<PAGE>1
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 June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8612
AMERITECH CORPORATION
(Incorporated under the laws of the State of Delaware)
30 S. Wacker Drive, Chicago, Illinois 60606
I.R.S. Employer Identification Number 36-3251481
Telephone Number - (312) 750-5000
At July 31, 1995, 554,205,917 common shares were outstanding.
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>2
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
Part I - Financial Information
The following condensed consolidated financial statements have been
prepared by Ameritech Corporation (Ameritech or 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 report on Form 10-Q previously filed in the current year.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Millions, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Revenues $3,368.9 $3,184.4 $6,514.6 $6,218.3
-------- -------- -------- --------
Operating Expenses
Employee-related expenses 893.1 904.4 1,773.4 1,783.2
Depreciation and amortization 535.2 563.4 1,061.5 1,110.3
Other operating expenses 929.4 833.1 1,792.3 1,621.6
Restructuring (credit) charge -- -- (256.3) 530.0
Taxes other than income taxes 151.6 137.9 295.1 286.7
-------- -------- -------- -------
2,509.3 2,438.8 4,666.0 5,331.8
-------- -------- -------- -------
Operating income 859.6 745.6 1,848.6 886.5
Interest expense 119.3 107.3 237.2 209.7
Other income, net (35.0) (32.5) (68.6) (62.6)
-------- -------- -------- -------
Income before income taxes 775.3 670.8 1,680.0 739.4
Income taxes 271.8 224.2 597.6 249.0
-------- -------- -------- -------
Net income $ 503.5 $ 446.6 $1,082.4 $ 490.4
-------- -------- -------- --------
Earnings per common share $0.91 $0.81 $1.96 $0.89
===== ===== ===== =====
Dividends declared per common
share $0.50 $0.48 $1.00 $0.96
===== ===== ===== =====
Average common shares outstanding
(millions) 553.7 548.6 553.0 548.0
===== ===== ===== =====
See Notes to Condensed Consolidated Financial Statements.
<PAGE>3
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
June 30, 1995 Dec. 31, 1994
(Unaudited) (Derived from
Audited
Financial
Statements)
ASSETS
Current assets
Cash and temporary cash investments $ 85.4 $ 73.7
Receivables, net 2,419.8 2,300.0
Material and supplies 182.4 203.7
Prepaid and other 272.8 313.2
--------- ---------
2,960.4 2,890.6
--------- ---------
Property, plant and equipment 30,139.7 29,545.7
Less, accumulated depreciation 16,906.1 16,091.2
--------- ---------
13,233.6 13,454.5
--------- ---------
Investments, primarily international 1,209.4 1,197.0
Other assets and deferred charges 2,929.7 2,404.7
--------- ---------
Total assets $20,333.1 $19,946.8
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Debt maturing within one year $ 1,696.6 $ 1,898.3
Accounts payable 1,247.4 1,546.3
Other 1,625.8 1,711.5
--------- ---------
4,569.8 5,156.1
--------- ---------
Long-term debt 4,571.7 4,447.9
--------- ---------
Deferred credits and other long-term liabilities
Accumulated deferred income taxes 712.0 611.0
Unamortized investment tax credits 231.3 255.8
Postretirement benefits other than pensions 2,936.7 2,915.0
Other 559.1 505.9
--------- ---------
4,439.1 4,287.7
--------- ---------
Shareowners' equity
Common stock, par value $1;1.2 billion
shares authorized, 587,612,000 issued 587.6 587.6
Proceeds in excess of par value 5,567.3 5,520.9
Reinvested earnings 1,854.3 1,325.3
Treasury stock, at cost (33,571,000 shares
in 1995 and 36,150,000 shares in 1994) (917.1) (977.0)
Deferred compensation (341.2) (396.0)
Currency translation adjustment (13.3) (15.9)
Other, net 14.9 10.2
--------- ---------
6,752.5 6,055.1
--------- ----------
Total liabilities and shareowners' equity $20,333.1 $19,946.8
--------- ----------
See Notes to Condensed Consolidated Financial Statements.
<PAGE>4
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Six Months Ended
June 30
1995 1994
Cash Flows from Operating Activities
Net income $1,082.4 $ 490.4
Adjustments to net income
Restructuring (credit) charge, net of tax (160.1) 332.8
Depreciation and amortization 1,061.5 1,110.3
Deferred income taxes, net 26.2 (16.8)
Investment tax credits, net (24.5) (26.7)
Interest during construction (6.6) (5.8)
Provision for uncollectibles 84.6 81.5
Change in accounts receivable (150.4) (167.5)
Change in material and supplies 17.7 (22.9)
Change in certain other current assets 31.5 20.7
Change in accounts payable (298.9) (99.8)
Change in certain other current liabilities (93.4) (5.4)
Change in certain other noncurrent
assets and liabilities (59.2) (97.2)
Other (44.8) (22.2)
-------- -------
Net cash from operating activities 1,466.0 1,571.4
-------- -------
Cash flows from Investing Activities
Capital expenditures (782.6) (850.1)
Additional investments (183.7) (489.2)
Other investing activities, net (4.2) 73.4
-------- -------
Net cash from investing activities (970.5) (1,265.9)
-------- -------
Cash Flows from Financing Activities
Net change in short-term debt (206.7) (43.1)
Issuance of long-term debt 194.4 645.3
Retirement of long-term debt (25.9) (543.7)
Dividend payments (552.1) (525.4)
Proceeds from issuance of treasury stock 122.0 97.2
Other financing activities, net (15.5) (5.6)
-------- ------
Net cash from financing activities (483.8) (375.3)
-------- ------
Net increase (decrease) in cash and
temporary cash investments 11.7 (69.8)
Cash and temporary cash investments,
beginning of period 73.7 155.9
-------- ------
Cash and temporary cash investments,
end of period $ 85.4 $ 86.1
======== ========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>5
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1: Work Force Restructuring
During March 1994, Ameritech announced its plan to reduce its existing
nonmanagement work force. Approximately 11,500 employees are expected to
leave under this program. Under terms of agreements between Ameritech, the
Communications 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 corresponds to contract expiration in 1995.
In addition, certain business units are offering financial incentives under
terms of the current contracts with the CWA and IBEW to selected
nonmanagement employees who leave the business before the end of 1995. See
additional discussion in Management's Discussion and Analysis below.
As a result of this restructuring, a pretax charge of $530.0 million, or
$332.8 million after-tax, was recorded in the first quarter 1994. In the
first quarter 1995, a gain of $256.3 million, or $160.1 million after-tax,
was recorded resulting primarily from settlement gains from lump sum
pension payments to former employees. Settlement gains were not recorded
in the second quarter of 1995 as they were not significant. The cumulative
gross program costs through June 30, 1995 totaled $1,080.0 million,
partially offset by settlement gains of $608.2 million for an aggregate
pretax net program cost of $471.8 million, or $295.7 million after-tax. At
June 30, 1995, the remaining severance accrual was $50.0 million.
As of June 30, 1995, approximately 10,300 employees have left the Company
as a result of this restructuring, with 1,200 expected to leave later in
1995.
NOTE 2: Discontinuation of FAS 71 and Reclassifications
As discussed more fully in the 1994 Annual Report to Shareowners and Annual
Report on Form 10-K, during the fourth quarter of 1994, Ameritech incurred
an extraordinary noncash after-tax charge of $2.2 billion as a result of
its decision to discontinue the application of Statement of Financial
Accounting Standards No. 71 (FAS 71), "Accounting for the Effects of
Certain Types of Regulation." FAS 71 was followed by the Company's five
landline telephone subsidiaries.
The principal component of the above charge related to a determination that
telephone plant asset lives were too long and analog switches were
obsolete. The net effect of this determination is causing 1995
depreciation expense at the landline telephone subsidiaries to decrease.
Long-term, depreciation expense will increase as the effects of shorter
lives on plant assets and future plant additions offset the discontinuation
of depreciation of analog switches.
Certain additional financial statement impacts occurred as a result of the
discontinuation of FAS 71, including the reclassification of the provision
for uncollectibles, previously shown as a reduction in directory, cellular
and other revenues, to other operating expenses.
<PAGE>6
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1995 vs.
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1994
RESULTS OF OPERATIONS
For the three months ended June 30, 1995, net income was $503.5 million or
$0.91 per common share on 553.7 million average common shares outstanding.
This represented a 12.7 percent increase in net income and a 12.3 percent
increase in earnings per common share from the comparable prior year period
for which net income was $446.6 million or $0.81 per common share on 548.6
million average common shares outstanding.
For the six months ended June 30, 1995, net income was $1,082.4 million or
$1.96 per common share on 553.0 million average common shares outstanding.
For the six months ended June 30, 1994, net income was $490.4 million or
$0.89 per common share on 548.0 million average common shares outstanding.
Results of operations during the six month periods were affected by
significant items during the first quarter of both years. Specifically,
during the first quarter of 1995 an after-tax credit was recorded of $160.1
million or $0.29 per common share related to settlement gains associated
with lump sum pension payments under the 1994 work force restructuring
program. Results in the first quarter of 1994 included an after-tax charge
of $332.8 million or $0.61 per common share related to work force
restructuring.
Excluding the above noted significant items in both years, income for the
six month periods ended June 30, 1995 and 1994 would have been $922.3
million and $823.2 million, respectively, an increase of 12.0 percent in
1995, and earnings per common share would have been $1.67 and $1.50 per
common share, respectively, an increase of 11.3 percent.
___________________________________________________________________________
Revenues
Total revenues for the three and six months ended June 30, 1995 increased
5.8 percent and 4.8 percent, respectively, over the comparable prior year
periods to $3,368.9 million and $6,514.6 million. The increases were
primarily attributable to higher network usage volumes due to access line
growth, as well as volume increases in cellular services due to cellular
subscriber growth. Rate reductions at the landline telephone operations
partially offset these increases.
<PAGE>7
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Local service
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $1,397.9 $1,332.6 $ 65.3 4.9
Six Months Ended 2,727.8 2,640.5 87.3 3.3
The increases in local service revenues for the three and six months ended
June 30, 1995 were primarily attributable to higher network volumes which
increased revenues by $74.0 million and $127.8 million, respectively. The
increased network usage volume resulted principally from growth in the
number of access lines, which increased 4.2 percent or 743,000 lines to
18,618,000 from 17,875,000 as of June 30, 1994, as well as increased
volumes and greater sales of special calling features, such as Call
Forwarding and Caller ID. These increases were partially offset by net
rate reductions of $13.7 million and $46.3 million, respectively, primarily
resulting from regulatory proceedings in Illinois, Indiana and Ohio and
legislation in Wisconsin which adopted price regulation in place of rate-of-
return regulation and removed limits on intrastate earnings.
___________________________________________________________________________
Network access
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Interstate
Three Months Ended $ 575.6 $ 554.6 $ 21.0 3.8
Six Months Ended 1,137.7 1,098.8 38.9 3.5
Intrastate
Three Months Ended $ 144.6 $ 160.1 $ (15.5) (9.7)
Six Months Ended 281.6 319.2 (37.6) (11.8)
The increases in interstate network access revenues for the three and six
months ended June 30, 1995 were primarily due to higher network usage,
which resulted in additional revenues of $37.8 million and $73.1 million,
respectively, as well as a reduction of $13.3 million and $26.7 million,
respectively, in National Exchange Carriers Association common line support
payments. Partially offsetting these revenue increases were net rate
reductions of $27.6 million and $52.9 million, respectively. Minutes of
use related to interstate calls for the three and six months ended June 30,
1995 increased 6.9 percent and 6.3 percent, respectively, over the
comparable prior year periods. See additional discussion below regarding
Ameritech's interstate access rate reductions.
The decreases in intrastate network access revenues for the three months
and six months ended June 30, 1995 were primarily due to rate reductions of
$24.3 million and $47.2 million, respectively. Approximately $12.4 million
and $27.2 million, respectively, of these rate reductions resulted from
regulatory proceedings in Illinois, Indiana and Ohio and legislation in
<PAGE>8
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Network access (cont'd.)
Wisconsin which also achieved certain regulatory freedoms as previously
discussed. Higher network usage resulted in additional revenues of $14.7
million and $19.0 million, respectively, which partially offset these
decreases. Minutes of use related to intrastate calls for the three and
six months ended June 30, 1995 increased 13.0 percent and 11.4 percent,
respectively, over the comparable prior year periods.
___________________________________________________________________________
Long distance service
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 361.9 $ 362.7 $ (0.8) (0.2)
Six Months Ended 712.2 726.9 (14.7) (2.0)
The decreases in long distance service revenues for the three and six
months ended June 30, 1995 were primarily attributable to volume decreases
of $1.4 million and $10.5 million, respectively, and the impact of the
Extended Community Calling plan in Wisconsin, which reclassified portions
of long distance usage to local service usage and effectively lowered long
distance revenues by $6.9 million and $14.6 million in the three and six
month periods ended June 30, 1995, respectively. These decreases were
partially offset by net rate increases of $5.4 million and $9.0 million,
respectively.
___________________________________________________________________________
Directory, cellular and other
June 30 Increase Percent
1995 1994 (Decrease) Change
(dollars in millions)
Three Months Ended $ 888.9 $ 774.4 $ 114.5 14.8
Six Months Ended 1,655.3 1,432.9 222.4 15.5
The increases in directory, cellular and other revenues for the three and
six months ended June 30, 1995 were attributable to cellular revenue growth
resulting from a 50.5 percent increase to 1,564,000 subscribers at June 30,
1995 from 1,039,000 subscribers at June 30, 1994. Paging revenues also
increased as a result of a 20.3 percent increase to 692,000 subscribers at
June 30, 1995 from 575,000 subscribers at June 30, 1994. Also contributing
to the increases were revenue increases in nonregulated services, such as
inside wire maintenance, telephone set sales, and PBX and system sales, in
certain business units. Revenues of the security monitoring services
subsidiary, acquired in December 1994, also contributed to the increases.
<PAGE>9
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Operating expenses
Total operating expenses for the three months ended June 30, 1995 increased
by $70.5 million or 2.9 percent over the prior year. Total operating
expenses for the six months ended June 30, 1995 decreased $665.8 million or
12.5 percent. The decrease was largely attributable to the work force
restructuring which resulted in a credit of $256.3 million ($160.1 million
after-tax) in the first quarter of 1995 related to the settlement gains
previously discussed compared with a first quarter 1994 charge of $530.0
million ($332.8 million after-tax).
___________________________________________________________________________
Employee-related expenses
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 893.1 $ 904.4 $ (11.3) (1.2)
Six Months Ended 1,773.4 1,783.2 (9.8) (0.5)
The decreases in employee-related expenses for the three and six months
ended June 30, 1995 were primarily attributable to the effects of work
force reductions over the past year of $43.5 million and $97.9 million,
respectively. These work force reductions, primarily at the landline
telephone subsidiaries, have been partially offset by additional expenses
for new employees in other business units, such as the cellular operation
and security monitoring services subsidiary of $9.9 million and $17.1
million, respectively. Also partially offsetting the decreases were the
effects of higher wage rates and overtime of $14.8 million and $49.4
million, respectively, at the landline telephone subsidiaries, as well as
increased employee benefits and other expenses, such as sales incentives
and training, of $7.5 million and $21.6 million, respectively.
There were 62,127 employees at June 30, 1995, compared with 66,593 at June
30, 1994.
<PAGE>10
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Depreciation and
amortization
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 535.2 $ 563.4 $ (28.2) (5.0)
Six Months Ended 1,061.5 1,110.3 (48.8) (4.4)
The decreases in depreciation and amortization expense for the three and
six months ended June 30, 1995 were primarily due to the cessation, in the
fourth quarter of 1994, of depreciation of analog switches at the landline
telephone subsidiaries. These decreases were partially offset by the
increase in depreciation rates as a result of shortening telephone plant
lives, as well as increased depreciation and amortization in the Company's
other business units.
___________________________________________________________________________
Other operating expenses
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 929.4 $ 833.1 $ 96.3 11.6
Six Months Ended 1,792.3 1,621.6 170.7 10.5
The increases in other operating expenses for the three and six months
ended June 30, 1995 were largely attributable to increased contract and
professional services of $64.5 million and $140.9 million, respectively,
primarily for systems development and process reengineering projects.
Growth-related cost of sales increases at the cellular operation, as well
as cost of sales increases related to increased telephone set sales and PBX
and system sales also contributed to the increases by $28.3 million and
$49.7 million, respectively, in the three and six months ended June 30,
1995, as compared to the prior year periods. Advertising and bad debt
expense increased during the periods by $8.6 million and $30.8 million,
respectively, reflecting increased marketing and sales efforts. Partially
offsetting these increases were reduced access charges paid to independent
telephone companies, primarily due to renegotiated contracts, as well as
lower switching system software and other expenses totaling $5.1 million
and $50.7 million, respectively.
<PAGE>11
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Restructuring (credit) charge
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ -- $ -- $ -- --
Six Months Ended (256.3) 530.0 (786.3) n/a
As discussed in Note 1, the Company announced in March 1994 that it
intended to reduce its nonmanagement work force by 6,000 employees by the
end of 1995. Reduction of the work force results from implementation of
technological improvements, consolidations and initiatives to balance cost
structure with emerging competition. The Company currently expects its
nonmanagement work force to be reduced by about 11,500 employees through
1995 instead of the 6,000 originally estimated in March 1994. A pretax
charge of $530.0 million ($332.8 million after-tax) related to the original
estimated work force reduction was recorded in the first quarter of 1994,
with additional charges recorded later in 1994. A net noncash settlement
gain of $256.3 million ($160.1 million after-tax) was recorded in the first
quarter of 1995 associated with lump-sum pension payments to former
employees. Future settlement gains (estimated at $50.0 million) are
anticipated.
Actual employee reductions by quarter were: 1,595 in the second quarter of
1994, 2,281 in the third quarter of 1994, 5,239 in the fourth quarter of
1994, 313 in the first quarter of 1995 and 870 in the second quarter of
1995. Employee reductions of 1,200 are expected in the third quarter of
1995. Cash requirements to fund the financial incentives (principally
contractual termination payments totaling approximately $239.7 million) are
being met as prescribed by applicable collective bargaining agreements.
Certain of these collective bargaining agreements require contractual
termination payments to be paid in a manner other than lump-sum, thus
requiring cash payments beyond an employee's termination date.
This program will reduce annual employee-related costs by approximately
$50,000 per departing employee. The projected savings are being partially
offset by the hiring of new employees with better matched skills to
accommodate growth, ensure high quality customer service and meet staffing
requirements for new business opportunities.
___________________________________________________________________________
Taxes other than income taxes
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 151.6 $ 137.9 $ 13.7 9.9
Six Months Ended 295.1 286.7 8.4 2.9
The increases in taxes other than income taxes for the three and six months
ended June 30, 1995 were primarily attributable to higher property taxes,
<PAGE>12
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Taxes other than income taxes (cont'd.)
partially offset by a decrease in capital stock tax in Illinois, as well as
lower sales taxes in Ohio resulting from a change in the method of
assessing the tax.
___________________________________________________________________________
Other Income and Expenses
Interest expense
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 119.3 $ 107.3 $ 12.0 11.2
Six Months Ended 237.2 209.7 27.5 13.1
The increases in interest expense for the three and six months ended June
30, 1995 were primarily due to the increase in short-term interest rates,
partially offset by lower average debt balances.
___________________________________________________________________________
Other income, net
June 30 (Increase) Percent
(dollars in millions) 1995 1994 Decrease Change
Three Months Ended $ (35.0) $ (32.5) $ (2.5) 7.7
Six Months Ended (68.6) (62.6) (6.0) 9.6
Other income, net includes equity earnings in affiliates, interest income
and other nonoperating items. The increases in other income, net result
primarily from increased equity earnings from Telecom Corporation of New
Zealand Limited, in which the Company owns a 24.8 percent interest.
___________________________________________________________________________
Income taxes
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 271.8 $ 224.2 $ 47.6 21.2
Six Months Ended 597.6 249.0 348.6 n/a
The increase in income taxes for the three months ended June 30, 1995
reflects the increase in pretax earnings discussed above. The increase in
income taxes for the six months ended June 30, 1995 was due primarily to
the change in pretax income and as a result of the work force restructuring
credit of $256.3 million (or $160.1 million after-tax) in the first quarter
of 1995 as compared to the work force restructuring charge of $530.0
million ($332.8 million after-tax) in the first quarter of 1994. Excluding
the effects of these significant items, income taxes increased in line with
earnings in the business.
<PAGE>13
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
FINANCIAL CONDITION AND OTHER MATTERS
Capital expenditures
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 440.1 $ 456.7 $ (16.6) (3.6)
Six Months Ended 805.1 894.2 (89.1) (10.0)
Capital expenditures include cash payments to acquire property, plant and
equipment and noncash items such as capitalized leases and interest during
construction.
The decreases in capital expenditures for the three and six months ended
June 30, 1995 relate primarily to lower capital expenditures at the
landline telephone subsidiaries.
___________________________________________________________________________
Dividends declared
June 30 Increase Percent
(dollars in millions) 1995 1994 (Decrease) Change
Three Months Ended $ 277.0 $ 263.6 $ 13.4 5.1
Six Months Ended 553.4 526.6 26.8 5.1
On June 21, 1995, the Board of Directors declared a quarterly dividend of
$0.50 per common share, a 4.2 percent increase over the $0.48 per common
share declared in the same quarter in the prior year.
___________________________________________________________________________
Debt ratio
The debt ratio was 48.1 percent as of June 30, 1995, compared with 51.2
percent as of December 31, 1994. The decrease can be attributed primarily
to lower debt levels, as well as increased reinvested earnings.
___________________________________________________________________________
Ratio of earnings to fixed charges
The ratio of earnings to fixed charges for the six months ended June 30 was
7.13 in 1995 and 4.14 in 1994. The ratio in 1995 was favorably affected by
a credit of $256.3 million for work force restructuring (see prior
discussion of this item). The ratio in 1994 was adversely affected by a
$530.0 million charge for work force restructuring. The work force
restructuring program has largely been funded by the Ameritech Pension
Plan. After adjustment to remove the effects of the work force
restructuring, the ratio is indicative of the Company's ability to meet its
debt funding requirements.
<PAGE>14
Form 10-Q Part I
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Interstate access rate reduction
On July 18, 1995, the Federal Communications Commission (FCC) approved
Ameritech's request for price regulation without sharing of earnings
effective January 1, 1995. By receiving FCC approval of Ameritech's waiver
request effective January 1, 1995, the total annual reduction in prices
that Ameritech charges long distance companies for local network
connections increased to $100.4 million effective August 1, 1995. The
current year impact is expected to be a reduction in interstate access
revenues of $42.7 million, which represents an increase of $15.1 million
over the 1995 reduction otherwise required under the FCC's interim price
cap rules.
___________________________________________________________________________
Labor negotiations
The Company's nonmanagement workforce (about 65 percent of total employees)
is represented principally by two labor unions with expiring labor
contracts. The International Brotherhood of Electrical Workers contract
originally expired in June 1995 but has been extended until August 9, 1995.
The Communications Workers of America (CWA) contract is set to expire
August 5, 1995. Membership of the CWA has authorized a work stoppage.
Negotiations with both unions continue and management believes a
satisfactory resolution will be achieved.
___________________________________________________________________________
Debt capacity
During the second quarter of 1995, the Company, through its subsidiary,
Ameritech Capital Funding Corporation, filed with the SEC a shelf
registration statement to issue debt aggregating $1.0 billion. The
registration statement is effective, but has not been used as of August 4,
1995.
<PAGE>15
Form 10-Q Part II
AMERITECH CORPORATION AND SUBSIDIARIES
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
six months ended June 30, 1995 and 1994.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
On July 20, 1995, a Current Report on Form 8-K dated July 20,
1995, was filed under Item 5, Other Events, to report Ameritech's
earnings for the second quarter 1995.
<PAGE>16
Form 10-Q Part II
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.
Ameritech Corporation
Date: August 4, 1995 By /s/ Betty F. Elliott
Betty F. Elliott
Vice President and Comptroller
(Principal Accounting Officer)
<PAGE>17
Exhibit 12
AMERITECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Six Months Ended
June 30
1995 1994
EARNINGS
Income before interest and income taxes $1,923.8 $ 954.9
Preferred dividends of subsidiary(4) 4.6 --
Portion of rent expense representing
interest 29.1 24.3
Michigan Single Business tax 20.8 14.7
-------- --------
Total earnings (1) (2) (3) 1,978.3 $ 993.9
-------- --------
FIXED CHARGES
Interest cost $ 243.8 $ 215.5
Preferred dividends of subsidiary 4.6 --
Portion of rent expense representing
interest expense 29.1 24.3
-------- --------
Total fixed charges 277.5 $ 239.8
-------- --------
Ratio of earnings to fixed charges 7.13 4.14
_______________ ==== ====
(1) The results for the first six months of 1995 reflect a first quarter
1995 $256.3 million pretax credit primarily from settlement gains
resulting from lump sum pension payments to former employees associated
with the nonmanagement work force restructuring. Results for the first
six months of 1994 reflect a first quarter $530.0 million pretax
charge associated with the nonmanagement work force restructuring.
Costs of the work force restructuring program have largely been funded
from the Ameritech Pension Plan.
(2) Earnings represent income before income taxes and fixed charges.
Since the Michigan Single Business Tax (the Tax) and rental expense have
been deducted to arrive at income before interest and income taxes, the
Tax and the one-third portion of rental expense considered to be fixed
charges are added back.
(3) Earnings have not been adjusted to reflect the timing of dividends
received and equity in earnings of unconsolidated affiliates as the
effect on an annual basis is not significant.
(4) For purposes of the above computation, the preferred stock dividend
requirement of a subsidiary has been increased to an amount
representing the pretax earnings which would be required to cover the
dividend requirements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Ameritech Corporation's June 30, 1995 consolidated financial statements
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 85,400
<SECURITIES> 0<F1>
<RECEIVABLES> 2,579,800
<ALLOWANCES> 160,000
<INVENTORY> 182,400
<CURRENT-ASSETS> 2,960,400
<PP&E> 30,139,700
<DEPRECIATION> 16,906,100
<TOTAL-ASSETS> 20,333,100
<CURRENT-LIABILITIES> 4,569,800
<BONDS> 4,571,700
<COMMON> 587,600
0
0
<OTHER-SE> 6,164,900
<TOTAL-LIABILITY-AND-EQUITY> 20,333,100
<SALES> 0<F2>
<TOTAL-REVENUES> 6,514,600
<CGS> 0<F3>
<TOTAL-COSTS> 4,666,000
<OTHER-EXPENSES> (68,600)
<LOSS-PROVISION> 84,600
<INTEREST-EXPENSE> 237,200
<INCOME-PRETAX> 1,680,000
<INCOME-TAX> 597,600
<INCOME-CONTINUING> 1,082,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,082,400
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Secuities 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>
