<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
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 1-1049
------------------------
BELLSOUTH TELECOMMUNICATIONS, INC.
A GEORGIA I.R.S. EMPLOYER
CORPORATION NO. 58-0436120
675 WEST PEACHTREE STREET, N. E., ATLANTA, GEORGIA 30375
TELEPHONE NUMBER 404 529-8611
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------- ---------------------------------------
SEE ATTACHMENT. NEW YORK
Securities registered pursuant to Section 12(g) of the Act:
None.
At March 22, 1994 one share of Common Stock was outstanding.
------------------------
THE REGISTRANT, A WHOLLY-OWNED SUBSIDIARY OF BELLSOUTH CORPORATION,
MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a) AND (b) OF
FORM 10-K AND IS THEREFORE FILING THIS FORM WITH REDUCED
DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION J(2).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [NOT APPLICABLE]
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 ___
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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<PAGE>
ATTACHMENT
Title of each class
- ----------------
DEBENTURES
Issues denominated as South Central Bell Telephone Company Debentures
- ---------------------------------------------------------------------
$100,000,000 Principal Amount of Forty Year 7 3/8% Debentures, due 2012
$210,000,000 Principal Amount of Forty Year 8 1/4% Debentures, due 2017
$300,000,000 Principal Amount of Forty Year 8 1/2% Debentures, due 2029
Issues denominated as Southern Bell Telephone and Telegraph Company Debentures
- ------------------------------------------------------------------------------
$30,000,000 Principal Amount of Forty Year 3 1/4% Debentures, due 1995
$75,000,000 Principal Amount of Thirty-Seven Year 5% Debentures, due 1997
$70,000,000 Principal Amount of Thirty-Seven Year 4 3/8% Debentures, due 1998
$75,000,000 Principal Amount of Thirty-Nine Year 4 3/8% Debentures, due 2001
$70,000,000 Principal Amount of Forty Year 4 3/8% Debentures, due 2003
$100,000,000 Principal Amount of Thirty-Five Year 4 3/4% Debentures, due 2000
$100,000,000 Principal Amount of Thirty-Eight Year 6% Debentures, due 2004
$150,000,000 Principal Amount of Thirty-Eight Year 7 3/8% Debentures, due 2010
$350,000,000 Principal Amount of Forty Year 7 5/8% Debentures, due 2013
$275,000,000 Principal Amount of Forty Year 8 1/8% Debentures, due 2017
$300,000,000 Principal Amount of Thirty-Eight Year 8 3/4% Debentures, due 2024
$500,000,000 Principal Amount of Forty Year 8 5/8% Debentures, due 2026
$300,000,000 Principal Amount of Forty Year 8 1/2% Debentures, due 2029
BellSouth Telecommunications, Inc.
- ---------------------------------
$250,000,000 Principal Amount of Forty Year 8 1/4% Debentures, due 2032
$300,000,000 Principal Amount of Forty Year 7 7/8% Debentures, due 2032
$300,000,000 Principal Amount of Forty Year 7 1/2% Debentures, due 2033
$350,000,000 Principal Amount of Fifteen Year 5 7/8% Debentures, due 2009
$400,000,000 Principal Amount of Forty Year 6 3/4% Debentures, due 2033
NOTES
BellSouth Telecommunications, Inc.
- ---------------------------------
$275,000,000 Principal Amount of Seven Year 6 1/2% Notes, Due February 1, 2000
$150,000,000 Principal Amount of Twelve Year 7% Notes, Due February 1, 2005
$450,000,000 Principal Amount of Ten Year 6 1/4% Notes, Due May 15, 2003
$200,000,000 Principal Amount of Eleven Year 6 3/8% Notes, Due June 15, 2004
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<C> <S> <C>
PART I
1. Business.......................................................... 1
Telephone Company Operations...................................... 3
Other Business Operations......................................... 8
Competition....................................................... 9
Legislation....................................................... 11
Research and Development.......................................... 12
Licenses and Franchises........................................... 12
Employees......................................................... 12
2. Properties........................................................ 13
3. Legal Proceedings................................................. 14
4. Submission of Matters to a Vote of Shareholders (Omitted pursuant
to General Instruction J(2))
PART II
5. Market for Registrant's Common Equity and Related Shareholder
Matters
(Inapplicable)
6. Selected Financial Data........................................... 15
7. Management's Discussion and Analysis of Results of Operations and
Financial
Condition (Abbreviated pursuant to General Instruction J(2))..... 16
8. Consolidated Financial Statements and Supplementary Data.......... 24
9. Changes in and Disagreements with Accountants on Accounting and
Financial
Disclosure....................................................... 42
PART III
10. Directors and Executive Officers of the Registrant (Omitted
pursuant to General Instruction J(2))
11. Executive Compensation (Omitted pursuant to General Instruction
J(2))
12. Security Ownership of Certain Beneficial Owners and Management
(Omitted pursuant to General Instruction J(2))
13. Certain Relationships and Related Transactions (Omitted pursuant
to General Instruction J(2))
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.............................................................. 42
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
BellSouth Telecommunications, Inc. ("BellSouth Telecommunications"), a
corporation wholly-owned by BellSouth Corporation ("BellSouth"), is the
surviving corporation from the merger, effective at midnight December 31, 1991
of South Central Bell Telephone Company ("South Central Bell") and Southern Bell
Telephone and Telegraph Company ("Southern Bell"). BellSouth Telecommunications
provides predominantly tariffed wireline telecommunications services to
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. These areas were previously served by South
Central Bell and Southern Bell. BellSouth Telecommunications continues to use
the names South Central Bell and Southern Bell for various purposes.
South Central Bell was incorporated in 1967 under the laws of the State of
Delaware and Southern Bell was incorporated in 1879 under the laws of the State
of New York. On December 31, 1983, pursuant to a consent decree approved by the
United States District Court for the District of Columbia (the "D. C. District
Court") entitled "Modification of Final Judgment" (the "MFJ") settling antitrust
litigation brought by the United States Department of Justice (the "Justice
Department") in 1974 and the related Plan of Reorganization (the "POR"),
American Telephone and Telegraph Company ("AT&T") transferred to BellSouth its
100% ownership of South Central Bell and Southern Bell. On the same date, South
Central Bell and Southern Bell were reincorporated through mergers into Georgia
corporations. Effective January 1, 1984, ownership of BellSouth was divested
from AT&T and BellSouth became a publicly traded company.
BellSouth Telecommunications has its principal executive offices at 675 West
Peachtree Street, N.E., Atlanta, Georgia 30375 (telephone number 404-529-8611).
MODIFICATION OF FINAL JUDGMENT
Pursuant to the MFJ, AT&T divested the 22 wholly-owned operating telephone
companies (the "Operating Telephone Companies"), including South Central Bell
and Southern Bell, that were included in the former Bell System. The ownership
of such 22 Operating Telephone Companies was transferred by AT&T to seven
holding companies (the "Holding Companies"), including BellSouth. All territory
in the continental United States served by the Operating Telephone Companies was
divided into geographical areas termed "Local Access and Transport Areas"
("LATAs"). These LATAs are generally centered in a city or other identifiable
community of interest.
The MFJ limits the telecommunications-related scope of the Operating
Telephone Companies'* post-divestiture business activities, and the D. C.
District Court retained jurisdiction over its construction, implementation,
modification and enforcement. Under the MFJ, the Operating Telephone Companies
may provide local exchange, exchange access, information access and toll
telecommunications services within the LATAs. Although prohibited from providing
service between LATAs, the Operating Telephone Companies provide exchange access
services that link a subscriber's telephone or other equipment in one of their
LATAs to the transmission facilities of carriers (the "Interexchange Carriers"),
which provide toll telecommunications services between different LATAs. The
Operating Telephone Companies may market, but not manufacture, customer premises
equipment ("CPE"), which is defined in the MFJ as equipment used on customers'
premises to originate, route or terminate telecommunications. A similar
restriction applies to the manufacture or provision of "telecommunications
equipment," which is defined in the MFJ as including equipment used by carriers
to provide telecommunications services. The MFJ restrictions precluding the
Holding Companies from providing information services and non-telecommunications
related products have been judicially removed.
- ------------------------
* The provisions of the MFJ are applicable to the Holding Companies.
<PAGE>
The D.C. District Court has established procedures for obtaining generic and
specific waivers from the manufacturing and interLATA communications
restrictions of the MFJ, although the required filings with and review by the
Justice Department and the D.C. District Court usually result in lengthy and
uncertain proceedings. The foregoing restrictions present significant obstacles
to the provision of certain wireless, cable television and other communications
services and require that such business operations, even where waivers are
ultimately obtained, be conducted under burdensome arrangements or subject to
elaborate structural separation or other conditions. BellSouth is advocating
legislation which would remove or relax the MFJ restrictions. (See "Business
Operations -- Legislation.")
The MFJ requires the Operating Telephone Companies to provide, upon a bona
fide request by any Interexchange Carrier or information service provider,
exchange access, information access and exchange services for such access that
will be equal to that provided to AT&T in quality, type and price. BellSouth
Telecommunications believes it is in compliance with this requirement.
BUSINESS OPERATIONS
Approximately 86% of BellSouth Telecommunications' operating revenues for
the years ended December 31, 1993, 1992 and 1991, respectively, were from
wireline telecommunications services and the remainder of revenues was
principally from directory publishing fees, CPE sales, inside wire services,
billing and collection services, cellular interconnect services and rental of
facilities.
Certain communications services and products are provided to business
customers by BellSouth Business Systems, Inc., BellSouth Communication Systems,
Inc. and Dataserv, Inc., subsidiaries of BellSouth Telecommunications.
Respectively, these companies provide sales, marketing, product management and
customer service for BellSouth Telecommunications' large business customers
within traditional telephone operating company service areas and nationwide;
sell, install and maintain CPE; and maintain and provide parts and integration
services for computer and data processing equipment.
In the aggregate, access revenues, revenues from billing and collection
activities and rental of facilities comprised approximately 30%, 30% and 31% of
1993, 1992 and 1991 operating revenues, respectively. The majority of these
revenues were from services provided to AT&T, BellSouth Telecommunications'
largest customer.
2
<PAGE>
TELEPHONE COMPANY OPERATIONS
BellSouth Telecommunications provides services, which include local
exchange, exchange access and intraLATA toll services, within each of the 38
LATAs in its combined nine-state operating area. (See "Local and Toll Services"
and "Access Services.") The tables below set forth the following: network access
lines in service at December 31 for the last five years; access lines in each
state at December 31, 1993; and the annual percentage increase in access lines
in each state at December 31 for the last four years.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(MILLIONS)
<S> <C> <C> <C> <C> <C>
NETWORK ACCESS
LINES IN SERVICE:*
Residence................................ 13.7 13.3 12.9 12.6 12.2
Business................................. 5.4 5.1 4.8 4.6 4.4
Other.................................... .2 .2 .3 .3 .3
---- ---- ---- ---- ----
Total.................................. 19.3 18.6 18.0 17.5 16.9
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
<TABLE>
<CAPTION>
PERCENT ACCESS LINE
INCREASE
-------------------------
1993 1992 1991 1990
---- ---- ---- ----
ACCESS LINES
1993
------------
(MILLIONS)
------------
<S> <C> <C> <C> <C> <C>
STATES
Alabama.......................... 1.7 3.6 3.0 2.8 3.4
Florida.......................... 5.1 4.0 3.5 3.3 3.7
Georgia.......................... 3.2 4.2 4.6 4.3 3.4
Kentucky......................... 1.0 2.9 2.9 3.1 1.9
Louisiana........................ 1.9 2.4 2.4 1.9 2.7
Mississippi...................... 1.1 3.4 2.3 2.9 2.9
North Carolina................... 1.9 4.1 3.7 3.0 2.7
South Carolina................... 1.2 2.7 3.0 2.8 3.5
Tennessee........................ 2.2 4.0 3.5 3.2 3.5
---
Total Lines/Increase........... 19.3 3.7 3.4 3.2 3.2
--- ---- ---- ---- ----
--- ---- ---- ---- ----
</TABLE>
Approximately 72% of such lines were in 53 metropolitan areas, each having a
population of 125,000 or more. Many localities and some sizable areas in the
states in which BellSouth Telecommunications operates are served by
non-affiliated telephone companies, which had approximately 29% of the network
access lines in such states on December 31, 1993. BellSouth Telecommunications
does not furnish local exchange, access or toll services in the areas served by
such companies.
The following table reflects access minutes of use and toll message volumes
for the last five years.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ACCESS MINUTES OF USE:*
Interstate........................................ 53,345.0 50,546.4 47,255.3 44,903.3 41,464.2
Intrastate........................................ 15,260.9 13,994.2 13,237.7 12,119.5 11,252.7
TOLL MESSAGES*...................................... 1,251.0 1,280.3 1,387.1 1,457.5 1,462.3
</TABLE>
The number of intraLATA toll messages carried by BellSouth
Telecommunications has declined, primarily because of the effect of expanded
local area calling plans and competition by others for the
- ------------------------
*Prior period operating data are revised at later dates to reflect the most
current information. The above information reflects the latest data available
for the periods indicated.
3
<PAGE>
provision of toll services. Toll message volumes are expected to decline further
as additional intraLATA toll competition is authorized in many of the states
served by BellSouth Telecommunications. (See "Competition" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Operating Environment and Trends of the Business -- Volumes of Business.")
LOCAL AND TOLL SERVICES
Charges for local services for the years ended December 31, 1993, 1992 and
1991 accounted for approximately 48%, 47% and 46%, respectively, of BellSouth
Telecommunications' operating revenues. Local services operations provide lines
from telephone exchange offices to subscribers' premises for the origination and
termination of telecommunications including the following: basic local telephone
service provided through the regular switching network; dedicated private line
facilities for voice and special services, such as transport of data, radio and
video, and foreign exchange services; switching services for customers' internal
communications through facilities owned by BellSouth Telecommunications;
services for data transport that include managing and configuring special
service networks; and dedicated low or high capacity public or private digital
networks. Other local services revenue is derived from intercept and directory
assistance, public telephones and various special and custom calling services.
BellSouth Telecommunications has the ability to offer certain enhanced
services through its network. Such offerings include various forms of data and
voice transmission, voice messaging and storage services and gateway
communications between customers and information services providers. The extent
to which these offerings can be profitably provided will depend on the degree of
market acceptance.
BellSouth Telecommunications provides intraLATA toll services within, but
not between, its 38 LATAs. Such toll services provided approximately 9%, 10% and
11% of BellSouth Telecommunications' operating revenues for the years ended
December 31, 1993, 1992 and 1991, respectively. These services include the
following: intraLATA service beyond the local calling area; Wide Area
Telecommunications Service ("WATS" or "800" services) for customers with highly
concentrated demand; and special services, such as transport of data, radio and
video.
BellSouth Telecommunications is subject to state regulatory authorities in
each state in which it provides telecommunications services with respect to
intrastate rates, services and other issues. Traditionally, BellSouth
Telecommunications' rates were set in each state in its service areas at levels
which were anticipated to generate revenues sufficient to cover its allowed
expenses and to provide an opportunity to earn a fair return on its capital
investment. Such a regulatory structure was satisfactory in a less competitive
era; however, BellSouth Telecommunications is currently advocating changes to
the regulatory processes responsive to the increasingly competitive
telecommunications environment. Modified forms of state regulation are in effect
in Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi and Tennessee.
Under such modified form of regulation, economic incentives are provided to
lower costs and increase productivity through the potential availability of
"shared" earnings over a benchmark rate of return. Generally, when levels above
targeted returns are reached, earnings are "shared" by providing refunds or rate
reductions to customers. The amounts of any such excess which may be retained
under some plans depend upon attaining mandated service standards, certain
productivity improvement provisions or both. Under some plans, if earnings fall
below a targeted minimum, additional earnings required to return to the bottom
of the allowed range can be obtained through rate increases. Sharing plans are
generally subject to renewal after two or three years, and may be subject to
modification prior to renewal.
4
<PAGE>
Despite the potential advantages offered by sharing plans, substantial rate
reductions have been incurred in connection with their adoption and operation.
Of the states in which these types of plans were in place, BellSouth
Telecommunications attained the earnings sharing range in Alabama, Kentucky,
Louisiana and Mississippi in 1993.
ALABAMA
An incentive regulation plan has been in effect in Alabama since December
1988, which provides for a return on average total capital* in the range of
11.65% to 12.30%. If earnings exceed 12.30%, sharing with customers may range
from 0% to 50%, depending upon whether certain service and efficiency
requirements are met.
In December 1993, in conjunction with approval of rate adjustments required
by its incentive plans, the Alabama Public Service Commission approved a
settlement of several outstanding issues. The settlement resulted in a net rate
reduction to the Company of $15.72 million.
FLORIDA
From 1988 through 1992, the Florida incentive plan provided for a return on
equity* of 11.5% to 16%, with earnings from 14% to 16% to be shared 40% by
BellSouth Telecommunications and 60% by customers. The sharing level was not
attained under the plan.
In 1993, BellSouth Telecommunications filed a petition to extend the
existing plan. In January 1994, after extensive proceedings and negotiations
between BellSouth Telecommunications, Public Counsel and intervenors, the
Florida Public Service Commission approved a settlement that extends incentive
regulation through 1996. Among other things, the terms of the settlement provide
for rate reductions of $55 million in February 1994, an additional $60 million
in July 1994, $80 million in October 1995 and $84 million in October 1996. The
settlement provides for other changes in service offerings and tariffs including
approximately $21 million in revenue reductions or increased expenses. Basic
service rates have been capped at their current levels through 1997, and
BellSouth Telecommunications has agreed not to propose any local measured
service on a statewide basis through the same time period. (See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Operating Environment and Trends of the Business -- Regulatory Environment --
State Regulation.")
The agreement establishes a 1994 return on equity* sharing level of 12% with
a cap of 14%, increasing in 1995 to a 12.5% sharing level with a cap of 14.5%.
Rates of return beyond 1995 would vary based upon changes in utility bond yields
but would change no more than 75 basis points from 1995 levels.
GEORGIA
The Georgia incentive plan adopted in 1990 provided that BellSouth
Telecommunications would retain all earnings up to a 14% return on equity*.
Subject to the attainment of service standards and productivity improvement
provisions, BellSouth Telecommunications could retain a portion of earnings
between 14% and 16%. The plan also provided for a reduction of rates if earnings
exceed 14% return on equity, even if the service standards and productivity
improvement provisions are met. The amount of any sharing and rate adjustments
would depend upon attaining certain service standards and productivity
improvements. BellSouth Telecommunications has yet to attain the sharing level
under the Georgia plan.
In December 1993, the Georgia Public Service Commission voted to extend the
plan for six months, effective January 1, 1994. Concurrent with the extension,
the Commission modified the return on equity at which sharing would occur from
14% to 13%.
-------------------------
* As defined in the plan for this state.
5
<PAGE>
KENTUCKY
Under the Kentucky incentive regulation plan, BellSouth Telecommunications
may earn a return on average total capital* in the range of 10.99% to 11.61%.
Earnings above 11.61% are subject to sharing. If the return on average total
capital falls below 10.99%, 50% of the shortfall may be recovered from
customers, and if the return falls below 9.49%, 75% of the shortfall may be
recovered. BellSouth Telecommunications achieved the sharing level during 1993
and reduced rates by $6.4 million in June. This plan will be reviewed by the
Kentucky Public Service Commission later in 1994.
LOUISIANA
In February 1992, in settlement of several years of regulatory and judicial
proceedings, BellSouth Telecommunications and the Louisiana Public Service
Commission agreed to a three year incentive regulation plan providing for an
immediate $55.0 million refund, a rate reduction of $31.4 million and an
authorized return on investment* in the range of 10.7% to 11.7%, with sharing of
earnings above 11.7% and below 12.7%. Based on 1992 results, BellSouth
Telecommunications reduced rates by $13.8 million in February and $7.8 million
in August 1993, reflecting its sharing obligation under the new plan. In January
1994, BellSouth Telecommunications filed a petition with the Louisiana
Commission requesting a price regulation plan. No hearings have been scheduled
on this proposal.
MISSISSIPPI
In June 1990, the Mississippi Public Service Commission authorized
implementation of an incentive plan that includes a return on average net
investment* ranging from 10.74% to 11.74% and provides that earnings above
11.74% and shortfalls below 10.74% would be shared with customers on a 50/50
basis. Rate reductions totaling $22.8 million on an annual basis were required
prior to implementation of the plan.
Additional revenue reductions in the amount of $12.8 million related to
intrastate access and area calling plan impacts became effective in January
1993. In June 1993, the Mississippi Commission renewed, through July 1, 1995 the
incentive plan and ordered BellSouth Telecommunications to reduce rates,
effective July 1993, based on a targeted 11.24% return.
Legislation has recently been passed in Mississippi which would allow price
regulation.
NORTH CAROLINA
In 1989, legislation was enacted in North Carolina authorizing the North
Carolina Public Service Commission to consider alternative forms of regulation.
No specific proposal has been approved or is pending. The North Carolina
Commission reviews BellSouth Telecommunications' rates annually.
In November 1993, the Commission approved one-time depreciation reserve
deficiency amortizations of $28.5 million and $25 million in 1993 and 1994,
respectively.
SOUTH CAROLINA
In August 1991, the South Carolina Public Service Commission authorized
implementation of an incentive plan providing for a return on equity* ranging
from 12.0% to 16.5%, and the sharing of earnings between 14.0% to 16.5%, on a
50/50 basis with customers. However, in August 1993, the South Carolina Supreme
Court ruled that the South Carolina Commission lacked the statutory authority to
approve incentive regulation plans. Legislation has been proposed in South
Carolina which would permit the Commission to adopt alternative forms of
regulation, including price regulation. In the interim, traditional rate of
return regulation is in effect.
TENNESSEE
In August 1993, the Tennessee Public Service Commission approved a three
year revised incentive regulation plan which lowered the sharing range as a
percentage return on average net investment* from 11.0% - 12.2% to 10.65% -
11.85%. Earnings between 11.85% - 15.85% must be shared
-------------------------
* As defined in the plan for this state.
6
<PAGE>
with ratepayers in varying degrees, depending on the quality of service. The
plan also provides for rate increases to cover up to 60% of the amount by which
earnings fall below 10.65%. The Tennessee Commission's decision was appealed by
several intervenors to the Tennessee Court of Appeals. The appeal, which is
pending, challenges the validity of the Commission's order and its rate of
return finding.
------------------------
In addition to the above matters, BellSouth Telecommunications is a party to
numerous proceedings pending before state regulatory bodies which involve, among
other things, terms and conditions of services provided by BellSouth
Telecommunications, rates charged for such services and relationships with
affiliates. No assurance can be given as to the outcome of any such matters.
ACCESS SERVICES
BellSouth Telecommunications provides access services by connecting the
communications networks of Interexchange Carriers with the equipment and
facilities of subscribers. These connections are provided by linking these
carriers and subscribers through the public switched network of BellSouth
Telecommunications or through dedicated private lines furnished by BellSouth
Telecommunications.
Access charges, which are payable both by Interexchange Carriers and
subscribers, provided approximately 29% of BellSouth Telecommunications'
operating revenues for the years ended December 31, 1993, 1992 and 1991,
respectively. These charges are designed to recover the costs of the common and
dedicated facilities and switching equipment used to connect networks of
Interexchange Carriers with the telephone company's local network. In addition,
an interstate monthly subscriber line access charge of $3.50 per line per month
applies to single-line business and residential customers. The interstate
subscriber access charge for multi-line business customers varies by state but
cannot exceed $6.00 per line per month.
In October 1990, the FCC authorized an alternative to traditional rate of
return regulation called "price caps," effective January 1, 1991, which is
mandatory for certain local exchange carriers ("LECs"), including BellSouth
Telecommunications and the other Operating Telephone Companies. In contrast to
traditional rate of return regulation, price caps limits the prices telephone
companies can charge for their services. The price cap plan limits aggregate
price changes to the rate of inflation minus a productivity offset, plus or
minus exogenous cost changes recognized by the FCC. The FCC expects price cap
regulation to provide LECs with enhanced incentives to increase productivity and
efficiency. Concurrent with the implementation of price caps, the FCC reduced
the allowed rate of return on interstate operations from 12.0% to 11.25%.
Those LECs which operate under price caps are allowed to elect annually by
April 1 a productivity offset factor of 3.3% or 4.3%. If the lower offset is
chosen, such carriers will be allowed to earn up to a 12.25% overall rate of
return without sharing. If such carriers earn between 12.25% and 16.25%, half of
the earnings in this range will be flowed through to customers in the form of a
lower price cap index in the following year. All earnings over 16.25% would be
flowed through to customers. If such carriers elect a 4.3% productivity offset,
all earnings below 13.25% may be retained, earnings up to 17.25% would be shared
and earnings over 17.25% would be flowed through to customers. BellSouth
Telecommunications elected to operate under the 3.3% productivity offset factor
for the period July 1, 1993 through June 30, 1994 and intends to elect the same
factor for the ensuing annual period.
In February 1994, the FCC initiated its review of the price cap plan
described in the preceding paragraph. The FCC identified three broad sets of
issues for examination including those related to the basic goals of price cap
regulation, the operation of price caps and the transition of local exchange
services to a fully competitive market. BellSouth Telecommunications believes
and will advocate that a revised price cap plan should be structured to provide
increased pricing flexibility for services as competition evolves in the
telecommunications markets. Any changes to the current plan are expected to be
effective January 1, 1995 or soon thereafter.
7
<PAGE>
State regulatory commissions have jurisdiction over charges related to the
provision of access to the Interexchange Carriers to complete intrastate
telecommunications. The state commissions have authorized BellSouth
Telecommunications to collect access charges from the Interexchange Carriers
and, in several states, from customers.
Open Network Architecture ("ONA") plans, permitting all users of the basic
network to interconnect to specific basic network functions and interfaces on an
unbundled and equal access basis for the provision of enhanced services, will
eliminate the FCC requirement that certain enhanced telecommunications services
be offered only through a separate subsidiary. The plans may be implemented when
ONA tariffs filed with the FCC become effective and are filed with the states in
which ONA services will be offered and the FCC is notified by the company that
it is prepared to offer the ONA services described in its plan. In November
1992, BellSouth Telecommunications filed a Notice of Initial ONA Implementation
and Petition for Removal of Structural Separation Requirement (the "Notice").
The Notice informed the FCC of BellSouth Telecommunications' completion of the
required steps for initial ONA implementation and asked the FCC to remove the
structural separation requirements imposed on enhanced services offerings. The
FCC granted the petition for structured relief in July 1993.
In addition to the above matters, BellSouth Telecommunications is a party to
numerous proceedings pending before the FCC which involve, among other things,
terms and conditions of services provided by BellSouth Telecommunications, rates
charged for such services and relationships with affiliates. No assurance can be
given as to the outcome of any such matters.
BILLING AND COLLECTION SERVICES
BellSouth Telecommunications provides, under contract and/or tariff, billing
and collection services for certain long distance services of AT&T and several
other Interexchange Carriers. The agreement with AT&T has been extended through
1996, subject to the right of AT&T to assume billing and collection for certain
of its services prior to the expiration of the agreement. Revenues from such
services are expected to decrease as AT&T and other carriers assume more direct
billing for their own services.
OPERATOR SERVICES
Directory assistance and local and toll operator services are provided by
BellSouth Telecommunications in its service areas. Toll operator services
include alternate billing arrangements, such as collect calls, third number
billing, person-to-person and calling card calls; dialing instructions; pre-
billed credit; and rate information. In addition, directory assistance is
provided for some Interexchange Carriers which do not directly provide such
services for their own customers.
OTHER BUSINESS OPERATIONS
Directory Publishing Fees
A percentage of the billed revenues from directory advertising operations of
BellSouth Advertising & Publishing Corporation, a wholly-owned subsidiary of
BellSouth, are paid as publication fees to BellSouth Telecommunications for
publishing rights and other services in its franchise areas. Such fees amounted
to approximately $616, $598, and $580 million in 1993, 1992 and 1991,
respectively.
SELLING, LEASING AND MAINTAINING EQUIPMENT
Through its subsidiaries, BellSouth Telecommunications sells, leases and
maintains CPE, computers and related office equipment. The Holding Companies,
AT&T and other substantial enterprises compete in the provision of CPE and other
services and products.
8
<PAGE>
COMPETITION
General
BellSouth Telecommunications is subject to increasing competition in all
areas of its business. Regulatory, legislative and judicial actions and
technological developments have expanded the types of available services and
products and the number of companies that may offer them. Increasingly, this
competition is from large companies which have substantial capital,
technological and marketing resources.
Developments during 1993 indicate that a technological convergence is
occurring in the telephone, cable and broadcast television, computer,
entertainment and information services industries. The technologies utilized and
being developed in these industries will enable companies to provide multiple
forms of communications offerings.
Current policies of Congress and the FCC strongly favor lowering legislative
and regulatory barriers to competition in the telecommunications industry.
Accordingly, the nature of competition which BellSouth Telecommunications will
face will depend to a large degree on regulatory actions at the state and
federal levels, decisions with respect to the MFJ and possible state and federal
legislation.
NETWORK AND RELATED SERVICES
LOCAL SERVICE
Many services traditionally provided exclusively by the LECs have been
deregulated, detariffed or otherwise opened for competition. For example, some
carriers and other customers with concentrated, high usage characteristics are
utilizing shared tenant services, private branch exchange (PBX) systems which
are owned by customers and provide internal switching functions without using
BellSouth Telecommunications' central office facilities, private line services
and other telecommunications links which bypass the switched networks of
BellSouth Telecommunications. An increasing number of private voice and data
communications networks utilizing fiber optic lines have been and are being
constructed in metropolitan areas, including Atlanta, Georgia, Charlotte, North
Carolina and Jacksonville, Miami and Orlando, Florida, which will offer certain
high volume users a competitive alternative to the public and private line
offerings of the LECs. In addition, the existing networks of cable television
systems are capable of carrying two-way interactive data messages and can be
configured to provide voice communications. Furthermore, wireless services, such
as cellular telephone and paging services and PCS services when operational
increasingly compete with wireline communications services.
BellSouth Telecommunications is presently vulnerable to bypass to the extent
that its access charges reflect subsidies for other services. Although BellSouth
Telecommunications believes that bypass has already occurred to a significant
degree in its nine-state area, it is difficult to quantify the lost revenues
since customers are not required to report to the telephone companies the
components of their telecommunications systems. In general, telephone company
telecommunications services in highly concentrated population and business areas
are more vulnerable to bypass.
MCI Communications Corporation has announced long range plans to invest more
than $20 billion to create and deliver a wide array of communications services.
Included in these plans is an investment of $2 billion to construct local
networks in major United States cities, including Atlanta, Georgia and other
cities in the Southeast. MCI has stated that it would connect directly to
customers and provide alternative local voice and data communications services.
Local service competition from MCI could emerge in Atlanta by mid-1994.
AT&T has announced an agreement to acquire McCaw Communications, Inc., the
largest domestic cellular communications company, which serves customers in 10
cities in BellSouth Telecommunications local wireline territory. Furthermore,
alliances are also being formed between other Holding Companies and large
corporations that operate cable television systems in many localities throughout
the United States, e.g., U S West, Inc./Time Warner Entertainment Co. L.P.,
Southwestern Bell Corp./
9
<PAGE>
Cox Cable Communications and NYNEX Corporation/Viacom, Inc. As technological and
regulatory developments make it more feasible for cable television to carry data
and voice communications, it is increasingly likely that BellSouth
Telecommunications will face competition within its region from the other
Holding Companies through their cable television venture arrangements.
U S West and Time Warner have announced plans to upgrade certain of their
cable TV systems to full-service networks which would support new interactive
and telephone services that will compete with the incumbent local exchange
carriers. The first of these full-service networks is being built in Orlando,
Florida and is expected to begin offering services this year.
Tele-Communications, Inc. has announced plans to offer similar services in South
Florida and Louisville, Kentucky.
ACCESS SERVICE
The FCC has adopted rules requiring local exchange carriers to offer
expanded interconnection for interstate special and switched transport.
BellSouth Telecommunications will be required to permit competitive carriers and
customers to terminate their own transmission facilities in its central office
buildings. Virtual collocation agreements may also be negotiated between
carriers. Various aspects of these rules have been challenged by a number of
carriers including BellSouth Telecommunications. The effects of the rules would
be to increase competition for access transport. It is uncertain whether the
local exchange carriers will receive the pricing flexibility necessary to
compete effectively with alternative access providers.
TOLL SERVICE
A number of firms compete with BellSouth Telecommunications for intraLATA
toll business by reselling toll services obtained at bulk rates from BellSouth
Telecommunications or, subject to the approval of the applicable state public
utility commission, providing toll services over their own facilities.
Commissions in the states in BellSouth Telecommunications' operating territory
have allowed the latter type of intraLATA toll calling, whereby the
Interexchange Carriers are assigned a multiple digit access code ("10XXX") which
customers may dial to place intraLATA toll calls through facilities of such
Interexchange Carriers. The Kentucky Commission has concluded that competing
carriers should be allowed to provide intraLATA toll presubscribed calling with
a single digit access code (1+ or 0+) but is considering how and when such
authorization should be implemented.
PERSONAL COMMUNICATIONS SERVICES (PCS)
The FCC is currently putting a licensing process in place that will allocate
160 megahertz for broadband PCS, with 120 megahertz being given to licensed
operators, 20 megahertz reserved for unlicensed voice operations and 20
megahertz reserved for unlicensed data operations. The FCC is developing rules
to award the licensed spectrum on an auction basis, with up to 7 licenses per
geographic area. It is anticipated that the auctions could begin as early as the
Fall of 1994. The federal government hopes to raise $10 billion auctioning off
the PCS spectrum. BellSouth has conducted several trials of PCS-like services
under experimental licenses from the FCC, but has made no final determination of
the scope of its participation in the PCS licensing auctions. It is anticipated
that substantial capital would be required to bid on licenses and to construct
the systems should BellSouth Telecommunications elect to participate. Although
the exact nature and scope of the services to be offered by PCS service
providers has yet to be determined, BellSouth Telecommunications anticipates
that its local wireline and telephone business may experience additional
competition from PCS service providers in the future.
BELLSOUTH TELECOMMUNICATIONS COMPETITIVE STRATEGY
REGULATORY AND LEGISLATIVE CHANGES
The states in BellSouth Telecommunications' service area currently provide
for some form of regulation of earnings, a regulatory framework that BellSouth
Telecommunications believes is not appropriate for the increasingly competitive
telecommunications environment. Accordingly, BellSouth Telecommunications'
primary regulatory focus continues to be directed toward modifying the
regulatory process to one that is more closely aligned with changing market
conditions and overall
10
<PAGE>
public policy objectives. As an alternative to the current regulatory process,
BellSouth Telecommunications believes that price regulation, whereby prices of
basic local exchange service are directly regulated and prices for other
products and services are based on market factors, is a logical progression
toward regulatory flexibility and is fair to consumers. As such, BellSouth
Telecommunications intends to pursue implementation of price regulation plans
through filings with state regulatory commissions or through legislative
initiatives.
BellSouth Telecommunications is also seeking relief in the courts and before
Congress and regulatory agencies from current laws, regulations and judicial
restrictions (including the MFJ) for the provision of voice, data and video
communications throughout its wireline service territory and elsewhere. It is
furthermore advocating legislative and regulatory initiatives which would
eliminate or modify restrictions to its current and future business offerings.
(See "Legislation.") Competitors and other interest groups with substantial
resources oppose many of these initiatives. The ultimate outcome and timing of
any relief obtained cannot be predicted with certainty.
Technological changes and the effects of competition reduce the economic
useful lives of BellSouth Telecommunications' fixed assets. As competition
increases in both the exchange access and local exchange markets, the economic
lives of related properties should continue to decrease. Therefore, BellSouth
Telecommunications is examining the rates of depreciation of fixed assets
authorized by the FCC and state regulatory commissions to ensure that these
rates are adequate to recover fixed asset costs in a timely fashion. The FCC and
the state commissions represcribe depreciation rates for BellSouth
Telecommunications at three-year intervals.
ENTRY INTO NEW MARKETS
Notwithstanding the risks associated with increased competition, BellSouth
Telecommunications will have the opportunity to benefit from entry into new
business markets. BellSouth Telecommunications believes that in order to remain
competitive in the future, it must aggressively pursue a corporate strategy of
expanding its offerings beyond its traditional businesses. These offerings may
include information services, interactive communications and cable television
and other entertainment services.
RESTRUCTURING
BellSouth Telecommunications is restructuring its telephone operations by
streamlining its fundamental processes and work activities to better respond to
an increasingly competitive business environment. The restructuring is expected
to improve overall responsiveness to customer needs, permit more rapid
introduction of new products and services and reduce costs. A primary objective
of this restructuring is the plan to downsize BellSouth Telecommunications'
workforce by 10,200 by the end of 1996.
LEGISLATION
There are a number of bills pending in Congress that, if enacted into law,
could significantly affect BellSouth Telecommunications' business operations and
opportunities. The provisions of the bills set the terms, conditions,
obligations and time frames under which the Operating Telephone Companies would
be permitted 1) to offer interLATA services, 2) to manufacture CPE, 3) to
manufacture and provide telecommunications equipment, 4) to provide video
programming in their telephone service territories and 5) to offer electronic
publishing services or alarm monitoring services. They also would address the
need to preserve universal service in a competitive telecommunications
marketplace and would preempt state laws prohibiting competition for intrastate
telephone services. In the House of Representatives, these items are addressed
in the provisions of two bills, H.R. 3626 and H.R. 3636. In the Senate, they are
contained in S.1822. H.R. 3636 as currently drafted also specifies that a
Federal/ State Joint Board should require that large carriers like BellSouth
Telecommunications be subject to alternative or price regulation rather than
traditional rate of return regulation.
11
<PAGE>
The House has held several hearings on the House bills, and the House
Judiciary Committee and the House Energy and Commerce Committee have each
adopted a version of H.R. 3626, and the House Energy and Commerce Committee has
adopted H.R. 3636. The Rules Committee will decide how and when these bills will
proceed to the floor of the House.
RESEARCH AND DEVELOPMENT
The services and products of BellSouth Telecommunications are in a highly
technological field. BellSouth Telecommunications has expended $43.2, $46.3, and
$42.0 million in 1993, 1992 and 1991, respectively, on company-sponsored
research and development activities. The majority of this activity is conducted
at Bell Communications Research, Inc. ("Bellcore"), one-seventh of which is
owned by BellSouth, through BellSouth Telecommunications, with the remainder
owned by the other Holding Companies. Bellcore provides research and development
and other services for its owners and is the central point of contact for
coordinating the Federal government's telecommunications requirements relating
to national security and emergency preparedness.
LICENSES AND FRANCHISES
BellSouth Telecommunications' local exchange business is typically provided
under certificates of public convenience and necessity granted pursuant to state
statutes and public interest findings of the various public utility commissions
of the states in which BellSouth Telecommunications does business. These
certificates provide for a franchise of indefinite duration, subject to the
maintenance of satisfactory service at reasonable rates.
BellSouth Telecommunications owns or has licenses to use all patents,
copyrights, licenses, trademarks and other intellectual property necessary for
it to conduct its present business operations. It is not anticipated that any of
such property will be subject to expiration or non-renewal of rights which would
materially and adversely affect BellSouth Telecommunications or its
subsidiaries.
EMPLOYEES
On December 31, 1993, 1992, and 1991 BellSouth Telecommunications employed
approximately 81,400, 82,900 and 82,200 persons, respectively. About 73% of
these employees at December 31, 1993 were represented by the Communications
Workers of America (the "CWA"), which is affiliated with the AFL-CIO.
In September 1992, the CWA ratified new three-year contracts with BellSouth
Telecommunications covering about 58,000 employees. These contracts included
provisions for wage increases, a cost-of-living adjustment and an increase in
the team incentive award that will total an estimated 11.3% over the three year
contract period.
In November, 1993, BellSouth Telecommunications announced plans to reduce
its work force by approximately 10,200 employees by the end of 1996 through
normal attrition, transitional programs, other voluntary options and involuntary
separations.
12
<PAGE>
ITEM 2. PROPERTIES
GENERAL
BellSouth Telecommunications' properties do not lend themselves to
description by character and location of principal units. BellSouth
Telecommunications' investment in property, plant and equipment consisted of the
following at December 31:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Outside Plant..................................................... 46% 47%
Central Office Equipment.......................................... 37% 36%
Land and Buildings................................................ 7% 7%
Station Equipment................................................. 2% 2%
Other............................................................. 8% 8%
--- ---
100% 100%
--- ---
--- ---
</TABLE>
Outside plant consists of connecting lines (aerial, underground and buried
cable) not on customers' premises, the majority of which are on or under public
roads, highways or streets while the remainder are on or under private property.
Central office equipment consists of analog switching equipment, digital
electronic switching equipment and circuit equipment. Land and buildings are
occupied principally by central offices. Station equipment consists of embedded
intrasystem wiring, substantially all of which is on the premises of customers.
Substantially all of the installations of central office equipment and
administrative offices are located in buildings and on land owned by BellSouth
Telecommunications. Many garages, business offices and telephone service centers
are in leased quarters.
BellSouth Telecommunications' customers are now served by electronic
switching systems that provide a wider variety of services than their mechanical
predecessors. The BellSouth Telecommunications network is in transition from an
analog to a digital network, which provides capabilities for BellSouth
Telecommunications to furnish advanced data transmission and information
management services.
PROPERTY ADDITIONS
Property additions include gross additions to property, plant and equipment
having an estimated service life of one year or more, plus the incidental costs
of preparing the asset for its intended use. In the case of constructed assets,
an amount related to the cost of debt and equity used in the construction of an
asset is capitalized as part of the asset when the construction period is in
excess of one year. Property additions also include assets acquired by means of
entering into a capital lease agreement, gross additions to operating lease
equipment and reused materials.
Significant additions to property, plant and equipment will be required to
meet the demand for telecommunications services and to further improve such
services. The total investment in telephone plant has increased from about
$32,877 million at January 1, 1989 to about $40,102 million at December 31,
1993, including the effects of retirements and property transferred at
divestiture, but not including deductions of accumulated depreciation at either
date.
BellSouth Telecommunications' property additions since January 1, 1989, were
approximately as follows:
<TABLE>
<CAPTION>
MILLIONS
---------
<S> <C>
1989..................................... $ 3,036
1990..................................... $ 3,055
1991..................................... $ 2,890
1992..................................... $ 2,927
1993..................................... $ 3,060
</TABLE>
13
<PAGE>
In 1993, BellSouth Telecommunications generated substantially all of its
funds for property additions internally; substantially all of such property
additions are expected to be financed through internally generated funds in
1994.
BellSouth Telecommunications currently projects property additions to be
approximately $3,000 million for 1994. The continued modernization of BellSouth
Telecommunications' network is necessary to meet the needs of customers and
competitive demands. (See "Competition.") Population and economic expansion is
projected by BellSouth Telecommunications in certain growth centers within its
nine-state area during the next five to ten years. Expansion of the network will
be needed to accommodate such projected growth.
ENVIRONMENTAL MATTERS
BellSouth Telecommunications is subject to a number of environmental matters
as a result of its operations and the shared liability provisions in the POR. As
a result, BellSouth Telecommunications expects that it will be required to
expend funds to remedy certain facilities, including those Superfund sites for
which BST has been named as a potentially responsible party, for the remediation
of sites with underground fuel storage tanks and other expenses associated with
environmental compliance. At December 31, 1993, BST's recorded liability related
primarily to remediation of these sites was $35.5 million.
BellSouth Telecommunications continually monitors its operations with
respect to potential environmental issues, including changes in legally mandated
standards and remediation technologies. BellSouth Telecommunications' recorded
liability reflects those specific issues where remediation activities are
currently deemed to be probable and where the cost of remediation is estimable.
BellSouth Telecommunications continues to believe that expenditures in
connection with additional remedial actions under the current environmental
protection laws or related matters will not be material.
ITEM 3. LEGAL PROCEEDINGS
The MFJ and the related POR provide for the recognition and payment of
liabilities by AT&T and the Operating Telephone Companies that are attributable
to pre-divestiture events but that did not become certain until after
divestiture. These contingent liabilities relate principally to litigation and
other claims with respect to the former Bell System's rates, taxes, contracts
and torts (including business torts, such as alleged violations of the antitrust
laws). Contingent liabilities that are attributable to pre-divestiture events
are shared by AT&T and the Operating Telephone Companies in accordance with
formulae prescribed by the POR, whether or not an entity was a party to the
proceeding and regardless of whether an entity was dismissed from the proceeding
by virtue of settlement or otherwise. BellSouth Telecommunications' share of
these liabilities to date has not been material to its financial position or
results of operations for any period.
BellSouth Telecommunications and its subsidiaries are subject to numerous
claims and proceedings arising in the ordinary course of business involving
allegations of personal injury, breach of contract, anti-competitive conduct and
other matters. While complete assurance cannot be given as to the outcome of any
contingent liabilities, in the opinion of BellSouth Telecommunications, any
financial impact to which BellSouth Telecommunications is subject is not
expected to be material in amount to BellSouth Telecommunications' operating
results or its financial position.
14
<PAGE>
PART II
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating Revenues....................... $13,580 $13,182 $12,768 $12,762 $12,346
Operating Expenses (1)................... 11,591 10,258 10,046 9,859 9,419
--------- --------- --------- --------- ---------
Operating Income......................... 1,989 2,924 2,722 2,903 2,927
Interest Expense......................... 562 583 650 626 652
Other Income, net........................ 21 75 1 27 21
Provision for Income Taxes............... 461 801 647 708 691
Extraordinary Loss, net of tax........... (87) (41) -- -- (22)
Accounting Change, net of tax............ (65) -- -- -- --
--------- --------- --------- --------- ---------
Net Income............................. $ 835 $ 1,574 $ 1,426 $ 1,596 $ 1,583
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Assets............................. $27,095 $26,442 $26,322 $26,511 $26,447
Capital Expenditures..................... $ 2,995 $ 2,846 $ 2,747 $ 2,938 $ 2,987
Long-Term Debt........................... $ 6,547 $ 6,336 $ 6,403 $ 6,440 $ 6,433
Ratio of Earnings to Fixed Charges (2)... 3.17 4.53 3.86 4.23 4.15
Return to Average Common Equity.......... 7.32% 13.78% 12.49% 14.13% 14.40%
Debt Ratio at End of Period.............. 41.29% 38.46% 38.17% 37.83% 38.38%
Employees................................ 81,415 82,866 82,245 85,967 86,728
Business Volumes (In Millions): (3)
Network Access Lines in Service:
Residence.............................. 13.7 13.3 12.9 12.6 12.2
Business............................... 5.4 5.1 4.8 4.6 4.4
Other.................................. .2 .2 .3 .3 .3
--------- --------- --------- --------- ---------
Total................................ 19.3 18.6 18.0 17.5 16.9
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Access Minutes of Use:
Interstate............................. 53,345.0 50,546.4 47,255.3 44,903.3 41,464.2
Intrastate............................. 15,260.9 13,994.2 13,237.7 12,119.5 11,252.7
Toll Messages............................ 1,251.0 1,280.3 1,387.1 1,457.5 1,462.3
<FN>
- ------------------------
(1) Operating Expenses for 1993 include a charge for restructuring of $1,136.4,
which reduced net income by $696.6. See Note J to the Consolidated
Financial Statements.
(2) For the purpose of this ratio: (i) earnings have been calculated by adding
income before income taxes, interest expense and such portion of rental
expense representative of the interest factor on such rentals; (ii) fixed
charges are comprised of total interest expense and such portion of rental
expense representative of the interest factor on such rentals.
(3) Prior period operating data are revised at later dates to reflect the most
current information. The above information reflects the latest data
available for the periods indicated.
</TABLE>
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(Dollars in Millions)
RESULTS OF OPERATIONS -- 1993 RESULTS COMPARED TO 1992
BellSouth Telecommunications, Inc. ("BellSouth Telecommunications") reported
net income of $835.0 for the year ended December 31, 1993, a decrease of $739.3
(47.0%) compared to 1992. The decrease was primarily attributable to a charge of
$696.6 for the restructuring of telephone operations (see Note J). Other charges
in 1993 that contributed to the decrease were $86.6 for debt refinancings (see
Note E), $64.8 for the adoption of Statement of Financial Accounting Standards
("SFAS") No. 112 (see Note H), $47 for the initial impact of a regulatory
settlement in Florida, approximately $24 related to the increase in the Federal
statutory income tax rate for corporations, exclusive of the tax benefit
associated with the restructuring charge, and approximately $25 associated with
severe weather conditions during first quarter 1993. The decreases were also
attributable in part to the inclusion in 1992's results of gains of $39.5 and
$32.9, respectively, from the settlement of a Federal income tax matter and the
settlement of prior year regulatory issues. The 1993 decreases were partially
offset by overall growth of operating revenues, driven by an improvement in key
business volumes, and the inclusion in 1992 of charges for debt refinancing and
Hurricane Andrew.
OPERATING REVENUES
Operating Revenues increased $397.5 (3.0%) in 1993 compared to 1992
primarily due to a $341.3 (5.5%) increase in Local Service revenue and smaller
increases in Interstate Access, Intrastate Access and Other revenues. These
increases were partially offset by a $29.3 (2.3%) decrease in Toll revenues.
See "Volumes of Business."
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Local Service............................. $6,577.3 $6,236.0 5.5%
</TABLE>
Local service revenues reflect amounts billed to customers for local
exchange services, which include connection to the network and secondary central
office feature services, such as custom calling features and custom dialing
packages. (Paging and other mobile service revenues and revenues from cellular
interconnection are included in Other operating revenues for both periods
presented.)
The increase in 1993 revenues of $341.3 (5.5%) was primarily attributable to
an increase of 683,000 access lines since December 31, 1992 and a $42.0 increase
from secondary central office services. In addition, the effects of a $27.9
refund in Florida during 1992 and revenue shifts from toll to local due to
expanded local area calling plans, including a plan implemented in Louisiana in
1992, contributed to the increase in 1993 (see "Toll"). The increase in revenues
from local area calling plans is primarily attributable to access line growth.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Interstate Access......................... $2,991.2 $2,945.6 1.5%
</TABLE>
Interstate access revenues result from the provision of access services to
interexchange carriers to provide telecommunications services between states.
Interstate access revenues increased $45.6 (1.5%) in 1993. The increase for 1993
reflects increased rates effective July 1, 1993 in conjunction with the
selection of a 3.3% productivity offset factor under the Federal Communications
Commission's ("FCC") price cap plan, growth in minutes of use and increases in
end user charges attributable to growth in the number of access lines in
service. The effect of these increases was substantially offset by decreased net
settlements with the National Exchange Carriers Association and revenue
deferrals under the FCC's price cap plan. Since BellSouth Telecommunications'
earnings are currently in the sharing range of the FCC's price cap plan and
because of other factors, significant revenue growth in this category is not
likely.
See "Operating Environment and Trends of the Business."
16
<PAGE>
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Intrastate Access......................... $881.9 $871.8 1.2 %
</TABLE>
Intrastate access revenues result from the provision of access services to
interexchange carriers which provide telecommunications services between LATAs
within a state. Revenues increased $10.1 (1.2%) in 1993. The increase, due
primarily to growth in minutes of use, was substantially offset by rate
reductions since December 31, 1992.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Toll...................................... $1,219.5 $1,248.8 (2.3%)
</TABLE>
Toll revenues are received from the provision of long-distance services
within (but not between) LATAs. These services include intraLATA service beyond
the local calling area; Wide Area Telecommunications Service ("WATS" or "800"
services) for customers with highly concentrated demand; and special services,
such as transport of voice, data and video. Toll revenues decreased $29.3 (2.3%)
in 1993. The decrease reflects rate reductions since December 31, 1992 and a
decline in toll message volumes largely attributable to the expansion of local
area calling plans which have the effect of shifting revenues from Toll to Local
Service. The decrease was partially offset by revenue increases due to optional
calling plans and independent company settlements. The overall decline in toll
revenues is expected to continue over the long term.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Other..................................... $1,909.7 $1,879.9 1.6%
</TABLE>
Other revenues include revenues from publishing rights fees, customer
premises equipment sales and maintenance services, billing and collection
services, cellular interconnect services and other nonregulated services
(primarily inside wire services). Other revenues increased $29.8 (1.6%) in 1993
primarily due to an increase in publishing rights fees and revenues from
nonregulated services, due in part to higher demand. Billing and collection
revenues also increased due to the effect of nonrecurring adjustments; however,
such revenues are expected to decline over the long term due to interexchange
carriers' assuming more direct billing for their own services. The overall
increase was offset by the effect of reclassifying in 1992 a $27.9 Florida
refund to ratepayers from Other revenues to Local Service and the inclusion in
1992 of $52.7 for the settlement of prior year regulatory issues.
OPERATING EXPENSES
Operating expenses increased $1,332.0 (13.0%) during 1993 primarily due to a
pre-tax charge of $1,136.4 for restructuring of the telephone operations.
Adjusted for the effect of the restructuring charge, Operating expenses
increased $195.6 (1.9%) due to expenses associated with improved business
volumes, higher levels of salaries and wages, a regulatory settlement in
Florida, and expenses attributable to severe weather conditions in the first
quarter of 1993. The increase was partially offset by decreased overtime
compensation and the inclusion in 1992 of expenses related to Hurricane Andrew.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Cost of Services and Products............. $5,169.4 $5,050.6 2.4%
</TABLE>
Cost of Services and Products includes operating expenses associated with
network support and maintenance of telecommunications property, plant and
equipment, material and supplies expense, cost of tangible goods sold and other
expenses associated with the cost of providing services. Cost of services and
products increased $118.8 (2.4%) during 1993. This increase was due to increased
expenses associated with volume growth, approximately $40 of expenses related to
severe weather conditions during first quarter 1993, network service improvement
activities, higher levels of base salary and wage expenses resulting from annual
increases for management and craft employees and an increase in employee
benefits expense, including amounts reclassified from Selling, General and
Administrative. The increase in employee benefits expense was driven by the
higher overall cost of medical services and an increase of $26 due to the
adoption of SFAS No. 106, "Employers' Accounting
17
<PAGE>
for Postretirement Benefits Other Than Pensions," partially offset by a decrease
in pension expense. Pension expense is expected to decrease further in 1994 due
primarily to the effect of modifying the benefit level under the recently
adopted cash balance pension plan for management employees and reevaluating
certain actuarial assumptions (see Note H). Other postretirement benefit
expenses for 1994 are expected to increase due to the effect of changes in
certain actuarial assumptions. The overall expense increase for 1993 was
partially offset by reduced expenses for overtime compensation, rents, software
license fees and expenses related to Hurricane Andrew reflected in 1992.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Depreciation.............................. $2,900.0 $2,859.9 1.4%
</TABLE>
Depreciation expense increased $40.1 (1.4%) during 1993. The increase was
partially attributable to higher levels of property, plant and equipment since
December 31, 1992 resulting from continued growth in the customer base and
approximately $20 of additional depreciation expense related to extraordinary
property retirements in conjunction with a regulatory settlement in Florida.
Higher intrastate depreciation rates for Mississippi and higher interstate
depreciation rates for Alabama, Kentucky, Louisiana, Mississippi and Tennessee,
all retroactive to January 1, 1993, also contributed to the increase. The 1993
increase was partially offset by the continued expiration of inside wire and
reserve deficiency amortizations and reduced depreciation expense in Florida and
Alabama resulting from represcription.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Selling, General and Administrative....... $2,384.7 $2,348.0 1.6%
</TABLE>
Selling, General and Administrative expenses include operating expenses
related to sales activities such as salaries, commissions, benefits, travel,
marketing and advertising expenses. Also included are the provision for
uncollectibles and research and development costs.
Selling, General and Administrative expenses increased $36.7 (1.6%) in 1993.
The increase was primarily attributable to approximately $55 for the initial
impact of a regulatory settlement in Florida, higher levels of salaries, wages
and taxes other than income taxes and an increase of $11 due to the adoption of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The 1993
increase was partially offset by the effect of a reclassification of certain
benefit expenses to Cost of Services and Products and a decrease in advertising
expense.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ---------
<S> <C> <C> <C>
Restructuring Charge...................... $1,136.4 -- --
</TABLE>
During 1993, BellSouth Telecommunications recognized a business
restructuring charge of $1,136.4. The restructuring is being undertaken to
redesign and streamline the fundamental processes and work activities of the
telephone operations to better respond to an increasingly competitive business
environment. The restructuring is expected to improve overall responsiveness to
customer needs, permit more rapid introduction of new products and services and
reduce costs.
As a part of the restructuring, BellSouth Telecommunications plans to
consolidate and centralize its existing operations. BellSouth Telecommunications
plans to establish a single point of contact and accountability for the receipt,
analysis and resolution of customer installation, repair activities and service
activation. As a result, 288 existing operations centers will be consolidated
into 80 locations. Data management centers used to support company operations
will be reduced from 11 to 6. In addition, customer service processes and
systems will be designed to provide one-number access, specific appointment
times, on-line and real-time access to customer records and immediate service
activation where facilities are already in place.
18
<PAGE>
The material components of the $1,136.4 charge relate to the downsizing of
the existing workforce by 10,200 employees through 1996. These components
include $368.2 for separation payments and relocations of remaining employees,
$342.8 for the consolidation and elimination of certain operations facilities
and $425.4 for enabling changes to information systems, primarily those used to
provide services to existing customers.
Substantially all of the restructuring charge is expected to require cash
payments in future periods. Exclusive of capital requirements, cash payments
related to restructuring for 1994, 1995 and 1996 are expected to be
approximately $500, $350 and $220, respectively. In addition, future capital
expenditures associated with the overall restructuring are estimated to be
approximately $650. The cash requirements associated with the restructuring
activities, including related capital expenditures, will be provided primarily
from BellSouth Telecommunications' operations and, if necessary, from external
sources.
BellSouth Telecommunications reduced its overall workforce by approximately
1,300 employees in 1993 following implementation of the restructuring plan.
Workforce reductions for 1994, 1995 and 1996 are expected to be approximately
3,700, 2,900 and 2,300, respectively. BellSouth Telecommunications expects that
the restructuring will result in cost savings beginning in 1994 due to the
workforce reductions. Once the restructuring is completed, annual cost savings
are expected to be approximately $600 due primarily to reduced employee-related
expenses.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- -------------
<S> <C> <C> <C>
Interest Expense................................ $562.6 $583.3 (3.5 %)
</TABLE>
Interest expense includes interest on debt, certain other accrued
liabilities and capital leases, offset by allowance for funds used during
construction, which is capitalized as a cost of installing equipment and
constructing plant. Interest expense decreased $20.7 (3.5%) in 1993. The
decrease was due primarily to a decline in interest rates on borrowings, both
short and long term, including the impact of refinancings of long-term debt at
lower interest rates. The decrease was offset by a higher average level of
short-term borrowings. (See Notes E and K.)
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- -------------
<S> <C> <C> <C>
Other Income, net............................... $21.4 $75.5 (71.7 %)
</TABLE>
Other income, which primarily includes interest and dividend income,
decreased $54.1 (71.7%) during 1993 due to the inclusion in 1992 of $56.6 of
interest income that resulted from a tax settlement with the Internal Revenue
Service.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- -------------
<S> <C> <C> <C>
Provision for Income Taxes...................... $461.5 $800.8 (42.4 %)
</TABLE>
Income tax expense decreased $339.3 (42.4%) in 1993 due to the impact of the
restructuring charge, which reduced tax expense by $439.8. The decrease was
partially offset by the impact of the Omnibus Budget Reconciliation Act of 1993,
including the increase in the Federal statutory income tax rate for
corporations, which, exclusive of the tax benefit associated with the
restructuring charge, increased tax expense by approximately $24.
BellSouth Telecommunications' effective tax rates were 31.9% and 33.1% in
1993 and 1992, respectively. A reconciliation of the statutory Federal income
tax rates to these effective tax rates is provided in Note L. A discussion of
the adoption of SFAS No. 109, "Accounting for Income Taxes," also is included
therein.
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS
REGULATORY ENVIRONMENT. In providing telecommunications services, BellSouth
Telecommunications is subject to regulation by both state and federal regulators
with respect to rates, services and other issues. While the states in BellSouth
Telecommunications' service area currently provide for some form of regulation
of earnings, as discussed below, BellSouth Telecommunications believes that
19
<PAGE>
the existing regulatory framework is not appropriate for the increasingly
competitive telecommunications environment. Accordingly, BellSouth
Telecommunications' primary regulatory focus continues to be directed toward
modifying the regulatory process to one that is more closely aligned with
changing market conditions and overall public policy objectives. As an
alternative to the current regulatory process, BellSouth Telecommunications
believes that price regulation, whereby prices of basic local exchange service
are directly regulated and prices for other products and services are based on
market factors, is a logical progression in regulatory flexibility and is fair
to consumers. As such, BellSouth Telecommunications intends to pursue
implementation of price regulation plans through filings with state regulatory
commissions or through legislative initiatives.
STATE REGULATION
Seven of the nine states in which BellSouth Telecommunications operates are
now under some alternative form of regulation other than traditional rate of
return regulation. The seven states are Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi and Tennessee. These state plans are designed to provide
BellSouth Telecommunications with economic incentives to improve cost controls
and general efficiency in the form of shared earnings over benchmark rates of
return. The plans in Georgia and Kentucky are scheduled to expire in 1994.
BellSouth Telecommunications attained the earnings sharing range in Alabama,
Kentucky, Louisiana and Mississippi at certain times during 1993.
For a part of 1993, South Carolina also operated under a form of alternative
regulation. However, in August 1993, the South Carolina Supreme Court ruled that
the South Carolina Public Service Commission (the "SCPSC") lacked the statutory
authority to approve incentive regulation plans of the type under which
BellSouth Telecommunications had been operating since 1992. Legislation has been
proposed in South Carolina which would permit the SCPSC to adopt alternative
forms of regulation including price regulation. In the interim, traditional rate
of return regulation is in effect in South Carolina.
In January 1994, the Florida Public Service Commission approved a settlement
reached by BellSouth Telecommunications and Florida's Office of Public Counsel
related to pending rate proceedings initially filed by BellSouth
Telecommunications in July 1992 and other consolidated matters. This settlement
ended outstanding rate case and consolidated issues in Florida and extended the
incentive regulation plan through at least 1996. Under the terms of the
settlement, BellSouth Telecommunications was required to recognize in 1993
business all remaining deferred expenses related to Hurricane Andrew and to
record expenses associated with extraordinary asset retirements, also related to
Hurricane Andrew. The aggregate impact of these items was approximately $75,
which reduced BellSouth Telecommunications' net income for 1993 by approximately
$47. The terms of the settlement also required BellSouth Telecommunications to
reduce rates by $55 in February 1994 and will require reductions of an
additional $60 in July 1994, $80 in October 1995 and $84 in October 1996. The
settlement provides for other changes in service offerings and tariffs including
approximately $21 in revenue reductions or increased expenses. Certain other
service rates have been capped at their current levels through 1997, and
BellSouth Telecommunications has agreed not to propose any local measured
service on a statewide basis through the same time period.
FEDERAL REGULATION
At the national level, BellSouth Telecommunications has been operating under
price cap regulation since January 1, 1991. In contrast to regulation which
limits the rate of return that can be achieved, price cap regulation limits the
prices telephone companies can charge for use of their services. The current FCC
plan allows for the sharing of earnings over a benchmark range of earnings. This
benchmark is dependent upon the productivity offset factor chosen annually by
the carrier. During the price cap plan's annual election period in 1993,
BellSouth Telecommunications selected a productivity offset factor of 3.3% which
increased access rates more than they would otherwise have
20
<PAGE>
been had the 4.3% factor been selected; however, selection of this lower
productivity factor provides for a lower allowed return before sharing is
required. As of December 31, 1993, BellSouth Telecommunications' recorded
liability for estimated sharing was $45.6.
In February 1994, the FCC initiated its review of the current price cap
plan. Under a notice of proposed rulemaking, the FCC identified for examination
three broad sets of issues including those related to the basic goals of price
cap regulation, the operation of price caps, and the transition of local
exchange services to a fully competitive market. BellSouth Telecommunications
believes and will advocate that a revised price cap plan should be structured to
provide increased pricing flexibility for services as competition evolves in the
telecommunications markets. Any changes to the current plan are expected to be
effective January 1, 1995 or soon thereafter.
ECONOMY. The nine-state region served by BellSouth Telecommunications'
wireline telephone business, as a whole, posted solid economic gains in 1993,
while continuing economic slumps on the West Coast and in the Northeast kept the
national economy sluggish for much of the year. Employment growth averaged 2.1%
in the region in 1993, slower than the 4% annual rate experienced in the 1980's,
but still above the national average of 1.6%. Manufacturing employment in the
region grew slightly during 1993 while the nation lost approximately 180,000
manufacturing jobs. Services employment increased about 4% to lead the region's
growth. Employment growth is expected to improve further in 1994. Residential
construction growth moved back above pre-recession levels with housing starts in
the region up 12% over the year. Housing demand is expected to remain strong in
1994. The region's relatively strong economy along with its attractive climate
have kept net in-migration near 400,000 per year, boosting the demand for
telecommunications services. However, increasing competition makes BellSouth
Telecommunications' financial performance more susceptible to changes in the
economy than previously, as its operations reflect the more competitive
environment and greater elasticity in demands for its products and services.
VOLUMES OF BUSINESS.
Network Access Lines in Service at December 31 (Thousands):
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Residence....................................... 13,691.4 13,298.3 3.0%
Business........................................ 5,388.3 5,088.1 5.9%
Other........................................... 252.9 263.2 (3.9%)
---------- ----------
Total......................................... 19,332.6 18,649.6 3.7%
---------- ----------
---------- ----------
</TABLE>
The total number of access lines in service increased by 683,000 over 1992,
representing a 3.7% increase, an improvement over the 3.4% rate of increase for
1992 over 1991. The overall increase, led by growth in Florida, Georgia, North
Carolina and Tennessee, was primarily attributable to continued economic
improvement, including expanding employment in BellSouth Telecommunications'
nine-state region and an increase in the number of second lines in residences.
While the overall growth rate for residence lines remained constant at 3.0%, the
growth rate for business lines continued to increase, reaching 5.9% in 1993,
compared to 5.1% in 1992.
Access Minutes of Use (Millions):
<TABLE>
<CAPTION>
1993 1992 % CHANGE
---------- ---------- ------------
<S> <C> <C> <C>
Interstate...................................... 53,345.0 50,546.4 5.5%
Intrastate...................................... 15,260.9 13,994.2 9.1%
---------- ----------
Total......................................... 68,605.9 64,540.6 6.3%
---------- ----------
---------- ----------
</TABLE>
Access minutes of use represent the volume of traffic carried by
interexchange carriers between LATAs, both interstate and intrastate, using
BellSouth Telecommunications' local facilities. Total access minutes of use
increased by 4,065.3 million (6.3%) in 1993 compared to a 6.7% increase in 1992.
The 1993 increase in access minutes of use was partially attributable to access
line growth and also to
21
<PAGE>
intraLATA toll competition, which has the effect of increasing access minutes of
use while reducing toll messages carried over BellSouth Telecommunications'
facilities. The growth rate in total minutes of use continues to be negatively
impacted by the effects of bypass 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 and to high capacity services, which causes a decrease
in minutes of use.
<TABLE>
<CAPTION>
1993 1992 % CHANGE
--------- --------- -----------
<S> <C> <C> <C>
Toll Messages (Millions).......................... 1,251.0 1,280.3 (2.3%)
</TABLE>
Toll messages, comprised of Message Telecommunications Service and Wide Area
Telecommunications Service, decreased 29.3 million (2.3%) compared to a 7.7%
decrease in 1992. The lower rate of decrease for 1993 was attributable to the
inclusion of the impact of the Louisiana area calling plan in both 1992
(beginning in March) and 1993. Competition in the intraLATA toll market and the
effects of expanded local area calling plans continue to have an adverse impact
on toll message volumes. These plans and the effects of competition have the
effect of shifting calls from toll to local service and access, respectively,
but the corresponding revenues are not generally shifted at commensurate rates.
The decline in toll message volumes is expected to continue for the foreseeable
future.
COMPETITION. Recent developments in the telecommunications marketplace
indicate that a technological convergence is occurring in the telephone, cable
and broadcast television, computer, entertainment and information services
industries. The technologies utilized and being developed in these industries
will enable multiple communications offerings. Several large companies have
recently announced proposed acquisitions or business alliances that, if
consummated, could intensify and expand competition for local communications and
other services currently provided over BellSouth Telecommunications' networks.
Other competitors have announced plans to build local phone connections that
would permit business and residential customers to bypass the facilities of
local telephone companies, including those of BellSouth Telecommunications in
certain cities in its service territory. In addition, legislative activities in
Congress could affect BellSouth Telecommunications' business and competitive
position. BellSouth Telecommunications has undertaken a plan to streamline its
telephone operations and to improve its overall cost structure as a part of its
competitive strategy (see "Results of Operations").
Notwithstanding the risks associated with increased competition, BellSouth
and BellSouth Telecommunications will have the opportunity to benefit from entry
into new business markets. BellSouth believes that in order to remain
competitive in the future, it must aggressively pursue a corporate strategy of
expanding its offerings beyond its traditional businesses which may include
information services, interactive communications and cable television and other
entertainment services. BellSouth plans to enter such businesses through
acquisitions, investments and strategic alliances with established companies in
such industries and through the development of such capabilities internally.
Such transactions, if accomplished, could initially reduce earnings and require
substantial capital. Financing for such business opportunities will be provided
from funds generated through internal operations and from external sources.
ACCOUNTING UNDER SFAS NO. 71. BellSouth Telecommunications continues to
account for the economic effects of regulation under SFAS No. 71, "Accounting
for the Effects of Certain Types of Regulation." BellSouth Telecommunications,
for strategic and business planning purposes, continuously monitors and
evaluates the impacts of both existing and potential competitive factors. If, in
BellSouth Telecommunications' judgment, changes in the competitive structure of
the telecommunications industry dictate that it could not charge prices to
customers which provide for the recovery of costs, SFAS No. 71 would no longer
apply. BellSouth Telecommunications currently believes that the existing and
anticipated levels of competition still permit prices based on costs to be
charged to and collected from customers. However, the rapid pace of change in
the industry is making it increasingly likely that BellSouth Telecommunications
will be required to discontinue its accounting under SFAS No. 71 in the future.
22
<PAGE>
BellSouth Telecommunications believes that the existing regulatory framework
is not appropriate for the increasingly competitive telecommunications
environment. Accordingly, BellSouth Telecommunications intends to pursue
implementation of price regulation plans in all of its jurisdictions through
filings with state regulatory commissions or through legislative initiatives.
Since price regulation plans do not provide for the recovery of specific costs,
SFAS No. 71 would no longer apply. If BellSouth Telecommunications is successful
in altering the existing regulatory framework and achieving price regulation,
BellSouth Telecommunications would be required to discontinue its accounting
under SFAS No. 71.
If BellSouth Telecommunications were to discontinue its accounting under
SFAS No. 71 due to the overall level of competition or to changes in regulatory
frameworks, the effect on its financial condition and results of operations
would be material. Specific financial impacts would depend on the timing and
magnitude of changes, both in the marketplace and in the overall regulatory
framework.
OTHER MATTERS
ACCOUNTING PRONOUNCEMENTS. Effective January 1, 1993, BellSouth
Telecommunications adopted three new accounting standards issued by the
Financial Accounting Standards Board. SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," requires employers to accrue the
cost of providing postretirement benefits other than pensions during the period
employees are expected to earn the benefit. BellSouth Telecommunications is
recognizing the related transition benefit obligation over 15 years. As a result
of the adoption of SFAS No. 106, operating expenses in 1993 were $26 higher than
they would have been using the former accounting method. Accordingly, net income
was reduced by approximately $16 (see Note H).
SFAS No. 109, "Accounting for Income Taxes," requires companies to compute
deferred income taxes using a liability approach rather than the deferred method
previously required under Accounting Principles Board Opinion No. 11. The
adoption of SFAS No. 109 did not materially affect tax expense or net income for
1993 (see Note L).
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," requires
employers to accrue the cost of postemployment benefits provided to former or
inactive employees after employment but before retirement. A one-time charge of
$64.8, net of a deferred tax benefit of $40.8, related to the adoption of SFAS
No. 112 was recognized as an accounting change (see Note H).
Other pronouncements have been issued by authoritative accounting bodies but
not yet adopted by BellSouth Telecommunications. The adoption of such standards
in future periods, where required, is not expected to have a material impact on
BellSouth Telecommunications' operating results and financial condition.
DEBT REFINANCINGS. During 1993, BellSouth Telecommunications refinanced
$2,760 of long-term debt at more favorable interest rates. An extraordinary loss
of $86.6, net of taxes of $58.8, was recognized in connection with the early
extinguishment of certain of these issues.
ENVIRONMENTAL ISSUES. BellSouth Telecommunications is subject to a number
of environmental matters as a result of its operations and shared liability
provisions in the Plan of Reorganization, related to the Modification of Final
Judgment. As a result, BellSouth Telecommunications expects that it will be
required to expend funds to remedy certain facilities, including those Superfund
sites for which BellSouth Telecommunications has been named as a potentially
responsible party and also for the remediation of sites with underground fuel
storage tanks and other expenses associated with environmental compliance. At
December 31, 1993, BellSouth Telecommunications' recorded liability related
primarily to remediation of these sites was $35.5.
BellSouth Telecommunications continually monitors its operations with
respect to potential environmental issues, including changes in legally mandated
standards and remediation technologies. BellSouth Telecommunications' recorded
liability reflects those specific issues where remediation activities are
currently deemed to be probable and where the cost of remediation is estimable.
23
<PAGE>
BellSouth continues to believe that expenditures in connection with additional
remedial actions under the current environmental protection laws or related
matters will not have a material impact on BellSouth Telecommunications'
operating results or financial condition.
SUBSEQUENT EVENT. During the first quarter of 1994, BellSouth Communication
Systems, Inc., a wholly-owned subsidiary, entered into an agreement to sell its
customer premise equipment sales and service operations outside the nine-state
region. The transaction is expected to close by the end of April 1994.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
These financial statements have been prepared in conformity with generally
accepted accounting principles and have been audited by Coopers & Lybrand,
independent accountants, whose report is contained herein.
The integrity and objectivity of the data in these financial statements,
including estimates and judgments relating to matters not concluded by the end
of the year, are the responsibility of the management of BellSouth
Telecommunications. Management has also prepared all other information included
in this Annual Report unless indicated otherwise.
Management maintains a system of internal accounting controls which is
continuously reviewed and evaluated. However, there are inherent limitations
that should be recognized in considering the assurances provided by any system
of internal accounting controls. The concept of reasonable assurance recognizes
that the cost of a system of internal accounting controls should not exceed, in
management's judgment, the benefits to be derived. Management believes that
BellSouth Telecommunications' system does provide reasonable assurance that the
transactions are executed in accordance with management's general or specific
authorizations and are recorded properly to maintain accountability for assets
and to permit the preparation of financial statements in conformity with
generally accepted accounting principles. Management also believes that this
system provides reasonable assurance that access to assets is permitted only in
accordance with management's authorizations, that the recorded accountability
for assets is compared with the existing assets at reasonable intervals and that
appropriate action is taken with respect to any differences. Management also
seeks to assure the objectivity and integrity of its financial data by the
careful selection of its managers, by organizational arrangements that provide
an appropriate division of responsibility and by communications programs aimed
at assuring that its policies, standards and managerial authorities are
understood throughout the organization. Management is also aware that changes in
operating strategy and organizational structure can give rise to disruptions in
internal controls. Special attention is given to controls while the changes are
being implemented.
Management maintains a strong internal auditing program that independently
assesses the effectiveness of the internal controls and recommends possible
improvements thereto. In addition, as part of its audit of these financial
statements, Coopers & Lybrand completed a review of the accounting controls to
establish a basis for reliance thereon in determining the nature, timing and
extent of audit tests to be applied. Management has considered the internal
auditor's and Coopers & Lybrand's recommendations concerning the system of
internal control and has taken actions that we believe are cost-effective in the
circumstances to respond appropriately to these recommendations. Management
believes that as of December 31, 1993, the system of internal controls was
adequate to accomplish the objectives discussed herein.
Management also recognizes its responsibility for fostering a strong ethical
climate so that BellSouth Telecommunications' affairs are conducted according to
the highest standards of personal and corporate conduct. This responsibility is
communicated to all employees through policies and guidelines addressing such
issues as conflict of interest, safeguarding of BellSouth Telecommunications'
real and intellectual properties, providing equal employment opportunities and
ethical relations with customers, suppliers and governmental representatives.
BellSouth Telecommunications maintains a program to assess compliance with these
policies.
F. Duane Ackerman Patrick H. Casey
PRESIDENT AND CHIEF EXECUTIVE OFFICER VICE PRESIDENT AND COMPTROLLER
February 3, 1994
25
<PAGE>
AUDIT COMMITTEE CHAIRMAN'S LETTER
The Audit Committee of the Board of Directors consists of four independent
Directors who are neither officers nor employees of BellSouth
Telecommunications. The Committee is responsible for oversight of the internal
controls of the Company and the objectivity of its financial reporting. The
Audit Committee met four times during 1993 and reviewed with the Director --
Internal Auditing, Coopers & Lybrand and management, the various audit
activities and plans, together with the results of selected internal audits. The
Audit Committee also reviewed the financial reporting process and the adequacy
of internal controls. The Audit Committee recommends the appointment of the
independent public accountants and considers factors relating to their
independence. The Director -- Internal Auditing and Coopers & Lybrand met
privately with the Audit Committee on occasion to encourage confidential
discussions as to any auditing matters.
Lloyd C. Elam
CHAIRMAN, AUDIT COMMITTEE
February 3, 1994
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
BellSouth Telecommunications, Inc.
Atlanta, Georgia
We have audited the accompanying consolidated financial statements and
financial statement schedules of BellSouth Telecommunications, Inc. and
Subsidiaries listed in Item 14(a) of the Form 10-K. These financial statements
and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BellSouth
Telecommunications, Inc. and Subsidiaries as of December 31, 1993 and 1992, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
As discussed in Notes H and L to the consolidated financial statements,
BellSouth Telecommunications changed its method of accounting for postretirement
benefits other than pensions, postemployment benefits, and income taxes in 1993.
Coopers & Lybrand
Atlanta, Georgia
February 3, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of BellSouth Telecommunications, Inc. on Form S-3 (File No. 33-49991) of our
report dated February 3, 1994, on our audits of the consolidated financial
statements and financial statement schedules of BellSouth Telecommunications,
Inc. listed in Item 14(a) of this Form 10-K.
Coopers & Lybrand
Atlanta, Georgia
March 28, 1994
27
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues:
Local service.......................................................... $ 6,577.3 $ 6,236.0 $ 5,846.2
Interstate access...................................................... 2,991.2 2,945.6 2,858.1
Intrastate access...................................................... 881.9 871.8 866.7
Toll................................................................... 1,219.5 1,248.8 1,373.7
Other.................................................................. 1,909.7 1,879.9 1,822.7
----------- ----------- -----------
Total Operating Revenues............................................. 13,579.6 13,182.1 12,767.4
----------- ----------- -----------
Operating Expenses:
Cost of services and products.......................................... 5,169.4 5,050.6 4,905.1
Depreciation........................................................... 2,900.0 2,859.9 2,819.1
Selling, general and administrative.................................... 2,384.7 2,348.0 2,321.6
Restructuring charge (Note J).......................................... 1,136.4 -- --
----------- ----------- -----------
Total Operating Expenses............................................. 11,590.5 10,258.5 10,045.8
----------- ----------- -----------
Operating Income......................................................... 1,989.1 2,923.6 2,721.6
Interest Expense (Note K)................................................ 562.6 583.3 649.8
Other Income, net (Note K)............................................... 21.4 75.5 .9
----------- ----------- -----------
Income Before Income Taxes, Extraordinary Loss and Cumulative Effect of
Change in Accounting Principle.......................................... 1,447.9 2,415.8 2,072.7
Provision for Income Taxes (Note L)...................................... 461.5 800.8 646.9
----------- ----------- -----------
Income Before Extraordinary Loss and Cumulative Effect of
Change in Accounting Principle.......................................... 986.4 1,615.0 1,425.8
Extraordinary Loss on Early Extinguishment of Debt, net of
tax (Note E)............................................................ (86.6) (40.7) --
Cumulative Effect of Change in Accounting Principle, net of
tax (Note H)............................................................ (64.8) -- --
----------- ----------- -----------
Net Income........................................................... $ 835.0 $ 1,574.3 $ 1,425.8
----------- ----------- -----------
----------- ----------- -----------
Retained Earnings:
At beginning of year................................................... $ 3,967.0 $ 3,983.5 $ 3,970.6
Net Income............................................................. 835.0 1,574.3 1,425.8
Dividends declared..................................................... (1,612.3) (1,587.8) (1,412.9)
Other adjustments...................................................... (9.7) (3.0) --
----------- ----------- -----------
At end of year......................................................... $ 3,180.0 $ 3,967.0 $ 3,983.5
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1992
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................ $ 84.3 $ 133.0
Accounts receivable, net of allowance for uncollectibles of $84.6 and $87.2.......... 2,229.0 1,944.7
Material and supplies................................................................ 374.3 385.8
Other current assets................................................................. 253.8 79.6
----------- -----------
Total Current Assets............................................................... 2,941.4 2,543.1
----------- -----------
Investments In and Advances to Affiliates (Note B)..................................... 238.2 30.3
----------- -----------
Property, Plant and Equipment, net (Note C)............................................ 23,444.4 23,311.9
----------- -----------
Deferred Charges and Other Assets...................................................... 471.2 557.0
----------- -----------
Total Assets....................................................................... $ 27,095.2 $ 26,442.3
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Debt maturing within one year (Note E)............................................... $ 1,094.6 $ 946.9
Accounts payable..................................................................... 1,037.1 989.5
Other current liabilities (Note D)................................................... 2,415.4 1,780.4
----------- -----------
Total Current Liabilities.......................................................... 4,547.1 3,716.8
----------- -----------
Long-Term Debt (Note E)................................................................ 6,546.5 6,336.0
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes.................................................... 2,831.4 3,639.5
Unamortized investment tax credits................................................... 515.9 604.3
Other liabilities and deferred credits (Note F)...................................... 1,994.7 763.0
----------- -----------
Total Deferred Credits and Other Liabilities....................................... 5,342.0 5,006.8
----------- -----------
Shareholder's Equity:
Common stock, one share, no par value................................................ 7,479.6 7,415.7
Retained earnings.................................................................... 3,180.0 3,967.0
----------- -----------
Total Shareholder's Equity......................................................... 10,659.6 11,382.7
----------- -----------
Total Liabilities and Shareholder's Equity......................................... $ 27,095.2 $ 26,442.3
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.......................................................... $ 835.0 $ 1,574.3 $ 1,425.8
Adjustments to net income:
Depreciation...................................................... 2,900.0 2,859.9 2,819.1
Restructuring charge.............................................. 1,136.4 -- --
Summary tax assessment settlement................................. -- 90.9 --
Provision for losses on bad debts................................. 128.6 142.5 157.3
Extraordinary loss on early extinguishment of debt................ 145.4 70.7 --
Change in accounting principle, net of tax........................ 64.8 -- --
Deferred income taxes and unamortized investment tax credits...... (677.1) (147.5) (406.3)
Allowance for funds used during construction...................... (23.7) (15.3) (18.1)
Net change in accounts receivable................................. (408.4) (206.7) (111.8)
Net change in material and supplies............................... (91.1) (135.0) (59.8)
Net change in accounts payable and other current liabilities...... 141.7 86.0 (32.7)
Net change in deferred charges and other assets................... 98.6 3.7 134.4
Net change in other liabilities and deferred credits.............. 148.2 162.0 120.9
Other reconciling items, net...................................... (41.4) (35.8) 1.5
------------ ------------ ------------
Net cash provided by operating activities....................... 4,357.0 4,449.7 4,030.3
------------ ------------ ------------
Cash Flows from Investing Activities:
Capital expenditures................................................ (2,994.9) (2,845.8) (2,747.3)
Proceeds from disposals of property, plant and equipment............ 87.4 82.9 55.9
Investment dispositions............................................. 15.0 -- --
Purchase of BellSouth Common Stock.................................. (199.9) -- --
Other investing activities, net..................................... (1.3) (1.1) (2.1)
------------ ------------ ------------
Net cash used for investing activities.......................... (3,093.7) (2,764.0) (2,693.5)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from short-term borrowings................................. 10,866.3 10,713.9 13,579.3
Repayment of short-term borrowings.................................. (10,645.0) (10,674.8) (13,431.8)
Advances from parent and affiliates................................. 359.8 267.8 --
Repayment of advances from parent and affiliates.................... (357.2) (270.2) --
Proceeds of long-term debt.......................................... 2,911.0 543.2 --
Repayment of long-term debt......................................... (2,777.5) (626.7) (28.9)
Payment of call premium............................................. (99.7) (33.4) --
Payment of capital lease obligations................................ (11.4) (13.4) (18.8)
Equity investment of parent......................................... 28.7 24.0 9.8
Dividends paid to parent............................................ (1,587.0) (1,618.5) (1,414.5)
------------ ------------ ------------
Net cash used for financing activities.......................... (1,312.0) (1,688.1) (1,304.9)
------------ ------------ ------------
Net Increase/(Decrease) in Cash and Cash Equivalents.................. (48.7) (2.4) 31.9
Cash and Cash Equivalents at Beginning of Period...................... 133.0 135.4 103.5
------------ ------------ ------------
Cash and Cash Equivalents at End of Period............................ $ 84.3 $ 133.0 $ 135.4
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions)
NOTE A -- ACCOUNTING POLICIES
BASIS OF PRESENTATION. BellSouth Telecommunications, Inc. ("BellSouth
Telecommunications") is a wholly-owned subsidiary of BellSouth Corporation
("BellSouth"). Effective at midnight December 31, 1991, South Central Bell
Telephone Company ("South Central Bell") and BellSouth Services Incorporated
("BellSouth Services") (a jointly-owned service subsidiary of South Central Bell
and Southern Bell Telephone and Telegraph Company ("Southern Bell")) merged with
and into Southern Bell and Southern Bell's name changed to BellSouth
Telecommunications, Inc. The accompanying financial statements reflect the
operations of South Central Bell, Southern Bell, BellSouth Services, and several
smaller affiliated companies transferred to BellSouth Telecommunications as
though the merger and such transfers had occurred on January 1, 1991. BellSouth
Telecommunications maintains substantially all of its accounts and records in
accordance with the Uniform System of Accounts prescribed by the Federal
Communications Commission ("FCC") and makes certain adjustments necessary to
present the accompanying financial statements in accordance with generally
accepted accounting principles applicable to regulated entities. Such principles
differ in certain respects from those used by unregulated entities, but are
required to appropriately reflect the financial and economic effects of
regulation and the rate-making process. Significant differences resulting from
the application of these principles are disclosed elsewhere in these Notes to
Consolidated Financial Statements where appropriate.
BASIS OF ACCOUNTING. BellSouth Telecommunications' consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles, including the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation." Where appropriate, SFAS No. 71 gives accounting recognition to the
actions of regulators. Such actions can provide reasonable assurance of the
existence of an asset, reduce or eliminate the value of an asset or impose or
eliminate a liability on a regulated entity.
CASH AND CASH EQUIVALENTS. BellSouth Telecommunications considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT. The investment in property, plant and
equipment dedicated to providing telecommunications services is stated at
original cost. Depreciation is based on the remaining life method of
depreciation and straight-line composite rates determined on the basis of equal
life groups of certain categories of telephone plant acquired in a given year.
Depreciation expense also includes amortization of certain classes of telephone
plant and identified depreciation reserve deficiencies over periods allowed by
regulatory authorities. When depreciable plant is disposed of, the original cost
less net salvage value is charged to accumulated depreciation.
MATERIAL AND SUPPLIES. New and reusable material is carried in inventory,
principally at average original cost, except that specific costs are used in the
case of large individual items. Nonreusable material is carried at estimated
salvage value.
MAINTENANCE AND REPAIRS. The cost of maintenance and repairs of plant,
including the cost of replacing minor items not effecting substantial
betterments, is charged to operating expenses.
REVENUE RECOGNITION. Revenues are recognized when earned. Certain revenues
derived from local telephone services are billed monthly in advance and are
recognized the following month when services are provided. Revenues derived from
other telecommunications services, principally network access and toll, are
recognized monthly as services are provided. Directory publishing fees are
recognized over the life of the related directories, published by an affiliated
company, which is generally one year.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION. Regulatory authorities allow
BellSouth Telecommunications to accrue interest as a cost of constructing
certain plant and as an item of income
31
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE A -- ACCOUNTING POLICIES (CONTINUED)
(interest charged construction). Such income is not realized in cash currently
but will be realized over the service life of the related plant as the resulting
higher depreciation expense and plant investment are recovered in the form of
increased revenues.
INCOME TAXES. Effective January 1, 1993, BellSouth Telecommunications
adopted SFAS No. 109, "Accounting for Income Taxes." In accordance with the
standard, the balance sheet reflects deferred tax balances associated with the
anticipated tax impact of future income or deductions implicit in the balance
sheet in the form of temporary differences. Temporary differences primarily
result from the use of accelerated methods and shorter lives in computing
depreciation for tax purposes. Prior to 1993, BellSouth Telecommunications
accounted for income taxes under the provisions of Accounting Principles Board
Opinion No. 11.
For financial reporting purposes, BellSouth Telecommunications is amortizing
deferred investment tax credits earned prior to the 1986 repeal of the
investment tax credit and also some transitional credits earned after the
repeal. The credits are being amortized as a reduction to the provision for
income taxes over the estimated useful lives of the assets to which the credits
relate.
NOTE B -- INVESTMENTS IN AND ADVANCES TO AFFILIATES
Investments In and Advances to Affiliates consists primarily of 3,766,199
shares of BellSouth common stock. During 1993, grantor trusts established by
BellSouth Telecommunications purchased for $199.9 the BellSouth common stock to
provide partial funding for the benefits payable under certain non-qualified
benefit plans. For 1993, dividend income earned from the BellSouth shares,
included as a component of Other Income, net, was $7.6.
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows at December 31:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Outside plant................................................................ $ 18,595.7 $ 17,813.5
Central office equipment..................................................... 14,668.0 13,893.9
Building and building improvements........................................... 2,682.8 2,556.0
Furniture and fixtures....................................................... 2,109.9 1,996.7
Operating and other equipment................................................ 825.1 777.5
Station equipment............................................................ 631.0 612.6
Plant under construction..................................................... 355.4 440.1
Land......................................................................... 157.6 156.3
Capital leases............................................................... 55.6 62.2
Other........................................................................ 20.4 15.5
----------- -----------
40,101.5 38,324.3
Less: Accumulated depreciation............................................... 16,657.1 15,012.4
----------- -----------
Total Property, Plant and Equipment, net................................. $ 23,444.4 $ 23,311.9
----------- -----------
----------- -----------
</TABLE>
32
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE D -- OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows at December 31:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Restructuring accrual.......................................................... $ 513.4 $ --
Advanced billing and customer deposits......................................... 414.8 414.2
Taxes accrued.................................................................. 405.3 311.3
Compensated absences........................................................... 307.4 293.4
Salaries and wages payable..................................................... 299.4 281.4
Interest and rents accrued..................................................... 231.2 258.9
Dividends payable to parent.................................................... 164.6 139.3
Other.......................................................................... 79.3 81.9
---------- ----------
Total Other Current Liabilities............................................ $ 2,415.4 $ 1,780.4
---------- ----------
---------- ----------
</TABLE>
NOTE E -- DEBT
DEBT MATURING WITHIN ONE YEAR: Debt maturing within one year is included as
debt in BellSouth Telecommunications' computation of debt ratios and consisted
of the following at December 31:
<TABLE>
<CAPTION>
DESCRIPTION 1993 1992 1991
- ----------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Advances and Notes Payable:
Advances from BellSouth and affiliates......................... $ -- $ 31.4 $ --
Commercial paper................................................. 1,085.6 863.0 821.3
Current Maturities of Long-term Debt............................. 9.0 52.5 31.1
------------ ----------- -----------
Total........................................................ $ 1,094.6 $ 946.9 $ 852.4
------------ ----------- -----------
------------ ----------- -----------
Advances from BellSouth and affiliates:
Maximum amount outstanding during the period................... $ 35.8 $ 37.4 $ --
Average amount outstanding during the period (a)............... $ 14.1 $ 21.7 $ --
Weighted average interest rate at end of period................ 3.15% 3.72% --
Weighted average interest rate during the period (b)........... 3.24% 3.77% --
Commercial Paper:
Maximum amount outstanding during period....................... $ 1,560.9 $ 945.7 $ 910.0
Average amount outstanding during the period (a)............... $ 1,082.0 $ 640.3 $ 746.1
Weighted average interest rate at end of period................ 3.31% 3.58% 4.69%
Weighted average interest rate during the period (b)........... 3.21% 3.71% 6.00%
<FN>
- ------------------------
(a) Determined by computing the average face amount of daily ending balances
in each category.
(b) Determined by dividing the average daily face amount described in (a) into
aggregate related interest expense.
</TABLE>
BellSouth Telecommunications has committed credit lines aggregating $1,096.9
with various banks. There were no borrowings under the committed lines at
December 31, 1993. BellSouth Telecommunications also maintains uncommitted lines
of credit of $40.0. There are no significant commitment fees or requirements for
compensating balances associated with any lines of credit.
33
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE E -- DEBT (CONTINUED)
LONG-TERM: Long-term debt is summarized as follows at December 31:
<TABLE>
<CAPTION>
DESCRIPTION INTEREST RATES MATURITIES 1993 1992
- ----------------------------- ---------------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Debentures: 3 1/4% - 6 7/8% 1995-2033 $ 1,270.0 $ 605.0
7 3/8% - 8 1/4% 1999-2033 1,935.0 3,335.0
8 1/2% - 10 3/8% 2001-2029 1,400.0 2,375.0
--------- ---------
4,605.0 6,315.0
Notes 5 1/4% - 7% 1998-2008 1,875.0 --
Capital leases and other 128.4 73.0
Unamortized discount, net of
premium (61.9) (52.0)
--------- ---------
Total Long-Term Debt $ 6,546.5 $ 6,336.0
--------- ---------
--------- ---------
</TABLE>
Maturities of long-term debt outstanding at December 31, 1993 are summarized
below:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Maturities........................ $ 9.0 $ 30.3 $ -- $ 75.0 $ 570.0 $ 5,933.1 $ 6,617.4
--- --------- --------- --------- --------- ---------- ----------
--- --------- --------- --------- --------- ---------- ----------
</TABLE>
During 1993 and 1992, BellSouth Telecommunications refinanced certain
long-term debt issues at more favorable interest rates. As a result of the early
extinguishment of these issues, charges of $86.6, net of taxes of $58.8, and
$40.7, net of taxes of $30.0, were recognized as extraordinary losses in 1993
and 1992, respectively.
At December 31, 1993, a shelf registration statement had been filed with the
Securities and Exchange Commission by BellSouth Telecommunications under which
$725.0 additional amount of debt securities could be offered.
NOTE F -- OTHER LIABILITIES AND DEFERRED CREDITS
Other liabilities and deferred credits is summarized as follows at December
31:
<TABLE>
<CAPTION>
1993 1992
---------- ---------
<S> <C> <C>
Restructuring accrual (see Note J)............................................... $ 570.0 $ --
Accrued pension cost............................................................. 539.4 426.9
Regulatory liability related to income taxes (see Note L)........................ 378.9 --
Compensation related............................................................. 274.5 206.5
Postemployment benefits (see Note H)............................................. 116.6 --
Other............................................................................ 115.3 129.6
---------- ---------
Total Other Liabilities and Deferred Credits................................. $ 1,994.7 $ 763.0
---------- ---------
---------- ---------
</TABLE>
NOTE G -- TRANSACTIONS WITH AFFILIATES
BellSouth Telecommunications has a contractual agreement with BellSouth
Advertising & Publishing Corporation ("BAPCO"), an affiliated company, wherein
BAPCO publishes certain telephone directories and in return pays BellSouth
Telecommunications a publishing rights fee in its franchise area. For the years
ended December 31, 1993, 1992 and 1991, these fees, included in Other operating
revenue, were $616.3, $598.2 and $580.1, respectively.
At December 31, 1993 and 1992, amounts receivable from affiliated companies
were $20.2 and $20.0, respectively. Amounts payable to affiliated companies at
December 31, 1993 and 1992, both short and long-term, were $465.8 and $336.5,
respectively.
34
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE H -- EMPLOYEE BENEFITS
PENSION PLANS. Substantially all employees of BellSouth Telecommunications
are covered by noncontributory defined benefit pension plans sponsored by
BellSouth. The plan covering non-represented employees prior to July 1993,
provided a benefit based on years of credited service and employees' average
compensation for a specified period. Effective July 1993, BellSouth converted
this plan to a cash balance plan where the pension benefit is determined by a
combination of compensation-based service and additional credits, and individual
account-based interest credits. The new cash balance plan is subject to a
minimum benefit determined under the prior plan's formula for employees retiring
through 2005. The December 31, 1993 projected benefit obligation assumes
interest and additional credits greater than the minimum levels specified in the
written plan. The conversion of the non-represented pension plan had no material
impact on 1993 pension cost. The estimated impact on 1994 projected pension cost
for BellSouth will be a reduction of $65. Pension benefits provided for
represented employees are based on specified benefit amounts and years of
service. Consistent with past practice, this plan includes the effect of future
bargained-for improvements.
BellSouth's funding policy is to make contributions to trust funds with the
objective of accumulating sufficient assets to pay all pension benefits for
which BellSouth is liable. Contributions are actuarially determined using the
aggregate cost method, subject to ERISA and Internal Revenue Service
limitations. Pension plan assets consist primarily of equity securities and
fixed income investments.
Pension cost allocated to BellSouth Telecommunications in 1993, 1992 and
1991 was $113.4, $155.3 and $133.4, respectively. SFAS No. 87, "Employers'
Accounting for Pensions," requires certain disclosures to be made with respect
to the components of net periodic pension cost for the period and a
reconciliation of the funded status of the plan with amounts reported in the
balance sheets. Such disclosures are not presented because the structure of the
BellSouth plans does not permit disaggregation of relevant plan information on
an individual company basis.
The projected benefit obligation for 1993 and 1992 was determined using a
discount rate of 7.5% and 7.75%, respectively, and for both years an expected
long-term rate of return on plan assets of 8% and a long-term assumed weighted
average rate of compensation increase of 5.7%. Other economic related benefit
assumptions, for both the non-represented and the represented plans, have been
changed to reflect both past experience and management's best estimate of future
benefit increases. For BellSouth, the assumption changes will have the impact of
reducing the projected 1994 pension cost by $20.
In 1991, BellSouth Telecommunications offered an early retirement option to
non-represented employees. Approximately 3,100 employees elected to retire under
this option, which allowed the employee to accept the present value of their
pension benefit as a lump-sum payment and to receive a special payment
equivalent to 5% of base pay times full years of service (not to exceed 100% of
base pay). The retirement option was accounted for in accordance with SFAS No.
88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits." BellSouth Telecommunications
recognized an expense of $68.1 in 1991 related to this option.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. Substantially all
non-represented and represented employees of BellSouth Telecommunications
participate in BellSouth's defined benefit postretirement health and life
insurance plans. Effective January 1, 1993, BellSouth Telecommunications adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," to account for these plans. BellSouth's transition benefit obligation
of $1,486 will be amortized over 15 years, the average remaining service period
of active plan participants. The accounting for the health care plan does not
anticipate future adjustments to the cost-sharing arrangements provided for in
the written plan. As a result of the adoption of SFAS No. 106, net income for
1993 was reduced by approximately $16.
35
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE H -- EMPLOYEE BENEFITS (CONTINUED)
As of January 1993, the accumulated postretirement health benefit obligation
for non-represented retirees is being funded over the average remaining service
period of currently active non-represented employees. The accumulated
postretirement benefit obligation for pre-January 1, 1990 represented retirees
is being funded over a 10-year period while the accumulated postretirement
benefit obligation for all other represented retirees is being funded over the
average remaining service period of currently active represented employees.
Postretirement benefit cost allocated to BellSouth Telecommunications for
the twelve months ended December 31, 1993 was $243.7. Prior to 1993, BellSouth
Telecommunications recognized the cost of providing postretirement benefits
based on funded amounts. The cost of providing health and life benefits for both
active and retired employees was $524.1 and $507.0 for 1992 and 1991,
respectively.
SFAS No. 106 requires certain disclosures to be made with respect to the
components of postretirement benefit cost for the period and a reconciliation of
the funded status of the plans with amounts reported in the balance sheet. Such
disclosures are not presented because the structure of the BellSouth plans does
not permit disaggregation of relevant plan information on an individual company
basis.
For measurement purposes, BellSouth used a 11.5% annual rate of increase in
the per capita cost of covered health care benefits for 1994; the rate is
assumed to decrease gradually to 5% in 2007 and remains at that level. The
health care cost trend rate assumption significantly affects the amounts
reported. A one-percentage-point increase in the assumed health care cost trend
rates for each future year would increase BellSouth's accumulated postretirement
benefit obligation by $171 and the estimated aggregate service and interest cost
components of the 1993 postretirement benefit cost by $15. For purposes of
valuing the postretirement life insurance obligation, a 5.7% rate of future
increase in compensation at December 31, 1993 was used.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5%. After a 30% tax reduction for the non-represented
employees' trust, the combined expected long-term rate of return on plan assets
used was 8%. The impact of reducing the discount rate from 9% to 7.5% will
increase BellSouth's 1994 postretirement benefit expense by approximately $30.
Most regulatory jurisdictions have accepted BellSouth Telecommunications'
SFAS No. 106 implementation plan. However, one state's commission is requiring a
20-year amortization of the transition benefit obligation and in another state
there are pending issues, the outcome of which are not expected to have a
material impact on recovery.
EFFECT OF RESTRUCTURING ON PENSIONS AND POSTRETIREMENT BENEFITS. As a
result of the restructuring (see Note J), BellSouth Telecommunications
recognized $88 of estimated net curtailment losses expected to impact BellSouth
Telecommunications' pension and postretirement benefit plans. Of the amount
recognized, $16 was realized in 1993.
DEFINED CONTRIBUTION PLANS. BellSouth maintains contributory savings plans
which cover substantially all employees of BellSouth Telecommunications.
Employees' eligible contributions are matched with BellSouth common stock based
on defined percentages determined annually by the Board of Directors. BellSouth
Telecommunications' recognized compensation expense of $107.3, $112.6 and $109.8
in 1993, 1992 and 1991, respectively, related to these plans.
POSTEMPLOYMENT BENEFITS. Effective January 1, 1993, BellSouth
Telecommunications adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." SFAS No. 112 requires employers to accrue the cost of
postemployment benefits provided to former or inactive employees after
employment but before retirement, including but not limited to workers'
compensation, disability,
36
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE H -- EMPLOYEE BENEFITS (CONTINUED)
and continuation of health care benefits. Previously, BellSouth
Telecommunications used the cash method to account for such costs. A one-time
charge related to adoption of SFAS No. 112 was recognized as a change in
accounting principle, effective as of January 1, 1993. The charge was $64.8, net
of a deferred tax benefit of $40.8. The effect of the change on BellSouth
Telecommunications' 1993 operating results was not material. Future expense
levels are dependent upon actual claim experience, but are not expected to
differ materially from expense recognized under the former accounting method.
NOTE I -- LEASES
BellSouth Telecommunications has entered into operating leases for
facilities and equipment used in operations. Rental expenses under operating
leases were $228.6, $258.7 and $224.4 for 1993, 1992 and 1991, respectively.
Capital leases currently in effect are not significant.
The following table summarizes the approximate future minimum rentals under
non-cancelable operating leases in effect at December 31, 1993:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 THEREAFTER TOTAL
--------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Minimum rentals..................... $ 74.2 $ 57.8 $ 43.7 $ 39.7 $ 33.8 $ 292.7 $ 541.9
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
</TABLE>
NOTE J -- RESTRUCTURING CHARGE
The results of operations for the year ended December 31, 1993 include a
$1,136.4 restructuring charge which reduced net income by $696.6. The
restructuring is being undertaken to redesign and streamline the fundamental
processes and work activities in the telephone operations to better respond to
an increasingly competitive business environment. The restructuring is expected
to improve overall responsiveness to customer needs, permit more rapid
introduction of new products and services and reduce costs.
The material components of the charge relate to the downsizing of the
existing workforce by 10,200 employees through 1996. These components include
provisions for separation payments and relocations of remaining employees,
consolidation and elimination of certain operations facilities and for enabling
changes to information systems, primarily those used to provide services to
existing customers.
NOTE K -- ADDITIONAL INCOME STATEMENT DATA
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Other Income, net:
Interest and dividend income............................................... $ 11.9 $ 69.4 $ 10.7
Other, net................................................................. 9.5 6.1 (9.8)
--------- --------- ---------
Total.................................................................... $ 21.4 $ 75.5 $ .9
--------- --------- ---------
--------- --------- ---------
</TABLE>
Interest and dividend income for 1992 includes $56.6 relating to the
settlement of an Internal Revenue Service summary assessment for the tax years
1979 and 1980.
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Interest Expense:
Long-term debt................................................... $ 500.4 $ 530.2 $ 533.9
Notes payable.................................................... 35.4 27.2 48.6
Other............................................................ 26.8 25.9 67.3
----------- ----------- -----------
Total.......................................................... $ 562.6 $ 583.3 $ 649.8
----------- ----------- -----------
----------- ----------- -----------
Depreciation of telephone plant as a percentage of average
depreciable telephone plant....................................... 7.51% 7.67% 7.76%
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
37
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE K -- ADDITIONAL INCOME STATEMENT DATA (CONTINUED)
Revenues from services provided to American Telephone and Telegraph Company,
BellSouth Telecommunications' largest customer, were approximately 16%, 16% and
17% of consolidated operating revenues for 1993, 1992 and 1991, respectively.
NOTE L -- INCOME TAXES
Effective January 1, 1993, BellSouth Telecommunications adopted SFAS No.
109, "Accounting for Income Taxes," which applies a balance sheet approach to
income tax accounting. In accordance with the new standard, the balance sheet
reflects the anticipated tax impact of future taxable income or deductions
implicit in the balance sheet in the form of temporary differences. These
temporary differences reflect the difference between the basis in assets and
liabilities as measured in the financial statements and as measured by tax laws
using enacted tax rates. The cumulative effect of the adoption of SFAS No. 109
was not material. As permitted by the new standard, prior years' financial
statements have not been restated.
In accordance with the provisions of SFAS No. 71, "Accounting for the
Effects of Certain Types of Regulation," BellSouth Telecommunications has, for
its regulated operations, only reflected the balance sheet impact of the
adoption of this statement. Specifically, BellSouth Telecommunications recorded
a net regulatory liability of $538.0 coincidental with the reduction of the
deferred tax reserves from higher historical to lower current tax rates. The
balance of such liability at December 31, 1993, included in Other Liabilities
and Deferred Credits, was $378.9. This regulatory liability will be adjusted as
the related temporary differences reverse.
BellSouth Telecommunications is included in the consolidated Federal income
tax return filed by BellSouth Corporation and its subsidiaries. Consolidated tax
expense is allocated among the separate members of the group in accordance with
the applicable sections of the Internal Revenue Code.
Generally, under this method each company calculates its current tax expense
as if it filed a separate return. The sum of the separate company liabilities is
compared to the consolidated return liability. The resulting difference, the
benefit of consolidation, is allocated to companies contributing benefits
(operating losses, excess credits and capital losses) in proportion to the
amounts contributed. Each company calculates its deferred tax expense as if it
filed a separate return. Deferred taxes are not allocated among the members of
the group.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Federal:
Current............................................................. $ 973.3 $ 810.3 $ 908.9
Deferred, net....................................................... (513.2) (74.4) (276.5)
Investment tax credits, net......................................... (88.3) (87.9) (108.8)
--------- --------- ---------
371.8 648.0 523.6
--------- --------- ---------
State:
Current............................................................. 152.1 134.2 152.8
Deferred, net....................................................... (62.4) 18.6 (29.5)
--------- --------- ---------
89.7 152.8 123.3
--------- --------- ---------
Total provision for income taxes.............................. $ 461.5 $ 800.8 $ 646.9
--------- --------- ---------
--------- --------- ---------
Amortization of investment tax credits.............................. $ 88.3 $ 88.2 $ 105.3
--------- --------- ---------
--------- --------- ---------
</TABLE>
38
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions)
NOTE L -- INCOME TAXES (CONTINUED)
Temporary differences and carryforwards which give rise to deferred tax
assets and (liabilities) at December 31, 1993 are as follows:
<TABLE>
<S> <C>
Restructuring charge..................................................... $ 419.5
Pensions................................................................. 228.5
Compensated absences..................................................... 79.9
Deferred compensation.................................................... 66.8
Bad debts................................................................ 64.8
Leveraged employee stock ownership plan.................................. 34.0
Other.................................................................... 56.5
---------
Deferred Tax Assets.................................................... 950.0
---------
Depreciation............................................................. (3,581.8)
---------
Deferred Tax Liabilities............................................... (3,581.8)
---------
Net Deferred Tax Liability......................................... $(2,631.8)
---------
---------
</TABLE>
Of the Net Deferred Tax Liability at December 31, 1993, $199.6 was current
and $(2,831.4) was noncurrent.
Deferred tax expense for 1992 and 1991 resulting from timing differences in
the recognition of revenue and expense items for tax and financial reporting
purposes, were as follows:
<TABLE>
<CAPTION>
1992 1991
--------- ---------
<S> <C> <C>
Property, plant and equipment...................................................... $ (8.4) $ (130.2)
Pension benefits................................................................... (51.6) (61.3)
Other timing differences........................................................... 4.2 (114.5)
--------- ---------
Total........................................................................ $ (55.8) $ (306.0)
--------- ---------
--------- ---------
</TABLE>
A reconciliation of the Federal statutory income tax rate to BellSouth
Telecommunications' effective tax rate follows:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Federal statutory tax rate............................................. 35.0% 34.0% 34.0%
State income taxes, net of Federal income tax benefit.................. 4.4% 4.2% 3.8%
Amortization of investment tax credits................................. (6.1%) (3.7%) (5.1%)
Miscellaneous items, net............................................... (1.4%) (1.4%) (1.5%)
------ ------ ------
Effective tax rate............................................... 31.9% 33.1% 31.2%
------ ------ ------
------ ------ ------
</TABLE>
NOTE M -- SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental information is presented in accordance with the
provisions of SFAS No. 95, "Statement of Cash Flows":
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Cash paid for Interest and Income Taxes:
Interest....................................................................... $ 615.9 $ 578.8 $ 634.1
--------- --------- ---------
--------- --------- ---------
Income taxes................................................................... $ 791.7 $ 959.5 $ 992.7
--------- --------- ---------
--------- --------- ---------
Net assets (liabilities) transferred to BellSouth Telecommunications............... $ 25.5 $ (47.3) $ (0.8)
--------- --------- ---------
--------- --------- ---------
</TABLE>
39
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE N -- FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is presented in accordance with the provisions of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined using available market information described
below. Since judgment is required to develop the estimates, the estimated
amounts presented herein may not be indicative of the amounts that BellSouth
Telecommunications could realize in a current market exchange.
<TABLE>
<CAPTION>
1993 1992
---------------------- ----------------------
RECORDED FAIR RECORDED FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents....................................... $ 84.3 $ 84.3 $ 133.0 $ 133.0
Marketable Securities........................................... 199.9 218.4 -- --
Debt Maturing Within One Year................................... 1,094.6 1,094.6 946.9 946.9
Long-Term Debt:
Debentures.................................................... 4,605.0 4,707.0 6,315.0 6,346.8
Notes......................................................... 1,875.0 1,901.0 -- --
</TABLE>
CASH AND CASH EQUIVALENTS. At December 31, 1993 and 1992, the recorded
amount for Cash and cash equivalents approximates fair value due to the
short-term nature of these instruments.
MARKETABLE SECURITIES. The fair value of marketable securities
(representing BellSouth Common Stock), included as a component of Investments in
and Advances to Affiliates, is based on the quoted market price at December 31,
1993 (see Note B).
DEBT. At December 31, 1993 and 1992, the recorded amount of Debt Maturing
Within One Year approximates the fair value due to the short-term nature of the
liabilities. The estimates of fair value for Debentures and Notes are based on
the closing market prices for each issue at December 31, 1993 and 1992,
respectively (see Note E).
40
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Millions)
NOTE O -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
In the following summary of quarterly financial information, all adjustments
necessary for a fair presentation of each period were included. The results for
first quarter 1993 were restated to reflect the one-time, non-cash charge for
retroactive adoption of SFAS No. 112.
<TABLE>
<CAPTION>
SECOND THIRD FOURTH
QUARTER QUARTER QUARTER
FIRST --------- --------- ---------
QUARTER
---------
(RESTATED)
<S> <C> <C> <C> <C>
1993
Operating Revenues.............................................. $ 3,337.0 $ 3,321.0 $ 3,447.5 $ 3,474.1
Operating Income (Loss)......................................... $ 740.5 $ 769.0 $ 831.1 $ (351.5)
Income (Loss) Before Extraordinary Loss on Early Extinguishment
of Debt and Cumulative Effect of Change in Accounting
Principle...................................................... $ 387.9 $ 410.3 $ 441.0 $ (252.8)
Extraordinary Loss on Early Extinguishment of Debt, net of
tax............................................................ -- (55.4) (7.8) (23.4)
Cumulative Effect of Change in Accounting Principle, net of
tax............................................................ (64.8) -- -- --
Net Income (Loss)............................................... $ 323.1 $ 354.9 $ 433.2 $ (276.2)
--------- --------- --------- ---------
1992
Operating Revenues.............................................. $ 3,268.6 $ 3,310.3 $ 3,311.1 $ 3,292.1
Operating Income................................................ $ 800.8 $ 815.8 $ 697.9 $ 609.1
Income Before Extraordinary Loss on Early Extinguishment of
Debt........................................................... $ 467.5 $ 441.9 $ 380.1 $ 325.5
Extraordinary Loss on Early Extinguishment of Debt, net of
tax............................................................ -- -- (40.7) --
Net Income...................................................... $ 467.5 $ 441.9 $ 339.4 $ 325.5
--------- --------- --------- ---------
</TABLE>
41
<PAGE>
PART IV
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No change in accountants or disagreements on the adoption of appropriate
accounting standards or financial disclosure have occurred during the periods
included in this report.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. Documents filed as a part of the report:
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C> <C>
(1) Financial Statements:
Report of Independent Accountants............................... 27
Consolidated Statements of Income and Retained Earnings......... 28
Consolidated Balance Sheets..................................... 29
Consolidated Statements of Cash Flows........................... 30
Notes to Consolidated Financial Statements...................... 31 - 41
(2) Financial Statement Schedules:
V. -- Property, Plant and Equipment............................. 44 - 45
VI. -- Accumulated Depreciation................................. 46 - 47
VIII. -- Allowance for Uncollectibles........................... 48
X. -- Supplementary Income Statement Information................ 49
</TABLE>
Financial statement schedules other than those listed above have been
omitted because the required information is contained in the financial
statements and notes thereto or because such schedules are not required or
applicable.
(3) Exhibits: Exhibits identified in parentheses below, on file with the
SEC, are incorporated herein by reference as exhibits hereto.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------
<S> <C>
3a Restated Articles of Incorporation of BellSouth Telecommunications, Inc. (Exhibit 3a to Form 10-K for
the year ended December 31, 1991, File No. 1-1049).
3b Bylaws of BellSouth Telecommunications, Inc. as amended, effective November 22, 1993.
4 No instrument which defines the rights of holders of long and intermediate term debt of BellSouth
Telecommunications is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to
this regulation, BellSouth Telecommunications, Inc. hereby agrees to furnish a copy of any such
instrument to the SEC upon request.
12 Computation of Ratio of Earnings to Fixed Charges. (Page 15 of this Form 10-K).
24 Powers of Attorney.
</TABLE>
b. Reports on Form 8-K:
None.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 TELECOMMUNICATIONS, INC.
/s/ PATRICK H. CASEY
--------------------------------------
Patrick H. Casey
VICE PRESIDENT AND COMPTROLLER
March 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
PRINCIPAL EXECUTIVE OFFICER:
F. Duane Ackerman*
President and Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER
AND PRINCIPAL ACCOUNTING OFFICER:
Patrick H. Casey*
Vice President and Comptroller
DIRECTORS:
F. Duane Ackerman*
Irving W. Bailey II*
Robert H. Boh*
Edward E. Crutchfield, Jr.*
Frank R. Day*
Jere A. Drummond*
Lloyd C. Elam*
John W. Harris*
Mark C. Hollis*
Harry M. Lightsey, Jr.*
Thomas H. Meeker*
Joe M. Rodgers*
Charles J. Zwick*
*By: /s/ PATRICK H. CASEY
----------------------------------
Patrick H. Casey
(INDIVIDUALLY AND AS
ATTORNEY-IN-FACT)
March 28, 1994
43
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF AT COST RETIREMENTS OTHER END OF
CLASSIFICATION PERIOD (A) (B) CHANGES PERIOD
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land & Land Improvements...................... $ 156.3 $ 1.0 $ (0.2) $ 0.5 $ 157.6
Buildings and Building Improvements........... 2,475.8 52.3 (10.4) 82.5 2,600.2
Leasehold Improvements........................ 80.2 4.4 (1.9) (0.1) 82.6
Operating & Other Equipment................... 777.5 89.0 (56.7) 15.3 825.1
Furniture and Fixtures........................ 1,996.7 211.6 (175.3) 76.9 2,109.9
Central Office Equipment...................... 13,893.9 258.3 (820.6) 1,336.4 14,668.0
Outside Plant................................. 17,813.5 643.6(d) (222.3) 360.9 18,595.7
Station Equipment............................. 612.6 63.8 (51.3) 5.9 631.0
Capital Leases................................ 62.2 3.7 (10.6) 0.3 55.6
Construction in Progress...................... 440.1 1,732.0(e) 0.0 (1,816.7) 355.4
Other Plant................................... 15.5 0.0 0.0 4.9 20.4
------------ ---------- ----------- ----------- -------------
Total Property, Plant and Equipment....... $ 38,324.3 $ 3,059.7 $ (1,349.3) $ 66.8 $ 40,101.5
------------ ---------- ----------- ----------- -------------
------------ ---------- ----------- ----------- -------------
</TABLE>
YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF AT COST RETIREMENTS OTHER END OF
CLASSIFICATION PERIOD (A) (B) CHANGES PERIOD
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land & Land Improvements...................... $ 154.1 $ 1.1 $ 0.0 $ 1.1 $ 156.3
Buildings and Building Improvements........... 2,385.5 24.4 (9.1) 75.0 2,475.8
Leasehold Improvements........................ 78.9 (0.4) (2.0) 3.7 80.2
Operating & Other Equipment................... 717.7 73.2 (32.4) 19.0 777.5
Furniture and Fixtures........................ 1,958.0 178.2 (250.9) 111.4 1,996.7
Central Office Equipment...................... 13,182.3 166.9 (555.8) 1,100.5 13,893.9
Outside Plant................................. 17,050.8 653.0(d) (194.8) 304.5 17,813.5
Station Equipment............................. 1,267.2 48.4 (708.9) 5.9 612.6
Capital Leases................................ 70.4 3.8 (11.9) (0.1) 62.2
Construction in Progress...................... 264.6 1,753.7(e) 0.0 (1,578.2) 440.1
Other Plant................................... 25.5 24.7 (0.3) (34.4) 15.5
------------ ---------- ----------- ----------- -------------
Total Property, Plant and Equipment....... $ 37,155.0 $ 2,927.0 $ (1,766.1) $ 8.4 $ 38,324.3
------------ ---------- ----------- ----------- -------------
------------ ---------- ----------- ----------- -------------
</TABLE>
The notes on Page 45 are an integral part of this Schedule.
44
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCE AT ADDITIONS OTHER BALANCE AT
BEGINNING OF AT COST RETIREMENTS CHANGES END OF
CLASSIFICATION PERIOD (A) (B) (C) PERIOD
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land & Land Improvements....................... $ 152.1 $ 0.8 $ 0.0 $ 1.2 $ 154.1
Buildings and Building Improvements............ 2,315.1 25.9 (8.9) 53.4 2,385.5
Leasehold Improvements......................... 56.9 0.9 (1.7) 22.8 78.9
Operating & Other Equipment.................... 539.2 86.5 (34.7) 126.7 717.7
Furniture and Fixtures......................... 1,770.4 143.3 (214.9) 259.2 1,958.0
Central Office Equipment....................... 12,467.9 201.7 (798.6) 1,311.3 13,182.3
Outside Plant.................................. 16,340.8 674.2(d) (240.5) 276.3 17,050.8
Station Equipment.............................. 1,399.1 52.0 (189.1) 5.2 1,267.2
Capital Leases................................. 59.9 22.7 (55.0) 42.8 70.4
Construction in Progress....................... 394.3 1,682.0(e) 0.7 (1,812.4) 264.6
Other Plant.................................... 286.6 0.3 (0.4) ( 261.0) 25.5
------------ ---------- ----------- ---------- -------------
Total Property, Plant and Equipment........ $ 35,782.3 $ 2,890.3 $ (1,543.1) $ 25.5 $ 37,155.0
------------ ---------- ----------- ---------- -------------
------------ ---------- ----------- ---------- -------------
NOTES TO SCHEDULE V
<FN>
(a) Additions shown include: (1) the original cost (estimated if not known) of
reused material, which is concurrently credited to material and supplies,
and (2) interest charged construction.
(b) Items of telephone plant when retired or sold are deducted from the
property accounts at the amounts at which they are included therein,
estimated if not known.
(c) Amounts in COL. E. -- Other Changes for the year ended December 31, 1991
represent primarily the reclassification of beginning balances of property,
plant and equipment for all BellSouth Telecommunications, Inc. companies
other than South Central Bell and Southern Bell to conform to current year
presentation.
(d) The material components of additions to Outside Plant are aerial,
underground and buried cable, and conduit systems.
(e) The material components of Construction in Progress are Central Office
Equipment, Outside Plant and Data Processing Equipment.
</TABLE>
45
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SCHEDULE VI -- ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF EXPENSE OTHER END OF
CLASSIFICATION PERIOD (A) RETIREMENTS CHANGES PERIOD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buildings and Building Improvements.............. $ 610.8 $ 50.7 $ (20.1) $ 6.1 $ 647.5
Leasehold Improvements........................... 44.2 7.4 (1.2) (0.2) 50.2
Operating & Other Equipment...................... 328.4 57.2 (52.2) (0.7) 332.7
Furniture and Fixtures........................... 941.8 295.1 (151.1) 1.2 1,087.0
Central Office Equipment......................... 5,204.9 1,365.2(d) (737.5) (0.4) 5,832.2
Outside Plant.................................... 7,380.8 1,018.5(e) (248.1) (0.6) 8,150.6
Station Equipment................................ 349.1 46.7 (40.3) 0.2 355.7
Capital Leases................................... 28.6 11.6 (10.6) 0.2 29.8
Depreciation Reserve Imbalance (c)............... 123.8 47.6 0.0 0.0 171.4
------------ ----------- ----------- ----- -------------
Total Accumulated Depreciation............... $ 15,012.4 $ 2,900.0 $ (1,261.1) $ 5.8 $ 16,657.1
------------ ----------- ----------- ----- -------------
------------ ----------- ----------- ----- -------------
</TABLE>
YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF EXPENSE OTHER END OF
CLASSIFICATION PERIOD (A) RETIREMENTS CHANGES PERIOD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buildings and Building Improvements.............. $ 569.6 $ 50.2 $ (9.0) $ 0.0 $ 610.8
Leasehold Improvements........................... 42.3 4.7 (2.0) (0.8) 44.2
Operating & Other Equipment...................... 304.0 53.0 (32.5) 3.9 328.4
Furniture and Fixtures........................... 856.0 334.8 (250.7) 1.7 941.8
Central Office Equipment......................... 4,406.0 1,354.9(d) (555.8) (0.2) 5,204.9
Outside Plant.................................... 6,739.8 835.7(e) (194.8) 0.1 7,380.8
Station Equipment................................ 933.2 124.7 (708.9) 0.1 349.1
Capital Leases................................... 25.9 14.7 (11.9) (0.1) 28.6
Depreciation Reserve Imbalance (c)............... 36.5 87.2 0.0 0.1 123.8
------------ ----------- ----------- ----------- -------------
Total Accumulated Depreciation............... $ 13,913.3 $ 2,859.9 $ (1,765.6) $ 4.8 $ 15,012.4
------------ ----------- ----------- ----------- -------------
------------ ----------- ----------- ----------- -------------
</TABLE>
The notes on Page 47 are an integral part of this Schedule.
46
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SCHEDULE VI -- ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, 1991
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING OF EXPENSE CHANGES END OF
CLASSIFICATION PERIOD (A) RETIREMENTS (B) PERIOD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buildings and Building Improvements............. $ 528.3 $ 52.4 $ (11.9) $ 0.8 $ 569.6
Leasehold Improvements.......................... 30.7 8.2 (2.3) 5.7 42.3
Operating & Other Equipment..................... 205.4 62.8 ( 30.5) 66.3 304.0
Furniture and Fixtures.......................... 696.1 265.7 (155.0) 49.2 856.0
Central Office Equipment........................ 4,032.5 1,158.4(d) (784.5) (0.4) 4,406.0
Outside Plant................................... 6,149.8 857.8(e) (267.5) (0.3) 6,739.8
Station Equipment............................... 1,039.2 68.8 (176.0) 1.2 933.2
Capital Leases.................................. 31.6 17.8 (59.5) 36.0 25.9
Depreciation Reserve Imbalance (c).............. (299.2) 273.1 0.0 62.6 36.5
Other Plant..................................... 128.7 0.0 0.0 (128.7) 0.0
------------ ----------- ----------- --------- -------------
Total Accumulated Depreciation.............. $ 12,543.1 $ 2,765.0 $ (1,487.2) $ 92.4 $ 13,913.3
------------ ----------- ----------- --------- -------------
------------ ----------- ----------- --------- -------------
NOTES TO SCHEDULE VI
<FN>
(a) Depreciation as stated in the statements of income includes certain minor
amounts which are not credited to this account.
(b) Amounts in Col. E -- Other Changes for the year ended December 31, 1991
represent primarily the reclassification of beginning balances of
accumulated depreciation of all BellSouth Telecommunications, Inc.
companies other than South Central Bell and Southern Bell to conform to
current year presentation.
(c) Classification authorized by the FCC and state regulatory commissions to
improve capital recovery.
(d) The material components of additions to Central Office Equipment are analog
switching equipment, digital electronic switching equipment and circuit
equipment.
(e) The material components of additions to Outside Plant are aerial,
underground and buried cable, and conduit systems.
</TABLE>
47
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR UNCOLLECTIBLES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF CHARGED TO OTHER END OF
DESCRIPTION PERIOD EXPENSE(A) ACCOUNTS(B) DEDUCTIONS(C) PERIOD
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1993................................. $87.2 105.9 121.8 230.3 $84.6
1992................................. $85.0 122.2 147.8 267.8 $87.2
1991................................. $79.6 139.8 141.7 276.1 $85.0
<FN>
- ------------------------
(a) Provision for uncollectibles as stated in the statements of income includes
certain minor uncollectible items which are written off directly and not
credited to the allowance account.
(b) Amounts include increases to this account for anticipated uncollectibles
related to purchased receivables and for recoveries of amounts previously
written off.
(c) Amounts written off as uncollectible.
</TABLE>
48
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Column B
----------------------------------
Column A
- ----------------------------------------------------------------------------- Charged to Costs or Expenses
----------------------------------
Item 1993 1992 1991
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Maintenance.................................................................. $ 2,510.3 $ 2,510.4 $ 2,349.7
---------- ---------- ----------
---------- ---------- ----------
TAXES, OTHER THAN INCOME AND PAYROLL-RELATED
Property.................................................................... $ 413.9 $ 400.2 $ 399.1
Gross receipts.............................................................. 157.4 145.8 137.7
Other....................................................................... 23.4 24.7 24.9
---------- ---------- ----------
Total Taxes, Other Than Income and Payroll-related....................... $ 594.7 $ 570.7 $ 561.7
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
49
EXHIBIT 3b
Bylaws of BellSouth Telecommunications, Inc. as amended
effective November 22, 1993
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
BYLAWS
AS AMENDED
EFFECTIVE NOVEMBER 22, 1993
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting
of the shareholders for the election of Directors and for the
transaction of such other business as may properly come
before the meeting shall be held at such place, either within
or without the State of Georgia, on such date and at such
time as the Chairman or President may determine, or if the
Chairman or President fails to so determine, then such
meeting shall be held at the principal office of the
Corporation at 10:00 a.m. on the fourth Monday in March of
each year, or, if such date is a legal holiday, on the next
succeeding business day. The Chairman or President may
specify prior to any special meeting of shareholders held
within the year that such meeting shall be in lieu of the
annual meeting, provided that notice of all purposes of the
meeting are described in the meeting notice.
Section 2. Special Meeting. A special meeting
of the shareholders may be called at any time by the Board of
Directors, the Chairman, the President or upon written
request to the Secretary of the Corporation, by the holders
of at least twenty-five percent of the outstanding shares
entitled to vote on any issue to be considered at such
meeting. Such written request shall specify the date, time
and purpose of the proposed meeting. Such meetings shall be
held at such place, either within or without the State of
Georgia, as is stated in the call and notice thereof.
Section 3. Notice of Meetings of Shareholders.
Written notice of each meeting of shareholders, stating the
place, date and time of the meeting, shall be mailed to each
shareholder entitled to vote at or to notice of such meeting
at his address shown on the books of the Corporation not less
than ten (10) nor more than sixty (60) days prior to such
meeting unless such shareholder waives notice of the meeting.
If such notice is for a special meeting, the notice shall
also include the purpose or purposes for which the special
meeting is being called and shall indicate that the notice is
being issued by or at the direction of the person or persons
calling the meeting. Any shareholder may execute a waiver of
notice, in person or by proxy, either before or after any
meeting. A shareholder shall be deemed to have waived notice
if he is present at such meeting in person or by proxy and
does not object at the beginning of the meeting to the
holding of such meeting or the transacting of business at the
meeting. Neither the business transacted at, nor the purpose
of, any meeting need be stated in the waiver of notice of
such meeting, except that, with respect to a waiver of notice
of a meeting at which an amendment to the Articles of
Incorporation, a plan of merger or share exchange, a sale of
assets, or any other action which would entitle the
shareholder to dissent and obtain payment for his shares is
considered, information as required by the Georgia Business
Corporation Code must be delivered to the shareholder prior
to his execution of the waiver of notice or the waiver itself
must expressly waive the right to such information. Failure
to receive notice of any meeting of shareholders shall not
invalidate the meeting. Notice of any meeting may be given
by the Chairman, the President, the Secretary or by the
person or persons calling such meeting. No notice need be
given of the time, date and place of reconvening of any
adjourned meeting, if the time, date and place to which the
meeting is adjourned are announced at the adjourned meeting
and if there is no change in the record date.
Section 4. Quorum; Required Shareholder Vote.
A quorum for the transaction of business at any annual or
special meeting of shareholders shall exist when the holders
of a majority of the outstanding shares entitled to vote are
represented either in person or by proxy at such meeting. A
shareholder who is present solely to object to the holding of
the meeting or transacting business at the meeting shall not
be deemed present for quorum purposes. If a quorum is
present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless a
greater vote is required by law, by the Articles of
Incorporation or by these Bylaws. When a quorum is once
present to organize a meeting, the shareholders present may
continue to do business at the meeting or at any adjournment
thereof (provided no new record date is set), notwithstanding
the withdrawal of enough shareholders to leave less than a
quorum. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present,
may adjourn such meeting from time to time.
Section 5. Proxies. A shareholder may vote
either in person or by a proxy which he has duly executed in
writing. No proxy shall be valid after eleven (11) months
from the date of its execution unless a longer period is
expressly provided in the proxy.
Section 6. Action of Shareholders Without
Meeting. Any action required to be, or which may be, taken at
a meeting of the shareholders, may be taken without a meeting
if written consent(s), describing the action taken, shall be
signed by all of the shareholders entitled to vote with
respect to the subject matter thereof, except that, the
consenting shareholder must have been furnished the same
information that would have been required by the Georgia
Business Corporation Code to be sent to shareholders in a
notice of a meeting at which the proposed action would have
been submitted to the shareholders for action or the consent
must expressly waive the right to such information. Such
consent shall have the same force and effect as a unanimous
affirmative vote of the shareholders at a meeting of the
shareholders and may be described as such in any document.
The written consent shall be delivered to the Corporation for
inclusion in the minutes of the proceedings of the
shareholders or filing with the corporate records.
ARTICLE II
DIRECTORS
Section 1. Power of Directors. The Board of
Directors shall direct the management of the business and
affairs of the Corporation and may exercise all the powers of
the Corporation, subject to any restrictions imposed by law,
by the Articles of Incorporation or by these Bylaws.
Section 2. Composition, Election and Term of the
Board of Directors. The Board of Directors of the Corporation
shall consist of at least one and not more than thirty (30)
natural persons, with the exact number to be determined by
the number of persons elected to the Board of Directors and
serving. Directors shall be elected at each annual
shareholders' meeting. A Director's term shall expire at the
next annual shareholders' meeting. Despite expiration of a
Director's term, however, the Director shall continue to
serve until his successor is elected and qualifies or until
there is a decrease in the number of Directors.
Section 3. Election of Chairman. The Board of
Directors may elect from their number a Chairman of the
Board. The Chairman shall preside at all meetings of the
shareholders, of the Board of Directors, and of the Executive
Committee, and shall have such other powers and duties as may
be conferred or assigned by the Board of Directors. If there
be no Chairman, or in the absence or disability of the
Chairman, the President shall act as Chairman and preside at
such meetings.
Section 4. Meetings of the Board of Directors;
Notice of Meetings; Waiver of Notice. The annual meeting of
the Board of Directors for the purpose of electing officers
and transacting such other business as may be brought before
the meeting shall be held each year following the annual
meeting of shareholders. The Board of Directors may by
resolution provide for the date, time and place of other
regular meetings and no notice of such regular meetings need
be given. Special meetings of the Board of Directors may be
called by the Chairman, by the Chief Executive Officer or by
any two members of the Executive Committee, and shall be
called by the Chairman or the Chief Executive Officer upon
request in writing signed by two or more Directors and
specifying the purpose or purposes of the meeting. Notice of
the date, time and place of such special meetings shall be
given to each Director, at his residence or usual place of
business, in person or by first class mail, express courier,
facsimile machine, telegraph, cablegram or telephone, or by
any other means customary for expedited business
communications, at least two (2) days before the meeting.
Any Director may execute a waiver of notice, either before or
after any meeting, and deliver the waiver to the Corporation
for filing with the corporate records. A Director's
attendance at or participation in a meeting waives any
required notice to him of the meeting, unless the Director,
at the beginning of the meeting, objects to holding the
meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
Neither the business to be transacted at, nor the purpose of,
any meeting of the Board of Directors need be stated in the
notice or waiver of notice of such meeting. Any meeting may
be held at any place within or without the State of Georgia.
Section 5. Quorum and Voting. One-third of the
Directors in office immediately before the meeting begins
shall constitute a quorum for the transaction of business at
any meeting. If a quorum is present when the vote is taken,
the vote of a majority of the Directors present shall be the
act of the Board of Directors unless a greater vote is
required by law, by the Articles of Incorporation or by these
Bylaws. A majority of the Directors present, whether or not
a quorum is present, may adjourn a meeting to any specified
time, date and place.
Section 6. Action of Board of Directors Without
Meeting. Any action required or permitted to be taken at a
meeting of the Board of Directors or any committee thereof
may be taken without a meeting if written consent(s),
describing the action taken, is signed by all the Directors
or committee members and delivered to the Corporation for
inclusion with the minutes of the proceedings of the Board of
Directors or committee or filing with the corporate records.
Such consent shall have the same force and effect as a
unanimous affirmative vote of the Board of Directors or
committee, as the case may be, and may be described as such
in any document.
Section 7. Committees. The Board of Directors,
by resolution adopted by a majority of all of the Directors,
may designate from among its members an Executive Committee
and such other committees as it deems necessary or desirable
and may fix the quorum thereof, each committee composed of
one (1) or more Directors, except that the Executive
Committee shall have three (3) or more Directors, and may fix
the quorum thereof. Any committee so designated shall serve
at the pleasure of the Board of Directors and may exercise
such authority as is delegated by the Board of Directors,
provided that no committee shall (1) approve or propose to
shareholders action that the Georgia Business Corporation
Code requires to be approved by shareholders; (2) fill
vacancies on the Board of Directors or on any of its
committees; (3) amend Articles of Incorporation; (4) adopt,
amend, or repeal Bylaws; or (5) approve a plan of merger not
requiring shareholder approval.
Section 8. Executive Committee. The Chairman and
the Chief Executive Officer, shall be members of the Executive
Committee. The Executive Committee shall have, except as
otherwise provided herein, by law or by resolution of the
Board of Directors, all the authority of the Board of
Directors during the intervals between the meetings of the
Board of Directors. Minutes of all meetings of the Executive
Committee shall be kept and recorded by the Secretary, and
shall be from time to time reported to the Board of Directors.
The Board of Directors may designate from time to time one or
more Directors as alternate members of the Executive Committee
or of any other committee, who may replace any absent member
or members at any meeting of the committee.
Section 9. Vacancies. A vacancy occurring in
the Board of Directors including a vacancy or vacancies
created by an increase in the number of Directors, may be
filled by the shareholders or by the affirmative vote of a
majority of the remaining Directors regardless of whether a
quorum of Directors remain. A vacancy that will occur at a
specified later date may be filled before the vacancy occurs
but the new Director may not take office until the vacancy
occurs. A Director elected to fill a vacancy shall serve for
the unexpired term of his predecessor in office.
Section 10. Telephone Conference Meetings.
Members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a
meeting of the Board of Directors or committee by means of
telephone conference or by any means of communication by
which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section 10
shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
Section 1. Executive Structure of the
Corporation. The officers of the Corporation shall be
elected by the Board of Directors and may consist of a
Chairman, a President, such number of Group Presidents,
Executive Vice Presidents, Senior Vice Presidents, State
Presidents, Presidents (of a business or functional unit or
division), and Vice Presidents as the Board of Directors
shall from time to time determine, a Secretary, a Treasurer,
a Comptroller and such other officers as may be elected by
the Board of Directors. The Board shall designate either the
Chairman or the President as the Chief Executive Officer of
the Corporation, and may designate a Chief Operating Officer.
Each officer shall hold office for the term for which he has
been elected or appointed and until his successor has been
elected or appointed and has qualified, or until his earlier
resignation, removal from office or death. Any two or more
offices may be held by the same person, except that neither
the Chairman nor the President shall serve as Secretary or
Assistant Secretary. The Chief Executive Officer may change
the title and responsibilities, but not the salary band, of
any individual holding one of the following offices to
another title within this group of offices: Group President,
Executive Vice President, Senior Vice President, State
President, President (of a business or functional unit or
division), and Vice President.
Section 2. Appointed Officers. The Board of
Directors may appoint one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers and
agents as the Board of Directors may consider necessary, who
shall have such authority and perform such duties as may be
provided in these Bylaws or as may be assigned to them by the
Board of Directors, the Chief Executive Officer or other
appropriate officer.
Section 3. Chief Executive Officer. The Chief
Executive Officer shall have the following powers and duties
in addition to those described elsewhere in these Bylaws. He
shall give general supervision and direction to the affairs
of the Corporation, subject to the direction of the Board of
Directors. He shall have the power to make and execute
contracts, deeds, evidences of indebtedness and other
instruments on behalf of the Corporation and to delegate such
powers to others. He shall have such additional powers and
duties as may be conferred or assigned by the Board of
Directors and as usually appertain to the chief executive
office in like business corporations. He also shall be
empowered at any time and from time to time to issue and
promulgate rules, regulations and directives relating to the
conduct of the business and affairs of the Corporation, and
the Secretary of the Corporation shall maintain a record of
such rules, regulations and directives. Rules, regulations
and directives so issued shall be available at any time to
the Board of Directors and, subject to the authority of the
Board of Directors or Executive Committee at any time to
amend, suspend or repeal any or all of such rules,
regulations or directives, shall evidence the authority of
the officers and employees named therein to act on behalf of
the Corporation with respect to the matters therein set
forth. If the Chief Executive Officer is absent or disabled,
the Chief Operating Officer shall perform the duties of the
Chief Executive Officer. If the Chief Executive Officer is
absent or disabled and if there be no Chief Operating
Officer, the duties of the Chief Executive Officer shall be
performed by such Group President, Executive Vice President,
Senior Vice President, Vice President or other officer of the
Corporation as the Board of Directors or the Chief Executive
Officer may have designated.
Section 4. Chief Operating Officer. If there be
one, the Chief Operating Officer of the Corporation shall,
under the direction of the Chief Executive Officer, have
direct supervision over the affairs of the Corporation,
and shall have such other authority and duties as may be
conferred or assigned by the Board of Directors or by the
Chief Executive Officer or by these Bylaws. If there be no
Chief Operating Officer, or in the case of absence or
disability of the Chief Operating Officer, the duties of the
office shall be performed by such Group President, Executive
Vice President, Senior Vice President, Vice President or
other officer of the Corporation as the Board of Directors,
the Chief Executive Officer or the Chief Operating Officer
may have designated.
Section 5. Group Presidents, Executive Vice
Presidents, Senior Vice Presidents, State Presidents,
Presidents (of a business or a functional unit or division),
and Vice Presidents. Each Group President, Executive Vice
President, Senior Vice President, State President, President
(of a business or a functional unit or division), and Vice
President shall have such authority and perform such duties
as may be assigned to him by the Board of Directors, the
Chairman or the President.
Section 6. Secretary. The Secretary shall send
all requisite notices of meetings of the shareholders, the
Board of Directors and the Executive Committee. The
Secretary shall attend all meetings of the shareholders, the
Board of Directors, and the Executive Committee, and shall
keep a true and faithful record of the proceedings. The
Secretary shall have custody of the seal of the Corporation,
the securities of the Corporation's subsidiary corporations,
the stock records of the corporation, and all other records,
books, documents, and papers of the Corporation, except those
required to be in the custody of the Treasurer or the
Comptroller, and except such records as may be kept in
departmental offices. The Secretary shall sign and execute
all documents which require his signature and execution,
shall affix the seal of the Corporation thereto and attest
the same when necessary, and shall authenticate corporate
records, when required. Assistant Secretaries appointed by
the Board of Directors shall perform such duties as the
Secretary finds appropriate to delegate in the ordinary
course of business. Any Assistant Secretary, in the case of
the absence or disability of the Secretary, may exercise the
authority and perform the duties of the Secretary.
Section 7. Treasurer. The Treasurer shall
receive and have charge of all funds of the Corporation and
shall have custody of all securities held by the Corporation,
except those securities in the custody of the Secretary. He
shall deposit the funds to the credit of the Corporation in
such depositories as shall be approved from time to time by
the Board of Directors, the Chairman, the President or the
Treasurer. The funds shall be disbursed only on the approval
of the Comptroller or his duly authorized representative, and
under such rules and regulations as the Board of Directors
may adopt. The Treasurer shall keep full and regular books
showing all his receipts and disbursements, which books shall
be open at all times to the inspection of the Chairman, the
President or of any other member of the Board of Directors;
and he shall make such reports as the Board of Directors, the
Chairman, or the President may require. Assistant Treasurers
appointed by the Board of Directors shall perform such duties
as the Treasurer finds appropriate to delegate in the
ordinary course of business. The Treasurer shall, with the
approval of the Chairman, or the President, designate which
Assistant Treasurer shall perform the duties of the Treasurer
in case of the absence or disability of the Treasurer. The
Treasurer and each Assistant Treasurer shall give such
security for the faithful performance of his duties as the
Board of Directors may require.
Section 8. Comptroller. The Comptroller shall
be the principal accounting officer of the Corporation and
shall have custody and charge of all books of account, except
those required by the Treasurer in keeping record of the work
of his office, and shall have supervision over such
accounting records as may be kept in departmental offices.
The Comptroller shall have access to all books of account,
including the records of the Secretary and the Treasurer, for
purposes of audit and for obtaining information necessary to
verify or complete the records of his office. The
Comptroller or his duly authorized representative shall
certify to the authorizations and approvals pertaining to all
vouchers; and no payments from the general cash shall be made
by the Treasurer except on vouchers bearing the written
approval of the Comptroller or his authorized representative.
With the approval of the Chairman or the President, the
Comptroller may designate some other person or persons to
perform such of his duties as he finds necessary to delegate
in the ordinary conduct of the business, and shall with such
approval designate some person to perform the duties of
Comptroller in case of his absence or disability.
Section 9. Other Duties and Authority. Each
officer, employee and agent of the Corporation shall have
such other duties and authority as may be conferred upon him
by the Board of Directors or delegated to him by the Chairman
or the President.
Section 10. Removal of Officers. Any officer
may be removed at any time by the Board of Directors with or
without cause, and such vacancy may be filled by the Board of
Directors. This provision shall not prevent the making of a
contract of employment for a definite term with any officer
and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a
contract of employment.
ARTICLE IV
STOCK
Section 1. Stock Certificates. The shares of
stock of the Corporation shall be represented by certificates
in such form as may be approved by the Board of Directors,
which certificates shall bear the name of the issuing
corporation and that it is organized under the laws of
Georgia, the name of the shareholder, the number, class, and
series, if any, of shares represented, and the date of issue;
and which shall be signed by the Chairman or President and
the Secretary or Treasurer or an Assistant Secretary or
Assistant Treasurer of the Corporation; and which shall be
sealed with the seal of the Corporation. No share
certificate shall be issued until adequate consideration for
the shares as determined by the Board of Directors has been
received by the Corporation. A facsimile of the seal of the
Corporation may be used in connection with the share
certificates of the Corporation. Facsimile signatures of the
officers named in this Section may be used in connection with
said certificates if the certificate is countersigned by a
transfer agent or registered by a registrar other than the
Corporation itself or an employee of the Corporation. In the
event any officer whose facsimile signature has been placed
upon a certificate shall cease to be such officer before the
certificate is issued, the certificate may be validly issued.
Section 2. Transfer of Stock. Shares of stock
of the Corporation shall be transferred only on the books of
the Corporation upon surrender to the Corporation of the
certificate or certificates representing the shares to be
transferred accompanied by an assignment in writing of such
shares properly executed by the shareholder of record or his
duly authorized attorney-in-fact and with all taxes on the
transfer having been paid. The Corporation may refuse any
requested transfer until furnished evidence satisfactory to
it that such transfer is proper. Upon the surrender of a
certificate for transfer of stock, such certificate shall at
once be conspicuously marked on its face "Cancelled" and
filed with the permanent stock records of the Corporation.
The Board of Directors may make such additional rules
concerning the issuance, transfer and registration of stock
and requirements regarding the establishment of lost,
destroyed or wrongfully taken stock certificates (including
any requirement of an indemnity bond prior to issuance of any
replacement certificate) as it deems appropriate.
Section 3. Registered Shareholders. The
Corporation may deem and treat the holder of record of any
stock as the absolute owner for all purposes and shall not be
required to take any notice of any right or claim of right of
any other person.
Section 4. Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at
any meeting of shareholders, for determining shareholders
entitled to receive payment of any dividend, or for
determining shareholders for any other purpose, the Board of
Directors of the Corporation may fix in advance a date as the
record date for any such determination of shareholders, such
date in any case to be not more than seventy (70) days prior
to the date on which the particular action, requiring such
determination of shareholders, is to be taken. A
determination of shareholders entitled to notice of or to
vote at a shareholders' meeting is effective for any
adjournment of the meeting unless the Board of Directors
fixes a new record date which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed
for the original meeting.
ARTICLE V
SEAL
The common seal of the Corporation shall bear
within concentric circles the words "BellSouth
Telecommunications, Inc." with the word "Seal" in the center.
The seal and its attestation may be facsimiles or may be
otherwise printed on any document and shall have, to the
extent permitted by law, the same force and effect as if it
had been affixed and attested manually.
ARTICLE VI
INDEMNITY
Section 1. Any person who was or is a party or
is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including any
action by or in the right of the Corporation), by reason of
the fact that he is or was a Director or officer of the
Corporation, or is or was serving at the request of the
Corporation as a Director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall
be indemnified by the Corporation against expenses (including
reasonable attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest of the Corporation (and
with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful), to
the maximum extent permitted by, and in the manner provided
by, the Georgia Business Corporation Code.
Section 2. The Board of Directors is expressly
authorized on behalf of the Corporation to enter into
indemnity agreements between the Corporation and any Director
or officer of the Corporation, or any person serving at the
request of the Corporation as a Director, officer, trustee,
agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or enterprise, in form
and content acceptable to the Board of Directors and
substantially in the form of agreement submitted to and
approved by the shareholders of the Corporation. Such
agreements may provide that the Corporation shall indemnify
such persons and provide for procedural rights intended to
assure that appropriate indemnification is available against
expenses (including reasonable attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by such persons in connection with such action, suit
or proceeding. No indemnification may be made for liability
(i) for any appropriation, in violation of a Director's
duties, of any business opportunity of the Corporation, (ii)
for acts or omissions not in good faith or constituting
intentional misconduct or a knowing violation of law, (iii)
for the types of liability set forth in Section 14-2-154 of
the Georgia Business Corporation Code, or (iv) for any
transaction from which the person derived an improper
personal benefit.
ARTICLE VII
AMENDMENT OF BYLAWS
Unless prohibited by the Georgia Business
Corporation Code, the Board of Directors shall have the power
to alter, amend or repeal the Bylaws or adopt new Bylaws, but
any Bylaws adopted by the Board of Directors may be altered,
amended or repealed and new Bylaws adopted by the
shareholders. The shareholders may prescribe that any Bylaw
or Bylaws adopted by them shall not be altered, amended or
repealed by the Board of Directors. If the Bylaws are to be
amended at a special meeting of Directors, notice of such
intention shall be included in the notice of the meeting.
Action by the shareholders with respect to the Bylaws shall
be taken by an affirmative vote of a majority of all shares
outstanding and entitled to vote.
<PAGE>
EXHIBIT 24
Powers of Attorney
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 28th day of February, 1994.
/s/ Irving W. Bailey II
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), propose to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ James H. Blanchard
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Robert H.Boh
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ J. Hyatt Brown
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Edward E. Crutchfield, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Frank R. Day
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Jere A. Drummond
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Lloyd C. Elam
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ William W. Gaston
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Lawrence L. Gellerstedt, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ John W. Harris
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Mark C. Hollis
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Harry M. Lightsey, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON,and each of them,
as attorneys for him and in his name, place and stead as a director of the
Company, to execute and file such annual report, and thereafter to execute
and file any amendment or amendments thereto, hereby giving and granting to
said attorneys full power and authority to do and perform all and every act
and thing whatsoever requisite and necessary to be done in and about the
premises as fully, to all intents and purposes, as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming
all that said attorneys may or shall lawfully do, or cause to be done, by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Thomas H. Meeker
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Joe M. Rodgers
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is a director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead as a director
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set
his hand this 28th day of February, 1994.
/s/ Charles J. Zwick
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, each of the undersigned is an officer or both an officer
and a director of the Company as indicated below under his name;
NOW, THEREFORE, the undersigned, and each of them, hereby
constitutes and appoints F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W.
ROBINSON, and each of them, as attorneys for him and in his name, place and
stead, and in each of his respective capacities with the Company, to
execute and file such annual report, and thereafter to execute and file any
amendment or amendments thereto, hereby giving and granting to said
attorneys full power and authority to do and perform all and every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his
hand this 28th day of February, 1994.
/s/ F. Duane Ackerman /s/ Patrick H. Casey
President and Chief Executive Vice President and Comptroller
Officer; Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia
corporation (hereinafter referred to as the "Company"), proposes to file
shortly with the Securities and Exchange Commission, under the provisions
of the Securities Exchange Act of 1934, as amended, an annual report on
Form 10-K; and
WHEREAS, the undersigned is an officer of the Company as
indicated below under his name;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
F. DUANE ACKERMAN, PATRICK H. CASEY and JERRY W. ROBINSON, and each of
them, as attorneys for him and in his name, place and stead, as an officer
of the Company, to execute and file such annual report, and thereafter to
execute and file any amendment or amendments thereto, hereby giving and
granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully, to all intents and purposes, as he might
or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause
to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this _____ day of ____________, 1994.
/s/ James E. Simpson
Treasurer
