SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
_
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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.
(Exact name of registrant as specified in its charter)
Georgia 58-0436120
(State of (I.R.S. Employer
Incorporation) Identification Number)
675 West Peachtree Street, N. E., Atlanta, Georgia 30375
(Address of principal executive offices) (Zip Code)
Registrant's telephone number 404 529-8611
THE REGISTRANT, A WHOLLY-OWNED SUBSIDIARY OF BELLSOUTH CORPORATION, MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO
GENERAL INSTRUCTION H(2).
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 .
<PAGE>
PART I - FINANCIAL INFORMATION
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
(In Millions)
For the Three Months
Ended March 31,
1994 1993
(Restated)
Operating Revenues:
Local service $1,679.7 $1,618.4
Interstate access 802.4 749.4
Intrastate access 230.1 215.5
Toll 300.2 305.1
Other 513.4 448.6
Total Operating Revenues 3,525.8 3,337.0
Operating Expenses:
Cost of services and products 1,315.7 1,339.4
Depreciation and amortization 728.9 706.5
Selling, general and administrative 561.9 550.6
Total Operating Expenses 2,606.5 2,596.5
Operating Income 919.3 740.5
Interest Expense 135.5 147.5
Other Income (Expense), net 4.0 (2.8)
Income Before Income Taxes and Cumulative
Effect of Change in Accounting Principle 787.8 590.2
Provision for Income Taxes 291.7 202.3
Income Before Cumulative Effect of
Change in Accounting Principle 496.1 387.9
Cumulative Effect of Change in
Accounting Principle, net of tax - (64.8)
Net Income $ 496.1 $ 323.1
Retained Earnings:
At beginning of period $3,180.0 $3,967.0
Net Income 496.1 323.1
Dividends declared (387.1) (384.3)
At end of period $3,289.0 $3,905.8
The accompanying notes are an integral part of these financial statements.
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(In Millions)
March 31, December 31,
1994 1993
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 161.8 $ 84.3
Accounts receivable, net of
allowance for uncollectibles of $86.2
and $84.6 2,128.9 2,229.0
Material and supplies 361.9 374.3
Other current assets 313.9 253.8
2,966.5 2,941.4
Investments In and Advances to Affiliates 242.1 238.2
Property, Plant and Equipment, net 23,378.6 23,444.4
Deferred Charges and Other Assets 487.4 471.2
Total Assets $27,074.6 $27,095.2
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Debt maturing within one year $ 1,008.5 $ 1,094.6
Accounts payable 948.3 1,037.1
Other current liabilities 2,402.8 2,415.4
4,359.6 4,547.1
Long-Term Debt 6,562.2 6,546.5
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,875.2 2,831.4
Unamortized investment tax credits 498.4 515.9
Other liabilities and deferred credits 2,010.6 1,994.7
5,384.2 5,342.0
Shareholder's Equity:
Common stock, one share, no par value 7,479.6 7,479.6
Retained earnings 3,289.0 3,180.0
10,768.6 10,659.6
Total Liabilities and Shareholder's Equity $27,074.6 $27,095.2
The accompanying notes are an integral part of these financial statements.
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
For the Three Months
Ended March 31,
1994 1993
(Restated)
Cash Flows from Operating Activities:
Net income....................................... $ 496.1 $ 323.1
Adjustments to net income:
Depreciation.................................. 727.9 706.1
Provision for losses on bad debts............. 33.1 34.8
Change in accounting principle, net of tax.... - 64.8
Deferred income taxes and unamortized
investment tax credits....................... (29.0) (50.2)
Allowance for funds used during construction.. (4.0) (5.4)
Net change in accounts receivable............. 67.0 (27.8)
Net change in material and supplies........... (14.6) (.7)
Net change in accounts payable and
other current liabilities.................... (120.2) (167.2)
Net change in deferred charges and
other assets................................. (77.9) (53.6)
Net change in other liabilities and
deferred credits............................. 72.3 28.2
Other reconciling items, net.................. (17.8) 11.6
Net cash provided by operating activities.. 1,132.9 863.7
Cash Flows from Investing Activities:
Capital expenditures............................. (636.5) (659.6)
Proceeds from disposals of property, plant
and equipment................................... 23.8 12.8
Other investing activities, net.................. (.2) (.5)
Net cash used for investing activities..... (612.9) (647.3)
Cash Flows from Financing Activities:
Proceeds from short-term borrowings.............. 2,709.0 2,380.0
Repayments of short-term borrowings.............. (2,795.5) (2,215.1)
Advances from parent and affiliates.............. 161.4 117.9
Repayment of advances from parent and affiliates. (145.8) (99.0)
Proceeds of long-term debt....................... - 425.0
Repayment of long-term debt...................... (.1) (439.6)
Payment of call premium.......................... - (5.3)
Payment of capital lease obligations............. (3.1) (2.9)
Equity investment of parent...................... - 5.0
Dividends paid to parent......................... (368.4) (386.7)
Net cash used for financing activities........ (442.5) (220.7)
Net Increase/(Decrease) in Cash and
Cash Equivalents................................... 77.5 (4.3)
Cash and Cash Equivalents at Beginning of Period.... 84.3 133.0
Cash and Cash Equivalents at End of Period.......... $ 161.8 $ 128.7
The accompanying notes are an integral part of these financial statements.
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Millions)
(Unaudited)
(a) Preparation of Interim Financial Statements
The consolidated financial statements of BellSouth Telecommunications, Inc.
("BellSouth Telecommunications") have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission ("SEC").
Certain amounts have been reclassified from previous presentations. In the
opinion of BellSouth Telecommunications, these statements include all
adjustments necessary for a fair presentation of the results of all interim
periods reported herein. All adjustments are of a normal recurring nature.
Certain information and footnote disclosures prepared in accordance with
generally accepted accounting principles have been either condensed or omitted
pursuant to SEC rules and regulations. However, BellSouth Telecommunications
believes that the disclosures made are adequate for a fair presentation of
results of operations, financial position and cash flows. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and accompanying notes included in BellSouth
Telecommunications' latest annual report on Form 10-K. BellSouth
Telecommunications is a wholly-owned subsidiary of BellSouth Corporation
("BellSouth").
(b) Supplemental Cash Flow Information
BellSouth Telecommunications considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents. The following
supplemental information is presented in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 95, "Statement of Cash
Flows":
For the Three Months
Ended March 31,
1994 1993
Cash paid during the period for:
Income taxes.................................. $125.2 $ 77.7
Interest...................................... $148.0 $190.5
(c) SFAS No. 112, "Employers' Accounting for Postemployment Benefits"
In the fourth quarter of 1993, BellSouth Telecommunications adopted SFAS No.
112, "Employers' Accounting for Postemployment Benefits." The cumulative
effect of the change in accounting principle was $64.8. Because the change in
accounting was retroactive to January 1, 1993, the consolidated financial
statements at March 31, 1993 and for the three months then ended have been
restated to reflect the adoption of the accounting standard.
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SELECTED OPERATING DATA
(Unaudited)
Network Access Lines in Service at March 31 (In Thousands)(a):
Percentage
Gain/(Loss) for the
Three Months Ended
March 31,
1994 vs. 1993 vs.
1994 1993 1992
By Category:
Residence 13,880.2 3.10 2.90
Business 5,479.2 6.23 5.48
Other 253.3 (2.88) (5.64)
Total Access Lines 19,612.7 3.87 3.46
By State:
Alabama 1,687.6 3.48 3.21
Florida 5,171.5 4.17 3.63
Georgia 3,224.4 4.65 4.75
Kentucky 1,041.3 3.00 2.92
Louisiana 1,988.6 2.68 2.08
Mississippi 1,094.8 3.52 2.52
North Carolina 1,923.7 4.39 3.41
South Carolina 1,216.1 2.95 2.61
Tennessee 2,264.7 4.07 3.95
Total Access Lines 19,612.7 3.87 3.46
For the Percentage
Three Gain/(Loss) for the
Months Three Months Ended
Ended March 31,
March 31, 1994 vs. 1993 vs.
1994 1993 1992
Access Minutes of Use (In Millions)(a)(b):
Interstate 14,050.8 7.94 5.55
Intrastate 4,005.6 11.39 6.74
Total 18,056.4 8.69 5.80
Toll Messages (In Millions)(a)(c) 388.6 5.83 (2.40)
(a) 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.
(b) Minutes of Use are classified as either interstate or intrastate based on
the percentage interstate usage factor. This factor is updated
periodically.
(c) Effective in 1994, Toll Messages include messages completed under Optional
Calling Plans. Prior period Toll Messages volumes have been restated to
reflect this change. See "Management's Discussion and Analysis of Results
of Operations -- Business Volumes."
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
SELECTED OPERATING DATA - (Continued)
(Unaudited)
For the Three
Months Ended
March 31, Year Ended December 31,
1994 1993 1992 1991 1990 1989
Ratio of Earnings to Fixed Charges (d) 5.94 3.17 4.53 3.86 4.23 4.15
(d) For the purpose of this ratio: (i) earnings have been calculated by adding
income before income taxes, gross interest expense and such portion of
rental expense representative of the interest factor on such rentals; (ii)
fixed charges are comprised of gross interest expense and such portion of
rental expense representative of the interest factor on such rentals.
At March 31,
1994 1993
Debt Ratio (e) 40.8% 39.1%
(e) This ratio is calculated by dividing the sum of debt maturing within one
year and long-term debt, net of unamortized debt issuance costs, by the sum
of shareholder's equity, debt maturing within one year and long-term debt,
net of unamortized debt issuance costs.
Sources of Revenues
Approximately 85% and 87% of BellSouth Telecommunications' Total Operating
Revenues for the three month periods ended March 31, 1994 and 1993,
respectively, were from wireline services. Charges for local service, access
services and toll messages for the three months ended March 31, 1994 accounted
for approximately 56%, 34%, and 10%, respectively, of the wireline revenues
discussed above. The remainder of BellSouth Telecommunications' Total Operating
Revenues was derived principally from directory publishing fees, customer
premises equipment sales and other nonregulated services.
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Dollars in Millions)
BellSouth Telecommunications, Inc. ("BellSouth Telecommunications") is a
wholly-owned subsidiary of BellSouth Corporation ("BellSouth") and is
headquartered in Atlanta, Georgia. BellSouth Telecommunications serves, in the
aggregate, approximately two-thirds of the population and one-half of the
territory within Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi,
North Carolina, South Carolina and Tennessee. BellSouth Telecommunications
primarily provides local exchange service and toll communications services
within court-defined geographic areas, called Local Access and Transport Areas
("LATAs"), and provides network access services to enable interLATA
communications using the long-distance facilities of interexchange carriers.
Through subsidiaries, telecommunications-related services and products are
provided both inside and outside the nine-state BellSouth Telecommunications'
region.
Results of Operations
For the Three Months
Ended March 31, Percentage
1994 1993 Change
Net Income $496.1 $323.1 53.5%
Reported earnings for the three months ended March 31, 1994 are a
BellSouth Telecommunications record for a quarterly period. Net Income
increased $173.0 (53.5%) for the three month period ended March 31, 1994 when
compared to the restated results for the same period in 1993. The increase was
attributable to revenue growth, driven by improved business volumes, cost
control efforts, including expense savings attributable to the restructuring
plan implemented in 1993, and the impact of charges in 1993 of $64.8 for the
retroactive adoption of Statement of Financial Accounting Standards ("SFAS") No.
112, "Employers' Accounting for Postemployment Benefits," and approximately $25
associated with severe 1993 winter weather conditions. After adjusting for the
effect of these unusual items, Net Income increased $83.2 (20.2%).
Business Volumes
Growth in access lines was particularly strong. The number of access lines in
service since March 31, 1993 increased by approximately 730,300, or 3.87%, to
19,612,700, compared to a 3.46% rate of increase for the same prior year period.
The overall increase, led by growth in Georgia, North Carolina, Florida 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 residential lines. The growth
rates for residence and business lines of 3.10% and 6.23%, respectively, for the
current quarter improved compared to growth rates of 2.90% and 5.48%,
respectively, for the same period in 1993.
<PAGE>
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
1,443.5 million (8.69%) for the three month period ended March 31, 1994, a
significant improvement over the 5.80% increase for the same period last year.
The increase in access minutes of use was partially attributable to access line
growth and also to 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.
Toll messages are comprised of Message Telecommunications Service and Wide Area
Telecommunications Service. Also, effective in 1994, toll messages include
messages completed under Optional Calling Plans ("OCPs"), which provide reduced
rates for toll calls within a LATA. Prior period toll messages volumes have
been restated to reflect this change. Service pricing under OCPs has resulted
in volume growth. Accordingly, the trend of declining toll messages volumes in
prior periods has been mitigated to some extent by the inclusion of messages
completed under these plans.
For the three month period ended March 31, 1994, toll messages increased by 21.4
million (5.83%) compared to a restated decrease of 2.40% for the corresponding
period in 1993. The improvement reflects the inclusion in both periods of the
negative impact of significant expanded local area calling plans and the growth
of messages completed under OCPs. Implementation of additional expanded local
area calling plans in BellSouth Telecommunications' service region, coupled with
competition in the intraLATA toll market, will adversely impact future toll
message volumes. These plans and the effects of competition result in the
transfer of calls from toll to local service and access categories,
respectively, but the corresponding revenues are not generally shifted at
commensurate rates.
See "Selected Operating Data."
Operating Revenues
Total Operating Revenues increased $188.8 (5.7%) for the three month period
ended March 31, 1994 when compared to the corresponding period in 1993. The
components of Total Operating Revenues, including percentage changes, were as
follows:
<PAGE>
For the Three Months
Ended March 31, Percentage
1994 1993 Change
Local Service $1,679.7 $1,618.4 3.8%
Interstate Access 802.4 749.4 7.1%
Intrastate Access 230.1 215.5 6.8%
Toll 300.2 305.1 (1.6%)
Other 513.4 448.6 14.4%
Total Operating
Revenues $3,525.8 $3,337.0 5.7%
Local Service revenues increased $61.3 (3.8%) for the three month period ended
March 31, 1994 as compared to the same period in 1993. The increase was
primarily attributable to an increase in access lines in service since March 31,
1993. In addition, growth in revenues from local area calling plans, which
shift revenues from Toll to Local Service, contributed to the increase for the
quarter. The increase was partially offset by rate reductions, principally in
Louisiana and Florida.
Interstate Access revenues increased $53.0 (7.1%) for the three month period
ended March 31, 1994 as compared to the same prior year period. The growth for
the quarter was attributable to increased rates effective July 1, 1993, growth
in minutes of use, increases in end user charges due primarily to access line
growth and the effect of billing adjustments recorded in first quarter 1993,
which reduced revenues for that period. The increase was partially offset by
revenue deferrals under the Federal Communications Commission's ("FCC") price
cap plan and decreased net settlements with the National Exchange Carriers
Association. Since BellSouth Telecommunications' earnings remain in the sharing
range of the FCC's current price cap plan and because of other factors, it is
unlikely that significant revenue growth in this category can be sustained over
the long term.
Intrastate Access revenues increased $14.6 (6.8%) for the three month period
ended March 31, 1994 from the comparable 1993 period. The increase was due to
growth in minutes of use, increased net settlements with independent telephone
companies and the effect of billing adjustments recorded in first quarter 1993,
which reduced revenues for that period. The increase was partially offset by
rate reductions since March 31, 1993.
Toll revenues decreased $4.9 (1.6%) for the three month period ended March 31,
1994 compared to the same prior year period. The decrease for the three month
period was due to rate reductions since March 31, 1993, including the impact of
local area calling plans which shift revenues to Local Service, and decreased
net settlements with independent telephone companies. The decrease was
partially offset by growth in toll message volumes, reflecting improvements
related in part to optional calling plans.
<PAGE>
Other revenues are principally comprised of revenues from publishing rights
fees, customer premises equipment ("CPE") sales and maintenance services,
billing and collection services, cellular interconnect services and other
nonregulated services (primarily inside wire services).
Other revenues increased $64.8 (14.4%) for the three month period ended March
31, 1994 when compared to the corresponding 1993 period. The increase was
attributable in part to volume growth in the CPE businesses, growth in
publishing rights and cellular interconnect fees and higher demand for voice
messaging and inside wire services. In addition, reported revenues increased
due to nonrecurring adjustments in certain states and the net effect of
intrastate sharing accruals in both first quarter periods.
See "Business Volumes."
Operating Expenses
The components of Total Operating Expenses are Depreciation and Amortization,
Cost of Services and Products and Selling, General and Administrative. Cost of
Services and Products includes employee and employee-related expenses
associated with network repair and maintenance, material and supplies expense,
cost of tangible goods sold and other expenses associated with providing
services. Selling, General and Administrative includes expenses related to
sales activities such as salaries, commissions, benefits, travel, marketing and
advertising expenses. For the quarter, Total Operating Expenses increased
$10.0 (0.4%) compared to the same period in 1993, the components of which were
as follows:
For the Three Months
Ended March 31, Percentage
1994 1993 Change
Depreciation and
Amortization $ 728.9 $ 706.5 3.2%
Cost of Services
and Products 1,315.7 1,339.4 (1.8%)
Selling, General and
Administrative 561.9 550.6 2.1%
Other Operating
Expenses 1,877.6 1,890.0 (0.7%)
Total Operating
Expenses $2,606.5 $2,596.5 0.4%
Depreciation and Amortization increased $22.4 (3.2%) due to higher levels of
property, plant and equipment since March 31, 1993 resulting from continued
growth in the customer base and continued modernization of the network. In
addition, higher depreciation rates in certain jurisdictions contributed to the
increase. The effect of the expiration of inside wire and reserve deficiency
amortizations partially offset the increase for the period.
<PAGE>
Other Operating Expenses decreased $12.4 (0.7%) due primarily to expense
savings attributable to a reduction of approximately 2,100 employees since
March 31, 1993 and the inclusion of approximately $40 of expenses related to
severe weather conditions during first quarter 1993. The decrease was
partially offset by increased expenses attributable to overtime compensation,
annual compensation increases for management and craft employees and volume
growth in the CPE businesses. Of the overall reduction in employees at
BellSouth Telecommunications, approximately 1,500 were attributable to the
restructuring plan announced in the fourth quarter of 1993.
For the Three Months
Ended March 31, Percentage
1994 1993 Change
Interest Expense $135.5 $147.5 (8.1%)
Other Income, net 4.0 (2.8) -
Provision for 291.7 202.3 44.2%
Income Taxes
Interest Expense decreased $12.0 (8.1%) for the three month period as compared
to the same 1993 period. The decrease was due primarily to a decline in
interest rates on indebtedness, which resulted from refinancings of long-term
debt at lower interest rates.
Provision for Income Taxes increased $89.4 (44.2%) for the three months ended
March 31, 1994 over the comparable 1993 period. The increase was due primarily
to a higher level of pre-tax income and, to a lesser extent, the one percent
increase in the Federal statutory income tax rate for corporations.
Other Matters
Restructuring of Telephone Operations
Since implementation in fourth quarter 1993 of BellSouth Telecommunications'
overall plan to redesign and streamline its telephone operations by the end of
1996, the workforce has been reduced by approximately 1,500 employees,
including 200 during the first quarter of 1994. In the first quarter of 1994,
cash expenditures by BellSouth Telecommunications related to the ongoing
implementation of the restructuring plan were approximately $40. At March 31,
1994, the liability associated with future restructuring activities was $1,043
BellSouth Telecommunications expects to reduce the workforce by an additional
3,500 employees by the end of 1994 as a part of the restructuring plan. Cash
expenditures of approximately $450 are expected during the remainder of 1994 in
connection with the additional workforce reductions, consolidation, elimination
and centralization of certain business operations and changes to information
systems used primarily to provide services to existing customers.
<PAGE>
Business Disposition
In April 1994, BellSouth Communication Systems, Inc., a wholly-owned
subsidiary, disposed of its customer premises equipment sales and service
operations outside the nine-state wireline region. The disposition will not
materially affect BellSouth Telecommunications' future operating results.
Regulatory Environment
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 telecommunictions industry dictate
that it could not charge prices to customers which provide for the recovery of
costs, SFAS No. 71 would no longer apply. Additionally, if BellSouth
Telecommunications is successful in altering the existing regulatory framework
and achieving price regulation, the accounting under SFAS No. 71 would be
discontinued since such plans do not provide for the recovery of specific
costs.
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.
If the accounting under SFAS No. 71 were to be discontinued due to the overall
level of competition or to changes in regulatory frameworks, the effect on
BellSouth Telecommunications' 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.
Annual Access Tariff
In April 1994, the 1994 Annual Access Tariff was filed with the Federal
Communications Commission with proposed access charges scheduled to become
effective on July 1, 1994. The filing proposes to decrease rates by $28
annually. BellSouth Telecommunications elected to retain a productivity offset
factor of 3.3%, which has applied since July 1, 1993.
Kentucky
As a part of the objective to align the regulatory framework and processes with
the increasingly competitive telecommunications environment, BellSouth
Telecommunications filed with the Kentucky Public Service Commission in March
1994 a proposed price regulation plan which, if adopted, would replace the
current incentive regulation plan that is scheduled to expire on May 31, 1994.
Under the proposed plan, the regulatory focus would shift from the company's
earnings to rates that customers pay for services. The proposal includes
<PAGE>
provisions that basic residential rates would not increase for three years,
residential touchtone charges would be eliminated over a four-year period,
intrastate switched access charges would be reduced to interstate levels and
prices for non-basic services would be based on market factors. Hearings on
the proposal are scheduled for the fall of 1994.
Louisiana
As previously disclosed, BellSouth Telecommunications filed a petition with the
Louisiana Public Service Commission in January 1994 requesting a price
regulation plan. In May 1994, the Lousisiana Commission scheduled hearings on
the proposal for the fall of 1994.
South Carolina
Traditional rate of return regulation is currently in effect in South Carolina.
However, during April 1994, legislation was enacted which would permit the
South Carolina Public Service Commission to adopt alternative forms of
regulation, including price regulation.
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibits identified in parentheses below, on file with
the SEC, are incorporated herein by reference as
exhibits hereto.
Exhibit
Number
4 No instrument which defines the rights of
holders of long and intermediate term debt of
BellSouth Telecommunications, Inc. 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 7 of this Form 10-Q).
(b) Reports on Form 8-K:
January 5, 1994 - Settlement with Florida's Office of
Public Counsel
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELLSOUTH TELECOMMUNICATIONS, INC.
By /s/ Patrick H. Casey
PATRICK H. CASEY
Vice President and Comptroller
(Principal Accounting Officer)
May 12, 1994
