SECURITIES AND EXCHANGE COMMISSION
FORM 10-K Annual report pursuant to section 13 and 15(d)
Filing Date: 1994-03-31 | Period of Report: 1993-12-31 SEC Accession No. 0000950124-94-000670
(HTML Version on secdatabase.com)
FILER AMERITECH CORP /DE/ Business Address 30 S WACKER DR CIK:732715| IRS No.: 363251481 | State of Incorp.:DE | Fiscal Year End: 1231 CHICAGO IL 60606 Type: 10-K | Act: 34 | File No.: 001-08612 | Film No.: 94519541 3127505000 SIC: 4813 Telephone communications (no radiotelephone)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 ------SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)...... FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-8612
AMERITECH CORPORATION
30 SOUTH WACKER DRIVE CHICAGO, ILLINOIS 60606 TELEPHONE NUMBER 312-750-5000
Securities registered pursuant to Section 12(b) of the Act: Common Stock (Par Value $1.00 Per Share) Preference Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Exchanges on which registered: Common Stock: New York, Chicago, Boston, Pacific and Philadelphia Preference Stock Purchase Rights: New York
Based on the average sales price on February 28, 1994, the aggregate market value of the voting stock held by non-affiliates was $22,074,804,907.
At February 28, 1994, 547,626,021 common shares and preference stock purchase rights 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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in a definitive proxy statement or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [x].
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's annual report to security holders for the year ended December 31, 1993 (Part II).
(2) Portions of the registrant's definitive proxy statement dated March 1, 1994 issued in connection with the annual meeting of shareowners (Part III). ------
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TABLE OF CONTENTS PART I
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Ameritech Corporation (Ameritech or the Company), incorporated in 1983 under the laws of the State of Delaware, with its principal executive offices at 30 South Wacker Drive, Chicago, Illinois 60606 (telephone number 312-750-5000), is a leading supplier of full service communications and advanced information services, primarily to 12 million customers in the Midwest. It also has interests in New Zealand, Hungary, Norway, Poland and other international areas.
Ameritech is the parent of Illinois Bell Telephone Company; Indiana Bell Telephone Company, Incorporated; Michigan Bell Telephone Company; The Ohio Bell Telephone Company; and Wisconsin Bell, Inc.; hereinafter referred to as the "landline telephone companies," as well as several other communications businesses.
In 1993, Ameritech restructured its five geographically based landline telephone companies and two other related businesses into a structure of customer-specific business units supported by a single, regionally coordinated network unit. The five Bell companies continue to function as legal entities, owning Bell company assets in each state, and continue to be regulated by the individual state public utility commissions. Products and services are now marketed under a single common brand identity, "Ameritech," rather than using the "Bell" name. While the Ameritech logo is now used to identify all the Ameritech companies, the landline telephone companies are sometimes regionally identified and hereinafter referred to by using "Ameritech" with the name of the state in which they operate, for example, "Ameritech Illinois."
TELECOMMUNICATIONS
Ameritech is engaged in the business of furnishing a wide variety of advanced telecommunications services, including local exchange and toll service, network access and telecommunications products, to 12 million business and residential customers in the Great Lakes region. Exchange telecommunications service refers to intraLATA service, defined below, which includes usage services as well as local service.
In connection with the divestiture described below, all Bell System territory within the continental United States was divided into 161 geographical areas which have been termed Local Access and Transport Areas (LATAs). These LATAs are generally centered on a city or other identifiable community of interest, and each LATA marks the boundary within which the former Bell operating communications company subsidiaries (Bell Companies) of American Telephone and Telegraph Company (AT&T) may provide telephone service. Since January 1, 1984, the Bell Companies have provided two basic types of telecommunications services. First, the Bell Companies transport telecommunications traffic between telephones and other customer premises equipment located within the same LATA (intraLATA service), which can include toll service as well as local service. Second, the Bell Companies provide exchange access service, which links a subscriber's telephone or other equipment to the network of transmission facilities of interexchange carriers, which in turn provide telecommunications service between LATAs (interLATA service).
AMERITECH'S BUSINESS UNITS AND NETWORK SERVICES
The following is a description of the business and network services units at March 30, 1994.
Local, regional and national business advertisers seeking to reach businesses or households with information are the customers of the Advertising Services Unit which connects buyers and sellers of goods and services by providing advertising in printed telephone directories, specialized printed guides and electronic advertising services across the United States and Europe.
The Cellular Services Unit provides cellular and other wireless
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document communications to customers using Ameritech's nearly 1 million cellular lines and 500,000 paging units in eight Midwestern states and Hawaii.
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This unit also identifies and pursues new wireless services such as data transmission and personal communications services (PCS).
The Consumer Services Unit provides communications services for 10.8 million residential customers.
The Custom Business Services Unit offers to 200 of Ameritech's largest and most sophisticated customers custom communications and information technology solutions, as well as the full complement of Ameritech products, through a single, dedicated sales and service account team well versed in the sophisticated business needs of each customer.
The Enhanced Business Services Unit offers packaged communications solutions to more than 50,000 medium-sized and large business customers. These innovative solutions are tailored to the needs of specific industries, such as health care, education, manufacturing, government and financial services.
The Small Business Services Unit delivers innovative telecommunications solutions for approximately 1 million small businesses in the Ameritech region.
Customers of the Information Industry Services Unit are the more than 2,500 communications network and information services providers that buy services from Ameritech and use them as components in offerings to their own customers. This unit assists these customers as they use the Ameritech network and other innovative services that enable them to offer their customers new ways to obtain and share information.
The Leasing Services Unit supports the sale of Ameritech products and services by providing competitive, value-added financing, primarily to large and medium-sized businesses and government units. Ameritech has financed more than $1 billion worth of equipment and services since 1984.
The Long Distance Industry Services Unit provides network access through switched and special access services, as well as other service options such as end user billing, to approximately 140 long distance companies.
The Pay Phone Services Unit makes it easier for "people in motion" to communicate while on the go. Customers are the millions of callers who use Ameritech's more than 200,000 pay phones for coin, calling card and operator assisted calls, and over 100,000 agents who have Ameritech pay phones on their premises.
For local exchange carriers, including 263 in the Ameritech region, the Telephone Industry Services Unit provides products and services including access, usage, directory assistance, operator services and 800 data base access. This unit also manages the costs of the services that Ameritech purchases from the independent telephone companies in the region.
The International Unit focuses technological and financial strength on business opportunities in communications and information systems around the world. With interests in Poland, Norway, Hungary and New Zealand, this unit invests in entities that provide customers with cellular services, telephone services and pay TV services.
Supporting the 12 business units, the Network Services Unit builds and maintains an advanced network and information technology infrastructure to meet business unit service expectations, and those of their customers, while improving overall cost performance.
INVESTMENTS IN INTERNATIONAL MARKETS
In December 1993, Ameritech, with its partner, Deutsche Bundespost Telekom of Germany (Deutsche Telekom), Europe's largest communications carrier, announced a major expansion of its international presence with an investment in MATAV, the Hungarian telephone company. Ameritech and Deutsche Telekom will have equal ownership totaling approximately 30 percent of the company. The Hungarian government owns the majority of the remaining 70 percent. Ameritech and its partner were selected by the Hungarian government from among several other leading telecommunications companies. MATAV, which is the principal provider of local, long distance and international telephone service and the controlling shareowner in a cellular venture using GSM (Global System for Mobile Communications) digital technology, is the first state-owned telecommunications company to be privatized in Eastern and Central Europe.
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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document MATAV has approximately 1.5 million customer lines in a country of 10.5 million people. MATAV plans to double the number of lines by the year 2000. Ameritech may increase its investment in MATAV if the government proceeds with plans to reduce its holdings.
In September 1993, Ameritech and its partners in the Norwegian firm NetCom GSM inaugurated service to Oslo, the central and eastern areas of Norway and several other major cities, on the first privately supplied cellular communications system in the country. In 1992, Ameritech and Singapore Telecom, the government-owned telecommunications and postal operator in Singapore, agreed to acquire an equal interest in NetCom totaling an effective 49.9 percent. Their agreement with NetCom includes a management service contract under which Ameritech and Singapore Telecom provide their skills and expertise in constructing and operating the system. Nationwide coverage by the NetCom system is expected within four years. NetCom officials estimate that the usage of GSM service in Norway currently is growing at 35 percent per year and that service could be extended to 700,000 Norwegian customers over the next 10 years. Norway is one of the leaders in Europe in per capita use of mobile telephones.
In June 1992, an Ameritech consortium began operating a cellular system in Poland after being selected by that country's government in an international competitive bidding process. Ameritech and France Telecom, in partnership with Telekomunikacja Polska S.A., Poland's state-owned telephone company, created the joint venture, Polska Telefonia Komorkowa (PTK), to build the nationwide cellular system. The government's terms for the cellular license include 51 percent ownership of the joint venture by Telekomunikacja Polska, with Ameritech and France Telecom taking equal shares of the remainder. The cellular network developed by PTK, which markets the system under the name "Centertel," was serving Warsaw and 15 other major cities by the end of 1993 and is expected to cover the entire country within four years.
In September 1990, Ameritech and Bell Atlantic Corporation (Bell Atlantic) purchased Telecom Corporation of New Zealand Limited (New Zealand Telecom), New Zealand's state-owned principal supplier of domestic and international telecommunications services, including mobile telephone and directory services, to 1.5 million customers. At the time of the purchase, the New Zealand government required Ameritech and Bell Atlantic to agree to reduce their combined ownership position of New Zealand Telecom to not more than 49.9 percent of the then outstanding shares by September 12, 1994. After stock sales, which were completed by September 1993, Ameritech has a 24.8 percent interest in the company.
Ameritech and Bell Atlantic, along with two leading cable television system operators, Tele-Communications, Inc. and Time Warner's American Television and Communications unit, own a 51 percent interest in Sky Network Television Limited of New Zealand (Sky). Sky provides multi-channel pay television services in New Zealand, using three UHF channels for movies, sports and news programming in a number of areas including Greater Auckland, the country's largest metropolitan market, Wellington, the capital of New Zealand, and other cities. Ameritech owns a 24.5 percent interest in the partnership which holds the 51 percent interest in Sky.
OTHER BUSINESS DEVELOPMENTS
In December 1993, Ameritech entered into an agreement with General Electric Company (GE) under which Ameritech will invest approximately $472 million in a new company that will include the assets of GE Information Services, a global leader in electronic commerce and electronic data interchange (EDI). Ameritech's investment will be in the form of a four-year convertible debenture, which, if legal restrictions are removed, will convert into a 30 percent equity position. The new company will develop and market on a worldwide basis information services products that facilitate intercompany communication and electronic commerce, a business that is growing at a double-digit pace. Electronic commerce links companies and internal organizations to each other and to customers, suppliers, banks, financial services providers and distributors in virtual electronic trading communities to simplify day-to-day transactions. Typical electronic commerce applications involve order entry and processing, invoicing, electronic payment, inventory management, cargo tracking, E-mail, electronic catalogs and point-of-sale data gathering. The transaction is scheduled to close in 1994.
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Ameritech, in an arrangement with Household International, Inc. (Household), offers a no fee, dual-purpose credit card and calling card, the Ameritech CompleteSM Card. Consumers may use the card to charge telephone calls as well as retail goods and services. The Complete card has no annual fee, competitive interest rates, and a 10 percent cash back offer from Household for all calling card calls made by dialing "0" plus the telephone number. Under the arrangement between the companies, Household owns and finances the credit card receivables and Ameritech funds certain marketing expenses. Since its introduction in 1991, the Complete card has attracted approximately 700,000 cardholders.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document RESEARCH AND DEVELOPMENT
Ameritech owns an equal one-seventh interest in Bell Communications Research, Inc. (Bellcore) with the other six regional holding companies (collectively, the RHCs) formed in connection with the court-ordered divestiture described below. Bellcore furnishes the RHCs with technical assistance, such as network planning, engineering and software development (including applied research), provided most effectively on a centralized basis. Bellcore is also a central point of contact for coordinating the efforts of the RHCs in meeting national security and emergency preparedness requirements of the Federal government.
CONSENT DECREE AND LINE OF BUSINESS RESTRICTIONS
On August 24, 1982, the U.S. District Court for the District of Columbia (Court) approved and entered a consent decree entitled "Modification of Final Judgment" (Consent Decree), which arose out of antitrust litigation brought by the Department of Justice (DOJ), and which required AT&T to divest itself of ownership of those portions of its wholly owned Bell Companies that related to exchange telecommunications, exchange access and printed directory advertising, as well as AT&T's cellular mobile communications business. On August 5, 1983, the Court approved a Plan of Reorganization (Plan) outlining the method by which AT&T would comply with the Consent Decree. Pursuant to the Consent Decree and the Plan, effective January 1, 1984, AT&T divested itself of, by transferring to Ameritech, its 100 percent ownership of the exchange telecommunications, exchange access and printed directory advertising portions of the Ameritech landline telephone companies as well as a cellular mobile communications service company.
The Consent Decree, as originally approved by the Court in 1982, provided that the Bell Companies could not, directly or through an affiliated enterprise, provide interLATA telecommunications services or information services, manufacture or provide telecommunications products, or provide any product or service, except exchange telecommunications and exchange access service, that is not a natural monopoly service actually regulated by tariff. The Consent Decree allowed the Bell Companies to provide printed directory advertising and to provide, but not manufacture, customer premises equipment.
The Consent Decree provided that the Court could grant a waiver to a Bell Company or its affiliates to engage in an otherwise prohibited line of business upon a showing to the Court that there is no substantial possibility that the Bell Company could use its monopoly power to impede competition in the market it seeks to enter. The Court has, from time to time, granted waivers to Ameritech's landline telephone companies and the other Bell Companies to engage in various activities.
The Court's order approving the Consent Decree provided for periodic reviews of the restrictions imposed by it. Following the first triennial review, in decisions handed down in September 1987 and March 1988, the Court continued the prohibitions against Bell Company manufacturing of telecommunications products and provision of interLATA services. The rulings allowed limited provision of information services by transmission of information and provision of information gateways, but excluded generation or manipulation of information content. In addition, the rulings eliminated the need for a waiver for entry into non-telephone related businesses.
In April 1990, a Federal appeals court affirmed the Court's decision continuing the restriction on Bell Company entry into interLATA services and the manufacture of telecommunications equipment, but directed the Court to review its ruling that restricted RHC involvement in the information services business and to determine whether removal of the information services restriction would be in the public interest. In July 1991, the Court lifted the information services ban, but stayed the effect of the decision pending outcome of
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Members of Congress and the White House are intensifying efforts to enact legislative reform of telecommunications policy in order to stimulate the development of a modern national information infrastructure to bring the benefits of advanced communications and information services to the American people.
CAPITAL EXPENDITURES
Capital expenditures represent the single largest use of Company funds. By reinvesting in the telecommunications core business, the Company expects to be
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document able to introduce new products and services, respond to ever increasing competitive challenges and increase the operating efficiency and productivity of the network.
Capital expenditures by all the Ameritech companies since January 1, 1989, were approximately as follows:
Responding to the market needs for cost-effective technology, Ameritech's capital expenditures for landline telephone operations decreased $265 million in 1993. The cellular services portion of the Company's capital expenditures increased $106 million in 1993 resulting from plans to expand service and offer new data and digital services. Network modernization expenditures occurred in all the states where the Company provides service.
Expanding on the aggressive deployment plan it began in 1992, in January 1994 Ameritech unveiled a multi-billion dollar plan for a digital network to deliver video services. The Company is launching a digital video network upgrade, subject to certain regulatory approvals, that by the end of the decade will enable 6 million customers in its region to access interactive information and entertainment services, as well as traditional cable TV services, from their homes, schools, offices, libraries and hospitals. The video network upgrade will increase Ameritech's capital spending over the next 15 years by $4.4 billion, to a total of approximately $29 billion. The Company expects to fund most of this amount by reducing capital expenditures in its core landline business. Capital expenditures anticipated in the first three years of the video upgrade total approximately $400 million. The video network concept, along with other competitive concerns, is discussed on page 10.
Anticipated capital expenditures for the Company including all subsidiaries approximate $1.9 billion for 1994. This amount excludes any capital expenditures that may occur in 1994 related to the above described video network upgrade program.
CUSTOMER LINES
As of December 31, 1993, 66 percent of the Company's customer lines were served by digital switches and virtually all its lines had been converted to equal access. In addition, the Company had installed 802,000 miles of fiber-optic lines. The number of customer lines in the Ameritech region served by the Ameritech landline telephone companies increased 3.3 percent from 17.0 million at December 31, 1992 to 17.6 million at December 31, 1993, including business lines, which grew 6.1 percent from 5.1 million to 5.4 million, and residential line service, which increased 2 percent from 11.4 million to 11.6 million. As of December 31, 1993, there were 295 customer lines in service per landline telephone company employee.
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Sizable areas within the five-state region are served by nonaffiliated telecommunications companies. Ameritech does not furnish local service in those areas or localities served by such companies.
The following table sets forth the number of customer lines served by Ameritech at the end of the year:
CUSTOMER LINES IN SERVICE
REGULATORY ENVIRONMENT
FCC Regulatory Jurisdiction
The Ameritech landline telephone companies are subject to the jurisdiction of the Federal Communications Commission (FCC) with respect to intraLATA interstate services, interstate access services and other matters. The FCC prescribes for communications companies a uniform system of accounts, rules for apportioning costs between regulated and non-regulated services, depreciation rates (for interstate services) and the principles and standard procedures (separations procedures) used to separate property costs, revenues, expenses, taxes and reserves between those applicable to interstate services under the jurisdiction of the FCC and those applicable to services under the jurisdiction of the respective state regulatory authorities.
For certain companies, including the Ameritech landline telephone companies, interstate services regulated by the FCC are covered by a price cap plan. The plan creates incentives to improve productivity over benchmark levels in order to retain higher earnings. Price cap regulation sets maximum limits on the prices that may be charged for telecommunications services but also provides for a sharing of productivity gains. Earnings in excess of 12.25 percent will result in prospective reductions of the price ceilings on interstate services.
In January 1994, the FCC began a scheduled fourth-year comprehensive review of price cap regulation for local exchange companies.
Intrastate Rates and Regulation
The Ameritech landline telephone companies, in providing communications services, are also subject to regulation by state commissions in all of the states in which they operate with respect to intrastate rates and services, depreciation rates (for intrastate services), issuance of securities and other matters. The increasing effects of competitive market forces are being recognized by state legislatures and state regulatory agencies. Legislation has been passed in the Company's five state region which will permit reduced regulation or deregulation of telephone companies and services as they become competitive.
Intrastate rate restructuring and repricing activities have been or are being undertaken by all Ameritech landline telephone companies, which are intended to alter the traditional pricing methods by de-averaging and restructuring rates towards cost-based pricing. In addition, Ameritech has actively pursued a policy of incentive regulation at the state and federal levels. No general intrastate rate increases have been authorized for the landline telephone companies since 1985. Presently, there are no pending requests for general rate increases.
Unless otherwise indicated, the changes in revenues resulting from the principal changes in intrastate rates since January 1, 1990, referred to below, are stated on an annual basis and are estimates without adjustment for subsequent changes in volumes of business.
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In May 1992, the Illinois General Assembly voted to revise the Universal Telephone Service Protection Law of 1985. The new law enables the Illinois Commerce Commission (ICC) to approve alternative regulation of any type, subject to explicit policy goals. In addition, the law transfers authority over intraLATA equal access dialing arrangements to the ICC. In the realm of competitive pricing, the law requires that telephone companies providing essential facilities impute the rate charged for those facilities to themselves and that telephone companies are required to apportion overhead and embedded costs between competitive and noncompetitive services. The law remains in effect until July 1, 1999. In December 1992, Ameritech Illinois filed a petition with the ICC proposing a price regulation plan which features a price cap mechanism under which future rate changes would be subject to a predetermined formula reflecting factors such as inflation and productivity improvement. If the plan is adopted, increases in basic residential rates will be prohibited for a three-year period. A decision by the ICC is expected during the second quarter of 1994.
In March 1990, the Michigan Public Service Commission (MPSC) issued an order in which it adopted an incentive regulation plan authorizing Ameritech Michigan a return-on-equity range of 12.25 percent to 13.25 percent. The order also established the following sharing arrangement: earnings between 13.25 percent and 14.25 percent to be shared 25 percent with customers, 25 percent with Ameritech Michigan, and 50 percent dedicated to special construction programs; earnings between 14.25 percent and 17.25 percent to be shared 25 percent with customers, 50 percent with Ameritech Michigan, and 25 percent to construction; earnings above 17.25 percent to be shared 75 percent with customers and 25 percent with Ameritech Michigan. The MPSC action resulted in a
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document revenue reduction of about $18.5 million annually. Of this amount, $14.5 million resulted from the change in authorized return. The Michigan Telecommunications Act of 1991 (Act), which became effective as of January 1, 1992 for a four-year period, removes traditional rate-of-return regulation as of that date. It gives Ameritech Michigan flexibility to adjust prices and introduce new services without regulatory approval. The law capped basic local residential service rates at current levels for two years and allows for expedited approval of increases in such rates after that period if the increase does not exceed a formula related to the Consumer Price Index (CPI). The law allows new usage charges for local calls in excess of a monthly call allowance for most residential customers. Long distance (toll) rates are capped for the four-year life of the Act at those in effect at the end of 1991, unless carrier access charges are increased during that period. The Act instituted a streamlined system for changes to basic rates, depending on the size of the change. Rate changes which do not exceed 1 percent less than the change in the CPI may be put in place after 90 days notice unless the MPSC takes further action, but proposed rate changes greater than 1 percent less than the CPI change require MPSC approval. As a direct response to this new pricing flexibility, Ameritech Michigan immediately reduced intraLATA message toll rates by $20 million effective January 1, 1992. An additional reduction of over $20 million was implemented in December 1992. Two new calling plans were introduced in 1992. Overall, the reductions and discount plans will amount to a cut of more than 12 percent in prices residence and business customers pay for long distance calls within LATAs.
In September 1990, Ameritech Wisconsin adopted a Public Service Commission of Wisconsin (PSCW) approved innovative regulatory plan, effective October 1, 1990, under which the rate-of-return on equity is set at 13.75 percent and the company's revenues are not subject to refund. This trial plan, which was to remain in effect until December 31, 1993, has been extended while the PSCW reviews a new price regulation plan. In February 1994, bills were introduced in the Wisconsin legislature that, if passed, would replace rate-of-return regulation with price regulation for companies choosing it. In September 1992, Ameritech Wisconsin eliminated business Touch-Tone charges reducing local service revenues by approximately $4 million annually. In March 1993, the PSCW reached a decision concerning inside wire and moratorium refund issues. In April 1993, Ameritech Wisconsin commenced refunding $22.5 million to residence, business customers and interexchange carriers in the form of credits and rate reductions.
In January 1993, the Public Utilities Commission of Ohio (PUCO) adopted new rules governing the rates and services of local exchange companies, including a process to change rates with faster, less tedious PUCO review. The new guidelines established a procedure for companies to file individual plans for alternative regulation. In June 1993, Ameritech Ohio filed its "Advantage Ohio" price regulation plan with the PUCO. Under the plan, future overall rate changes would be subject to price ceilings based on inflation, Ameritech Ohio's productivity and service quality, and significant tax law or accounting rule changes. The
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10 plan will also provide for the ability to flexibly price competitive services and discretionary services within the boundary of the price ceilings. The proposed plan will include significant infrastructure investment and pricing commitments. The PUCO's decision on the plan is expected in 1994.
As a result of an agreement on a settlement with the Indiana Utility Regulatory Commission (IURC), Touch-Tone rates were reduced by $6 million in 1992. In Indiana, state law permits the IURC to adopt alternatives to rate-of-return regulation. In February 1994, Ameritech Indiana and consumer representatives announced a wide-ranging agreement to speed development of an advanced communications system in Indiana, make Indiana a national leader in the use of technology to improve education, provide Ameritech regulatory flexibility, remove the cap on earnings, reduce local phone charges, and cap basic rates for three years. The agreement, reached in settlement of Ameritech Indiana's "Opportunity Indiana" regulatory reform initiative, which was proposed in May 1993, still requires approval of the IURC.
ACCESS CHARGE ARRANGEMENTS
Interstate Access Charges
The Ameritech landline telephone companies provide access services for the origination and termination of interstate telecommunications. The access charges are of three types: common line, switched access and trunking.
The common line portion of interstate revenue requirements are recovered through monthly subscriber line charges and per minute carrier common line charges. The carrier common line rates include recovery of transitional and long-term support payments for distribution to other local exchange carriers. Transitional support payments were made over a four-year period which ended on April 1, 1993. Long-term support payments will continue indefinitely.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Effective January 1, 1994, rates for local transport services were restructured and a new "trunking" service category was created. Trunking services consist of two types: those associated with the local transport element of switched access and those associated with special access. Trunking services associated with switched access handle the transmission of traffic between a local exchange carrier's serving wire center and an Ameritech end office where local switching occurs. Trunking services associated with special access handle the transmission of telecommunications services between any two customer-designated premises or between a customer-designated premise and an Ameritech end office where multiplexing occurs. High volume customers generally use the flat-rated dedicated facilities associated with special access, while usage-sensitive rates apply for lower-volume customers that utilize a common switching center.
Local transport rate elements for switched services assess a flat monthly rate and a mileage-sensitive rate for the physical facility between the customer's point of termination and the end office, a usage-sensitive and mileage-sensitive rate assessed for the facilities between the end office through the access tandem to the customer's serving wire center, and a minute of use charge assessed to all local transport. The flat rate transport rates and structure generally mirror special access rate elements. Customers can order direct transport between the serving wire center and the access tandem or end office, and tandem switched transport between the access tandem and the end office.
Special access charges are monthly charges assessed to customers for access to interstate private line service. Charges are paid for local distribution channels, interoffice mileage and optional features and functions.
State Access Charges
Compensation arrangements required in connection with origination and termination of intrastate communications by interexchange carriers are subject to the jurisdiction of the state regulatory commissions. The Ameritech landline telephone companies currently provide access services to interexchange carriers authorized by the state regulatory commissions to provide service between local serving areas pursuant to tariffs which generally parallel the terms of the interstate access tariffs. In the event interexchange carriers are authorized by the state regulatory commissions to provide service within their local serving areas, the
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Ameritech landline telephone companies intend to provide access service under the same tariffs applicable to intrastate services provided by such carriers between the landline telephone companies' local serving areas.
Separate arrangements govern compensation between Ameritech telephone companies and independent telephone companies for jointly provided communications within Ameritech's local serving areas and associated independent telephone company exchanges. These arrangements are subject to the jurisdiction of the FCC and the state regulatory commissions.
COMPETITION
Regulatory, legislative and judicial decisions and technological advances, as well as heightened customer interest in advanced telecommunications services, have expanded the types of available communications services and products and the number of companies offering such services. Market convergence, already a reality, is expected to intensify.
The FCC has taken a series of steps that are expanding opportunities for companies to compete with local exchange carriers in providing services under the FCC's jurisdiction. In September 1992, the FCC mandated that local exchange carriers provide network access for special transmission paths to competitive access providers, interexchange carriers and end users. In February 1993, Ameritech filed a tariff with the FCC, which was effective in May, making possible this type of interconnection. In August 1993, the FCC issued an order that permits competitors to interconnect to local telephone company switches. Under the new rules, certain telephone companies must allow all interested parties to terminate their switched access transmission facilities at telephone company central offices, wire centers, tandem switches and certain remote nodes. Ameritech filed a tariff in November 1993 to effect that change in February 1994.
Ameritech is seeking opportunities to compete on an equal footing. Although the Company is barred from providing interLATA and nationwide cable services, its competitors are not. Cellular telephone and other wireless technologies are poised to bypass Ameritech's local access network. Cable providers, who currently serve more than 80 percent of American homes, could provide telephone service and have expressed their desire to do so. Certain interexchange carriers and competitive access providers have demonstrated interest in providing local exchange service. Ameritech's plan is to facilitate competition in the local
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document exchange business in order to compete in the total communications marketplace.
CUSTOMERS FIRST: AMERITECH'S ADVANCED UNIVERSAL ACCESS PLAN
In 1993, Ameritech embarked on a long-range restructuring with the intent of dramatically changing the way it serves its customers, and in the process altered its corporate framework, expanding the nature and scope of its services and supporting the development of a fully competitive marketplace. In March, Ameritech filed a plan with the FCC to change the way local telecommunications services are provided and regulated and to furnish a policy framework for advanced universal access to modern telecommunications services -- voice, data and video information. This effort is called the Customer First Plan.
Ameritech proposes to facilitate competition in the local exchange business by allowing other service providers to purchase components of its network and to repackage them with their own services for resale, in exchange for the freedom to compete in both its existing and currently prohibited businesses. Ameritech has requested regulatory reforms to match the competitive environment as well as support of its efforts to remove restraints, such as the interLATA service restriction, which currently restrict its participation in the full telecommunications marketplace. In addition, the Company asks for more flexibility in pricing new and competitive services and replacement of caps on earnings with price regulation. Under the plan, customers would be able to choose from competitive providers for local service as they now can choose a provider for interexchange service.
To demonstrate conclusively the substantial customer and economic benefits of full competition, in December 1993 Ameritech proposed a trial of its plan, beginning in 1995. The Company has petitioned the DOJ to recommend Federal District Court approval of a waiver of the long distance restriction of the Consent Decree so that Ameritech can offer interexchange service. At the same time, Ameritech would facilitate the
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12 development of local communications markets by unbundling the local network and integrating competitors' switches. The trial would begin in Illinois in the first quarter of 1995 and would last indefinitely. Other states could be added over time. If the trial is approved by the DOJ, the request must be acted on by the Court which retains jurisdiction over administering the terms of the Consent Decree. In February 1994, Ameritech filed tariffs with the ICC that propose specific rates and procedures to open the local network in Illinois. Approval could take up to 11 months.
The Company has received broad support for the plan from Midwest elected officials, national and Midwest business leaders and education, health industry, economic development and consumer leaders. The national and local offices of the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) also support the plan.
Ameritech has alternative regulatory proposals pending with the state regulatory commissions in its region to support implementation of the plan. These proposals are discussed on pages 7 and 8 in Intrastate Rates and Regulation.
MICHIGAN INTRALATA LONG DISTANCE SERVICE ORDER
On July 31, 1992, MCI Telecommunications Corporation (MCI) filed a complaint with the MPSC seeking "1+" intraLATA dialing parity for all toll competitors of Ameritech Michigan alleging that current dialing arrangements violated the Michigan Telecommunications Act. Callers in Michigan must currently dial "10" plus a three digit access code to use the services of Ameritech's intraLATA toll competitors. The MPSC dismissed MCI's complaint finding no statutory violations. However, as a result of subsequent proceedings in the case, on February 24, 1994, the MPSC issued an order requiring implementation of "1+" intraLATA toll dialing parity in Michigan. The effective date of the order is to be concurrent with receipt of relief from the Consent Decree interLATA service restriction sought under the Customers First Plan, but in any event, no later than January 1, 1996. The order also called for establishing an industry task force to consider all factors necessary to establish full intraLATA toll competition. The task force will develop a deployment schedule, identify the costs for deployment and determine the methodology to recover those costs. The task force is required to file its findings with the MPSC by September 23, 1994.
Ameritech believes that the MPSC has not considered all relevant factors in rendering its decision. Accordingly, Ameritech Michigan has filed a petition for a rehearing with the MPSC as a first step in bringing further clarification to the issues.
In 1993, Ameritech Michigan recorded $695.8 million of long distance revenue, of which approximately $634 million resulted from intraLATA long distance service. Customer response to dialing parity and the effect on Ameritech Michigan's intraLATA long distance revenue is uncertain. However,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Ameritech Michigan estimates that approximately 50% of any long distance revenue lost, which could be significant, would be offset by additional access revenue.
AMERITECH'S VIDEO NETWORK CONCEPT
In January 1994, Ameritech filed plans with the FCC to construct a digital video network upgrade that could reach 6 million customers by the end of the decade. Ameritech is pursuing alliances and partnerships that will position it as a key participant in the emerging era of interactive video experiences. Pending FCC approval of Ameritech's plan and clearing of other regulatory hurdles, the construction of the first phase of the network could begin as soon as the fourth quarter of 1994. The new network, which will be separate from Ameritech's core local communications network, could be expanded to approximately 1 million additional Midwest customers in each of the next five years.
Ameritech will be only one of many users of the broadband network. A multitude of competing video information providers, businesses, institutions, interexchange carriers and video telephony customers will also have access to the technology.
With the new system, customers will have access to a virtually unlimited variety of programming sources. These will include basic broadcast services, similar to today's cable service, and advanced interactive services
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13 such as video on demand, home healthcare, interactive educational software, distance learning, interactive games and shopping, and a variety of other entertainment and information services that can be accessed from homes, offices, schools, hospitals, libraries and other public and private institutions.
CABLE/TELCO CROSSOWNERSHIP BAN
In November 1993, Ameritech filed motions in two federal courts seeking freedom from the ban on providing video services in its own service area. The Company asked U.S. District Courts in Illinois and Michigan to declare unconstitutional the provisions of the Cable Act of 1984 that bar the RHCs from providing cable TV service in areas where they hold monopolies on local phone service. Only Bell Atlantic has won the right to enter the video services business. The U.S. District Court that permitted entry to Bell Atlantic denied the requests of Ameritech and the other RHCs.
Legislation has been introduced in Congress that would repeal the crossownership ban.
EMPLOYEE RELATIONS
As of December 31, 1993, the Ameritech companies employed 67,192 persons, a decrease from 71,300 at December 31, 1992. During 1993, approximately 1,700 management employees left the payroll as a result of voluntary and involuntary workforce reduction programs and 900 nonmanagement employees took advantage of a Supplemental Income Protection Program (SIPP) established under labor agreements to voluntarily exit the workforce. Additional restructuring was done by normal attrition. Some reductions were partially offset by workforce additions due to acquisitions and growth.
On March 25, 1994, Ameritech announced that it will reduce its nonmanagement workforce by 6,000 employees by the end of 1995. Under terms of agreements between Ameritech, the CWA and the IBEW, Ameritech is implementing an enhancement to the Ameritech pension plan by adding three years to the age and the net credited service of eligible nonmanagement employees who leave the business during a designated period that ends in mid-1995. In addition, Ameritech's network business unit is offering financial incentives under terms of its current contracts with the CWA and IBEW to selected nonmanagement employees who elect to leave the business before the end of 1995. Reduction of the workforce results from technological improvements, consolidations, and initiatives identified by management to balance its cost structure with emerging competition.
Approximately 48,000 employees are represented by unions. Of those so represented, about 71 percent are represented by the CWA and about 29 percent are represented by the IBEW, both of which are affiliated with the AFL-CIO.
In July and August 1993, the Ameritech landline telephone companies and Ameritech Services, the wholly owned centralized procurement and support subsidiary of the landline telephone companies, reached agreement with the two unions on a workforce transition plan for assigning union-represented employees to the newly established business units. The separate agreements with the CWA and the IBEW extend existing union contracts with the landline telephone companies and Ameritech Services to the new units. The pacts address a number of force assignment, employment security and union representation issues. In 1995, when union contracts are due to expire, the parties will negotiate regional
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document contracts.
ITEM 2. PROPERTIES.
The properties of the Company do not lend themselves to description by character and location of principal units. At December 31, 1993, central office equipment represented 37 percent of its consolidated investment in telecommunications plant; land and buildings (occupied principally by central offices) represented 11 percent; telecommunications instruments and related wiring and equipment, including private branch exchanges, substantially all of which are on the premises of customers, represented 2 percent; and connecting lines which constitute outside plant, the majority of which are on or under public roads, highways or streets and the remainder of which are on or under private property, represented 40 percent.
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Substantially all of the installations of central office equipment and administrative offices are located in buildings owned by the Ameritech landline telephone companies situated on land held in fee. Many garages and business offices and some installations of central office equipment and administrative offices are in rented quarters.
ITEM 3. LEGAL PROCEEDINGS.
PRE-DIVESTITURE CONTINGENT LIABILITIES AGREEMENT
The Plan provides for the recognition and payment of liabilities that are attributable to pre-divestiture events (including transactions to implement the divestiture) but that do not become certain until after divestiture. These contingent liabilities relate principally to litigation and other claims with respect to the former Bell System's rates, taxes, contracts, equal employment matters, environmental matters and torts (including business torts, such as alleged violations of the antitrust laws).
With respect to such liabilities, AT&T and the Bell Companies will share the costs of any judgment or other determination of liability entered by a court or administrative agency, the costs of defending the claim (including attorneys' fees and court costs) and the cost of interest or penalties with respect to any such judgment or determination. Except to the extent that affected parties may otherwise agree, the general rule is that responsibility for such contingent liabilities will be divided among AT&T and the Bell Companies on the basis of their relative net investment (defined as total assets less reserves for depreciation) as of the effective date of divestiture. Different allocation rules apply to liabilities which relate exclusively to pre-divestiture interstate or intrastate operations.
Although complete assurance cannot be given as to the outcome of any litigation, in the opinion of the Company's management any monetary liability or financial impact to which the Company would be subject after final adjudication of all of the foregoing actions would not be material in amount to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders in the fourth quarter of the fiscal year covered by this report.
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EXECUTIVE OFFICERS OF THE COMPANY (AS OF MARCH 1, 1994)
The following table sets forth, as to the executive officers of Ameritech, their ages, their offices with Ameritech and the period during which they have held such offices.
------* Member of the Board of Directors, Chairman of the Executive Committee
** Member of the Board of Directors and the Finance Committee
*** Member of the Board of Directors
+ Member of the Board of Directors, the Finance Committee and the Executive Committee
Prior to the most recent election to office with Ameritech, the above officers held high-level managerial positions within Ameritech for more than the past five years, except for Mr. Bruce, Mr. Edwardson, Mr. Edson, Mr. Welsh and Mr. Campbell. Prior to joining Ameritech, Mr. Bruce was a four-term member of the U.S. House of Representatives from Illinois. Mr. Edwardson was Chief Financial Officer of United (Airlines) Employee Acquisition Corp. from 1990 to 1991 and Executive Vice President and Chief Financial and Administrative Officer of IMCERA Group, Inc. from 1989 to 1990. Mr. Edson was with the Office of the U.S. Trade Representative as chief of staff and counselor and then as general counsel from 1989 to 1993. Mr. Welsh was chief legal officer for the City of Chicago from 1989 to 1993 and, prior to that, was an attorney with Mayer, Brown and Platt, a Chicago-based law firm. Mr. Campbell was President of Columbia TriStar Home Video, a Sony Pictures Entertainment Company, from 1989 to 1994.
Mrs. Thornton and Mr. Rutigliano have announced plans to retire in April and June 1994, respectively.
Officers are elected annually but may be removed at any time at the discretion of the Board of Directors.
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PART II
ITEMS 5 THROUGH 8.
There were 956,338 owners of record of Ameritech Common Stock as of December 31, 1993. Ameritech Common Stock is listed on the New York, Boston, Chicago, Pacific, Philadelphia, London, Tokyo, Amsterdam, Basel, Geneva and Zurich stock exchanges. The rest of the information required by these items is included in the Financial Review section on pages 16 through 22, pages 24 through 37, and on page 40 of the Company's annual report to security holders for the year ended December 31, 1993. Such information is incorporated by reference pursuant to General Instructions G(2).
In March 1994, Ameritech announced plans to reduce its nonmanagement workforce by 6,000 employees by the end of 1995. This program, discussed on page 11, will result in a charge to first quarter 1994 earnings of approximately $530 million, or $335 million and $.60 per share on an after-tax basis. A significant portion of the program cost will be funded by the pension plan, whereas financial incentives to be paid by Ameritech will require company funds of approximately $140 million. Settlement gains, which result from terminated employees accepting lump-sum payments from the pension plan, will be reflected in income as employees leave the payroll. Ameritech believes this program will reduce its employee-related costs by approximately $300 million on an annual basis upon completion of this program.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
No disagreements with accountants on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure occurred during the period covered by this annual report.
PART III
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ITEMS 10 THROUGH 13.
Information regarding executive officers required by Item 401 of Regulation S-K is furnished in a separate disclosure in Part I of this report since the Company did not furnish such information in its definitive proxy statement dated March 1, 1994, prepared in accordance with Schedule 14A.
The other information required by these items is included in the Company's definitive proxy statement in the last two paragraphs on the first page, on pages 2 through 4, in the section on Compensation of Directors on page 6, in the section on Officer and Director Stock Ownership on page 7, and in the section on Executive Compensation on pages 10 through 18, and is incorporated herein by reference pursuant to General Instructions G(3).
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as a part of the report:
* Incorporated herein by reference to the appropriate portions of the Company's annual report to security holders for the year ended December 31, 1993
Schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable. Separate financial statements of subsidiaries not consolidated and 50 percent or less owned persons are omitted since no such entity constitutes a "significant subsidiary" pursuant to the provisions of Regulation S-X, Article 3-09.
Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 15
18
16
19
17
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Ameritech will furnish, without charge, to a security holder upon request a copy of the annual report to security holders and the proxy statement, portions of which are incorporated by reference, and will furnish any other exhibit at cost.
(b) Reports on Form 8-K:
On December 29, 1993, the Company filed a Current Report on Form 8-K dated December 15, 1993, to report on Item 5, Other Events, approval of a two-for-one split in the form of a 100 percent stock dividend of the Company's Common Stock, payable to owners of record at the close of business on December 31, 1993.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document By /s/ BETTY F. ELLIOTT ------(Betty F. Elliott, Vice President and Comptroller)
March 30, 1994
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
PRINCIPAL EXECUTIVE OFFICER: R. C. Notebaert* President and Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER: J. A. Edwardson* Executive Vice President and Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER: B. F. Elliott *By /s/ BETTY F. ELLIOTT Vice President and ------Comptroller (Betty F. Elliott, for herself and as Attorney-in-Fact) DIRECTORS: R. H. Brown* D. C. Clark* R. M. Gillett* H. H. Gray* March 30, 1994 J. A. Henderson* S. B. Lubar* L. M. Martin* J. B. McCoy* R. C. Notebaert* J. D. Ong* A. B. Rand* L. J. Rutigliano* W. L. Weiss* 19
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors Ameritech Corporation
We have audited in accordance with generally accepted auditing standards the financial statements included in Ameritech Corporation's annual report to shareowners incorporated by reference in this Form 10-K, and have issued our report thereon dated January 28, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The financial statement schedules listed in Item 14(a)(2) are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Chicago, Illinois January 28, 1994
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AMERITECH CORPORATION SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT (MILLIONS OF DOLLARS)
NOTES TO SCHEDULE V
(a) Additions, other than to Buildings, include material purchased from Ameritech Services, Inc., a wholly owned centralized procurement subsidiary of the Ameritech landline telephone companies (see Notes to Consolidated Financial Statements in the Company's annual report to security holders for the year ended December 31, 1993). Additions shown also include (1) the original cost (estimated if not known) of reused material, which is concurrently credited to Material and Supplies, and (2) Interest during construction. Transfers between the classifications listed are included in Column C.
(b) Items of telecommunications plant when retired or sold are deducted from the property accounts at the amounts at which they are included therein, estimated if not known.
(c) Comprised principally, for all years, of the reclassification between plant categories.
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AMERITECH CORPORATION
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SCHEDULE VI -- ACCUMULATED DEPRECIATION (MILLIONS OF DOLLARS)
NOTES TO SCHEDULE VI
(a) The Company's provision for depreciation is based principally on the straight-line remaining life and the straight-line equal life group methods of depreciation applied to individual categories of plant with similar characteristics. The Company is allowed by regulatory authorities to use reserve deficiency amortization in conjunction with the remaining life method. For years 1993, 1992 and 1991, depreciation expressed as a percentage of average depreciable plant was 7.4 percent, 7.2 percent and 7.3 percent, respectively.
(b) The Company's amount for additions charged to expenses (column C above) does not agree with the amounts reported on the face of the consolidated statements of income under the caption "depreciation and amortization." The difference relates primarily to the amortization of intangibles.
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AMERITECH CORPORATION SCHEDULE VIII -- ALLOWANCE FOR UNCOLLECTIBLES (MILLIONS OF DOLLARS)
------(a) Includes principally amounts previously written off which were credited directly to this account when recovered and amounts related to interexchange carrier receivables which are being billed by the Company.
(b) Amounts written off as uncollectible.
AMERITECH CORPORATION SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION (MILLIONS OF DOLLARS)
------Note: All other possible applicable items did not meet the one percent sales test and therefore are excluded.
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26 EXHIBIT INDEX
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29
30
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 EXHIBIT 10bb-1
FIRST AMENDMENT TO LONG TERM INCENTIVE PLAN (As Amended and Restated Effective as of January 1, 1992)
Pursuant to the second sentence of paragraph I-10 of the Ameritech Long Term Incentive Plan (the "Plan"), the Compensation Committee of the Board of Directors of Ameritech Corporation hereby amends the Plan as follows:
1. By adding after the words "For all purposes of the Plan, other than Part VI" in the third sentence of paragraph II-1 of the Plan the following: "and except as provided in the fourth sentence of this paragraph II-1,".
2. By adding the following sentence after the third sentence of paragraph II-1 of the Plan: "If a Participant elects to pay the purchase price upon exercise of a Stock Option by delivery of the Participant's irrevocable instructions to a broker to promptly pay the option price upon receipt of the certificate representing the shares as permitted by paragraphs II-3 and III-3 (sometimes referred to as a "Cashless Exercise"), the "Fair Market Value" of each share of Common Stock purchased upon exercise of such Stock Option shall be the price at which such shares are sold by such broker in such Cashless Exercise."
* * * * * *
The foregoing is a true and correct copy of an amendment adopted by the Compensation Committee of the Board of Directors of Ameritech Corporation on August 20, 1993.
/s/ BRUCE B. HOWAT ------Bruce B. Howat Corporate Secretary
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TENTH AMENDMENT TO AMERITECH MANAGEMENT SUPPLEMENTAL PENSION PLAN
RESOLVED, that pursuant to the authority granted to this Committee, the Ameritech Management Supplemental Pension Plan (the "Supplemental Plan"), is hereby amended by adding the following as Supplement A to the Supplemental Plan, effective as of the date or dates indicated therein:
"SUPPLEMENT A TO AMERITECH MANAGEMENT SUPPLEMENTAL PENSION PLAN
Anything in the Supplemental Plan to the contrary notwithstanding, (A) any Eligible Employee (as that term is defined in Supplement G of the Pension Plan) who terminates employment between September 24, 1991 and December 30, 1991, who is eligible for a deferred vested pension under Paragraph 1(b) of Section 4 of the Pension Plan and who elects under Subsection 3.5 of the Supplemental Plan to receive his supplemental pension benefits under the Supplemental Plan in a lump sum, or (B) any Eligible Employee (as that term is defined in Supplement G of the Pension Plan) who retires between December 15, 1991 and December 30, 1991, who is eligible for a service pension under Paragraph 1(a) of Section 4 of the Pension Plan and who elects under Subsection 3.5 of the Supplemental Plan to receive his supplemental pension benefits under the Supplemental Plan in a lump sum, shall be entitled to make such election in writing under Subsection 3.5 of the Supplemental Plan no later than December 10, 1991, in lieu of the election date or dates otherwise specified with respect to such Eligible Employee in Subsection 3.5 of the Supplement Plan."
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 EXHIBIT 10ii-4
ELEVENTH AMENDMENT
TO
AMERITECH MANAGEMENT SUPPLEMENTAL PENSION PLAN
RESOLVED, that pursuant to the authority granted to this Committee, the Ameritech Management Supplemental Pension Plan (the "Plan") is hereby amended as follows effective as of April 1, 1993:
1. To add the following as the second sentence of Section 2: "An individual shall also commence participating in the Supplemental Plan as of the first date on which such individual ceases to be a Senior Management Employee (as defined in the Ameritech Senior Management Retirement and Survivor Protection Plan) if such individual is a former Senior Management Employee who is no longer entitled to a supplemental benefit under the Ameritech Senior Management Retirement and Survivor Protection Plan by reason of the final sentence of subsection 2.1 of that Plan and such individual's Modified Compensation (as defined in subsection 3.1) includes awards or salary deferrals as described in item (ii) of subsection 3.1."
2. To delete subsection 3.1(a) in its entirety and substitute the following therefor:
"(a) the amount of the benefit payment (expressed in the form of the benefit payable to or on account of the individual under the Pension Plan) that would have been payable to or on account of the individual under the Pension Plan as of that date, determined without regard to the limitations imposed by either section 401(a)(17) or 415 of the Code, and determined as if the individual's compensation under the Pension Plan were equal to the individual's Modified Compensation (as defined below);" and
3. To add the following as the final paragraph of subsection 3.1:
"An individual's Modified Compensation as of any date shall be equal to the amount that would be the individual's compensation as of the date under the Pension Plan if it included:
(i) the amount of any incentive compensation or bonus deferred under the Ameritech Senior Management Supplemental Savings and Deferral Plan, and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2 (ii) solely with respect to any former Senior Management Employee (as defined in the Ameritech Senior Management Retirement and Survivor Protection Plan) who is no longer entitled to a supplemental benefit under the Ameritech Senior Management Retirement and Survivor Protection Plan by reason of the final sentence of subsection 2.1 of that Plan, the amount of such individual's actual awards under Ameritech's or an Employer's Senior Management Short Term Incentive Plan, and the amount of any salary deferrals under the Ameritech Senior Management Supplemental Savings and Deferral Plan, (all without regard to any deferral of such incentive compensation, bonus, awards or salary under the Ameritech Senior Management Supplemental Savings and Deferral Plan)."
I, Carol J. Ogren, Secretary of the Ameritech Benefit Plan Committee, hereby certify that the foregoing is a correct copy of a resolution adopted by the Ameritech Benefit Plan Committee on April 22, 1993, and that the resolution has not been changed or repealed.
/s/ CAROL J OGREN ------Secretary
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 10ii-5
TWELFTH AMENDMENT TO AMERITECH MANAGEMENT SUPPLEMENTAL PENSION PLAN
RESOLVED, that pursuant to the authority granted to this Committee, the Ameritech Management Supplemental Pension Plan (the "Supplemental Plan"), is hereby amended as follows effective as of the date or dates indicated:
1. Effective as of August 18, 1993, to delete the term "30th" from subsection 3.5(d) of the Supplemental Plan and to substitute therefor the term "60th"; and
2. Effective immediately, to add the following at the end of subsection 3.1 of the Supplemental Plan:
"The term "Affected Participant" as used in this subsection shall mean any former Senior Management Employee (as defined in the Ameritech Senior Management Retirement and Survivor Protection Plan (the "Senior Management Plan")) who received a lump sum payment of his interest under the Senior Management Plan pursuant to Supplement A of the Senior Management Plan and who is now participating in this Supplemental Plan.
The benefits to which an Affected Participant or his surviving spouse is otherwise entitled under this Supplemental Plan in the form of a lump sum shall be reduced by an amount based upon the amount paid to the Affected Participant or to the grantor trust established by the Affected Participant in accordance with Supplement A of the Senior Management Plan, and the amount withheld therefrom for the payment of taxes, but calculated using the interest assumption then being used to calculate lump sum payments under the Pension Plan. No adjustment shall be made to the amount of the reduction to reflect earnings or losses on amounts previously paid. If an Affected Participant's or surviving spouse's benefits under the Supplemental Plan are not paid in the form of a lump sum, the amount of such benefits shall be determined by converting the net lump sum that would be payable in accordance with the first sentence of this paragraph (after reduction by the amount specified above) to an actuarially equivalent amount based upon the rates, tables and factors then utilized under the Supplemental Plan to determine lump sum amounts. If the amount of the reduction exceeds
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2 the benefits to which the Affected Participant or his surviving spouse would otherwise be entitled under the Supplemental Plan, no benefits shall be paid to such Affected Participant or surviving spouse under the Supplemental Plan and no amount shall be owed from the Affected Participant or surviving spouse to the Supplemental Plan or Ameritech."
I, Carol J. Ogren, Secretary of the Ameritech Benefit Plan Committee, hereby certify that the foregoing is a correct copy of a resolution adopted by the Ameritech Benefit Plan Committee on September 23, 1993, and that the resolution has not been changed or repealed.
/s/ CAROL J. OGREN ------Secretary
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 10jj-3
SECOND ADMINISTRATIVE AMENDMENT TO AMERITECH SENIOR MANAGEMENT RETIREMENT AND SURVIVOR PROTECTION PLAN
Pursuant to authority reserved to Ameritech Corporation, the Ameritech Senior Management Retirement and Survivor Protection Plan (As Amended and Restated Effective as of January 1, 1992) (the "Plan") is hereby amended effective as of April 1, 1993, as follows:
1. To delete the last sentence of subsection 2.1 in its entirety and to substitute the following therefor: "A former Senior Management Employee who on or after April 1, 1993 no longer is at a level or holds a position described in the preceding sentence shall cease to be a Plan Participant for all purposes under the Plan effective as of the date such individual ceases to be at such a level or hold such a position; provided, that any former Senior Management Employee who ceased to be a Senior Management Employee before April 1, 1993 shall cease to be a Plan Participant for all purposes under this Plan when the amount of any salary deferrals, any awards deferred under the annual bonus plans of the Company or a Subsidiary and any actual awards under the Incentive Plans (without regard to any deferral of such salary or awards under the Ameritech Senior Management Supplemental Savings and Deferral Plan) earned or deferred while such individual was a Senior Management Employee shall no longer be included in such individual's Modified Compensation as defined in subsection 3.1 of this Plan;" and
2 2. To delete Section 7.3 in its entirety and to substitute the following therefor: "7.3. Participation Rights. No action under this Section 7 shall reduce or impair the interests of individuals in benefits being paid under the Plan at the date of amendment or termination, as the case may be."
Dated: March _____, 1993 AMERITECH CORPORATION
By:/s/Martha L. Thornton ------Senior Vice President - Human Resources
Concur: /s/ Thomas P. Hester
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ------Executive Vice President and General Counsel
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FOURTH ADMINISTRATIVE AMENDMENT TO AMERITECH SENIOR MANAGEMENT RETIREMENT AND SURVIVOR PROTECTION PLAN (As Amended and Restated Effective as of January 1, 1992)
Pursuant to authority reserved to Ameritech Corporation, the Ameritech Senior Management Retirement and Survivor Protection Plan (As Amended and Restated Effective as of January 1, 1992) (the "Plan") is hereby amended effective as of August 18, 1993 to delete the term "30th" from paragraph (c) of subsection 6.6 of the Plan and to substitute therefor the term "60th."
Dated: October 21, 1993
AMERITECH CORPORATION
Concur: By: /s/ Martha L. Thornton ------Senior Vice President - /s/ Thomas P. Hester Human Resources ------Executive Vice President and General Counsel
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 10mm
AGREEMENT REGARDING CHANGE IN CONTROL
This Agreement entered into as of the 19th day of January, 1994 by and between Ameritech Corporation, a Delaware corporation (the "Company"), and Richard C. Notebaert (the "Executive"),
WITNESSETH THAT:
WHEREAS, the Company wishes to induce the Executive to remain in its employ, to provide fair and equitable treatment and a competitive compensation package to the Executive, and to assure continued attention of the Executive to his duties without any distraction arising out of uncertain personal circumstances in a change in control environment; and
WHEREAS, the Company recognizes that in the event of a change in control of the Company it is likely that the Executive's authorities, duties and responsibilities would be substantially altered; and
WHEREAS, the Company and the Executive accordingly desire to enter into this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the date hereof and shall continue through December 31, 1994; provided, however, that on such date and on each December 31 thereafter, the Term of this Agreement shall automatically be extended for one additional year (but not beyond the Executive's attainment of age 65) unless, not later than the preceding November 1 the Company shall have given notice that it does not wish to extend the Term; and provided, further, that if a Change in Control (as defined in paragraph 2 below) shall have occurred during the original or any extented Term of this Agreement, the Term of this Agreement shall continue for a period of twenty-four months beyond the month in which such Change in Control occurs, but not beyond the Executive's attainment of age 65.
2. Change in Control. For purposes of this Agreement, the term "Change in Control" means a change in the beneficial ownership of the Company's voting stock or a change in the composition of the Company's Board of Directors which occurs as follows:
2 (a) any "person" (as such term is used in Section 13(d) and 14(d)(2)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or
(ii) the Executive or any person acting in concert with the Executive
is or becomes a beneficial owner (as defined in rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of stock of Company representing 20% or more of the total voting power of the Company's then outstanding stock; provided, however, that this subparagraph (a) shall not apply to any tender offer made pursuant to an agreement with the Company approved by the Company's Board of Directors and entered into before the offeror has become a beneficial owner of stock of the Company representing 5% or more of the combined voting power of the Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person making the offer owns or has accepted for payment stock of the Company representing 20% or more of the total voting power of the Company's then outstanding stock; provided, however, that this subparagraph (b) shall not apply to any tender offer made pursuant to an agreement with the Company approved by the Company's Board of Directors and entered into before the offeror has become a beneficial owner of stock of the Company representing 5% or more of the combined voting power of the Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a majority of the Board of Directors comprised as follows: individuals who at the beginning of such period constitute the Board of Directors and any new director(s) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-third (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; or
(d) the stockholders of the Company approved a merger or consolidation of the Company with any other company other than:
2
3 (i) a merger or consolidation which would result in the Company's voting stock outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document converted into voting stock of the surviving entity) more than 70% of the combined voting power of the Company's or such surviving entity's outstanding voting stock immediately after such merger or consolidation; or
(ii) a merger or consolidation which would result in the directors of the Company who were directors immediately prior thereto continuing to constitute at least 50% of the directors of the surviving entity immediately after such merger or consolidation.
For purposes of subparagraph (d) above, the phrase "surviving entity" shall mean only an entity in which all the Company's stockholders who are stockholders immediately before the merger or consolidation (other than stockholders exercising dissenter rights) become stockholders by the terms of the merger or consolidation, and the phrase "directors of the Company who were directors immediately prior thereto" shall not include (A) any director of the Company who was designated by a person who has entered into an agreement with the Company to effect a transaction described in subparagraph (a) or subparagraph (d) above, or (B) any director who was not a director at the beginning of the 24-consecutive-month period preceding the date of such merger or consolidation, unless his election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors who were directors before the beginning of such period.
3. Compensation After a Change in Control. During any period in which the Executive is employed by the Company after a Change in Control, there shall be no reduction in the base salary, long and short term incentives and bonuses, employee benefits (including medical insurance, disability income protection, and life insurance and death benefits), fringe benefits and perquisites to which the Executive was entitled prior to the Change in Control.
4. Severence Payments. Subject to the provisions of paragraphs 5 and 6 below, in the event that the Executive's employment with the Company is voluntarily terminated by the Executive or involuntarily terminated by the Company for any reason other than death, Disability (as defined below) or Just Cause (as defined below) during the twenty-four month period following a Change in Control, the Executive shall continue to receive all medical insurance, disability income protection, life insurance coverage and death benefits, fringe benefits and perquisites to which the
3
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 4 Executive was entitled prior to the Change in Control for period of not less than the 24 consecutive months immediately following the date of his termination of employment, and shall be entitled to a lump sum payment in cash no later than ten business days and no earlier than two business days after the date of termination equal to the sum of:
(a) an amount equal to 2.99 (or, if less, the number of years remaining until the Executive's attainment of age 65) times the Executive's annual salary rate in effect immediately prior to the Change in Control;
(b) an amount equal to 2.99 (or, if less, the number of years remaining until the Executive's attainment of age 65) times the Executive's short term incentive award and other bonuses payable for the calendar year preceding the Change in Control; and
(c) the actuarial equivalent of the additional pension benefits which the Executive would have accrued under the terms of the Ameritech Management Pension Plan, the Ameritech Senior Management Retirement and Survivor Protection Plan and each other tax- qualified or nonqualified defined benefit pension plan maintained by the Company (determined without regard to any termination or any amendment adversely affecting the Executive which is adopted on or after a Change in Control or in contemplation of a Change in Control) if, on the date of Termination, the Executive had been credited with two additional years of service and two additional years of compensation at his annual base salary rate and target short term incentive award in effect on the date of the Change in Control for benefit accrual purposes and were two years older than his actual age on such date; provided, however, that the additional service, compensation and age credits under this paragraph (c) shall be proportionately reduced if the Executive is at least age 63 on the date of termination and eliminated if the Executive is age 65 or older on such date. For purposes of this subparagraph (c), actuarial equivalence shall be determined in accordance with the terms of the Ameritech Senior Management Retirement and Survivor Protection Plan for purposes of lump sum payments under that plan, but without regard to any amendment of that plan adopted on or after a Change in Control or in contemplation of a Change in Control which would reduce the amount of such lump sum payment.
For purposes of this Agreement, the Executive's employment with the Company shall be deemed to have been involuntarily terminated by the Company if the Executive's duties and responsibilities are significantly
4
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5 diminished by the Company without the Executive's consent. For purposes of this Agreement, the term "Disability" means an incapacity, due to physical injury or illness or mental illness, causing a Participant to be unable to perform his duties for the Company on a full-time basis for a period of at least six consecutive months and the term "Just Cause" means willful misconduct, dishonesty, conviction of a felony or excessive absenteeism not related to illness or disability.
5. Tax Limitations. If any payments under this Agreement, after taking in account all other payments to which the Executive is entitled from the Company, or any affiliate thereof, are more likely than not to result in a loss of a deduction to the Company by reason of section 2800 of the Internal Revenue Code of 1986 or any successor provision to that section, such payments shall be reduced by the least amount required avoid such loss of deduction. If the Executive and the Company shall disagree as to whether a payment under this Agreement is more likely than not to result in the loss of a deduction, the matter shall be resolved by an opinion of tax counsel chosen by the Company's independent auditors. The Company shall pay the fees and expenses of such counsel, and shall make available such information as may be reasonably requested by such counsel to prepare the opinion. If, by reason of the limitations of this paragraph 5, the maximum amount payable to the Executive under paragraph 4 above cannot be determined prior to the due date for such payment, the Company shall pay on the due date the minimum amount which it in good faith determines to be payable and shall pay the remaining amount, with interest calculated at the rate prescribed by section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as soon as such remaining amount is determined in accordance with this paragraph 5.
6. Source of Payments and Withholding. Any amount payable under the terms of this Agreement shall be paid from the general assets of the Company or from one or more trusts, the assets of which are subject to the claims of the Company's general creditors. All payments to the Executive under this Agreement will be subject to all applicable withholding of state and federal taxes.
7. Arbitration of All Disputes. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in the City of Chicago, in accordance with the laws of the State of Illinois, by three arbitrators, one of whom shall be appointed by the Company, one by the Executive and third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be appointed by the Chief Judge of the United States Court of Appeals for the Seventh Circuit. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5
6 selection of arbitrators which shall be as provided in this paragraph 11. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. In the event that it shall be necessary or desirable for the Executive to retain legal counsel or incur other costs and expenses in connection with enforcement of his rights under this Agreement, the Company shall pay (or the Executive shall be entitled to recover from the Company, as the case may be) his reasonable attorneys' fees and costs and expenses in connection with enforcement of his rights (including the enforcement of any arbitration award in court). Payments shall be made to the Executive at the time such fees, costs and expenses are incurred. If, however, the arbitrators shall determine that, under the circumstances, payment by the Company of all or part of any such fees and costs and expenses would be unjust, the Executive shall repay such amounts to the Company in accordance with the order of with the order of the arbitrators.
8. Mitigation and Set-Off. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. The Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amonts owed to the Company by the Executive, any amounts earned by the Executive in other employment after termination of this employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment.
9. Severance Pay Plan. During the Term of this Agreement, the Executive shall not participate in or have any rights under either the Ameritech Senior Management Severance Pay Plan or the Ameritech Management Employees Severance Pay Plan.
10. Non-Alienation. The Executive shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this Agreement; and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law. Nothing in this paragraph shall limit the Executive's rights or powers to dispose of his property by will or limit any rights or powers which his executor or administrator would otherwise have.
11. Governing Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois.
12. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and, so long as the Executive lives, no person, other than the
6
7 parties hereto, shall have any rights under or interest in this Agreement or
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the subject matter hereof.
13. Successors to the Company. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company. The Company will require any successor (whether director or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place.
14. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.
15. Counterparts. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the date and year first above written.
/s/Richard C. Notebaert ------Executive
Ameritech Corporation
By: /s/ Bruce B. Howat ------
Its: Secretary
ATTEST:
/s/ Marilyn S. Sprocker ------Assistant Secretary
7
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 8 Schedule to Exhibit 10mm
Ameritech Corporation has an identical Agreement Regarding Change In Control dated January 19, 1994 with William L. Weiss, which superseded and replaced an Agreement Regarding Change In Control dated January 1, 1989 between Ameritech and Mr. Weiss.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 10oo-1
FIRST AMENDMENT TO 1989 LONG TERM INCENTIVE PLAN (As Amended and Restated Effective as of January 1, 1992)
Pursuant to the second sentence of paragraph I-12 of the Ameritech 1989 Long Term Incentive Plan (the "Plan"), the Compensation Committee of the Board of Directors of Ameritech Corporation hereby amends the Plan as follows:
1. By adding after the words "For all purposes of the Plan," in the first sentence of paragraph I-7 of the Plan the following: "except as provided in the second sentence of this paragraph I-7,".
2. By adding the following sentence after the first sentence of paragraph I-7 of the Plan: "If a Participant elects to pay the purchase price upon exercise of a Stock Option by delivery of the Participant's irrevocable instructions to a broker to promptly pay the option price upon receipt of the certificate representing the shares as permitted by paragraph II-3 (sometimes referred to as a "Cashless Exercise"), the "Fair Market Value" of each share of Common Stock purchased upon exercise of such Stock Option shall be the price at which such shares are sold by such broker in such Cashless Exercise."
* * * * * *
The foregoing is a true and correct copy of an amendment adopted by the Compensation Committee of the Board of Directors of Ameritech Corporation on August 20, 1993.
/s/ Bruce B. Howat ------Bruce B. Howat Corporate Secretary
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 10rr-1
FIRST ADMINISTRATIVE AMENDMENT TO AMERITECH KEY MANAGEMENT LIFE INSURANCE (Effective as of July 1, 1990)
Pursuant to authority reserved to Ameritech Corporation, the Ameritech Key Management Life Insurance Plan (Effective as of July 1, 1990) (the "Plan") is hereby amended effective as of October 1, 1993 to add the following as paragraph 6.3 of the Plan:
"6.3 Administrative Amendments. The Company's Senior Vice President - Human Resources, or such other officer of the Company as may from time to time be primarily responsible for human resources matters, may, with the concurrence of the Company's Executive Vice President and General Counsel, make minor or administrative amendments to the Plan."
Dated: November 30, 1993
AMERITECH CORPORATION
Concur: By: /s/ Martha L. Thornton ------Senior Vice President - Human Resources /s/ Thomas P. Hester ------Executive Vice President and General Counsel
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 10ss-1
FIRST ADMINISTRATIVE AMENDMENT TO AMERITECH ESTATE PRESERVATION PLAN (Effective as of July 1, 1990)
Pursuant to authority reserved to Ameritech Corporation, the Ameritech Estate Preservation Plan (Effective as of July 1, 1990) (the "Plan") is hereby amended effective as of October 1, 1993 as follows:
1. To add the following as paragraph 6.3 of the Plan:
"6.3 Administrative Amendments. The Company's Senior Vice President - Human Resources, or such other officer of the Company as may from time to time be primarily responsible for human resources matters, may, with the concurrence of the Company's Executive Vice President and General Counsel, make minor or administrative amendments to the Plan;" and
2. To delete subparagraph (v) of paragraph 4.8(a) in its entirety and to substitute therefor the following:
"(v) the latest of:
(A) the date the Participant's employment with the Company or a Subsidiary terminates after the Participant has reached age 65 and on or after the date upon which the Participant becomes retirement eligible, or
(B) the date the Participant reaches age 65 for any Participant whose employment with the Company or a Subsidiary terminates on or after the date upon which the Participant becomes retirement eligible but before the Participant has reached age 65, or
(C) the date immediately before the date fifteen (15) years after the policy date of the Estate Preservation Policy (as defined therein).
2 For purposes of subparagraph (C) above, all years during which any Estate Preservation Policy is in effect with respect to a Participant, whether or not consecutive, shall be aggregated."
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Dated: November 30, 1993
AMERITECH CORPORATION
Concur: By: /s/ Martha L. Thornton ------Senior Vice President - /s/ Thomas P. Hester Human Resources ------Executive Vice President and General Counsel
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 10ww
AGREEMENT REGARDING CHANGE IN CONTROL
This Agreement entered into as of the 19th day of January, 1994 by and between Ameritech Corporation, a Delaware corporation (the "Company"), and Richard H. Brown (the "Executive"),
WITNESSETH THAT:
WHEREAS, the Company wishes to induce the Executive to remain in its employ, to provide fair and equitable treatment and a competitive compensation package to the Executive, and to assure continued attention of the Executive to his duties without any distraction arising out of uncertain personal circumstances in a change in control environment; and
WHEREAS, the Company recognizes that in the event of a change in control of the Company it is likely that the Executive's authorities, duties and responsibilities would be substantially altered; and
WHEREAS, the Company and the Executive accordingly desire to enter into this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the date hereof and shall continue through December 31, 1994; provided, however, that on such date and on each December 31 thereafter, the Term of this Agreement shall automatically be extended for one additional year (but not beyond the Executive's attainment of age 65) unless, not later than the preceding November 1 the Company shall have given notice that it does not wish to extend the Term; and provided, further, that if a Change in Control (as defined in paragraph 2 below) shall have occurred during the original or any extended Term of this Agreement, the Term of this Agreement shall continue for a period of twenty-four months beyond the month in which such Change in Control occurs, but not beyond the Executive's attainment of age 65.
2. Change in Control. For purposes of this Agreement, the term "Change in Control" means a change in the beneficial ownership of the
2 Company's voting stock or a change in the composition of the Company's Board of Directors which occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or
(ii) the Executive or any person acting in concert with the Executive
is or becomes a beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of stock of the Company representing 20% or more of the total voting power of the Company's then outstanding stock; provided, however, that this subparagraph (a) shall not apply to any tender offer made pursuant to an agreement with the Company approved by the Company's Board of Directors and entered into before the offeror has become a beneficial owner of stock of the Company representing 5% or more of the combined voting power of the Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company, and the person making the offer owns or has accepted for payment stock of the Company representing 20% or more of the total voting power of the Company's then outstanding stock; provided, however, that this subparagraph (b) shall not apply to any tender offer made pursuant to an agreement with the Company approved by the Company's Board of Directors and entered into before the offeror has become a beneficial owner of stock of the Company representing 5% or more of the combined voting power of the Company's then outstanding stock;
(c) during any period of 24 consecutive months there shall cease to be a majority of the Board of Directors comprised as follows: individuals who at the beginning of such period constitute the Board of Directors and any new director(s) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-third (2/3) of the directors then still in office who either were directors at the beginning of the
2
3 period or whose election or nomination for election was previously so approved; or
(d) the stockholders of the Company approve a merger or consolidation of the Company with any other company other than:
(i) a merger or consolidation which would result in the Company's voting
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document stock outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting stock of the surviving entity) more than 70% of the combined voting power of the Company's or such surviving entity's outstanding voting stock immediately after such merger or consolidation; or
(ii) a merger or consolidation which would result in the directors of the Company who were directors immediately prior thereto continuing to constitute at least 50% of the directors of the surviving entity immediately after such merger or consolidation.
For purposes of subparagraph (d) above, the phrase "surviving entity" shall mean only an entity in which all of the Company's stockholders who are stockholders immediately before the merger or consolidation (other than stockholders exercising dissenter rights) become stockholders by the terms of the merger or consolidation, and the phrase "directors of the Company who were directors immediately prior thereto" shall not include (A) any director of the Company who was designated by a person who has entered into an agreement with the Company to effect a transaction described in subparagraph (a) or subparagraph (d) above, or (B) any director who was not a director at the beginning of the 24-consecutive-month period preceding the date of such merger or consolidation, unless his election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors who were directors before the beginning of such period.
3. Compensation After a Change in Control. During any period in which the Executive is employed by the Company after a Change in Control, there shall be no reduction in the base salary, long and short term incentives and bonuses, employee benefits (including medical insurance, disability income protection, and life insurance and death benefits), fringe benefits and perquisites to which the Executive was entitled prior to the Change in Control.
3
4 4. Severance Payments. Subject to the provisions of paragraphs 5 and 6 below, in the event that (i) the Executive's employment with the Company is involuntarily terminated by the Company for any reason other than death, Disability (as defined below) or Just Cause (as defined below) during the twenty-four month period following a Change in Control or (ii) the Executive's employment with the Company is terminated by the Executive for any reason during the thirty-day period beginning on the first anniversary of a Change in Control, the Executive shall continue to receive all medical insurance, disability income protection, life insurance coverage and death benefits, fringe benefits and perquisites to which the Executive was entitled prior to the Change in Control for a period of not less than the 24 consecutive months immediately following the date of his termination of employment, and shall be
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document entitled to a lump sum payment in cash no later than ten business days and no earlier than two business days after the date of termination equal to the sum of:
(a) an amount equal to 2.99 (or, if less, the number of years remaining until the Executive's attainment of age 65) times the Executive's annual salary rate in effect immediately prior to the Change in Control;
(b) an amount equal to 2.99 (or, if less, the number of years remaining until the Executive's attainment of age 65) times the Executive's short term incentive award and other bonuses payable for the calendar year preceding the Change in Control; and
(c) the actuarial equivalent of the additional pension benefits which the Executive would have accrued under the terms of the Ameritech Management Pension Plan, the Ameritech Senior Management Retirement and Survivor Protection Plan and each other tax-qualified or nonqualified defined benefit pension plan maintained by the Company (determined without regard to any termination or any amendment adversely affecting the Executive which is adopted on or after a Change in Control or in contemplation of a Change in Control) if, on the date of Termination, the Executive had been credited with two additional years of service and two additional years of compensation at his annual base salary rate and target short term incentive award in effect on the date of the Change in Control for benefit accrual purposes and were two years older than his actual age on such date; provided, however, that the additional service, compensation and age credits under this paragraph (c) shall be proportionately reduced if the Executive is at least age 63 on the date of termination and eliminated if
4
5 the Executive is age 65 or older on such date. For purposes of this subparagraph (c), actuarial equivalence shall be determined in accordance with the terms of the Ameritech Senior Management Retirement and Survivor Protection Plan for purposes of lump sum payments under that plan, but without regard to any amendment of that plan adopted on or after a Change in Control or in contemplation of a Change in Control which would reduce the amount of such lump sum payment.
For purposes of this Agreement, the Executive's employment with the Company shall be deemed to have been involuntarily terminated by the Company if the Executive's duties and responsibilities are significantly diminished by the Company without the Executive's consent. For purposes of this Agreement, the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document term "Disability" means an incapacity, due to physical injury or illness or mental illness, causing a Participant to be unable to perform his duties for the Company on a full-time basis for a period of at least six consecutive months and the term "Just Cause" means willful misconduct, dishonesty, conviction of a felony or excessive absenteeism not related to illness or disability.
5. Tax Limitations. If any payments under this Agreement, after taking in account all other payments to which the Executive is entitled from the Company, or any affiliate thereof, are more likely than not to result in a loss of a deduction to the Company by reason of section 280G of the Internal Revenue Code of 1986 or any successor provision to that section, such payments shall be reduced by the least amount required to avoid such loss of deduction. If the Executive and the Company shall disagree as to whether a payment under this Agreement is more likely than not to result in the loss of a deduction, the matter shall be resolved by an opinion of tax counsel chosen by the Company's independent auditors. The Company shall pay the fees and expenses of such counsel, and shall make available such information as may be reasonably requested by such counsel to prepare the opinion. If, by reason of the limitations of this paragraph 5, the maximum amount payable to the Executive under paragraph 4 above cannot be determined prior to the due date for such payment, the Company shall pay on the due date the minimum amount which it in good faith determines to be payable and shall pay the remaining amount, with interest calculated at the rate prescribed by section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as soon as such remaining amount is determined in accordance with this paragraph 5.
6. Source of Payments and Withholding. Any amount payable under the terms of this Agreement shall be paid from the general assets
5
6 of the Company or from one or more trusts, the assets of which are subject to the claims of the Company's general creditors. All payments to the Executive under this Agreement will be subject to all applicable withholding of state and federal taxes.
7. Arbitration of All Disputes. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in the City of Chicago, in accordance with the laws of the State of Illinois, by three arbitrators, one of whom shall be appointed by the Company, one by the Executive and third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be appointed by the Chief Judge of the United States Court of Appeals for the Seventh Circuit. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this paragraph 11. Judgment upon the award
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document rendered by the arbitrators may be entered in any court having jurisdiction thereof. In the event that it shall be necessary or desirable for the Executive to retain legal counsel or incur other costs and expenses in connection with enforcement of his rights under this Agreement, the Company shall pay (or the Executive shall be entitled to recover from the Company, as the case may be) his reasonable attorneys' fees and costs and expenses in connection with enforcement of his rights (including the enforcement of any arbitration award in court). Payments shall be made to the Executive at the time such fees, costs and expenses are incurred. If, however, the arbitrators shall determine that, under the circumstances, payment by the Company of all or a part of any such fees and costs and expenses would be unjust, the Executive shall repay such amounts to the Company in accordance with the order of the arbitrators.
8. Mitigation and Set-Off. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. The Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts owed to the Company by the Executive, any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment.
9. Severance Pay Plan. During the Term of this Agreement, the Executive shall not participate in or have any rights under either the Ameritech Senior Management Severance Pay Plan or the Ameritech Management Employees Severance Pay Plan.
6
7 10. Non-Alienation. The Executive shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this Agreement; and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law. Nothing in this paragraph shall limit the Executive's rights or powers to dispose of his property by will or limit any rights or powers which his executor or administrator would otherwise have.
11. Governing Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois.
12. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and, so long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof.
13. Successors to the Company. This Agreement shall be
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document binding upon and inure to the benefit of the Company and any successor of the Company. The Company will require any successor (whether director or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place.
14. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.
15. Counterparts. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others.
7
8 IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the date and year first above written.
Richard H. Brown ------Executive
Ameritech Corporation
By Bruce B. Howat ------Its Secretary ------ATTEST: Marilyn S. Spracker ------Assistant Secretary
8
9 Schedule to Exhibit 10ww
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Ameritech Corporation has an identical Agreement Regarding Change In Control dated January 19, 1994 with each of John A. Edwardson, Thomas P. Hester, Louis J. Rutigliano and Martha L. Thornton. The agreement with Mr. Rutigliano superseded and replaced an Agreement Regarding Change In Control dated September 1, 1989 between Ameritech and Mr. Rutigliano.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 EXHIBIT 11a
Ameritech Corporation Computation for Primary Earnings Per Share
This calculation is submitted in accordance with Regulation S-K, Item 601 (b)II, 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.
Note: All share amounts have been restated for two-for-one stock split effective December 31, 1993.
2 EXHIBIT 11a
Ameritech Corporation Computation for Primary Earnings Per Share
This calculation is submitted in accordance with Regulation S-K, Item 601 (b)II, 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. Accordingly, reported EPS does not consider dilutive securities.
Note: All share amounts have been restated for two-for-one stock split effective December 31, 1993.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 EXHIBIT 11b
Ameritech Corporation Computation of Fully Diluted Earnings Per Share
This calculation is submitted in accordance with Regulation S-K, Item 601 (b)II, 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.
Note: All share amounts have been restated for two-for-one stock split effective December 31, 1993.
2 Exhibit 11b
Ameritech Corporation Computation of Fully Diluted Earnings Per Share
This calculation is submitted in accordance with Regulation S-K, Item 601(b)II, although not required by footnote 2 to paragraph 14 of the Accounting Principles Board opinion No. 15 because it results in dilution of less than three percent. Accordingly, reported EPS does not consider dilutive securities.
Note: All share amounts have been restated for two-for-one stock split effective December 31, 1993.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 EXHIBIT 12
Ameritech Corporation Computation of Ratio of Earnings to Fixed Charges Years Ending December 31, 1993, 92, 91, 90 and 89
(Dollars in Millions)
EARNINGS ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 EXHIBIT 13
Financial Review
Management's Discussion and Analysis of Financial Condition and Results of Operations
(Discussion that follows gives retroactive effect to the two-for-one stock split effective December 31, 1993.)
(dollars in millions, except per share amounts)
Overview
1993 was a year of many successes for Ameritech in meeting the needs of the company's customers and shareowners. Ameritech restructured its five geographically based landline telephone operating companies and two other related businesses into a structure of customer-specific business units supported by a single, regionally coordinated network unit. The company's marketing effort was also streamlined to that of a single common brand identity, "Ameritech." Products and services are no longer being marketed using the "Bell" name -- a change designed to enhance market awareness and customer loyalty.
From a financial perspective, 1993 was the most successful year in the company's history. Net income was $1,512.8 million and earnings per share were $2.78, increases of 12.4 percent and 10.8 percent, respectively, when compared with 1992 results before accounting changes. Revenue growth of 5.0 percent resulted from record setting access line growth of 3.3 percent, cellular subscriber growth of 46.8 percent and solid increases in calling volumes. The decision to refinance $1.6 billion in long-term debt at lower interest rates, plus a continuing focus on productivity improvement (costs and expenses, excluding depreciation, increased by only 2.5 percent), contributed to the excellent earnings performance in 1993. Results in 1993 include $24.7 million, or $.05 per share, from the sale of shares of New Zealand Telecom, net of restructuring costs at that company.
Earnings per share, before accounting changes [Graph illustrating earnings per share over a five year period from 1988 to 1993 is filed under separate cover of Form SE]
1993 was also an outstanding year for developing new opportunities that should enhance the company's ability to meet customer needs for new types of electronic communications. For example, the company announced an alliance (scheduled to close in 1994) with General Electric Company involving GE's existing global electronic commerce business unit, which is experiencing significant revenue growth. Additionally in January 1994, the company unveiled a multibillion dollar program to launch a digital video network upgrade that by the end of the decade could be available to 6 million customers. The network will provide customer access to interactive information and entertainment services, as well as traditional cable television service. The company plans to begin marketing this new service in late 1994, subject to approval by the Federal Communications Commission (FCC).
On the international front, in December 1993 the company purchased a 15 percent interest in MATAV, the Hungarian telephone company. MATAV is Hungary's principal provider of landline telephone communications and international long distance, as well as cellular services supported by GSM digital technology. The Hungarian investment represents a rare growth opportunity because of the low 1.5 million access line penetration among that country's population of 10.5 million. The goal of the Hungarian government is to double the number of access lines by
2 the year 2000, which the company believes is realistic given the estimated 13-year waiting period for a landline telephone. The company's investment in Hungary increases its presence in Europe, where it already has interests in cellular ventures in Norway and Poland. The Norway cellular venture, also using GSM digital technology, became operational in September 1993.
In support of developing a fully competitive marketplace, Ameritech also undertook a number of important public policy initiatives in 1993. In March the company filed its "Customers First Plan" with the FCC. The plan proposes to
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document facilitate competition in the local exchange business in return for removal of the interLATA long distance ban and greater flexibility in FCC rules. In December the company proposed that the plan be implemented on a trial basis beginning in January 1995 in Illinois and in additional states thereafter. The Customers First Plan and other initiatives, together with certain competitive concerns, are discussed more completely beginning on Page 21.
Management's primary commitment to its shareowners is to increase shareowner value over time. In December, Ameritech's Board of Directors approved a 4.3 percent increase in the quarterly dividend and a two-for-one stock split. Both actions demonstrate the company's confidence in its ability to generate sustainable growth in the future.
Over the past 10 years, the company has produced a total return on its shareowners' investment of 535 percent, significantly greater than that of the S&P 500. Management continues to have 6 to 8 percent average annual growth in earnings per share as one of its key long-term financial goals, though the alliances described above and entry into video services may slow earnings growth in the near term.
The following sections provide a more detailed discussion of Ameritech's results of operations over the past three years, as well as its financial condition and discussion of accounting changes for postretirement and postemployment costs that resulted in a net loss for 1992.
3 Financial Review
Results of Operations
Revenues
Total revenues increased by 5.0 percent to $11.7 billion in 1993. This was attributable to higher calling volumes, due to access line growth and increased business at the cellular communications and information system sales operations. Rate reductions and refunds partially offset the increase.
In 1992, total revenues increased 3.1 percent to $11.2 billion, due to an improved economy, which helped produce higher calling volumes and lower uncollectible revenues. Also contributing were growth and acquisitions at the cellular communications and information system sales operations. Rate reductions and refunds partially offset the increase.
Distribution of revenues, 1993 [The pie chart illustrating the distribution of revenues is filed under separate cover of Form SE]
Local service revenues include the basic monthly service fee and usage charges, fees for custom-calling features, public phone revenues, and installation and connection charges. Local service rates are generally regulated by state public service commissions.
Access lines--percent increase [The graph illustrating the increase in access lines over a five year period from 1988 to 1993 is filed under separate cover of Form SE]
Higher calling volumes increased local service revenues by $179.1 million during 1993. The increased calling volumes resulted principally from growth in the number of access lines, which increased 3.3 percent. Partially offsetting this increase was a 1993 reclassification of $119.9 million to the long distance revenue category in Michigan to comply with a state regulatory ruling.
In 1992, local service revenues increased $126.4 million or 2.6 percent. Increased calling volumes, resulting from a 2.5 percent increase in the number of access lines, were partially offset by a change in classification of excise taxes in Illinois.
Network access revenues are fees charged to interexchange carriers, such as AT&T and MCI, that use the local telecommunication network to provide long distance services to their customers. In addition, end users pay flat rate access fees to connect to the local network to obtain long distance service. These revenues are generated from both interstate and intrastate services. Interstate network access services
4 are subject to regulation by the FCC, which has established a "price-cap" plan to regulate the company's network access services. The plan creates incentives to improve productivity over benchmark levels in order to retain higher earnings. The interstate rate of return for 1993 has not been finalized; however, for 1992, as reported to the FCC, it was 12.79 percent. This return is higher than the FCC authorized rate of return for local exchange carriers of 11.25 percent. Under the FCC's price-cap plan, investors are entitled to retain 100 percent of all earnings between 11.25 percent and 12.25 percent, and 50 percent of earnings between 12.26 percent and 16.25 percent.
Interstate network access revenues increased $77.0 million in 1993 due primarily to increased calling volumes of $101.0 million. This increase was partially offset by rate reductions. Minutes of use related to interstate calls increased by 4.5 percent.
Interstate network access revenues increased $48.6 million or 2.4 percent in 1992. Increased calling volumes, which produced revenues of $79.1 million, were partially offset by rate reductions and interexchange carrier settlements.
Intrastate network access revenues increased $9.9 million in 1993 when compared with 1992, due primarily to increased calling volumes, which produced revenues of $36.6 million, partially offset by rate reductions. Minutes of use related to intrastate calls increased by 11.3 percent.
In 1992 intrastate network access revenues increased $56.6 million or 10.2 percent due to increased calling volumes, which produced revenues of $41.9 million, and interexchange carrier settlements.
Long distance service revenues result when a customer makes a call to a location outside of his or her local calling area but within the same service area. The rates the company charges customers for this service are generally governed by the public service commission in each state.
5 Financial Review
The increase in long distance service revenues for 1993 was attributable to volume growth and the reclassification of revenues from local service in Michigan as previously discussed, partially offset by rate reductions.
In 1992, long distance revenues decreased $42.5 million or 3.3 percent attributable to lower rates, primarily in Ohio, of $41.4 million and higher independent telephone company settlements. Volume increases partially offset the decrease.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Directory and other revenues are derived from publishing telephone directories, cellular communications, paging services, lease financing, billing and collection services, and telephone equipment sales and installation. As reflected above, directory and other revenues are net of the company's provision for uncollectibles.
1993 revenue growth was attributable primarily to cellular subscriber growth of 46.8 percent and the effect of increased business at the information system sales operation.
In 1992, directory and other revenues increased $145.5 million or 7.0 percent. This increase was attributable to increased cellular and information system sales operation revenues due to growth and acquisitions as well as decreased uncollectible revenues.
Cellular subscribers [The graph illustrating the increase in cellular subscribers over a five year period from 1988 to 1993 is filed under separate cover of Form SE]
Operating Expenses
Total operating expenses in 1993 increased $343.2 million or 3.9 percent from 1992. The increase was primarily attributable to increased depreciation and amortization expense due to an expanded plant base and increased rates, and increased cost of sales at the cellular and information system sales operation due to growth. Offsetting these increases were decreased employee-related expenses due to the work force reductions that occurred over the past year.
Total operating expenses in 1992 decreased $27.4 million or 0.3 percent from 1991. The decrease was primarily attributable to restructuring charges totaling $187.0 million recorded in 1991. Partially offsetting this decrease was higher depreciation and amortization expense resulting from acquisitions and an expanded plant base.
The company has changed the presentation of its operating expenses in the consolidated statements of income to facilitate a better understanding of its operating results. Prior year amounts have been reclassified to conform with this presentation.
Distribution of operating expenses, 1993 [The pie chart illustrating the distribution of operating expenses in 1993 is filed under separate cover of Form SE]
6
The decrease in 1993 in employee-related expenses was primarily attributable to the effect of work force reductions over the past year. Offsetting these decreases were the effects of higher wages, increased overtime payments and increased costs related to postretirement benefits.
In 1992, employee-related expenses decreased $10.3 million or 0.3 percent. The decrease was primarily attributable to increased pension credits due to the continuing favorable investment performance and the funded status of the company's pension plans.
There were 67,192 employees on December 31, 1993, and 71,300 on December 31, 1992. Voluntary and involuntary work force reductions reduced the management work force by about 1,700 employees in 1993 and 3,000 in 1992. Reductions in the nonmanagement work force account for most of the remaining decrease in employees in 1993.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The increase in depreciation and amortization expense in 1993 resulted from continued expansion of the telephone plant investment base of $75.3 million, growth at the company's cellular operation of $20.0 million, and $55.4 million due to increased depreciation rates, mostly in Ohio. Partially offsetting these increases was $29.1 million related to the completion in 1992 of certain fixed asset amortization adjustments, primarily in Ohio and Wisconsin.
In 1992, depreciation and amortization expense increased $116.6 million, or 6.1 percent. The increase in 1992 was due to continued expansion of
7 Financial Review the plant investment base and acquisitions and growth at the company's unregulated operations, partially offset by the completion in 1991 of certain fixed asset amortization adjustments primarily in Michigan and Ohio.
The increase in other operating expenses in 1993 was primarily attributable to increased contract services, right-to-use fees, access expenses paid to independent telephone companies, advertising expenses and an accrual to further streamline the nonmanagement work force. Increased cost of sales at the cellular and information system sales operations due to acquisitions and growth contributed to the increase. Partially offsetting these increases were several fourth-quarter 1992 items including a $47.0 million charge for market realignment and advertising costs and $8.0 million for the net write-down of certain unregulated assets. The company continued voluntary and involuntary separation programs that saw approximately 1,700 management employees leave the payroll in 1993. The majority of these employees were from the landline telephone operations. The net cost of this 1993 program, along with termination benefits and settlement and curtailment gains from the pension plan, was a credit to this expense category of $33.3 million.
Other operating expenses decreased 5.0 percent or $137.4 million in 1992. This decrease was due primarily to a 1991 restructuring charge of $187.0 million. Excluding this restructuring charge, other operating expenses increased 1.9 percent. This was due to the fourth-quarter 1992 items discussed above; increased costs at the landline telephone companies associated with contract services and claims accruals for billing of interexchange carriers; increases in cost of sales associated with the acquisition of two software companies; and higher promotion, advertising and acquisition costs at the cellular operation. Partially offsetting these items were expense savings in certain unregulated operations due to the 1991 write-down of assets and intangibles. The company initiated a voluntary and involuntary separation program in 1992 that saw about 3,000 management employees leave the payroll. The net cost of this program, along with other pension plan transfers, termination benefits and settlement and curtailment gains from the pension plan, was a credit to this expense category of $12.4 million in 1992.
The $7.1 million decrease in taxes other than income taxes for 1993 was primarily attributable to lower capital stock taxes and decreased property taxes.
In 1992, taxes other than income taxes increased $3.7 million or 0.6 percent. This increase was primarily attributable to higher property taxes offset by the reclassification and adoption of excise taxes in Illinois to replace previously enacted gross receipts taxes.
8 Other Income and Expenses
The decrease in interest expense during 1993 was due primarily to the calling of certain long-term debt totaling $1.6 billion and the refinancing at lower fixed rates on $900.0 million of that called debt, the effect of lower short-term interest rates and the reduction in debt due to the application of proceeds received from the sale of New Zealand Telecom shares. During 1992 interest expense decreased $64.7 million due primarily to lower debt levels, expenses related to a 1991 IRS settlement and lower interest rates. Partially offsetting these decreases were increases related to the corporate-owned life insurance program and the costs associated with financing acquisitions.
Other income, net includes earnings related to Ameritech's investments (when the equity method of accounting is followed), interest during construction (which represents the capitalized cost of funds used to finance certain major construction projects), interest income and other nonoperating items.
The significant components of other income during the two years included the following items related to the company's investment in New Zealand Telecom--an $85.7 million pretax gain in 1993 ($61.7 million after-tax) from the sale of shares, and 1993 equity method income of $29.0 million (reflecting a $42.0 million restructuring charge) compared with $67.4 million in 1992. Other income in 1993 also included a favorable impact of $18.8 million resulting from the leveraged employee stock ownership plans (LESOPs). Offsetting these income items were costs (call premiums, write-offs of unamortized deferred costs) associated with the early extinguishment of debt of $66.3 million in 1993 and $32.2 million in 1992, and interest earned in 1992 from an IRS settlement of $41.0 million.
Other income, net decreased $109.4 million in 1992. The decrease was primarily attributable to the 1991 gain of $81.3 million related to the sale of a portion of New Zealand Telecom and the increased costs associated with early retirement of debt in 1992 of $25.2 million. Other income in
9 Financial Review
1992 also included $41.0 million of interest income earned from an IRS settlement.
The increase in income taxes in 1993 was due primarily to higher pretax income and an increase in the federal tax rate. Partially offsetting the increase were higher investment tax credit amortization in Michigan due to a revision of depreciation rates and the realization of previously unrecognized tax benefits on prior year unregulated asset write-downs.
The increase in income taxes in 1992 of $136.8 million was primarily attributable to higher pretax income and lower investment tax credit amortization.
Change in Accounting Principles
The company changed its accounting for income taxes effective January 1, 1993, as required by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The impact of adoption on the company's
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document financial statements was not significant.
As more fully discussed in Note 4 to the consolidated financial statements, effective January 1, 1992, the company adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 112, "Employers' Accounting for Postemployment Benefits." As a result of implementing these standards the company recorded an after-tax noncash charge of approximately $1.8 billion in 1992. This charge caused the company to have a loss in 1992.
Liquidity and Capital Resources
Management believes that the company has adequate internal and external resources available to finance its business development, network expansion, dividends, acquisitions and investments.
Uses of cash
[The pie chart illustrating uses of cash in 1993 and 1992 are filed under separate cover on Form SE]
Cash Flows from Operating Activities
Cash flow from operations was $3,188.6 million in 1993, a decrease of $99.7 million from 1992. The reason for the decrease is primarily certain nonrecurring items in both years.
Cash Flows from Investing Activities
Capital expenditures continue to represent the single largest use of company funds. Management believes that by investing in the telecommunications core business, such effort will facilitate introduction of new products and services, respond to ever increasing competitive challenges and increase the operating efficiency and productivity of the network.
10 Ameritech's capital expenditures for landline telephone operations decreased $265 million in 1993. The cellular services portion of the company's capital expenditures increased $106 million in 1993 resulting from plans to increase coverage and offer new data and digital services. Overall, Ameritech's total capital expenditures decreased in 1993 to $2,108 million from $2,267 million in 1992.
Rapid modernization of the landline network continued throughout 1993 as demonstrated by the following year-end information.
Cash flows from investing activities in 1993 also include $280.6 million as a result of sales of a portion of the company's investment in New Zealand Telecom. In addition, the company invested $437.5 million for a 15 percent share in the Hungarian telephone company (see Note 2 to the consolidated financial statements on Page 30).
Cash Flows from Financing Activities and Other Activities
To take advantage of lower long-term interest rates, the company called $1.6 billion of long-term debt in 1993 and issued $900 million of long-term debt. While costs associated with the early extinguishment of debt in 1993 were $66.3 million, these refinancings will result in a reduction of approximately $30 million in annual interest payments in future years. Total debt (long- and short-term) at the end of 1993 decreased $11.9 million from 1992. As of December 31, 1993, the company's debt maturing within one year includes debt that was called in anticipation of refinancing at more favorable interest rates.
The company's debt ratio decreased to 46.0 percent as of December 31, 1993, compared with 48.9 percent as of December 31, 1992. The decreased debt levels, as discussed above, along with increased reinvested earnings account for the decrease.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document As a result of an agreement with General Electric Company (see Note 2 to the consolidated financial statements on Page 30) the company intends to invest approximately $472 million in 1994 into a newly formed company. The company plans to fund this commitment with debt financing.
As previously noted, in January 1994, the company announced a program, subject to FCC approval, to enter the interactive information and entertainment service business. The company expects to invest
11 Financial Review approximately $4.4 billion over the next 15 years (network upgrades including fiber optics, servers, switches and customer premise equipment) to deliver these new services. The company believes it can fund most of this amount by reducing capital expenditures in its core landline business, as evidenced in 1993, while maintaining its current high quality of service to customers.
Dividends
The company paid $999.4 million in 1993 in dividends. This was a $56.7 million or 6.0 percent increase over 1992. The company believes that its dividend policy is consistent with the needs of both shareowners and the business.
Dividends declared per share [The graph illustrating dividends declared per share over the five year period from 1988 to 1993 is filed under separate cover of Form SE]
Financing Options
As of December 31, 1993, the company maintained available lines of credit totaling $1.3 billion, a committed credit facility of $1.0 billion and shelf registrations for issuance of up to $2.0 billion in unsecured debt securities.
Funding for Postretirement Benefits
Among the initiatives taken by the company to contain its future liability for postretirement benefit costs are a managed health care network and the creation of certain trust accounts to fund health care and group life insurance benefits for retirees. The trusts currently have more than $1.1 billion in assets to fund these benefits. The company intends to continue to fund the nonmanagement VEBA and is exploring other available funding and cost containment alternatives. Specifically, in 1993, the company utilized approximately $90 million in excess pension plan assets to help pay the nonmanagement retiree health care obligation. The Internal Revenue Code allows such transfers through 1995. The company has not determined whether it will make any additional transfers in 1994 or 1995.
Stock Repurchase Program
The company's Board of Directors authorized management to repurchase up to 20 million shares of Ameritech common stock through 1994 on the open market or through private transactions. No significant purchases have been made since the program was approved by the Board in 1991.
Other Matters
Regulatory Environment
Customer demand, technology and the preferences of policymakers are all coming together to increase competition in the local exchange business. The effects of increasing competition are apparent in the marketplace Ameritech serves. For example, about half of the intraLATA long distance service purchased by large- and medium-sized business customers in its region is sold by carriers other than Ameritech. Similarly, competitive access providers are active in the region and either operate or plan to operate in many cities throughout the region, including Chicago, Columbus, Milwaukee, Indianapolis and the Detroit
12 area. In Illinois, one competitive access provider MFS Communications Company, Inc. has requested regulatory authority to provide full local exchange service. Also, in June 1993 the FCC's order that allows competitive access providers to interconnect in more liberal ways with Ameritech facilities for interstate special access was implemented in the four Ameritech states that had not already done so.
Ameritech has recognized this trend, and its regulatory/public policy activities are focused on achieving a framework that allows for expanding
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document competition while providing a fair opportunity for all carriers, including Ameritech, to succeed. The cornerstone of this effort is Ameritech's "Customers First Plan" that was filed with the FCC on March 1, 1993. In a subsequent filing with the U.S. Department of Justice, Ameritech proposed that the Customers First Plan be implemented on a trial basis beginning in January 1995 in Illinois and in additional states thereafter.
In the Customers First Plan, the company has proposed to facilitate competition in the local telephone business. In exchange, Ameritech has requested three regulatory changes. First, Ameritech has requested relief from the Modification of Final Judgment (MFJ) interLATA ban. Such relief would mean that Ameritech would be allowed to offer all long distance services. Second, Ameritech has requested a number of modifications in the FCC's price cap rules. These modifications would apply only to Ameritech and would eliminate any obligation on Ameritech's part to refund, in the form of future rate reductions, interstate earnings in excess of 12.25 percent. The modifications would also provide Ameritech increased ability to price its interstate access services in a manner appropriate to competitive conditions. Third, Ameritech has requested FCC authority to collect, in a competitively neutral manner, the social subsidies currently embedded in the rates that Ameritech charges long distance carriers for access to the local network.
Ameritech expects the U.S. Department of Justice to issue a recommendation and for the U.S. District Court to rule on Ameritech's request for interLATA relief in 1994. Ameritech's proposal is also pending before the FCC for those aspects of the plan (including any trial) that are under FCC jurisdiction. Ameritech has also been working with the state regulatory agencies throughout its region to prepare for implementation of the Customers First Plan. The first state proceedings will begin in early 1994.
Besides its activities designed to achieve new business opportunities and a fair way to introduce competition into the local exchange business, Ameritech has proceedings active in three states Illinois, Indiana and Ohio to replace rate of return regulation with price regulation plans. In Illinois, the record is closed and an order is expected in early 1994.
13 Financial Review
In Indiana and Ohio, the proceedings are ongoing.
Ameritech has also filed with the Wisconsin Public Service Commission to implement a price regulation plan to replace the current three year plan (which has been extended). In addition, the Wisconsin legislature is expected to consider in 1994 legislation that would allow Ameritech to elect price regulation in Wisconsin.
The Ameritech landline telephone companies have continued to implement price reforms that will allow them to compete effectively both now and in the future. For example, the subsidy that is collected from interexchange carriers to access the local network for long distance calls was reduced in 1993. In September 1993, the Public Utilities Commission of Ohio permitted Ameritech to de-average intraLATA toll rates in Ohio. Implementation began at the end of 1993. In the interstate arena, Ameritech has been permitted by the FCC to de-average its prices for dedicated facilities based on traffic density. Ameritech has implemented a de-averaged price structure, and over time the prices will be put in place as competitive conditions warrant. De-averaging means that the prices charged in specific areas (for example, downtown Chicago) can be more reflective of local competitive conditions. A de-averaged price structure for intrastate special access service is in place in Illinois, Indiana, Michigan and Ohio. In December 1993, the FCC approved Ameritech's plan to implement prices for switched access transport that are much more closely aligned with costs. This price reform is essential for Ameritech to remain competitive as the FCC implements its requirements to allow more liberal interconnection to these facilities in a manner similar to what it did for special access services. While the price reform is already in place, the more liberal interconnections are expected to be implemented in early 1994. The local transport price reform has been implemented in four of the five Ameritech state jurisdictions as well.
The company believes that competition is best for customers and for shareowners but only if it is implemented in a manner that provides a fair opportunity for all players, including Ameritech. This balance is essential in order for customers in the region to benefit from expanding competition and for Ameritech to remain a strong player in the local exchange portion of the industry. The regulatory changes that the company and its regulators are putting in place are designed to accomplish exactly that.
Regulatory Accounting
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document As described in Note 1 to the consolidated financial statements on Page 29, the company complies with the provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation". In the event the company determines that it no longer meets the criteria for following SFAS No. 71, the accounting impact to the company would be an extraordinary noncash charge to operations of an amount that could be material. Criteria that give rise to the discontinuance of SFAS No. 71 include (1) increasing competition that restricts the company's ability to establish prices to recover specific costs, and (2) a significant change in the manner in which rates are set by regulators from cost-based regulation to another form of regulation. The company periodically reviews these criteria to ensure that continuing application of SFAS No. 71 is appropriate.
14
Year-end market price of common stock [The graph illustrating year-end market price of common stock from 1984 to 1993 is filed under separate cover of Form SE]
Business Units
During 1993, the company restructured its business into separate units supported by a single network unit. The units cross current legal entities. In 1994, as the business units begin to mature and their results are validated, the company expects to report additional financial information about the units. Based upon preliminary analysis, 1993 revenues would be attributed to the business units as follows:
Consumer 33% Custom, enhanced and small business 29 Long distance* 17 Advertising 8 Cellular, including paging 5 All other 8 ---- 100%
*Long distance as a business unit closely relates to the revenue categories of interstate and intrastate network access.
15 Financial Review
Report of Independent Public Accountants
Board of Directors
Ameritech Corporation
We have audited the accompanying consolidated balance sheets of Ameritech Corporation (a Delaware corporation) and subsidiaries as of December 31, 1993 and 1992 and the related consolidated statements of income, shareowners' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ameritech Corporation and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 4 to the consolidated financial statements, the company changed its method of accounting for certain postretirement and postemployment benefits in 1992.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Arthur Andersen & Co.
Chicago, Illinois
January 28, 1994
16 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME Ameritech Corporation and Subsidiaries
*Gives retroactive effect for two-for-one stock split effective December 31, 1993.
The accompanying notes are an integral part of the financial statements.
17 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS Ameritech Corporation and Subsidiaries
The accompanying notes are an integral part of the financial statements
18 Consolidated Financial Statements
Consolidated Statements of Shareowners' Equity Ameritech Corporation and Subsidiaries
Shareowners' Equity
19
The accompanying notes are an integral part of the financial statements.
20 CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Ameritech Corporation and Subsidiaries
21 Notes to Consolidated Financial Statements
(dollars in millions, except per share amounts)
1. Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of Ameritech Corporation and all of its majority-owned subsidiaries. All significant intercompany transactions have been eliminated except as discussed below.
Basis of Accounting
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles. In compliance with Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), the Ameritech Bell companies give
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document accounting recognition to the actions of regulators where appropriate. Such actions can provide reasonable assurance of the existence of an asset, reduce or eliminate the value of an asset or impose a liability. Actions of a regulator can also eliminate a liability previously imposed by the regulator. The Ameritech Bell companies are Illinois Bell Telephone Company; Indiana Bell Telephone Company, Incorporated; Michigan Bell Telephone Company; The Ohio Bell Telephone Company; and Wisconsin Bell, Inc.
Property, Plant and Equipment
Property, plant and equipment are stated at original cost. The original cost of telecommunication plant acquired from Ameritech Services, Inc., a wholly owned centralized procurement and support subsidiary of the Ameritech Bell companies, includes a return on investment to Ameritech Services, Inc. that is not eliminated in consolidation.
The provision for depreciation is based principally on straight-line remaining life and straight-line equal life group methods of depreciation applied to individual categories of plant with similar characteristics.
Generally, when depreciable plant is retired, the amount at which such plant has been carried in property, plant and equipment is charged to accumulated depreciation. The cost of maintenance and repair of plant is charged to expense.
Material and Supplies
Inventories of new and reusable material and supplies are stated at the lower of cost or market with cost generally determined on an average-cost basis.
Income Taxes
Ameritech and its subsidiaries file a consolidated federal income tax return. Effective January 1, 1993, the company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). The new accounting method is essentially a refinement of the liability method already followed by the company and, accordingly, did not have a significant impact on the company's financial statements upon adoption.
22 Deferred tax assets and liabilities are based on differences between the financial statement bases of assets and liabilities and the tax bases of those same assets and liabilities. Under the liability method, deferred tax assets and liabilities at the end of each period are determined using the statutory tax rates in effect when these temporary differences are expected to reverse. Deferred income tax expense is measured by the change in the net deferred income tax asset or liability during the year. The company also provides deferred income taxes on undistributed equity earnings from foreign investments.
The Ameritech Bell companies use the deferral method of accounting for investment tax credits. Therefore, credits earned prior to the repeal of the investment tax credit by the Tax Reform Act of 1986, and also certain transitional credits earned after the repeal, are being amortized as reductions in tax expense over the life of the plant that gave rise to the credits.
Temporary Cash Investments
Temporary cash investments are stated at cost, which approximates market value. The company considers all highly liquid, short-term investments with an original maturity of three months or less to be cash equivalents.
Translation Adjustments
The assets and liabilities relating to the company's share of significant foreign operations are translated to U.S. dollars at year-end exchange rates. Revenues and expenses are translated to U.S. dollars using average rates for the year. Translation adjustments are accumulated and recorded as a separate component of shareowners' equity.
2. Investments
Telecom Corporation of New Zealand Limited
On September 12, 1990, Ameritech and Bell Atlantic Corporation purchased all of the shares of Telecom Corporation of New Zealand Limited (New Zealand Telecom), the state-owned telephone company in New Zealand, for approximately $2.5 billion.
After stock sales required by the New Zealand government in the purchase agreement, which were completed in September 1993, the company's share of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ownership is 24.8 percent.
The company's long-term investment in New Zealand Telecom ($610.4 million as of December 31, 1993) is accounted for under the equity method. The portion of the company's investment that was required to be sold was accounted for under the cost method. Goodwill of approximately $290 million associated with this investment is being amortized by the straight-line method over a period of 40 years.
Stock sales of New Zealand Telecom in 1993 resulted in an after-tax gain of $61.7 million, and a stock sale in 1991 resulted in an after-tax gain of $73.6 million.
23 Notes to Consolidated Financial Statements
Other Investments
On December 22, 1993, the company made an investment of $437.5 million, for a 15 percent share, in the Hungarian telephone company, MATAV. The company's investment will be accounted for using the equity method, since the company exercises significant operating influence. Based on preliminary analysis, approximately 50 percent of the investment represents goodwill, which will be amortized by the straight-line method over a period of 40 years.
In December 1993, the company signed a definitive agreement with General Electric Company to invest approximately $472 million in a newly formed company. General Electric will contribute the assets of its General Electric Information Services division, a global leader in electronic data interchange and electronic commerce. The company's investment will be in the form of a four-year convertible debenture, which, if legal restrictions are removed, will convert into a 30 percent equity position. The transaction is scheduled to close in 1994.
During 1993, 1992 and 1991, the company made several other investments and acquisitions totaling approximately $33.7, $31.8 and $617.9 million, respectively. The 1991 amount includes about $500 million to acquire a St. Louis-based cellular and paging company. The acquisitions have been accounted for as purchases.
3. Income Taxes
The components of income tax expense follow:
Deferred income tax expense (credit) results principally from temporary differences caused by the change in the book and tax bases of property, plant and equipment due to the use of different depreciation methods and lives for financial reporting and income tax purposes. Total income taxes paid were $774.4, $712.2, and $616.6 million in 1993, 1992 and 1991, respectively.
The following is a reconciliation between the statutory federal income tax rate for each of the past three years and the company's effective tax rate:
24
The Revenue Reconciliation Act of 1993, enacted in August 1993, increased the statutory federal income tax rate for 1993 to 35 percent. In accordance with the liability method of accounting, the company adjusted, on the enactment date, its deferred income tax balances not subject to regulatory accounting prescribed by SFAS No. 71 (see Note 1). The result was a reduction in deferred income tax expense of $23.4 million, primarily from increasing the deferred tax assets associated with SFAS Nos. 106 and 112 (see Note 4).
As of December 31, 1993, the company had a regulatory asset of $429.2 million (reflected in other assets and deferred charges) related to the cumulative amount of income taxes on temporary differences previously flowed through to ratepayers. In addition, on that date, the company had a regulatory liability of $710.3 million (reflected in other long-term liabilities) related to the reduction of deferred taxes resulting from the change in the federal statutory income tax rate to 35 percent and deferred taxes provided on unamortized investment tax credits. These amounts will be amortized over the regulatory lives of the related depreciable assets concurrent with recovery in rates. The accounting for and the impact on future net income of these amounts will depend on the rate-making treatment authorized in future regulatory proceedings.
25 Notes to Consolidated Financial Statements
As of December 31, 1993 and 1992 the components of long-term accumulated deferred income taxes were as follows:
Deferred income taxes in current assets and liabilities are not shown as they are not significant.
4. Employee Benefit Plans
Pension Plans
The company maintains noncontributory defined pension and death benefit plans covering substantially all employees. The pension benefit formula used in the determination of pension cost is based on the average compensation earned during the five highest consecutive years of the last 10 years of employment under the management plan and a flat dollar amount per year of service under the nonmanagement plan. The company's funding policy is to contribute an amount up to the maximum that can be deducted for federal income tax purposes. However, due to the funded status of the plans, no contributions have been made for the years reported below.
Pension expense was determined using the projected unit credit actuarial method in accordance with Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" (SFAS No. 87). The resulting pension
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document credits are primarily attributable to favorable investment performance and the funded status of the plans.
The components of pension cost (credits) follow:
The funded status of the plans follows:
26
The assets of the pension plans consist principally of debt and equity securities, fixed income instruments and real estate. The assumed long-term rate of return on plan assets used in determining pension cost was 7.25 percent for 1993, 1992 and 1991. The assumed discount rate used to determine the projected benefit obligation as of December 31, 1993 and 1992 was 5.8 percent, while the assumed rate of increase in future compensation levels, also used in the determination of the projected benefit obligation, was 4.5 percent in 1993 and 1992.
Postretirement Benefits Other Than Pensions
Effective January 1, 1992, the company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106). SFAS No. 106 requires the cost of postretirement benefits granted to employees be accrued as expense over the period in which the employee renders service and becomes eligible to receive benefits. The cost of postretirement health care and life insurance benefits for current and future retirees was recognized as determined under the projected unit credit actuarial method.
In adopting SFAS No. 106, the company elected to immediately recognize, effective January 1, 1992, the transition obligation for current and future retirees. The transition amount was $2.6 billion net of the then estimated fair value of plan assets of $825 million. The charge to income was $1.65 billion net of a deferred tax benefit of $950 million.
As defined by SFAS No. 71, a regulatory asset associated with the recognition of the transition obligation was not recorded because of uncertainties as to the timing and extent of recovery in the rate-making process.
The company sponsors noncontributory defined benefit postretirement plans for substantially all of its retirees and their eligible dependents. Contributions for health care benefits are made to voluntary employee
27 Notes to Consolidated Financial Statements benefit association trust funds (VEBAs). The company also maintains retirement
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document funding accounts (RFAs) to provide life insurance benefits. The company intends to continue to fund the nonmanagement VEBA and is exploring other available funding and cost-containment alternatives for its entire postretirement obligation. Specifically, during 1993 the company utilized approximately $90 million in excess pension plan assets to help pay the nonmanagement retiree health care obligation. Funding of the management VEBA was suspended effective in 1994 primarily due to a tax rate increase from 31.0 percent to 39.6 percent on its investment income. The nonmanagement VEBA and RFAs earn income without tax. Plan assets consist principally of corporate securities and bonds. The components of postretirement benefit cost for 1993 and 1992 follow:
The funded status of the plans as of December 31, 1993 and 1992, follows:
28
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The assumed discount rate used to measure the accumulated postretirement benefit obligation as of December 31, 1993 was 7.0 percent and was 7.5 percent as of December 31, 1992. The assumed rate of future increases in compensation levels was 4.5 percent in 1993 and 1992. The expected long-term rate of return on plan assets was 7.25 percent in 1993 and 1992 on VEBAs and 8.0 percent in 1993 and 1992 on RFAs. The assumed health care cost trend rate in 1993 was 9.6 percent and 10 percent in 1992 and is assumed to decrease gradually to 4.0 percent in 2007 and remain at that level. The assumed health care cost trend rate is 9.2 percent for 1994. The health care cost trend rate has a significant effect on the amounts reported for costs each year as well as on the accumulated postretirement benefit obligation. Specifically, increasing the assumed health care cost trend rate by one percentage point in each year would increase the aggregate of the service and interest cost components for 1993 by $50.1 million, and would have increased the accumulated postretirement benefit obligation as of December 31, 1993, by $502.2 million.
During 1991, the cost of postretirement health care benefits for retirees was $242.1 million.
As of December 31, 1993, the company had approximately 48,000 retirees eligible to receive health care and group life insurance benefits.
Postemployment Benefits
Effective January 1, 1992, the company adopted Statement of Financial Accounting Standards No. 112, "Employers Accounting for Postemployment Benefits" (SFAS No. 112). SFAS No. 112 requires employers to accrue the future cost of certain benefits such as workers' compensation, disability benefits and health care continuation coverage. A one-time charge related to adoption of this statement was recognized as a change in accounting
29 Notes to Consolidated Financial Statements principle, effective as of January 1, 1992. The charge was $101.6 million, net of a deferred tax benefit of $58.5 million. Previously, the company used the cash method to account for such costs. Current expense levels are dependent upon actual claim experience, but are not materially different than prior charges to income.
Leveraged Employee Stock Ownership Plans
In 1989, the company created leveraged employee stock ownership plans (LESOPs) within its existing employee savings plans. To fund the LESOPs, the Trustee for the savings plans issued $665.0 million of debt, at 8.1 percent interest, payable in semiannual installments through 2001, which the company guaranteed. The Trustee used the proceeds to purchase at fair market value 22,566,276 shares of the company's common stock from the company's treasury. The trusts repay the notes, including interest, with funds from the company's contributions to the savings plans and from dividends paid on the shares of company common stock held by the Trustee. The interest rate on this debt decreased to 8.03 percent effective January 1, 1993, due to the increased federal income tax rate.
As a result of the company's unconditional guarantee, the notes of the trusts are recorded as long-term debt and as deferred compensation in the company's balance sheets. Deferred compensation represents a reduction of shareowners' equity. As the Trustee makes principal payments, the company reduces the debt and deferred compensation. As of December 31, 1993, the company had $416.5 million in long-term debt and $52.0 million included in long-term debt maturing within one year as a result of the company's guarantee.
The company maintains savings plans that cover substantially all of its employees. Under these plans, the company matches a certain percentage of eligible contributions made by the employees. The LESOP provisions of the savings plans became effective January 1, 1990. Under these provisions, company matching contributions are allocated to employees in company stock from the LESOP trusts. Employees are not allowed to switch the company matching contributions from company stock to alternative investments for the life of the LESOPs except under certain circumstances. Company stock is released for allocation to employees in the proportion that principal and interest paid in a year bears to the total principal and interest due over the life of the notes.
Company matching contributions to the plans are recorded as compensation expense. Any change in the required contribution as a result of leveraging this obligation is recorded as a gain or loss in other income. The amount expensed and contributed to the LESOPs for 1993 and 1992 totaled $50.8 million and $72.1 million, respectively. Interest expense incurred by the savings plans for 1993 and 1992 was $39.2 million and $45.2 million, respectively. Dividends paid on
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shares of stock held by the Trustee used to partially satisfy debt repayment requirements were $40.1 million and $39.2 million for 1993 and 1992, respectively.
Work Force Reductions
During 1993, about 1,200 management employees left the company involuntarily and another 500 employees left voluntarily. The net cost of these reductions including termination benefits, settlement and curtailment gains from the pension plan, was a credit to expense of $33.3 million. The involuntary termination plan remains in effect until June 30, 1994.
30 During 1992, about 3,000 management employees left the company through a voluntary early retirement program and involuntary terminations. The net cost of this program, along with other transfers from the pension plan, including termination benefits, settlement and curtailment gains from the pension plan, was a credit to expense of $12.4 million.
During 1991, the company offered most of its management employees an early retirement program under which approximately 2,100 employees left the payroll. The net cost of the program, including termination benefits and a settlement gain from the pension plan, was $12.0 million.
Funding of the above termination benefits was primarily from the management pension plan, except for the 1993 involuntary program.
5. Financial Instruments
The following table presents the estimated fair value of the company's financial instruments as of December 31, 1993 and 1992:
The following methods and assumptions were used to estimate the fair value of financial instruments:
Cash and Temporary Cash Investments
The carrying value approximates fair value because of the short-term maturity of these instruments.
Debt
The carrying amount (including accrued interest) of the company's debt maturing within one year approximates fair value because of the short- term maturities involved. The fair value of the company's long-term debt was estimated based on the year-end quoted market price for the same or similar issues.
31 Notes to Consolidated Financial Statements
Other Assets and Liabilities
These financial instruments consist primarily of long-term receivables, other investments, financial contracts and customer deposits. The fair values of these items were based on expected cash flows or, if available, quoted market prices.
Financial Contracts
Primarily to hedge exposure to adverse exchange rate risks, the company enters into foreign currency options, forward exchange contracts and swaps. Related gains and losses are reflected in net income. At December 31, 1993, and 1992, the company had contracts giving it the right to deliver foreign currency valued at $11.1 million and $81.1 million, respectively. At December 31, 1993 and 1992, the company had also entered into interest rate swap agreements to change the interest rate on $115.0 million and $80.0 million, respectively, of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document short-term commercial paper to a fixed rate over one to five years. Related interest income and expense is included in net income. The company is exposed to credit risk in the unlikely event of nonperformance by counterparties.
6. Debt Maturing Within One Year
Debt maturing within one year is included as debt in the computation of debt ratios and consists of the following as of December 31:
*Computed by dividing the average daily face amount of notes payable into the aggregate related interest expense.
In May 1991, the company established a $2.0 billion committed revolving credit facility that was renewed in 1992, and again in 1993 to a level of $1.0 billion. The fees for this facility range up to 1/8 of 1 percent per annum. There has not been any usage of this facility. In addition, Ameritech has entered into uncommitted agreements with a number of banks for lines of credit totaling $1.3 billion. The interest rates on these lines are negotiable at the time of borrowing. There was
32 $179.0 million outstanding under these agreements as of December 31, 1993. There are no significant commitment fees or material compensating balance requirements associated with any of these lines of credit. These lines, as well as the revolving credit facility, are available for support of commercial paper borrowing and to meet short-term cash needs.
7. Long-Term Debt
Long-term debt consists principally of debentures issued by the Ameritech Bell companies.
The following table sets forth interest rates and other information on long-term debt outstanding at December 31, after giving effect to refinancings in January 1994:
Scheduled maturities of long-term debt include $39.6 million due in 1995, $41.9 million due in 1996, $55.9 million due in 1997 and $104.0 million due in 1998.
Assets of Illinois Bell, comprising approximately $8,223.7 million of total gross property, plant and equipment, are subject to lien under mortgage bonds with outstanding balances of $330.0 million.
The company, through a wholly owned subsidiary, Ameritech Capital Funding Corporation, has filed a registration statement with the Securities and Exchange Commission (SEC) for the issuance of up to $1.0 billion in unsecured debt securities for general corporate purposes. As of December 31, 1993, $357.8 million of these securities had been issued and $155.0 million were outstanding.
The company, through its Ameritech Bell companies, has registered with the SEC the issuance of up to $1.4 billion in unsecured debt securities for corporate purposes. As of December 31, 1993, none of these securities had been issued; however, $200 million were issued subsequent to year-end.
33 Notes to Consolidated Financial Statements
8. Lease Commitments
The company leases certain facilities and equipment used in its operations under both operating and capital leases. Rental expense under operating leases was $196.2, $196.3 and $213.0 million for 1993, 1992 and 1991, respectively. As of December 31, 1993, the aggregate minimum rental commitments under noncancelable leases were approximately as follows:
9. Shareowners' Equity
Stock Split
On December 15, 1993, the company's board of directors approved a two-for-one stock split, effected by declaring a 100 percent stock dividend, effective December 31, 1993. The split shares were distributed in January 1994. All share and per share data in the consolidated financial statements and notes have been restated for all periods presented to reflect this stock split.
Shareowners' Rights
The certificate of incorporation of Ameritech authorizes the issuance of 1.2 billion shares of common stock, 30 million shares of preferred stock (par value $1 per share) and 30 million shares of preference stock (par value $1 per share).
One preference stock purchase right is attached to each share of the company's common stock. Under certain circumstances, each right may be exercised to purchase one one-hundredth of a share of Series A Junior Participating Preference Stock, $1 par value, at a price of $125. If a person acquires, or announces a tender offer for, 20 percent or more of the company's common stock, rights become exercisable for common stock of the company having a market value of two times the exercise price. If the company is acquired in a merger or similar transaction, the rights may be exercised to purchase common stock of the surviving company, having a market value of two times the exercise price. The rights, which are nonvoting, are redeemable by the company for $.01 per right and expire on December 31, 1998, or upon consummation of certain merger transactions. Until the occurrence of certain events, the rights are attached to and trade with shares of the company's common stock. As of December 31,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1993, 546,642,992 rights were outstanding.
Stock Plans
The company, through its Long Term Incentive Plan and the 1989 Long Term Incentive Plan (the plans), grants incentive compensation to its officers and other employees in the form of stock options, stock
34 appreciation rights, restricted stock and performance awards. The incentives granted are based upon terms and conditions, subject to certain limitations, determined by a committee of the Board of Directors, which administers the plans. The Long Term Incentive Plan and the 1989 Long Term Incentive Plan authorize the issuance of up to 20,752,976 and 40,000,000 shares of common stock, respectively, over 10-year periods.
Stock options may be granted under the plans as either incentive stock options or nonqualified stock options. Options have not been granted at less than fair market value as of the date of grant (however, nonqualified options may be granted at not less than 50 percent of fair market value under the 1989 Long Term Incentive Plan) and have a maximum life of 10 years and one day from the date of grant. Stock appreciation rights may be granted independently or in tandem with stock options and permit the optionee to receive stock, cash or a combination thereof equal to the amount by which the fair market value on the exercise date exceeds the option price. Stock options granted on or following December 16, 1987, are exercisable after one year, in equal increments over the following three years.
Information with respect to options granted under the plans is as follows:
As of December 31, 1993, incentive stock options for 15,268 shares and nonqualified stock options for 4,250,690 shares were exercisable at average prices of $20.59 and $29.94, respectively. All stock appreciation rights granted under the plans have been issued in tandem with nonqualified stock options. Stock appreciation rights granted prior to 1987 have been capped at $29.938. The exercise of a nonqualified option or a stock appreciation right cancels the related right or option. No stock appreciation rights have been issued after December 31, 1990.
35 Notes to Consolidated Financial Statements
During 1991, the company issued, to certain key employees, performance based restricted stock under its existing 1989 Long Term Incentive Plan. The employees earn, without cost to them, Ameritech stock over three years, although restrictions generally continue for two additional years. As of December 31, 1993, 593,932 shares had been awarded under this plan. The company also has 175,696 shares of nonperformance based restricted stock issued under this plan. Shareowners' equity reflects deferred compensation for the unvested stock awarded. This amount is reduced and charged against operations (together with any change in market price) as the employees vest in the stock.
10. Additional Financial Information
Interest paid, net of amounts capitalized was $456.1, $485.9 and $460.4 million in 1993, 1992 and 1991, respectively.
Revenues from AT&T, principally for interstate network access and billing and collection service, comprised approximately 10, 12 and 12 percent of consolidated revenues in 1993, 1992 and 1991, respectively. No other customer accounted for more than 10 percent of revenues.
11. Quarterly Financial Information (unaudited)
36
Several significant income and expense items were reported in the fourth quarters of 1993 and 1992, the net result of which in both years was not material to the respective quarters or years. In 1993, the company recognized gains from a work force resizing and its LESOP, and charges for the early retirement of debt. In 1992, the company recognized higher costs and charges
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document resulting from its market realignment efforts, the early retirement of debt, the net write-down of certain unregulated assets and increased advertising. These costs were offset by gains resulting primarily from work force resizing and higher than expected pension credits.
First quarter 1992 results reflect charges related to the adoption of SFAS Nos. 106 and 112 for certain postretirement and postemployment benefits, as discussed in Note 4 above. The charges totaled approximately $1.8 billion, after taxes, or $3.27 per share ($3.26 per share when calculated on average common shares outstanding for all of 1992).
All adjustments necessary for a fair statement of results for each period have been included.
37 Six-Year Summary
Selected Financial and Operating Data Ameritech Corporation and Subsidiaries
*Gives retroactive effect for two-for-one stock split, effective December 31,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1993.
**Return to average equity and return on average total capital are calculated using weighted average monthly amounts.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1
2
* Jointly owned by the Ameritech landline telephone companies ** Jointly owned by Ameritech Services, Inc. (49%) and Ameritech Corporation (51%) *** AMCI has an approximate 36% interest **** Gensub, Inc. has a 7.5% interest and McCaw has a 15% interest + 49.9% interest with Singapore Telecom. Majority ownership is held by Arkla A.S. and Comvik International A.S. ++ The consortium MagyarCom, of which Ameritech is a member, owns 3,126,845 shares of MATAV. Ameritech's approximate ownership interest is 15.14%
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors Ameritech Corporation
As independent public accountants, we hereby consent to incorporation by reference of our reports dated January 28, 1994, included (or incorporated by reference) in this Form 10-K for the year ended December 31, 1993, into Ameritech Corporation's previously filed Registration Statement File Nos. 33-26366, 2-97037, 33-30593, 33-32705, 33-34006, 33-36790, 33-47608, 33-49036, 33-51771 and 33-51773.
/s/ Arthur Andersen & Co. ARTHUR ANDERSEN & CO.
Chicago, Illinois March 30, 1994
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Exhibit 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is an Officer and Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as an Officer and a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ RICHARD H. BROWN ------Richard H. Brown Vice Chairman
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me Richard H. Brown to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994.
/s/ ANN L. KITTELL ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notary Public [Official Seal]
2 Exhibit 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994. /s/ DONALD C. CLARK ------Donald C. Clark
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me Donald C. Clark to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994.
/s/ ANN L. KITTELL ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notary Public
[Official Seal]
3 EXHIBIT 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, and Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ RICHARD M. GILLETT ------Richard M. Gillett
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me Richard M. Gillett to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notary Public
[Official Seal]
4 Exhibit 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, and Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 16th day of March, 1994.
/s/ HANNA HOLBORN GRAY ------Hanna Holborn Gray
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me Hanna Holborn Gray to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notary Public
[Official Seal]
5 EXHIBIT 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ JAMES A. HENDERSON ------James A. Henderson
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me James A. Henderson to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notary Public
[Official Seal]
6 EXHIBIT 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ SHELDON B. LUBAR ------Sheldon B. Lubar
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me Sheldon B. Lubar to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notary Public
[Official Seal]
7 EXHIBIT 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 16th day of March, 1994.
/s/ LYNN M. MARTIN ------Lynn M. Martin
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me Lynn M. Martin to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notary Public
[Official Seal]
8 EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON AND B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ JOHN B. McCOY ------John B. McCoy
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me John B. McCoy to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document WITNESS my hand and official seal this 16th day of March, 1994.
/s/ ANN L. KITTELL ------Notary Public
[Official Seal]
9 EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ J.D. ONG ------John D. Ong
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me John D. Ong to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994.
/s/ ANN L. KITTELL ------Notary Public
[Official Seal]
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 10 EXHIBIT 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as a Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ A. BARRY RAND ------A. Barry Rand
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me A. Barry Rand to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------Notary Public
[Official Seal]
11
Exhibit 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is an Officer and Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as an Officer and Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ LOUIS J. RUTIGLIANO ------Louis J. Rutigliano Vice Chairman and Director
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me Louis J. Rutigliano to me known and known to be the person described in and who executed
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------Notary Public
[Official Seal]
12 EXHIBIT 24
POWER OF ATTORNEY ------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AMERITECH CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Annual Report"); and
WHEREAS, the undersigned is an Officer and Director of the Company;
NOW, THEREFORE, THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS R.H. BROWN, R.C. NOTEBAERT, L.J. RUTIGLIANO, J.A. EDWARDSON and B.F. ELLIOTT, and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead as an Officer and Director of the Company, to execute and file the Annual Report, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 16th day of March, 1994.
/s/ W. L. WEISS ------W. L Weiss Chairman
STATE OF ILLINOIS ) COUNTY OF COOK )
On the 16th day of March, 1994, personally appeared before me William L.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Weiss to me known and known to be the person described in and who executed the foregoing instrument and such person duly acknowledged that such person executed and delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 16th day of March, 1994
/s/ ANN L. KITTELL ------Notary Public
[Official Seal]
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