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, 1999
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 Incorporation) (I.R.S. Employer
Identification Number)
675 West Peachtree Street, N. E., 30375
Atlanta, Georgia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number 404 927-1909
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>
Table of Contents
Item Page
Part I
1. Financial Statements
Consolidated Statements of Income and
Retained Earnings ....................................... 3
Consolidated Balance Sheets .............................. 4
Consolidated Statements of Cash Flows .................... 5
Notes to Consolidated Financial Statements ............... 6
2. Management's Discussion and Analysis of Results of Operations 8
Part II
6. Exhibits and Reports on Form 8-K ............................ 14
<PAGE>
PART I - FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
(Dollars In Millions)
For the Three Months
Ended March 31,
1999 1998
<S> <C> <C>
Operating Revenues:
Local service ................................. $2,654 $2,414
Network access ................................. 1,191 1,151
Long distance .................................. 150 175
Other .......................................... 328 280
Total Operating Revenues...................... 4,323 4,020
Operating Expenses:
Operational and support expenses ............... 2,269 1,971
Depreciation and amortization .................. 833 826
Total Operating Expenses ..................... 3,102 2,797
Operating Income .................................. 1,221 1,223
Interest Expense .................................. 135 133
Other Income, net ................................. 1 2
Income Before Income Taxes ........................ 1,087 1,092
Provision for Income Taxes ........................ 404 409
Net Income ................................... $ 683 $ 683
Retained Earnings:
At beginning of period .......................... $1,354 $1,140
Add: Net Income ................................ 683 683
Deduct: Dividends Declared ..................... (571) (553)
At end of period ................................ $1,466 $1,270
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(In Millions)
March 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ...................................................... $ 208 $ 337
Accounts receivable, net of allowance for uncollectibles of $68 and $75 ........ 2,811 2,952
Material and supplies .......................................................... 259 248
Other current assets ........................................................... 209 177
Total Current Assets ......................................................... 3,487 3,714
Investments and Advances ........................................................ 313 310
Property, Plant and Equipment ................................................... 51,100 50,248
Less: accumulated depreciation .................................................. 31,880 31,240
Property, Plant and Equipment, net ........................................... 19,220 19,008
Deferred Charges and Other Assets ............................................... 1,083 884
Total Assets .................................................................... $ 24,103 $23,916
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Debt maturing within one year .................................................. $ 1,910 $ 1,556
Accounts payable ............................................................... 1,039 1,586
Other current liabilities ...................................................... 2,636 2,090
Total Current Liabilities .................................................... 5,585 5,232
Long-Term Debt .................................................................. 6,249 6,523
Noncurrent Liabilities:
Deferred income taxes .......................................................... 1,358 1,274
Unamortized investment tax credits ............................................. 157 167
Other noncurrent liabilities .................................................. 1,862 1,945
Total Noncurrent Liabilities ................................................. 3,377 3,386
Shareholder's Equity:
Common stock, one share, no par value .......................................... 7,426 7,421
Retained earnings .............................................................. 1,466 1,354
Total Shareholder's Equity ................................................... 8,892 8,775
Total Liabilities and Shareholder's Equity ...................................... $24,103 $23,916
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BELLSOUTH TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Millions)
For the Three Months
Ended March 31,
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net income .................................................................... $ 683 $ 683
Adjustments to net income:
Depreciation and amortization ............................................. 833 826
Provision for uncollectibles .............................................. 34 35
Deferred income taxes and unamortized investment tax credits .............. 69 5
Net change in:
Accounts receivable and other current assets .............................. 34 (3)
Accounts payable and other current liabilities ............................ (56) 250
Deferred charges and other assets ......................................... (122) (58)
Other liabilities and deferred credits .................................... (83) 9
Other reconciling items, net .................................................. 22 1
Net cash provided by operating activities ................................. 1,414 1,748
Cash Flows from Investing Activities:
Capital expenditures .......................................................... (1,089) (843)
Other investing activities, net ............................................... 6 10
Net cash used for investing activities .................................... (1,083) (833)
Cash Flows from Financing Activities:
Net borrowings (repayments) of short-term debt ................................ 48 (332)
Repayments of long-term debt................................................... (6) (70)
Advances from parent and affiliates ........................................... 156 118
Repayments of advances from parent and affiliates ............................. (141) (119)
Dividends paid to parent ...................................................... (517) (536)
Net cash used for financing activities .................................... (460) (939)
Net Decrease in Cash and Cash Equivalents ...................................... (129) (24)
Cash and Cash Equivalents at Beginning of Period ............................... 337 49
Cash and Cash Equivalents at End of Period ..................................... $ 208 $ 25
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Millions)
Note A - Preparation of Interim Financial Statements
In this report, BellSouth Telecommunications, Inc. and its subsidiaries are
referred to as "we" or "BST."
The accompanying unaudited consolidated financial statements have been
prepared based upon Securities and Exchange Commission rules that permit reduced
disclosure for interim periods. In our opinion, these statements include all
adjustments necessary for a fair presentation of the results of the interim
periods shown. All adjustments are of a normal recurring nature unless otherwise
disclosed. Revenues, expenses, assets and liabilities can vary during each
quarter of the year. Therefore, the results and trends in these interim
financial statements may not be the same as those for the full year. For a more
complete discussion of our significant accounting policies and other
information, you should read this report in conjunction with the consolidated
financial statements included in our latest annual report on Form 10-K.
Certain amounts have been reclassified within the prior year's information
to conform to the current year's presentation.
Note B - New Accounting Pronouncements
In the first quarter of 1999, we adopted a new accounting standard (SOP
98-1) related to the capitalization of certain costs for internal-use software
development. Adoption of the new standard resulted in an increase in earnings as
a result of the capitalization of costs which had previously been expensed. The
first quarter impact was an increase in income before income taxes of $86 and
net income of $53. The adoption also changed the classification of these
expenditures in the consolidated statements of cash flows from operating to
investing activities.
Note C - Segment Information
Our predominant products are local exchange and long distance
communications services within LATAs (referred to as intraLATA) and network
access services, all of which are provided over a single network. Operating
decisions regarding resource allocation and performance evaluation are made
based on total operations. Based on these factors, we have determined that we
operate as one operating segment as defined by Statement of Financial Accounting
Standards No. 131.
Note D - Supplemental Cash Flow Information
For the Three Months
Ended March 31,
1999 1998
Cash Paid For:
Income taxes ......................... $ 15 $ 28
Interest ............................. $ 77 $ 84
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In Millions)
Note E - Contingencies
Following the enactment of the Telecommunications Act of 1996, we entered
into interconnection agreements with various competitive local exchange carriers
(CLECs). These agreements provide for, among other things, the payment of
reciprocal compensation for local calls initiated by the customers of one
carrier that are completed on the network of the other carrier. Numerous CLECs
have claimed entitlement from us for compensation associated with dial-up calls
originating on our network and connecting with Internet service providers (ISPs)
served by the CLECs' networks. It is our position that dial-up calls to ISPs are
not local calls for which terminating compensation is due under the
interconnection agreements. The courts and state commissions that have
considered the matter to date, however, have ruled that such calls invoke the
reciprocal compensation obligation.
In February 1999, the Federal Communications Commission (FCC) issued a
decision that such ISP traffic does not terminate at the ISP and, therefore, is
interstate in nature, rather than local. The FCC stated further that it would
not interfere with prior state commissions' decisions regarding this matter. We
continue to believe that we have a good basis for our claims that we do not owe
such reciprocal compensation to the CLECs. We have, however, received an
unfavorable ruling before a state commission subsequent to the FCC's decision.
We have appealed this decision like those released prior to the FCC's order.
At March 31, 1999, our exposure related to these disputed claims was
approximately $240, including accrued interest.
Note F - Subsequent Event
In 1994, the South Carolina General Assembly adopted a statute which gave
the South Carolina Public Service Commission (SCPSC) the authority to regulate
telephone utilities by alternative regulation. In January 1996, the SCPSC issued
an order approving our price regulation plan. In April 1999, the South Carolina
Supreme Court ruled that the SCPSC's approval of our price regulation plan did
not meet the statutory requirements. We have filed a petition for rehearing with
the Court.
<PAGE>
BELLSOUTH TELECOMMUNICATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS
(Dollars in Millions)
For a more complete understanding of our industry, the drivers of our
business, and our current period results, you should read the following
Management's Discussion and Analysis of Results of Operations (MD&A) in
conjunction with the MD&A in our latest annual report on Form 10-K.
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Results of Operations
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Our reported results include the effect of charges from an affiliated
company for use of intellectual property rights related to trademarks, service
marks and patents. These charges increased our reported first quarter 1999
operational and support expenses by $192 and reduced our reported net income by
$118 when compared to first quarter 1998. To assist your understanding of the
results of operations, the following discussion excludes the effect of these
charges, which are eliminated in the consolidated financial results of BellSouth
Corporation.
Key financial and operating data for first quarter of 1999 and 1998,
adjusted to exclude the effect of the charges discussed above, are as follows:
----------------------- --------------
First Quarter %
-----------------------
1999 1998 Change
----------- ----------- --------------
Revenues $ 4,323 $ 4,020 7.5
- ------------------------------------- ----------- ----------- --------------
Expenses $ 2,910 $ 2,797 4.0
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Operating income $ 1,413 $ 1,223 15.5
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Net income $ 801 $ 683 17.3
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EBITDA (a) $ 2,246 $ 2,049 9.6
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EBITDA margin 52.0% 51.0% +100bps
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Access line counts (000's):
- ------------------------------------- ----------- ----------- --------------
Switched access lines 24,361 23,548 3.5
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Access line equivalents 16,065 11,537 39.2
- ------------------------------------- ----------- ----------- --------------
Total equivalent access lines 40,426 35,085 15.2
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Access minutes of use (millions) 26,825 25,082 6.9
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Digital and data revenues $535 $415 28.9
- ------------------------------------- ----------- ----------- --------------
Convenience feature revenues $434 $357 21.6
- ------------------------------------- ----------- ----------- --------------
(a) EBITDA represents income before net interest expense, income taxes,
depreciation and amortization and other income, net. EBITDA is presented because
it is a widely accepted financial indicator used by certain investors and
analysts to analyze and compare companies on the basis of operating performance
and because our management believes that EBITDA is an additional meaningful
measure of performance and liquidity. EBITDA is not intended to present cash
flows for the period, nor has it been presented as an alternative to operating
income (loss) as an indicator of operating performance and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with generally accepted accounting principles. The items excluded
from the calculation of EBITDA are significant components in understanding and
assessing our financial performance. Our computation of EBITDA may not be
comparable to the computation of similarly titled measures of other companies.
EBITDA does not represent funds available for discretionary uses.
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Overview
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Our results reflect strong revenue growth, including a 28.9% growth in
digital and data services revenues. Expense growth was driven by increased
spending for customer service and network support functions and expenses for
development and promotion of new business initiatives including high-speed data
and Internet service offerings.
In addition, on January 1, 1999, we adopted a new accounting standard on
capitalization of internal-use software. The quarter-over-quarter impact of
capitalizing software costs under the new standard was a benefit of $53 to first
quarter 1999 net income.
<PAGE>
- -------------------------------------- ----------------------- -----------
First Quarter %
1999 1998 Change
- -------------------------------------- ----------- ----------- -----------
Operating revenues:
Local service ................ $2,654 $2,414 9.9
Network access ............... 1,191 1,151 3.5
Long distance ................ 150 175 (14.3)
Other wireline................ 328 280 17.1
- -------------------------------------- ----------- ----------- -----------
Total operating revenues ... $4,323 $4,020 7.5
- -------------------------------------- ----------- ----------- -----------
Operating Revenues
Local service
The $240 increase in local service revenues is attributable to growth in
access lines and strong demand for digital and data services and convenience
features.
We ended the first quarter with over 40 million total equivalent access
lines, an increase of 15.2% over the prior year. Residential access lines
increased 3.9% to 16,764,000 in first quarter 1999, driven by economic growth in
our nine-state region as well as demand for additional residence lines for home
office purposes, Internet access and children's phones. We added 385,000 second
lines since last year, increasing the penetration rate to 16.6%. Business access
lines, including data circuits, grew 25.2% propelled by expanding demand for our
digital and data services. Switched business access lines grew 2.5% to 7,325,000
lines in service. This growth rate reflects the continued migration of new and
existing business customers to high-capacity data lines.
Revenues from optional convenience features such as custom calling features
(e.g., Caller ID, Call Waiting, Call Return) and MemoryCall(R) service increased
$77 or 21.6%. We continued to drive growth of convenience feature usage through
our Complete Choice Package, a one-price bundled offering of over 20 features.
Increased penetration of extended local area calling plans also increased
revenues by approximately $44 over first quarter 1998.
Network access
Network access revenues grew $40 in first quarter 1999 due largely to
higher demand. Access minutes of use rose 6.9% to 26,825 million in first
quarter 1999 from 25,082 million in first quarter 1998. Increases in switched
access lines and promotional activities by long distance carriers continue to be
the primary drivers of the increase in minutes of use. The growth rate in total
minutes of use continues to be negatively impacted by competition and the
migration of long distance carriers to categories of service (such as special
access) that have a fixed charge and are excluded from minutes of use counts.
Revenues from special access services grew approximately $34 as Internet service
providers and high-capacity users increased their use of our network.
These increases were largely offset by rate reductions related to the
Federal Communications Commission's (FCC) productivity factor adjustment and
access reform that decreased revenues by $38 compared to first quarter 1998.
Long distance
The $25 decrease is primarily attributable to a regulatory ruling related
to compensation we received from long distance carriers for interconnection to
our public payphones. Also contributing to the decline in revenues was an 11.9%
decrease in long distance message volumes since first quarter 1998. Partially
offsetting these decreases were increased revenues from the provision of digital
and data services and independent company settlements occurring in first quarter
1999.
Competition from alternative intraLATA long distance carriers and increased
penetration of extended local area calling plans continue to have an adverse
impact on our long distance message volumes. Effective February 1999, we
implemented 1+ dialing parity for all states in our region, which allows our
customers to choose an intraLATA long distance carrier without having to dial a
special access code. We believe that competition in the intraLATA long distance
market will continue to adversely impact long distance message volumes and
revenues.
<PAGE>
Other wireline
The $48 increase is attributable to higher revenues in first quarter 1999
from sales of customer premises equipment, revenues from our Internet access
offering and interconnection revenues from wireless carriers. We ended the
quarter with over 469,000 subscribers to our BellSouth.net (sm) service, an
increase of 125% compared to first quarter 1998.
Operating Expenses
Operational and support expenses
Operational and support expenses increased $106 (5.4%) for first quarter
1999 when compared to first quarter 1998. Adjusted for the impact of adopting
the new rules on software capitalization, expenses increased $197 (10.0%).
Increased labor costs, primarily in our customer service and network
support functions, and other increased costs in the telephone operations
associated with higher business volumes were the main contributors to the
increase. Also contributing to the increase were expenses related to new data
initiatives, including Asymmetric Digital Subscriber Line (ADSL) and integrated
fiber-in-the-loop (IFITL), and promotional expenses related to expanding our
Internet customer base.
We anticipate making ADSL service available in 30 markets this year, with
an addressable market of approximately 5.2 million access lines. We are
currently deploying IFITL in nearly all newly built neighborhoods and some
200,000 homes in Atlanta and Miami.
Depreciation and amortization
Depreciation and amortization expense was relatively flat compared to the
prior year, increasing $7 or 0.8%. While gross depreciable plant increased by
$2,614 or 5.4% over the prior year, the overall composite depreciation rate was
slightly lower resulting in flat depreciation expense.
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Other Nonoperating Items
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- -------------------------------------- ----------------------- -----------
First Quarter %
1999 1998 Change
- -------------------------------------- ----------- ----------- -----------
Interest Expense ................. $135 $133 1.5
Other Income, net ................ 1 2 N/M
Provision for Income Taxes ....... 478 409 16.9
- -------------------------------------- ----------- ----------- -----------
Interest expense
Higher interest expense in first quarter 1999 is attributable to higher
average debt balances.
Provision for income taxes
The provision for income taxes increased $69 due primarily to higher
operating income during first quarter 1999. The effective income tax rate is the
provision for income taxes as a percentage of income before taxes. The effective
rate for first quarter 1999 was 37.4% compared to 37.5% in first quarter 1998
and is in line with our expected rate for 1999.
<PAGE>
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Operating Environment and Trends of the Business
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Regulatory Developments
Reciprocal Compensation. See Note E to the consolidated financial statements.
South Carolina Supreme Court Decision. See Note F to the consolidated financial
statements.
Year 2000 Readiness Disclosure
You should note that the following discussion about the Year 2000 includes
certain forward-looking statements that are subject to risks and uncertainties.
Factors that could cause actual results to differ materially from those
expressed in the forward-looking statements include, but are not limited to:
o Our Year 2000 program is not complete; ongoing implementation and testing
could reveal the need for additional unplanned remedial efforts;
o Third party vendors and suppliers could fail to meet their stated
objectives, timetables or cost estimates; and
o Our timetable or cost estimates could be impacted by unforeseen shortages
of skilled personnel.
We have initiated a company-wide program to identify and address issues
associated with the ability of our date-sensitive information, telephony and
business systems and certain equipment to properly recognize the Year 2000 as a
result of the century change on January 1, 2000. The program is also designed to
assess the readiness of other entities with which we do business.
Inability to reach substantial Year 2000 compliance in our systems and
integral third party systems could result in interruption of telecommunications
services, interruption or failure of our customer billing, operating and other
information systems and failure of certain date-sensitive equipment. These
failures could result in substantial claims by customers as well as loss of
revenue due to service interruption, delays in our ability to bill our customers
accurately and timely and increased expenses associated with litigation,
stabilization of operations following such failures or execution of contingency
plans.
Our Year 2000 program is being conducted by a management team that is
coordinating efforts of internal resources as well as third party providers and
vendors in identifying and making necessary changes to our systems hardware,
software and date-sensitive equipment. Some of the changes that are necessary in
our operations are being made as a part of ongoing systems upgrades.
Our Year 2000 program has been divided into six phases: planning;
inventory; impact analysis; conversion; testing; and implementation. We monitor
our progress within these six phases based on the number of inventoried items
that have been addressed. Management's target date for completion of all phases
for most of our mission critical applications is July 1999. Mission critical
applications include those that:
o directly affect delivery of primary services to our customers;
o directly affect our revenue recognition and collection;
o would create noncompliance with any statutes or laws; and
o would require significant costs to address in the event of noncompliance.
<PAGE>
We have identified three main areas of focus for our Year 2000 program:
network components; information technology systems; and building and
environmental systems. Each focus area includes the hardware, software, embedded
chips, third party vendors and suppliers as well as third party networks that
are associated with the identified systems. At March 31, 1999, the planning,
inventory and impact analysis phases have been substantially completed and the
conversion, testing and implementation phases are well under way. Our status for
the conversion, testing and implementation phases is as follows:
Network components - 85% complete
This focus area consists of the switches, transmission systems and
associated software that comprise the core of our telephony systems. Outside
suppliers provide all hardware and most software that comprise our networks;
these components are being remediated by those third party suppliers. Either we,
our vendors and/or industry groups such as the Telco Year 2000 Forum are
performing testing of these components for compliance.
Information technology systems - 70% complete
This focus area consists of those systems that primarily support "customer
care" operations such as order taking and billing. The software for these
systems was developed by both us and vendors and is being remediated and tested
by both.
Building and environmental systems - 40% complete
This focus area includes various products and systems that are not used in
support of network or customer care functions. Building and environmental
systems are primarily provided by third parties and include building operations,
office equipment, utilities, etc.
Buildings are not considered fully converted, tested and implemented until
every environmental component within the building is complete. We have completed
approximately 85% of our conversion and testing efforts for individual
environmental components.
Contingency plans. We have developed numerous continuity plans for
conducting our business operations in the event of crises including system
outages and natural disasters. We have chartered a Year 2000 Business
Contingency Planning project to ensure that contingency plans are developed and
tested, and support infrastructures are in place. This effort is not limited to
the risks posed by the potential Year 2000 failures of our networks, internal
information systems or infrastructures, but also includes the potential
secondary impact on us of Year 2000 failures, including potential systems
failures of business partners and infrastructure service providers. Business
impact assessments have been substantially completed, and the completion of
contingency plan testing and sign-off is scheduled for third quarter 1999.
Costs of project. Some of the costs associated with our Year 2000
compliance efforts were incurred in 1997 and 1998. We will incur the remainder
during 1999 and 2000. You should note that costs are not incurred equally over
all phases of the project, but increase over time. We anticipate that the
conversion and testing phases will require an increase in spending over the
earlier phases of the project. At March 31, 1999, we have spent approximately
$98 in external costs towards Year 2000 compliance. We estimate the total
external cost of our compliance efforts will be between $200 and $250 over the
life of the project. We intend to continually reassess the estimated costs and
status of Year 2000 remediation efforts.
Expected completion. We currently anticipate that most of our mission
critical applications will be Year 2000 compliant by July 1999. However,
unforeseen circumstances such as those discussed previously could affect our
current assessments. As a result, we are unable to determine the impact that any
system interruption would have on our results of operations, financial position
and cash flows.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The standard requires that all derivative
instruments be recognized as assets or liabilities and adjusted to fair value
each period. We will adopt SFAS No. 133 on January 1, 2000 and are currently
assessing the impact that adoption will have on our results of operations and
financial position.
<PAGE>
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Cautionary Language Concerning Forward-Looking Statements
- --------------------------------------------------------------------------------
In addition to historical information, management's discussion and analysis
includes certain forward-looking statements regarding events and financial
trends that may affect our future operating results and financial position.
Words such as "expect," "forecast," "intend," "plan," "will," "anticipates,"
"achieve," "initiatives" or similar expressions are intended to identify such
forward-looking statements. These statements are based on our assumptions and
estimates and are subject to risks and uncertainties. For these statements, we
claim the protection of the safe harbor for forward-looking statements provided
by the Private Securities Litigation Reform Act of 1995.
Factors that could affect future operating results and financial position
and could cause actual results to differ materially from those expressed in the
forward-looking statements are:
o a change in economic conditions in markets where we operate or have
material investments which would affect demand for our services;
o the intensity of competitive activity and its resulting impact on pricing
strategies and new product offerings;
o further delay in BellSouth Corporation's entry into the interLATA long
distance market;
o higher than anticipated start-up costs or significant up-front
investments associated with new business initiatives;
o unanticipated higher capital spending from the deployment of new
technologies;
o unsatisfactory results in regulatory actions including access reform,
universal service, terms of interconnection and unbundled network elements and
resale rates; and
o failure to satisfactorily identify and complete Year 2000 software and
hardware revisions by us and entities with which we do business.
These cautionary statements should not be construed as exhaustive. These
and other developments could cause our actual results to differ materially from
those forecast or implied in the aforementioned forward-looking statements. You
are cautioned not to place undue reliance on these forward-looking statements,
which are current only as of the date of this filing. We have no obligation to
publicly release the results of any revisions to these forward-looking
statements to reflect events or circumstances after the date of this filing.
<PAGE>
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PART II -- OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number
4a No instrument which defines the rights of holders of our long- and
intermediate-term debt is filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation, we hereby agree to furnish a
copy of any such instrument to the SEC upon request.
10a BellSouth Compensation Deferral Plan, as amended and restated effective
September 28, 1998. (Exhibit 10z to BellSouth Corporation Form 10-Q for the
quarter ended March 31, 1999, File No. 1-8607.)
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule as of March 31, 1999.
(b) Reports on Form 8-K:
None.
<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/ Isaiah Harris
ISAIAH HARRIS
Vice President, Chief Financial Officer and Comptroller
(Principal Financial and Accounting Officer)
May 10, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
Number
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule as of March 31, 1999.
EXHIBIT 12
BellSouth Telecommunications Inc.
Computation Of Earnings To Fixed Charges
(Dollars In Millions)
For the Three Months
Ended March 31,
1999
1. Earnings
(a) Income from continuing operations before
deductions for taxes and interest $ 1,222
(b) Portion of rental expense representative
of interest factor 10
TOTAL $ 1,232
2. Fixed Charges
(a) Interest $ 140
(b) Portion of rental expense representative
of interest factor 10
TOTAL $ 150
Ratio (1 divided by 2) 8.21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 208
<SECURITIES> 313
<RECEIVABLES> 2,879
<ALLOWANCES> 68
<INVENTORY> 259
<CURRENT-ASSETS> 3,487
<PP&E> 51,100
<DEPRECIATION> 31,880
<TOTAL-ASSETS> 24,103
<CURRENT-LIABILITIES> 5,585
<BONDS> 6,249
0
0
<COMMON> 7,426
<OTHER-SE> 1,466
<TOTAL-LIABILITY-AND-EQUITY> 24,103
<SALES> 26
<TOTAL-REVENUES> 4,323
<CGS> 57
<TOTAL-COSTS> 2,196
<OTHER-EXPENSES> 906
<LOSS-PROVISION> 34
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> 1,087
<INCOME-TAX> 404
<INCOME-CONTINUING> 683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 683
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
