SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: August 13, 1996
SBC COMMUNICATIONS INC.
A Delaware Corporation
Commission File No. 1-8610
IRS Employer No. 43-1301883
175 E. Houston, San Antonio, Texas 78205
Telephone Number (210) 821-4105
Item 7. Financial Statements and Exhibits
SBC Communications Inc. (SBC) hereby incorporates by
reference herein Pacific Telesis Group's (PAC) Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996 as
filed with the Securities and Exchange Commission (File No.
1-8609). SBC also presents herein unaudited pro forma
combined condensed financial statements of SBC and PAC to
reflect the proposed business combination of SBC and PAC as
of and for the six months ended June 30, 1996.
(a)UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS OF SBC COMMUNICATIONS INC. AND PACIFIC TELESIS
GROUP
The following unaudited pro forma combined condensed
financial statements and notes thereto are presented
assuming the merger will be accounted for as a "pooling
of interests." Under this method of accounting, SBC
will restate its consolidated financial statements to
include the assets, liabilities, shareowners' equity and
results of operations of PAC.
The following unaudited pro forma combined condensed
financial statements have been prepared using an assumed
exchange ratio of 0.733. The actual exchange ratio is
subject to change under the terms of the merger
agreement.
The unaudited pro forma combined condensed income
statements reflect the combination of the historical
operating results of SBC and PAC for the six months
ended June 30, 1996. The unaudited pro forma combined
condensed balance sheets reflect the combination of the
historical balance sheets of SBC and PAC at June 30,
1996. The information set forth in the pro forma
financial statements below should be read in conjunction
with the annual financial statements and notes thereto
included in (a) SBC's 1995 Annual Report to Shareowners,
which is incorporated by reference into SBC's Annual
Report on Form 10-K for 1995, and (b) PAC's 1996 Proxy
Statement, which is incorporated by reference into SBC's
registration statement on Form S-4, dated June 3, 1996
(File No. 333-02587).
The unaudited pro forma combined condensed financial
statements are not necessarily indicative of the results
of operations or financial position that actually would
have occurred had the merger been consummated on the
dates indicated or that may be obtained in the future.
These unaudited pro forma combined condensed financial
statements should be read in conjunction with the
related historical financial statements and notes
thereto of SBC and PAC noted above, and (a) SBC's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, and (b) PAC's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996.
<TABLE>
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
Unaudited Pro Forma Combined Condensed Balance Sheet
As of June 30, 1996
<CAPTION>
Historical Pro Forma
SBC PAC Adjustments Combined
(in millions)
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 369 $ 54 $ $ 423
Accounts receivable - net 2,220 1,552 3,772
Other current assets 1,285 1,010 (41)2a 2,254
Total current assets 3,874 2,616 (41) 6,449
Property, Plant and 13,276 11,526 24,802
Equipment - Net
Intangible Assets - Net 2,594 992 3,586
Other Assets 2,751 923 (562)2a 3,112
Total Assets $ 22,495 $ 16,057 $ (603) $ 37,949
Liabilities and
Shareowners' Equity
Current Liabilities
Debt maturing within one $ 1,721 $ 583 $ $ 2,304
year
Other current liabilities 3,398 2,744 (41)2a 6,101
Total current liabilities 5,119 3,327 (41) 8,405
Long-term debt 5,535 5,149 10,684
Postemployment benefit 2,728 2,460 5,188
obligation
Other noncurrent 2,423 1,659 (562)2a 3,520
liabilities
Corporation-obligated
mandatorily redeemable - 1,000 1,000
preferred securities of
subsidiary trusts*
Shareowners' Equity
Common shares 621 43 271 2b 935
Capital in excess of par 6,312 3,501 (398) 2b 9,415
value
Retained earnings 1,119 (770) 349
(deficit)
Guaranteed obligations of (247) (185) (432)
ESOPs
Foreign currency (601) - (601)
translation adjustment
Treasury shares (514) (127) 127 2b (514)
Total shareowners' equity 6,690 2,462 - 9,152
Total Liabilities and $ 22,495 $ 16,057 $ (603) $ 37,949
Shareowners' Equity
<FN>
* The sole asset of the trusts consist of $1,030 million in principal
amount of the Subordinated Debentures of PAC.
The accompanying notes are an integral part of these pro forma
combined condensed financial statements.
</FN>
</TABLE>
<TABLE>
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
Unaudited Pro Forma Combined Condensed Statement of Income
For the Six Months Ended June 30, 1996
<CAPTION>
Historical Pro Forma
SBC PAC Adjustments Combined
(in millions, except per share amounts)
<S> <C> <C> <C> <C>
Total operating revenues $ 6,529 $ 4,727 $ $ 11,256
Total operating expenses 4,884 3,537 8,421
Operating Income 1,645 1,190 2,835
Interest expense (237) (187) (424)
Other income (expense) - 101 (21) 80
net
Income Before Income 1,509 982 2,491
Taxes
Income Taxes 544 403 947
Net Income 965 579 1,544
Earnings Per Common 1.58 1.35 1.67
Share:
Weighted Average Number of
Common Shares
Outstanding $ 609.2 $ 428.4 $ (114.4)2c $ 923.2
<FN>
The accompanying notes are an integral part of these pro forma
combined condensed financial statements.
</FN>
</TABLE>
SBC COMMUNICATIONS INC. AND PACIFIC TELESIS GROUP
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited pro forma combined condensed financial
statements are presented for illustrative purposes only and do
not give effect to any cost savings which may result from the
integration of SBC's and PAC's operations. Additionally, the
unaudited pro forma combined condensed financial statements do
not include any future transaction costs relating to the merger
(which are estimated to be approximately $50 million), nor do
they consider any reorganization or regulatory costs that might
occur as a result of the merger. Differences in accounting
policies do not have a material effect on either the pro forma
financial position or pro forma results of operations and have
not been reflected in the unaudited pro forma combined condensed
financial statements. The unaudited pro forma combined condensed
balance sheets reflect the merger as if it had occurred on
June 30, 1996. The unaudited pro forma combined condensed
statements of income reflect the merger as if it had been in
effect on January 1, 1996.
The unaudited pro forma combined condensed financial statements
are not necessarily indicative of the results of operations or
financial position that actually would have occurred had the
merger been consummated on the dates indicated or that may be
obtained in the future. These unaudited pro forma combined
condensed financial statements should be read in conjunction with
the related historical financial statements and notes thereto
included in (a) SBC's 1995 Annual Report to Shareowners, which is
incorporated by reference into SBC's Annual Report on Form 10-K
for 1995, and (b) PAC's 1996 Proxy Statement, which is
incorporated by reference into SBC's registration statement on
Form S-4, dated June 3, 1996 (File No. 333-02587), and (c) SBC's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, and (d) PAC's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996.
Note 2 - Pro Forma Adjustments
a. Deferred income taxes - Deferred income taxes were
reclassified to present a net asset or liability for both current
and non-current amounts.
b. Shareowners' Equity - The shareowners' equity accounts of
PAC have been adjusted to reflect the assumed issuance of
approximately 314 million shares of SBC Common Stock in exchange
for all of the issued and outstanding PAC Common Stock (assuming
an Exchange Ratio of 0.733 of a share of SBC Common Stock for
each share of PAC Common Stock; the exchange ratio is subject to
change under the terms of the merger agreement). The actual
number of shares of SBC Common Stock to be issued in connection
with the merger will be based upon the number of shares of PAC
Common stock issued and outstanding immediately prior to the
consummation of the merger and the exchange ratio determined as
of the effective date of the merger.
c. Earnings per Common Share - Pro forma combined earnings per
common share information for each period presented is based on
the combined weighted average shares outstanding in each period
after conversion of PAC's weighted average shares outstanding at
a ratio of 0.733 shares of SBC Common Stock for each share of PAC
Common Stock. The actual ratio is subject to change under the
terms of the merger agreement.
d. Intercompany transactions - There are no significant
intercompany transactions between SBC and PAC.
e. Effective with the dividend for the second quarter of 1996,
PAC's quarterly dividend per share will not exceed 0.733
multiplied by SBC's quarterly dividend per share. Dividends per
share of the combined company are expected to be equivalent to
the dividend per share of SBC Common Stock.
Note 3 - Federal Income Tax Consequences of the Merger
The unaudited pro forma combined condensed financial statements
assume that the merger qualifies as a tax-free reorganization for
federal income tax purposes.
(b) Exhibits
Exhibit 99 Pacific Telesis Group's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1996 (File No. 1-8609) is incorporated herein by
reference.
SIGNATURE
Pursuant to the requirements 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.
SBC Communications Inc.
/s/ Donald E. Kiernan
Donald E. Kiernan
Senior Vice President, Treasurer
and Chief Financial Officer
August 13, 1996
