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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): October 15, 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
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Item 5. Other Events
Ameritech today reported record third-quarter profits, powered by strong
gains in its core business, including rapid growth in data services, and
continued solid contributions from the company's extensive European
portfolio. The results marked Ameritech's 20th consecutive quarter of
double-digit profit growth before one-time items.
Third-quarter earnings per share grew 11.5 percent to 58 cents, up from 52
cents before a one-time item in the third quarter a year ago. Earnings
advanced 12.0 percent to $645 million, up from $576 million in the third
quarter of 1997. Revenues rose 7.1 percent to $4.29 billion, compared with
$4.01 billion a year ago.
Ameritech's third-quarter results included strong annual customer and volume
gains:
- 21 percent growth in sales of call management services such as Caller
ID, Call Waiting and Voice Messaging.
- 15 percent increase in total voice channel equivalents, which
includes 3.7 percent growth in switched access lines to 20.9 million
combined with rapid growth in high-capacity connections.
- 58 percent growth in ISDN channels and 37 percent growth in high-
capacity circuits.
- 19 percent growth in cellular customers to 3.5 million. Ameritech
added 549,000 cellular customers over the past 12 months.
Ameritech's extensive European portfolio continued to make significant c
ontributions to Ameritech's growth in the third quarter. With major
strategic partnerships in the national communications companies Belgacom of
Belgium, Tele Danmark of Denmark and MATAV of Hungary, Ameritech is the
largest foreign investor in European telecommunications, with financial
interests in 15 countries.
During the past three months, Ameritech made significant progress furthering
its growth strategies. The company:
- launched Privacy Manager, a breakthrough new call management
service that gives customers choice and control over the calls
coming into their homes and lets them reject unwanted calls.
Ameritech customers in Chicago and Detroit are the first in the
nation for whom the new service is available.
- expanded its data services capabilities by acquiring Detroit-
based Clover Technologies, a leading network integrator and the 11th
largest local area network solutions provider in the United States.
Ameritech also introduced end-to-end data networking solutions for
small businesses and announced plans to deploy ADSL for up to 20,000
students, faculty and staff at the University of Michigan--one of the
largest single commercial deployments of the high-speed technology
in the country. Ameritech ADSL lets users access the Internet at
speeds up to 50 times faster than a standard phone line and modem.
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- deployed ClearPathTM digital wireless service in the Indianapolis,
St. Louis and Columbus, Ohio, markets, giving customers added call
clarity, longer talk times and a host of new features such as Caller
ID and Voice Mail. Ameritech launched ClearPath service in its two
largest markets, Chicago and Detroit, in late 1997.
During the third quarter of 1997, Ameritech realized a one-time after-tax gain
of $37 million, or 4 cents per share, from the sale of its stake in Sky Network
Television Limited of New Zealand.
In May of this year, Ameritech and SBC Communications Inc. announced an
agreement to merge, pending shareowner and regulatory approvals. Upon completion
of the proposed transaction, Ameritech shareowners will receive 1.316 shares of
SBC common stock for each share of Ameritech common stock. Ameritech
shareowners will vote on approval of the agreement at a special shareowner
meeting scheduled for December 11, 1998 in Chicago.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts; unaudited)
Three Months Ended
September 30 Percent
1998(1) 1997(1) Change
Revenues $4,290 $4,006 7.1%
Operating expenses 3,227 3,044 6.0%
Operating income 1,063 962 10.5%
Other income, net
Recurring other income 83 75 10.7%
Gain from sale of Sky Network
Television of New Zealand (2) -- 52 --
Total other income 83 127 --
Interest expense 140 123 13.8%
Income before income taxes 1,006 966 4.1%
Income taxes 361 353 2.3%
Net income, as reported $ 645 $ 613 5.2%
Net income before one-time items $ 645 $ 576 12.0%
Average common shares
outstanding (000)* 1,102,842 1,098,070 0.4%
Average shares with dilution (000) 1,112,762 1,104,093 0.8%
Basic earnings per common share $0.58 $0.56 3.6%
Basic earnings per common share
before one-time items $0.58 $0.52 11.5%
Diluted earnings per common share $0.58 $0.56 3.6%
Diluted earnings per common share
before one-time items $0.58 $0.52 11.5%
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 12.0 percent to $645 million
from $576 million in the third quarter of 1997. Diluted
earnings per share before one-time items grew 11.5 percent to
$0.58 per share, up from $0.52 per share in the third quarter of
1997. See note (2) for details of the one-time item reflected
in 1997.
(2) Results for 1997 include a $52 million pretax gain ($37 million
after-tax or $0.04 per share) resulting from the sale of our
12.5 percent interest in Sky Network Television of New Zealand.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts; unaudited)
Nine Months Ended
September 30 Percent
1998(1) 1997(1) Change
Revenues $12,712 $11,851 7.3%
Operating expenses
Recurring operating expenses 9,476 8,936 6.0%
Restructuring charge (2) 104 -- --
Total operating expenses 9,580 8,936 7.2%
Operating income 3,132 2,915 7.4%
Other income (expense), net
Recurring other income 272 213 27.7%
One-time items (2), (3) 1,489 (35) --
Total other income (expense) 1,761 178 --
Interest expense 462 371 24.5%
Income before income taxes 4,431 2,722 --
Income taxes 1,586 1,036 --
Net income, as reported $ 2,845 $ 1,686 --
Net income before one-time items $ 1,931 $ 1,736 11.2%
Average common shares
outstanding (000) 1,101,226 1,099,680 0.1%
Average shares with dilution (000) 1,110,185 1,105,655 0.4%
Basic earnings per common share $2.58 $1.53 --
Basic earnings per common share
before one-time items $1.75 $1.58 10.8%
Diluted earnings per common share $2.56 $1.53 --
Diluted earnings per common share
before one-time items $1.74 $1.57 10.8%
Dividends declared per common share $0.90 $0.8475 6.2%
(1) Income before one-time items rose 11.2 percent to $1,931 million
in the nine months ended September 30, 1998. Diluted earnings
per share before one-time items grew 10.8 percent to $1.74 per
share, up from $1.57 per share in the first nine months of 1997.
See notes (2) and (3) for details of these one-time items.
(2) Results for the first nine months 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; a pretax
restructuring charge (included in operating expenses) of $104 million
($64 million after-tax, or $0.06 per share) 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 related to our investment in Tele Danmark.
(3) Results for the nine months ended September 30, 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, as
well as a $52 million pretax gain ($37 million after-tax or
$0.04 per share) resulting from the sale of our 12.5 percent
interest in Sky Network Television of New Zealand.
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
Change
from
Sept. 30 Dec. 31 Dec. 31
1998 1997 1997
(Unaudited)
ASSETS
Current assets $ 5,267 $ 4,549 $ 718
Property, plant and equipment 14,144 13,873 271
Investments, primarily international 4,815 1,751 3,064
Other assets and deferred charges 5,617 5,166 451
Total assets $29,843 $25,339 $ 4,504
LIABILITIES AND SHAREOWNERS' EQUITY
Debt maturing within one year $ 1,229 $ 3,036 $(1,807)
Other current liabilities 5,195 4,205 990
Long-term debt 7,013 4,610 2,403
Deferred credits and
other long-term liabilities 5,614 5,180 434
Shareowners' equity 10,792 8,308 2,484
Total liabilities and
shareowners' equity $29,843 $25,339 $ 4,504
SELECTED FINANCIAL AND OPERATING DATA
(Unaudited)
(Dollars in millions)
Sept. 30, Sept. 30, Percent
1998 1997 Change
Debt ratio 43.3% 49.7% (12.9)%
Customer lines (000's) 20,925 20,173 3.7%
Employees 70,728 69,056 2.4%
Telephone company employees 50,183 50,603 (0.8)%
Customer lines per telephone
company employee 417 399 4.5%
Return on average
equity - annualized* Qtr. 24.6% 29.1% (15.5)%
YTD 36.2% 28.7% 26.1%
Return on average total
capital - annualized* Qtr. 16.4% 18.3% (10.4)%
YTD 21.6% 17.8% 21.3%
Construction activity Qtr. $742 $652 13.8%
YTD $2,147 $1,829 17.4%
* Adjusted for one-time items
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Under the requirements of the Securities Exchange Act of 1934, an
authorized company official has signed this report on our behalf.
Dated: October 15, 1998
Ameritech Corporation
By: /s/ Barbara A. Klein
Vice President and Comptroller
