SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 20, 1998
BELLSOUTH CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 1-8607 58-1533433
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
1155 Peachtree Street, N. E., Atlanta, Georgia 30309-3610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(404) 249-2000
Item 5. Other Events
First Quarter 1998 Earnings
On April 20, 1998, BellSouth announced earnings for the first quarter
of 1998. See Exhibit 99 for a complete copy of the related press
release.
1998 Earnings Growth
The consensus of analyst estimates for 1998 normalized diluted EPS is
$3.12, with the range of estimates being from $3.02 to $3.20.
BellSouth has stated that it would be more comfortable with a
consensus at the higher end of this range. This forward-looking
statement is based on a number of assumptions including, but not
limited to: (1) continued economic growth and demand for BellSouth's
services; (2) continued monetary 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 the impact of
competition in its markets; and (5) satisfactory resolution of Year
2000 software revisions. Any developments significantly deviating
from these assumptions could cause actual results to differ
materially from those in the above forward-looking statement.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit No.
99 Press Release - First Quarter 1998 Earnings
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BELLSOUTH CORPORATION
By: /s/ W. Patrick Shannon
W. Patrick Shannon
Vice President and Controller
April 20, 1998
Exhibit 99
ATLANTA - Driven by continued strength in its core wireline and
wireless businesses in the Southern U.S., and by 83 percent growth in
its international wireless customer base, BellSouth Corporation
(NYSE: BLS) reported first quarter diluted earnings per share (EPS)
of 80 cents before a one-time gain. This is an increase of 14.3
percent compared to 70 cents in the first quarter of 1997.
The one-time gain related to an after-tax profit of $96 million
resulting from additional proceeds on the July 1997 sale of
BellSouth's investment in ITT World Directories. Including the gain,
first quarter EPS of 89 cents increased 27.1 percent.
Revenues increased 12.0 percent, aided by the first-time inclusion of
certain operations in BellSouth's consolidated revenues. If the same
operations had been consolidated in 1997, revenue growth in the first
quarter of 1998 would have been 9.5 percent.
"Our strong first quarter proves that high quality services for
customers produce high quality earnings," said Duane Ackerman,
chairman and chief executive officer. "As data, wireless and
international contribute more to our earnings growth, customer
service will continue to be the common denominator that drives our
financial performance."
BellSouth's sales of data and digital services surged in the first
quarter of 1998. The company markets a complete array of high
capacity services to business customers and carriers. Revenues from
these services increased 44 percent to $401 million, compared with
$279 million in the first quarter of 1997.
BellSouth's access lines increased 348,000 in the three months ended
March 31, 1998, including a record quarterly gain of 286,000
residential lines. Some 117,000 new residential lines were
additional lines to the home, boosting additional lines past the 2
million milestone. Customers are using additional lines for Internet
services such as BellSouth.net(SM), for children's phones and fax
machines, and for telecommuting and other work-at-home tools. In
total, access lines grew at the annual rate of 4.6 percent.
Sales of BellSouth's calling features continued to grow rapidly.
Revenues from services such as Caller ID Deluxe, Call Return and
Flexible Call Forwarding were $353 million in the first quarter of
1998, up 18 percent from the same three months of 1997. BellSouth's
Complete Choicer packages, which combine basic telephone service with
any or all of more than 20 calling features, are now used by more
than 2.5 million residential customers, more than doubling in the
past year.
BellSouth's wireless businesses, which worldwide cover a total of 295
million potential customers, added nearly 1.5 million customers since
March 1997. In international markets, the company added 953,000
customers, growing 83 percent. In its domestic cellular and PCS
markets, BellSouth added 522,000 customers, for 13.7 percent annual
growth. In the second quarter, BellSouth and its partners will
launch wireless service in Sao Paulo, Brazil, the third largest city
in the world. More than 500,000 customers are anticipated by late
summer.
Total operating expenses increased 13.7 percent, including the
operations that were consolidated for the first time. If the same
operations had been consolidated in 1997, expense growth in the first
quarter of 1998 would have been 10.2 percent.
Net income in the first quarter of 1998 was $892 million, including
the $96 million from the gain on ITT World Directories. Net income
in the first quarter a year ago was $693 million.
BellSouth is a $21 billion communications services company. It
provides telecommunications, wireless communications, directory
advertising and publishing, video, Internet and information services
to nearly 30 million customers in 20 countries worldwide.
NOTE: For more information about BellSouth Corporation, visit the
BellSouth Web page at http://www.bellsouth.com/
PRELIMINARY
April 20, 1998
BELLSOUTH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In Millions, Except Per Share Amounts)
For the Three
Months Ended
March 31,
1998 1997
(Unaudited) (Unaudited)
Operating Revenues:
Network and related
services
Local service $ 2,262 $ 2,104
Interstate access 945 917
Intrastate access 206 218
Toll 175 174
Wireless communications 1,116 765
Directory advertising
and publishing 362 361
Other services 360 306
Total Operating Revenues 5,426 4,845
Operating Expenses:
Cost of services and
products 1,667 1,422
Depreciation and
amortization 1,043 960
Selling, general and
administrative 1,262 1,110
Total Operating Expenses 3,972 3,492
Operating Income 1,454 1,353
Interest Expense 190 183
Gain on Sale of
Operations 155 --
Other Income(Expense),net 28 (7)
Income Before Income
Taxes 1,447 1,163
Provision for Income
Taxes 555 470
Net Income $ 892 $ 693
Weighted Average Common
Shares Outstanding:
Basic 991 992
Diluted 997 994
Dividends Declared Per
Common Share $ .36 $ .36
Earnings Per Share:
Basic $ .90 $ .70
Diluted $ .89 $ .70
PRELIMINARY
April 20, 1998
BELLSOUTH CORPORATION
EARNINGS SUMMARY
(Unaudited)
(In Millions, Except Per Share Amounts)
For the Three
Months Ended
March 31,
1998 1997
Net Income
Reported Net Income $ 892 $ 693
Gain from Additional Proceeds on
Sale of ITT World Directories(a) (96) --
Adjusted Net Income $ 796 $ 693
Diluted Earnings Per Share
Reported Earnings Per Share $ .89 $ .70
Gain from Additional Proceeds on
Sale of ITT World Directories(a) (.10) --
Adjusted Earnings Per Share (b) $ .80 $ .70
(a) Represents the after-tax gain associated with additional
proceeds received on the July 1997 sale of ITT World Directories.
The pre-tax gain related to the proceeds was $155.
(b) Does not sum in 1998 due to rounding.
PRELIMINARY
April 20, 1998
BELLSOUTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Per Share Amounts)
March 31, December 31,
1998 1997
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,120 $ 2,570
Temporary cash investments 9 17
Accounts receivable, net of
allowance for uncollectibles
of $253 and $246 4,433 4,750
Material and supplies 421 393
Other current assets 533 387
Total Current Assets 7,516 8,117
Investments and Advances 2,896 2,675
Property, Plant and Equipment:
Property, plant and equipment 55,283 53,828
Accumulated depreciation 31,933 30,967
Property, plant and
equipment, net 23,350 22,861
Deferred Charges and Other
Assets 754 702
Intangible Assets, net 2,427 1,946
Total Assets $ 36,943 $ 36,301
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Debt maturing within one year $ 3,302 $ 3,706
Accounts payable 1,619 1,825
Other current liabilities 3,620 3,252
Total Current Liabilities 8,541 8,783
Long-Term Debt 7,673 7,348
Deferred Credits and Other
Liabilities:
Accumulated deferred income
taxes 2,016 2,023
Unamortized investment tax
credits 201 213
Other liabilities and
deferred credits 2,820 2,769
Total Deferred Credits and
Other Liabilities 5,037 5,005
Shareholders' Equity:
Common stock, $1 par value 1,010 1,010
Paid-in capital 7,746 7,750
Retained earnings 7,919 7,382
Shares held in trust and
Treasury (614) (575)
Guarantee of ESOP debt (369) (402)
Total Shareholders' Equity 15,692 15,165
Total Liabilities and
Shareholders' Equity $ 36,943 $ 36,301
PRELIMINARY
April 20, 1998
BELLSOUTH FINANCIAL HIGHLIGHTS
SELECTED DATA
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
Earnings per share:
Basic $ .90 (a) $ .70
Diluted $ .89 (a) $ .70
Return on average common
Equity (annualized) 23.0% (b) 20.5%
Return on average total
Capital(annualized) 15.6% (c) 14.3%
Weighted average common shares
Outstanding (millions)
Basic 991 992
Diluted 997 994
Dividends per share $ .36 $ .36
Property additions (millions) $ 1,233 $ 901
At March 31,
1998 1997
Common shares outstanding
(millions) 991 992
Debt ratio 41.1% 41.2%
Total employees 84,126 81,803
(a) Includes an after-tax gain of $96 million ($.10 per share)
related to additional proceeds from the sale of ITT World
Directories.
(b) After adjusting net income for the gain from additional proceeds
on ITT World Directories, Return on average common equity was 20.5%.
(c) After adjusting net income for the gain from additional proceeds
on ITT World Directories, Return on average total capital was 14.1%.
PRELIMINARY
April 20, 1998
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Millions)
For the
Three Months Ended
March 31,
1998 1997
(Unaudit (Unaudit
ed) ed)
Operating Revenues:
Local service $ 2,262 $ 2,104
Interstate access 945 917
Intrastate access 206 218
Toll 175 174
Other 432 392
Total Operating Revenues 4,020 3,805
Operating Expenses:
Cost of services and
products 1,336 1,205
Depreciation and
amortization 826 819
Selling, general and
administrative 635 630
Total Operating Expenses 2,797 2,654
Operating Income 1,223 1,151
Interest Expense 133 134
Other Income, net 2 2
Income Before Income
Taxes 1,092 1,019
Provision for Income
Taxes 409 386
Net Income $ 683 $ 633
PRELIMINARY
April 20, 1998
BELLSOUTH TELECOMMUNICATIONS FINANCIAL HIGHLIGHTS
SELECTED DATA
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
Property additions (millions) $ 854 $ 732
Access minutes of use
(millions):
Interstate 18,998 17,721
Intrastate 6,084 5,552
IntraLATA toll messages 201 230
(millions)
At March 31,
1998 1997
Debt ratio 46.6% 47.7%
Telephone employees 58,326 62,307
Network access lines in
service (thousands) 23,548 22,514
PRELIMINARY
April 20, 1998
BELLSOUTH CORPORATION
CELLULAR OPERATING INFORMATION (UNAUDITED) (7)
($ IN THOUSANDS, EXCEPT First First
PER CUSTOMER Quarter Quarter
INFORMATION) NOTES 1998 1997 % Change
DOMESTIC OPERATIONS
Cellular Revenues (1), (4) $ 635,169 $ 588,154 8.0%
Net
Operating Expenses (1) 347,551 361,857 -4.0%
Depreciation (1) 108,054 89,354 20.9%
Expense
Amortization of
Intangibles (1) 19,776 18,505 6.9%
(including
goodwill)
Total Operating (1) 475,381 469,716 1.2%
Expenses
Operating Income (1) 159,788 118,438 34.9%
Other Expenses (1) 67,380 56,641 19.0%
(includes interest
and taxes)
Net Income (1) $ 92,408 $ 61,797 49.5%
Operating Cash (1), (6) $ 287,618 $ 226,297 27.1%
Flow
Cash Operating (1), (6) 45.28% 38.48% 17.7%
Margin
DOMESTIC CELLULAR DATA
Population Served: (11)
Control Basis (2) 50,149,000 52,060,000 -3.7%
Equity Basis (3) 40,340,000 40,778,000 -1.1%
Customers Served:
Control Basis (2), (8) 5,027,000 4,645,000 8.2%
Equity Basis (3), (8) 4,230,000 3,764,000 12.4%
Average Monthly (5) $ 47 $ 52 -9.6%
Service Revenue per
Customer
Penetration Rate (3) 10.5% 9.2% 14.1%
Property, plant (1) $3,771,172 $3,245,859 16.2%
and Equipment
PRELIMINARY
April 20, 1998
BELLSOUTH CORPORATION
CELLULAR OPERATING INFORMATION (UNAUDITED) (7)
($ IN THOUSANDS, EXCEPT First First
PER CUSTOMER Quarter Quarter
INFORMATION) NOTES 1998 1997 % Change
DOMESTIC PCS DATA
Population Served: (11)
Control Basis (2) 25,096,000 24,032,000 4.4%
Equity Basis (3) 20,432,000 19,428,000 5.2%
Customers Served:
Control Basis (2) 167,000 80,500 107.5%
Equity Basis (3) 105,000 49,200 113.4%
SELECTED INTERNATIONAL OPERATING DATA (9),(10)
Cellular Revenues (1) $ 428,476 $ 264,107 62.2%
Population Served:
Control Basis (2) 71,100,000 68,900,000 3.2%
Equity Basis (3) 90,729,000 68,542,000 32.4%
Cellular Customers Served:
Control Basis (2) 1,984,000 939,000 111.3%
Equity Basis (3) 2,098,000 1,145,000 83.2%
Penetration Rate (3),(10) 2.9% 2.1% 38.1%
SELECTED LATIN AMERICA INFORMATION (10)
Cellular Revenues (1) $ 275,403 $ 141,423 94.7%
Net Earnings from (1) 24,852 17,133 45.1%
Operations
Operating Cash (1), (6) 84,396 52,015 62.3%
Flow
Cash Operating (1), (6) 30.6% 36.8% -16.8%
Margin
Population Served:
Control Basis (2) 67,400,000 65,300,000 3.2%
Equity Basis (3) 63,881,000 42,050,000 51.9%
Customers Served:
Control Basis (2) 1,881,000 872,000 115.7%
Equity Basis (3) 1,204,000 534,000 125.5%
Average Monthly
Service Revenue (5) $ 72 $ 83 -13.3%
Per Customer
Penetration Rate (3),(10) 2.7% 1.9% 42.1%
PRELIMINARY
April 20, 1998
BellSouth Corporation
Schedule of International Customers and POPS by Country (000's)
First Quarter 1998
------------------------------------------
Customers POPS
-------------------- --------------------
Equity Equity
Country Company Weighted Control Weighted Control
-------- --------- --------- -------- -------- --------
Argentina CRM 421 647 8,515 13,100
Chile BellSouth 148 148 7,400 7,400
Chile
Ecuador BellSouth 42 69 7,462 12,200
Ecuador
Nicaragua BellSouth 8 10 2,581 2,900
Nicaragua
Panama BSC Panama 10 - 1,135 -
Peru Tele 2000 85 144 4,133 7,000
Uruguay Abiatar 19 41 966 2,100
Venezuela Telcel 471 822 13,010 22,700
Brazil Region 1-BCP - - 7,374 -
Region 10-BSE - - 11,305 -
------ ------ ------ ------
Subtotal Latin America 1,204 1,881 63,881 67,400
------ ------ ------ ------
Denmark DMT 257 - 2,465 -
Germany E-Plus 261 - 18,545 -
Israel Cellcom 304 - 2,085 -
India Skycell 5 - 1,348 -
New Zealand BSNZ 67 103 2,405 3,700
------ ------ ------ ------
Subtotal other 894 103 26,848 3,700
------ ------ ------ ------
Total International 2,098 1,984 90,729 71,100
====== ====== ====== ======
PRELIMINARY
April 20, 1998
BellSouth Corporation
Schedule of International Customers and POPS by Country (000's)
First Quarter 1997
------------------------------------------
Customers POPS
-------------------- --------------------
Equity Equity
Country Company Weighted Control Weighted Control
-------- --------- --------- -------- -------- --------
Argentina CRM 183 306 7,863 13,100
Chile BellSouth 111 111 7,200 7,200
Chile
Ecuador BellSouth - - 7,137 11,700
Ecuador
Nicaragua BellSouth - - 2,403 2,700
Nicaragua
Panama BSC Panama 3 - 1,079 -
Peru Tele 2000 - - 4,109 7,000
Uruguay Abiatar 12 33 595 1,700
Venezuela Telcel 225 422 11,664 21,900
Brazil Region 1-BCP - - - -
Region 10-BSE - - - -
------ ------ ------ ------
Subtotal Latin America 534 872 42,050 65,300
------ ------ ------ ------
Denmark DMT 249 - 2,418 -
Germany E-Plus 121 - 18,388 -
Israel Cellcom 194 - 1,998 -
India Skycell 4 - 1,348 -
New Zealand BSNZ 43 67 2,340 3,600
------ ------ ------ ------
Subtotal other 611 67 26,492 3,600
------ ------ ------ ------
Total International 1,145 939 68,542 68,900
====== ====== ====== ======
PRELIMINARY
April 20, 1998
NOTES
(1) The presentation of selected income statement and balance sheet
information is based on BellSouth's ownership percentage for all
domestic and international cellular subsidiaries and affiliates,
whether or not consolidated for financial statement presentation
purposes. Gains/losses from the sale of properties and other unusual
items are not included in net income. Financial information for
Domestic Cellular Operations does not include PCS.
(2) Includes 100% of population/customers served in markets where
BellSouth has operating control and/or BellSouth ownership exceeds
50%; excludes population/customers served for markets where BellSouth
does not have operating control and ownership is less than 50%.
First quarter 1997 information has been revised to reflect the most
current information.
(3) Includes population/customers served based on BellSouth's
ownership percentage in all markets served. First quarter 1997
information has been revised to reflect the most current information.
(4) Included in revenues is equipment revenue net of cost.
(5) Includes local service revenue, which consists of charges for
cellular air-time service, long distance, and access billed by a
carrier for services in its market. Excluded are roaming charges,
toll charges, taxes on service revenues, equipment sales,
installation and repair revenues.
(6) Operating cash flow represents operating income before
depreciation and amortization.
(7) The income statement and balance sheet information are for the
periods ended February 28, 1998 and 1997. The domestic customer
numbers presented above are as of March 31, 1998 and 1997 and
international customer numbers are as of February 28, 1998 and 1997.
(8) As information, domestic cellular customers served on a control
basis for the periods ended February 28, 1998 and 1997 were 4,944,000
and 4,574,000 respectively. On an equity basis, domestic cellular
customers served for the same periods were 4,156,000 and 3,705,000
respectively.
(9) BellSouth sold its investment in Optus during the third quarter
of 1997. Previously reported data for 1997 has been restated to
exclude Optus.
(10) For first quarter 1998, no financial or customer information
related to the newly acquired licenses in Brazil is included, and the
penetration rate calculation excludes the Brazil population amounts.
Financial and customer information for licenses acquired in Peru,
Nicaragua, and Ecuador in early 1997 are excluded for first quarter
1997, as well as population for calculation of the international
penetration rates.
(11) Coverage areas for certain BellSouth Domestic Cellular and PCS
licenses overlap each other. If these categories were combined for
reporting purposes, First quarter 1998 total population served would
be reduced by 428,000 (control basis) and 830,000 (equity basis) for
the overlap.
