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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): January 13, 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 7. Financial Statements and Exhibits
Ameritech extended its record of double-digit profit growth to five
consecutive years and 17 consecutive quarters, as it reported fourth-quarter
and full-year 1997 results today.
Fourth-quarter earnings per share grew 12% to 56 cents, up from 50
cents a year ago, before one-time items, and earnings increased 10.5% to a
record $610 million, compared with $552 million in the fourth quarter of
1996. Revenues climbed 6.8% to $4.15 billion in the quarter, up from $3.88
billion in the fourth quarter of 1996.
For the year, Ameritech's earnings per share also increased 12% to
$2.14, up from $1.91 in 1996, before one-time items, and earnings grew 10.9%
to a record $2.35 billion, up from $2.12 billion. Revenues advanced 7.2% in
1997 to $16.0 billion, compared with $14.92 billion in 1996. Earnings per
share figures for the quarter and the year have been adjusted to reflect
Ameritech's two-for-one stock split effective at year-end 1997.
Ameritech's growth was powered by strong volume and customer gains:
o 27% annual growth in cellular customers to 3.2 million. Ameritech added
665,000 cellular customers in 1997, the best one-year increase in the
company's history.
o 17% annual growth in sales of call management services such as Caller ID,
call waiting and voice messaging.
o 31% annual increase in paging customers to 1.5 million.
o 8.1% annual growth in network access minutes of use.
o 4.3% annual increase in access lines to 20.5 million-including a 12.2%
increase in additional lines, a 45% increase in ISDN lines and a 20%
increase in high capacity lines.
o security monitoring customers more than doubled over the past year and
now exceed 1 million.
During the fourth quarter, Ameritech advanced its growth strategies
through these actions:
o Reached agreement to become a strategic partner in Tele Danmark through
an investment of $3.2 billion for a 42% stake. Tele Danmark serves
customers in Denmark through 3.3 million phone lines, 850,000 cellular
phones, and 750,000 cable TV connections. Including its planned
investment in Tele Danmark, Ameritech will be the largest U.S. investor
in European telecommunications, with investments valued at more than
$6 billion.
o Expanded in the high-growth security monitoring business by acquiring
the security monitoring assets of Republic Industries, Inc. and Rollins,
Inc. With these transactions, SecurityLink from Ameritech now has more
than 1 million customers and a presence in 92 of the United States' 100
largest metropolitan areas.
o Continued expansion of americast(TM) enhanced cable television service,
adding 11 new franchises in the quarter and 34 in the year. Ameritech
now has 63 cable TV franchises covering more than 2.5 million people and
offers its service in 40 communities in the Chicago, Detroit, Cleveland
and Columbus metro areas.
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o Announced plans for a public sale of its 24.95% stake in Telecom
Corporation of New Zealand, which at current market prices is valued at
more than $2 billion. The prospectus offering of shares is expected to
take place in the first half of 1998, with proceeds to be used to fund
North American and European growth initiatives.
Reported fourth quarter 1997 results included several one-time items,
which offset one another and resulted in no impact on net income.
Ameritech's reported fourth quarter earnings per share were 56 cents,
compared with 52 cents in 1996, and reported earnings were $610 million, up
from $570 million in 1996. Reported earnings per share for the year were
$2.09 compared with $1.93 in 1996, and reported net income was $2.30 billion,
up from $2.13 billion a year ago.
Earnings per share figures provided in this release are basic, as defined
by recent Financial Accounting Standards Board rules. Fourth quarter 1997
diluted earnings per share were 55 cents both before and after one-time
items. Full-year 1997 diluted earnings per share were $2.12 before one-time
items and $2.08 including the items.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions, except per share amounts)
Three Months Ended
December 31 %
1997(1)(2) 1996(1)(3) Change
Revenues $4,147 $3,884 6.8%
Operating expenses 3,263 3,020 8.0%
Operating income 884 864 2.3%
Other income, net 212 128 65.6%
Interest expense 134 132 1.5%
Income before income taxes 962 860 11.9%
Income taxes 352 290 21.4%
Net income $ 610 $ 570 7.0%
Average common shares
Outstanding (000) 1,095,800 1,099,414 (0.3)%
Basic earnings per common share $0.56 $0.52 7.7%
Diluted earnings per common share $0.55 $0.52 5.8%
Dividends declared per
common share $0.30 $0.2825 6.2%
(1)Income before one-time items rose 10.5 percent to $610 million from
$552 million in the fourth quarter of 1996. Basic earnings per share
before one-time items grew 12.0 percent to $0.56 per share, up from
$0.50 per share in the fourth quarter of 1996. See notes (2) and (3)
for details of the one-time items reflected in 1997 and 1996.
(2)Results for the fourth quarter of 1997 include several one-time
adjustments. (All impact Other income, net in the income statements
above, except the litigation charge, which impacts Operating expenses):
- a pretax charge of $69 million ($42 million after-tax, or $0.04 a
share) resulting from the agreement to settle lawsuits related to
our inside wire maintenance services;
- a pretax gain of $42 million ($25 million after-tax, or $0.02 a
share) resulting from the sale of our 14.3 percent share of Bell
Communications Research (Bellcore);
- a pretax gain of $43 million ($27 million after-tax, or $0.03 a
share) resulting from the sale in an initial public offering of a
portion of our stake in MATAV, the telecommunications provider in
Hungary; and
- a pretax charge of $16 million ($10 million after-tax, or $0.01 per
share) for a currency-related fair-value adjustment in conjunction
with our planned investment in Tele Danmark.
(3)Results for the fourth quarter of 1996 included an $18 million after-
tax gain or $0.02 per share related to the sale of Ameritech's interest
in Centertel, a cellular telephone company in Poland.
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CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
Twelve Months Ended
December 31 %
1997 (1)(2) 1996 (1)(3) Change
Revenues $15,998 $14,917 7.2%
Operating expenses 12,199 11,412 6.9%
Operating income 3,799 3,505 8.4%
Other income, net 390 326 19.6%
Interest expense 505 514 (1.8)%
Income before income taxes 3,684 3,317 11.1%
Income taxes 1,388 1,183 17.3%
Net income $ 2,296 $ 2,134 7.6%
Average common shares
outstanding (000) 1,098,702 1,103,708 (0.5)%
Basic earnings per common share $2.09 $1.93 8.3%
Diluted earnings per common share $2.08 $1.92 8.3%
Dividends declared per
common share $1.148 $1.078 6.5%
(1)Income before one-time items rose 10.9 percent to $2,346 million from
$2,116 million in 1996. Basic earnings per share before one-time items
grew 12.0 percent to $2.14 per share, up from $1.91 per share in 1996.
See note (2) and (3) for details of the one-time items reflected in
1997 and 1996.
(2)Results for 1997 include several one-time adjustments. (All impact
Other income, net in the income statements above, except the litigation
charge, which impacts Operating expenses):
- an after-tax charge of $87 million, or $0.08 a share, related to our
share of the costs of a work force restructuring at Belgacom, the
telecommunications provider in Belgium;
- a pretax gain of $52 million ($37 million after-tax, or $0.03 a
share) resulting from the sale of our 12.5 percent interest in Sky
Network Television of New Zealand;
- a pretax charge of $69 million ($42 million after-tax, or $0.04 a
share) resulting from the agreement to settle lawsuits related to
our inside wire maintenance services;
- a pretax gain of $42 million ($25 million after-tax, or $0.02 a
share) resulting from the sale of our 14.3 percent share of Bell
Communications Research (Bellcore);
- a pretax gain of $43 million ($27 million after-tax, or $0.03 a
share) resulting from the sale in an initial public offering of a
portion of our stake in MATAV, the telecommunications provider in
Hungary; and
- a pretax charge of $16 million ($10 million after-tax, or $0.01 per
share) for a currency-related fair-value adjustment in conjunction
with our planned investment in Tele Danmark.
(3)Results for 1996 included an $18 million after-tax gain or $0.02 per
share related to the sale of Ameritech's interest in Centertel, a
cellular telephone company in Poland.
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
Change
from
Dec. 31 Dec. 31 Dec. 31
1997 1996 1996
ASSETS
Current assets $ 4,076 $ 3,799 $ 277
Property, plant and equipment 13,873 13,507 366
Investments, primarily international 1,751 2,323 (572)
Other assets and deferred charges 5,639 4,078 1,561
Total assets $25,339 $23,707 $1,632
LIABILITIES AND SHAREOWNERS' EQUITY
Debt maturing within one year $ 3,036 $ 3,155 $ (119)
Other current liabilities 4,205 3,677 528
Long-term debt 4,610 4,437 173
Deferred credits and
other long-term liabilities 5,180 4,751 429
Shareowners' equity 8,308 7,687 621
Total liabilities and
shareowners' equity $25,339 $23,707 $1,632
SELECTED FINANCIAL AND OPERATING DATA
(Unaudited)
(Dollars in millions)
Dec. 31 Dec. 31 %
1997 1996 Change
Debt ratio 47.9% 49.7% (3.6)%
Customer lines (000's) 20,544 19,704 4.3%
Employees 74,359 66,128 12.4%
Telephone company employees 51,283 50,210 2.1%
Customer lines per telephone
company employee 401 392 2.3%
Return on average
equity - annualized Qtr. 28.7% 29.9% (4.0)%
YTD 28.5% 28.7% (0.7)%
Return on average total
capital - annualized Qtr. 18.0% 17.7% 1.7%
YTD 18.1% 17.1% 5.8%
Construction activity Qtr. $822 $797 3.1%
YTD $2,651 $2,476 7.1%
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SIGNATURE
Under the requirements of the Securities and Exchange Act of 1934, an
authorized company official has signed this report on our behalf.
Dated: January 13, 1998
Ameritech Corporation
By: /s/ Bruce B. Howat
Secretary
