SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number : 001-8610 (SBC Communications Inc.)
001-7155 (R.H. Donnelley Corporation)
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
DonTech Profit Participation Plan, 200 East Randolph Drive, Chicago,
Illinois 60601
B. Name of issuers of the securities held pursuant to the plan and the address
of their principal executive offices:
SBC Communications Inc., 175 E. Houston Street, San Antonio, TX 78205 and
R.H. Donnelley Corporation, One Manhattanville Road, Purchase, NY 10577
REQUIRED INFORMATION
The required financial statements are attached to this report.
<PAGE>
DONTECH PROFIT PARTICIPATION PLAN
INDEX TO FORM 11-K
Page
Report of Independent Accountants 3
Statement of Net Assets Available for Benefits,
as of December 31, 1999 and 1998 4
Statement of Changes in Net Assets Available for
Benefits for the Years Ended December 31, 1999 and 1998 5
Notes to Financial Statements 6-10
Signatures 11
Exhibit 23 - Consent of Independent Accountants 12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants of the Dontech Profit Participation Plan and the Employee
Benefits Committee of the Board of Directors of DonTech II:
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the DonTech Profit Participation Plan (the "Plan") at December 31, 1999 and
1998, and the changes in net assets available for benefits for the years then
ended in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Plan's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Chicago, Illinois
June 29, 2000
<PAGE>
<TABLE>
DONTECH PROFIT PARTICIPATION PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS,
AS OF DECEMBER 31, 1999 and 1998
(Dollars in Thousands)
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Assets:
Investment in Master Trust $ - $50,181
Investments in Trust, at fair value 50,699 -
Cash in trust 59 -
Participant contributions receivable 61 118
Employer contributions receivable 5 27
Total assets --------- --------
50,824 50,326
Liabilities:
Other accrued liabilities - (25)
Total liabilities --------- --------
- (25)
Net assets available for
benefits $ 50,824 $50,301
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
DONTECH PROFIT PARTICIPATION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
FOR THE YEARS ENDED DECEMBER 31, 1999 and 1998
(Dollars in Thousands)
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Additions:
Investment income:
Allocated income in Master trust $ - $ 6,776
Net realized and unrealized appreciation in
fair value of investments 4,409 -
Interest 1,008 -
Dividends 319 -
Contributions:
Participant 2,299 2,361
Employer 699 752
Transfer from other Trustee - 4,605
-------- --------
Total Additions 8,734 14,494
Deductions:
Net distributions to participants (8,211) (5,888)
Administrative fees - (20)
-------- --------
Total Deductions (8,211) (5,908)
Net increase 523 8,586
Net assets available for benefits
as of January 1 50,301 41,715
-------- --------
Net assets available for benefits
as of December 31 $50,824 $50,301
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1. Plan Description
Overview
--------
DonTech II is a general partnership between R.H. Donnelley Corporation ("RHD")
and Ameritech Publishing of Illinois, Inc. ("APIL"), an indirect, wholly owned
subsidiary of Ameritech Corporation ("Ameritech"). The partnership does business
under the name DonTech ("DonTech" or the "Company"). On July 1, 1998, RHD
separated from The Dun & Bradstreet Corporation ("D&B"), and operates as an
independent public company. On October 8, 1999 Ameritech became a wholly owned
subsidiary of SBC Communications Inc.
DonTech (the "Plan Administrator") has adopted the DonTech Profit Participation
Plan (the "Plan") for the benefit of its eligible employees. The Plan is a
defined contribution plan and is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan was
established to provide a convenient way for eligible employees to save on a
regular and long-term basis. The following summary provides an overview of major
Plan provisions in effect for the Plan years ended December 31, 1999 and 1998
and is provided for general informational purposes. Employees who contribute to
the Plan ("Participants") or former employees who have assets in the Plan should
refer to the Plan document for more complete information and a full description
of the Plan provisions and qualifications.
Eligibility
-----------
Full-time employees of the Company are immediately eligible to participate in
the Plan on their date of hire. Part-time employees who work at least one
thousand hours during the consecutive twelve-month period following employment
or in any calendar year thereafter are eligible to participate in the Plan on
the first day of the following January.
Contributions
-------------
Participants in the Plan authorize direct payroll deductions of between 1% and
6%, in whole percent increments, of their included compensation, as defined by
the Plan document ("Basic Contributions"). Participants may make additional
contributions ("Investment Contributions") up to a maximum of 10% of included
compensation.
Participants' Basic Contributions and Investment Contributions may be made from
before-tax earnings, which has the effect of reducing current taxable earnings
for federal income tax purposes, and/or after tax earnings. In any Plan year, a
Participant may contribute up to a maximum of 16% of his or her included
compensation (up to 6% in Basic Contributions and 10% in Investment
Contributions) or the maximum allowed by the Internal Revenue Code ("IRC"),
whichever is less. For each of the Plan years 1999 and 1998, the IRC limit on
before-tax contributions was $10,000.
The Company makes contributions ("Matching Contributions") equal to a minimum of
50% of aggregate Basic Contributions. Investment Contributions are not eligible
for Matching Contributions. In accordance with the provisions of the Plan, the
Company may contribute an additional percentage of the Participant's aggregate
Basic Contribution if the Company's net income for a Plan year increases more
than 5% over the preceding Plan year.
To comply with certain provisions of the Tax Reform Act of 1986, as amended (the
"Act"), the Plan limits covered compensation for purposes of determining Basic,
Investment and Matching Contributions (collectively, "Contributions") to
$160,000 for each of the calendar years ended December 31, 1999 and 1998.
All contributions are subject to limitations imposed by the IRC and ERISA.
<PAGE>
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Vesting
-------
Basic and Investment Contributions are fully vested when made. Matching
Contributions are fully vested when the Participant has completed three years of
service with the Company. In addition, a Participant becomes fully vested in
Matching Contributions immediately upon attaining age 65 or in the event of
death or disablement.
Investment Options
------------------
The Plan allows Participants to allocate their Contributions to various
investment options available under the Plan. These elections must be made in 1%
increments. Participants are able to reallocate their entire account balances in
multiples of 1% among the Plan's investment options.
Payment of Benefits
-------------------
Upon termination of service with the Company, Participants become eligible for a
lump sum distribution of the vested portion of their account. Retired and
terminated Participants who have an account balance in excess of $5,000 may
elect various forms of deferred distribution. In connection with the removal of
the Plan from the R. H. Donnelley Corporation Defined Contribution Master Trust
(see Note 3), account balances of former Participants, who became employees of
Ameritech Corporation, were transferred from the Plan to the qualified plan of
Ameritech Corporation. The amounts transferred, $2,003,000, are reflected in Net
distributions to participants on the Statement of Changes in Net Assets
Available for Benefits for the year ended December 31, 1999.
Participant Loans
-----------------
Participants may borrow from their vested account balance a minimum of $500 up
to a maximum of $50,000, or 50% of the vested account balance, whichever is
less. Loan terms range from 1 to 5 years or up to 10 years for the purchase of a
primary residence. Loans are secured by the balance in the Participant's account
and bear interest at the Prime rate, as quoted in the Wall Street Journal as of
the last day of the month immediately preceding the receipt of the loan
application, plus 2%. Principal and interest payments are payable ratably
through payroll deductions. The total number of Participants with outstanding
loans at December 31, 1999 and 1998 was 205 and 151, respectively.
Forfeitures
-----------
Amounts forfeited by non-vested Participants who terminated during the year were
$52,000 and $48,000 for the years ended December 31, 1999 and 1998,
respectively. Forfeited amounts reduce future Company contributions.
Note 2. Investments
Investment Funds
----------------
Participants of the Plan can elect to have Contributions credited to their Plan
accounts invested in one or more of the various investment fund options of the
Plan.
Trust and Master Trust
-----------------------
Prior to July 1, 1998, assets of the Plan were commingled with the assets of the
Profit Participation Plan of The Dun & Bradstreet Corporation in The Dun &
Bradstreet Defined Contribution Plan Group Trust (the "Group Trust"). From
January 1, 1998 through April 30, 1998 the Group Trust was held by Bankers Trust
Company as trustee. On May 1, 1998, D&B terminated its trustee relationship with
Bankers Trust Company, established a new Group Trust at the Northern Trust
Company (the "Former Trustee") and transferred the assets of the Plan to the
Trustee. On July 1, 1998, RHD established with the Former Trustee the R.H.
Donnelley Corporation Defined Contribution Plan Master Trust (the "Master
Trust").
<PAGE>
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
Upon the separation of RHD from D&B, the assets of the Plan were transferred
from the Group Trust to the Master Trust. At December 31, 1998, assets of the
Plan were commingled with the assets of The Profit Participation Plan of R.H.
Donnelley.
On March 1, 1999, the Plan Administrator removed the Plan from the R.H.
Donnelley Corporation Defined Contribution Master Trust. The Plan Administrator
established the DonTech Profit Participation Plan Trust (the "Trust") and
appointed Merrill Lynch (the "Trustee") as Trustee of the Plan assets and as
recordkeeper and investment advisor. As of December 31, 1999 cash and
investments of the Plan are in the Trust.
Note 3. Summary of Significant Accounting Policies
Method of Accounting
--------------------
The Plan's financial statements are prepared on the accrual basis of accounting.
Investment Valuation and Income Recognition
-------------------------------------------
As of December 31, 1999, fair value of assets in the Trust is determined based
on net asset value for shares of mutual funds, quoted market prices for shares
of stock, and contract value, which approximates fair value, for investment
contracts. The net appreciation in the fair value of the investments of the
Trust, as applicable, consists of realized and unrealized appreciation and
depreciation for the specified period. Dividend income is recorded on the
ex-dividend date. Interest earned on investments is recorded on the accrual
basis. Purchases and sales of securities are recorded on the trade date.
As of December 31, 1998, the Plan's investment in the Master Trust was based on
its relative interest in the fair value of the assets held in the Master Trust.
Investment income, gains and losses on sales of investments and net
appreciation/depreciation in the fair value of investments were allocated to the
Plan based upon the relative investment balances at fair value during the
valuation period. Fair value was determined based on quoted market prices of
investment securities or contract value for investment contracts.
Contributions
-------------
Participant contributions, the amounts withheld each pay period, are recorded
when made. Company contributions are based upon amounts required under the
provisions of the Plan and are recorded when made.
Benefit Payments
----------------
Benefits are recorded when paid. Liabilities relating to Participants who have
elected to withdraw from the Plan but have not yet been paid were $35,179 and
$352,000 as of December 31, 1999 and 1998, respectively. These amounts will be
reflected on the Form 5500 to be filed by the Plan Administrator.
Expenses and Administrative Costs
---------------------------------
As of March 1, 1999, expenses and administrative costs are paid by the Company.
Prior to March 1, 1999, investment manager fees and certain transaction fees
related to the Plan were charged against Plan assets. Trustee fees and other
miscellaneous expenses of administering the Plan are paid by the Company.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and
<PAGE>
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of changes in net assets
available for benefits during the reporting period. Actual results could differ
from those estimates.
Risks and Uncertainties
-----------------------
The Plan provides for various investment options in a number of funds which
invest in stocks, bonds, fixed income securities, mutual funds, and other
investment securities. Certain investment securities are exposed to risks such
as changes in interest rates, fluctuations in market conditions and credit risk.
The level of risk associated with certain investment securities and uncertainty
related to changes in value of these securities could materially affect
Participant account balances and amounts reported in the financial statements
and accompanying notes.
Plan Termination
----------------
While the Company has not expressed any intent to do so, it may discontinue its
contributions or terminate the Plan at any time, subject to the provisions of
ERISA and the IRC. These provisions state that in such an event, all
Participants of the Plan shall be fully vested in the current market value of
amounts credited to their accounts as of the date of termination.
Reclassifications
-----------------
Certain reclassifications were made to the 1998 financial statements to conform
to the 1999 financial statement presentation.
Note 4. Tax Status
The Internal Revenue Service has determined and informed the Company by a letter
dated June 9, 1999, that the Plan and related Trust are designed in accordance
with applicable sections of the IRC. Although the Plan has been amended since
the date of the letter, the Plan Administrator and the Administrator's legal
counsel believe the amendments do not alter the tax status of the Plan and the
Plan is currently being operated in compliance with the applicable requirements
of the IRC.
Note 5. Investment in Trusts
The investments reflected in the Statement of Net Assets Available for Benefits
represents the total assets in the Trust as of December 31, 1999 and the Plan's
share of total assets in the Master Trust as of December 31, 1998. The Plan's
share is 100% of the Trust assets at December 31, 1999 and 44% of the total
Master Trust assets at December 31, 1998.
The following presents investments that represent 5 percent or more of the
Plan's assets at fair value in the Trust (in thousands):
Trust
-----
December 31,1999
----------------
DonTech Stable Value Fund $ 13,151
Merrill Lynch Equity Index Fund 19,743
SBC Communications Inc.Common Stock Fund 10,661
R.H. Donnelley Corporation Common Stock Fund 2,945
<PAGE>
DONTECH PROFIT PARTICIPATION PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
The following presents investments that represent 5 percent or more of the total
assets at fair value in the Master Trust (in thousands):
Master Trust
------------
December 31,1998
----------------
BGI Equity Index Fund $ 47,994
R.H. Donnelley Corporation Common Stock Fund 7,726
Ameritech Corporation Common Stock Fund 10,047
BGI Special Fixed Income Fund 32,417
At December 31, 1999 and 1998, the Trust and Master Trust have entered into
benefit responsive investment contracts with various insurance companies
("Insurers"). The fair value of these contracts is recorded in the DonTech
Stable Value Fund and BGI Special Fixed Income Fund at December 31, 1999 and
1998, respectively. The Insurers maintain the contributions in a pooled account,
which is credited with earnings on the underlying assets and charged for
Participant withdrawals and administrative expenses. The contracts are included
in the financial statements at contract value which approximates fair value and
there are no reserves against contract value for credit risk of the contract
insurer or other risks at December 31, 1999 and 1998. Fair value of the
contracts in the Trust and Master Trust was $9,707,000 and $24,844,000 at
December 31, 1999 and 1998, respectively. The average interest rate was
approximately 6.43% for the period from March 1, 1999 (inception of the DonTech
Stable Value Fund) to December 31, 1999 and approximately 6.6% for the Plan year
ended December 31, 1998.
Note 6. Related Party Transactions
Shares of the Merrill Lynch Equity Index Fund are managed by the Trustee and
therefore, these transactions qualify as party-in-interest transactions. Fees
paid by the Company for the investment management services were nominal for the
year ended December 31, 1999. There were no such party-in-interest transactions
at December 31, 1998.
Note 7. Subsequent Events
Investment Funds
----------------
Effective April 2, 2000, the Plan was amended to add six additional investment
fund options to the Plan.
Vesting
-------
Effective June 1, 2000, the Plan was amended to change the vesting of Matching
Contributions to be fully vested when made. All Participants of the Plan who
were actively employed on June 1, 2000 were fully vested in all the Matching
Contributions existing in their Participant accounts on that date. Subsequent
Matching Contributions are fully vested when made.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the DonTech
II general partnership (the administrator of the DonTech Profit Participation
Plan) has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
DonTech Profit Participation Plan
(Name of Plan)
BY: /s/ Robert Gross
Vice President - Finance &
Chief Financial Officer
Date: June 30, 2000
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in (i) the Registration
Statement on Form S-8 (File No. 333-88667) of SBC Communications Inc., and (ii)
the Registration Statement on Form S-8 (File No. 333-27144) of R.H. Donnelley
Corporation of our report dated June 29, 2000, which appears in this annual
report on Form 11-K.
/s/PricewaterhouseCoopers LLP
Chicago, Illinois
June 30, 2000
