U. S. Securities And Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 16, 1998
Commission File Number 1-8612
Ameritech Corporation
a Delaware Corporation
30 South Wacker Drive
Chicago, Illinois 60606
I.R.S. Employer Identification Number 36-3251481
Telephone number (800)257-0902
Item 5. Other Events
Driven by strong gains across its core business, including rapid
growth in data services, Ameritech (NYSE: AIT) reported record second-
quarter earnings and revenues. The results marked Ameritech's 19th
consecutive quarter of double-digit profit growth before one-time items.
Earnings advanced 11.4 percent to $695 million, up from $624
million in the second quarter of 1997, before one-time items. Second-
quarter earnings per share grew 10.5 percent to 63 cents, up from 57 cents
a year ago, on both a diluted and basic basis. Revenues climbed 7.6 percent
to a record $4.29 billion, up from $3.99 billion in the second quarter of 1997.
Ameritech's second quarter results include the following highlights:
- - 21 percent annual growth in sales of call management services such as
Caller ID, call waiting and voice messaging.
- - 4.1 percent annual increase in switched access lines to 20.8 million,
including a 12 percent increase in residential additional lines.
- - 15 percent annual increase in total voice channel equivalents, reflecting
robust demand for ISDN and high-capacity connections in addition to
continued growth in traditional customer lines.
- - 64 percent growth in ISDN channels over the past year and 38 percent
growth in high capacity circuits. Data services accounted for more than
one-fourth of Ameritech's revenue growth in the quarter.
- - 21 percent annual growth in cellular customers to 3.5 million. Ameritech
added 606,000 cellular customers over the past 12 months.
Second-quarter growth also was powered by continuing strong
contributions from Ameritech's extensive international portfolio, including
major strategic investments in the national communications companies
Belgacom of Belgium, Tele Danmark of Denmark and Matav of Hungary.
Ameritech is the largest foreign investor in European telecommunica-
tions, with financial interests in 15 countries and a portfolio currently
valued at $8 billion.
To focus resources on European and North American growth
opportunities, during the second quarter Ameritech completed a successful
global offering of substantially all of its 24.95 percent stake in Telecom
Corporation of New Zealand Limited. The sale resulted in an after-tax gain
to Ameritech of $1.0 billion or 91 cents per share on a diluted basis.
Including this gain, second-quarter earnings per share were $1.54 on a
diluted basis, basic earnings per share were $1.55, and net income was
$1,707 million.
On May 11, 1998, Ameritech and SBC Communications Inc. announced an
agreement to merge, pending shareowner and regulatory approvals. The
proposed transaction is a stock-for-stock exchange to be accounted for as a
pooling of interests. Upon completion of the merger, Ameritech
shareholders will receive 1.316 shares of SBC common stock for each share
of Ameritech common stock. Both companies expect to submit the agreement
to their shareowners for approval later this year.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
Three Months Ended
June 30 %
1998(1) 1997(1) Change
(Unaudited) (Unaudited)
Revenues $4,289 $3,986 7.6%
Operating expenses 3,125 2,945 6.1%
Operating income 1,164 1,041 11.8%
Other income (expense), net
Gain on sale of TCNZ shares (2) 1,543 -- --
Belgacom restructuring (3) -- (87) --
Recurring other income 84 73 15.1%
Total other income (expense) 1,627 (14) --
Interest expense 148 123 20.3%
Income before income taxes 2,643 904 --
Income taxes 936 367 --
Net income $1,707 $ 537 --
Average common shares
outstanding (000)* 1,101,153 1,099,948 0.1%
Dilutive potential
common shares (000) 9,104 4,679 --
Average shares with dilution (000) 1,110,257 1,104,627 0.5%
Basic earnings per common share $1.55 $0.49 --
Diluted earnings per common share $1.54 $0.49 --
Dividends declared per
common share $0.30 $0.2825 6.2%
*Share and per-share amounts for 1997 have been restated to reflect two-for-one
stock split effective December 31, 1997.
(1)Income before one-time items rose 11.4 percent to $695 million from $624
million in the second quarter of 1997. Diluted earnings per share before
one-time items grew 10.5 percent to $0.63 per share, up from $0.57 per share
in the second quarter of 1997. See notes (2) and (3) for details of the one-
time items reflected in 1998 and 1997.
(2)Results for the second quarter of 1998 include a pretax gain of $1.5
billion ($1.0 billion after-tax or $0.91 per diluted share) resulting from
the public sale of substantially all of our stake in Telecom Corporation of
New Zealand Limited (TCNZ).
(3)Results for the second quarter of 1997 include an $87 million after-tax
charge ($0.08 per share) related to our share of the costs of a work force
restructuring at Belgacom, the national communications company of Belgium.
We are a 17.5 percent owner and strategic partner in Belgacom.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
Six Months Ended
June 30 %
1998(1) 1997(1) Change
(Unaudited) (Unaudited)
Revenues $8,422 $7,845 7.4%
Operating expenses (3) 6,353 5,892 7.8%
Operating income 2,069 1,953 5.9%
Other income (expense), net
Gain on sale of TCNZ shares (2) 1,543 -- --
Currency-related
fair value adjustment (3) (54) -- --
Belgacom restructuring (4) -- (87) --
Recurring other income 189 138 37.0%
Total other income (expense) 1,678 51 --
Interest expense 322 248 29.8%
Income before income taxes 3,425 1,756 --
Income taxes 1,225 683 --
Net income $2,200 $1,073 --
Average common shares
outstanding (000)* 1,100,405 1,100,498 --
Dilutive potential
common shares (000) 8,944 4,434 --
Average shares with dilution (000) 1,109,349 1,104,932 0.4%
Basic earnings per common share $2.00 $0.98 --
Diluted earnings per common share $1.98 $0.97 --
Dividends declared per
common share $0.60 $0.565 6.2%
*Share and per-share amounts for 1997 have been restated to reflect two-for-one
stock split effective December 31, 1997.
(1)Income before one-time items rose 10.8 percent to $1,286 million from $1,160
million in the first six months of 1997. Diluted earnings per share before
one-time items grew 10.5 percent to $1.16 per share, up from $1.05 per share
in the first half of 1997. See notes (2) through (4) for details of the one-
time items reflected in 1998 and 1997.
(2) Results for the first half of 1998 include a pretax gain of $1.5 billion
($1.0 billion after-tax or $0.91 per diluted share) resulting from the
public sale of substantially all of our stake in TCNZ.
(3)Results for the first half of 1998 also include a pretax charge of $104
million ($64 million after-tax, or $0.06 per share) for a restructuring
charge (included in operating expenses) related to the cost containment
program announced in March 1998, and a pretax charge of $54 million ($34
million after-tax, or $0.03 per share) for a currency-related fair value
adjustment in conjunction with our January 1998 investment in Tele Danmark.
(4)Results for the first half of 1997 include an $87 million after-tax charge
($0.08 per share) related to our share of the costs of a work force
restructuring at Belgacom, the national communications company of Belgium.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
Change
from
June 30 Dec. 31 Dec. 31
1998 1997 1997
ASSETS (Unaudited)
Current assets $ 5,134 $ 4,549 $ 585
Property, plant and equipment 14,025 13,873 152
Investments, primarily international 4,426 1,751 2,675
Other assets and deferred charges 5,460 5,166 294
Total assets $29,045 $25,339 $ 3,706
LIABILITIES AND SHAREOWNERS' EQUITY
Debt maturing within one year $ 1,281 $ 3,036 $(1,755)
Other current liabilities 5,031 4,205 826
Long-term debt 7,013 4,610 2,403
Deferred credits and
other long-term liabilities 5,645 5,180 465
Shareowners' equity 10,075 8,308 1,767
Total liabilities and
shareowners' equity $29,045 $25,339 $ 3,706
SELECTED FINANCIAL AND OPERATING DATA
(Unaudited)
(Dollars in millions)
June 30, June 30, %
1998 1997 Change
Debt ratio 45.2% 46.3% (2.4)%
Customer lines (000's) 20,835 20,018 4.1%
Employees 72,342 67,764 6.8%
Telephone company employees 51,204 50,901 0.6%
Customer lines per telephone
company employee 407 394 3.3%
Return on average
equity - annualized* Qtr. 38.7% 31.0% 24.8%
YTD 37.9% 28.6% 32.5%
Return on average total
capital - annualized* Qtr. 23.2% 19.0% 22.1%
YTD 21.8% 17.6% 23.9%
Construction activity Qtr. $742 $644 15.2%
YTD $1,405 $1,177 19.4%
* Adjusted for one-time items
SIGNATURE
Under the requirements of the Securities and Exchange Act of 1934, an
authorized company official has signed this report on our behalf.
Dated: July 16, 1998
AMERITECH CORPORATION
By: /s/ Barbara A. Klein
Barbara A. Klein
Vice President and Comptroller
