<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, 1996
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 - (800) 257-0902
At July 31, 1996, 549,577,944 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
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,
--------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues........................ $ 3,744 $ 3,369 $ 7,311 $ 6,515
------- ------- ------- -------
Operating expenses
Employee-related expenses..... 931 893 1,867 1,773
Depreciation and amortization. 590 536 1,164 1,062
Other operating expenses...... 1,130 929 2,221 1,792
Restructuring credit . -- -- -- (256)
Taxes other than income taxes. 147 151 291 295
------- ------- ------- -------
2,798 2,509 5,543 4,666
------- ------- ------- -------
Operating income................ 946 860 1,768 1,849
Interest expense................ 128 119 252 237
Other income, net ............. 73 35 124 68
------- ------- ------- -------
Income before income taxes...... 891 776 1,640 1,680
Income taxes.................... 324 272 595 598
------- ------- ------- -------
Net income...................... $ 567 $ 504 $ 1,045 $ 1,082
======= ======= ======= =======
Earnings per common share....... $1.02 $0.91 $1.89 $1.96
===== ===== ===== =====
Dividends declared per common
share ...................... $0.53 $0.50 $1.06 $1.00
===== ===== ===== =====
Average common shares outstanding
(millions)...................... 553.2 553.7 554.0 553.0
===== ===== ===== =====
See Notes to Condensed Consolidated Financial Statements.
<PAGE>3
AMERITECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
June 30, 1996 Dec. 31, 1995
------------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
ASSETS
- ------
Current assets
Cash and temporary cash investments......... $ 246 $ 131
Receivables, net............................ 3,056 2,774
Material and supplies....................... 208 205
Prepaid and other........................... 326 342
------- -------
3,836 3,452
------- -------
Property, plant and equipment................ 31,357 30,874
Less, accumulated depreciation.............. 18,132 17,417
------- -------
13,225 13,457
------- -------
Investments, primarily international......... 2,376 1,497
Other assets and deferred charges............ 3,730 3,536
------- -------
Total assets................................. $23,167 $21,942
======= =======
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities
Debt maturing within one year............... $ 3,533 $ 2,138
Accounts payable............................ 1,545 1,792
Other....................................... 1,872 1,831
------- -------
6,950 5,761
------- -------
Long-term debt............................... 4,216 4,513
------- -------
Deferred credits and other long-term liabilities
Accumulated deferred income taxes........... 789 782
Unamortized investment tax credits.......... 189 208
Postretirement benefits
other than pensions....................... 2,960 2,967
Other....................................... 667 696
------- -------
4,605 4,653
------- -------
Shareowners' equity
Common stock, par value $1;2.4 billion
shares authorized, 588,110,000 issued in 1996
and 587,612,000 issued in 1995.......... 588 588
Proceeds in excess of par value............. 5,710 5,613
Reinvested earnings......................... 2,667 2,209
Treasury stock, at cost (34,703,000 shares
in 1996 and 33,773,000 shares in 1995)..... (1,189) (986)
Deferred compensation....................... (266) (329)
Currency translation adjustment............. (121) (85)
Other, net.................................. 7 5
------- -------
7,396 7,015
------- -------
Total liabilities and shareowners' equity.... $23,167 $21,942
======= =======
See Notes to Condensed Consolidated Financial Statements.
<PAGE>4
AMERITECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Six Months Ended
June 30,
-------------
1996 1995
---- ----
Cash Flows from Operating Activities
Net income................................... $1,045 $1,082
Adjustments to net income
Restructuring credit, net of tax........... -- (160)
Depreciation and amortization.............. 1,164 1,062
Deferred income taxes, net................. 3 26
Investment tax credits, net................ (19) (25)
Capitalized interest....................... (14) (7)
Provision for uncollectibles............... 167 85
Change in accounts receivable.............. (449) (150)
Change in material and supplies............ (19) 18
Change in certain other current assets..... 13 32
Change in accounts payable................. (247) (300)
Change in certain other current
liabilities ............................. 61 (94)
Change in certain other noncurrent
assets and liabilities................... (145) (59)
Other...................................... (24) (44)
------- -------
Net cash from operating activities........... 1,536 1,466
------- -------
Cash Flows from Investing Activities
Capital expenditures......................... (999) (783)
Additional investments....................... (880) (184)
Other investing activities, net.............. 6 (4)
------- -------
Net cash from investing activities........... (1,873) (971)
------- -------
Cash Flows from Financing Activities
Net change in short-term debt................ 1,170 (207)
Issuance of long-term debt................... -- 194
Retirement of long-term debt................. (22) (26)
Dividend payments............................ (587) (552)
Issuance of common stock .................. 47 11
Proceeds from reissuance of treasury stock... 132 122
Repurchase of common stock................... (287) (26)
Other financing activities, net.............. (1) --
------- -------
Net cash from financing activities........... 452 (484)
------- -------
Net increase in cash and
temporary cash investments.................. 115 11
Cash and temporary cash investments,
beginning of period......................... 131 74
------- -------
Cash and temporary cash investments,
end of period............................... $ 246 $ 85
======= =======
See Notes to Condensed Consolidated Financial Statements.
<PAGE>5
AMERITECH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1: Work Force Restructuring
As announced in March 1994, Ameritech restructured its existing
nonmanagement work force, reducing the work force by 11,500 employees
during 1994 and 1995. As a result of the restructuring, a gain of
$256 million or $160 million after-tax was recorded in the first six
months of 1995, resulting primarily from settlement gains from lump
sum pension payments from the Ameritech Pension Plan to former
employees. No restructuring charges or credits were recorded in the
first six months of 1996.
The Company recorded additional restructuring charges in the fourth
quarter of 1995, primarily for the consolidation of data centers and
additional work force reductions. The total amount remaining accrued
for restructuring charges as of June 30, 1996 was $52 million. See
further discussion in Management's Discussion and Analysis below.
NOTE 2: Advantage Ohio
In June 1996 the provisions of the "Advantage Ohio" plan were restored
as a result of legislation in Ohio. The legislation was enacted
following approval by the Public Utilities Commission of Ohio (PUCO)
of an agreement between the Company and certain interexchange
carriers, cable TV companies and consumer representatives, which
stipulated a $21 million reduction in intrastate access charges
effective September 1, 1996, as well as additional customer benefits.
The Ohio Supreme Court had overturned the Advantage Ohio plan in March
1996.
<PAGE>6
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1996 vs.
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1995
RESULTS OF OPERATIONS
---------------------
Net income for the three months ended June 30, 1996 was $567 million
or $1.02 per common share on 553.2 million average common shares
outstanding. This represented a 12.5 percent increase in net income
and a 12.1 percent increase in earnings per common share from the
comparable prior year period, for which net income was $504 million or
$0.91 per common share on 553.7 million average common shares
outstanding.
For the six months ended June 30, 1996, net income was $1,045 million
or $1.89 per common share on 554.0 million average common shares
outstanding. This represented a 3.4 percent decrease in net income and
a 3.6 percent decrease in earnings per common share from the
comparable prior year period, for which net income was $1,082 million
or $1.96 per common share on 553.0 million average common shares
outstanding.
Results for the six months ended June 30, 1995 included an after-tax
restructuring credit of $160 million or $0.29 per common share related
to net settlement gains associated with lump-sum payments from the
nonmanagement pension plan to former employees pursuant to the work
force restructuring program. Excluding the work force restructuring
credit in 1995, net income for the six months ended June 30, 1996 of
$1,045 million would have represented an increase of 13.3 percent over
the net income of $922 million for the six months ended June 30, 1995.
Earnings per common share would have been $1.89 and $1.67,
respectively, an increase of 13.2 percent.
----------------------------------------------------------------------
Revenues
--------
Total revenues for the three and six months ended June 30, 1996
increased 11.1 percent and 12.2 percent, respectively, over the
comparable prior year periods to $3,744 million and $7,311 million.
The increases were primarily attributable to higher network usage
volumes due to access line growth, volume increases in cellular
services due to cellular subscriber growth, increased security
monitoring revenues resulting from the October 1995 acquisition of The
National Guardian Corporation and higher equipment sales. Rate
reductions at the landline communications subsidiaries partially
offset these increases.
----------------------------------------------------------------------
Local service
-------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $1,539 $1,398 $ 141 10.1
Six Months Ended 3,004 2,728 276 10.1
The increases in local service revenues for the three and six months
ended June 30, 1996 were primarily attributable to higher network
usage volumes which increased revenues by $151 million and $277
million, respectively. The increased network usage volume resulted
principally from growth in the number of access lines, which increased
4.2 percent or 781,000 lines to 19,399,000 from 18,618,000 as of June
30, 1995. Increased sales of call management services such as Call
Forwarding and Caller ID also contributed to the revenue increases.
These increases were partially offset by net rate reductions of $11
million and $5 million, respectively.
<PAGE>7
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Network access
--------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Interstate
----------
Three Months Ended $ 585 $ 576 $ 9 1.6
Six Months Ended 1,164 1,138 26 2.3
Intrastate
----------
Three Months Ended $ 135 $ 145 $ (10) (6.9)
Six Months Ended 275 282 (7) (2.5)
The increases in interstate network access revenues for the three and
six months ended June 30, 1996 were due primarily to increases of $50
million and $104 million, respectively, resulting from higher network
usage. These increases were partially offset by net rate reductions
of $36 million and $68 million, respectively, as well as increases in
National Exchange Carrier Association common line support payments.
Minutes of use related to interstate calls for the three and six
months ended June 30, 1996 increased 7.5 percent and 8.4 percent,
respectively, over the comparable prior year periods.
The decreases in intrastate network access revenues for the three and
six months ended June 30, 1996 were primarily due to net rate
reductions of $22 million and $44 million, respectively, as well as
decreases due to a reclassification of certain revenues to the long
distance revenue category and a decrease in the second quarter of 1996
due to an unfavorable regulatory ruling in Illinois involving certain
payphone revenues. These decreases were partially offset by increases
of $28 million and $59 million, respectively, resulting from higher
network usage. Minutes of use related to intrastate calls for the
three and six months ended June 30, 1996 increased 13.1 percent over
the comparable prior year periods. See also Note 2 for a discussion
of additional intrastate access charge reductions in Ohio to become
effective September 1, 1996.
----------------------------------------------------------------------
Long distance service
---------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 392 $ 362 $ 30 8.3
Six Months Ended 768 712 56 7.9
The increases in long distance service revenues for the three and six
months ended June 30, 1996 were primarily attributable to increases of
$12 million and $30 million, respectively, resulting from higher
network usage, combined with increases primarily related to the
reclassification of certain revenues from the intrastate network
access category.
<PAGE>8
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Cellular, directory and other
-----------------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $1,093 $ 888 $ 205 23.1
Six Months Ended 2,100 1,655 445 26.9
The increases in cellular, directory and other revenues for the three
and six months ended June 30, 1996 were attributable to cellular
revenue growth resulting from a 39.7 percent increase in subscribers
from 1,564,000 at June 30, 1995 to 2,185,000 at June 30, 1996. Paging
revenues also increased as a result of a 36.6 percent increase in
subscribers from 692,000 at June 30, 1995 to 945,000 at June 30, 1996.
Revenues from the security monitoring business, equipment sales and
nonregulated services, such as inside wire maintenance, also
contributed to the increase. Increased security monitoring revenues
resulted primarily from the October 1995 acquisition of The National
Guardian Corporation.
----------------------------------------------------------------------
Operating expenses
------------------
Total operating expenses for the three and six months ended June 30,
1996 increased by 11.5 percent and 18.8 percent, respectively, to
$2,798 million and $5,543 million. The increases were largely
attributable to the work force restructuring which resulted in a
credit of $256 million ($160 million after-tax) in the first six
months of 1995 related to settlement gains resulting from lump-sum
pension payments to former employees. Increased employee-related
expenses and cost of sales in growth-related businesses, such as
cellular and security monitoring services also contributed to the
increase, as well as increased costs associated with new businesses
such as long distance, personal communications services (PCS) and
cable TV.
----------------------------------------------------------------------
Employee-related expenses
-------------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 931 $ 893 $ 38 4.3
Six Months Ended 1,867 1,773 94 5.3
The increases in employee-related expenses for the three and six
months ended June 30, 1996 were primarily attributable to increased
employee levels in the cellular, long distance, cable TV and security
monitoring businesses, resulting in increased expenses of $44 million
and $90 million, respectively, as well as increases of $21 million and
$33 million, respectively, related to higher wage rates, commissions,
overtime levels and bonus accruals for employees at the landline
communications subsidiaries. These increases were partially offset by
decreases in medical expenses due to renegotiated contracts with
health care providers.
There were 66,913 employees at June 30, 1996, compared with 62,127 at
June 30, 1995. The increase was due to growth in the cellular and
security monitoring businesses, as well as staffing for new businesses
such as long distance and cable TV.
<PAGE>9
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) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 590 $ 536 $ 54 10.1
Six Months Ended 1,164 1,062 102 9.6
The increases in depreciation and amortization expense for the three
and six months ended June 30, 1996 were primarily due to higher plant
balances, as well as higher effective depreciation rates.
Amortization of intangibles from acquisitions, excluding equity
investments, also contributed to the increases.
----------------------------------------------------------------------
Other operating expenses
------------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $1,130 $ 929 $ 201 21.6
Six Months Ended 2,221 1,792 429 23.9
The increases in other operating expenses for the three and six months
ended June 30, 1996 were largely attributable to growth-related cost
of sales and business volume increases at the cellular and security
monitoring services operations, as well as cost of sales increases
related to increased equipment sales. Costs associated with long
distance, PCS and cable TV also resulted in expense increases, as did
higher uncollectibles and higher advertising and distributor
commission expenses associated with increased marketing and sales
efforts.
Restructuring credit
--------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ -- $ -- $ -- n/a
Six Months Ended -- (256) 256 n/a
As discussed in Note 1, the Company significantly reduced its
nonmanagement work force during 1994 and 1995 by 11,500 employees.
New employees with different skills were added during this period to
accommodate growth and meet staffing requirements for new business
opportunities. As of June 30, 1995, 10,298 employees had left the
Company, with 313 leaving in the first quarter of 1995 and 870 leaving
in the second quarter of 1995. A pretax, noncash settlement gain of
$256 million was recorded in the first six months of 1995 associated
with lump-sum pension payments to former employees. No restructuring
charges or credits were recorded in the first six months of 1996.
<PAGE>10
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
Taxes other than income taxes
-----------------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 147 $ 151 $ (4) (2.7)
Six Months Ended 291 295 (4) (1.4)
The decreases in taxes other than income taxes for the three and six
months ended June 30, 1996 were due primarily to decreases in property
taxes resulting from favorable legislation involving property tax
reforms, as well as decreases in capital stock taxes resulting primarily
from a smaller tax base in Illinois. These decreases were partially
offset by increases in gross receipts taxes, primarily in Wisconsin.
----------------------------------------------------------------------
Other Income and Expenses
-------------------------
Interest expense
-----------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 128 $ 119 $ 9 7.6
Six Months Ended 252 237 15 6.3
The increases in interest expense for the three and six months ended June
30, 1996 were primarily attributable to higher interest on short-term
debt due to higher average balances, largely to finance the Company's
acquisition of an interest in Belgacom, partially offset by the impact of
lower effective interest rates.
----------------------------------------------------------------------
Other income, net
-----------------
Change
June 30 Income Percent
----------
(dollars in millions) 1996 1995 (Expense) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 73 $ 35 $ 38 108.6
Six Months Ended 124 68 56 82.4
Other income, net includes equity earnings from unconsolidated
affiliates, interest income and other nonoperating items. Other income,
net increased for the three and six months ended June 30, 1996 due
primarily to an increase in equity earnings from international
investments. Equity earnings from Belgacom favorably impacted the
increase beginning in the second quarter of 1996.
<PAGE>11
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
----------------------------------------------------------------------
Income taxes
------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 324 $ 272 $ 52 19.1
Six Months Ended 595 598 (3) (0.5)
The increase in income taxes for the three months ended June 30, 1996 as
compared with the prior year period was primarily attributable to the
changes in pretax earnings related to the revenue and expense items
previously discussed. The decrease in income taxes for the six months
ended June 30, 1996 was due primarily to the tax effect ($96 million)
associated with the work force restructuring credit recorded in the first
quarter of 1995. Excluding the effects of this item, income taxes
increased in line with the earnings of the business.
FINANCIAL CONDITION AND OTHER MATTERS
-------------------------------------
Capital expenditures
--------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 556 $ 440 $ 116 26.4
Six Months Ended 1,022 805 217 27.0
The increase in capital expenditures for the three and six months ended
June 30, 1996 related primarily to higher capital expenditures at the
landline and wireless communications subsidiaries to accommodate growth.
----------------------------------------------------------------------
Dividends declared
-------------------
June 30 Increase Percent
----------
(dollars in millions) 1996 1995 (Decrease) Change
------------------- ---- ---- -------- ------
Three Months Ended $ 294 $ 277 $ 17 6.1
Six Months Ended 587 553 34 6.1
On June 19, 1996, the Board of Directors declared a quarterly dividend of
$0.53 per common share, a 6.0 percent increase over the $0.50 per common
share declared in the same quarter in the prior year.
Additional Investment
----------
During the first six months of 1996, a consortium led by Ameritech closed
its strategic consolidation agreement with Belgacom S.A., the national
telecommunications operator of Belgium. Ameritech invested about $865
million for its 35 percent allocable share in the consortium, or about
17.5 percent of Belgacom S.A.
<PAGE>12
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
----------------------------------------------------------------------
Debt ratio
----------
The debt ratio was 51.2 percent as of June 30, 1996, compared with
48.7 percent as of December 31, 1995. The increase is largely
attributable to an increase in short-term debt used to finance the
Belgacom investment and to fund the Company's acquisition of its own
common stock.
----------------------------------------------------------------------
Ratio of earnings to fixed charges
----------------------------------
The ratio of earnings to fixed charges for the six months ended June
30 was 6.27 in 1996 and 6.90 in 1995. The ratio in 1995 was favorably
affected by a credit of $256 million for work force restructuring.
The work force restructuring program was largely funded by the
Ameritech Pension Plan.
Other Matters
--------------
Telecommunications Act of 1996
------------------------------
The Telecommunications Act of 1996 was signed into law on February 8,
1996. This legislation defines the conditions under which Ameritech
will be permitted to offer interLATA long distance service and
provides certain mechanisms intended to facilitate local exchange
competition. This legislation, in addition to allowing Ameritech to
offer interLATA long distance services, will allow competitors into
the Company's traditional local exchange markets. Management believes
the legislation gives the Company an opportunity to expand its revenue
base by providing long distance services, while retaining lower-margin
access revenues as other local service providers, acting as resellers,
continue to use Ameritech's network facilities.
On August 1, 1996 the Federal Communications Commission adopted rules
by which competitors will connect to local network facilities. The
rules address, among other things, unbundling of network elements,
pricing for interconnection and unbundled elements, and resale of
network services. The Company has not yet determined the impact of
the new rules.
<PAGE>13
AMERITECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (cont'd.)
AMERITECH CORPORATION AND SUBSIDIARIES
Part II - Other Information
---------------------------
Item 6 Exhibits and Reports on Form 8-K.
------ ---------------------------------
(a) Exhibits
--------
11a Statement re: Computation of primary earnings per share
for the three months ended June 30, 1996 and 1995.
11b Statement re: Computation of fully diluted earnings per
share for the three months ended June 30, 1996 and 1995.
11c Statement re: Computation of primary earnings per share
for the six months ended June 30, 1996 and 1995.
11d Statement re: Computation of fully diluted earnings per
share for the six months ended June 30, 1996 and 1995.
12 Computation of ratio of earnings to fixed charges for the
six months ended June 30, 1996 and June 30, 1995.
27 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
On July 16, 1996, a Current Report on Form 8-K dated July 16,
1996 was filed under Item 5, Other Events, to report
Ameritech's earnings for the second quarter 1996.
<PAGE>14
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 7, 1996 By /s/ Oren G. Shaffer
------------------------
Oren G. Shaffer
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
EXHIBIT 11a
AMERITECH CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Three Months Ended
June 30,
-------------
1996 1995
---- ----
Net Income $566,639,000 $503,526,000
============ ============
Weighted average number of
shares outstanding 553,172,522 553,719,115
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 4,253,187 7,862,453
------------ ------------
Weighted average shares outstanding
on which primary earnings per share
are based 557,425,709 561,581,568
Primary earnings per share $1.02 $0.90
============ ============
This calculation is submitted in accordance with Regulation S-K,
Item 601 (b)11, although not required by footnote 2 to paragraph 14 of
Accounting Principles Board opinion No. 15 because it results in dilution
of less than three percent.
EXHIBIT 11b
AMERITECH CORPORATION
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Three Months Ended
June 30,
-------------
1996 1995
---- ----
Net Income $566,639,000 $503,526,000
============ ============
Weighted average number of
shares outstanding 553,172,522 553,719,115
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 4,547,927 7,964,973
------------ ------------
Weighted average shares outstanding
on which fully diluted earnings
per share are based 557,720,449 561,684,088
Fully diluted earnings per share $1.02 $0.90
============ ============
This calculation is submitted in accordance with Regulation S-K,
Item 601 (b)11, although not required by footnote 2 to paragraph 14 of
Accounting Principles Board opinion No. 15 because it results in dilution
of less than three percent.
EXHIBIT 11c
AMERITECH CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Six Months Ended
June 30,
-------------
1996 1995
---- ----
Net Income $1,044,984,000 $1,082,445,000
============ ============
Weighted average number of
shares outstanding 553,962,130 552,998,160
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 4,253,187 7,862,453
------------ ------------
Weighted average shares outstanding
on which primary earnings per share
are based 558,215,317 560,860,613
Primary earnings per share $1.87 $1.93
============ ============
This calculation is submitted in accordance with Regulation S-K,
Item 601 (b)11, although not required by footnote 2 to paragraph 14 of
Accounting Principles Board opinion No. 15 because it results in dilution
of less than three percent.
EXHIBIT 11d
AMERITECH CORPORATION
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
Six Months Ended
June 30,
-------------
1996 1995
---- ----
Net Income $1,044,984,000 $1,082,445,000
============ ============
Weighted average number of
shares outstanding 553,962,130 552,998,160
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 4,547,927 7,964,973
------------ ------------
Weighted average shares outstanding
on which fully diluted earnings
per share are based 558,510,057 560,963,133
Fully diluted earnings per share $1.87 $1.93
============ ============
This calculation is submitted in accordance with Regulation S-K,
Item 601 (b)11, although not required by footnote 2 to paragraph 14 of
Accounting Principles Board opinion No. 15 because it results in dilution
of less than three percent.
EXHIBIT 12
AMERITECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Six Months Ended
June 30
--------------
1996 1995
---- ----
EARNINGS
- --------
Income before interest, income taxes
and undistributed equity earnings.......... $1,846 $1,864
Preferred dividends of subsidiary (3)....... 7 5
Portion of rent expense
representing interest...................... 31 29
Michigan Single Business tax................ 22 21
------ ------
Total earnings (1) (2)...................... $1,906 $1,919
------ ------
FIXED CHARGES
- -------------
Interest expense............................ $ 252 $ 237
Preferred dividends of subsidiary........... 7 5
Capitalized interest........................ 14 7
Portion of rent expense representing
interest expense........................... 31 29
------ ------
Total fixed charges......................... $ 304 $ 278
------ ------
Ratio of earnings to fixed charges.......... 6.27 6.90
===== =====
(1) The results for the first six months of 1995 reflect a $256
million pretax credit primarily from settlement gains resulting
from lump sum pension payments to former employees who left the
business in the nonmanagement work force restructuring. Costs of
the work force restructuring program were largely 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) 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, 1996 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-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 248,000
<SECURITIES> 0<F1>
<RECEIVABLES> 3,056,000
<ALLOWANCES> 0
<INVENTORY> 208,000
<CURRENT-ASSETS> 3,836,000
<PP&E> 31,357,000
<DEPRECIATION> 18,132,000
<TOTAL-ASSETS> 23,167,000
<CURRENT-LIABILITIES> 6,950,000
<BONDS> 4,216,000
0
0
<COMMON> 588,000
<OTHER-SE> 6,808,000
<TOTAL-LIABILITY-AND-EQUITY> 23,167,000
<SALES> 0<F2>
<TOTAL-REVENUES> 7,311,000
<CGS> 0<F3>
<TOTAL-COSTS> 5,543,000
<OTHER-EXPENSES> (124,000)
<LOSS-PROVISION> 167,000
<INTEREST-EXPENSE> 252,000
<INCOME-PRETAX> 1,640,000
<INCOME-TAX> 595,000
<INCOME-CONTINUING> 1,045,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,045,000
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
<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>
