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
March 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3499
MICHIGAN BELL TELEPHONE COMPANY
(Incorporated under the laws of the State of Michigan)
I.R.S. Employer Identification Number 38-0823930
444 Michigan Avenue, Detroit, Michigan 48226
Telephone - Area Code (313) 223-9900
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 April 29, 1994, 120,526,415 common shares were outstanding.
Form 10-Q Part I Michigan Bell Telephone Company
PART I - FINANCIAL INFORMATION
The following financial statements have been prepared by Michigan Bell
Telephone Company ("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 presentation of results of operations,
financial position and cash flows 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.
CONDENSED STATEMENTS OF INCOME AND REINVESTED EARNINGS
(Millions of Dollars)
(Unaudited)
For the 3 Months Ended
March 31, 1994 March 31, 1993
Revenues . . . . . . . . . . . . . . . .$697.6 667.0
Operating expenses
Depreciation and amortization . . . . . 136.3 136.5
Employee-related expenses . . . . . . . 171.3 176.6
Taxes other than income taxes . . . . 34.6 37.8
Work force restructuring . . . . . . . 137.8 0.0
Other operating expenses . . . . . . . 201.4 181.6
681.4 532.5
Operating income . . . . . . . . . . . 16.2 134.5
Interest expense . . . . . . . . . . . 23.9 27.2
Other (income) expense net . (1.2) 0.9
Income before income taxes . . . . . (6.5) 106.4
Income taxes . . . . . . . . . . . . . (2.0) 32.1
Net income (loss) . . . . . . . . . . (4.5) 74.3
Reinvested earnings - at
beginning of period . . . . . . . . 21.4 2.8
Less dividends . . . . . . . . . . . . 89.6 80.5
Reinvested earnings (deficit) - at
end of period . . . . . . . . . . . . ($72.7) ($3.4)
See Notes to Condensed Financial Statements
Form 10-Q Part 1 Michigan Bell Telephone Company
CONDENSED BALANCE SHEETS
(Millions of Dollars)
March 31, 1994 December 31, 1993
(Unaudited) (Derived from Audited
Financial Statements)
ASSETS
CURRENT ASSETS
Cash and temporary cash investments . $0.0 $17.0
Receivables, net
Customers . . . . . . . . . . . . 451.9 452.9
Ameritech and affiliates. . . . 18.6 15.7
Other . . . . . . . . . . . . . 20.6 27.8
Material and supplies. . . . . . . 26.5 26.4
Prepaid and other . . . . . . . . 21.9 23.0
539.5 562.8
Telecommunications plant . . . . 7,601.7 7,559.0
Less: accumulated depreciation . 3,270.6 3,176.2
4,331.1 4,382.8
Investments,principally in affiliates 62.1 68.5
Other assets and deferred charges . . 166.4 245.1
TOTAL ASSETS . . . . . . . . . . . $5,099.1 $5,259.2
LIABILITIES AND SHAREOWNER'S EQUITY
CURRENT LIABILITIES
Debt maturing within one year
Ameritech . . . . . . . . . . . $292.4 $382.9
Other . . . . . . . . . . . . . . . 3.2 3.2
Accounts payable
Ameritech Services Inc. . . . . 23.6 50.6
Other Ameritech affiliates . . . . 22.7 47.0
Other . . . . . . . . . . . . . . 201.3 168.5
Other current liabilities . . . . . 413.8 322.9
957.0 975.1
LONG-TERM DEBT . . . . . . . . . . . 1,131.9 1,132.4
DEFERRED CREDITS AND OTHER
LONG-TERM LIABILITIES
Accumulated deferred income taxes . 362.1 405.7
Unamortized investment tax credits . 90.2 93.7
Postretirement benefits other
than pensions . . . . 671.2 636.8
Long-term payable to affiliate (ASI)
for SFAS 106 adoption . . . . . . . 22.9 22.9
Regulatory liability and other . . 196.2 230.9
1,342.6 1,390.0
SHAREOWNER'S EQUITY
Common stock $14 2/7 par value
120,810,000 shares
authorized 120,526,415 issued
and outstanding 1,721.8 1,721.8
Proceeds in excess of par value .. . 18.5 18.5
Reinvested earnings (deficit) . . . (72.7) 21.4
1,667.6 1,761.7
TOTAL LIABILITIES AND
SHAREOWNER'S EQUITY . . . $5,099.1 $5,259.2
See Notes to Condensed Financial Statements
Form 10-Q Part I Michigan Bell Telephone Company
CONDENSED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
For the 3 Months Ended March 31
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . ($4.5) $74.3
Adjustments to net income (loss):
Workforce restructuring charge, net of tax 89.2 0.0
Depreciation and amortization . . . .. 136.3 136.5
Deferred income taxes, net . . . . . . .. 4.6 (0.9)
Investment tax credits . . . . . . . . . (3.5) (4.2)
Interest during construction . . . . . . . (0.3) (0.4)
Provision for uncollectibles . . . . . . 10.0 11.2
Increase in accounts receivable . . . . . (4.7) (10.4)
Increase in material and supplies . . . . (0.4) (2.9)
Decrease in certain other current assets . 1.2 0.5
Decrease in accounts payable . . . . . . (18.5) (24.1)
Increase in accrued taxes . . . . . . . 59.5 60.0
Decrease in certain other current
liabilities . . . . (7.0) (17.1)
Change in certain noncurrent
assets and liabilities . . . . . . . (20.7) (7.7)
Other . . . . . . . . . . . . . . . . . . 6.9 (4.9)
Net cash from operating activities . . . . . 248.1 209.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . (84.7) (107.6)
Proceeds from disposal
of telecommunications plant . . . . . . . 0.3 1.3
Net cash used in investing activities . . . (84.4) (106.3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Inter-company financing, net . . . . . . . (90.4) (67.3)
Issuance of long-term debt . . . . . . . . . 0.1 200.0
Retirements of long-term debt . . . . . . . (0.8) (150.6)
Cost of refinancing long-term debt . . . . . 0.0 (5.2)
Dividend payments . . . . . . . . . . . . (89.6) (80.5)
Net cash used in financing activities . . (180.7) (103.6)
Net increase (decrease) in cash and
temporary cash investments . . . . . . . (17.0) 0.0
Cash and temporary cash investments
at beginning of period . . . . . . . . . 17.0 0.0
Cash and temporary cash investments
at end of period . . . . . . . . . . . . . $0.0 $0.0
See Notes to Condensed Financial Statements.
Form 10-Q Part I Michigan Bell Telephone Company
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Dollars in Millions)
(A) WORK FORCE RESTRUCTURING
On March 25, 1994, the Company's parent (Ameritech Corporation)
announced that it will reduce its nonmanagement work force by 6,000
employees by the end of 1995, including approximately 1,560 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, the Company is offering
financial incentives under the terms of its current contract with the
CWA to selected nonmanagement employees who leave the business
before the end of 1995.
This program resulted in a first quarter 1994 charge of $137.8 or $89.2
after tax. The charge reduced the Company's prepaid pension assets by
$79.2 for pension enhancements and curtailment losses. The charge
also includes a curtailment loss of $34.2 related to SFAS No. 106
("Employers Accounting for Postretirement Benefits Other than
Pensions") and an increase in a severance accrual of $24.4.
(B) CONTINGENCIES
The Company has disputed the manner of assessment of its property
taxes in Michigan. In August of 1993, the Michigan Supreme Court
agreed to hear certain issues associated with that dispute which
involves the 1984-1986 tax years. If the Company is successful in its
arguments, it will receive a refund of overpayment of property taxes.
If unsuccessful, the Company may be subject to an additional, and
possibly substantial, tax liability for those years beyond 1986. An
opinion of the court could be issued by the end of 1994. Management
of the Company believes that the ultimate resolution of this case will
not have a material adverse effect on the Company's financial position
or results of operations.
Form 10-Q Part I Michigan Bell Telephone Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
VS. THE THREE MONTHS ENDED MARCH 31, 1993
(Dollars in Millions)
Following is a discussion and analysis of operations of the Company for the
three months ended March 31, 1994 and for the three months ended March 31,
1993 which is based on the Statements of Income and Reinvested Earnings on
page 2. Results for the three months ended March 31, 1994 are not necessarily
indicative of the results for the full year.
REVENUES
Revenues increased $30.6 or 4.6% due to the following:
Increase
1994 1993 (Decrease) %Change
Local service $281.7 $263.1 $18.6 7.1
Higher calling volumes increased local service revenues by approximately
$18.0. These volume increases were primarily the result of gains in central
office custom calling features, local messages, and directory assistance
charges. The volume increases also resulted from expansion of the number of
customer lines, which increased 3.1% to 4,611,711 lines from 4,472,804 as of
March 31, 1993.
Increase
1994 1993 (Decrease) %Change
Access service
Interstate access $132.2 $120.8 $11.4 9.4
Intrastate access $50.2 $48.0 $2.2 4.6
Interstate access increased $11.4 due mainly to a volume of business increase
of $6.3 and a $5.0 reduction in long-term support payments made to the
National Exchange Carrier Association.
Intrastate access increased $2.2 due to a $8.5 volume of business increase.
Partially offsetting this increase was a $5.2 reduction in rates and a $1.4
decrease related to out-of-period adjustments.
Increase
1994 1993 (Decrease) %Change
Long distance services $174.6 $176.9 ($2.3) (1.3)
The decrease in long distance services of $2.3 is primarily the result of
volume decreases of $1.1 in wide area telephone service (WATS) and $.4 in
privateline service. An additional $.7 decrease was caused by a rate
reduction in message toll service.
Form 10-Q Part I Michigan Bell Telephone Company
Increase
1994 1993 (Decrease) %Change
Other $58.9 $58.2 $0.7 1.2
Increased revenue was provided by $1.8 in nonregulated revenues (primarily
inside wiring services) and a $1.2 reduction in the uncollectibles provision
resulting from an improvement in collection efforts. Reductions of $2.2 in
other miscellaneous revenues (primarily rent revenues) partially offset these
increases.
OPERATING EXPENSES
Operating expenses increased $148.9 or 28.0% due to the following:
Increase
1994 1993 (Decrease) %Change
Depreciation and
amortization $136.3 $136.5 ($0.2) (0.1)
Depreciation expense decreased $2.4 due mainly to the expiration of FCC-
authorized amortization schedules at the end of June 1993. Offsetting this
decrease was a $2.2 increase resulting from the continued expansion of the
plant investment base.
Increase
1994 1993 (Decrease) %Change
Employee-related
expenses $171.3 $176.6 ($5.3) (3.0)
The $5.3 decrease in employee-related expenses was due to a $7.3 reduction in
wages and salaries resulting primarily from a $4.2 decrease attributed to lower
force levels, a $3.8 reduction in the provision for team incentive awards and
bonus payments, and a $3.2 decrease in overtime payments. The total
employee count was 14,359 as of March 31, 1994, compared to 14,949 at
March 31, 1993. The above decreases were partially offset by a $3.9 increase
in wage rates. The wage and salary decrease was also partially offset by a
$1.9 increase in other employee-related costs, primarily the provision for
postretirement benefits other than pensions.
Increase
1994 1993 (Decrease) %Change
Taxes other than
income taxes $34.6 $37.8 ($3.2) (8.5)
The decrease in taxes other than income taxes was due to a decrease in the
provision for property taxes to recognize the impact of new state legislation
enacted in December 1993 which lowers property tax millage rates in
Michigan.
Form 10-Q Part I Michigan Bell Telephone Company
Increase
1994 1993 (Decrease) %Change
Work force restructuring
charges $137.8 $0.0 $137.8 NM
As more fully discussed in the Notes to the Financial Statements, Ameritech
(The Company's parent) announced on March 25, 1994, that it will reduce its
nonmanagement work force by 6,000 employees by the end of 1995, including
approximately 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.
This program resulted in a first quarter 1994 charge of $137.8 or $89.2 after
tax. A significant portion of the program's cost will be funded by the
Ameritech Pension Plan, whereas financial incentives to be paid by the
Company will require Company funds of approximately $38.7. Settlement
gains of an estimated $50.0, which result from lump-sum payments from the
Ameritech Pension Plan, will be reflected in income as payments are made by
the Ameritech Pension Plan. Settlement gains are noncash in nature and result
from the funded status of the Ameritech Pension Plan.
Ameritech advised the Company that it expects that approximately two-thirds
of the 1,560 employees will leave the payroll in 1994 with the balance by the
end of the third quarter of 1995. Ameritech will manage the departure of all
6,000 employees to minimize disruption within its business (including its
entire five-state region) and to its customers. Cash requirements of the
Company to fund the financial incentives (principally contractual termination
payments) will be met as prescribed by applicable collective bargaining
agreements. Certain of these collective bargaining agreements may 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 $78.0 on an annual basis upon completion of this program.
However, these anticipated savings may be partially offset by the addition of
other employees with different skills or by growth in the business.
Increase
1994 1993 (Decrease) %Change
Other operating
expenses $201.4 $181.6 $19.8 10.9
The growth reported in this category was due to increases of $13.3 in payments
for services provided by affiliated companies due in part to a transfer of
certain work functions to Ameritech Services, Inc., $2.1 in higher advertising
costs,$1.8 in charges related to higher write-offs of certain purchased
receivable accounts due to toll fraud, $1.2 in engineering overhead costs, $.9
in access charges paid to other carriers for access and $.8 in communications
services used by employees.
Form 10-Q Part I Michigan Bell Telephone Company
OTHER INCOME AND EXPENSES
Increase
1994 1993 (Decrease) %Change
Interest expense $23.9 $27.2 ($3.3) (12.1)
The decrease in interest expense is attributable to a $2.3 decrease in interest
related to long-term debt resulting from refinancing activity in 1993, offset
partially by $.7 in higher short-term interest from borrowings to fund the
redemption. In addition, interest not related to debt decreased $1.7 due
primarily to a $1.1 adjustment made in first quarter 1993 to recognize the
interest component of the Company's liability under the 1990 incentive
regulation plan.
Increase
1994 1993 (Decrease) %Change
Other (income),
expense, net ($1.2) $0.9 ($2.1) NM
This increase in income was the result of a $1.2 decrease in first quarter
charitable contributions, the result of efforts to more evenly distribute these
payments throughout the year. An additional $.6 increase was the result of
higher subsidiary (Ameritech Services, Inc.) earnings.
Increase
1994 1993 (Decrease) %Change
Income taxes ($2.0) $32.1 ($34.1) (106.2)
Income taxes decreased approximately $48.6 due to the $137.8 work force
restructuring charge discussed above. Partially offsetting this decrease was
an increase of $14.9 related to higher 1994 pre-tax income (excluding the one-
time charge), and other effects resulting from the one-time charge.
OTHER INFORMATION
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
previously 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 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.
Form 10-Q Part I Michigan Bell Telephone Company
New Michigan sales tax rate
Through the passage of a statewide ballot proposal, the sales tax in Michigan
will be increased from 4% to 6% effective May 1, 1994. The effect of this
legislation is to increase the sales tax the Company will pay in the last eight
months of 1994 by approximately $5.1. However, the income statement effect
for 1994 is expected to be approximately 30% of this amount, or $1.5 (before
income tax effects). This is because an estimated 70% of the Company's
purchases subject to Michigan sales tax are for telecommunications plant
materials, and the corresponding sales tax is recognized in the same plant
account as the materials purchased.
IntraLATA Long Distance Service Order
On July 31, 1992, MCI Telecommunications Corporation ("MCI") filed a
complaint with the MPSC seeking "1+" intraLATA dialing parity for all toll
competitors of the Company, alleging that current dialing arrangements
violated the Michigan Telecommunications Act. Callers in Michigan must
currently dial "10" plus a three digit access code to use the services of the
Company's intraLATA toll competitors.
The MPSC dismissed MCI's complaint finding no statutory violations.
However, as a result of subsequent proceedings in the case, on February 24,
1994, the MPSC issued an order requiring the implementation of "1+"
intraLATA toll dialing parity in Michigan. The MPSC order requires dialing
parity to be implemented concurrently with the termination of prohibitions
against the Company's ability to offer interLATA service, but in no event later
than January 1, 1996.
The Company believes that the MPSC has not considered all relevant factors in
rendering its decision on intraLATA parity. Accordingly, the Company has
filed a petition for a rehearing with the MPSC as a first step in bringing
further clarification to the issues. Through the first quarter of 1994, the
Company has not received a response from the MPSC on its petition.
In 1993 the Company recorded $695.8 of long distance revenue, of which
approximately $634.0 resulted from intraLATA message and unidirectional
long distance services. Customer response to dialing parity and the effect on
the Company's intraLATA long distance revenue is uncertain. However, it is
estimated that approximately 50% of any long distance revenue lost, which
could be significant, would be offset by additional access revenue.
New publishing services contract
On September 9, 1993, Ameritech Publishing, Inc. ("API"), a wholly-owned
subsidiary of the Company's parent, Ameritech Corporation, exercised its right
to terminate its publishing services contract (the "Agreement") with the
Company, effective September 8, 1994, or such other mutually acceptable date.
Pursuant to the Agreement, which became effective on January 1, 1991, the
Company granted a license and provided billing, collection and other services
to API, and API provided directory services for the Company. The
Agreement's initial term was to have been five years, subject, however, to
either party's right to terminate on not less than twelve months' prior notice.
In 1993, the Company earned fees of approximately $132.7 from API and
incurred approximately $19.8 in directory publishing expenses.
In March 1994, the Company completed negotiations with API for a new
contract effective April 1, 1994. Under the terms of the new contract, API will
assume full responsibility for publishing White Pages Directories and incur all
associated expenses, and will retain all revenues from the sale of White Pages
listings and advertising to business customers. The Company will continue to
sell certain listing services to residential customers such as VIP listings,
foreign listings, and additional listings, and will retain all associated
revenues.
Form 10-Q Part I Michigan Bell Telephone Company
API will publish White Pages Directories containing the Company's subscriber
listings and such information as required by law or the Michigan Public
Service Commission (MPSC), and will arrange for delivery in a manner
consistent with the Company's regulatory requirements. Previously, costs
associated with these activities were shared by API and the Company. In
addition, the Company will continue to provide services to API, some of which
were previously covered under the license fee and now have been unbundled.
These include services such as billing, collection, and related services, as
well as listing updates, delivery information, and public telephone services.
The Company will continue to receive subsidy payments from API, although at
a reduced rate. The effect of all provisions of the contract result in reduced
revenues and expenses which are expected to reduce pre-tax net income by
approximately $50.0 on an annual basis. The new agreement will terminate on
March 31, 1995, unless terminated earlier or extended as provided in the
contract. Under current Michigan law, the approval of the MPSC of the terms
or conditions of the new contract is not required.
Ratio of earnings to fixed charges
The Company's ratio of earnings to fixed charges for the three months ended
March 31 was 1.03 in 1994 and 4.69 in 1993. The ratio in 1994 was adversely
affected by a first quarter pre-tax charge of $137.8 for work force
restructuring (see prior discussion of this charge). This charge 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.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits identified below, on file with the SEC, are
incorporated herein by reference as exhibits hereto.
12 Computation of Ratio of Earnings to Fixed
Charges for the three months ended March 31,
1994 and March 31, 1993.
(b) Reports on Form 8-K
No Form 8-K was filed by the registrant during the
quarter for which this report was filed
SIGNATURE
Form 10-Q Michigan 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.
Michigan Bell Telephone Company
Date May 12, 1994
J. W. Trunk
J. W. Trunk
Vice President -
Comptroller
Exhibit 12
MICHIGAN BELL TELEPHONE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
Three Months Three Months
Ended Ended
March 31 March 31
1994 1993
1. Earnings
(a) Income before interest
expense and income taxes $17,404 $133,579
(b) Single Business Tax 7,350 6,870
(c) Portion of rental expense
representative of the
interest factor (1) (2) 3,195 3,505
Total 1.(a) through (c) $27,949 $143,954
2. Fixed Charges
(a) Total interest deductions $23,887 $27,195
(c) Portion of rental expense
representative of the
interest factor (1) (2) 3,195 3,505
Total 2.(a) and (b) $27,082 $30,700
3. Ratio (1. divided by 2.) 1.03 (3) 4.69
(1) The Company considers 1/3 of
rental expense to be the amount
representing return on capital and
therefore it must be included in
fixed charges.
(2) Earnings are income before income
taxes and fixed charges. Since the
Single Business Tax and rental
expense have already been
deducted, the Tax and the 1/3
portion of rental expense
considered to be fixed charges are
added back.
(3) The results for the first quarter of
1994 reflect a $137.8 million pre-
tax charge for work force
restructuring (see M,D&A
discussion of this charge). This
charge will be primarily funded
from the Ameritech pension plan.
