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):
March 30, 1999
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.)
Room 15G03, 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
<PAGE>
Item 5. Other Events
On March 30, 1999, BellSouth issued a press release which
(1) details our adoption of segment reporting and
(2) presents reformatted 1998 quarterly and year-to-date
information for use in comparison with 1999 periods.
See Exhibit 99 for a complete copy of the release.
<PAGE>
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
March 30, 1999
BellSouth Moves to Segment Reporting
Effective with 1Q99 Earnings Release
1998 Quarterly Results, by Segment, Are Attached
ATLANTA - March 30, 1999 - Following adoption of the FASB standard
on segment reporting (FAS 131), BellSouth will disclose quarterly and
year-to-date financial results based on operating segments, effective
with our 1Q99 earnings release on April 20, 1999. To assist our investors
with analyzing and comparing our 1999 results to prior year results, this
BLS Investor News includes definitions of our operating segments,
explanation of changes to our income statement format (driven by
segment reporting), and restatement of 1998 results, by quarter, by segment.
Included in this package are the Consolidated Statements of Income by
quarter for 1998, restated to conform to segment reporting.
Operating Segments
- ------------------
We will report financial results and select operating data for the
following segments:
* Wireline Communications - Includes local exchange and access
services to business and residential customers in a nine-state
region located in the Southeastern United States.
* Domestic Wireless - Includes our domestic cellular and PCS
businesses.
* International Operations - Includes a variety of communications
services, primarily wireless communications, in our markets outside
the United States.
* Advertising and Publishing - Includes all businesses related to
publishing, printing, and selling advertising in telephone
directories, both paper and electronic.
* Other - Includes the operations of all other businesses which fall
below the segment reporting threshold, such as entities providing
internet access, wireless data, entertainment, and other strategic
initiatives.
Segment Presentation and Other Changes
- --------------------------------------
* Revenues: Revenue line items have been recast to align with
our operating segments (see the attachment titled "Income
Statement Revenue Definitions" for the new line items).
Highlights of classification changes include:
* MemoryCall (voice messaging) and Inside Wire Maintenance
have been reclassified from Other Services Revenues to
Local Service Revenue.
* Interstate Access Revenues and Intrastate Access Revenues
have been combined into Network Access Revenues.
* Toll Revenue is now called Long Distance Revenue.
* Certain revenues previously classified as Wireless
Communications or as Directory Advertising and
Publishing Revenue are now classified as Other Wireline
Revenue; these include revenues from enhanced white pages
listings and revenues from wireless interconnection.
* Revenues on the Consolidated Income Statement are GAAP based,
which eliminate intercompany billings. Revenues on the
Segment Income Statements do not eliminate intercompany billings,
which better reflects the operations of the segment.
* Expenses: Cost of Services and Products has been combined with
Selling, General & Administrative into one expense line item
titled "Operational and Support Expenses."
* Selected Financial and Operating Data:
* Capital Expenditures will now be reported, replacing
Property Additions.
* The Wireless Operating Information schedule is now
integrated with the segment information, and the
following changes have been made:
* Cellular and PCS results will now be combined for all
financial reporting and operating data.
* The International segment statements will include
proportional financial results and operating data for
all international properties; Latin America will no longer
be disclosed separately.
* Proportional Wireless Revenues and ARPU are calculated
as follows:
Domestic Revenues International Revenues
Activation fees Activation fees
+ Access + Access
+ Airtime + Airtime
+ Roaming (net) + Roaming (net)
+ Long Distance* + Long Distance
+ Equipment Sales (net) + Equipment Sales
+ Value Added Services + Value Added Services
+ Other Revenue + Other Revenue
Wireless Revenues, net Wireless Revenues, net
* Denotes change from prior years' domestic wireless
proportional revenues, which reported Long Distance as net
ARPU (both Domestic and International)
Activation fees*
+ Access
+ Airtime
+ Roaming (net)*
+ Long Distance (gross)*
+ Value Added Services
Average Monthly Revenue/Proportionate Customers = ARPU
* Denotes change from prior years' Domestic ARPU
calculation, in order to be consistent with industry
standards
1999 Quarterly Earnings Release Format
Our 1999 quarterly earnings releases will include the following
financial statements and related operating data:
* Consolidated Statement of Income (GAAP basis)
* Normalized Earnings Summary
* Consolidated Balance Sheet (GAAP basis)
* Wireline Communications segment Statement of Income, including
Selected Financial and Operating Data
* Domestic Wireless segment Statement of Income, including
Proportionate Basis Selected Financial and Operating Data
* International Operations segment Statement of Income, including
Proportionate Basis Selected Financial and Operating Data. A
schedule of both Proportionate Basis and Control Basis customers, by
country, will also be included.
* Advertising and Publishing segment Statement of Income
* Other segment Statement of Income
<PAGE>
=========================================================================
INCOME STATEMENT REVENUE DEFINITIONS
=========================================================================
=========================================================================
Wireline Communications
=========================================================================
Local service revenues
.........................................................................
* Basic local telephone service
* Convenience features ( e.g., Caller ID
Deluxe, Call Return, Call Waiting, MemoryCall(r) )
* Local data transport services
* Public payphone services
* Directory assistance
* Inside wire maintenance contracts
* Resold access lines
Network access revenues
.........................................................................
* Usage based switched access
* Dedicated transport for special access
* Access-line related charges (e.g., Subscriber
Line Charges (SLC) and Presubsribed
Interexchange Carrier Charges (PICC))
* Universal Service Fund (USF) receipts
Long distance revenues
.........................................................................
* Intralata long distance voice and data traffic
Other wireline revenues
.........................................................................
* Customer premises equipment sales and
maintenance services
* Network integration and advanced business
solutions
* Billing and collection services
* Enhanced consumer white pages listings
* Unbundled network elements
* Interconnection revenues for terminating
wireless traffic
=========================================================================
Domestic Wireless
=========================================================================
Domestic wireless revenues
.........................................................................
For all consolidated properties:
* Cellular and PCS local, long distance and
roaming charges
* Convenience features
* Sales of cellular and PCS handsets and
accessories
* Interconnection revenues for terminating
traffic
=========================================================================
International Operations
=========================================================================
International operations' revenues
.........................................................................
For all consolidated properties: Argentina, Chile, Ecuador, Peru,
Venezuela (Brazil, Nicaragua, Panama, Uruguay, Denmark, Germany,
India, Israel are accounted for under the equity method and
included in Other Income.)
* Cellular and PCS local, long distance, and
roaming charges
* Convenience features
* Sales of cellular and PCS handsets and
accessories
* Interconnection revenues for terminating
traffic
* Internet access and cable television
services
=========================================================================
Advertising and Publishing
=========================================================================
Advertising and publishing revenues
.........................................................................
* Selling and publishing yellow pages
advertising
* Publishing fees for white pages
directories
* Enhanced business white pages listings
* Electronic media advertising (e.g.,
Internet and CD-ROM products)
=========================================================================
Other
=========================================================================
* Internet access (segment reporting purposes only)
* Entertainment (domestic cable television
operations)
* Wireless data
* Other strategic initiatives
<PAGE>
BellSouth Corporation
Consolidated Statements of Income (unaudited)
(amounts in millions, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
-------------------------------- ----------
<S> <C> <C> <C> <C> <C>
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
Operating Revenues
Wireline communications
Local service $2,414 $2,502 $2,542 $2,575 $10,033
Network access 1,151 1,160 1,147 1,174 4,632
Long distance 175 177 180 181 713
Other wireline 236 249 267 271 1,023
Total Wireline
communications 3,976 4,088 4,136 4,201 16,401
Domestic wireless 644 672 702 705 2,723
International
operations 452 484 514 545 1,995
Advertising &
publishing 336 394 481 680 1,891
Other 18 26 32 37 113
Total Operating
Revenues 5,426 5,664 5,865 6,168 23,123
Operating Expenses
Operational and
support expenses 2,929 3,156 3,291 3,486 12,862
Depreciation and
amortization 1,043 1,074 1,111 1,129 4,357
Total Operating
Expenses 3,972 4,230 4,402 4,615 17,219
Operating Income 1,454 1,434 1,463 1,553 5,904
Interest Expense 190 203 218 226 837
Gain on Sale of
Operations 155 - - 180 335
Other Income, net 28 118 73 130 349
Income Before
Income Taxes 1,447 1,349 1,318 1,637 5,751
Provision for
Income Taxes 555 531 504 634 2,224
Net Income $892 $818 $814 $1,003 $3,527
Earnings Per Share:
Basic $0.45 $0.41 $0.41 $0.51 $1.79
Diluted $0.45 $0.41 $0.41 $0.51 $1.78
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Selected Financial and Operating Data
- -------------------------------------------------------------------------
Quarter Ended Year Ended
-------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
(amounts in millions, except per share data)
<S> <C> <C> <C> <C> <C>
EBITDA $2,497 $2,508 $2,574 $2,682 $10,261
EBITDA margin 46.0% 44.3% 43.9% 43.5% 44.4%
Return on average equity
(annualized) 23.0% 20.2% 19.6% 25.1% 22.3%
Return on average total
capital (annualized) 15.6% 14.0% 13.9% 16.3% 15.1%
Weighted average common
shares outstanding
Basic 1,983 1,978 1,965 1,954 1,970
Diluted 1,993 1,990 1,979 1,972 1,984
Dividends per share $0.18 $0.18 $0.18 $0.19 $0.73
Capital expenditures $1,226 $1,254 $1,264 $1,468 $5,212
</TABLE>
<TABLE>
<CAPTION>
As of
--------------------------------
3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C>
Common shares
outstanding 1,982 1,971 1,959 1,950
Book value per
share $7.92 $8.04 $8.12 $8.26
Debt ratio 41.1% 42.2% 42.7% 43.0%
Total employees 84,126 86,188 86,628 88,450
</TABLE>
See Accompanying Notes at Page 8
<PAGE>
BellSouth Corporation
Normalized Earnings Summary ($ in millions, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
-------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Reported Net
Income $892 $818 $814 $1,003 $3,527
Gain on Sale of
ITT World
Directories(a) (96) (96)
Gain on Sale of
BellSouth New
Zealand (110) (110)
Income from Prime
Loan Settlement(b) (62) (62)
Normalized Net
Income $796 $818 $814 $831 $3,259
Reported Diluted
Earnings Per Share $0.45 $0.41 $0.41 $0.51 $1.78
Gain on Sale of
ITT World
Directories(a) (0.05) (0.05)
Gain on Sale of
BellSouth New
Zealand (0.06) (0.06)
Income from Prime
Loan Settlement(b) (0.03) (0.03)
Normalized Diluted
Earnings Per Share $0.40 $0.41 $0.41 $0.42 $1.64
Growth over prior
year period(c) 14.3% 17.1% 17.1% 16.7% 16.3%
</TABLE>
(a) Represents the after-tax gain associated with additional proceeds
received in first quarter 1998 on the July 1997 sale of ITT World
Directories.
(b) Represents contingent interest and prepayment penalties associated
with the repayment of the Prime Loan.
(c) Prior year earnings per share were adjusted to exclude the impact
of after-tax gains of $352 ($.18 per share), $128 ($.06 per share)
and $23 ($.01 per share) from the sales of Optus Communications , ITT
World Directories and Bellcore, respectively and the after-tax effect
of a regulatory settlement in South Carolina of $47 ($.02 per share).
See Accompanying Notes at Page 8
<PAGE>
BellSouth Corporation
Consolidated Statements of Income ($ in millions) (unaudited)
- -------------------------------------------------------------------------
Wireline Communications
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Year Ended
-------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Operating Revenues
Local service $2,414 $2,502 $2,542 $2,575 $10,033
Network access 1,151 1,160 1,147 1,174 4,632
Long distance 175 177 180 181 713
Other wireline 280 297 326 341 1,244
Total Operating
Revenues 4,020 4,136 4,195 4,271 16,622
Operating Expenses
Operational and
support expenses 1,971 2,121 2,203 2,092 8,387
Depreciation and
amortization 826 836 847 854 3,363
Total Operating
Expenses 2,797 2,957 3,050 2,946 11,750
Operating Income 1,223 1,179 1,145 1,325 4,872
Interest Expense 133 144 132 142 551
Other Income
(Expense), net 2 2 (2) 1 3
Income Before
Income Taxes 1,092 1,037 1,011 1,184 4,324
Provision for
Income Taxes 409 393 344 427 1,573
Segment Net
Income(1) $683 $644 $667 $757 $2,751
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Selected Financial and Operating Data
- -------------------------------------------------------------------------
Quarter Ended Year Ended
-------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
(amounts in millions)
<S> <C> <C> <C> <C> <C>
EBITDA $2,049 $2,015 $1,992 $2,179 $8,235
EBITDA margin 51.0% 48.7% 47.5% 51.0% 49.5%
Convenience feature
revenues $360 $394 $422 $423 $1,599
Access minutes
of use 25,082 26,240 26,438 26,613 104,373
Long distance
messages 201 201 199 183 784
Capital
expenditures $843 $880 $870 $919 $3,512
</TABLE>
See Accompanying Notes at Page 8
<PAGE>
BellSouth Corporation
Consolidated Statements of Income ($ in millions) (unaudited)
- -------------------------------------------------------------------------
Domestic Wireless (2)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Year Ended
-------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Operating Revenues $646 $674 $703 $707 $2,730
Segment Net
Income(1) $69 $74 $79 $61 $283
Total Assets $5,859 $5,879 $6,005 $6,540 $6,540
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Control Basis(3) - Selected Operating Data
- -------------------------------------------------------------------------
(end of period,
in thousands)
<S> <C> <C> <C> <C>
Customers 5,194 5,427 5,648 4,901
POPs 74,817 74,971 74,971 60,341
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Proportionate Basis(4) - Selected Financial and Operating Data
- -------------------------------------------------------------------------
Quarter Ended Year Ended
----------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
(amounts in millions,
except customer data
in thousands)
<S> <C> <C> <C> <C> <C>
Wireless revenues,
net(5) $650 $662 $692 $713 $2,717
Net income(6) $70 $79 $80 $49 $278
Operating cash flow(7) $267 $279 $298 $265 $1,109
Operating cash flow
margin(8) 41.1% 42.1% 43.1% 37.2% 40.8%
Customer net adds
in period
(excluding ownership
changes) 130 195 171 258 754
Average monthly revenue
per customer(9) $53 $51 $54 $52 $52
</TABLE>
<TABLE>
<CAPTION>
As of
----------------------------------
3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C>
Wireless:
Customers 4,335 4,529 4,700 4,796
POPs 59,942 60,311 60,250 58,122
Penetration rate(10) 8.9% 9.3% 9.6% 9.2%
Property, plant
and equipment $4,376 $4,505 $4,606 $4,929
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Normalized Financial and Operating Data(11):
- -------------------------------------------------------------------------
Quarter Ended Year Ended
----------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Wireless revenues,
net(5) $624 $638 $665 $688 $2,615
Customers 4,185 4,376 4,541 4,796
POPs 57,664 58,033 57,971 58,122
Penetration rate(10) 9.1% 9.4% 9.7% 9.2%
</TABLE>
See Accompanying Notes at Page 8
<PAGE>
BellSouth Corporation
Consolidated Statements of Income ($ in millions) (unaudited)
- -------------------------------------------------------------------------
International Operations (2)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Year Ended
--------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Operating Revenues $452 $484 $514 $545 $1,995
Segment Net
Income (Loss)(1) $(5) $(22) $5 $(40) $(62)
Total Assets $4,190 $4,715 $4,483 $4,449 $4,449
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Control Basis(3) - Selected Operating Data
- -------------------------------------------------------------------------
(end of period, in thousands)
<S> <C> <C> <C> <C>
Wireless:
Customers 1,984 2,226 2,430 2,666
POPs 71,100 88,100 88,100 84,400
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Proportionate Basis(4) - Selected Financial and Operating Data
- -------------------------------------------------------------------------
Quarter Ended Year Ended
----------------------------------- -----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
(amounts in millions,
except customer
data in thousands)
<S> <C> <C> <C> <C> <C>
Wireless revenues,
net(5) $427 $472 $620 $668 $2,187
Net income
(loss)(6) $17 $(6) $20 $(24) $7
Operating cash
flow(7) $103 $123 $170 $174 $570
Operating cash flow
margin(8) 24.2% 26.1% 27.4% 26.1% 26.1%
Customer net adds
in period (excluding
ownership changes) 217 291 403 483 1,394
Average monthly
revenue per
customer(9) $66 $64 $67 $65 $65
</TABLE>
<TABLE>
<CAPTION>
As of
--------------------------------------
3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C>
Wireless:
Customers 2,098 2,390 3,014 3,439
POPs 90,729 100,766 108,942 108,313
Penetration rate(10) 2.9% 3.0% 3.1% 3.5%
Property, plant
and equipment,
gross $2,107 $2,335 $2,819 $3,013
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Normalized Financial and Operating Data(12):
- -------------------------------------------------------------------------
Quarter Ended Year Ended
----------------------------------- -----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Wireless revenues,
net(5) $406 $451 $600 $662 $2,119
Customers 2,031 2,316 2,933 3,439
POPs 88,324 98,361 106,537 108,313
Penetration rate(10) 2.9% 3.0% 3.0% 3.5%
</TABLE>
See Accompanying Notes at Page 8
<PAGE>
BellSouth Corporation
Consolidated Statements of Income ($ in millions) (unaudited)
- -------------------------------------------------------------------------
Advertising & Publishing
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Year Ended
-------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Operating Revenues $338 $392 $481 $680 $1,891
Segment Net Income(1) $86 $102 $143 $199 $530
Total Assets $1,154 $1,117 $1,117 $1,288 $1,288
</TABLE>
- -------------------------------------------------------------------------
Selected Financial and Operating Data
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Year Ended
-------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
EBITDA $143 $163 $239 $329 $874
EBITDA Margin 42.3% 41.6% 49.7% 48.4% 46.2%
</TABLE>
- -------------------------------------------------------------------------
Other
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Year Ended
--------------------------------- ----------
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
<S> <C> <C> <C> <C> <C>
Operating Revenues $72 $79 $90 $99 $340
Segment Net Loss(1) $(40) $(31) $(50) $(89) $(210)
Total Assets $1,247 $1,301 $1,132 $1,273 $1,273
See Accompanying Notes at Page 8
<PAGE>
BellSouth Corporation
Notes
(1) Segment net income (loss) is based on normalized
results which exclude certain one-time transactions and
certain corporate intercompany billings. Intersegment
revenues are not eliminated for purposes of management
reporting.
(2) Domestic and international financial and operating data
are reported one month in arrears, except for domestic
wireless customers and POPs which are presented as of
quarter end (3/31, 6/30, 9/30 and 12/31, respectively.)
(3) Control basis customers and POPs represent end of
period customers and estimated market population,
respectively, in markets where we exercise operating control
of the entity.
(4) Proportionate basis financial and operating data
reflect our ownership interest in the total operating
results for each of our wireless properties, both domestic
and international, whether or not consolidated for financial
statement presentation purposes. Proportionate basis
customers and POPs represent end of period customers and
estimated market population, respectively, multiplied by our
ownership interest in a licensee operating in that market.
(5) Wireless revenues, net include activation fees,
access, airtime, roaming (net), long distance, equipment
sales, value added services and other revenue. Domestic
operations' wireless revenues include net losses on equipment
sold to customers.
(6) Net income (loss) represents our proportionate interest in the
net income (loss) of the respective operations and does not include
gains (losses) from the sale of properties or development
expenses for markets prior to service initiation.
(7) Operating cash flow is defined as operating income plus
depreciation and amortization. While it represents our
proportionate interest in the operating entities' operating
cash flows, it does not necessarily represent cash available
to us.
(8) Operating cash flow margin is calculated by dividing
operating cash flow by wireless revenues, net.
(9) Average monthly revenue per customer is calculated by
dividing average monthly revenue by average proportionate basis
customers. Average monthly revenue includes activation
fees, access, airtime, roaming (net), long distance and value
added services.
(10) Penetration rate is calculated by dividing
proportionate basis customers by proportionate basis POPs
(excludes POPs in markets where service has not been
initiated).
(11) During the fourth quarter of 1998, we reorganized our Los
Angeles and Houston/Galveston cellular partnerships with AT&T.
The reorganization changed our ownership interest from 60%, 44%
and 37%, respectively, to 44%, 44% and 39%, respectively. We have
restated the operating data to reflect this reorganization
for all periods presented and provide a more meaningful
presentation of existing operations.
(12) During 1997 and 1998, we sold our interests in Optus
Communications and BellSouth New Zealand. We have restated
the operating data to exclude these operations from
all periods presented and provide a more meaningful
presentation of existing operations.
</TABLE>
