SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-2222
ILLINOIS BELL TELEPHONE COMPANY
(Incorporated under the laws of the State of Illinois)
225 W. Randolph Street, Chicago, Illinois 60606
I.R.S. Employer Identification Number 36-1253600
Telephone - Area Code 312-727-9411
THE REGISTRANT, A WHOLLY-OWNED SUBSIDIARY OF AMERITECH CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM
10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT
PURSUANT TO GENERAL INSTRUCTION H(2).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
---- ----
At October 31, 1994, 81,938,121 common shares were outstanding.
Form 10-Q - Part I Illinois Bell Telephone Company
PART I - FINANCIAL INFORMATION
The following financial statements have been prepared by Illinois Bell
Telephone Company (the Company) pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC) and, in the opinion of the
Company, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of results for each period
shown. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC
rules and regulations. The Company believes that the disclosures made are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's latest Annual Report on Form 10-K
and the quarterly reports on Form 10-Q previously filed in the current
year.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS
(Millions of Dollars)
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
---- ---- ---- ----
Revenues. . . . . . . . . . . . $ 828.3 $ 768.2 $2,432.5 $2,261.7
Operating expenses
Employee-related expenses. . . 215.0 225.5 642.0 662.3
Depreciation and amortization. 132.8 128.3 398.1 383.4
Other operating expenses . . . 239.3 199.5 689.1 582.9
Restructuring charges. . . . . 75.9 - 213.7 -
Taxes other than income taxes. 22.4 22.6 63.2 65.5
------- ------- ------- --------
685.4 575.9 2,006.1 1,694.1
Operating income. . . . . . . . 142.9 192.3 426.4 567.6
Interest expense. . . . . . . . 28.5 31.1 80.7 91.7
Other (income) expense, net . . (3.6) 8.6 (8.8) 6.3
------- ------- ------- -------
Income before income taxes. . . 118.0 152.6 354.5 469.6
Income taxes. . . . . . . . . . 40.6 50.5 122.9 162.5
------- ------- ------- -------
Net income. . . . . . . . . . . 77.4 102.1 231.6 307.1
Reinvested earnings,
beginning of period. . . . . . 85.0 124.3 133.2 114.5
Less dividends. . . . . . . . . 25.1 97.0 227.5 292.2
------- ------- -------- --------
Reinvested earnings,
end of period. . . . . . . . . $ 137.3 $ 129.4 $ 137.3 $ 129.4
======= ======= ======== =======
See Notes to Condensed Consolidated Financial Statements.
Form 10-Q - Part I Illinois Bell Telephone Company
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
September 30, 1994 December 31, 1993
(Unaudited) (Derived from
audited financial
statements)
ASSETS
Current assets
Cash and temporary cash investments . $ 14.4 $ 14.7
Receivables, net
Customers. . . . . . . . . . . . . . 652.2 591.6
Ameritech and affiliates . . . . . . 29.8 40.9
Other. . . . . . . . . . . . . . . . 25.4 30.8
Material and supplies . . . . . . . . 18.5 15.6
Prepaid and other . . . . . . . . . . 11.6 12.1
-------- --------
751.9 705.7
-------- --------
Telecommunications plant. . . . . . . . 8,327.6 8,223.7
Less, accumulated depreciation. . . . . 3,330.2 3,185.2
-------- --------
4,997.4 5,038.5
-------- --------
Investments, principally in affiliates. 85.4 86.8
Other assets and deferred charges . . . 260.0 345.2
-------- --------
Total assets. . . . . . . . . . . . . . $6,094.7 $6,176.2
======== ========
See Notes to Condensed Consolidated Financial Statements.
Form 10-Q - Part I Illinois Bell Telephone Company
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
September 30, 1994 December 31, 1993
(Unaudited) (Derived from
audited financial
statements)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Debt maturing within one year
Ameritech. . . . . . . . . . . . . . $ 636.1 $ 494.2
Other. . . . . . . . . . . . . . . . 1.2 100.3
Accounts payable
Ameritech and affiliates . . . . . . 89.0 79.3
Other. . . . . . . . . . . . . . . . 301.9 321.5
Other current liabilities . . . . . . 321.5 404.6
-------- --------
1,349.7 1,399.9
-------- --------
Long-term debt. . . . . . . . . . . . . 1,072.9 1,077.0
-------- --------
Deferred credits and other long-term liabilities
Accumulated deferred income taxes. . . 575.2 587.1
Unamortized investment tax credits . . 97.8 109.9
Postretirement benefits other
than pensions . . . . . . . . . . . . 899.0 815.7
Long-term payable to affiliate (ASI)
for SFAS 106 adoption . . . . . . . . 30.4 30.9
Other. . . . . . . . . . . . . . . . . 227.6 317.7
-------- --------
1,830.0 1,861.3
-------- --------
Shareholder's equity
Common shares - ($20 par value; 100,000,000
shares authorized; 81,938,121 issued and
outstanding). . . . . . . . . . . . . 1,638.8 1,638.8
Proceeds in excess of par value. . . . 66.0 66.0
Reinvested earnings. . . . . . . . . . 137.3 133.2
-------- --------
1,842.1 1,838.0
-------- --------
Total liabilities and shareholder's equity $6,094.7 $6,176.2
======== ========
See Notes to Condensed Consolidated Financial Statements.
Form 10-Q - Part I Illinois Bell Telephone Company
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
For the Nine Months Ended
September 30,
1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . $ 231.6 $ 307.1
Adjustments to net income:
Restructuring charges, net of tax. . . . . 128.8 --
Depreciation and amortization. . . . . . . 398.1 383.4
Deferred income taxes, net . . . . . . . . 4.3 5.8
Investment tax credits, net. . . . . . . . (12.1) (13.6)
Interest during construction . . . . . . . (2.6) (1.5)
Provision for uncollectibles . . . . . . . 35.1 24.7
Increase in accounts receivable. . . . . . (79.2) (49.9)
(Increase) decrease in material and
supplies . . . . . . . . . . . . . . . . (2.9) 5.1
Increase in certain other current assets . (0.3) (3.5)
Decrease in accounts payable . . . . . . . (9.9) (12.7)
(Decrease) increase in accrued taxes. . . . (13.9) 33.1
Decrease in certain other current
liabilities. . . . . . . . . . . . . . . (33.3) (23.3)
Change in certain other noncurrent assets
and liabilities. . . . . . . . . . . . . (17.9) (38.5)
Other. . . . . . . . . . . . . . . . . . . 1.3 9.4
-------- --------
Net cash from operating activities . . . . . 627.1 625.6
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . (356.0) (392.9)
Proceeds from (cost of) disposals of
telecommunications plant . . . . . . . . . 0.3 (1.3)
Additional investments, principally in
affiliates . . . . . . . . . . . . . . . . - (9.9)
-------- --------
Net cash from investing activities . . . . . (355.7) (404.1)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany financing, net. . . . . . . . . 141.9 53.1
Issuance of long-term debt . . . . . . . . . 196.1 295.9
Retirements of long-term debt. . . . . . . . (300.9) (275.9)
Costs of refinancing long-term debt. . . . . - (2.6)
Dividend payments. . . . . . . . . . . . . . (308.8) (287.9)
-------- --------
Net cash from financing activities . . . . . (271.7) (217.4)
-------- --------
Net (decrease) increase in cash and temporary
cash investments. . . . . . . . . . . . . . (0.3) 4.1
Cash and temporary cash investments at
beginning of period . . . . . . . . . . . . 14.7 17.6
-------- --------
Cash and temporary cash investments at end
of period . . . . . . . . . . . . . . . . . $ 14.4 $ 21.7
======== ========
See Notes to Condensed Consolidated Financial Statements.
Form 10-Q - Part I Illinois Bell Telephone Company
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Millions of Dollars)
(A) LONG-TERM DEBT
On January 12, 1994, the Company redeemed all $300.0 of the principal amounts
outstanding of its thirty-one year, 8% debentures, due December 10, 2004.
The debentures were redeemed at 101.85% plus interest accrued to the
redemption date. Expenses associated with this call, recorded in 1993, were
$6.5, including a call premium of $5.6.
On February 4, 1994, the Company issued debt of $200.0. These issues
included $100.0 of debentures at 6-5/8%, due February 1, 2025 (noncallable
until 2004) and $100.0 of notes at 5-4/5%, due February 1, 2004. The
proceeds from these issues were used to repay outstanding notes payable.
At December 31, 1993, debt maturing within one year reflected the redemption
of the $300.0, net of the $200.0 of debt issued by the Company.
(B) WORK FORCE RESTRUCTURING
On March 25, 1994, the Company's parent, Ameritech, announced plans to reduce
its existing nonmanagement work force by 6,000 employees by the end of 1995,
including 1,560 at the Company. Under terms of agreements between Ameritech,
the Communication Workers of America (CWA) and the International Brotherhood
of Electrical Workers (IBEW), Ameritech implemented an enhancement to the
Ameritech Pension Plan by adding three years to both the age and the net
credited service of eligible nonmanagement employees who leave the business
during a designated period that ends in mid-1995. In addition, certain of
the Company's business units are offering financial incentives under terms of
the current contracts with the CWA and the IBEW to selected nonmanagement
employees who leave the business before the end of 1995.
The Company recorded a first quarter 1994 charge of $137.8 or $83.0 after-tax
to reflect the cost of restructuring. This charge reduced the Company's
prepaid pension asset by $79.2 for pension enhancements and curtailment
losses. The charge also included a curtailment loss of $34.2 related to the
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions," and an
additional severance accrual of $24.4.
Employee response to the pension enhancement program and other financial
incentives being offered by the Company has exceeded the Company's initial
expectations. As a result, the Company expects its existing nonmanagement
work force to be reduced by 2,716 through next year instead of the 1,560
originally estimated in March.
The Company recorded an additional charge in the third quarter of 1994 of
$75.9 or $45.8 after-tax for the additional program participants and for
revised participant demographics. The third quarter charge included
settlement gains of $33.1 associated with lump sum pension payments made by
the pension trust through September 30, 1994. This $75.9 charge reduced the
Company's prepaid pension asset by $14.6 for pension enhancements and
curtailment losses, net of the settlement gains. The charge also included a
curtailment loss of $47.0 related to SFAS No. 106 and an additional severance
accrual of $14.3.
Form 10-Q - Part I Illinois Bell Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The following is a discussion and analysis of the changes in revenues,
operating expenses and other income and expenses for the first nine months of
1994 as compared to the first nine months of 1993:
Results of Operations (Millions of Dollars)
- -------------------------------------------
Revenues
- --------
Increase
1994 1993 (Decrease) % Change
Local service . . . . . . . $1,441.0 $1,370.0 $ 71.0 5.2%
Higher network usage increased local service revenues by $55.1. Increased
volumes were primarily attributed to growth in the number of customer lines,
which increased 3.5% to 5,914,536 from 5,713,959 the previous year, as well
as greater sales of custom calling features (e.g., Call Forwarding, Caller
ID, etc.). In addition, local message revenues increased by $15.6 due to a
change in the method of recording transactions between the Company and
independent telephone companies for jointly provided telecommunications
services. These revenues, along with long distance service revenues, were
previously offset by access charge payments to independent telephone
companies.
Increase
1994 1993 (Decrease) % Change
Network Access
Interstate . . . . . . . . $ 553.7 $ 513.3 $ 40.4 7.9%
Intrastate . . . . . . . . $ 69.4 $ 59.6 $ 9.8 16.4%
Interstate access revenues increased by $43.2 due to growth of customer
lines, switched access minutes of use and special access circuits.
Additionally, revenues increased by $19.0 due to lower National Exchange
Carrier Association support payments and revenue sharing accruals. These
increases were offset by lower revenues of $21.8 primarily due to rate
reductions. Intrastate access revenues increased by $14.7 due primarily to
growth of switched access minutes of use, offset by $4.9 due to rate
reductions for switched access services.
Form 10-Q - Part I Illinois Bell Telephone Company
Increase
1994 1993 (Decrease) % Change
Long distance service . . . $ 170.1 $ 123.8 $ 46.3 37.4%
Long distance service revenues were higher by $40.9 primarily due to the
previously discussed change in the method of recording transactions between
the Company and independent telephone companies, and by $5.4 primarily due to
higher intrastate and intraLATA interstate network usage.
Increase
1994 1993 (Decrease) % Change
Other . . . . . . . . . . . $ 198.3 $ 195.0 $ 3.3 1.7%
Other revenues include revenues derived from directory advertising, billing
and collection services, inside wire installation and maintenance services
and other miscellaneous services. These revenues are net of the Company's
provision for uncollectibles. The increase in other revenues is primarily
due to growth of inside wire, voice messaging and other non-regulated
services of $13.7, offset by a $10.4 increase in the provision for
uncollectible accounts, due primarily to higher receivable account balances
and higher realized uncollectibles.
Operating Expenses
- ------------------
Increase
1994 1993 (Decrease) % Change
Employee-related expenses . $ 642.0 $ 662.3 $ (20.3) (3.1)%
Employee-related expenses include employee salaries, benefits and other
employee-related expenses. Wage rate increases were completely offset by
lower accruals for employee bonuses and salary savings created by a reduced
work force as a result of voluntary and involuntary severance programs. The
Company's work force decreased to 16,553 at September 30, 1994 from 18,052 at
September 30, 1993.
Increase
1994 1993 (Decrease) % Change
Depreciation
and amortization . . . . . $ 398.1 $ 383.4 $ 14.7 3.8%
The increase in depreciation expense is primarily due to increased interstate
rates effective January 1, 1994, resulting from the Company's 1994 Federal
Communications Commission depreciation represcription.
Form 10-Q - Part I Illinois Bell Telephone Company
Increase
1994 1993 (Decrease) % Change
Other operating expenses. . $ 689.2 $ 582.9 $ 106.3 18.2%
The increase in other operating expenses is primarily due to a $45.9 increase
in access charge expenses, resulting from a change in the method of recording
transactions between the Company and independent telephone companies for
jointly provided telecommunications. These charges previously offset local
service and long distance service revenues. Also contributing to the
increase were higher expenses of $45.4 for affiliated services and $25.3 for
other miscellaneous expenses, offset by a decrease of $10.2 in expenses for
material and supplies and contract services.
Increase
1994 1993 (Decrease) % Change
Restructuring charge. . . . $ 213.7 -- $ 213.7 --%
As discussed more fully in Note (B), the Company's parent, Ameritech
announced on March 25, 1994 that it would reduce its existing nonmanagement
work force by 6,000 employees by the end of 1995, including 1,560 at the
Company. Reduction of the work force results from technological
improvements, consolidations, and initiatives identified by management to
balance its cost structure with emerging competition. Originally the Company
expected 1,560 employees to leave the payroll, but 2,716 are now expected to
leave the business. A charge for 1,560 employees was recorded in the first
quarter and an additional charge was recorded in the third quarter to reflect
acceptance of the plan by a total of 2,716 employees.
This program resulted in a first quarter 1994 charge of $137.8 ($83.0 on an
after-tax basis) and an additional charge of $75.9 ($45.8 on an after-tax
basis) in the third quarter of 1994 for a total charge of $213.7 ($128.8 on
an after-tax basis.) The additional charge of $75.9 includes the effect of
$33.1 in settlement gains (discussed below) associated with lump-sum pension
payments through September 30, 1994.
The Company originally estimated that 1,560 employees were expected to leave
under the program. The Company currently estimates that, including the
additional 1,156 employees, approximately 2,278 will leave under the program
in 1994 and 438 in 1995. These employee reductions by quarter are as
follows: 451 (actual) in the second quarter of 1994, 822 (actual) in the
third quarter of 1994, 1,005 (estimated) in the fourth quarter of 1994, 73
(estimated) in the first quarter of 1995, 184 (estimated) in the second
quarter of 1995, and 181 (estimated) in the third quarter of 1995. As
previously discussed in Note (B), the program has generated more employee
requests to accept the incentives offered than originally planned, requiring
revision to the expected number and timing of employees terminating
employment. The Company is managing the departure of all employees to
minimize disruption within its business and to its customers, while still
accommodating the individual employee's acceptance of the program. Cash
requirements of the Company to fund the financial incentives (principally
contractual termination payments totalling approximately $50.0) will be met
as prescribed by applicable collective bargaining agreements. Certain of
these collective bargaining agreements require contractual termination
payments to be paid to employees in a manner other than lump-sum, thus
requiring cash payments beyond an employee's termination date.
The Company believes this program will reduce its employee-related costs by
approximately $50,000 per departing employee on an annual basis. The
projected savings will be partially offset by the hiring of new employees to
accommodate growth and ensure high quality customer service, and to meet
staffing requirements for new business opportunities.
Increase
1994 1993 (Decrease) % Change
Taxes other
than income taxes. . . . . $ 63.2 $ 65.5 $ (2.3) (3.5)%
Taxes other than income taxes decreased $7.2 due to lower capital stock and
gross receipts taxes, offset by higher property and other taxes of $4.9.
Other Income and Expenses
- -------------------------
Increase
1994 1993 (Decrease) % Change
Interest expense. . . . . . $ 80.7 $ 91.7 $ (11.0) (12.0)%
Interest expense on long-term debt decreased by $24.9 as a result of lower
long-term debt outstanding. This decrease was offset by an increase in
interest incurred on short-term debt of $14.1, resulting primarily from
higher average notes payable.
Increase
1994 1993 (Decrease) % Change
Other (income) expense, net $ (8.8) $ 6.3 $ 15.1 --%
The shift from other expense to other income is a result of higher expenses
incurred in 1993 due to costs of $10.9 for the early extinguishment of the
Company's long-term debt. Current year other income primarily reflects the
Company's share of equity earnings in Ameritech Services, Inc. (ASI).
Form 10-Q - Part I Illinois Bell Telephone Company
Increase
1994 1993 (Decrease) % Change
Income taxes. . . . . . . . $ 122.9 $ 162.5 $ (39.6) (24.4)%
Income taxes decreased primarily as a result of lower pre-tax income, due
principally to the work force restructuring charge of $213.7 (or $128.8
after-tax). Excluding the effect of the restructuring charge, income taxes
increased in line with increased earnings of the business.
Results for the nine months ended September 30, 1994 are not necessarily
indicative of the results for the entire year.
Form 10-Q - Part I Illinois Bell Telephone Company
Other Matters
- -------------
Regulatory Proceedings
- ----------------------
Advantage Illinois
------------------
On October 11, 1994, the Illinois Commerce Commission (ICC) approved an
alternative regulation proposal -- Advantage Illinois -- that was initially
filed by the Company in December 1992. The ICC order eliminates rate of
return regulation and replaces it with price regulation.
The order includes initial rate reductions of $93.2. These reductions will
include the elimination of monthly touch-tone charges for all customers and
the lowering of monthly charges for business customers who have their own PBX
call processing equipment. Other reductions include lower usage rates for
all calls and lower charges for carrier access. The order also imposes a
five-year cap on basic residential rates including all residential usage
connecting in a Company central office. It also allows the Company to set
its own depreciation rates. The Company expects to increase its depreciation
rates, which will result in an increase in the Company's annual intrastate
depreciation expense of approximately $75.0.
Subsequent rate changes related to noncompetitive services will be
implemented July 1, 1995 and each July 1st thereafter based on changes in
Gross Domestic Product Price Index (GDPPI) and other factors, for the
previous calendar year.
The Company filed a rehearing with the ICC for reconsideration of portions of
the order, including the implementation of $51.0 in rate reductions related
to the revenues from DonTech, an affiliate company that publishes Ameritech
PagesPlus directories in Illinois. The ICC denied the Company the rehearing.
The Company has filed an appeal with the Illinois Appellate Court.
Reconnaissance Management Audit
-------------------------------
In November 1991, the ICC began a reconnaissance management audit of the
Company. The audit consisted of a broad-based review of the Company's
management and operations. The ICC Staff concluded that, on an overall
basis, the Company is well-managed and ranks above average. Due to the scope
and difficulty in reviewing the Company's affiliated relationships, the ICC
ordered a focused management audit of the Company's affiliated interest
transactions. A final report on the focused audit was issued in July 1993
that generally found that the Company was a relatively low cost provider of
telecommunications services and that it obtained efficient services from its
affiliates. Presently, the Company is working with the ICC Staff to reach
closure on the remaining outstanding reconnaissance audit recommendations.
Form 10-Q - Part I Illinois Bell Telephone Company
Effects of Regulatory Accounting
- --------------------------------
The Company presently gives accounting recognition to the actions of
regulators where appropriate, as prescribed by SFAS No. 71, "Accounting
for the Effects of Certain Types of Regulation." 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. The Company cannot presently quantify, without a complete
historical assessment of its competitive and regulatory environments, what
the financial statement impact would have been had depreciation expense been
determined absent regulation.
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 would 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 is currently reviewing these
criteria in light of the changes in its regulatory environment discussed
above to ensure that the continuing application of SFAS No. 71 is still
appropriate.
Ratio of Earnings to Fixed Charges of the Company
- -------------------------------------------------
The Company's ratio of earnings to fixed charges for the nine months ended
September 30 was 5.11 in 1994 and 5.75 in 1993. The ratio in 1994 was
adversely affected by charges of $213.7 for work force restructuring (see
prior discussion of this charge). These charges will be primarily funded
from the Ameritech Pension Plan. The Company believes its ratio in 1994 is
not indicative of a significant change in its ability to fund its debt.
Shelf Registration
- ------------------
On August 17, 1993, the Company filed a shelf registration statement with the
Securities and Exchange Commission for the issuance of up to $550.0 in
unsecured debt securities to be used to retire long-term indebtedness. As of
November 10, 1994, $200.0 of debt securities had been issued under this
shelf registration.
Form 10-Q - Part I Illinois Bell Telephone Company
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
12 Computation of Ratio of Earnings to Fixed Charges for the Nine
Months Ended September 30, 1994 and September 30, 1993.
27 Financial data schedule for the nine months ended September
30, 1994.
(b) Reports on Form 8-K
-------------------
On February 4, 1994, the Company filed a Current Report on Form
8-K dated February 4, 1994 to file pursuant to Item 7, Financial
Statements and Exhibits, certain financial information concerning
the Company and its subsidiary. On February 4, 1994, the Company
filed a Current Report on Form 8-K dated January 28, 1994 to file
pursuant to Item 5, Other Events, (a) copies of an Underwriting
Agreement and a Pricing Agreement executed in connection with a
proposed offering of debentures by the Company to issue pursuant
to the Registration Statement on Form S-3 (File No 33-50007) filed
by the Company on August 17, 1993, together with a form of
Officer's Certificate and a form of debentures and (b) an
Underwriting Agreement and a Pricing Agreement executed in
connection with a proposed offering of notes by the Company to be
issued pursuant to the Registration Statement, together with a
form of Officer's Certificate and a form of notes.
Form 10-Q - Part I Illinois Bell Telephone Company
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ILLINOIS BELL TELEPHONE COMPANY
--------------------------------
(Registrant)
Date: November 10, 1994 /s/ Richard A. Kuzmar
------------------------- --------------------------------
Richard A. Kuzmar
Vice President - Controller
(Principal Accounting Officer)
Exhibit 12
ILLINOIS BELL TELEPHONE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)
For the Nine Months Ended
September 30,
1994 1993
---- ----
1. EARNINGS
a) Income before interest
expense and income taxes . . . . . . $ 435.2 $ 561.3
b) Portion of rental expense
representative of the
interest factor (1). . . . . . . . . 5.5 7.2
------- -------
Total 1(a) through 1(b) . . . $ 440.7 $ 568.5
------- -------
2. FIXED CHARGES
a) Total interest expense
including capital lease
obligations. . . . . . . . . . . . . $ 80.7 $ 91.7
b) Portion of rental expense
representative of the
interest factor (1). . . . . . . . . 5.5 7.2
------- -------
Total 2(a) through 2(b) . . . $ 86.2 $ 98.9
------- -------
3. RATIO OF EARNINGS TO FIXED CHARGES. . . . 5.11 5.75
======= =======
- ---------------------
(1) The Company considers one-third of rental expense to be the amount
representing return on capital.
(2) The results for the first nine months of 1994 reflect $213.7 in pre-tax
charges for work force restructuring (see M,D&A discussion of this
charge.) These charges will funded primarily from the Ameritech Pension
Plan.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ILLINOIS
BELL TELEPHONE COMPANY'S SEPTEMBER 30, 1994 CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 14400
<SECURITIES> 0<F1>
<RECEIVABLES> 751300
<ALLOWANCES> 43900
<INVENTORY> 18500
<CURRENT-ASSETS> 751900
<PP&E> 8327600
<DEPRECIATION> 3330200
<TOTAL-ASSETS> 6094700
<CURRENT-LIABILITIES> 1349700
<BONDS> 1072900
<COMMON> 1638800
0
0
<OTHER-SE> 203300
<TOTAL-LIABILITY-AND-EQUITY> 6094700
<SALES> 0<F2>
<TOTAL-REVENUES> 2432500
<CGS> 0<F3>
<TOTAL-COSTS> 2006100
<OTHER-EXPENSES> (8800)
<LOSS-PROVISION> 35100
<INTEREST-EXPENSE> 80700
<INCOME-PRETAX> 354500
<INCOME-TAX> 122900
<INCOME-CONTINUING> 231600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231600
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>SECURITIES ARE NOT MATERIAL AND THEREFORE HAVE NOT BEEN STATED SEPARATELY
IN THE FINANCIAL STATEMENTS. THIS AMOUNT IS INCLUDED IN THE CASH TAG.
<F2>NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT
IS INCLUDED IN THE TOTAL REVENUES TAG.
<F3>COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICE AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE TOTAL COST TAG, PURSUANT TO REGULATION
S-X, RULE 5-03(B).
</FN>
</TABLE>
