FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 1-6589
WISCONSIN BELL, INC.
A Wisconsin I.R.S. Employer
Corporation No. 39-0716650
722 North Broadway, Milwaukee, Wisconsin 53202
Telephone Number 414 549-7102
Securities registered pursuant to Section 12(b) of the Act: See attached
Schedule A.
Securities registered pursuant to Section 12(g) of the Act: None.
THE REGISTRANT, A WHOLLY-OWNED SUBSIDIARY OF AMERITECH
CORPORATION, MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION J(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING
THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION J(2).
Indicate by check mark 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>
Schedule A
Securities registered pursuant to Section 12(b) of the Act:
______________________________________________________________________
Name of each exchange
Title of each class on which registered
Thirty-Six Year 7 1/4% Debentures, New York Stock Exchange
due February 1, 2007
<PAGE>
TABLE OF CONTENTS
PART I
Description
Item Page
1. Business .......................................................... 4
2. Properties ........................................................ 14
3. Legal Proceedings ................................................. 14
4. Submission of Matters to a Vote of Security Holders (Omitted
pursuant to General Instruction J(2)).
PART II
Description
5. Market for the Registrant's Common Equity and Related Stockholder
Matters (Inapplicable).
6. Selected Financial and Operating Data ............................. 15
7. Management's Discussion and Analysis of the Results of Operations
(Abbreviated pursuant to General Instruction J(2))............... 17
8. Financial Statements and Supplementary Data ....................... 23
9. Changes in and Disagreements on Accounting and Financial
Disclosure....................................................... 42
PART III
Description
10. Directors and Executive Officers of Registrant (Omitted pursuant
to General Instruction J(2)).
11. Executive Compensation (Omitted pursuant to General Instruction
J(2)).
12. Security Ownership of Certain Beneficial Owners and Management
(Omitted pursuant to General Instruction J(2)).
13. Certain Relationships and Related Transactions (Omitted pursuant
to General Instruction J(2)).
PART IV
Description
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K ............................................................. 43
<PAGE>
PART I
Item 1. Business.
General
Wisconsin Bell, Inc. (the Company), is incorporated under the laws of the
State of Wisconsin and has its principal office at 722 North Broadway,
Milwaukee, Wisconsin 53202 (telephone number 414-549-7102). The Company is a
wholly owned subsidiary of Ameritech Corporation (Ameritech), a Delaware
corporation. Ameritech is the parent of the Company, Illinois Bell Telephone
Company, Indiana Bell Telephone Company, Incorporated, Michigan Bell Telephone
Company and The Ohio Bell Telephone Company (the "landline telephone
companies"), as well as several other communications businesses and has its
principal executive offices at 30 South Wacker Drive, Chicago, Illinois 60606
(telephone number 312-750-5000). The Company is managed by its sole
shareholder rather than a Board of Directors as permitted by Wisconsin law.
In 1993, Ameritech restructured its landline telephone companies and two other
related businesses into a structure of customer-specific business units
supported by a single, regionally coordinated network unit. The five Bell
companies continue to function as legal entities, owning Bell company assets
in each state and continue to be regulated by the individual state public
utility commissions. Products and services are now marketed under a single
common brand identity, "Ameritech," rather than using the "Bell" name.
While the Ameritech logo in now used to identify all the Ameritech companies,
the Company is sometimes regionally identified as Ameritech Wisconsin.
The Company is engaged in the business of furnishing a wide variety of
advanced telecommunications services in Wisconsin, including local exchange
and toll service and network access services in Wisconsin. In accordance with
the Consent Decree and resulting Plan of Reorganization (Plan) described
below, the Company provides two basic types of telecommunications services
within speci-fied geograph-ical areas termed Local Access and Transport Areas
(LATAs), which are generally centered on a city or other identifiable
community of interest. The first of these services is the transporting of
telecommunica-tions traffic between telephones and other equipment on
customers' premises located within the same LATA (intraLATA service), which
can include toll service as well as local service. The second service is
providing exchange access service, which links a customer's telephone or other
equipment to the network of transmission facilities of interexchange carriers
which provide telecommunications service between LATAs (interLATA service).
About 67 percent of the population and 14 percent of the area of Wisconsin is
served by the Company. The remainder of the state is served by other local
telecommunications companies. La Crosse, Wisconsin, is the only city of over
50,000 population in the State in which local service is furnished by a non-
affiliated company. Other communications services offered by the Company
include data transmission, transmission of radio and television programs and
private line voice and data services.
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The following table sets forth for the Company the number of customer lines
in service at the end of each year.
Thousands
1993 1992 1991 1990 1989
Customer Lines
in Service . . . . . . . . . 1,898 1,834 1,784 1,738 1,684
The Company has certain agreements with Ameritech Publishing, Inc. ("Ameritech
Publishing"), an Ameritech business unit doing business as "Ameritech
Advertising Services," under which Ameritech Publishing publishes and
distributes classified directories under a license from the Company and
provides services to the Company relating to both classified and alphabetical
directories. API pays license fees to the Company under the agreements.
Ameritech Services, Inc. (ASI) is a company jointly owned by the Company and
the other Ameritech landline telephone companies. ASI provides to those
companies human resources, technical, marketing, regulatory planning and real
estate asset management services, purchasing and material management support,
as well as labor contract bargaining oversight and coordination. ASI acts as
a shared resource for the Ameritech subsidiaries providing operational support
for the landline telephone companies and integrated communications and
information systems for all the business units.
Ameritech Information Systems, Inc., a subsidiary of Ameritech, sells,
installs and maintains business customer premises equipment, and sells network
and central office-based services provided by the Company and the other four
landline telephone companies. It also provides expanded marketing, product
support and technical design resources to large business customers in the
Ameritech region.
In 1993, about 91% of the total operating revenues of the Company were from
telecommunications services and the remainder principally from billing and
collection services, rents, directory advertising and other miscellaneous
nonregulated operations. About 75% of the revenues from communication
services were attributable to intrastate operations.
Capital expenditures represent the single largest use of Company funds. The
Company has been making and expects to continue to make large capital
expenditures to meet the demand for telecommunications services and to further
improve such services. The total investment in telecommunications plant
increased from about $2,571,000,000 at December 31, 1988, to about
$2,724,000,000 at December 31, 1993, after giving effect to retirements but
before deducting accumulated depreciation at either date. Capital
expenditures of the Company since January 1, 1989, were approximately as
follows:
1989 .............. $174,000,000 1992 .............. $174,000,000
1990 .............. $155,000,000 1993 .............. $147,000,000
1991 .............. $164,000,000
Expanding on the aggressive deployment plan it began it 1992, in January 1994,
Ameritech unveiled a multi-billion dollar plan for a digital network to
deliver video services. Ameritech is launching a digital video network
upgrade that by the end of the decade will enable 6,000,000 customers in its
<PAGE>
region to access interactive information and entertainment services, as well
as traditional cable TV services, from their homes, schools, offices,
libraries and hospitals. The Company, for its part in the network upgrade
has made an initial filing with the Federal Communications Commission (FCC)
seeking approval of the program. The filing reflects capital expenditures of
approximately $53.0 over the next three years.
The Company may also, depending on market demand make additional capital
expenditures under the digital video network upgrade program. The Company
anticipates that its capital expenditures for the program will be funded
without increasing its recent historical level of capital expenditures.
Capital expenditures are expected to be about $156.0 in 1994. This amount
excludes any capital expenditures that may occur in 1994 related to the above
described video network upgrade program.
Consent Decree and Line of Business Restrictions
On August 24, 1982, the United States District Court for the District of
Columbia (Court) approved and entered a consent decree entitled the
"Modification of Final Judgment" (Consent Decree), which arose out of
antitrust litigation brought by the Department of Justice (DOJ), and which
required AT&T to divest itself of ownership of those portions of its wholly--
owned Bell operating communications company subsidiaries (Bell Companies) that
related to exchange telecommunications, exchange access and printed directory
advertising, as well as AT&T's cellular mobile communications business. On
August 5, 1983, the Court approved a Plan outlining the method by which AT&T
would comply with the Consent Decree. Pursuant to the Consent Decree and the
Plan, effective January 1, 1984, AT&T divested itself of, by transferring to
Ameritech, its ownership of the exchange telecommunications, exchange access
and printed directory advertising portions of the Ameritech Bell Companies,
as well as its regional cellular mobile communications business.
The Consent Decree, as originally approved by the Court in 1982, provided
that the Company (as well as the other Bell Companies) could not, directly
or through an affiliated enterprise, provide interLATA telecommunica-tions
services or information services, manufacture or provide telecommun-ications
products or provide any product or service, except exchange telecom-
munications and exchange access service, that is not a natural monopoly
service actually regulated by tariff. The Consent Decree allowed the Company
and the other Bell Companies to provide printed directory advertising and to
provide, but not manufacture, customer premises equipment.
The Consent Decree provided that the Court could grant a waiver to a Bell
Company or its affiliates upon a showing to the Court that there is no
substantial possibility that the Bell Company could use its monopoly power
to impede competition in the market it seeks to enter. The Court has, from
time to time, granted waivers to the Company and other Bell Companies to
engage in various activities.
The Court's order approving the Consent Decree provides for periodic reviews
of the restrictions imposed by it. Following the first triennial review, in
decisions handed down in September 1987 and March 1988, the Court continued
the prohibitions against Bell Company manufacturing of telecommunications
products and provision of interLATA services. The rulings allowed limited
provision of information services by transmission of information and provision
<PAGE>
of information gateways, but excluded generation or manipulation of
information content. In addition, the rulings eliminated the need for a
waiver for entry into non-telephone related businesses.
In April 1990, a Federal appeals court decision affirmed the Court's decision
continuing the restriction on Bell Company entry into interLATA services and
the manufacture of telecommunications equipment, but directed the Court to
review its ruling that restricted RHC involvement in the information services
business and to determine whether removal of the information services
restriction would be in the public interest. In July 1991, the Court lifted
the information services ban but stayed the effect of the decision pending
outcome of the appeals process. Soon after the stay was lifted on appeal and
in July 1993, the U.S. Court of Appeals unanimously upheld the Court's order
allowing the Bell companies to produce and package information for sale across
business and home phone lines. In November 1993, the U.S. Supreme Court
declined to review the lower court ruling.
Members of Congress and the White House are intensifying efforts to enact
legislative reform of telecommunications policy in order to stimulate the
development of a modern national information infrastructure to bring the
benefits of advanced communications and information services to the American
people.
Intrastate Rates and Regulation
The Company, in providing communications services, is subject to regulation
by the Public Service Commission of Wisconsin (PSCW) with respect to
intrastate rates and services, depreciation rates (for intrastate services),
issuance of securities and other matters. Unless otherwise indicated, the
amounts of the changes in revenues resulting from changes in intrastate rates
referred to below are stated on an annual basis and are estimates without
adjustment for subsequent changes in volumes of business. The principal
changes in intrastate rates authorized since January 1, 1989, were:
On June 29, 1989, the PSCW approved an order which extended competition to
some intraLATA toll services by authorizing interexchange carriers to provide
certain services in competition with the Company and other local carriers. As
a result, effective July 6, 1989, the PSCW approved the Company's proposals to
reprice the intraLATA toll services that would be affected by the new
competitive environment. These services include WATS and 800 Services and
Value Calling Plans. This repricing order caused long distance revenue to
decrease by about $5,800,000 annually.
On July 1, 1989, the PSCW ordered a 14% return on equity which resulted in
credits on customer bills. This would have caused an annual decrease of
$34,700,000 in local service and access revenues, however, this amount was
reduced by $3,500,000 due to a temporary injunction granted by the Milwaukee
County Circuit Court on August 9, 1989. The injunction was a result of an
appeal filed by the Company relating to the inside wire installation and
maintenance portion of the PSCW order.
On December 27, 1989, the PSCW issued an interim and amended order which
decreased the ongoing rate credit by $5,200,000 per quarter year starting
January 1, 1990. This adjustment was in consideration of the shortfall
<PAGE>
Wisconsin Bell was expected to incur due to the implementation of access rates
for intrastate long distance service and the mirroring of interstate access
rates. Additionally, the PSCW established this adjustment on a
subject-to-refund with interest provision basis, pending final determination
of the Company's shortfall at a later date.
On June 15, 1990, the PSCW ordered a refund of $23,500,000 to residential and
business customers as well as interexchange carriers, related to the level of
earnings experienced during the moratorium period covering August 1987 through
July 1989. At the same time, the PSCW also ordered the Company to refund
approximately $2,000,000 to customers in order to pass back savings resulting
from a gross receipts tax rate reduction effective January 1, 1989. The
order resulted in credits on customer bills and refunds to interexchange
carriers during the month of July 1990. The Company made sufficient
provisions in the financial statements throughout the 1987-89 period in
anticipation of the PSCW findings. The PSCW also ruled that an additional
$9,300,000 was subject to refund pending the outcome of the appeal associated
with inside wire.
On September 5, 1990, the PSCW approved two alternate plans for intrastate
regulation - the Base Case Plan and the Three-Year Plan. The Company chose to
participate in the Three-Year Plan. The terms and conditions of the plan were
effective October 1, 1990, and resulted in an annual decrease of $3,943,000 in
local service revenues. Under the Three--Year Plan, the rate of return on
equity was set at 13.75 percent and the Company's revenues were not subject--
to-refund on a going forward basis. This trial, which was to remain in effect
until December 31, 1993, has been extended while the PSCW reviews a new price
regulation plan. In February 1994, bills were introduced in the Wisconsin
legislature that, if passed, would replace rate-of-return regulation with
price regulation for companies choosing it.
On February 21, 1991, the PSCW authorized the elimination of the subject--
to-refund with interest provision pertaining to the Company's expected
quarterly shortfall of $5,200,000 due to the change from independent company
settlements to access charges. The PSCW also determined that no refund is
necessary for this item during the January 1, 1990, through September 30,
1990, subject-to--refund period.
On May 1, 1991, the Company repriced its Value Calling Plans reducing long
distance revenue by approximately $900,000 annually.
Effective June 1991 and in accordance with provisions of the Three-Year Plan,
the Company implemented a volume discount rate structure that replaced the
previous residential local service calling plans. The new rate structure
reduces local service revenue by nearly $23,000,000 annually.
On September 1, 1992, the Company eliminated Business Touchtone charges
reducing local service revenue by $4,800,000 annually.
On October 5, 1992, the Company repriced its Value Calling Plans reducing long
distance revenue by approximately $600,000 annually.
On March 30, 1993, the PSCW reached a final decision concerning inside wire
and moratorium refund issues. In April 1993, the Company commenced refunding
$22,500,000 to residential and business customers and interexchange carriers.
<PAGE>
The $21,300,000 credit/rate reduction consisted of three elements:
$17,300,000 for settlement of inside wire appeals; $3,900,000 for an addi-
tional refund from the 1987-89 moratorium review; and $158,000 for additional
gross receipts tax rate reductions that must be passed back to customers.
Additionally during 1993, the Company repriced other specific services which
resulted in the following approximate rate reductions:
Effective Date Revenue Category/Service Annual Impact
January 1, 1993 Access Revenue $ (500,000)
Carrier Directory Assistance
Long Distance Revenue (145,000)
Special Toll Billing
February 1, 1993 Local Svc./Long Dist. Revenue (2,330,000)
Optinet Bell Channel
March 1, 1993 Access Revenue (560,000)
Optinet DS1
May 15, 1993 Access Revenue (6,130,000)
Switched Access CCL and TS
August 1, 1993 Local Service Revenue (1,400,000)
Business Volume Discount Plan
FCC Regulatory Jurisdiction
The Company is subject to the jurisdiction of the Federal Communications
Commission (FCC) with respect to intraLATA interstate services, interstate
access services and other matters. The FCC prescribes for communications
companies a uniform system of accounts apportioning costs between regulated
and nonregulated services, depreciation rates (for interstate services) and
the principles and standard procedures (separations procedures) used to
separate property costs, revenues, expenses, taxes and reserves between those
applicable to interstate services under the jurisdiction of the FCC and those
appli-cable to services under the jurisdiction of the respective state
regulatory authorities.
For certain companies, including the Company, interstate services regulated
by the FCC are covered by a price cap plan. The Plan creates incentives to
improve productivity over benchmark units in order to retain higher
earnings. Price cap regulation sets maximum limits on the prices that may
be charged for telecommunications services but also provides for a sharing of
productivity gains. Earnings in excess of 12.25% will result in prospective
reductions of the price ceilings on interstate services.
In January 1994, the FCC began a scheduled fourth-year comprehensive review of
price cap regulation for local exchange companies.
Access Charges Arrangements
Interstate Access Charges.
<PAGE>
The Ameritech landline telephone companies provide access services for the
origination and termination of interstate telecommunications. The access
charges are of three types: common line, switched access and trunking.
The common line portion of interstate revenue requirements are recovered
through monthly subscriber line charges and per minute carrier common line
charges. The carrier common line rates include recovery of transitional and
long-term support payments for distribution to other local exchange carriers.
Transitional support payments were made over a four-year period which ended on
April 1, 1993. Long-term support payments will continue indefinitely.
Effective January 1, 1994, rates for local transport services were
restructured and a new "trunking" service category created. Trunking services
consist of two types: those associated with the local transport element of
switched access and those associated with special access. Trunking services
associated with switched access handle the transmission of traffic between a
local exchange carrier's serving wire center and a Company end office where
local switching occurs. Trunking services associated with special access
handle the transmission of telecommunications services between any two
customer-designated premises or between a customer-designated premise and a
Company end office where multiplexing occurs. High volume customers generally
use the flat-rated dedicated facilities associated with special access, while
usage sensitive rates apply for lower-volume customers that utilize a common
switching center.
Local transport rate elements for switched services assess a flat monthly rate
and a mileage sensitive rate for the physical facility between the customer's
point of termination and the end office, a usage sensitive and mileage
sensitive rate assessed for the facilities between the end office through the
access tandem to the customer's serving wire center, and a minute of use
charge assessed to all local transport. The flat rate transport rates and
structure generally mirror special access rate elements. Customers can order
direct transport between the serving wire center or end office and the access
tandem and tandem switched transport between the access tandem and the end
office.
Special access charges are monthly charges assessed to customers for access to
interstate private line service. Charges are paid for local distribution
channels, interoffice mileage and optional features and functions.
State Access Charges.
Compensation arrangements required in connection with origination and
termination of intrastate communications by interexchange carriers are
subject to the jurisdiction of the state regulatory commissions. The
Ameritech landline telephone companies currently provide access services to
interexchange carriers authorized by the state regulatory commissions to
provide service between local serving areas pursuant to tariffs which
generally parallel the terms of the interstate access tariffs. In the event
interexchange carriers are authorized by the state regulatory commissions to
provide service within their local serving areas, the Ameritech landline
telephone companies intend to provide access service under the same tariffs
applicable to intrastate services provided by such carriers between the
Ameritech landline telephone companies' local serving areas.
<PAGE>
Separate arrangements govern compensation between Ameritech landline telephone
companies and independent telephone companies for jointly provided
communications within the five Ameritech companies' local serving areas and
associated independent telephone company exchanges. These arrangements are
subject to the jurisdiction of the FCC and the state regulatory commissions.
Competition
Regulatory, legislative and judicial decisions, technological advances
as well as heightened customer interest in advanced telecommunications
services, have expanded the types of available communications services and
products and the number of companies offering such services. Market
convergence, already a reality, is expected to intensify.
The FCC has taken a series of steps that are expanding opportunities for
companies to compete with local exchange carriers in providing services that
fall under the FCC's jurisdiction. In September 1992, the FCC mandated that
local exchange carriers provide network access for special transmission paths
to competitive access providers, interexchange carriers and end users. In
February 1993, Ameritech filed a tariff with the FCC, which was effective in
May, making possible this type of interconnection. In August 1993, the FCC
issued an order that permits competitors to interconnect to local telephone
company switches. Under the new rules, certain telephone companies must allow
all interested parties to terminate their switched access transmission
facilities at telephone company central offices, wire centers, tandem switches
and certain remote nodes. Ameritech filed a tariff in November 1993 to effect
that change which was effective in February 1994.
Ameritech is seeking opportunities to compete on an equal footing. Although
the Company is barred from providing interLATA and nationwide cable services,
its competitors are not. Cellular telephone and other wireless technologies
are poised to bypass Ameritech's local access network. Cable providers, who
currently service more than eighty percent of American homes, could provide
telephone service and have expressed their desire to do so. Certain
interexchange carriers and competitive access providers have demonstrated
interest in providing local exchange service. Ameritech's plan is to
facilitate competition in the local exchange business in order to compete in
the total communications marketplace.
Customers First: Ameritech's Advanced Universal Access Plan
In 1993, Ameritech embarked on a long-range restructuring with the intent of
dramatically changing the way it serves its customers, and in the process
altered its corporate framework, expanding the nature and scope of its
services and supporting the development of a fully competitive marketplace.
In March, Ameritech filed a plan with the FCC to change the way local
telecommunications services are provided and regulated and to furnish a policy
framework for advanced universal access to modern telecommunications services
- - voice, data and video information.
Ameritech proposes to facilitate competition in the local exchange business
by allowing other service providers to purchase components of its network and
to repackage them with their own services for resale, in exchange for the
freedom to compete in both its existing and currently prohibited businesses.
<PAGE>
Ameritech has requested regulatory reforms to match the competitive environ-
ment as well as support of its efforts to remove restraints, such as the
interLATA service restriction, which currently restrict its participation in
the full telecommunications marketplace. In addition, Ameritech asks for more
flexibility in pricing new and competitive services and replacement of caps on
earnings with price regulation. Under the plan, customers would be able to
choose from competitive providers for local service as they now can choose a
provider for interexchange service.
To demonstrate conclusively the substantial customer and economic benefits of
full competition, in December 1993, Ameritech proposed a trial of its plan,
beginning in 1995. Ameritech has petitioned the DOJ to recommend Federal
District Court approval of a waiver of the long-distance restriction of the
Consent Decree so that Ameritech can offer interexchange service. At the same
time, Ameritech would facilitate the development of local communications
markets by unbundling the local network and integrating competitors'
switches. The trial would begin in Illinois in the first quarter of 1995 and
would last indefinitely. Other states could be added over time. If the trial
is approved by the DOJ, the request must be acted on by the Court which
retains jurisdiction over administering the terms of the Consent Decree. In
February 1994, Ameritech filed tariffs with the Illinois Commerce Commission
that propose specific rates and procedures to open the local network in that
state. Approval could take up to 11 months.
Ameritech has received broad support for the plan from Midwest elected
officials, national and Midwest business leaders, and education, health
industry, economic development and consumer leaders. The national and local
offices of the Communications Workers of America (CWA) and the International
Brotherhood of Electrical Workers (IBEW) also support the plan.
Ameritech has alternative regulatory proposals pending with the state
regulatory commissions in its region to support implementation of the plan.
Ameritech Video Network Concept
In January 1994, Ameritech filed plans with the FCC to construct a digital
video network upgrade that will enable it to reach 6,000,000 customers by the
end of the decade. Ameritech expects to spend $4.4 billion to upgrade its
network to provide video services, part of a total of approximately $29
billion Ameritech estimates it will spend on network improvements over the
next fifteen years. Ameritech is pursuing alliances and partnerships that
will position it as a key participant in the emerging era of interactive video
experiences. Pending FCC approval of Ameritech's plan and clearing of other
regulatory hurdles, the construction of the first phase of the network could
begin as soon as the fourth quarter of 1994. The new network, which will be
separate from Ameritech's core local communications network, will be expanded
to approximately 1,000,000 additional Midwest customers in each of the next
five years.
Ameritech will be only one of many users of the broadband network. A
multitude of competing video information providers, businesses, institutions,
interexchange carriers and video telephony customers will also have access to
the technology.
<PAGE>
With the new system, customers will have access to a virtually unlimited
variety of programming sources. These will include basic broadcast services,
similar to today's cable service, and advanced interactive services such as
video on demand, home healthcare, interactive educational software, distance
learning, interactive games and shopping, and a variety of other entertainment
and information services that can be accessed from homes, offices, schools,
hospitals, libraries and other public and private institutions.
Cable/Telco Cross Ownership Ban
In November 1993, Ameritech filed motions in two federal courts seeking
freedom from the ban on providing video services in its own service area.
Ameritech asked U.S. District Courts in Illinois and Michigan to declare
unconstitutional the provisions of the Cable Act of 1984 that bar the RHCs
from providing cable TV service in areas where they hold monopolies on local
phone service. In August 1993, a U.S. District Court in Washington D.C.
granted a request by Bell Atlantic Corporation for such an order, but that
court denied similar requests by Ameritech and the other RHCs.
Legislation has been introduced in Congress that would repeal the
cross ownership ban.
Employee Relations
As of December 31, 1993, the Company employed 5,137 persons, a decrease
from 5,659 at December 31, 1992. During 1993, approximately 270 employees
left the payroll as a result of voluntary and involuntary workforce programs,
and 156 nonmanagement employees took advantage of a Supplemental Protection
Program (SIPP) established under labor agreements to voluntarily exit the
workforce. Additional restructuring was done by normal attrition. On
March 25, 1994, Ameritech announced that it will reduce its nonmanagement
workforce by 6,000 employees by the end of 1995, including approximately 600
at the Company. Under terms of agreements between Ameritech, the CWA and the
IBEW, Ameritech is implementing an enhancement to the Ameritech pension plan
by adding three years to the age and net credited service of eligible
nonmanagement employees who leave the business during a designated period that
ends in mid-1995. In addition, Ameritech's network business unit is offering
financial incentives under the terms of its current contracts with the CWA and
IBEW to selected nonmanagement employees who leave the business before the end
of 1995.
The reduction of the workforce results from technological improvements,
consolidations and initiatives identified by management to balance its cost
structure with emerging competition.
Approximately 3,875 employees are represented by the Communications Workers of
America (CWA), a union affiliated with the AFL-CIO.
In July and August 1993, the Ameritech landline telephone companies and
Ameritech Services reached agreement with the union on a workforce transition
plan for assigning union-represented employees to the newly established
business units. The agreement with the CWA extends existing union contracts
with the landline telephone companies and Ameritech Services to the new units.
The pacts address a number of force assignment, employment security and union
representation issues. In 1995, when union contracts are due to expire, the
parties will negotiate regional contracts.
<PAGE>
During 1992, 171 of the Company's management employees left the Company
through a voluntary early retirement program and involuntary terminations.
Through 1995, the Company expects to eliminate additional positions through
job consolidations and force reduction initiatives resulting from
technological efficiencies.
Item 2. Properties.
The properties of the Company do not lend themselves to description by
character and location of principal units. At December 31, 1993, central
office equipment represented 36% of the Company's investment in telecommunica-
tions plant in service; land and buildings (occupied principally by central
offices) represented 12%; telecommunications instruments and related wiring
and equipment, including private branch exchanges, substantially all of which
are on the premises of customers, represented 10%; and connecting lines which
constitute outside plant, the majority of which are on or under public roads,
highways or streets and the remainder of which are on or under private
property, represented 42%.
Substantially all of the installations of central office equipment and
administrative offices are located in buildings owned by the Company
situated on land which it owns in fee. Many garages, administrative offices,
business offices and some installations of central office equipment are in
rented quarters.
Item 3. Legal Proceedings.
Pre-divestiture Contingent Liabilities Agreement
The Plan provides for the recognition and payment of liabilities that are
attributable to pre-divestiture events (including transactions to implement
the divestiture) but that do not become certain until after divestiture.
These contingent liabilities relate principally to litigation and other
claims with respect to the former Bell System's rates, taxes, contracts,
equal employment matters, environmental matters and torts (including
business torts, such as alleged violations of the antitrust laws).
With respect to such liabilities, AT&T and the Bell Companies, including
the Company, will share the costs of any judgment or other determination of
liability entered by a court or administrative agency, the costs of
defending the claim (including attorneys' fees and court costs) and the
cost of interest or penalties with respect to any such judgment or
determination. Except to the extent that affected parties may otherwise
agree, the general rule is that responsibility for such contingent
liabilities will be divided among AT&T and the Bell Companies on the basis
of their relative net investment (defined as total assets less reserves for
depreciation) as of the effective date of divestiture. Different
allocation rules apply to liabilities which relate exclusively to
pre-divestiture interstate or intrastate operations.
Although complete assurance cannot be given as to the outcome of any
litigation, in the opinion of the Company's management any monetary
liability or financial impact to which the Company would be subject after
final adjudication of all of the foregoing actions would not be material in
amount to the financial position of the Company.
<PAGE>
PART II
WISCONSIN BELL, INC.
Item 6. SELECTED FINANCIAL AND OPERATING DATA
(Dollars in Millions)
1993 1992 1991 1990 1989
Revenues
Local service. . . . . . . . $ 488 $ 475 $ 471 $ 476 $ 433
Interstate network access. . 239 225 221 219 212
Intrastate network access. . 88 93 85 73 72
Long distance. . . . . . . . 207 200 198 193 137
Other. . . . . . . . . . . . 100 94 98 99 106
Total. . . . . . . . . . . . . 1,122 1,087 1,073 1,060 960
Operating expenses . . . . . . 867 866 865 848 764
Operating income . . . . . . . 255 221 208 212 196
Interest expense . . . . . . . 32 42 44 41 43
Other (income) expense, net . 11 6 (2) 1 2
Income taxes . . . . . . . . . 74 56 57 56 41
Income before cumulative
effect of change in
accounting principles. . . . 138 117 109 114 110
Cumulative effect of change
in accounting principles . . - (152) - - -
Net income (loss) . . . . . . $ 138 $ ( 35) $ 109 $ 114 $ 110
Total assets . . . . . . . . . $2,038 $2,043 $2,048 $2,056 $2,011
Property, plant and
equipment, net . . . . . . . $1,658 $1,700 $1,711 $1,723 $1,746
Capital Expenditures . . . . . $ 147 $ 174 $ 164 $ 155 $ 174
Long-term debt . . . . . . . . $ 307 $ 379 $ 476 $ 507 $ 509
<PAGE>
PART II
WISCONSIN BELL, INC.
Item 6. SELECTED FINANCIAL AND OPERATING DATA
(Dollars in Millions)
(Continued)
1993 1992 1991 1990 1989
Debt ratio . . . . . . . . . . 44.6% 44.9% 40.0% 39.2% 39.8%
Pretax interest coverage . . . 7.4 5.4 5.3 5.4 4.9
Return to average equity . . . 20.9% (5.2)% 13.2% 14.1% 13.6%
Return on average total
capital. . . . . . . . . . . 13.8% .4% 10.5% 11.0% 10.6%
Customer lines - at end of
year (000's) . . . . . . . . 1,898 1,834 1,784 1,738 1,684
% Customer lines served by
digital electronic offices . 64.3% 49.0% 32.6% 28.3% 26.9%
% Customer lines served by
analog electronic offices. . 35.7% 51.0% 67.4% 71.7% 73.1%
Customer lines per employee. . 369 324 292 260 244
Employees - at end of year . . 5,137 5,659 6,106 6,690 6,908
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
(Dollars in Millions)
The Year 1993 Compared to the Year 1992
Following is a discussion and analysis of the results of operations of
the Company for the years ended December 31, 1993 and 1992, based on the
Statements of Income and Rein-vested Earnings. Other pertinent data are also
given in the Selected Financial and Operating Data.
Revenues
Total operating revenues were $1,122.3 for 1993 and $1,087.4 for 1992. The
increase of $34.9 or 3.2%, consisted of the following:
Increase Percent
1993 1992 (Decrease) Change
Local service $487.7 $474.9 $12.8 2.7%
Local service revenues increased $12.8 which resulted from an $18.9 increase
in business and residence revenue volumes. Customer lines increased 3.5% from
1,833,722 at December 31, 1992, to 1,898,159 at December 31, 1993. In
addition, public telephone revenues increased $1.0 and Directory revenues
increased $0.5. These increases were partially offset by a $3.0 decrease due
to the business touchtone rate elimination effective September 1992, and a
$2.6 reduction related to a refund for inside wire that was charged against
local message revenues effective April 1, 1993. In addition, private line
revenues decreased $2.0.
Increase Percent
1993 1992 (Decrease) Change
Network access
Interstate access $239.1 $224.6 $ 14.5 6.5%
Intrastate access $ 88.6 $ 93.3 $ (4.7) (5.0%)
Interstate access charge revenues increased $14.4 due in part to a $6.4
decrease in National Exchange Carriers Association (NECA) transitional support
funding and a $5.9 demand and rate increase in end user revenues. In
addition, payments to American Telephone and Telegraph (AT&T) for 800
settlements decreased $3.6. A demand increase of $5.7 in traffic sensitive
access revenues also contributed to the increase. Interstate switched minutes
of use increased 5.3%. This increase was partially offset by a $7.3 decrease
in traffic sensitive access revenues caused by rate reductions.
Intrastate access revenues decreased $4.7 primarily from a $11.4 decrease in
switched access revenues caused by rate reductions. This decrease was
partially offset by a $6.0 increase in switched access volumes. Intrastate
switched minutes of use increased 8.3%.
<PAGE>
Increase Percent
1993 1992 (Decrease) Change
Long distance $206.8 $200.4 $6.4 3.2%
Long distance revenues increased $6.4 primarily due to a $5.2 increase
associated with increased message toll volumes, a $2.1 increase in independent
company toll revenue and a $1.8 increase related to the finalization of
independent company cost studies. These increases were partially offset by
$2.7 in volume decreases in private line, wide area telephone service (WATS)
and coin revenues.
Increase Percent
1993 1992 (Decrease) Change
Miscellaneous - net $100.1 $94.2 $5.9 6.3%
Miscellaneous revenues increased $5.9 due to a $2.8 increase in revenues from
inside wire due to the price restructuring of inside wire maintenance plans
and increased time and material rates. In addition, affiliated company cost
recovery billings increased $1.1, and uncollectible expense decreased $1.6.
Operating Expenses
Operating expenses were $867.3 in 1993 and $865.9 in 1992. The increase of
$1.4 or 0.1% consisted of the following:
Increase Percent
1993 1992 (Decrease) Change
Depreciation $186.1 $186.4 $(0.3) (.1%)
Depreciation decreased $0.3 as a result of completing the amortization of a
reserve deficiency authorized by the Public Service Commission of Wisconsin
(PSCW) of $24.3. This decrease was partially offset by increased rates due to
the PSCW represcription, and the amortization of an additional reserve
deficiency authorized by the PSCW effective July 1, 1993.
Increase Percent
1993 1992 (Decrease) Change
Employee related expenses $255.8 $260.7 $(4.9) (1.9%)
Employee related expenses decreased $4.9. Force reductions reduced employee
related expenses by $15.3. At December 31, 1993, the Company had 5,137
employees compared to 5,659 at December 31, 1992, a decrease of 522 employees.
This decrease due to force reductions was partially offset by wage and salary
increases of $7.4 and overtime increases of $2.5.
<PAGE>
Increase Percent
1993 1992 (Decrease) Change
Taxes other than income taxes $62.8 $61.7 $1.1 1.8%
The increase in taxes other than income taxes resulted from an increase in
remainder assessment fees and a sales/use tax assessment.
Increase Percent
1993 1992 (Decrease) Change
Other operating expenses $362.6 $357.1 $5.5 1.5%
The increase in other operating expenses resulted primarily from affiliated
billing increases of $10.7 for the Company's allocation of common Ameritech
costs. These increases were partially offset by a $2.0 decrease in contract
services, a $2.0 decrease in materials and supplies and a $1.2 decrease in
miscellaneous other expenses.
Other Income and Expenses
Increase Percent
1993 1992 (Decrease) Change
Interest Expense $32.0 $42.0 ($10.0) (23.8%)
The decrease in interest expense is due to the retirements in 1993 of $300.0
in long-term debt, bearing interest ranging from 8% to 8-3/4%. This debt was
refinanced with short-term debt with Ameritech, which bears lower interest
rates, and $150.0 of long-term debt bearing interest at 6-3/4%.
Increase Percent
1993 1992 (Decrease) Change
Other (Income)/Expense $10.7 $6.2 $4.5 72.6%
The increase in other expense is due primarily to $5.8 in interest income from
Internal Revenue Service refunds that occurred during 1992. In addition, the
Company expensed $9.0 in debt refinancing costs in 1993 and $8.0 of such costs
in 1992.
Increase Percent
1993 1992 (Decrease) Change
Income Tax Expense $74.3 $56.0 $18.3 32.7%
The increase in income tax expense reflects the increase in the federal tax
rate from 34% to 35% and a $39.0 or 22.5% increase in income before income
taxes and cumulative change in accounting principles.
<PAGE>
Other Matters
Effects of Regulatory Accounting
The Company presently gives accounting recognition to the actions of
regulators where appropriate, as prescribed by Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS No. 71). Under SFAS No. 71, the Company records certain
assets and liabilities because of actions of regulators. Further, amounts
charged to operations for depreciation expense reflect estimated useful lives
and methods prescribed by regulators rather than those that might otherwise
apply to unregulated enterprises. In the event the Company determines that it
no longer meets the criteria for following SFAS No. 71, the accounting impact
to the Company would be an extraordinary noncash charge to operations of an
amount which could be material. Criteria that give rise to the discontinuance
of SFAS No. 71 include: (1) increasing competition which restricts the
Company's ability to establish prices to recover specific costs, and (2) a
significant change in the manner in which rates are set by regulators from
cost-based regulation to another form of regulation. The Company periodically
reviews these criteria to ensure that continuing application of SFAS No. 71 is
appropriate.
Regulatory Environment
Customer demand, technology and the preferences of policy makers are all
converging to increase competition in the local exchange business. The
effects of increasing competition are apparent in the marketplace the Company
serves. For example, competitive access providers have requested regulatory
authority to provide full local exchange service in Wisconsin. Additionally,
increasing volumes of intraLATA long distance services purchased by large and
medium sized business customers are sold by carriers other than the Company.
Recognizing the trend, the Company's regulatory/public policy activities are
focused on achieving a framework that allows for expanding competition while
providing a fair opportunity for all carriers, including the Company, to
succeed. The cornerstone of this effort is Ameritech's "Customers First Plan"
that was filed with the Federal Communications Commission (FCC) on March 1,
1993. In a subsequent filing with the U.S. Department of Justice, Ameritech
proposed that the Customers First Plan be implemented on a trial basis
beginning in January, 1995 in Illinois and other states thereafter.
The Customers First Plan proposed to open all of the local telephone business
in the Company's service area to competition. In exchange, Ameritech has
requested three regulatory changes. First, Ameritech has requested relief
from the Modification of Final Judgment (MFJ) interLATA ban. Such relief
would mean that the Company would be allowed to offer all long distance
services. Second, Ameritech has requested a number of modifications in the
FCC's price cap rules. These modifications would apply only to Ameritech,
including the Company, and would eliminate any obligation to refund, in the
form of its share of future rate reductions, its share of interstate earnings
in excess of 12.25%. The modifications would also provide the Company
increased ability to price its interstate access services in a manner
appropriate to competitive conditions. Third, Ameritech has requested FCC
authority to collect in a competitively neutral manner, the social subsidies
currently embedded in the rates that the Company charges long distance
carriers for access to the local network.
<PAGE>
Status of Business Units
In February 1993, following a year-long examination of its business called
"Breakthrough Leadership," Ameritech announced it would restructure its
business into separate units organized around specific customer groups - such
as residential customers, small businesses, interexchange companies and large
corporations - and a single unit that will run Ameritech's network in
Illinois, Indiana, Michigan, Ohio and Wisconsin. The Ameritech Bell Companies
will continue to function as legal entities owning current Bell Company assets
in each state. The network unit will provide network and information
technology resources in response to the needs of the other business units.
This unit will be the source of network capabilities for products and services
offered by the other business units and will be responsible for the
development and day-to-day operation of an advanced information
infrastructure.
All of the business units and the network unit are currently operational.
Ameritech has developed a new logo and is marketing all of its products and
services under the single brand name "Ameritech."
Digital Video Network
In January 1994, Ameritech Corporation (Ameritech), the parent of the Company,
announced a program to launch a digital video network upgrade that is
expected, by the end of the decade, to make available interactive information
and entertainment services, as well as traditional cable TV services, to
approximately 6,000,000 Ameritech customers. The Company has filed an
application with the FCC seeking approval of the program. The application
reflects capital expenditures of approximately $53.0 over the next three
years. The Company may also, depending on market demand, make additional
capital expenditures under this program. The Company anticipates that its
capital expenditures for the program will be funded without an increase to its
recent historical level of capital expenditures.
Changes in Accounting Principles
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The new
accounting method is essentially a refinement of the method the Company had
been following and, accordingly, did not have a material impact on the
Company's financial statements upon adoption.
As more fully discussed in Note C to the financial statements, effective
January 1, 1992, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," and SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." The cumulative effect of these
accounting changes was recognized in the first quarter of 1992 as a change in
accounting principles of $151.8, net of a deferred income tax benefit of
$93.8.
<PAGE>
Workforce Resizing
On March 25, 1994, Ameritech announced that it will reduce its nonmanagement
workforce by 6,000 employees by the end of 1995, including approximately 600
at the Company. Under terms of agreements between Ameritech, the
Communications Workers of America (CWA) and the International Brotherhood of
Electrical Workers (IBEW), Ameritech is implementing an enhancement to the
Ameritech pension plan by adding three years to the age and net credited
service of eligible nonmanagement employees who leave the business during a
designated period that ends in mid-1995. In addition, Ameritech's network
business unit is offering financial incentives under the terms of its current
contracts with the CWA and IBEW, to selected nonmanagement employees who leave
the business before the end of 1995.
The above actions will result in a charge to first quarter 1994 earnings of
approximately $53.0 or $31.7 after-tax. A significant portion of the program
cost will be funded by Ameritech's pension plan, whereas financial incentives
to be paid from company funds are estimated to be approximately $14.2.
Settlement gains, which result from terminated employees accepting lump-sum
payments from the pension plan, will be reflected in income as employees leave
the payroll. The Company believes this program will reduce its employee-
related costs by approximately $30.0 on an annual basis upon completion of
this program.
The reduction of the workforce results from technological improvements,
consolidations and initiatives identified by management to balance its cost
structure with emerging competition.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Wisconsin Bell, Inc.:
We have audited the accompanying balance sheets of Wisconsin Bell, Inc., (a
Wisconsin corporation) as of December 31, 1993 and 1992, and the related
statements of income and reinvested earnings and cash flows for each of three
years in the period ended December 31, 1993. These financial statements and
the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wisconsin Bell, Inc. as of
December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Note C to the financial statements, the Company changed its
method of accounting for certain postretirement and postemployment benefits in
1992.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedules
listed in Item 14(a)(2) are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not a required part of the
basic financial statements. These schedules have been subjected to the
auditing procedures applied in our audits of the basic financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen & Co.
Milwaukee, Wisconsin
January 28, 1994
<PAGE>
WISCONSIN BELL, INC.
STATEMENTS OF INCOME AND REINVESTED EARNINGS
(Dollars in Millions)
Year Ended December 31,
1993 1992 1991
Revenues . . . . . . . . . . . . . . . . . . . $1,122.3 $1,087.4 $1,072.8
Operating expenses
Depreciation and amortization . . . . . . . 186.1 186.4 181.6
Employee related expenses . . . . . . . . . 255.8 260.7 285.3
Taxes other than income taxes. . . . . . . . 62.8 61.7 59.6
Other operating expenses . . . . . . . . . . 362.6 357.1 338.7
867.3 865.9 865.2
Operating income . . . . . . . . . . . . . . 255.0 221.5 207.6
Interest expense . . . . . . . . . . . . . . 32.0 42.0 43.6
Other expense (income), net. . . . . . . . . . 10.7 6.2 (1.6)
Income before income taxes and cumulative
effect of change in accounting principles. . 212.3 173.3 165.6
Income taxes . . . . . . . . . . . . . . . . . 74.3 56.0 56.8
Income before cumulative effect of
change in accounting principles. . . . . . . 138.0 117.3 108.8
Cumulative effect of change in
accounting principles, net of related
tax benefits ($93.8) . . . . . . . . . . . . - (151.8) -
Net income (loss) . . . . . . . . . . . . . . 138.0 (34.5) 108.8
Reinvested earnings, beginning
of year . . . . . . . . . . . . . . . . . . 11.9 171.6 166.8
Less: dividends . . . . . . . . . . . . . . . 125.0 125.2 104.0
Reinvested earnings, end of year . . . . . . . $ 24.9 $ 11.9 $ 171.6
_______ _______ _______
The accompanying notes are an integral part of the financial statements.
<PAGE>
WISCONSIN BELL, INC.
BALANCE SHEETS
(Dollars in Millions)
December 31, December 31,
1993 1992
ASSETS
Current Assets:
Cash . . . . . . . . . . . . . . . . . $ - $ 3.1
Receivables
Customers (less allowance for
uncollectibles of $9.2 and $9.3
respectively) 179.0 177.2
Ameritech and affiliates. . . . . . . 31.2 6.6
Other . . . . . . . . . . . . . . . . 12.6 16.4
Material and supplies . . . . . . . . . 6.4 7.8
Prepaid directories . . . . . . . . . . 10.8 10.9
Prepaid and other . . . . . . . . . . . 21.0 9.0
261.0 231.0
Property, plant and equipment . . . . . . 2,724.4 2,704.1
Less, accumulated depreciation. . . . . . 1,066.2 1,003.9
1,658.2 1,700.2
Investments, principally in affiliates. . 27.5 22.6
Other assets and deferred charges . . . . 91.6 89.6
Total assets. . . . . . . . . . . . . . . $2,038.3 $2,043.4
________ ________
LIABILITIES AND SHAREOWNER'S EQUITY
Current Liabilities:
Debt maturing within one year -
Ameritech . . . . . . . . . . . . . . $ 237.8 $ 61.3
Other . . . . . . . . . . . . . . . . .9 100.4
Accounts payable -
Ameritech and affiliates. . . . . . . 27.4 32.7
Other . . . . . . . . . . . . . . . . 109.0 85.6
Other current liabilities . . . . . . . 76.9 111.6
452.0 391.6
Long-term debt. . . . . . . . . . . . . . 306.5 379.0
Deferred Credits and Other Long-Term
Liabilities:
Accumulated deferred income taxes . . . 201.6 155.2
Unamortized investment tax credits. . . 42.9 52.2
Postretirement benefits other
than pensions . . . . . . . . . . . . 225.8 231.3
Long-term payable to affiliate (ASI)
for SFAS 106 adoption . . . . . . . . 8.8 9.9
Other . . . . . . . . . . . . . . . . . 124.2 160.7
603.3 609.3
<PAGE>
WISCONSIN BELL, INC.
BALANCE SHEETS (Continued)
(Dollars in Millions)
December 31, December 31,
1993 1992
Shareowner's Equity:
Common shares, $20 par value per
share, 31,995,000 shares authorized,
31,960,395 shares issued and
outstanding . . . . . . . . . . . . . . 639.2 639.2
Proceeds in excess of par value . . . . 12.4 12.4
Reinvested earnings . . . . . . . . . . 24.9 11.9
676.5 663.5
Total liabilities and
shareowner's equity . . . . . . . . . . . $2,038.3 $2,043.4
________ ________
The accompanying notes are an integral part of the financial statements.
<PAGE>
WISCONSIN BELL, INC.
STATEMENTS OF CASH FLOWS
(Dollars in Millions)
Year Ended December 31,
1993 1992 1991
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . $138.0 $(34.5) $108.8
Adjustments to net income (loss):
Cumulative effect of change
in accounting principles. . . . . . . - 151.8 -
Depreciation and amortization. . . . . 186.1 186.4 181.6
Deferred income taxes, net . . . . . . 10.7 (18.3) (16.8)
Investment tax credits, net. . . . . . (9.3) (6.9) (9.0)
Interest during construction . . . . . (.4) (.4) (.3)
Provision for uncollectibles . . . . . 10.4 12.0 9.5
Change in accounts receivable. . . . . (33.0) (16.5) 18.9
Change in materials and supplies . . . 1.4 (0.6) (4.9)
Change in prepaid expenses and
certain other current assets . . . . (24.6) (1.0) (49.7)
Change in accounts payable . . . . . . 18.1 18.1 18.6
Change in accrued taxes. . . . . . . . (2.4) (4.5) 2.1
Change in certain other current
liabilities. . . . . . . . . . . . . .7 11.0 (14.1)
Net change in certain noncurrent . . .
assets and liabilities. . . . . . . . (27.8) 20.0 3.7
Other. . . . . . . . . . . . . . . . . 12.6 - (.2)
Net cash from operating activities . . . . . 280.5 316.6 248.2
Cash flows used for investing activities:
Capital expenditures, net. . . . . . . . . (147.4) (174.4) (164.3)
Proceeds (net of removal costs)
from disposal of property,
plant and equipment. . . . . . . . . . . 2.3 1.2 (.2)
Additional equity investments in
ASI (affiliates) . . . . . . . . . . . . (3.0) (4.0) -
Net cash used for investing activities (148.1) (177.2) (164.5)
<PAGE>
WISCONSIN BELL, INC.
STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Millions)
Year Ended December 31,
1993 1992 1991
Cash flows used for financing activities:
Net change in short-term debt. . . . . . . - (42.0) 23.3
Intercompany financing, net. . . . . . . . 176.5 61.3 -
Issuance of long-term debt,
net of discount . . . . . . . . . . . . 145.6 - -
Retirements of long-term debt. . . . . . . (320.0) (30.7) (2.7)
Cost of refinancing long term debt . . . . (12.6) - -
Dividend payments. . . . . . . . . . . . . (125.0) (125.2) (104.0)
Net cash used for financing activities (135.5) (136.6) (83.4)
Net increase (decrease) in cash. . . . . . . (3.1) 2.8 .3
Cash, beginning of period. . . . . . . . . . 3.1 .3 -
Cash, end of period . . . . . . . . . . . . $ - $ 3.1 $ .3
______ ______ ______
The accompanying notes are an integral part of the financial statements.
<PAGE>
WISCONSIN BELL, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in Millions)
Wisconsin Bell, Inc. ("the Company"), is a wholly-owned subsidiary of
Ameritech Corporation ("Ameritech").
(A) ACCOUNTING POLICIES - The financial statements of the Company reflect
the application of the accounting policies described in this Note.
Basis of Accounting - The financial statements have been prepared in
accordance with generally accepted accounting principles. In
compliance with Statement of Financial Accounting Standards (SFAS
No. 71), "Accounting for the Effects of Certain Types of Regulation"
the Company gives accounting recognition to the actions of regulators
where appropriate. Such actions can provide reasonable assurance of
the existence of an asset, reduce or eliminate the value of an asset
or impose a liability. Actions of a regulator can also eliminate a
liability previously imposed by the regulator.
Transactions with Affiliates - The Company has various agreements with
affiliated companies. Below is a description of the significant
arrangements followed by a table of the amounts involved.
1. Ameritech Services, Inc. (ASI) - The Company has a 10% ownership
interest in ASI, an Ameritech controlled affiliate, that provides
consolidated planning, development, management and support services
to all of the Ameritech Bell companies. The Company also provides
certain services, such as loaned employees, to ASI.
1993 1992 1991
. Purchases of materials and $174.4 $178.1 $161.4
charges for services from ASI
. Recovery of cost for services $ 15.0 $ 14.1 $ 11.3
provided to ASI
2. Ameritech (the Company's parent) - Ameritech provides various
administrative, planning, financial and other services to the
Company. These services are billed to the Company at cost.
1993 1992 1991
. Charges incurred for services $ 11.4 $12.8 $12.9
<PAGE>
3. Ameritech Publishing, Inc. (API) - The Company has an agreement
under which payments are made to the Company by API for license fees
and billing and collection services by the Company. The Company
also purchases directory services from API under the same agreement.
1993 1992 1991
. Fees paid to the Company by API $40.6 $40.9 $40.8
. Purchases by the Company from API $ 9.1 $ 8.3 $ 7.9
4. Ameritech Information Systems, Inc. (AIS) - The Company has an
agreement under which the Company reimburses AIS for costs
incurred by AIS in connection with the sale of network services
by AIS employees.
1993 1992 1991
. Charges incurred for services $5.6 $4.5 $4.6
5. Bell Communications Research, Inc. (Bellcore) - Bellcore provides
research and technical support to the Company. ASI has a
one-seventh interest in Bellcore and bills the Company for the
costs.
1993 1992 1991
. Charges incurred for services $12.6 $15.2 $14.6
Property, Plant and Equipment - Property, plant and equipment is
stated at original cost. The original cost of property, plant and
equipment acquired from ASI includes a return on investment to ASI.
The provision for depreciation is based principally on the
straight-line remaining life and the straight-line equal life group
methods of depreciation applied to individual categories of property,
plant and equipment with similar characteristics. The provision for
intrastate deprecia-tion is prescribed by the Public Service Commission of
Wisconsin (PSCW) and differs from the Federal Communications Commission
(FCC) prescribed methods. The PSCW permits only the use of the
straight-line remaining life method.
Generally, when depreciable plant is retired, the amount at which such
plant has been carried in property, plant and equipment in service is
charged to accumulated depreciation.
The cost of maintenance and repairs of plant is charged to expense.
Investments - The Company's investment in ASI (10% ownership or $26.7 for
1993 and 10% or $22.0 for 1992, respectively) is reflected in the
financial statements using the equity method of accounting. All other
investments are carried at cost.
<PAGE>
Material and Supplies - Inventories of new and reusable material and
supplies are stated at the lower of cost or market with cost determined
generally on an average cost basis.
Interest During Construction - Regulatory authorities allow the Company
to accrue interest as a cost of constructing certain plant and as an item
of income, i.e., allowance for debt and equity funds used to finance
construction. Such income is not realized in cash currently but will be
realized over the service life of the plant as the resulting higher
depreciation expense is recovered in the form of increased revenues.
Income Taxes - The Company is included in the consoli-dated federal
income tax return filed by Ameritech and its subsidiaries. Consolidated
income tax currently payable has been allocated to the Company based on
the Company's contribution to consolidated taxable income and tax
credits. Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
(SFAS No. 109). The new accounting method is essentially a refinement of
the liability method already followed by the Company and accordingly, did
not have a significant impact on the Company's financial statements upon
adoption.
Deferred tax assets and liabilities are based on differences between the
financial statement bases of assets and liabilities and the tax bases of
those same assets and liabilities. Under the liability method, deferred
tax assets and liabilities at the end of each period are determined using
the statutory tax rates in effect when these temporary differences are
expected to reverse. Deferred income tax expense is measured by the
change in the net deferred income tax asset or liability during the year.
In addition, for regulated companies, SFAS No. 109 requires that all
deferred regulatory liabilities be recognized at the revenue requirement
level. It further requires that a deferred tax liability be recorded to
reflect the amount of cumulative tax benefits previously flowed through
to ratepayers and that a long-term deferred asset be recorded to reflect
the revenue to be recovered in telephone rates when the related taxes
become payable in future years.
The Company uses the deferral method of accounting for investment tax
credits. Therefore, credits earned prior to the repeal of investment
tax credits by the Tax Reform Act of 1986 and also certain
transitional credits earned after the repeal are being amortized as
reductions in tax expense over the life of the plant which gave rise
to the credits.
Temporary Cash Investments - Temporary cash investments are stated at
cost, which approximates market. The Company considers all highly
liquid, short-term investments with an original maturity of three months
or less to be cash equivalents.
Short Term Financing Arrangement - During 1991, Ameritech entered into
an arrangement with its subsidiaries for the provision of short-term
financing. This arrangement became effective for the Company June 1,
1992. Ameritech issues commercial paper and notes and secures bank
loans to fund the working capital requirements of its subsidiaries and
invests short-term, excess funds on their behalf. See Note D and H.
<PAGE>
(B) INCOME TAXES - The components of income tax expense before accounting
changes were as follows:
Year Ended December 31,
1993 1992 1991
Federal
Current . . . . . . . . . . . $ 60.1 $65.8 $68.5
Deferred - net. . . . . . . . 2.4 (22.3) (20.3)
Investment tax credits - net. (9.3) (6.9) (9.0)
Total. . . . . . . . . . 53.2 36.6 39.2
State and Local
Current . . . . . . . . . . . 12.8 15.4 14.1
Deferred - net. . . . . . . . 8.3 4.0 3.5
Total. . . . . . . . . . 21.1 19.4 17.6
Total income tax expense . . . . . $ 74.3 $56.0 $56.8
Deferred income tax expense (credits) results principally from temporary
differences caused by the change in the book and tax bases of property,
plant and equipment due to the use of different depreciation methods
and lives for financial reporting and income tax purposes.
Total income taxes paid were $74.5, $89.0 and $77.1 in 1993, 1992 and
1991, respectively.
The following is a reconciliation between the statutory federal income tax
rate for each of the last three years and the Company's effective tax rate:
Year Ended December 31,
1993 1992 1991
Statutory tax rate. . . . . . . . . . . 35.0% 34.0% 34.0%
State income taxes, net of federal
benefit . . . . . . . . . . . . . . . . 6.5 7.4 7.0
Reduction in tax expense due to
amortization of investment tax
credits . . . . . . . . . . . . . . . . (4.3) (4.1) (5.4)
Benefit of tax rate differential
applied to reversing temporary
differences . . . . . . . . . . . . . . (2.4) (3.3) (3.5)
Other - net . . . . . . . . . . . . . . 0.2 (1.7) 2.2
Effective tax rate. . . . . . . . . . . 35.0% 32.3% 34.3%
_____ _____ _____
<PAGE>
The Revenue Reconciliation Act of 1993, enacted in August of 1993,
increased the statutory federal income tax rate for 1993 to 35 percent.
In accordance with the liability method of accounting, the Company
adjusted, on the enactment date, its deferred income tax balances not
subject to regulatory accounted prescribed by SFAS No. 71 (see Note A).
The result was a reduction in deferred income tax expense of $2.3,
primarily from increasing the deferred tax assets associated SFAS Nos.
106 and 112 (see Note C).
As of December 31, 1993, the Company had a regulatory asset of $41.7
(reflected in Other Assets and Deferred Charges) related to the
cumulative amount of income taxes on temporary differences previously
flowed through to ratepayers. In addition, on that date, the Company had
a regulatory liability of $72.2 (reflected in Other Deferred Credits)
related to the reduction of deferred taxes resulting from the change in
the federal statutory income tax rate of 35 percent and deferred taxes
provided on unamortized investment tax credits. These amounts will be
amortized over the regulatory lives of the related depreciable assets
concurrent with recovery in rates. The accounting for and the impact on
future net income of these amounts will depend on the ratemaking
treatment authorized in future regulatory proceedings.
As of December 31, 1993 and 1992, the components of long-term accumulated
deferred income taxes were as follows:
1993 1992
Deferred tax assets:
Postretirement benefits $ 87.0 $ 90.2
Postemployment benefits 3.5 3.5
SFAS No. 71 accounting 25.6 71.8
Other, net 13.3 11.1
129.4 176.6
Deferred tax liabilities:
Accelerated depreciation 323.3 331.4
Other 7.7 .4
331.0 331.8
Net deferred tax liability $201.6 $155.2
Deferred income taxes in current assets and liabilities are not shown as
they are not significant.
<PAGE>
(C) EMPLOYEE BENEFIT PLANS
Pension Plans - Ameritech maintains noncontributory defined pension and
death benefit plans covering substantially all of the Company's
management and nonmanagement employees. The pension benefit formula used
in the determination of pension cost is based on the average compensation
earned during the five highest consecutive years of the last ten years of
employment for the management plan and a flat dollar amount per year of
service for the nonmanagement plan. Pension (credit) cost is allocated
to subsidiaries based upon the percentage of compensation for the
management plan and per employee for the nonmanagement plan. The
Company's funding policy is to contribute annually an amount up to the
maximum amount that can be deducted for federal income tax purposes.
However, due to the funded status of the plans, no contributions have
been made for the years reported below. The following data provides
information on the Company's (credit) cost for the Ameritech plans:
Year Ended December 31,
1993 1992 1991
Pension credit . . . . . . . . . . . . . . $(9.8) $(10.6) $(7.3)
______ _______ ______
Current year credit as a percentage
of salaries and wages. . . . . . . . . . . (4.7%) (4.8%) (3.0%)
_______ ________ _______
Pension credit was determined using the projected unit credit actuarial
method in accordance with Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions." The resulting pension
credits are primarily attributable to favorable investment performance
and the funded status of the plans.
Certain disclosures are required to be made of the components of pension
costs and the funded status of the plans, including the actuarial present
value of accumulated plan benefits, accumulated projected benefit
obligation and the fair value of plan assets. Such disclosures are not
presented for the Company because the structure of the Ameritech plans
does not permit the plans' data to be readily disaggregated.
The assets of the Ameritech plans consist principally of debt and equity
securities, fixed income securities and real estate. As of December 31,
1993, the fair value of plan assets available for plan benefits exceeded
the projected benefit obligation (calculated using a discount rate of
5.8% as of December 31, 1993 and 1992). The assumed long-term rate of
return on plan assets used in determining pension cost was 7.25% for
1993, 1992 and 1991. The assumed increase in future compensation levels
also used in the determination of the projected obligation was 4.5% in
1993 and 1992.
<PAGE>
Postretirement Benefits Other Than Pensions - Effective January 1, 1992,
the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers Accounting for Postretirement Benefits Other Than Pensions"
(SFAS No. 106). SFAS No. 106 requires the cost of postretirement
benefits granted to employees to be accrued as expense over the period in
which the employee renders service and becomes eligible to receive
benefits. The cost of health care costs and post-retirement life
insurance benefits for current and future retirees was recognized as
determined under the projected unit credit actuarial method.
In adopting SFAS No. 106, the Company elected to immediately recognize
effective January 1, 1992, the transition obligation for current and
future retirees. The unrecognized obligation was $230.2 less deferred
income taxes of $90.3 or $139.9, net. To this amount, is added the
Company's 10 percent share of ASI's transition benefit obligation of $6.2
for a total charge of $146.1.
As defined by SFAS No. 71, a regulatory asset and any corresponding
regulatory liability associated with the recognition of the transition
obligation was not recorded because of uncertainties as to the timing and
extent of recovery in the ratemaking process.
Substantially all current and future retirees are covered under
postretirement benefit plans sponsored by Ameritech. Such benefits
include medical, dental and group life insurance. Ameritech has been
prefunding (including cash received from the Company) certain of these
benefits through Voluntary Employee Benefit Associations (VEBAs) and
Retirement Funding Accounts (RFAs). The associated plan assets
(primarily corporate securities and bonds) were considered in determining
the transition obligation under SFAS No. 106. Ameritech intends to
continue to fund its obligation appropriately, and is exploring other
available funding and cost containment alternatives. Ameritech allocates
its retiree health-care costs on per participant basis, whereas group
life insurance is allocated based on compensation levels.
SFAS No. 106 requires certain disclosures as to the components of
postretirement benefit costs and the funded status of the plans. Such
disclosures are not presented for the Company as the structure of the
Ameritech plans does not permit the data to be readily disaggregated.
However, the Company has been advised by Ameritech as to the following
assumptions used in determining its SFAS No. 106 costs.
As of December 31, 1993, the projected benefit obligation exceeded the
fair value of plant assets available for plan benefits. The assumed
discount rate used to measure the accumulated postretirement benefit
obligation was 7.0% as of December 31, 1993 and 7.5% as of December 31,
1992. The assumed rate of future increases in compensation level was
4.5% as of December 31, 1993 and December 31, 1992. The expected
long-term rate of return on plan assets was 7.25% in 1993 and 1992 on
VEBAs and 8.0% in 1993 and 1992 on RFAs. The assumed healthcare cost
trend rate in 1993 was 9.6% and 10% in 1992, and is assumed to decrease
gradually to 4% in 2007 and remain at that level. The assumed increase
in healthcare cost is 9.2% for 1994. The healthcare cost trend rates
have a significant effect on the amounts reported for costs each year.
<PAGE>
Specifically, increasing the assumed healthcare cost trend rates by one
percentage point in each year would have increased the transition
obligation and annual expense by 18%.
Postretirement benefit cost under SFAS No. 106 for 1993 and 1992 was
$23.7 and $21.9, respectively. During 1991, the cost of postretirement
health care benefits for retirees was $20.3.
As of December 31, 1993, the company had approximately 4,359 retirees
eligible to receive health care and group life insurance benefits.
Postemployment Benefits - Effective January 1, 1992, the Company adopted
Statement of Financial Accounting Standards No. 112, "Employers
Accounting for Postemployment Benefits" (SFAS No. 112). SFAS No. 112
requires employers to accrue the future cost of certain benefits such as
workers compensation, disability benefits and health care continuation
coverage. A one-time charge related to adoption of this statement was
recognized as a change in accounting principle, effective as of
January 1, 1992. The charge was $5.5, net of deferred taxes of $3.5. To
this amount is added the Company's 10% share of ASI's one-time charge of
$.2 for a total charge of $5.7. Previously the Company used the cash
method to account for such costs. Future expense levels are dependent
upon actual claim experience, but are not expected to be materially
different than prior charges to income.
Workforce Reductions - During 1993, 270 employees left the Company
through a voluntary early retirement program and involuntary
terminations. The net cost of this effort including termination
benefits, settlement and curtailment gains from the pension plan, was a
credit to expense of $2.8. The involuntary termination plan remains in
effect until December 31, 1994.
During 1992, 172 employees left the Company through a voluntary early
retirement program and involuntary terminations. The net cost of this
effort including termination benefits, settlement and curtailment gains
from the pension plan, was a credit to expense of $0.1.
During 1991, the Company offered most of its management employees an
early retirement program. The net cost of this program, including
termination benefits and a settlement gain from the pension plan, was
$0.9.
<PAGE>
(D) DEBT MATURING WITHIN ONE YEAR - Debt maturing within one year is included
as debt in the computation of debt ratios and consists of the following
at December 31:
Weighted
Average
Amounts Interest Rates
1993 1992 1991 1993 1992 1991
Notes Payable -
Commercial Paper . . $ - $ - $42.1 - % - % 4.7%
Parent (Ameritech) . 237.8 61.3 - 3.1% 3.3% -
Long-term debt maturing
within one year. . . .9 100.4 30.7
Total. . . . . $238.7 $161.7 $72.8
______ ______ _____
Average notes payable
outstanding during
the year . . . . . . . $115.7 $ 43.5 $13.6 3.1%* 3.5%* 5.5%*
______ ______ _____ ___ ___ ___
Maximum notes payable
at any month-end
during the year. . . . $237.8 $ 65.2 $42.1
______ ______ _____
* Computed by dividing the average daily face amount of advances and
notes payable into the aggregate-related interest expense.
During 1991, Ameritech consolidated the short-term financing of its
subsidiaries at Ameritech Corporate. See Note A - short-term financing
arrangements.
(E) LONG-TERM DEBT - Long-term debt consists principally of mortgage bonds
and debentures issued by the Company.
The following table sets forth interest rates and other information on
long-term debt outstanding at December 31.
Interest Maturities 1993 1992
4.88% 1995 $ - $ 20.0
4.38% 2002 20.0 20.0
6.25% 2004 50.0 50.0
7.25% 2007 90.0 90.0
8.00% 2014 - 100.0
8.25% 2016 - 100.0
6.75% 2024 150.0 -
310.0 380.0
Capital lease obligation . . . .9 .6
Other . . . . . . . . . . . . (.9) (.3)
Unamortized discount, net . . (3.5) (1.3)
Total . . . . . . . . . . . . $306.5 $379.0
_______ _______
<PAGE>
On December 30, 1992, the Company announced a plan to call its 8-3/4%
$100.0 bonds effective February 1, 1993. The premium paid to call the
bonds, ($5.1) along with the unamortized discount and debt issuance costs
related to the bonds ($2.9) have been expensed as of December 31, 1992
and are included in other expense (income). The bond call was financed
with short-term borrowings from Ameritech.
On August 11, 1993, the Company issued $150.0 of 6-3/4% debentures due
August 15, 2024. The proceeds from the sale, along with short-term
borrowings, were used to retire $100.0 of 8-1/4% debentures due
November 15, 2016 and $100.0 of 8% debentures due January 1, 2014. The
Company has filed a registration statement with the Securities and
Exchange Commission for the issuance of up to $200.0 in unsecured debt
securities for general corporate purposes.
Early extinguishment of debt costs (including call premiums and
write-offs of unamortized deferred costs) were $9.0, $8.0 and $0.0 in
1993, 1992 and 1991, respectively, and were included in other expense
(income) on the statements of income.
(F) LEASE COMMITMENTS - The Company leases certain facilities and equipment
used in its operations under both operating and capital leases. Rental
expense under operating leases was $14.1, $14.7 and $19.3 for 1993, 1992
and 1991, respectively. At December 31, 1993 the aggregate minimum
rental commitments under noncancelable leases were approximately as
follows:
Years Operating Capital
1994 . . . . . . . . . . . . . . . . . . . . . $2.3 $1.0
1995 . . . . . . . . . . . . . . . . . . . . . 1.9 .8
1996 . . . . . . . . . . . . . . . . . . . . . 1.2 .2
1997 . . . . . . . . . . . . . . . . . . . . . .7 -
1998 . . . . . . . . . . . . . . . . . . . . . .3 -
Thereafter . . . . . . . . . . . . . . . . . . .2 -
Total minimum rental commitments . . . . . . . $6.6 2.0
____
Less: amount representing executory costs . . .1
amount representing interest costs . . .1
Present value of minimum lease payments . $1.8
____
(G) FINANCIAL INSTRUMENTS - The following table presents the estimated fair
value of the Company's financial instruments as of December 31, 1993:
1993
Carrying Fair
Value Value
Cash and temporary cash investments. . . . . . $ - $ -
Debt . . . . . . . . . . . . . . . . . . . . . 551.7 549.5
Long-term payable to ASI (for postretirement
benefits). . . . . . . . . . . . . . . . . 8.8 8.8
Other assets . . . . . . . . . . . . . . . . . 3.1 3.1
Other liabilities. . . . . . . . . . . . . . . 6.8 6.8
<PAGE>
1992
Carrying Fair
Value Value
Cash and temporary cash investments. . . . . . $ 3.1 $ 3.1
Debt . . . . . . . . . . . . . . . . . . . . . 555.6 541.8
Long-term payable to ASI (for postretirement
benefits). . . . . . . . . . . . . . . . . 9.9 9.9
Other assets . . . . . . . . . . . . . . . . . 7.3 7.3
Other liabilities. . . . . . . . . . . . . . . 23.1 23.1
The following methods and assumptions were used to estimate the fair
value of financial instruments:
Cash and Temporary Cash Investments - Carrying value approximates fair
value because of short-term maturity of these instruments.
Debt - The carrying amount (including accrued interest) of the Company's
debt maturing within one year approximates fair value because of the
short-term maturities involved. The fair value of the Company's
long-term debt was estimated based on the year-end quoted market price
for the same or similar issues.
Other Assets and Liabilities - These financial instruments consist
primarily of other investments, other accrued liabilities and customer
deposits. The fair values of these items was based on expected cash
flows or, if available, quoted market prices.
Long-Term Payable to ASI (For Postretirement Benefits) - This item
represents the long-term payable to ASI for the Company's proportional
share of ASI's transition benefit obligation related to the adoption of
SFAS No. 106.
(H) ADDITIONAL FINANCIAL INFORMATION
Balance Sheet December 31,
Other current liabilities: 1993 1992
Accrued payroll . . . . . . . . . . . $ 6.1 $ 12.6
Compensated absences. . . . . . . . . 17.7 17.9
Accrued taxes . . . . . . . . . . . . 4.3 6.7
Income taxes deferred one year . . . - 8.8
Advance billings and customers'
deposits . . . . . . . . . . . . . 32.4 32.0
Accrued interest . . . . . . . . . . 9.5 11.2
Other . . . . . . . . . . . . . . . . 6.9 22.4
Total . . . . . . . . . . . . . . . $ 76.9 $111.6
_______ _______
<PAGE>
Statements of Income Year Ended December 31,
1993 1992 1991
Interest Expense:
Interest on long-term debt . . . . . $ 29.3 $ 37.5 $ 38.2
Interest on notes payable - Ameritech 4.0 .9 -
Interest on notes payable - Other . . - .6 .8
Other . . . . . . . . . . . . . . . . (1.3) 3.0 4.6
Total . . . . . . . . . . . . . . . $ 32.0 $ 42.0 $ 43.6
_______ _______ _______
Interest paid, net of amounts capitalized was $29.7, $40.9 and $39.7
in 1993, 1992 and 1991, respectively.
Taxes other than income taxes
Gross receipts. . . . . . . . . . . . $ 59.7 $ 59.8 $ 57.7
Other . . . . . . . . . . . . . . . . 3.1 1.9 1.9
Total . . . . . . . . . . . . . . . $ 62.8 $ 61.7 $ 59.6
_______ _______ _______
Maintenance and repair expense $158.0 $160.1 $158.3
_______ _______ _______
Advertising $ 12.7 $ 9.4 $ 9.7
_______ _______ _______
Depreciation - Percentage of
average depreciable property,
plant and equipment . . . . . . . . . 7.0% 7.1% 7.1%
_______ _______ _______
Revenues from AT&T, consisting principally of interstate network access
and billing and collection service revenues, comprised approximately 14%
of total operating revenues in 1993, 1992 and 1991. No other customer
accounted for more than 10% of total revenues.
(I) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Net
Calendar Operating Income
Quarter Revenues Income (Loss)
1993
1st . . . . . . . . . . . $ 272.8 $ 67.0 $ 37.6
2nd . . . . . . . . . . . 281.4 62.1 35.7
3rd . . . . . . . . . . . 282.7 59.3 30.2
4th . . . . . . . . . . . 285.4 66.6 34.5
Total . . . . . . . . $1,122.3 $255.0 $138.0
________ ______ _______
1992
1st . . . . . . . . . . . $ 264.8 $ 54.2 $(120.4)
2nd . . . . . . . . . . . 269.6 55.2 28.0
3rd . . . . . . . . . . . 276.7 61.7 30.4
4th . . . . . . . . . . . 276.3 50.4 27.5
Total . . . . . . . . $1,087.4 $221.5 $ (34.5)
________ ______ ________
<PAGE>
The fourth quarters of 1993 and 1992 were affected by several income and
expense items. The fourth quarter of 1993 was affected by gains from a
workforce resizing and charges for the early retirement of debt. In the
1992 quarter, the Company recognized higher costs and charges resulting
from its market realignment efforts, the early retirement of debt, and
increased advertising. These costs were offset by gains resulting from
workforce resizing and higher than expected pension credits.
First quarter 1992 results reflect charges related to the adoption of
SFAS Nos. 106 and 112 for postretirement and postemployment benefits, as
discussed previously in Note C. The charges totaled $151.8.
All adjustments necessary for a fair statement of results for each period
have been included.
(J) CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges of the Company for the years ended
December 31, 1993, 1992, 1991, 1990 and 1989 were 6.78, 4.70, 4.31, 4.57
and 4.00, respectively.
For the purpose of calculating this ratio, (i) earnings have been
calculated by adding to income before interest expense and accounting
changes, the amount of related taxes on income and the portion of rentals
representative of the interest factor, (ii) the Company considers
one-third of rental expense to be the amount representing return on
capital, and (iii) fixed charges comprise total interest expense and such
portion of rentals.
(K) EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT - (UNAUDITED)
On March 25, 1994, Ameritech announced it would reduce its nonmanagement
workforce resulting in an after-tax charge to the Company of $31.7. The
charge will be recorded in the first quarter of 1994. The details of
this plan are discussed on page 22 in MD&A.
<PAGE>
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure.
No changes in nor disagreements with accountants on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure occurred during the period covered by the annual report.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as a part of this report:
(1) Financial Statements: Page
Selected Financial and Operating Data................ 15
Report of Independent Public Accountants............. 23
Statements of Income and Reinvested Earnings......... 24
Balance Sheets....................................... 25
Statements of Cash Flows............................. 27
Notes to Financial Statements........................ 29
(2) Financial Statement Schedules:
V - Telecommunications Plant...................... 46
VI - Accumulated Depreciation...................... 50
VIII - Allowance for Uncollectibles.................. 54
Financial statement schedules other than those listed above
have been omitted because the required information is contained
in the financial statements and notes thereto, or because such
schedules are not required or applicable.
<PAGE>
(3) Exhibits:
Exhibits identified in parentheses below, on file with the
Securities and Exchange Commission ("SEC"), are incorporated
herein by reference as exhibits hereto.
Exhibit
Number
(3)a Articles of Association of the registrant as
amended March 27, 1990. (Exhibit 3a to
Form 10-K for 1989, File No. 1-6589.)
(3)b By-Laws of the registrant as amended March 27,
1990. (Exhibit 3b to Form 10-K for 1989, File
No. 1-6589.)
(4) No instrument which defines the rights of
holders of long and intermediate term debt of
the registrant is filed herewith pursuant to
Regulation S-K, Item 601(b)(4)(iii)(A).
Pursuant to this regulation, the registrant
hereby agrees to furnish a copy of any such
instrument to the SEC upon request.
(10)a Reorganization and Divestiture Agreement among
American Telephone and Telegraph Company,
American Information Technologies Corporation
and Affiliates dated November 1, 1983.
(Exhibit 10a to Form 10-K for 1983 for American
Information Technologies Corporation, File No.
1-8612.)
(10)b Agreement Concerning Contingent Liabilities, Tax
Matters and Termination of Certain Agreements
among American Telephone and Telegraph Company,
Bell System Operating Companies, Regional
Holding Companies and Affiliates dated
November 1, 1983. (Exhibit 10j to Form 10-K for
1983 for American Information Technologies
Corporation, File No. 1-8612.)
(12) Computation of ratio of earnings to fixed
charges.
(24) Consent of independent public accountants.
(28) Authorization of deputization.
(b) Reports on Form 8-K:
No report on Form 8-K was filed by the registrant during the last
quarter of the year covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Wisconsin Bell, Inc.
By Paul J. LaRosa
(Paul J. LaRosa, Treasurer)
March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Principal Executive Officer:
Bronson J. Haase President
Principal Financial Officer:
Richard H. Witte Vice President and By Paul J. LaRosa
Comptroller (Paul J. LaRosa,
Treasurer and by
written authorization)
December 16, 1993)
Ameritech Corporation
By Richard H. Brown
(Richard H. Brown, Vice Chairman)
the sole shareholder of the registrant,
which is a statutory close corporation
managed by the shareholder rather than
by a board of directors.
March 30, 1994
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________
Balance at Additions Retire- Other Balance
Beginning at Cost ments Changes at End
Classification of Period -Note(a) -Note(b) -Note(c) of Period
______________________________________________________________________________
Year 1993
Land.................... $ 16.5 $ 0.8 $ 0.3 $ - $ 17.0
Buildings............... 315.2 9.4 2.9 - 321.7
Computers and Other
Office Equipment....... 153.9 7.3 13.8 - 147.4
Vehicles and Other
Work Equipment......... 26.7 2.3 1.6 - 27.4
Central Office
Equipment.............. 968.7 98.2 97.2 - 969.7
Information Origination/
Termination Equipment.. 26.6 2.1 1.9 - 26.8
Cable and Wire
Facilities............. 1,144.9 40.8 8.8 - 1,176.9
Capitalized Lease
Assets................. 4.4 1.5 0.7 - 5.2
Miscellaneous Other
Property............... 6.2 0.9 (0.2) - 7.3
Total Telecommunications
Plant in Service....... 2,663.1 163.3 127.0 - 2,699.4
Telecommunications Plant
Under Construction..... 41.0 (16.0) - - 25.0
Total Telecommunications
Plant.................. $2,704.1 $147.3 $127.0 $ - $2,724.4
________ _______ ______ _______ ________
The notes on page 50 are an integral part of this Schedule.
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________
Balance at Additions Retire- Other Balance
Beginning at Cost ments Changes at End
Classification of Period -Note(a) -Note(b) -Note(c) of Period
______________________________________________________________________________
Year 1993
Land.................... $ 16.0 $ 0.7 $ 0.2 $ - $ 16.5
Buildings............... 306.4 12.2 3.4 - 315.2
Computers and Other
Office Equipment....... 156.2 7.1 9.4 - 153.9
Vehicles and Other
Work Equipment......... 27.4 2.1 2.8 - 26.7
Central Office
Equipment.............. 971.1 86.9 89.3 - 968.7
Information Origination/
Termination Equipment.. 25.3 3.1 1.8 - 26.6
Cable and Wire
Facilities............. 1,109.6 45.6 10.3 - 1,144.9
Capitalized Lease
Assets................. 4.6 0.2 0.4 - 4.4
Miscellaneous Other
Property............... 7.4 (1.2) - - 6.2
Total Telecommunications
Plant in Service....... 2,624.0 156.7 117.6 - 2,663.1
Telecommunications Plant
Under Construction..... 23.3 17.7 - - 41.0
Total Telecommunications
Plant.................. $2,647.3 $174.4 $117.6 $ - $2,704.1
________ _______ ______ _______ ________
The notes on page 50 are an integral part of this Schedule.
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________
Balance at Additions Retire- Other Balance
Beginning at Cost ments Changes at End
Classification of Period -Note(a) -Note(b) -Note(c) of Period
______________________________________________________________________________
Year 1993
Land.................... $ 14.8 $ 1.7 $ 0.5 $ - $ 16.0
Buildings............... 294.6 14.0 2.2 - 306.4
Computers and Other
Office Equipment....... 165.0 14.5 23.3 - 156.2
Vehicles and Other
Work Equipment......... 27.1 3.2 2.9 - 27.4
Central Office
Equipment.............. 942.3 80.0 51.2 - 971.1
Information Origination/
Termination Equipment.. 25.2 2.8 2.7 - 25.3
Cable and Wire
Facilities............. 1,072.3 51.0 13.7 - 1,109.6
Capitalized Lease
Assets................. 5.2 0.1 0.7 - 4.6
Miscellaneous Other
Property............... 8.5 (1.1) - - 7.4
Total Telecommunications
Plant in Service....... 2,555.0 166.2 97.2 - 2,624.0
Telecommunications Plant
Under Construction..... 19.6 3.7 - - 23.3
Total Telecommunications
Plant.................. $2,574.6 $169.9 $97.2 $ - $2,647.3
________ _______ _____ _______ ________
The notes on page 50 are an integral part of this Schedule.
<PAGE>
FOOTNOTES TO SCHEDULE V
(Millions of Dollars)
_______________
(a) Additions, other than to buildings, include material purchased from
Ameritech Services Inc., a centralized procurement subsidiary in which
the Company has a 10 percent ownership interest (see Note (A) to
Financial Statements). Additions shown also include: (1) the original
cost (estimated if not known) of reused material, which is concurrently
credited to material and supplies, and (2) interest during construction.
Transfers between the classifications listed are included in Column E.
(b) Items of telecommunications plant, when retired or sold, are deducted
from the property accounts at the amounts at which they are included
therein, estimated if not known.
(c) Comprised principally of reclassifications between plant categories.
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________
Balance at Additions Retire- Other Balance
Beginning at Cost ments Changes at End
Classification of Period -Note(a) -Note(b) -Note(c) of Period
______________________________________________________________________________
Year 1993
Buildings............... $ 64.1 $ 7.7 $ 4.4 $(0.2) $ 67.2
Computers and Other
Office Equipment....... 98.3 14.1 13.4 - 99.0
Vehicles and Other
Work Equipment......... 9.0 1.6 1.9 - 8.7
Central Office
Equipment.............. 376.2 95.9 92.9 - 379.2
Information Origination/
Termination Equipment.. 13.9 2.8 2.0 - 14.7
Cable and Wire
Facilities............. 438.6 63.2 10.6 - 491.2
Capitalized Lease
Assets................. 3.5 0.4 0.7 - 3.2
Miscellaneous Other
Property............... 0.3 0.4 (2.1) 0.2 3.0
Total Telecommunications
Plant in Service....... 1,003.9 186.1 123.8 - 1,066.2
Telecommunications Plant
Under Construction..... - - - - -
Total Telecommunications
Plant.................. $1,003.9 $186.1 $123.8 $ - $1,066.2
________ ______ ______ _______ ________
The notes on page 54 are an integral part of this Schedule.
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________
Balance at Additions Retire- Other Balance
Beginning at Cost ments Changes at End
Classification of Period -Note(a) -Note(b) -Note(c) of Period
______________________________________________________________________________
Year 1993
Buildings............... $ 61.4 $ 7.7 $ 5.0 $ - $ 64.1
Computers and Other
Office Equipment....... 88.3 19.3 9.3 - 98.3
Vehicles and Other
Work Equipment......... 9.6 1.8 2.4 - 9.0
Central Office
Equipment.............. 362.9 99.7 86.4 - 376.2
Information Origination/
Termination Equipment.. 13.6 2.2 1.9 - 13.9
Cable and Wire
Facilities............. 396.5 54.1 12.0 - 438.6
Capitalized Lease
Assets................. 3.4 0.5 0.4 - 3.5
Miscellaneous Other
Property............... .7 1.1 1.5 - 0.3
Total Telecommunications
Plant in Service....... 936.4 186.4 118.9 - 1,003.9
Telecommunications Plant
Under Construction..... - - - - -
Total Telecommunications
Plant.................. $936.4 $186.4 $118.9 $ - $1,003.9
______ ______ ______ _______ ________
The notes on page 54 are an integral part of this Schedule.
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E COL. F
______________________________________________________________________________
Balance at Additions Retire- Other Balance
Beginning at Cost ments Changes at End
Classification of Period -Note(a) -Note(b) -Note(c) of Period
______________________________________________________________________________
Year 1993
Buildings............... $ 57.8 $ 7.4 $ 3.8 $ - $ 61.4
Computers and Other
Office Equipment....... 90.4 20.7 7 22.8 - 88.3
Vehicles and Other
Work Equipment......... 10.2 1.9 2.5 - 9.6
Central Office
Equipment.............. 317.3 96.4 50.8 - 362.9
Information Origination/
Termination Equipment.. 14.4 2.0 2.8 - 13.6
Cable and Wire
Facilities............. 357.5 53.9 14.9 - 396.5
Capitalized Lease
Assets................. 3.4 0.6 0.6 - 3.4
Miscellaneous Other
Property............... 1.0 (1.3) (1.0) - 0.7
Total Telecommunications
Plant in Service....... 852.0 181.6 97.2 - 936.4
Telecommunications Plant
Under Construction..... - - - - -
Total Telecommunications
Plant.................. $852.0 $181.6 $97.2 $ - $936.4
______ ______ _____ _______ ______
The notes on page 54 are an integral part of this Schedule.
<PAGE>
FOOTNOTES TO SCHEDULE VI
(Millions of Dollars)
_______________
(a) Comprised of depreciation related to short-term interest during
construction charged initially to deferred charges and reclassifications
between plant categories.
<PAGE>
______________________________________________________________________________
______________________________________________________________________________
COL. A COL. B COL. C COL. D COL. E
______________________________________________________________________________
Charged to
Balance at Other Balance
Beginning Charged to Accounts Deductions at End
Classification of Period Expenses -Note(a) -Note(b) of Period
________________________________________________________________________________
Year 1993 .......... $9.3 $10.4 $19.1 $29.6 $9.2
Year 1992 .......... $6.3 $12.0 $19.6 $28.6 $9.3
Year 1991 .......... $4.8 $9.5 $11.9 $19.9 $6.3
__________________________
(a) Includes principally amounts previously written off which were credited
directly to this account when recovered and amounts related to
interexchange carrier receivables which are billed by the Company.
(b) Amounts written off as uncollectible.
<PAGE>
EXHIBIT INDEX
Exhibit
Number Page
(3)a Articles of Incorporation of the registrant,
as amended March 27, 1990. (Exhibit 3a to
Form 10-K for 1989, File No. 1-6589.)
(3)b By-laws of the registrant, as amended
March 27, 1990. (Exhibit 3b to Form 10-K for
1989, File No. 1-6589.)
4 No instrument which defines the rights of
holders of long-term debt of the registrant is
filed herewith pursuant to Regulation S-K,
Item 601(b)(4)(iii)(A). Pursuant to this
regulation, the registrant hereby agrees to
furnish a copy of any such instrument to the
SEC upon request.
(10)a Reorganization and Divestiture Agreement among
American Telephone and Telegraph Company,
American Information Technologies Corporation
and Affiliates dated November 1, 1983.
(Exhibit 10a to Form 10-K for 1983 for
American Information Technologies Corporation,
File No. 1-8612.)
(10)b Agreement Concerning Contingent Liabilities,
Tax Matters and Termination of Certain
Agreements among American Telephone and
Telegraph Company, Bell System Operating
Companies, Regional Holding Companies and
Affiliates dated November 1, 1983. (Exhibit
10j to Form 10-K for 1983 for American
Information Technologies Corporation, File
No. 1-8612.)
(12) Computation of ratio of earnings to fixed 56
charges.
(24) Consent of independent public accountants. 57
(28) Authorization of deputization. 58
<PAGE>
WISCONSIN BELL, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Year Ended December 31,
1993 1992 1991 1990 1989
EARNINGS
(a) Income before interest
deductions and cumulative
effect of change in
accounting principles . . . $ 170.0 $ 159.3 $ 152.4 $ 155.6 $ 153.8
(b) Federal and state income
taxes . . . . . . . . . . . 74.3 56.0 56.8 55.9 41.2
(c) Portion of rental expense
representative of interest
factor . . . . . . . . . . 4.7 4.9 6.4 6.0 7.2
$ 249.0 $ 220.2 $ 215.6 $ 217.5 $ 202.2
FIXED CHARGES
(a) Total interest deductions
including capital lease
obligations . . . . . . . . $ 32.0 $ 42.0 $ 43.6 $ 41.6 $ 43.3
(b) Portion of rental expense
representative of the
interest factor . . . . . . 4.7 4.9 6.4 6.0 7.2
$ 36.7 $ 46.9 $ 50.0 $ 47.6 $ 50.5
Ratio . . . . . . . . . . . . . 6.78 4.70 4.31 4.57 4.00
_______ _______ _______ _______ _______
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated January 28, 1994, included as an Exhibit to
this Form 10-K, into Wisconsin Bell, Inc.'s previously filed Registration
Statement File No. 33-53510.
Arthur Andersen & Co.
Milwaukee, Wisconsin
March 30, 1994
<PAGE>
Ameritech Exhibit 28
AUTHORIZATION OF DEPUTIZATION
AUTHORIZATION
Date 12 / 16 / 93
I, (Principal Name) Richard H. Witte hereby appoint
(Deputy Name) Paul J. LaRosa (Title) Treasurer
(Location) 722 N. Broadway, Milwaukee to sign on my behalf.
X All papers requiring my signature.
Only those papers listed below (specify).
__________________________________________________________________
__________________________________________________________________
Principal's Approval Status Indicator(s):
4 Capital Expenditures 4 General Expenditures
Length of deputization (maximum one year):
From Date 12 / 16 / 93 To Date 12 / 16 / 94
Signature of Deputy /s/ Paul J. LaRosa Title Treasurer
Vice President and
Signature of Principal /s/ Richard H. Witte Title Comptroller
CANCELLATION
Effective Date / /
Signature of Principal ____________________________________________________
or
Signature of Deputy ________________________________________________________
DISTRIBUTION
Forward original to the appropriate voucher unit.
Forward copies to others on a need-to-know basis.
<PAGE>
