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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: September 7, 1995
PACIFIC TELESIS GROUP
A Nevada Commission File I.R.S. Employer
Corporation No. 1-8609 No. 94-2919931
130 Kearny Street, San Francisco, California 94108
Telephone Number (415) 394-3000
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Form 8-K Pacific Telesis Group
September 7, 1995
Item 5. Other Events
--------------------
Exhibit 99 hereto is incorporated by reference herein.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
Exhibit
Number Description
------- -----------
99 Press Release announcing non-cash charge and SFAS 71
discontinuance.
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Form 8-K
Pacific Telesis Group
September 7, 1995
SIGNATURES
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.
PACIFIC TELESIS GROUP
September 7, 1995 By:/s/E.O. Laico
---------------------------
E. O. Laico
Controller
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EXHIBIT INDEX
Exhibit
Number Description
------- -----------
99 Press Release announcing non-cash charge and SFAS 71
discontinuance.
4
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Exhibit 99
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PACIFIC TELESIS CHANGES ITS ACCOUNTING;
TAKES ONE-TIME, NON-CASH CHARGE OF $3.3 BILLION
SAN FRANCISCO -- Pacific Telesis announced today that its Pacific Bell
subsidiary is discontinuing the use of accounting rules for regulated
companies because of the competitive environment which Pacific Bell now faces.
As a result of discontinuing these rules, known as Statement of Financial
Accounting Standards No. 71 (SFAS 71), the company will record a one-time,
non-cash accounting charge during the third quarter of 1995 of $3.3 billion,
after taxes, or about $7.70 per share.
"After assessing recent and proposed orders by the California Public Utilities
Commission (CPUC) and Federal Communications Commission (FCC), we recognize
that as the company changes to meet competition our accounting processes must
change, too," said Bill Downing, Chief Financial Officer for Pacific Telesis.
Accounting rules, set by the Financial Accounting Standards Board, require
regulated companies subject to traditional forms of regulation, such as
telecommunications firms and other utilities, to follow SFAS 71. When the
business environment becomes highly competitive and less regulated, as is now
occurring with telecommunications companies in California and throughout the
nation, these companies must discontinue the use of the SFAS 71 accounting
rules.
"The discontinuance of SFAS 71 is for public financial reporting only," said
Peter Darbee, Chief Financial Officer of Pacific Bell, "and has no effect on
Pacific Bell's customers."
Telecommunications companies nationwide are discontinuing SFAS 71 accounting
as the long-standing regulatory environment gives way to a new, vigorously
competitive business environment. Pacific Telesis is the sixth Regional Bell
Company to discontinue SFAS 71 accounting.
The extraordinary charge Pacific Telesis is taking as a result of the
discontinuance of SFAS 71 accounting primarily reflects an increase in Pacific
Bell's depreciation reserve to recognize shorter estimated lives for its fixed
assets in a competitive market. For example, depreciable lives for copper
which presently range from 19 years to 26 years will decrease to 14 years, and
lives for fiber, which now range from 28 years to 30 years, will decrease to
20 years. (See attached Fact Sheet).
This accounting action has no impact on the company's customers, its debt
covenants or contracts, nor does it have any effect on our ability to pay
dividends or the tax treatment of dividends. The discontinuance of SFAS 71 is
not expected to have a material effect on future earnings.
Pacific Telesis is a diversified telecommunications corporation based in San
Francisco, and the parent company of Pacific Bell.
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FACT SHEET
THIRD QUARTER 1995 FINANCIAL STATEMENT IMPACTS
SFAS 71 DISCONTINUANCE
(Dollars in millions)
ESTIMATED INCOME STATEMENT IMPACT
PRE-TAX POST-TAX
------- --------
Extraordinary Charges:
Regulatory Asset Write-Off $1,000 $ 650
Telephone Plant Write-Down 4,700 2,650
------- --------
TOTAL $5,700 $3,300
ESTIMATED BALANCE SHEET IMPACT OF TELEPHONE PLANT WRITE-DOWN
-------------PACIFIC BELL---------------
Plant in Accumulated Net Reserve Revised
Service Reserve Plant Adjustment Net Plant
--------- ----------- --------- ---------- -----------
Copper $6,700 $2,700 $4,000 $2,000 $2,000
Switches 3,400 900 2,500 1,400 1,100
Circuits 3,800 2,100 1,700 700 1,000
Fiber 400 100 300 100 200
Underground
Conduit 2,100 500 1,600 500 1,100
------- ------- ------- ------ -------
Total 16,400 6,300 10,100 4,700 5,400
All other 10,000 4,400 5,600 - 5,600
------- ------- ------- ------ -------
Total PP&E* $26,400 $10,700 $15,700 $4,700 $11,000
======= ======= ======= ====== =======
* for illustration reflects pro forma impact on Pacific Bell's June 30,1995
plant balances
ASSET LIVES
(in years)
OLD NEW
=== ===
Copper 19 - 26 14
Digital Switches 16.5 10
Digital Circuits 9.6 - 11.5 8
Fiber 28 - 30 20
Conduit 59 50
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