-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JkXt5YAK5J3xqtcJXHHGBcvuxC15RUcShNIc2OzyOZZJgVEm3psPxAiQsC4nOvwC jBf5d/rJ+m8Xb3uaTgoU7Q== 0000950149-96-001255.txt : 19960814 0000950149-96-001255.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950149-96-001255 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC BELL CENTRAL INDEX KEY: 0000075641 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 940745535 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-49477 FILM NUMBER: 96610791 BUSINESS ADDRESS: STREET 1: 140 NEW MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4155429000 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC TELEPHONE & TELEGRAPH CO DATE OF NAME CHANGE: 19840115 424B2 1 424B2 FILING 1 Filed Pursuant to Rule 424 (b)(2) Registration Number 033-49477 PROSPECTUS SUPPLEMENT (To Prospectus Dated April 12, 1993) $250,000,000 LOGO 6 7/8% DEBENTURES DUE AUGUST 15, 2006 The Debentures will mature on August 15, 2006. Interest on the Debentures will be payable semiannually on February 15 and August 15 of each year, commencing February 15, 1997. The Debentures may not be redeemed prior to maturity and will not be subject to any sinking fund. The Debentures will be represented by Global Securities registered in the name of the nominee of The Depository Trust Company, as the Depository (the "Depository"). Interests in the Debentures represented by Global Securities will be shown on, and transfers thereof will be effected only through, records maintained by the Depository and its direct and indirect participants. Except as described herein, Debentures in definitive form will not be issued. See "Description of the Debentures." THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - --------------------------------------------------------------------------------------------- PRICE TO UNDERWRITING PROCEEDS TO PUBLIC(1) DISCOUNT COMPANY(1)(2) Per Debenture........................ 99.303% .650% 98.653% Total................................ $248,257,500 $1,625,000 $246,632,500 - ---------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from date of issuance to date of delivery. (2) Before deduction of expenses payable by the Company estimated at $80,000. The Debentures are offered subject to receipt and acceptance by the Underwriters, to prior sale and to the Underwriters' right to reject any order in whole or in part and to withdraw, cancel or modify the offer without notice. It is expected that delivery of Global Securities will be made through the facilities of The Depository Trust Company on or about August 15, 1996. SALOMON BROTHERS INC LEHMAN BROTHERS MERRILL LYNCH & CO. The date of this Prospectus Supplement is August 12, 1996. 2 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ------------------------ USE OF PROCEEDS Pacific Bell (the "Company") intends to apply the proceeds from the sale of the Debentures to reduce a portion of the short-term debt used to refinance the following Company indebtedness called for redemption effective December 29, 1995: $102 million of the Company's 9 1/8% Debentures due December 15, 2030; $200 million of the Company's 7.80% Debentures due March 1, 2007; and $200 million of the Company's 7 5/8% Debentures due June 1, 2009. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges of the Company for the year ended December 31, 1995 is 4.51 and for the six months ended June 30, 1996 is 5.86. For the purpose of calculating this ratio, earnings consist of income before taxes and fixed charges. Fixed charges include interest on indebtedness and the portion of rentals representative of the interest factor. RECENT DEVELOPMENTS For the three months ended June 30, 1996, the Company reported earnings of $304 million on revenues of $2.352 billion as compared to earnings of $243 million on revenues of $2.186 billion for the three months ended June 30, 1995. For the six months ended June 30, 1996, the Company reported earnings of $594 million on revenues of $4.635 billion as compared to earnings of $489 million on revenues of $4.398 billion for the six months ended June 30, 1995. DESCRIPTION OF THE DEBENTURES The Debentures will be limited to $250,000,000 aggregate principal amount and will be issuable only in registered form in denominations of $1,000 and integral multiples thereof under an Indenture dated as of April 7, 1993, which is more fully described in the accompanying Prospectus under "Description of Debt Securities." The Debentures will mature on August 15, 2006. Interest on the Debentures will be paid from the date of issuance of the Debentures, expected to be on or around August 15, 1996, and will be payable semi-annually on February 15 and August 15 of each year, commencing February 15, 1997, to the persons in whose names the Debentures are registered at the close of business on the February 1 or August 1 prior to the payment date, at the annual rate set forth on the cover page of this Prospectus Supplement. Principal of and interest on the Debentures will be payable at the office or agency of the Company maintained for such purpose, which, at the date of this Prospectus Supplement, is the office of First Trust of California, National Association, as Trustee, One California Street, San Francisco, California. Under the Indenture, at the option of the Company, interest on the Debentures may be paid by check or draft mailed to the person entitled thereto at the address of such person appearing on the register of Debentures. The Debentures may not be redeemed prior to maturity and will not be subject to any sinking fund. The Debentures will be issued in the form of one or more registered Global Securities which will be deposited with, or on behalf of, the Depository. The Global Securities will be registered in the name of Cede & Co., the Depository's nominee. Except for certain exceptions set forth in the Indenture, the S-2 3 registered Global Securities may be transferred, in whole but not in part, only to another nominee of the Depository or to a successor of the Depository or its nominee. The Depository holds securities for its participating organizations (the "Participants") and facilitates the settlement among Participants of securities transactions in such securities through electronic book-entry changes in its Participants' accounts. Participants include securities brokers and dealers (including the Underwriters), banks and trust companies, clearing corporations and certain other organizations. Access to the Depository's system is also available to others such as brokers, dealers, banks and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("indirect participants"). Persons who are not Participants may beneficially own securities held by the Depository only through Participants or indirect participants. The Debentures will trade in the Same-Day Funds Settlement System of the Depository until maturity, and settlement for the Debentures will be made in immediately available funds. In connection therewith, all payments of principal of and interest on the Debentures will be made in immediately available funds. Because the Debentures will trade in the Depository's Same-Day Funds Settlement System, secondary market trading activity in the Debentures will be required by the Depository to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the Debentures. LEGAL OPINIONS Certain matters relating to the legality of the Debentures offered hereby will be passed on for the Company by Mr. James S. Hamasaki, General Counsel of the Company. As of June 30, 1996, Mr. Hamasaki beneficially owned or had an interest in approximately 1,227 shares of Pacific Telesis Group Common Stock and had unexercised options under the Pacific Telesis Group 1994 Stock Incentive Plan or its predecessor in the aggregate amount of 77,000 shares of Pacific Telesis Group Common Stock of which 53,000 shares are currently exercisable and options to purchase 24,000 shares of Pacific Telesis Group Common Stock will become exercisable within a year. Certain matters relating to the legality of the Debentures offered hereby will be passed on for the Underwriters by Pillsbury Madison & Sutro LLP. For many years, such firm has acted and continues to act as counsel in certain matters for the Company and certain of its affiliates. UNDERWRITING Salomon Brothers Inc, Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriters") have, under the terms of and subject to the conditions contained in an Underwriting Agreement dated August 12, 1996, severally agreed to purchase, and the Company has agreed to sell to each of the Underwriters, the principal amount of Debentures set forth opposite its name below:
PRINCIPAL AMOUNT UNDERWRITER OF DEBENTURES - ---------------------------------------------------------- ------------- Salomon Brothers Inc...................................... $83,500,000 Lehman Brothers Inc....................................... 83,250,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated........ 83,250,000 ------------- Total........................................... $250,000,000 =============
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the Debentures if any Debentures are purchased. The Underwriters propose initially to offer the Debentures directly to the public at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less S-3 4 a concession not in excess of .400% of the principal amount of the Debentures. The Underwriters may allow, and dealers may reallow, a concession not in excess of .250% of the principal amount of the Debentures to certain other dealers. The Debentures are a new issue of securities with no established trading market. The Company does not intend to apply for listing of the Debentures on a national securities exchange. The Company has been advised by the Underwriters that they currently intend to make a market in the Debentures as permitted by applicable laws and regulations, but the Underwriters are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Debentures. The Underwriting Agreement provides that the Company will indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, or contribute to payments the Underwriters may be required to make in respect thereof. Salomon Brothers Inc is acting as financial advisor to Pacific Telesis Group in connection with its pending merger with SBC Communications Inc. In its compensation arrangements, Salomon Brothers Inc agreed to rebate a cumulative total of $500,000 of its fee for financial advisory work to Pacific Telesis Group or any of its subsidiaries against any fees received by Salomon Brothers Inc in connection with financing assignments. The full amount of the rebate will become payable to the Company upon closing of the sale of the Debentures. S-4 5 PROSPECTUS $1,950,000,000 (PACIFIC BELL LOGO) DEBT SECURITIES Pacific Bell (the "Company") may offer from time to time its unsecured debt securities consisting of notes, debentures or other evidences of indebtedness (the "Debt Securities") at an aggregate initial offering price of not more than $1,950,000,000 or, if applicable, the equivalent thereof at the time of the offering in any other currency or currency units. The Debt Securities may be offered as separate series in amounts, at prices and on terms to be determined in light of market conditions at the time of sale and set forth in a Prospectus Supplement or Prospectus Supplements. The terms of each series of Debt Securities, including, where applicable, the specific designation, aggregate principal amount, authorized denominations, maturity, rate or rates (which may be fixed or variable) and time or times of payment of any interest, any terms for optional or mandatory redemption or payment of additional amounts or any sinking fund provisions, any initial public offering price, the proceeds to the Company and any other specific terms in connection with the offering and sale of such series will be set forth in a Prospectus Supplement or Prospectus Supplements. As used herein, Debt Securities shall include securities denominated in United States dollars or, at the option of the Company if so specified in an applicable Prospectus Supplement, in any other currency or in composite currencies or in amounts determined by reference to an index. The Debt Securities may be sold directly by the Company, through agents designated from time to time or to or through underwriters or dealers. See "Plan of Distribution." If any agents of the Company or any underwriters are involved in the sale of any Debt Securities in respect of which this Prospectus is being delivered, the names of such agents or underwriters and any applicable commissions or discounts will be set forth in a Prospectus Supplement. The net proceeds to the Company from such sale also will be set forth in a Prospectus Supplement. The Debt Securities may be issued in registered form or bearer form with or without coupons attached. In addition, all or a portion of the Debt Securities of a series may be issuable in temporary or permanent global form. Securities in bearer form, Securities in permanent global form exchangeable for Securities in bearer form and Securities initially represented by a temporary global Security are offered only to non-United States persons and to offices of certain United States financial institutions located outside the United States and its possessions. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS APRIL 12, 1993. 6 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR AGENT. NEITHER THIS PROSPECTUS NOR THE PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATES. AVAILABLE INFORMATION The Company maintains its principal offices at 140 New Montgomery Street, San Francisco, California 94105 (telephone number (415) 542-9000), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "SEC"). Such reports, and other information filed by the Company can be inspected and copied at the public reference facilities of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as at the following SEC Regional Offices: Seven World Trade Center, 13th Floor, New York, NY 10048; and Suite 1400, 500 West Madison Street, Chicago, IL 60661. Such material can also be inspected at the New York, Midwest and Pacific Stock Exchanges. Copies can be obtained from the SEC by mail at prescribed rates. Requests should be directed to the SEC's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. This Prospectus does not contain all information set forth in the Registration Statement and Exhibits thereto which have been filed with the SEC under the Securities Act of 1933, as amended (the "Act"), and to which reference is hereby made. INCORPORATION OF DOCUMENTS BY REFERENCE The following documents have been filed by the Company with the SEC (File No. 1-1414) and are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1992. (2) The Company's Current Report on Form 8-K, Date of Report, January 26, 1993. (3) The Company's Current Report on Form 8-K, Date of Report, February 25, 1993. (4) The Company's Current Report on Form 8-K, Date of Report, March 9, 1993. All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein or in any Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Copies of the above documents (other than exhibits) may be obtained upon request without charge from the Company's Investor Services office, 130 Kearny Street, Suite 2926, San Francisco, California 94108 (telephone number (415) 394-3078). 2 7 THE COMPANY Pacific Bell (the "Company") was incorporated in 1906 under the laws of the State of California. It has its principal executive offices at 140 New Montgomery Street, San Francisco, California 94105 (telephone number (415) 542-9000). Through December 31, 1983, the Company was an associated company of the Bell System and a subsidiary of American Telephone and Telegraph Company ("AT&T"). Effective January 1, 1984, the Company became a subsidiary of Pacific Telesis Group, one of the seven regional holding companies (the "RHCs") formed by AT&T in connection with the divestiture from AT&T of its 22 wholly owned operating telephone companies pursuant to a consent decree approved by the United States District Court for the District of Columbia (the "Consent Decree"). The Company provides a wide variety of communications services in California including local exchange and toll service, network access and, through its subsidiary Pacific Bell Directory, directory advertising. Effective January 1, 1993, the Company transferred the business unit which offers certain services such as voice mail, electronic messaging and interactive voice response to a wholly owned subsidiary known as Pacific Bell Information Services ("PBIS"). Under the terms of the Consent Decree and resulting Plan of Reorganization, all territory served by the operating telephone companies was divided into geographical areas called "Local Access and Transport Areas" ("LATAs" or "Service Areas"). These Service Areas are usually centered around a city or other generally identifiable community of interest. California has been divided into ten Service Areas. The Consent Decree generally prohibits the Company and/or its affiliates from providing for hire communications services that cross Service Area boundaries; however, the Company's networks interconnect with carriers that provide such services (commonly referred to as "interexchange carriers") and in this way the telephones and telecommunications equipment in the Company's Service Areas can be connected with the telephones and telecommunications systems throughout the United States and with telecommunications systems in most other countries. The Consent Decree provides that the Company and/or its affiliates shall not engage in certain lines of business, including the provision of interexchange telecommunications or telecommunications equipment. In addition, the Company and/or its affiliates are generally prohibited from manufacturing telecommunications equipment and customer premises equipment ("CPE"). However, the Consent Decree does allow the Company and/or its affiliates to provide exchange telecommunications and exchange access services, CPE, printed directory advertising and, after September 10, 1987, any other products or services except those specifically prohibited. Although the Consent Decree originally prohibited the Company or its affiliates from providing information services, the U.S. District Court for the District of Columbia removed this prohibition in July 1991 but stayed its decision pending appeal. In October 1991, the U.S. Court of Appeals for the District of Columbia lifted the stay. The appeal is still pending. The removal of this ban allows the Company to offer a variety of new information services such as enhanced voice mail and electronic yellow pages. The Company anticipates that legislation to reverse the lifting of the ban, which the Company will oppose, will be considered in Congress in 1993. Other subsidiaries of Pacific Telesis Group are engaged in the provision of cellular telecommunications, cellular CPE and other lines of business. For a description of the Company's business and the risks attendant thereto, see the Pacific Bell Annual Report on Form 10-K for 1992. 3 8 USE OF PROCEEDS The Company intends to apply the proceeds from the sale of the Debt Securities to refund maturing debt and to make additional optional repurchases and retirements of previously issued Debt Securities. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the historical ratios of earnings to fixed charges of the Company for the periods indicated:
YEAR ENDED DECEMBER 31, - ---------------------------------------------- 1992 1991 1990 1989 1988 - ------ ----- ------ ------ ------ 4.51 3.92 * 4.12 4.62 4.41
For the purpose of calculating this ratio, earnings consist of income before income taxes and fixed charges.** Fixed charges include interest on indebtedness and the portion of rentals representative of the interest factor. - ------------ * This figure reflects restructuring charges of approximately $121 million after taxes which were taken in fourth quarter 1991. ** The Company is secondary obligor on $300 million of 8 7/8 percent debt due July 1, 2015 assumed by AT&T at divestiture. In March 1993, AT&T announced that it will redeem this debt effective April 23, 1993. In the Company's opinion, the likelihood that it will be required to pay principal or interest on this debt is remote. As a result, fixed charges associated with this debt in the amount of approximately $27 million annually are not included in the calculation of the above ratios. RECENT DEVELOPMENTS An Administrative Law Judge in the Late Payment Charge Complaint at the California Public Utilities Commission (the "CPUC") issued her proposed decision in the matter on April 6, 1993. The proposed decision states that the Company violated the Public Utilities Code, a prior CPUC order and the Company's own tariffs by imposing improper late payment charges and disconnecting customers in error due to payment processing delays between 1986 and February 1991. The proposed decision finds that $32 million in late payment and reconnection charges are owed by the Company to its customers. Additionally, the proposed decision would impose a $33 million penalty and order an extensive audit of the Company's management of customer service operations. Under the CPUC's Rules of Practice and Procedure, parties have until April 26, 1993 to file comments on the proposed decision, and 5 days thereafter to file reply comments. The Commission will issue a final decision in the matter thereafter, which decision the Company has the right to appeal. The Company intends to file comments on the proposed decision alleging both legal and factual errors. The Company believes the proposed decision is seriously flawed in that it ignores extensive portions of the evidentiary record and reaches conclusions not supported by the record. DESCRIPTION OF DEBT SECURITIES The following description sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The Debt Securities may be issued from time to time in one or more series. The particular terms of each series of Debt Securities offered by any Prospectus Supplement or Prospectus Supplements, and the extent to which such general provisions described below may apply thereto, will be described in such Prospectus Supplement or Prospectus Supplements relating to such series. The Debt Securities are to be issued under an indenture (the "Indenture") dated as of April 7, 1993 between the Company and First Trust of California, National Association, as Trustee (the "Trustee"). 4 9 The following summaries of certain provisions of the Debt Securities and the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of the Indenture, including the definition therein of certain terms. Particular sections of the Indenture which are relevant to the discussion are cited parenthetically. Wherever particular sections or defined terms of the Indenture are referred to, it is intended that such sections or defined terms shall be incorporated herein by reference. The term "Securities," as used under this caption, refers to all Securities issued under the Indenture and includes the Debt Securities. GENERAL The Indenture does not limit the aggregate amount of Securities which may be issued thereunder and additional Debt Securities may be issued thereunder from time to time in separate series up to the aggregate amount from time to time authorized by the Company for each series. The Securities will be unsecured obligations of the Company and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. The applicable Prospectus Supplement or Prospectus Supplements will describe the following terms of the Debt Securities: (1) the title of the Debt Securities; (2) any limit on the aggregate principal amount of the Debt Securities; (3) whether the Debt Securities are to be issuable as registered Securities or bearer Securities or both, whether any of the Debt Securities are to be issuable initially in temporary global form and whether any of the Debt Securities are to be issuable in permanent global form; (4) the price or prices (expressed as a percentage of the aggregate principal amount thereof) at which the Debt Securities will be issued; (5) the date or dates on which the Debt Securities will mature; (6) the rate or rates per annum at which the Debt Securities will bear interest, if any, or the formula pursuant to which such rate or rates will be determined, and the date or dates from which any such interest will accrue; (7) the interest payment dates on which any such interest on the Debt Securities will be payable, the regular record date for any interest payable on any Debt Securities which are registered Securities on any interest payment date; (8) the Person to whom any registered Security of such series will be payable, if other than the Person in whose name that Security is registered at the close of business on the regular record date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of such series will be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto, and the extent to which, or the manner in which, any interest payable on a temporary or permanent global Security on an interest payment date will be paid; (9) each office or agency where the principal of and any premium and interest on the Debt Securities will be payable and each office or agency where the Debt Securities may be presented for registration of transfer or exchange; (10) the period or periods within which and the price or prices at which the Debt Securities may, pursuant to any optional redemption provisions, be redeemed, in whole or in part, and the other detailed terms and provisions of any such optional redemption provisions; (11) the obligation, if any, of the Company to redeem or purchase the Debt Securities pursuant to any sinking fund or analogous provisions or at the option of the Holder thereof and the period or periods within which and the price or prices at which the Debt Securities will be redeemed or purchased, in whole or in part, pursuant to such obligation, and the other detailed terms and provisions of such obligation; (12) the denominations in which any Debt Securities which are Registered Securities will be issuable, if other than denominations of $1,000 and any integral multiple thereof, and the denomination or denominations in which any Debt Securities which are bearer Securities will be issuable, if other than denominations of $5,000; (13) the currency or currencies, including composite currencies, of payment of principal of, and any premium and interest on, the Debt Securities if other than the currency of the United States; (14) any index used to determine the amount of payments of principal of, and any premium and interest on, the Debt Securities; (15) if other than the principal amount thereof, the portion of the principal amount of the Debt Securities which shall be payable upon acceleration of the maturity thereof; and (16) any other terms of the Debt Securities not inconsistent with the provisions of the Indenture. (Section 2.02.) Any such Prospectus 5 10 Supplement will also describe any special provisions for the payment of additional amounts with respect to the Debt Securities. Securities may be issued as original issue discount Securities to be sold at a substantial discount below their principal amount. Special United States federal income tax considerations applicable to Securities issued at an original issue discount, including original issue discount Securities, and special United States tax considerations applicable to any Debt Securities which are denominated in a currency or currency unit other than United States dollars will be described in the applicable Prospectus Supplement or Prospectus Supplements. EXCHANGE OF DEBT SECURITIES Except in the case of Securities offered in the form of a global security, registered Debt Securities may be exchanged for an equal aggregate principal amount of registered Debt Securities of the same series and date of maturity in such authorized denominations as may be requested upon surrender of the registered Debt Securities at an agency of the Company maintained for such purpose and upon fulfillment of the customary requirements of such agent. (Section 2.08(a).) To the extent permitted by the terms of a series of Debt Securities authorized to be issued in registered form and bearer form, bearer Debt Securities may be exchanged for an equal aggregate principal amount of registered or bearer Debt Securities of the same series and date of maturity in such authorized denominations as may be requested upon surrender of the bearer Debt Securities with all unpaid coupons relating thereto at an agency of the Company maintained for such purpose and upon fulfillment of all other requirements of such agent. (Section 2.08(b).) As of the date of this Prospectus, temporary United States Treasury regulations do not permit exchanges of registered Debt Securities for bearer Debt Securities and, unless such regulations are modified, the terms of a series of Debt Securities will not permit registered Debt Securities to be exchanged for bearer Debt Securities. The manner of exchanging an interest in any global security will be addressed in the applicable Prospectus Supplement or Prospectus Supplements. LIEN ON ASSETS The Company covenants in the Indenture that, if at any time the Company mortgages, pledges or otherwise subjects to any lien the whole or any part of any property or assets now owned or hereafter acquired by it, except as hereinafter provided, the Company will secure the outstanding Debt Securities and any other obligations of the Company which may then be outstanding and entitled to the benefit of a covenant similar in effect to this covenant, equally and ratably with the indebtedness or obligations secured by such mortgage, pledge or lien, for as long as any such indebtedness or obligation is so secured. This covenant does not apply to the creation, extension, renewal or refunding of purchase-money mortgages or liens or other liens to which any property or asset acquired by the Company is subject as of the date of its acquisition by the Company, as the case may be, or to the making of any deposit or pledge to secure public or statutory obligations, or with any governmental agency, at any time required by law in order to qualify the Company to conduct its business or any part thereof or in order to entitle it to maintain self-insurance or to obtain the benefits of any law relating to workers' compensation, unemployment insurance, old age pensions or other social security, or with any court, board, commission or governmental agency as security incident to the proper conduct of any proceeding before it. Nothing contained in the Indenture prevents a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Company from mortgaging, pledging or subjecting to any lien any property or assets, whether or not acquired from the Company. (Section 4.02.) AMENDMENT AND WAIVER Subject to certain exceptions, the Indenture or the Debt Securities may be amended or supplemented by the Company and the Trustee with the written consent of the holders of a majority in principal amount of the outstanding Debt Securities of each series affected by the amendment or supplement 6 11 (with each series voting as a class), or compliance with any provision may be waived with the consent of the holders of a majority in principal amount of the outstanding Debt Securities of each series affected by such waiver (with each series voting as a class), except a default in the payment of the principal of and interest on any Debt Security. However, without the consent of each holder of Debt Securities affected, an amendment or waiver may not (i) reduce the amount of Debt Securities whose holders must consent to an amendment or waiver; (ii) reduce the rate of or change the time for payment of interest on any Debt Security; (iii) reduce the principal or change the fixed maturity of any Debt Security; (iv) waive a default in the payment of the principal of or interest on any Debt Security; (v) make any Debt Security payable in money other than that stated in the Debt Security; or (vi) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security. (Section 9.02.) The Indenture may be amended or supplemented without the consent of any holder of Debt Securities (i) to cure any ambiguity, defect or inconsistency in the Indenture or in the Debt Securities of any series, provided that such action shall not adversely affect the interest of the holders of Debt Securities of any series or any related coupons in any material respect; (ii) to provide for the issuance of and establish the form and terms and conditions of a series of Debt Securities and to establish the form of any certifications required to be furnished pursuant to the terms of the Indenture or any series of Debt Securities; (iii) to secure the Debt Securities pursuant to Section 4.02 of the Indenture; (iv) to provide for the assumption of all the obligations of the Company under the Debt Securities and any coupons related thereto and the Indenture by any corporation in connection with a merger, consolidation, transfer or lease of the Company's property and assets substantially as an entirety, as provided for in the Indenture; (v) to provide for uncertificated Debt Securities in addition to or in place of certificated Debt Securities; (vi) to add to rights of holders of Debt Securities or surrender any right or power conferred on the Company; (vii) to make any change that does not adversely affect the rights of any holder of Debt Securities; or (viii) to change or eliminate any of the provisions of the Indenture, provided that any such change or elimination shall become effective only when there is no Debt Security outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision. (Section 9.01.) SUCCESSOR ENTITY The Company may consolidate with or merge into, or transfer or lease its property and assets substantially as an entirety to, another entity, provided the successor entity is a United States corporation and assumes all the obligations of the Company under the Debt Securities and any coupons related thereto and the Indenture and, after giving effect thereto, no default under the Indenture shall have occurred and be continuing. Thereafter, except in the case of a lease, all such obligations of the Company terminate. (Section 5.01.) DEPOSIT OF MONEY OR GOVERNMENT OBLIGATIONS TO PAY DEBT SECURITIES The Company has the right to terminate certain of its obligations under the Debt Securities and the Indenture with respect to the Debt Securities of any series or any installment of principal of or interest on that series if the Company deposits with the Trustee, in trust for the benefit of the holders of that series, money or obligations of the United States sufficient to pay, when due, principal and interest on the Debt Securities of that series to maturity or redemption or such installment of principal or interest, as the case may be. In such event, however, the Company's obligation to pay the principal of and interest on the Debt Securities shall survive until the earlier to occur of such time as (i) none of the Debt Securities of that series is outstanding, or (ii) in the case of a deposit sufficient to pay, when due, principal and interest on the Debt Securities of that series to maturity or redemption and if all other conditions set forth in the Indenture and the Debt Securities of that series are met, the Company shall have delivered to the Trustee an opinion of counsel to the effect that holders of the Debt Securities of that series will not recognize income or loss for federal income tax purposes as a result of the termination of obligations. (Section 8.01.) 7 12 EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default" with respect to a series of Debt Securities: (i) default in the payment of interest on any Debt Security of such series for 30 days; (ii) default in the payment of the principal of any Debt Security of such series when the same becomes due and payable; (iii) failure by the Company for 60 days, after notice to it, to comply with any of its other agreements in the Debt Securities of such series, in the Indenture or in any supplemental indenture under which the Debt Securities of that series may have been issued (other than covenants relating only to other series); and (iv) certain events of bankruptcy or insolvency. (Section 6.01.) If an Event of Default occurs with respect to the Debt Securities of any series and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of all of the outstanding Debt Securities of that series may declare the principal (or, if the Debt Securities of that series are original issue discount Debt Securities, such portion of the principal amount as may be specified in the terms of that series) of, and any accrued interest on, all the Debt Securities of that series to be due and payable. Upon such declaration, such principal (or, in the case of original issue discount Debt Securities, such specified amount) and interest shall be due and payable immediately. (Section 6.02.) Holders of Debt Securities may not enforce the Indenture or the Debt Securities, except as provided in the Indenture. (Section 6.06.) The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Debt Securities. (Section 7.01(e).) Subject to certain limitations, holders of a majority in principal amount of the Debt Securities of each series affected (with each series voting as a class) may direct the Trustee in its exercise of any trust power. (Section 6.05.) The Trustee may withhold from holders of Debt Securities notice of any continuing default (except a default in payment of principal or interest) if a committee of the Trustee's officers determines that withholding notice is in the interests of the Holders of Debt Securities. (Section 7.05.) The Company is not required under the Indenture to furnish any periodic evidence as to the absence of default or as to compliance with the terms of the Indenture. CONCERNING THE TRUSTEE The Trustee is trustee of most of the Company's outstanding long-term debt issues. PLAN OF DISTRIBUTION The Company may sell Debt Securities to one or more underwriters for public offering and sale by them or may sell Debt Securities to investors directly or through agents. Any such underwriter or agent involved in the offer and sale of the Debt Securities will be named in an applicable Prospectus Supplement or Prospectus Supplements. Underwriters may offer and sell the Debt Securities at a fixed price or prices, which may be changed, or, from time to time, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Company also may, from time to time, authorize underwriters acting as the Company's agents to offer and sell the Debt Securities upon the terms and conditions as shall be set forth in any Prospectus Supplement or Prospectus Supplements. In connection with the sale of Debt Securities, underwriters may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Debt Securities for whom they may act as agent. Underwriters may sell Debt Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions (which may be changed from time to time) from the purchasers for whom they may act as agent. Any underwriting compensation paid by the Company to underwriters or agents in connection with the offering of Debt Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement or Prospectus Supplements. Underwriters, dealers and agents participating in the distribution of the Debt Securities 8 13 may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Debt Securities may be deemed to be underwriting discounts and commissions under the Act. Underwriters, dealers and agents may be entitled, under agreements with the Company, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Act, and to reimbursement by the Company for certain expenses. If so indicated in an applicable Prospectus Supplement, the Company will authorize dealers acting as the Company's agents to solicit offers by certain institutions to purchase Debt Securities from the Company at the public offering price set forth in such Prospectus Supplement or Prospectus Supplements pursuant to Delayed Delivery Contracts (the "Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount not less than, and the aggregate principal amount of Debt Securities sold pursuant to Contracts shall be not less nor more than, the respective amounts stated in such Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and other institutions, but will in all cases be subject to the approval of the Company. Contracts will not be subject to any conditions except (i) the purchase by an institution of the Debt Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject and (ii) if the Debt Securities are being sold to underwriters, the Company shall have sold to such underwriters the total principal amount of the Debt Securities less the principal amount thereof covered by Contracts. Agents and underwriters will have no responsibility in respect of the delivery or performance of Contracts. All Debt Securities will be a new issue of securities with no established trading market. Any underwriters to whom Debt Securities are sold by the Company for public offering and sale may make a market in such Debt Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of or the trading markets for any Debt Securities. Certain of the underwriters or agents and their associates may be customers of, engage in transactions with and perform services for the Company in the ordinary course of business. LEGAL OPINIONS Certain matters relating to the legality of the Debt Securities offered hereby will be passed on for the Company by Mr. James S. Hamasaki, General Counsel of the Company. As of January 31, 1993, Mr. Hamasaki beneficially owned or had an interest in approximately 1,185 shares of Pacific Telesis Group Common Stock. In addition, as of the same date, Mr. Hamasaki had been granted options under the Pacific Telesis Group Stock Option and Stock Appreciation Rights Plan with respect to 29,475 shares of Pacific Telesis Group Common Stock. Certain matters relating to the legality of the Debt Securities offered hereby will be passed on for any underwriters, dealers or agents by Pillsbury Madison & Sutro. For many years, such firm has acted and continues to act as counsel in certain matters for the Company and certain of its affiliates. FINANCIAL STATEMENTS OF THE COMPANY The financial statements and financial statement schedules of the Company included in the Company's Annual Report on Form 10-K for the year ended December 31, 1992 have been audited by Coopers & Lybrand, independent accountants, whose report is incorporated by reference herein. These financial statements and financial statement schedules are incorporated herein by reference in reliance on the report of Coopers & Lybrand which is given on the authority of that firm as experts in accounting and auditing. 9 14 NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. - ------------------------------------------------------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT Use of Proceeds.......................... S-2 Ratio of Earnings to Fixed Charges....... S-2 Recent Developments...................... S-2 Description of the Debentures............ S-2 Legal Opinions........................... S-3 Underwriting............................. S-3 PROSPECTUS Available Information.................... 2 Incorporation of Documents by Reference.............................. 2 The Company.............................. 3 Use of Proceeds.......................... 4 Ratio of Earnings to Fixed Charges....... 4 Recent Developments...................... 4 Description of Debt Securities........... 4 Plan of Distribution..................... 8 Legal Opinions........................... 9 Financial Statements of the Company...... 9
$250,000,000 LOGO 6 7/8% DEBENTURES DUE AUGUST 15, 2006 SALOMON BROTHERS INC LEHMAN BROTHERS MERRILL LYNCH & CO. PROSPECTUS SUPPLEMENT DATED AUGUST 12, 1996 -----END PRIVACY-ENHANCED MESSAGE-----