately eligible to receive pension benefits
under the Supplemental Executive Retirement Plan (SERP)
maintained by the Employer or one of its subsidiaries.
2.18 "Single Life Coverage" means life insurance coverage on the
life of the Participant.
2.19 "Survivorship Coverage" means life insurance coverage on the
lives of the Participant and the Participant's spouse, with the
life insurance death benefit to be payable at the death of the
last survivor of the Participant and the Participant's spouse.
2.20 "Terminated for Cause" means, with respect to a Participant,
the termination of the Participant's employment with the Employer
due to: (i) fraud, misappropriation, embezzlement, or intentional
material damage to the property or business of the Employer; (ii)
commission of a felony involving moral turpitude of which the
Participant is finally adjudicated guilty; or (iii) continuance
of either willful and repeated failure or grossly negligent and
repeated failure by the Participant to materially perform his
duties.
3. ELIGIBILITY
3.01 General. Each Employee with a Prior Plan Agreement in
effect on the day preceding the Effective Date shall be
eligible to participate in the Plan, provided that the
Employee (and any other appropriate party, such as the
Employee's spouse or a Policy Owner other than the
Employee, as determined by the Plan Administrator)
executes an Agreement consenting to the terms of this
Plan, as amended, and completes such other forms as the
Plan Administrator shall require. Any Employee
eligible to participate who fails to execute (or secure
execution of) an Agreement consenting to the terms of
this Plan, as amended, by August 31, 1998, shall not be
eligible for coverage under the Plan, but shall remain
subject to the terms and conditions of the Prior
Plan(s) in which such Employee participates as in
effect on the day preceding the Effective Date, as
amended thereafter from time to time.
3.02 Type of Coverage. The type(s) of coverage for a
Participant on the Effective Date shall be the type(s)
of coverage in place on the day preceding the Effective
Date pursuant to the Participant's Agreement(s) under
the Prior Plan(s). Provided, however, that the Policy
Owner may make a one-time election to exchange
Survivorship Coverage for Single Life Coverage (equal
to fifty percent (50%) of the Participant's
Survivorship Coverage Amount), or to exchange Single
Life Coverage for Survivorship Coverage (equal to two
hundred percent (200%) of the Participant's Single Life
Coverage Amount), subject to any proof of insurability
required by the Insurer. Such an election must be made
by August 31, 1998. If an unmarried Participant
enrolls for Single Life Coverage and subsequently
marries, then, subject to the approval of the Plan
Administrator, the Participant (or other Policy Owner)
shall have the right to make an election, exercisable
no later than one hundred eighty (180) days following
the marriage, to convert (subject to any proof of
insurability required by the Insurer) the Single Life
Coverage to Survivorship Coverage (with the Coverage
Amount equal to two hundred percent (200%) of the
Single Life Coverage Amount). If a married Participant
enrolls for Survivorship Coverage and subsequently
divorces, then, subject to the approval of the Plan
Administrator, the Participant (or other Policy Owner)
shall have the right to make an election, exercisable
no later than one hundred eighty (180) days following
the finalization of the divorce, to convert (subject to
any proof of insurability required by the Insurer) the
Survivorship Coverage to Single Life Coverage (with the
Coverage Amount equal to fifty percent (50%) of the
Survivorship Coverage Amount). Under no other
circumstances shall a Participant (or other Policy
Owner) have any right to change an election as to type
of coverage after the coverage becomes effective. Any
Insurer charges or tax liability resulting from a
conversion shall be borne by the Participant or other
Policy Owner.
4. AMOUNT OF COVERAGE
The Coverage Amount for a Participant shall be the amount
specified in the Participant's Agreement.
5. PAYMENT OF PREMIUMS; PAYMENT OF CERTAIN TAXES
5.01 Participant Premium Payments. A Participant shall pay
the Participant Premium for each Policy Year which is a
Premium Payment Year for the Participant. The amount
shall be paid by the Participant to the Employer by
payroll (or retirement income) deductions of equal
installments during the Policy Year, or in such other
manner as may be agreed to between the Plan
Administrator and the Participant. The Employer shall
pay the Participant Premium amount to the Insurer, and
can do so as collected from the Participant or can
advance payments to the Insurer for a Policy Year at
any time during the Policy Year or up to thirty (30)
days in advance of the Policy Year. If a Participant
terminates employment with the Employer, and the
Employer has made such an advance payment of the
Participant Premium to the Insurer, the Employer may
withhold any uncollected portion of the advanced
Participant Premium from any amount payable to the
Participant by the Employer to the extent permitted by
law. Notwithstanding the other provisions of this
paragraph, no Participant Premium shall be required
with respect to Survivorship Coverage after the death
of the Participant, and no Participant Premium shall be
required after termination of the Participant's
Agreement pursuant to Section 8.01.
5.02 Employer Premium Payments. The Employer shall pay the
Employer Premium for a Participant's Policy within
thirty (30) days of the beginning of each Policy Year
which is a Premium Payment Year. However, no Employer
Premium shall be required: (1) after the Participant's
Agreement terminates pursuant to Section 8.01; or, (2)
for a Policy Year if the Employer withdrawal and
release of Assignment under Section 8.03 would have
occurred at the end of the prior Policy year but for
the requirement in Section 8.03 that the Policy not
constitute a Modified Endowment Contract following such
withdrawal. Also, if the payment of the Employer
Premium for a Policy year would cause the Participant's
Policy to constitute a Modified Endowment Contract (as
such term is defined in Section 7702A of the Internal
Revenue Code), then the Employer Premium amount for
such Policy year shall be reduced to the largest such
amount that can be paid without causing the Policy to
constitute a Modified Endowment Contract. The Employer
may, but shall not be required to, make additional
premium payments with respect to a Participant's Policy
after the last Premium Payment Year.
5.03 Additional Employer Payments.
a. If, during any year which is not a
Premium Payment Year, participation in the Plan
results in the recognition of income for tax
purposes by the Participant for the economic
benefit to the Participant as described in, e.g.,
Revenue Ruling 64-328, 1964-2 C.B.11, the Employer
shall pay to the Participant an amount determined
by the Plan Administrator which is designed to
approximate the (1) sum of the total federal and
state income taxes and applicable payroll taxes
which would be payable by the Participant at the
highest marginal rate provided for under
applicable federal income tax laws, and at the
highest marginal rate provided for under
applicable state income tax laws for the state of
the Participant's tax domicile, on the income so
recognized, plus (2) the total federal and state
income taxes and applicable payroll taxes which
would be payable by the Participant on the payment
described in clause (1). Any payment to be made
under this subsection a. shall be made no later
than April 1 of the year following the year to
which the payment relates.
b. If, with respect to Survivorship
Coverage after the death of the Participant,
participation in the Plan results in the
recognition of income for tax purposes by the
Participant's spouse or other Policy Owner for the
economic benefit to the Participant's spouse or
other Policy Owner as described in, e.g., Revenue
Ruling 64-328, 1964-2 C.B.11, the Employer shall
pay to the Participant's spouse or other Policy
Owner an amount determined by the Plan
Administrator which is designed to approximate the
total federal and state income taxes which would
be payable by the Participant's spouse or other
Policy Owner at the highest marginal rate provided
for under applicable federal income tax laws, and
the highest marginal rate provided for under
applicable state income tax laws for the state of
the tax domicile of the Participant's spouse or
other Policy Owner, on the income so recognized.
Any payment to be made under this subsection b.
shall be made no later than April 1 of the year
following the year to which the payment relates.
c. If the termination of the Employer's interest in a
Participant's Policy pursuant to Section 8.03 of
the Plan results in the recognition of income for
tax purposes by the Participant, the Employer
shall pay to the Participant an amount determined
by the Plan Administrator which is designed to
approximate the total federal and state income
taxes which would be payable by the Participant at
the highest marginal rate provided for under
applicable federal income tax laws, and at the
highest marginal rate provided for under
applicable state income tax laws for the state of
the Participant's tax domicile, attributable to
such termination. Such payment shall be made
immediately following the termination of the
Employer's interest in the Policy or, if later, at
such time as a determination is made that such a
tax is payable.
d. For purposes of this Section 5.03, a tax shall be
deemed payable or income shall be deemed
recognized, if either (i) it is finally determined
by the Internal Revenue Service, or (ii) an
opinion is given by the Employer's counsel, that
the tax is payable.
e. Any amount to be paid to a Participant,
a Participant's spouse, or other Policy Owner
under this Section, and the amounts payable, shall
be conclusively determined by the Plan
Administrator, based on generally applicable tax
rates and not based upon the unique tax situation
of each Participant, Participant's spouse, or
other Policy Owner.
6. ACCOUNTS
With respect to each Policy covered by an Agreement made
under this Plan, the Employer shall maintain bookkeeping
entries reflecting the Employer Account and Participant
Account values.
7. POLICY OWNERSHIP
7.01 Ownership. Except as otherwise provided in this Plan,
the Policy Owner shall be the sole and exclusive owner
of a Participant's Policy and shall be entitled to
exercise all of the rights of ownership including, but
not limited to, the right to designate the beneficiary
or beneficiaries to receive payment of the portion of
the death benefit under the Policy equal to the
Coverage Amount, and the right to assign any part or
all of the Policy Owner's interest in the Policy
(subject to the Employer's rights, the terms and
conditions of the Assignment specified in Section 7.02
of the Plan, and the terms and conditions of this Plan)
to any person, entity or trust by the execution of a
written instrument delivered to the Employer.
7.02 Employer's Rights. In exchange for the Employer's
agreement to pay the amounts described in Sections 5.02
and 5.03 of this Plan, the Policy Owner shall execute
an Assignment to the Employer of the rights provided to
the Employer under this Plan. The Employer shall have
the right to direct the Policy Owner in writing to take
any action required consistent with these rights, and
upon the receipt of such written direction from the
Employer, the Policy Owner shall promptly take such
action as is necessary to comply therewith. The
Employer agrees that it shall not exercise any rights
assigned to it in the Assignment in any way that might
impair or defeat the rights and interest of the Policy
Owner under this Plan. The Employer shall have the
right to assign any part or all of its interest in the
Policy (subject to the Policy Owner's rights and the
terms and conditions of this Plan) to any person,
entity or trust by the execution of a written
instrument delivered to the Policy Owner.
7.03 Possession of Policy. The Employer shall keep
possession of the Policy. The Employer agrees to make
the Policy available to the Policy Owner or to the
Insurer from time to time for the purposes of endorsing
or filing any change of beneficiary on the Policy or
exercising any other rights as the owner of the Policy,
but the Policy shall promptly be returned to the
Employer.
7.04 Policy Loans. Except as otherwise specifically
provided for in Section 8 of this Plan, neither the
Employer nor the Policy Owner may borrow against the
Policy cash values.
7.05 Withdrawals and Surrender. Except as otherwise
specifically provided for in Section 8 of this Plan,
neither the Employer nor the Policy Owner may withdraw
Policy cash values or surrender all or a portion of the
Policy. Provided, however, that a cancellation or
exchange of a Replaced Policy in connection with the
acquisition of a Replacement Policy shall not be deemed
a withdrawal from or surrender of the Replaced Policy.
8. TERMINATION OF AGREEMENT
8.01 Termination Events. Notwithstanding anything herein to
the contrary, the Participant's Agreement, and the
Employer's obligation to pay premiums with respect to
the Participant's Policy acquired pursuant to the
Agreement, shall terminate upon the first to occur of
any of the following events:
a. Termination of employment of the Participant with
the Employer prior to the Participant's death for
reasons other than Retirement or Disability.
b. Termination of the Participant's Agreement by
mutual agreement of the Participant and the
Employer.
c. A unilateral election by the Participant to
terminate the Participant's Agreement; provided,
however, that such an election may be made by a
Participant only within sixty (60) days following
the end of the last Premium Payment Year for the
Participant's Policy.
d. The written notice by the Employer to the
Participant following a resolution by the Board of
Directors of BellSouth Corporation to terminate
this Plan and all Agreements made under the Plan.
e. As to Single Life Coverage only, the death of the
Participant.
f. As to Survivorship Coverage only, the death of the
last survivor of the Participant and the
Participant's spouse.
g. After the release of Assignment pursuant to
Section 8.03.
8.02 Disposition of Policy
a. In the event of a termination of a Participant's
Agreement under Section 8.01a or b of the Plan,
the Policy Owner shall be entitled to acquire the
Employer's rights under the Participant's Policy
by paying to the Employer an amount equal to the
Employer Account; alternatively, the Policy Owner
can require the Employer to withdraw a portion of
the cash values from the Participant's Policy,
partially surrender the Policy, or borrow a
portion of the cash values from the Participant's
Policy, with the amount to be specified by the
Policy Owner, and the Policy Owner's required
payment to the Employer under this Section shall
thereby be reduced to an amount equal to the
excess of the Employer Account over the amount
withdrawn, received upon partial surrender, or
borrowed by the Employer (for these purposes, the
amount withdrawn, received upon partial surrender,
or borrowed shall refer to the amount actually
received by the Employer after the application of
any charges, such as surrender charges, applicable
to the withdrawal, partial surrender, or
borrowing). The Policy Owner may exercise this
right to acquire the Employer's interest in the
Policy by so notifying the Employer within ninety
(90) days after an event of termination under
Section 8.01a or b of this Plan has occurred.
Within thirty (30) days after receipt of such
notice, the Employer shall make any required
withdrawal, partial surrender, or policy loan and
the Policy Owner shall pay the Employer the
applicable payment, if any. Upon receipt of
payment from the Policy Owner, or immediately
following the withdrawal, partial surrender, or
policy loan if no payment is required, the
Employer shall release the Assignment and the
Policy Owner shall have all rights, title, and
interest in the Policy free of all provisions and
restrictions of the Assignment, the Agreement and
this Plan.
b. Notwithstanding the provisions of Section 8.02a,
if the Participant is Terminated for Cause by the
Employer, then the Policy Owner shall have no
right to acquire the Employer's interest in the
Policy.
c. If the Policy Owner fails to exercise his right to
acquire the Employer's interest in the Policy
pursuant to Section 8.02a or is precluded from
exercising such right pursuant to Section 8.02b,
the Policy Owner shall transfer title to the
Policy to the Employer, free of all provisions and
restrictions of the Assignment, the Participant's
Agreement and this Plan.
d. In the event of a termination of a Participant's
Agreement pursuant to the Participant's election
under Section 8.01c, the Employer shall receive
from the Participant's Policy an amount equal to
the Employer Account, with such amount to be
received through a withdrawal, partial surrender,
policy loan, or some combination thereof, as
determined by the Employer. Immediately
thereafter, the Employer shall release the
Assignment and the Policy Owner shall have all
rights, title and interest in the Policy free of
all provisions and restrictions of the Assignment,
the Participant's Agreement, and this Plan.
e. Notwithstanding the provisions of Section 2.08 to
the contrary, in the event of a termination of a
Participant's Agreement under Section 8.01d, prior
to the application of Section 8.02, the Employer
Account shall be reduced to an amount equal to the
excess, if any, of the cash values of the Policy
over the amount of cash value necessary in order
for such Policy to immediately qualify as a
Permanent Policy after withdrawal of such excess
amount. The Employer shall receive from the
Policy the reduced Employer Account value and,
with such amount to be received through a
withdrawal, partial surrender, policy loan, or
some combination thereof, as determined by the
Employer, and shall, within thirty (30) days of
the Plan termination, release the Assignment and
the Policy Owner shall have all rights, title, and
interest in the Policy free of all provisions and
restrictions of the Assignment, the Agreement and
this Plan.
8.03 Release of Assignment. At the end of each Policy Year
for a Participant's Policy, the Plan Administrator
shall determine whether a withdrawal from the Policy by
the Employer of an amount equal to the Employer
Account, and a release of the Assignment, shall occur
with respect to the Participant's Policy. Such
withdrawal and release shall be made within ninety (90)
days after the end of the first Policy Year as of the
end of which: (1) the Participant's Policy would
qualify as a Permanent Policy following such withdrawal
by the Employer; and, (2) the Participant's Policy
would not constitute a Modified Endowment Contract (as
such term is defined in Section 7702A of the Internal
Revenue Code) following such withdrawal. The Employer
withdrawal shall be made though a withdrawal, partial
surrender, or policy loan, or some combination thereof,
as determined by the Employer. Immediately after
receiving the proceeds of the withdrawal, partial
surrender, or policy loan, the Employer shall release
the Assignment and the Policy Owner shall have all
rights, title and interest in the Policy free of all
provisions and restrictions of the Assignment, the
Participant's Agreement and this Plan.
8.04 Allocation of Death Benefit. In the event of a
termination under Section 8.01e or 8.01f of the Plan,
the death benefit under the Participant's Policy shall
be divided as follows:
a. The beneficiary or beneficiaries of the Policy
Owner shall be entitled to receive an amount equal
to the Coverage Amount.
b. The Employer shall be entitled to receive the
balance of the death benefit.
8.05 Employer Undertakings. Upon the death of the
Participant (or, in the case of Survivorship Coverage,
the death of the last survivor of the Participant and
the Participant's spouse) while the Participant's
Agreement is in force, the Employer agrees to take such
action as may be necessary to obtain payment from the
Insurer of the death benefit to the beneficiaries,
including, but not limited to, providing the Insurer
with an affidavit as to the amount to which the
Employer is entitled under the Agreement and this Plan.
9. GOVERNING LAWS AND NOTICES
9.01 Governing Law. This Plan shall be governed by and
construed in accordance with the laws of the State of
Georgia.
9.02 Notices All notices hereunder shall be in writing and
sent by first class mail with postage prepaid. Any
notice to the Employer shall be addressed to BellSouth
Corporation at its office at 1155 Peachtree Street,
N.E., Atlanta, GA 30367-6000, ATTENTION: Human
Resources-Director Executive Benefits. Any notice to
the Employee shall be addressed to the Employee at the
address following such party's signature on his
Agreement. Any party may change the address for such
party herein set forth by giving notice of such change
to the other parties pursuant to this Section.
10. NOT A CONTRACT OF EMPLOYMENT
This Plan and any Agreement executed hereunder shall not be
deemed to constitute a contract of employment between an
Employee and the Employer or a Participant and the Employer,
nor shall any provision restrict the right of the Employer
to discharge an Employee or Participant, or restrict the
right of an Employee or Participant to terminate employment.
11. AMENDMENT, TERMINATION, ADMINISTRATION, CONSTRUCTION AND
SUCCESSORS
11.01 Amendment. The Board of Directors of BellSouth
Corporation, or its delegate, shall have the right it
its sole discretion, to amend the Plan in whole or in
part at any time and from time to time. In addition,
the Plan Administrator shall have the right, in its
sole discretion, to amend the Plan at any time and from
time to time so long as such amendment is not of a
material nature. Notwithstanding the foregoing, no
modification or amendment shall be effective so as to
decrease any benefits of a Participant unless the
Participant consents in writing to such modification or
amendment. Written notice of any material modification
or amendment shall be given promptly to each
Participant.
11.02 Termination. The Board of Directors of BellSouth
Corporation may terminate the Plan without the consent
of the Participants or Employees. Provided, however,
in the event of a termination of the Plan by the
Employer, the Participants will have those rights
specified in Section 8.02e of the Plan.
11.03 Interpretation. As to the provisions of the
Assignment, the Agreement and the Plan, the provisions
of the Assignment shall control. As between the
Agreement and the Plan, the provisions of the Agreement
shall control.
11.04 Successors. The terms and conditions of this Plan
shall enure to the benefit of and bind the Employer,
the Participant, their successors, assignees, and
representatives. If, subsequent to the Effective Date
of the Plan, substantially all of the stock or assets
of the Employer are acquired by another corporation or
entity or if the Employer is merged into, or
consolidated with, another corporation or entity, then
the obligations created hereunder shall be obligations
of the acquirer or successor corporation or entity.
12. PLAN ADMINISTRATION
12.01 Individual Administrator. If the Plan
Administrator is an individual, he shall act and record
his actions in writing. Any matter concerning
specifically such individual's own benefit or rights
hereunder shall be determined by the Board of Directors
of BellSouth Corporation or its delegate.
12.02 Administrative Committee. If the Plan
Administrator is a committee, or if any of the duties
or responsibilities of the Plan Administrator are
vested in a committee, action of the Plan Administrator
may be taken with or without a meeting of committee
members; provided, action shall be taken only upon the
vote or other affirmative expression of a majority of
the committee members qualified to vote with respect to
such action. If a member of the committee is a
Participant, he shall not participate in any decision
which solely affects his own benefit under the Plan.
For purposes of administering the Plan, the Plan
Administrator shall choose a secretary who shall keep
minutes of the committee's proceedings and all records
and documents pertaining to the administration of the
Plan. The secretary may execute any certificate or
other written direction on behalf of the Plan
Administrator.
12.03 Rights and Duties of the Plan Administrator.
The Plan Administrator shall administer the Plan and
shall have all powers necessary to accomplish that
purpose, including (but not limited to) the following:
a. to construe, interpret and administer the
Plan;
b. to make determinations required by the
Plan, and to maintain records regarding
Participants' benefits hereunder;
c. to compute and certify the amount and
kinds of benefits payable to Participants, and to
determine the time and manner in which such
benefits are to be paid;
d. to authorize all disbursements pursuant
to the Plan;
e. to maintain all the necessary records of
the administration of the Plan;
f. to make and publish such rules and
procedures for the regulation of the Plan as are
not inconsistent with the terms hereof;
g. to designate to other individuals or
entities from time to time the performance of any
of its duties or responsibilities hereunder; and
h. to hire agents, accountants, actuaries,
consultants and legal counsel to assist in
operating ad administering the Plan.
The Plan Administrator shall have the exclusive
right to construe and interpret the Plan, to decide all
questions of eligibility for benefits and to determine
the amount of benefits, and its decisions on such
matters shall be final and conclusive on all parties.
12.04 Bond; Compensation. The Plan Administrator
and (if applicable) its members shall serve as such
without bond and without compensation for services
hereunder.
13. CLAIMS PROCEDURE
13.01 Named Fiduciary. The Plan Administrator is hereby
designated as the named fiduciary under this Plan.
13.02 Claims Procedures. Any controversy or claim
arising out of or relating to this Plan shall be filed
with the Plan Administrator which shall make all
determinations concerning such claim. Any decision by
the Plan Administrator denying such claim shall be in
writing and shall be delivered to all parties in
interest in accordance with the notice provisions of
Section 9.02 hereof. Such decision shall set forth the
reasons for denial in plain language. Pertinent
provisions of the Plan shall be cited and, where
appropriate, an explanation as to how the Employee can
perfect the claim will be provided. This notice of
denial of benefits will be provided within 90 days of
the Plan Administrator's receipt of the Employee's
claim for benefits. If the Plan Administrator fails to
notify the Employee of its decision regarding the
claim, the claim shall be considered denied, and the
Employee shall then be permitted to proceed with the
appeal as provided in this Section.
An Employee who has been completely or partially denied
a benefit shall be entitled to appeal this denial of
his/her claim by filing a written statement of his/her
position with the Plan Administrator no later than
sixty (60) days after receipt of the written
notification of such claim denial. The Plan
Administrator shall schedule an opportunity for a full
and fair review of the issue within thirty (30) days of
receipt of the appeal. The decision on review shall
set forth specific reasons for the decision, and shall
cite specific references to the pertinent Plan
provisions on which the decision is based.
Following the review of any additional information
submitted by the Employee, either through the hearing
process or otherwise, the Plan Administrator shall
render a decision on the review of the denied claim in
the following manner:
a. The Plan Administrator shall make its decision
regarding the merits of the denied claim within 60
days following receipt of the request for review
(or within 120 days after such receipt, in a case
where there are special circumstances requiring
extension of time for reviewing the appealed
claim). The Plan Administrator shall deliver the
decision to the claimant in writing. If an
extension of time for reviewing the appealed claim
is required because of special circumstances,
written notice of the extension shall be furnished
to the Employee prior to the commencement of the
extension. If the decision on review is not
furnished within the prescribed time, the claim
shall be deemed denied on review.
b. The decision on review shall set forth
specific reasons for the decision, and shall cite
specific references to the pertinent Plan
provisions on which the decision is based.
Exhibit "A"
BellSouth Split-Dollar Life Insurance Plan
Agreement
This Agreement is made effective as of January 1, 1998, by and
between the Employer and _______________________ (the
"Participant").
WHEREAS, the Employer and the Participant executed an agreement
(the "Prior Agreement") under the [BellSouth Corporation
Executive Life Insurance Plan] [BellSouth Corporation Senior
Manager Life Insurance Plan] (the "Prior Plan"); and
WHEREAS, the Prior Plan has been amended and restated as the
BellSouth Split-Dollar Life Insurance Plan (the "Plan"); and
WHEREAS, in exchange for coverage under the Plan as amended and
restated, the Participant consents and agrees to the terms of the
Plan, as amended and restated;
NOW, THEREFORE, in consideration of the promises contained herein
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and
the Participant hereby mutually covenant and agree as follows:
1. This Agreement shall constitute an amendment and restatement
of the Prior Agreement and, as of the effective date of this
Agreement, the Prior Plan and Prior Agreement shall be
terminated and replaced by the Plan and this Agreement.
2. The Policy subject to this Agreement is Policy number
______________, issued by Pacific Life Insurance Company
(the "Replacement Policy"), which replaces the Replaced
Policy. As of the effective date of this Agreement, no
further benefits will be provided to the Participant or
Employer under the Replaced Policy, and such Policy will be
canceled.
3. The Replaced Policy Cash Value shall be transferred directly
to the Replacement Policy as of the effective date of this
Agreement.
4. The Coverage Amount shall be $ __________ of [Single Life]
[Survivorship] Coverage.
5. The Premium Payment Years shall be _______ consecutive
Policy Years.
6. For each Policy Year beginning after 1998, the total Policy
premium for each year which is a Premium Payment Year shall
be $__________, and the Employer Premium shall equal such
total Policy premium reduced by the Participant Premium
payable by the Participant for such Policy Year.
7. The Policy Owner for the Replacement Policy shall be the
same as the Policy Owner for the Replaced Policy.
8. The Participant agrees to pay the Participant Premium
contribution as specified in the Plan, and consents to
paying such amount to the Employer through regular payroll
(or retirement income) deductions.
9. The Participant has read and understands the provisions of
the Plan, and agrees that all of the terms and conditions
specified in the Plan are hereby incorporated by reference
herein and form a part of this Agreement.
10. Subject to the terms of the Plan, this Agreement shall not
be amended or modified without the written consent of the
Participant and the Employer.
11. This Agreement shall be governed by the laws of the State of
Georgia.
Date For the Employer
Date Signature of Participant
Address of Participant
Exhibit "B"
BellSouth Split-Dollar Life Insurance Plan
Assignment
This Assignment is made by the undersigned Policy Owner effective
January 1, 1998.
Definitions:
Assignee: BellSouth Corporation
Participant:
Policy Owner:
Insured(s):
Insurer: Pacific Life Insurance Company
Policy: Policy # issued
by the Insurer.
Replaced Policy: Policy # issued
by the Insurer.
Split-Dollar Life That certain Agreement executed to be
Insurance Plan effective on
Agreement January 1, 1998, between the Participant and
(the the Assignee.
"Agreement"):
Coverage Amount: That portion of the death benefit coverage
under the Policy equal to
$___________________.
Recitals:
1. The benefits provided to the Policy Owner under the Policy
replace those previously provided under the Replaced Policy.
2. Under the Agreement, the Assignee has agreed to assist the
Policy Owner in the payment of premiums on the Policy issued
by the Insurer.
3. In consideration of such premium payments by the Assignee,
the undersigned Policy Owner intends to grant the Assignee
certain limited interests in the Policy.
THEREFORE, for value received, it is agreed:
1. Assignment. The Policy Owner hereby assigns, transfers,
and sets over to the Assignee, its successors and assigns,
the following specific rights in the Policy and subject to
the following terms and conditions:
a. the sole right to make withdrawals or borrow against
the cash value of the Policy, as provided in Sections
8.02a, 8.02d, 8.02e and 8.03 of the Plan;
b. the right to receive from the Insurer upon the death of
the Insured(s) the proceeds of the Policy in excess of
the Coverage Amount;
c. the sole right to surrender all or a portion of the
Policy and receive the surrender value thereof, as
provided in Sections 8.02a, 8.02d, 8.02e and 8.03 of
the Plan.
2. Retained Rights. Except as expressly provided in Section 1,
the Policy Owner retains all rights under the Policy
including but not limited to:
a. the right to designate and change the beneficiary; and
b. the right to elect any optional mode of settlement
permitted by the Policy or Insurer, subject only to the
Assignee's right in Section 1.(b).
3. Authorization. For purposes of Sections 1 and 2, the
signature of either the Assignee or the Policy Owner shall
be sufficient. Both the Assignee and the Policy Owner
acknowledge that between themselves, they are bound by the
limitations of this Assignment and that the Insurer will
recognize the signature of either.
4. Insurer. The Insurer is hereby authorized to recognize, and
is fully protected in recognizing the claims of the Assignee
to rights hereunder, without investigating the reasons for
such action by the Assignee, or the validity or the amount
of such claims, nor giving notice to the Policy Owner of
such claims of rights or interest to exercise such rights.
Insurer reserves the right to require signatures of both the
Assignee and the Policy Owner to exercise any or all
ownership rights, as is their normal procedure.
5. Death Proceeds. The Insurer shall pay to the Assignee that
portion of the death benefit to which it is entitled.
Payment by the Insurer of any or all of the death proceeds
to the Assignee in reliance upon a signed authorization by
any officer of the Assignee as to the share of death
proceeds due it shall be a full discharge of the Insurer for
such share and shall be binding on all parties claiming any
interest in the Policy.
6. Release of Assignment. Upon payment to the Assignee of
those amounts due to it under the terms of the Agreement,
the Assignee shall execute a written release of this
Assignment to the Insurer who may then treat the Policy
Owner of the Policy as the sole Policy Owner for all
purposes.
7. Assignment Controls. In the event of any conflict between
the provisions of this Assignment and provisions of the
Agreement with respect to the Policy or rights of collateral
assignment therein, the provisions of this Assignment shall
prevail.
8. Cancellation of Replaced Policy. The Policy Owner agrees
that no further benefits will be provided under the Replaced
Policy, and that benefits provided under the Policy are in
lieu of the benefits previously provided under the Replaced
Policy.
IN TESTIMONY WHEREOF, the Policy Owner has executed this
Assignment to be effective January 1, 1998.
Signature of Policy Owner
Date
Plan Document
This section includes a general information summary (first 3
pages) and the plan document for the BellSouth Supplemental Life
Insurance Plan. The plan document and the general information
summary together are intended to serve as both the full text of
the BellSouth Supplemental Life Insurance Plan as well as a
summary plan description of such plan.
General Information About The BellSouth
Supplemental Life Insurance Plan
NAME OF PLAN
BellSouth Supplemental Life Insurance Plan
NAME AND ADDRESS OF EMPLOYER
Various BellSouth companies participate in this Plan.
BellSouth Corporation's address is:
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309
EMPLOYER IDENTIFICATION NUMBER
58-1533433
PLAN NUMBER
589
TYPE OF PLAN
This Plan is a welfare benefit plan in which participants
are given the opportunity to receive life insurance coverage
purchased with a combination of employer and employee
contributions.
TYPE OF ADMINISTRATION
Benefits are provided through insurance contracts purchased
under the terms of the Plan. The Plan is administered by
BellSouth Corporation.
CLAIMS PROCEDURE
Claims for insurance benefits under the Plan are handled by
and should be directed to the Plan Administrator.
PLAN YEAR
The Plan Year is the period beginning each January 1 and
ending each December 31 during which the Plan is in effect.
END OF YEAR FOR FISCAL YEAR PURPOSES
December 31.
NAME, BUSINESS ADDRESS AND TELEPHONE NUMBER OF
PLAN ADMINISTRATOR
BellSouth Corporation
1155 Peachtree Street, N.E.
Atlanta, Georgia 30309-3610
Attn.: Director Executive Benefits
(404) 249-2228
SERVICE OF LEGAL PROCESS
Service of legal process may be made upon the Plan
Administrator.
EFFECTIVE DATE
The Effective Date of the Plan is January 1, 1998.
PARTICIPANT'S RIGHTS UNDER ERISA
Participants in the Plan are entitled to certain rights and
protections under the Employee Retirement Income Security
Act of 1974 ("ERISA"). ERISA provides that each Plan
participant may:
(1) Examine, without charge, all Plan documents, and
copies of all documents files by the Plan with the U.S.
Department of Labor, such as detailed annual reports
and Plan descriptions, if applicable.
(2) Obtain copies of all Plan documents and other Plan
information upon written request to the Plan
Administrator. The Administrator may make a reasonable
charge for copies;
(3) Receive a summary of the Plan's annual financial
report. The Plan Administrator is required by law to
furnish each participant with a copy of this summary
annual report;
You should also be aware of the following protections
afforded by ERISA:
(1) The people who operate the Plan, called
"fiduciaries," must act prudently and in the interest
of you and other Plan participants and beneficiaries.
(2) No one may interfere with the exercise of any
rights which you have under the Plan or ERISA.
(3) If your claim for a benefit is denied in whole or
in part, you must receive a written explanation of the
reason for denial.
(4) You have the right to have the Plan Administrator
review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the
above rights. If you request materials from the Plan and do
not receive them within 30 days, you may choose to file suit
in a federal court. If the court finds that you are
entitled to receive those materials, it may require the Plan
Administrator to provide the materials and pay you a daily
penalty until you receive them. However, if the documents
were not sent because of reasons beyond the control of the
Plan Administrator, he will not be penalized. If you have a
claim for benefits which is denied or ignored, in whole or
in part, you may choose to file suit in a state or federal
court. If it should happen that Plan fiduciaries misuse the
Plan's money, or if you are discriminated against for
asserting your rights, you may seek assistance from the U.
S. Department of Labor, or you may file suit in a federal
court. The court will decide who should pay court costs and
legal fees. If you lose, the court may order you to pay
these costs and fees, if, for example, it finds your claim
frivolous.
If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area
Office of the U.S. Labor - Management Services
Administration Department of Labor.
BellSouth Supplemental Life Insurance Plan
1. PURPOSE
The purpose of the BellSouth Supplemental Life Insurance
Plan (the "Plan") is to provide an insurance arrangement
under which BellSouth Corporation and its subsidiaries and
affiliates can assist key employees in acquiring and
financing life insurance coverage.
2. DEFINITIONS
For purposes of this Plan, the following terms have the
meanings set forth below:
2.01 "Coverage Amount" means the Policy death benefit
payable under the Participant's Policy.
2.02 "Coverage Level" means the Single Life Coverage
insurance death benefit the Employee is eligible for
under the Plan, determined based on the Employee's job
classification, in accordance with the schedule of
Coverage Levels maintained by the Plan Administrator.
Provided, however, that to determine the amount of
insurance death benefit for which an Employee is
eligible, the applicable amount from the schedule of
Coverage Levels shall be reduced by one hundred percent
(100%) of the amount of any Single Life Coverage
insurance death benefit and by fifty percent (50%) of
the amount of any Survivorship Coverage insurance death
benefit provided to the Employee under the BellSouth
Split-Dollar Life Insurance Plan, the BellSouth
Corporation Executive Life Insurance Plan, or the
BellSouth Corporation Senior Manager Life Insurance
Plan.
2.03 "Disability" means that the Participant is receiving
disability benefits under any long-term disability plan
sponsored by the Employer or an affiliated entity.
2.04 "Effective Date" means the effective date of the Plan,
which is January 1, 1998.
2.05 "Employee" means an employee or former employee of the
Employer who is eligible to participate in the Plan.
2.06 "Employer" means BellSouth Corporation and any
subsidiary or affiliate of BellSouth Corporation which
is authorized by the Plan Administrator to participate
in this Plan.
2.07 "Employer Premium" means, with respect to a
Participant's Policy, the Total Policy Premium payable
for the year, less the portion of the premium to be
paid by the Participant pursuant to Section 5.01 of the
Plan.
2.08 "Enrollment Age" means the Participant's age at the
time of enrollment in the Plan as to the Participant's
initial Coverage Amount under the Plan, and it means
the Participant's age at a subsequent enrollment for an
increased Coverage Amount as to the increased Coverage
Amount.
2.09 "Insurance Cost" means, with respect to a Participant,
the annual cost for the Participant's Coverage Amount
determined pursuant to the Insurance Cost schedule
maintained by the Plan Administrator. The Insurance
Cost for a Participant shall be determined at the time
of the Participant's enrollment in the Plan, based on
the Participant's Coverage Amount and Enrollment Age,
and shall not change thereafter. A smoker rate shall
be used to determine the Insurance Cost for any
Participant who is deemed a smoker by the Insurer; a
nonsmoker rate shall be used for all other
Participants. A change in the Insurance Cost schedule
will be effective only as to Plan enrollments occurring
after the effective date of the change; it shall not
affect the Insurance Cost for a Participant with
respect to any Coverage Amount in effect for the
Participant prior to the effective date of the change.
If a Participant's coverage is in effect for a period
of less than twelve (12) months during any Policy Year,
the Participant's Insurance Cost for that year shall be
determined by multiplying the annual cost as determined
from the Insurance Cost schedule by a fraction, the
numerator of which is the number of full months that
the coverage is in effect and the denominator of which
is twelve (12).
2.10 "Insurer" means, with respect to a Participant's
Policy, the insurance company issuing the insurance
policy on the Participant's life (or on the joint lives
of the Participant and the Participant's spouse, in the
case of a Survivorship Policy) pursuant to the
provisions of the Plan.
2.11 "Participant" means an Employee who is participating in
the Plan.
2.12 "Participant Premium" means, with respect to each
Policy Year (or portion thereof) for a Participant, the
Participant's Insurance Cost.
2.13 "Permanent Policy" means a Participant's Policy having
cash values which are projected to be sufficient to
continue to provide death benefit coverage at least
equal to the Participant's Coverage Amount until the
policy maturity date specified in the Participant's
Policy (determined without regard to any Policy rider
which extends the maturity date beyond the originally
scheduled policy maturity date), and which is projected
to have a cash accumulation value equal to at least
ninety-five percent (95%) of the Policy Coverage Amount
at the maturity date specified in such Policy, with no
further premium payments. The determination of whether
a Policy is at a given time a Permanent Policy shall be
made by the Plan Administrator, based on Policy
projections provided by the Insurer or its agent
utilizing the Policy's then current mortality rates and
Policy expenses, and the following Policy interest
crediting rates. For the Policy Year in which the
determination is made and for all prior Policy years,
if any, the Policy projection shall be based on the
actual interest crediting rates in effect for the
Policy (or, if such rate is not known when the
determination is made, the actual rate in effect for
the preceding Policy Year). For each of the ten (10)
succeeding Policy Years, the projections shall reflect
that rate decreased ratably such that the rate for the
tenth Policy Year following the Policy Year in which
the determination is made shall be five percent (5%).
For all successive Policy Years, the projection shall
reflect a five percent (5%) Policy interest crediting
rate. Notwithstanding the foregoing, if the interest
crediting rate in effect for the Policy Year in which
the determination is made is less than five percent
(5%), the projections shall reflect such lower rate for
all Policy Years thereafter.
2.14 "Plan" means the BellSouth Supplemental Life Insurance
Plan, embodied herein.
2.15 "Plan Administrator" means the Chief Executive Officer
of BellSouth Corporation and any individual or
committee he designates to act on his behalf with
respect to any or all of his responsibilities
hereunder; provided, the Board of Directors of
BellSouth Corporation may designate any other person or
committee to serve in lieu of the Chief Executive
Officer as the Plan Administrator with respect to any
or all of the administrative responsibilities
hereunder.
2.16 "Policy" means the life insurance coverage acquired on
the life of the Participant (or on the joint lives of
the Participant and the Participant's spouse, in the
case of a Survivorship Policy) by the Participant or
other Policy Owner issued pursuant to the terms of this
Plan. The Plan Administrator shall determine the
specific policies which may be acquired under the Plan,
and shall maintain a list of approved policies.
2.17 "Policy Owner" means the Participant or that person or
entity to whom the Participant has assigned his
interest in the Policy.
2.18 "Policy Year" means the twelve month period (and each
successive twelve month period) beginning on the issue
date of the Policy.
2.19 "Premium Payment Years" means, with respect to a
Participant's Policy, the number of consecutive Policy
Years, beginning with the first Policy Year, and
continuing for the longer of: (1) all Policy Years
ending at the end of the Policy Year during which the
Participant attains age sixty-two (62) (or, if the
Participant dies before such time, the end of the
Policy Year during which the Participant would have
attained such age); or (2) five (5) Policy Years.
Notwithstanding the foregoing, if prior to the end of
such period the Policy qualifies as a Permanent Policy,
the Premium Payment Years shall end at such earlier
time.
2.20 "Retirement" means a termination of the Participant's
employment with the Employer under circumstances where
the Participant is immediately eligible to receive
pension benefits under the Supplemental Executive
Retirement Plan (SERP) maintained by the Employer or
one of its subsidiaries.
2.21 "Single Life Coverage" means life insurance coverage on
the life of the Participant.
2.22 "Survivorship Coverage" means life insurance coverage
on the lives of the Participant and the Participant's
spouse, with the life insurance death benefit to be
payable at the death of the last survivor of the
Participant and the Participant's spouse.
2.23 "Total Policy Premium" means the level annual premium
amount for the Participant's Single Life Coverage
Policy that is projected to result in the Policy
qualifying as a Permanent Policy if the annual premium
amount is paid each year for all scheduled Premium
Payment Years, assuming the Participant qualifies for
the Insurer's guaranteed issue nonsmoker rates, or if
the Participant is deemed by the Insurer to be a
smoker, the Insurer's guaranteed issue smoker rates.
The determination as to the amount of the Total Policy
Premium shall be based on Single Life Coverage even if
the Participant elects Survivorship Coverage. If more
than one type of Single Life Coverage Policy is
available under the Plan, the Plan Administrator shall
determine the Single Life Coverage Policy to be used to
determine the Total Policy Premium. The Total Policy
Premium for a Participant shall be determined when the
Participant enrolls for coverage under the Plan, and
shall not be changed thereafter; it shall be based on
the Participant's Coverage Level, or, if less, the
actual Coverage Amount elected by the Participant.
3. ELIGIBILITY
3.01 General. Each Employee who is designated by the Plan
Administrator as a member of the Employer's "executive
compensation group" or as a "senior manager" shall be
eligible to participate in the Plan, provided that the
Employee (and any other appropriate party, such as the
Employee's spouse or a Policy Owner other than the
Employee, as determined by the Plan Administrator)
relinquishes any rights to or interests in any policies
providing interim coverage during the rehabilitation of
Confederation Life Insurance Company under the
BellSouth Corporation Executive Life Insurance Plan or
the BellSouth Corporation Senior Manager Life Insurance
Plan and completes such other forms as the Plan
Administrator may require. Each such Employee on the
Effective Date shall be eligible to participate in the
Plan as of the Effective Date. Each Employee
subsequently satisfying such eligibility requirements
shall be eligible to participate in the Plan effective
as of the first day of the calendar quarter (i.e.,
January 1, April 1, July 1, and October 1) following
the date on which such standards are satisfied.
3.02 Type of Coverage. If an Employee is married at the
time the Employee enrolls in the Plan, the Employee can
elect to participate in either Single Life Coverage or
Survivorship Coverage. An Employee who is unmarried at
the time the Employee enrolls in the Plan shall be
eligible for Single Life Coverage only. The election
of one type of coverage shall not preclude the
Participant from electing the other type of coverage as
to any increased Coverage Level the Participant becomes
eligible for pursuant to Section 4.02 of the Plan.
3.03 Conversion of Coverage. Subject to any proof of
insurability required by the Insurer, a Participant (or
other Policy Owner) can elect to convert Survivorship
Coverage to Single Life Coverage, and with respect to a
married Participant, the Participant (or other Policy
Owner) can elect to convert Single Life Coverage to
Survivorship Coverage. Provided, however, that the
number of Premium Payment Years for a Participant shall
not be redetermined in connection with a conversion
from one type of coverage to another. Upon a
conversion, the cash values of the replaced Policy
shall be transferred to the new Policy in accordance
with the Insurer's practices. Any Insurer charges or
tax liability resulting from a conversion shall be
borne by the Participant or other Policy Owner.
4. AMOUNT OF COVERAGE
4.01 General. An Employee who is eligible to participate in
the Plan under Section 3.01 of the Plan shall be
eligible for the full Coverage Level as specified in
the Plan under Section 2.02. However, within sixty
(60) days of becoming eligible to participate, a
Participant can elect a Coverage Amount which is less
than the applicable Coverage Level; provided, however,
that the Coverage Amount elected must be an even
multiple of $100,000. If a Participant elects a
Coverage Amount less than the Participant's Coverage
Level (or fails to elect any Coverage), the Participant
cannot later increase the Coverage Amount except in
connection with a promotion under Section 4.02 of the
Plan.
4.02 Promotions. Employees promoted to a job classification
or position eligible for an increased Coverage Level
shall be eligible for the increased Coverage Level
effective as of the first day of the calendar quarter
(i.e., January 1, April 1, July 1, and October 1)
following the promotion. The additional Coverage
Amount available to the Participant under this Section
shall be equal to the applicable Coverage Level after
the promotion reduced by any Coverage Amounts already
in effect for a Participant. In order to be effective,
any election for an increase in the Coverage Amount
must be made within the time period prescribed by the
Plan Administrator in enrollment materials provided to
the Employee.
4.03 Survivorship Coverage. If a Participant elects
Survivorship Coverage, the amount of Survivorship
Coverage will be determined by the Plan Administrator
based on the Participant's age and smoker or nonsmoker
status, the age and insurability of the Participant's
spouse, and based on the Participant's Total Policy
Premium. The Coverage Amount shall be the highest
amount such that the Policy will qualify as a Permanent
Policy if the Total Policy Premium is paid for each
year that is a scheduled Premium Payment Year.
5. PAYMENT OF PREMIUMS
5.01 Participant Premium Payments. A Participant shall pay
the Participant Premium for each Policy Year which is a
Premium Payment Year for the Participant. The amount
shall be paid by the Participant to the Employer by
payroll (or retirement income) deductions of equal
installments during the Policy Year, or in such other
manner as may be determined by the Plan Administrator.
The Employer shall pay the Participant Premium amount
to the Insurer, and can do so as collected from the
Participant or can advance payments to the Insurer for
a Policy Year at any time during the Policy Year or up
to thirty (30) days in advance of the Policy Year. If
a Participant terminates employment with the Employer,
and the Employer has made such an advance payment of
the Participant Premium to the Insurer, the Employer
may withhold any uncollected portion of the advanced
Participant Premium from any amount payable to the
Participant by the Employer to the extent permitted by
law. Notwithstanding the other provisions of this
paragraph, no Participant Premium shall be required
with respect to Survivorship Coverage after the death
of the Participant.
5.02 Employer Premium Payments. The Employer shall pay the
Employer Premium for a Participant's Policy within
thirty (30) days of the beginning of each Policy Year
which is a Premium Payment Year.
5.03 Additional Employer Premium Payments. For each of the
last three (3) scheduled Premium Payment Years for a
Participant, the Plan Administrator shall determine
whether there will be any increased Employer premium
payment with respect to a Participant's Policy. The
Plan Administrator shall first determine whether the
Participant's Policy is then projected to qualify as a
Permanent Policy if the Total Policy Premium is paid
each year for the remaining scheduled Premium Payment
Years. If the Policy is projected to qualify as a
Permanent Policy, no increased Employer Premium payment
shall be required for such Premium Payment Year. If
the projections indicate that the Policy will not
qualify as a Permanent Policy, then the amount payable
by the Employer under Section 5.02 shall be increased
by an amount which will result in the Policy qualifying
as a Permanent Policy if such increased amount is paid
for each remaining Premium Payment Year, but any such
increase in Employer Premium shall be limited by the
maximum premium amounts permissible for such Policy
under Internal Revenue Code Sections 7702 and 7702A (or
comparable successor sections) without forfeiting any
of the favorable tax attributes associated with life
insurance policies. The determination as to whether
any increased amount is payable shall be made
separately for each of the last three (3) Premium
Payment Years. However, the Employer Premium payable
under Section 5.02 shall not be reduced to an amount
that is less than the amount which would have been
payable by the Employer for a Premium Payment Year
without regard to this Section 5.03. Regardless of the
type of coverage actually provided to a Participant,
and notwithstanding any changes in the type of coverage
provided to the Participant under Section 3.03, the
increased Employer Premium payable under this Section
5.03 shall be the amount that would be payable if the
Participant had elected Single Life Coverage and
maintained such coverage for all Policy Years; also, if
more than one type of Single Life Coverage Policy is
available under the Plan, the Single Life Coverage
Policy used to determine Total Policy Premium under
Section 2.23 shall be used to make the determination
under this Section 5.03. In the event tax law limits
preclude the Employer from qualifying a Policy as a
Permanent Policy by the end of the last scheduled
Premium Payment Year, then the Employer's obligation to
pay premiums under Section 5.02 and 5.03 (and make
additional Employer payments under Section 5.04) shall
be extended until projections indicate that the Policy
qualifies as a Permanent Policy.
5.04 Additional Employer Payments.
a. If the payment of an Employer Premium under
Section 5.02 (or any increased amount under
Section 5.03) results in the recognition of income
for tax purposes by the Participant in any year,
the Employer shall pay to the Participant an
amount determined by the Plan Administrator which
is designed to approximate (1) the sum of the
total federal and state income taxes and
applicable payroll taxes which would be payable by
the Participant at the highest marginal rate
provided for under applicable federal income tax
laws, and at the highest marginal rate provided
for under applicable state income tax laws for the
state of the Participant's tax domicile, on the
income so recognized, plus (2) the total federal
and state income taxes and applicable payroll
taxes which would be payable by the Participant on
the payment described in clause (1).
b. If the payment of any Employer Premium under
Section 5.02 (or any increased amount under
Section 5.03) on Survivorship Coverage after the
death of the Employee results in the recognition
of income for tax purposes by the Participant's
spouse or other Policy Owner, the Employer shall
pay to the Participant's spouse or other Policy
Owner an amount determined by the Plan
Administrator which is designed to approximate the
total federal and state income taxes which would
be payable by the Participant's spouse or other
Policy Owner at the highest marginal rate provided
for under applicable federal income tax laws, and
at the highest marginal rate provided for under
applicable state income tax laws for the state of
the tax domicile of the Participant's spouse or
other Policy Owner, attributable to such premium
payment.
c. For purposes of this Section 5.04, a tax
shall be deemed payable or income shall be deemed
recognized if either (i) it is finally determined
by the Internal Revenue Service, or (ii) an
opinion is given by the Employer's counsel, that
the tax is payable.
d. Any payment made to a Participant or a
Participant's spouse under this Section shall be
made no later than April 1 of the year following
the year to which the payment relates.
e. Any amount to be paid to a Participant, a
Participant's spouse, or other Policy Owner under
this Section, and the amounts payable, shall be
conclusively determined by the Plan Administrator
based on generally applicable tax rates and not
based upon the unique tax situation of each
Participant, Participant's spouse, or other Policy
Owner.
5.05 Termination of Obligation to Pay Premiums.
Notwithstanding anything herein to the contrary, the
Employer's obligation to pay premiums (including any
increased amounts under Section 5.03) with respect to
the Participant's Policy, shall terminate upon the
first to occur of any of the following events:
a. Termination of employment of the Participant with
the Employer prior to the Participant's death for
reasons other than Retirement or Disability.
b. The written notice by the Employer to the
Participant following a resolution by the Board of
Directors of BellSouth Corporation to terminate
this Plan.
c. As to Single Life Coverage only, the death of the
Participant.
d. As to Survivorship Coverage only, the death of the
last survivor of the Participant and the
Participant's spouse.
e. The surrender or cancellation of the Participant's
Policy, except that a Policy will not be
considered surrendered or canceled if the
surrender or cancellation is in connection with
the replacement of the Policy with another Policy
pursuant to the provisions of the Plan.
f. The withdrawal of any Policy cash values, or
borrowing against the Policy cash values, by the
Participant or other Policy Owner.
g. The reduction of the Participant's Policy death
benefit to a level that is less than the initial
Policy Coverage Amount, except that a conversion
from Survivorship Coverage to Single Life Coverage
shall not be considered a reduction in Policy
death benefit for the purpose of this Section.
h. The determination by the Plan Administrator that
the Policy will qualify as a Permanent Policy with
no further Employer Premium payments.
6. POLICY OWNERSHIP
6.01 Ownership. The Policy Owner shall be the sole and
exclusive owner of a Participant's Policy and shall be
entitled to exercise all of the rights of ownership.
6.02 Possession of Policy. The Policy Owner shall keep
possession of the Policy.
7. GOVERNING LAWS & NOTICES
7.01 Governing Law. This Plan shall be governed by and
construed in accordance with the laws of the State of
Georgia.
7.02 Notices. All notices hereunder shall be in writing and
sent by first class mail with postage prepaid. Any
notice to the Employer shall be addressed to BellSouth
Corporation at its office at 1155 Peachtree Street,
N.E., Atlanta, GA 30367-6000, ATTENTION: Human
Resources - Director Executive Benefits. Any notice to
the Employee shall be addressed to the Employee at the
address for the Employee maintained in the Employer's
records. Any party may change the address for such
party herein set forth by giving notice of such change
to the other parties pursuant to this Section.
8. NOT A CONTRACT OF EMPLOYMENT
This Plan shall not be deemed to constitute a contract of
employment between an Employee and the Employer or a
Participant and the Employer, nor shall any provision
restrict the right of the Employer to discharge an Employee
or Participant, or restrict the right of an Employee or
Participant to terminate employment.
9. AMENDMENT, TERMINATION, ADMINISTRATION, CONSTRUCTION AND
SUCCESSORS
9.01 Amendment. The Board of Directors of BellSouth
Corporation, or its delegate, shall have the right in
its sole discretion, to amend the Plan in whole or in
part at any time and from time to time. In addition,
the Plan Administrator shall have the right, in its
sole discretion, to amend the Plan at any time and from
time to time so long as such amendment is not of a
material nature. Notwithstanding the foregoing, no
modification or amendment shall be effective so as to
decrease any benefits of a Participant unless the
Participant consents in writing to such modification or
amendment. Written notice of any material modification
or amendment shall be given promptly to each
Participant.
9.02 Termination. The Board of Directors of BellSouth
Corporation may terminate the Plan without the consent
of the Participants or Employees.
9.03 Successors. The terms and conditions of this Plan
shall enure to the benefit of and bind the Employer,
the Participant, their successors, assignees, and
representatives. If, subsequent to the Effective Date
of the Plan, substantially all of the stock or assets
of the Employer are acquired by another corporation or
entity or if the Employer is merged into, or
consolidated with, another corporation or entity, then
the obligations created hereunder shall be obligations
of the acquirer or successor corporation or entity.
10. PLAN ADMINISTRATION
10.01 Individual Administrator. If the Plan
Administrator is an individual, he shall act and record
his actions in writing. Any matter concerning
specifically such individual's own benefit or rights
hereunder shall be determined by the Board of Directors
of BellSouth Corporation or its delegate.
10.02 Administrative Committee. If the Plan
Administrator is a committee, or if any of the duties
or responsibilities of the Plan Administrator are
vested in a committee, action of the Plan Administrator
may be taken with or without a meeting of committee
members; provided, action shall be taken only upon the
vote or other affirmative expression of a majority of
the committee members qualified to vote with respect to
such action. If a member of the committee is a
Participant, he or she shall not participate in any
decision which solely affects his or her own benefit
under the Plan. For purposes of administering the
Plan, the Plan Administrator shall choose a secretary
who shall keep minutes of the committee's proceedings
and all records and documents pertaining to the
administration of the Plan. The secretary may execute
any certificate or other written direction on behalf of
the Plan Administrator.
10.03 Rights and Duties of the Plan Administrator.
The Plan Administrator shall administer the Plan and
shall have all powers necessary to accomplish that
purpose, including (but not limited to) the following:
a. to construe, interpret and administer the
Plan;
b. to make determinations required by the
Plan, and to maintain records regarding
Participants' benefits hereunder;
c. to compute and certify the amount and
kinds of benefits payable to Participants, and to
determine the time and manner in which such
benefits are to be paid;
d. to authorize all disbursements pursuant
to the Plan;
e. to maintain all the necessary records of
the administration of the Plan;
f. to make and publish such rules and
procedures for the regulation of the Plan as are
not inconsistent with the terms hereof;
g. to designate to other individuals or
entities from time to time the performance of any
of its duties or responsibilities hereunder; and
h. to hire agents, accountants, actuaries,
consultants and legal counsel to assist in
operating and administering the Plan.
The Plan Administrator shall have the exclusive
right to construe and interpret the Plan, to decide all
questions of eligibility for benefits and to determine
the amount of benefits, and its decisions on such
matters shall be final and conclusive on all parties.
10.04 Bond; Compensation. The Plan Administrator
and (if applicable) its members shall serve as such
without bond and without compensation for services
hereunder.
11. CLAIMS PROCEDURE
11.01 Named Fiduciary. The Plan Administrator is hereby
designated as the named fiduciary under this Plan.
11.02 Claims Procedures. Any controversy or claim
arising out of or relating to this Plan shall be filed
with the Plan Administrator which shall make all
determinations concerning such claim. Any decision by
the Plan Administrator denying such claim shall be in
writing and shall be delivered to all parties in
interest in accordance with the notice provisions of
Section 7.02 hereof. Such decision shall set forth the
reasons for denial in plain language. Pertinent
provisions of the Plan shall be cited and, where
appropriate, an explanation as to how the Employee can
perfect the claim will be provided. This notice of
denial of benefits will be provided within 90 days of
the Plan Administrator's receipt of the Employee's
claim for benefits. If the Plan Administrator fails to
notify the Employee of its decision regarding the
claim, the claim shall be considered denied, and the
Employee shall then be permitted to proceed with the
appeal as provided in this Section.
An Employee who has been completely or partially denied
a benefit shall be entitled to appeal this denial of
his/her claim by filing a written statement of his/her
position with the Plan Administrator no later than
sixty (60) days after receipt of the written
notification of such claim denial. The Plan
Administrator shall schedule an opportunity for a full
and fair review of the issue within thirty (30) days of
receipt of the appeal. The decision on review shall
set forth specific reasons for the decision, and shall
cite specific references to the pertinent Plan
provisions on which the decision is based.
Following the review of any additional information
submitted by the Employee, either through the hearing
process or otherwise, the Plan Administrator shall
render a decision on the review of the denied claim in
the following manner:
a. The Plan Administrator shall make its decision
regarding the merits of the denied claim within
sixty (60) days following receipt of the request
for review (or within 120 days after such receipt,
in a case where there are special circumstances
requiring extension of time for reviewing the
appealed claim). The Plan Administrator shall
deliver the decision to the claimant in writing.
If an extension of time for reviewing the appealed
claim is required because of special
circumstances, written notice of the extension
shall be furnished to the Employee prior to the
commencement of the extension. If the decision on
review is not furnished within the prescribed
time, the claim shall be deemed denied on review.
b. The decision on review shall set forth specific
reasons for the decision, and shall cite specific
references to the pertinent Plan provisions on
which the decision is based.
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share
For the Three Month For the Six Month
Period Ended Period Ended
June 30, June 30,
1998 1997 1998 1997
Basic Earnings Per Common Share:
Net Income $ 818 $ 654 $ 1,710 $ 1,347
Weighted
average shares
Outstanding 989 992 990 992
Earnings Per
Common Share $ .83 $ .66 $ 1.73 $ 1.36
EXHIBIT 11
BellSouth Corporation
Computation of Earnings Per Share (continued)
For the Three Month For the Six Month
Period Ended Period Ended
June 30, June 30,
1998 1997 1998 1997
Diluted Earnings Per Common Share:
Net Income $ 818 $ 654 $ 1,710 $ 1,347
Weighted
average shares
Outstanding 989 992 990 992
Incremental
shares from
Assumed
exercise of
stock options
and payment of
performance
share awards 6 2 6 2
Total Shares 995 994 996 994
Earnings Per
Common Share $ .82 $ .66 $ 1.72 $ 1.36
EXHIBIT 12
BellSouth Corporation
Computation Of Earnings To Fixed Charges
(Dollars In Millions)
For the Six
Months Ended
June 30,
1998
1. Earnings
(a) Income from continuing operations $ 3,189
before deductions for taxes and interest
(b) Portion of rental expense 41
representative of interest factor
(c) Equity in losses from less-than-50% 32
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) (31)
TOTAL $ 3,231
2. Fixed Charges
(a) Interest $ 408
(b) Portion of rental expense
representative of interest factor 41
TOTAL $ 449
Ratio (1 divided by 2) 7.20
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<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,222
<SECURITIES> 94
<RECEIVABLES> 4,430
<ALLOWANCES> 263
<INVENTORY> 423
<CURRENT-ASSETS> 7,389
<PP&E> 56,182
<DEPRECIATION> 32,705
<TOTAL-ASSETS> 37,521
<CURRENT-LIABILITIES> 8,092
<BONDS> 8,535
0
0
<COMMON> 1,010
<OTHER-SE> 14,833
<TOTAL-LIABILITY-AND-EQUITY> 37,521
<SALES> 224
<TOTAL-REVENUES> 11,090
<CGS> 353
<TOTAL-COSTS> 5,527
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<LOSS-PROVISION> 153
<INTEREST-EXPENSE> 393
<INCOME-PRETAX> 2,796
<INCOME-TAX> 1,086
<INCOME-CONTINUING> 1,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,710
<EPS-PRIMARY> 1.73
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