FORM l0-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from______to______
Commission file Number l-8610
SBC COMMUNICATIONS INC.
Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification Number 43-1301883
175 E. Houston, San Antonio, Texas 78205
Telephone Number 210-821-4105
SBC Communications Inc. hereby amends the following exhibits of its Annual
Report for the year ended December 31, 1997 on Form 10-K as set forth in the
pages attached hereto:
(1) Exhibit 99.d Annual report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried
Employees for the year 1997.
(2) Exhibit 99.e Annual report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Nonsalaried
Employees for the year 1997.
(2) Exhibit 99.f Annual report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP) for the year 1997.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized on the th day of June, 1998.
SBC COMMUNICATIONS INC.
By /s/ Donald E. Kiernan
------------------------------
Donald E. Kiernan
Senior Vice President, Treasurer
and Chief Financial Officer
June 26, 1998
Exhibit 99d
Form 10-K for 1997
File No. 1-8610
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number 1-8610
---------------
PACIFIC TELESIS GROUP
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
---------------
SBC Communications Inc.
175 E. Houston, San Antonio, Texas 78205
<PAGE>
TABLE OF CONTENTS
Description
-----------
Page
1. Financial Statements and Exhibits .. . . . . . . . . . . . . . . . . . .1
<PAGE>
1. Financial Statements and Exhibits
(a) Financial Statements of Pacific Telesis Group Supplemental
Retirement and Savings Plan for Salaried Employees (the
"Plan") included herein:
Report of Ernst & Young LLP Independent Auditors
Financial Statements:
Statements of Net Assets Available for Benefits
with Fund Information - As of December 31, 1997
and 1996
Statements of Changes in Net Assets Available
for Benefits with Fund Information For the Years
Ended December 31, 1997 and 1996
Notes to Financial Statements
Schedules:
Line 27a - Schedule of Assets Held for
Investment Purposes
Line 27d- Schedule of Reportable Transactions
(b) Exhibits:
Exhibit 23a - Consent of Independent Auditors
Ernst & Young LLP.
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Savings Plans Committee
Pacific Telesis Group Supplemental Retirement
and Savings Plan for Salaried Employees:
We have audited the accompanying statements of net assets available for benefits
of the Pacific Telesis Group Supplemental Retirement and Savings Plan for
Salaried Employees as of December 31, 1997 and 1996, and the related statements
of changes in net assets available for benefits for the years then ended. 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 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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees at
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 1997 and of reportable transactions
for the year ended December 31, 1997, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The Fund Information in
the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available for benefits
and changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
ERNST & YOUNG LLP
San Jose, California
June 19, 1998
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1997
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
-------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stock:
SBC Communications Inc. common
shares $ 535,313 $ - $ - $ - $ -
AirTouch Communications, Inc.
common shares - 238,121 - - -
Common/commingled trust funds:
State Street S&P 500 Fund - - 670,309 - -
State Street Bond Market Fund - - - - 39,168
State Street Money Market Fund - - - - -
State Street Balanced Fund - - - - -
Short-term Investment Fund 2,783 500 1,868 26,781 167
Investments at contract value:
Contracts with insurance companies
and banks - - - 155,436 -
-------------- ------------- -------------- ------------- -------------
Total Investments 538,096 238,621 672,177 182,217 39,335
Employee contributions receivable 192 - 278 - 23
Dividends and interest receivable 45 15 7 976 -
Receivable for investments sold - - 13 16 1
-------------- ------------- -------------- ------------- -------------
Total Assets 538,333 238,636 672,475 183,209 39,359
-------------- ------------- -------------- ------------- -------------
Liabilities
Payable for investments purchased - - - 977 -
Fees payable 13 7 - 4 -
-------------- ------------- -------------- ------------- -------------
Total Liabilities 13 7 - 981 -
============== ============= ============== ============= =============
Net assets available for benefits $ 538,320 $ 238,629 $ 672,475 $ 182,228 $ 39,359
============== ============= ============== ============= =============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1997
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Other Total
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stock:
SBC Communications Inc. common shares $ - $ - $ - $ 535,313
AirTouch Communications, Inc. common shares - - - 238,121
Common/commingled trust funds:
State Street S&P 500 Fund - - - 670,309
State Street Bond Market Fund - - - 39,168
State Street Money Market Fund 80,492 - - 80,492
State Street Balanced Fund - 332,030 - 332,030
Short-term Investment Fund (238) 1,017 409 33,287
Investments at contract value:
Contracts with insurance companies and banks - - - 155,436
------------- -------------- ------------- ---------------
Total Investments 80,254 333,047 409 2,084,156
Employee contributions receivable 52 151 - 696
Dividends and interest receivable 427 1 1 1,472
Receivable for investments sold 1,994 9 - 2,033
------------- -------------- ------------- ---------------
Total Assets 82,727 333,208 410 2,088,357
------------- -------------- ------------- ---------------
Liabilities
Payable for investments purchased 420 - - 1,397
Fees payable - - - 24
------------- -------------- ------------- ---------------
Total Liabilities 420 - - 1,421
============= ============== ============= ===============
Net assets available for benefits $ 82,307 $ 333,208 $ 410 $ 2,086,936
============= ============== ============= ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
-------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stock:
Pacific Telesis Group common
shares $ 413,673 $ - $ - $ - $ -
AirTouch Communications, Inc.
common shares - 203,338 - - -
Common/commingled trust funds:
State Street S&P 500 Fund - - 544,706 - -
State Street Bond Market Fund - - - - 36,465
State Street Money Market Fund - - - - -
State Street Balanced Fund - - - - -
Short-term Investment Fund 1,514 444 143 20,528 23
Investments at contract value:
Contracts with insurance companies
and banks - - - 192,313 -
-------------- ------------- -------------- ------------- -------------
Total Investments 415,187 203,782 544,849 212,841 36,488
Employee contributions receivable 1,304 - 1,892 - 177
Dividends and interest receivable 3,556 2 3 1,123 -
Receivable for investments sold - - - 1,742 -
-------------- ------------- -------------- ------------- -------------
Total Assets 420,047 203,784 546,744 215,706 36,665
-------------- ------------- -------------- ------------- -------------
Liabilities
Payable for investments purchased - - - - -
Fees payable 30 14 60 39 5
-------------- ------------- -------------- ------------- -------------
Total Liabilities 30 14 60 39 5
============== ============= ============== ============= =============
Net assets available for benefits $ 420,017 $ 203,770 $ 546,684 $ 215,667 $ 36,660
============== ============= ============== ============= =============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Other Total
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stock:
Pacific Telesis Group common shares $ $ $ - $ 413,673
AirTouch Communications, Inc. common shares
- 203,338
Common/commingled trust funds:
State Street S&P 500 Fund - 544,706
State Street Bond Market Fund - 36,465
State Street Money Market Fund 83,494 - 83,494
State Street Balanced Fund - 297,767 - 297,767
Short-term Investment Fund 1,418 92 6,834 30,996
Investments at contract value:
Contracts with insurance companies and banks - - - 192,313
------------- -------------- ------------- -------------
Total Investments 84,912 297,859 6,834 1,802,752
Employee contributions receivable 434 1,134 - 4,941
Dividends and interest receivable 354 2 30 5,070
Receivable for investments sold - - - 1,742
------------- -------------- ------------- -------------
Total Assets 85,700 298,995 6,864 1,814,505
------------- -------------- ------------- -------------
Liabilities
Payable for investments purchased 349 - - 349
Fees payable 12 39 - 199
------------- -------------- ------------- -------------
Total Liabilities 361 39 - 548
============= ============== ============= =============
Net assets available for benefits $ 85,339 $ 298,956 $ 6,864 $ 1,813,957
============= ============== ============= =============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
for the year ended December 31, 1997
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
-------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net assets available for benefits,
December 31, 1996 $ 420,017 $ 203,770 $ 546,684 $ 215,667 $ 36,660
-------------- ------------- -------------- ------------- -------------
Employee contributions 19,337 - 28,043 - 2,557
Employee rollover contributions 1,402 - 9,009 - 1,443
Investment income:
Dividends on SBC Communications
Inc. common shares 10,227 - - - -
Interest 179 41 41 12,416 5
Net appreciation of investments 174,361 100,727 172,160 - 3,445
Transfers from other Pacific Telesis
Group Plans - - - - -
Interfund transfers, net (3,654) (29,663) 18,688 (13,314) 3,300
-------------- ------------- -------------- ------------- -------------
Total additions (deductions), net 201,852 71,105 227,941 (898) 10,750
Less: Distributions to participants 83,381 36,173 101,886 32,274 8,034
Fees 168 73 264 267 17
-------------- ------------- -------------- ------------- -------------
Net increase (decrease) 118,303 34,859 125,791 (33,439) 2,699
-------------- ------------- -------------- ------------- -------------
Net assets available for benefits,
December 31, 1997 $ 538,320 $ 238,629 $ 672,475 $ 182,228 $ 39,359
============== ============= ============== ============= =============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
for the year ended December 31, 1997
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Other Total
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Net assets available for benefits, December 31,
1996 $ 85,339 $ 298,956 $ 6,864 $ 1,813,957
------------- -------------- ------------- ---------------
Employee contributions 6,062 16,279 - 72,278
Employee rollover contributions 3,678 8,403 (2,532) 21,403
Investment income:
Dividends on SBC Communications Inc common
shares - - - 10,227
Interest 4,837 26 197 17,742
Net appreciation of investments - 53,513 - 504,206
Transfer from other Pacific Telesis Group Plans - - 992 992
Interfund transfers, net 12,859 13,905 (2,121) -
------------- -------------- ------------- ---------------
Total additions (deductions), net 27,436 92,126 (3,464) 626,848
Less: Distributions to participants 30,430 57,737 2,990 352,905
Fees 38 137 - 964
------------- -------------- ------------- ---------------
Net increase (decrease) (3,032) 34,252 (6,454) 272,979
------------- -------------- ------------- ---------------
Net assets available for benefits, December 31,
1997 $ 82,307 $ 333,208 $ 410 $ 2,086,936
============= ============== ============= ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
for the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
-------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net assets available for benefits,
December 31, 1995 $ 394,853 $ 264,368 $ 450,220 $ 230,144 $ 38,919
-------------- ------------- -------------- ------------- -------------
Employee contributions 19,124 - 23,950 - 2,564
Employee rollover contributions 603 - 2,629 - 138
Investment income:
Dividends on Pacific Telesis
Group common stock 17,108 - - - -
Interest 131 32 16 14,146 1
Net appreciation (depreciation)
of investments 33,309 (26,580) 103,289 - 1,359
Interfund transfers, net (7,966) (11,083) 11,143 (8,415) (1,325)
-------------- ------------- -------------- ------------- -------------
Total additions (deductions), net 62,309 (37,631) 141,027 5,731 2,737
Less: Distributions to participants 36,916 22,831 44,181 19,875 4,964
Fees 229 136 382 333 32
-------------- ------------- -------------- ------------- -------------
Net increase (decrease) 25,164 (60,598) 96,464 (14,477) (2,259)
-------------- ------------- -------------- ------------- -------------
Net assets available for benefits,
December 31, 1996 $ 420,017 $ 203,770 $ 546,684 $ 215,667 $ 36,660
============== ============= ============== ============= =============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
for the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Other Total
------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net assets available for benefits, December 31,
1995 $ 76,655 $ 268,466 $ - $ 1,723,625
------------- -------------- --------------- ---------------
Employee contributions 5,651 15,271 711 67,271
Employee rollover contributions 1,935 2,337 8,370 16,012
Investment income:
Dividends on Pacific Telesis Group common stock
- - - 17,108
Interest 4,016 13 69 18,424
Net appreciation (depreciation) of investments - 33,694 - 145,071
Interfund transfers, net 11,060 8,872 (2,286) -
------------- -------------- --------------- ---------------
Total additions (deductions), net 22,662 60,187 6,864 263,886
Less: Distributions to participants 13,918 29,485 - 172,170
Fees 60 212 - 1,384
------------- -------------- --------------- ---------------
Net increase (decrease) 8,684 30,490 6,864 90,332
------------- -------------- --------------- ---------------
Net assets available for benefits, December 31,
1996 $ 85,339 $ 298,956 $ 6,864 $ 1,813,957
============= ============== =============== ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
1. Plan Description
The Pacific Telesis Group Supplemental Retirement and Savings Plan for
Salaried Employees (the "Plan") was established by Pacific Telesis Group
to provide a convenient way for eligible employees to save for retirement
on a regular and long-term basis. The following description of the Plan
provides only general information. The Plan has detailed provisions
covering participant eligibility, participant allotments from pay,
participant withdrawals, and employer contributions and Plan expenses. The
Plan text and prospectus include complete descriptions of these and other
Plan provisions.
The Plan is a defined contribution plan covering all salaried employees of
Pacific Telesis Group (the "Corporation") and its participating
subsidiaries (the "Employing Company") who have completed six months of
service. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Eligible employees may authorize a contribution of up to 16% of salary in
1% increments. Employee contributions on a before-tax basis are limited to
an annual maximum, adjusted for inflation ($9,500 for 1997 and 1996).
Salaried employees may elect to roll over a distribution from another
qualified plan to the Plan.
Each participant's account is credited with the participant's
contributions and allocations of Plan earnings. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
Each participant receives a "matching" allocation equal to 66-2/3% of the
employee's initial 6% contributions. The Plan and the Pacific Telesis
Group Supplemental Retirement and Savings Plan for Nonsalaried Employees
incorporate a leveraged employee stock ownership plan called the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP) (the "LESOP") to provide for company
matching allocations.
Employing Company matching contributions made for periods before March 1,
1990 were credited to matching accounts under the Plan. Thereafter, the
Employing Company matching contributions are made through the LESOP.
Participants who retire and elect a cashout from the Pacific Telesis Group
Pension Plan for Salaried Employees (renamed the Pacific Telesis Group
Cash Balance Pension Plan for Salaried Employees) or the Pacific Telesis
Group Pension Plan may roll over the cashout to the Plan. Effective June
30, 1997, and subject to certain requirements, Plan participants are
permitted to transfer their account balances from the Pacific Telesis
Group Supplemental Retirement and Savings Plan for Nonsalaried Employees
to the Plan.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
Employees may elect that their payroll deductions be invested in any of
the following funds, in 1% increments, with elections totaling 100%:
(a) the Company Stock Fund;
(b) the Equity Fund;
(c) the Bond Fund;
(d) the Money Market Fund; and
(e) the Balanced Fund.
On April 1, 1997, the Corporation became a wholly-owned subsidiary of SBC
Communications Inc.(SBC). Each share of common stock of the Corporation
was exchanged for 0.73145 of a share of SBC common stock. The shares of
stock of the Corporation held under the Plan in the Company Stock Fund
were also exchanged.
Net assets available for benefits also includes assets invested in the
Interest Income Fund which was closed to new contributions and investment
transfers in as of December 31, 1992 and the AirTouch Stock Fund described
below. The Other account is comprised of amounts pending distribution to
participants and rollover contributions pending allocation to the fund as
directed by the participant.
The AirTouch Stock Fund was closed to new contributions and investment
transfers as of April 1, 1994. The Plan allows fund transfers out of the
AirTouch Stock Fund to any other investment fund option, except the
Interest Income Fund, as of the end of any month.
All participant accounts are fully vested and nonforfeitable.
Once in any six-month period, a participant while still employed may elect
to withdraw all or part of his or her vested account balance attributable
to after-tax contributions, subject to certain restrictions. In the event
of hardship, amounts attributable to before-tax contributions may be
withdrawn. Upon reaching age 59 1/2, or termination of employment, single
sum or annuity payment distributions may be made to the participant or his
or her beneficiary in accordance with Plan provisions. A participant or
beneficiary may choose to receive cash or shares from amounts invested in
the Company Stock Fund or AirTouch Stock Fund.
Although it has not expressed any intent to do so, SBC has the right under
the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
Northern Trust Company is the trustee of the Plan.
2. Summary of Accounting Policies
The values of investments are determined as follows: investment in common
shares on the basis of the last published sales prices as reported on the
composite tape of the New York Stock Exchange and other exchanges;
contracts with insurance companies and other financial institutions at
contract value (principal plus reinvested interest) which approximates
fair value; State Street: Bond Market Fund, Money Market Fund, Balanced
Fund, and Equity Fund at net asset values per share obtained from
published sources; and temporary cash investments at cost which
approximates fair value.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
(EIN #94-2919931 PLAN #003)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of Accounting Policies (Continued)
Purchases and sales of securities are reflected as of the trade date.
Dividend income is recognized on the ex-dividend date. Interest earned on
investments is recognized on the accrual basis.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
The Bond Fund invests primarily in long-term obligations, including U.S.
Government and government agency debts, and corporate bonds; the Money
Market Fund invests primarily in short-term debts of U.S. Government
agencies and corporations; the Balanced Fund invests in a predetermined
mix of large U.S. and international company stocks, high quality bonds,
and money market instruments; the Equity Fund invests primarily in a broad
mix of U.S. company common stocks.
The Interest Income Fund invests in fully benefit-responsive investment
contracts with insurance companies, banks or other financial institutions,
savings accounts, certificates of deposit, obligations of the U.S.
Government or other credit worthy organizations, commercial paper,
corporate bond or other debt obligations, as well as other fixed income
investments (subject to any guidelines adopted by the Corporation) which
guarantee by agreement the repayment of principal plus interest. Fair
value has been estimated based on a discounted cash flow analysis using a
current market rate at year end.
At December 31, 1997, the fixed crediting interest rates of the Plan's
fully benefit-responsive investment contracts ranged from 4.5% to 7.5% per
annum (4.9% to 7.5% per annum at December 31, 1996). The average yield for
the contracts was 6.5% for 1997 (6.3% for 1996).
3. Tax Status
The Internal Revenue Service has determined and informed the Corporation
by a letter dated July 18, 1995 that the Plan and related Trust are
designed in accordance with applicable sections of the Internal Revenue
Code (the "IRC"). A subsequent favorable determination letter was issued
on May 11, 1998 on the Plan as amended to April 1, 1997. The Plan
administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
4. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500 as of December 31 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Net assets available for benefits per the financial statements $ 2,086,936 $ 1,813,957
Less: Distributions payable to participants (29,217) (97,955)
--------------- ---------------
Net assets available for benefits per the Form 5500 $ 2,057,719 $ 1,716,002
=============== ===============
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
4. Reconciliation of Financial Statements to Form 5500 (continued)
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for years ended December 31, 1997
and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Distributions to participants per financial statements $ 352,905 $ 169,414
Benefits due:
Beginning of year (97,955) (23,782)
End of year 29,217 97,955
--------------- ---------------
Distributions to participants per the Form 5500 $ 284,167 $ 243,587
=============== ===============
</TABLE>
5. Related Party Transactions
Trustee fees, investment manager fees, fees charged by financial
institutions in connection with the investment of any funds under the
Plan, and certain administrative fees are charged to the applicable Plan
fund or prorated among the applicable Plan funds. Brokerage fees, transfer
taxes and other expenses incidental to the purchase or sale of securities
are considered part of the cost of the securities or a reduction in the
sales price.
Pacific Telesis Group (PAC) common shares were an investment choice of
Plan participants until March 31, 1997 when the PAC shares were converted
to SBC common shares. Both PAC and SBC qualify as parties-in-interest to
the Plan. Certain Plan investments are shares of collective trusts managed
by State Street. State Street is the custodian as defined by the Plan and,
therefore, these transactions qualify as party-in-interest transactions.
Certain short-term Plan investments are shares of collective trust funds
of Northern Trust Collective Short-Term Investment Fund. Since Northern
Trust is trustee of the Plan, these transactions also qualify as
party-in-interest transactions.
6. Subsequent Event
On January 1, 1998, Bankers Trust became the trustee of the Plan.
During 1998, participants were instructed to transfer their funds in the
AirTouch Stock Fund to other investment fund options, and on May 1, 1998,
the AirTouch Stock Fund was eliminated.
Effective July 1, 1998, the assets and liabilities of the Plan will be
transferred to the SBC Savings Plan.
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
EIN #94-2919931/ PLAN #003
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1997
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of investment
including maturity date,
(b) Identity of issue collateral,
borrower, lessor or par or (e) Current
(a) similar party maturity value (d) Cost Value
- ----- ------------------------------- ---------------------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
* SBC Communications Inc. 7,308 common shares** $ 254,933 $ 535,313
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund 2,783 2,783
------------------- ------------------
$ 257,716 $ 538,096
=================== ==================
* Air Touch Communications, 5,729 common shares $ 80,943 $ 238,121
Inc.
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund 500 500
------------------- ------------------
$ 81,443 $ 238,621
=================== ==================
* State Street S&P 500 Fund - 4,209
common/commingled trust shares $279,414 $ 670,309
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund 1,868 1,868
------------------- ------------------
$281,282 $ 672,177
=================== ==================
* State Street Bond Market Fund - 2,599
common/commingled trust shares $ 28,521 $ 39,168
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund 167 167
------------------- ------------------
$ 28,688 $ 39,335
=================== ==================
* State Street Money Market Fund $ 80,492 $ 80,492
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund (238) (238)
------------------- ------------------
$ 80,254 $ 80,254
=================== ==================
* State Street Balanced Fund - 16,563
common/commingled trust shares $186,374 $ 332,030
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund 1,017 1,017
------------------- ------------------
$187,391 $ 333,047
=================== ==================
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
EIN: 94-2919931/PLAN: 003
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1997
(Dollars in thousands)
(Continued)
<CAPTION>
(c) Description of investment
including maturity date,
(b) Identity of issue collateral,
borrower, lessor or par or (e) Current
(a) similar party maturity value (d) Cost Value
- ----- ------------------------------- ---------------------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund $ 409 $ 409
------------------- ------------------
$ 409 $ 409
================== ===================
Contracts with insurance companies and banks:
Aetna $6,633 par value, 5.74% due
December 31, 1998 $ 6,633 $ 6,633
Allstate $5,259 par value, 6.81% due July
5, 2000 5,259 5,259
Cigna $16,107 par value, 6.05% due
December 31, 1999 16,107 16,107
Citibank $4,601 par value, 7.23% due
December 31, 1998 4,601 4,601
CNA $13,358 par value,
6.75% due June 30, 1999 13,358 13,358
CNA $10,638 par value, 6.02% due
June 30, 1999 10,638 10,638
Jackson National $10,270 par value,
6.79% due June 30, 2000 10,270 10,270
Jackson National $5,606 par value, 6.93% due June
29, 2001 5,606 5,606
John Hancock $13,079 par value, 6.72% due
June 29, 2001 13,079 13,079
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
EIN: 94-2919931/PLAN: 003
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1997
(Dollars in thousands)
(Continued)
<CAPTION>
(c) Description of investment
including maturity date,
(b) Identity of issue collateral,
borrower, lessor or par or (e) Current
(a) similar party maturity value (d) Cost Value
- ----- ------------------------------- ---------------------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
MBL Life $1,391 par value, 4.50% due
December 31, 2003 $ 1,391 $ 1,391
Met Life $9,799 par value, 6.74% due
December 31, 2001 9,799 9,799
NY Life $10,391 par value, 6.74% due
June 30, 2001 10,391 10,391
People's Security $9,802 par value, 6.78% due
December 31, 2001 9,802 9,802
Provident $2,422 par value, 6.60% due
January 2, 1998 2,422 2,422
Prudential $3,698 par value, 5.29% due
December 31, 1998 3,698 3,698
Prudential $11,631 par value, 6.94% due
June 30, 1999 11,631 11,631
Prudential $6,522 par value, 7.51% due June
30, 1999 6,522 6,522
Lotsoff $14,229 par value, 5.14% due
June 30, 2000
(synthetic contract) 14,033 14,033
Security Life of Denver Wrapper for Lotsoff Synthetic
Contract 196 196
------------------ -------------------
Total contracts with
insurance companies and banks 155,436 155,436
------------------ -------------------
* Northern Trust Collective Short-Term Investment
Fund - Collective Trust Fund 26,781 26,781
------------------ -------------------
$ 182,217 $ 182,217
================== ===================
GRAND TOTAL $1,099,400 $2,084,156
================== ===================
<FN>
* A party-in-interest to the Plan.
** Does not reflect two-for-one stock split declared in the first quarter of 1998.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
EIN: 94-2919931/PLAN#: 003
Line 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1997
(Dollars in thousands)
Category (iii)
<CAPTION>
(h)
Current
Value of
(c) (d) (g) Asset on (i)
(a) (b) Purchase Selling Cost of Transaction Net/Gain
Identity of Party Involved Description of Assets Price Price Asset Date (Loss)
- ------------------------------- ----------------------------- -------------- --------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund $ 433,905 $ - $ 433,905 $ 433,905 $ -
Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund - $ 431,614 $ 431,614 $ 431,614 $ -
<FN>
There were no category (i), (ii) or (iv) reportable transactions during 1997.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Benefit
Plan Committee has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
Pacific Telesis Group Supplemental Retirement
and Savings Plan for Salaried Employees
By Benefit Plan Committee
By /s/ Cassandra C. Carr
Cassandra C. Carr, Chairman
Dated: June 26, 1998
<PAGE>
EXHIBIT INDEX
Exhibit identified below, is filed herein as exhibit hereto.
Exhibit
Number .................................................................
23-a Consent of Independent Auditors Ernst & Young LLP.
<PAGE>
Ex-23a
Form 11-K for 1997
File No. 1-8610
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8, No. 33-54309 and 333-24295) pertaining to the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried Employees of our report
dated June 19, 1998, with respect to the financial statements and supplemental
schedules of the Pacific Telesis Group Supplemental Retirement and Savings Plan
for Salaried Employees included in this Annual Report (Form 11-K) for the year
ended December 31, 1997.
ERNST & YOUNG LLP
San Jose, California
June 25, 1998
Exhibit 99e
Form 10-K for 1997
File No. 1-8610
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number 1-8610
----------
PACIFIC TELESIS GROUP
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR NONSALARIED EMPLOYEES
----------
SBC Communications Inc.
175 E. Houston, San Antonio, Texas 78205
<PAGE>
TABLE OF CONTENTS
Description
Page
1. Financial Statements and Exhibits........................................1
<PAGE>
1. Financial Statements and Exhibits
(a) Financial Statements of Pacific Telesis Group Supplemental
Retirement and Savings Plan for Nonsalaried Employees (the "Plan")
included herein:
Report of Ernst & Young LLP Independent Auditors
Financial Statements:
Statements of Net Assets Available for Benefits,
with Fund Information - As of December 31, 1997
and 1996
Statements of Changes in Net Assets Available
for Benefits, with Fund Information For the
Years Ended December 31, 1997 and 1996
Notes to Financial Statements
Schedules:
Line 27a - Schedule of Assets Held for
Investment Purposes
Line 27d - Schedule of Reportable Transactions
(b) Exhibits:
Exhibit 23a - Consent of Independent Auditors
Ernst & Young LLP.
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Savings Plans Committee
Pacific Telesis Group Supplemental Retirement
and Savings Plan for Nonsalaried Employees:
We have audited the accompanying statements of net assets available for benefits
of the Pacific Telesis Group Supplemental Retirement and Savings Plan for
Nonsalaried Employees as of December 31, 1997 and 1996, and the related
statements of changes in net assets available for benefits for the years then
ended. 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 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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Nonsalaried Employees
at December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 1997 and of reportable transactions
for the year ended December 31, 1997, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The Fund Information in
the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available for benefits
and changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
ERNST & YOUNG LLP
San Jose, California
June 19, 1998
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1997
(Dollars in thousands)
<CAPTION>
Company AirTouch Equity Interest
Stock Fund Stock Fund Fund Income Fund
-------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stock:
SBC Communications Inc. common shares $ 747,254 $ - $ - $ -
AirTouch Communications, Inc. common shares - 272,587 - -
Common/commingled trust funds:
State Street S&P 500 Fund - - 218,750 -
State Street Bond Market Fund - - - -
State Street Money Market Fund - - - -
State Street Balanced Fund - - - -
Short-term Investment Fund 4,032 500 1,206 7,153
Investments at contract value:
Contracts with insurance companies and banks - - - 106,633
-------------- -------------- ---------------- ---------------
Total investments 751,286 273,087 219,956 113,786
Employee contributions receivable 314 - 151 -
Dividends and interest receivable 42 9 - 614
Receivable for investments sold - - 7 6,774
-------------- -------------- ---------------- ---------------
Total assets 751,642 273,096 220,114 121,174
-------------- -------------- ---------------- ---------------
Liabilities
Payable for investments purchased - - - 616
Fees payable 11 4 - -
-------------- -------------- ---------------- ---------------
Total liabilities 11 4 - 616
-------------- -------------- ---------------- ---------------
Net assets available for benefits $ 751,631 $ 273,092 $ 220,114 $ 120,558
============== ============== ================ ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1997
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Other Total
--------------- --------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stock:
SBC Communications Inc. common
shares $ - $ - $ - $ - $ 747,254
AirTouch Communications, Inc.
common shares - - - - 272,587
Common/commingled trust funds:
State Street S&P 500 Fund - - - - 218,750
State Street Bond Market Fund 22,747 - - - 22,747
State Street Money Market Fund - 58,771 - - 58,771
State Street Balanced Fund - - 139,226 - 139,226
Short-term Investment Fund 187 302 864 (10) 14,234
Investments at contract value:
Contracts with insurance
companies and banks - - - - 106,633
--------------- --------------- --------------- -------------- ----------------
Total investments 22,934 59,073 140,090 (10) 1,580,202
Employee contributions receivable 22 89 106 - 682
Dividends and interest receivable - 308 - 1 974
Receivable for investments sold - 1,432 2 - 8,215
--------------- --------------- --------------- -------------- ----------------
Total assets 22,956 60,902 140,198 (9) 1,590,073
--------------- --------------- --------------- -------------- ----------------
Liabilities
Payable for investments purchased - 307 - - 923
Fees payable - - - - 15
--------------- --------------- --------------- -------------- ----------------
Total liabilities - 307 - - 938
--------------- --------------- --------------- -------------- ----------------
Net assets available for benefits $ 22,956 $ 60,595 $ 140,198 $ (9) $ 1,589,135
=============== =============== =============== ============== ================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Equity Interest
Stock Fund Stock Fund Fund Income Fund
--------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stocks:
Pacific Telesis Group common shares $ 508,375 $ - $ - $ -
AirTouch Communications Inc. common shares - 207,415 - -
Common/commingled trust funds:
State Street S&P 500 Fund - - 140,199 -
State Street Bond Market Fund - - - -
State Street Money Market Fund - - - -
State Street Balanced Fund - - - -
Short-term Investment Fund 3,950 335 1,145 11,931
Investments at contract value:
Contracts with insurance companies and banks - - - 113,420
--------------- -------------- ---------------- ---------------
Total investments 512,325 207,750 141,344 125,351
Employee contributions receivable 242 - 99 -
Dividends and interest receivable 4,368 2 2 693
Receivable for investments sold - - - 6,339
--------------- -------------- ---------------- ---------------
Total assets 516,935 207,752 141,445 132,383
--------------- -------------- ---------------- ---------------
Liabilities
Payable for investments purchased - - - 694
Fees payable 64 35 24 41
--------------- -------------- ---------------- ---------------
Total liabilities 64 35 24 735
=============== ============== ================ ===============
Net assets available for benefits $ 516,871 $ 207,717 $ 141,421 $ 131,648
=============== ============== ================ ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Other Total
------------- -------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Assets
Investments at fair value:
Common stock:
Pacific Telesis Group common shares $ - $ - $ - $ - $ 508,375
AirTouch Communications Inc. common
shares - - - - 207,415
Common/commingled trust funds: -
State Street S&P 500 Fund - - - - 140,199
State Street Bond Market Fund 20,688 - - - 20,688
State Street Money Market Fund - 50,735 - - 50,735
State Street Balanced Fund - - 112,663 - 112,663
Short-term Investment Fund 236 1,856 933 543 20,929
Investments at contract value: -
Contracts with insurance companies
and banks - - - - 113,420
------------- -------------- -------------- ------------- ----------------
Total investments 20,924 52,591 113,596 543 1,174,424
Employee contributions receivable 20 77 81 - 519
Dividends and interest receivable - 219 1 4 5,289
Receivable for investments sold - - - - 6,339
------------- -------------- -------------- ------------- ----------------
Total assets 20,944 52,887 113,678 547 1,186,571
------------- -------------- -------------- ------------- ----------------
Liabilities
Payable for investments purchased - 214 - - 908
Fees payable 3 9 19 - 195
------------- -------------- -------------- ------------- ----------------
Total liabilities 3 223 19 - 1,103
------------- -------------- -------------- ------------- ----------------
Net assets available for benefits $ 20,941 $ 52,664 $ 113,659 $ 547 $ 1,185,468
============= ============== ============== ============= ================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1997
(Dollars in thousands)
<CAPTION>
Company AirTouch Equity Interest
Stock Fund Stock Fund Fund Income Fund
--------------- -------------- --------------- ---------------
Net assets available for benefits, December 31, 1996 $ 516,871 $ 207,717 $ 141,421 $ 131,648
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Employee contributions 37,637 - 16,285 -
Employee rollover contributions 1,452 36 604 -
Investment income:
Dividends on SBC Communications Inc. common shares
13,667 - - -
Interest 205 34 28 7,998
Net appreciation of investments 234,904 111,651 50,504 -
Transfers to Other Pacific Telesis Group Plan - - - -
Interfund transfers, net 1,020 (27,413) 28,415 (7,941)
--------------- -------------- --------------- ---------------
Total additions (deductions), net 288,885 84,308 95,836 57
Less: Distributions to participants 53,569 18,744 16,972 10,963
Fees 556 189 171 184
--------------- -------------- --------------- ---------------
Net increase (decrease) 234,760 65,375 78,693 (11,090)
=============== ============== =============== ===============
Net assets available for benefits, December 31, 1997 $ 751,631 $ 273,092 $ 220,114 $ 120,558
=============== ============== =============== ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1997
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Other Total
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net assets available for benefits,
December 31, 1996 $ 20,941 $ 52,664 $ 113,659 $ 547 $ 1,185,468
--------------- --------------- --------------- --------------- ---------------
Employee contributions 2,917 11,584 12,588 - 81,011
Employee rollover contributions 154 999 231 2,153 5,629
Investment income:
Dividends on SBC Communications
Inc. common shares
- - - - 13,667
Interest 5 3,327 19 22 11,638
Net appreciation of investments 2,047 - 21,637 - 420,743
Transfers to Other Pacific Telesis
Group Plans - - - (894) (894)
Interfund transfers, net (1,069) 1,639 4,706 643 -
--------------- --------------- --------------- --------------- ---------------
Total additions (deductions), net 4,054 17,549 39,181 1,924 531,794
Less: Distributions to participants 2,017 9,561 12,518 2,480 126,824
Fees 22 57 124 - 1,303
--------------- --------------- --------------- --------------- ---------------
Net increase (decrease) 2,015 7,931 26,539 (556) 403,667
--------------- --------------- --------------- --------------- ---------------
Net assets available for benefits,
December 31, 1997 $ 22,956 $ 60,595 $ 140,198 $ (9) $ 1,589,135
=============== =============== =============== =============== ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Equity Interest
Stock Fund Stock Fund Fund Income Fund
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net assets available for benefits,
December 31, 1995 $ 474,193 $ 271,626 $ 109,300 $ 143,759
--------------- --------------- ---------------- ---------------
Employee contributions 36,704 - 15,949 -
Employee rollover contributions 612 - 836 -
Investment income:
Dividends on Pacific Telesis Group common
shares 20,510 - - -
Interest 176 46 18 8,649
Net appreciation (depreciation) of investments 42,064 (25,879) 25,819 -
Interfund transfers (5) (7,015) 7,410 (2,822)
--------------- --------------- ---------------- ---------------
Total additions (deductions), net 100,061 (32,848) 50,032 5,827
Less: Distributions to participants 56,598 30,672 17,658 17,601
Fees 785 389 253 337
--------------- --------------- ---------------- ---------------
Net increase (decrease) 42,678 (63,909) 32,121 (12,111)
=============== =============== ================ ===============
Net assets available for benefits,
December 31, 1996 $ 516,871 $ 207,717 $ 141,421 $ 131,648
=============== =============== ================ ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Other Total
-------------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net assets available for benefits,
December 31, 1995 $ 21,172 $ 46,147 $ 101,040 $ - $ 1,167,237
Employee contributions 3,237 11,726 13,095 - 80,711
Employee rollover contributions 140 886 983 556 4,013
Investment income:
Dividends on Pacific Telesis Group
common shares - - - - 20,510
Interest 4 2,798 15 18 11,724
Net appreciation (depreciation) of
investments 791 - 12,741 - 55,536
Interfund transfers (1,180) 1,111 2,528 (27) -
-------------- ------------ -------------- ----------- --------------
Total additions (deductions), net 2,992 16,521 29,362 547 172,494
Less: Distributions to participants 3,180 9,906 16,537 - 152,152
Fees 43 98 206 - 2,111
-------------- ------------ -------------- ----------- --------------
Net increase (decrease) (231) 6,517 12,619 547 18,231
============== ============ ============== =========== ==============
Net assets available for benefits,
December 31, 1996 $ 20,941 $ 52,664 $ 113,659 $ 547 $ 1,185,468
============== ============ ============== =========== ==============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
1. Plan Description
The Pacific Telesis Group Supplemental Retirement and Savings Plan for
Nonsalaried Employees (the "Plan") was established by Pacific Telesis
Group to provide a convenient way for eligible employees to save for
retirement on a regular and long-term basis. The following description of
the Plan provides only general information. The Plan has detailed
provisions covering participant eligibility, participant allotments from
pay, participant withdrawals, and employer contributions and Plan
expenses. The Plan text and prospectus include complete descriptions of
these and other Plan provisions.
The Plan is a defined contribution plan covering all nonsalaried employees
of Pacific Telesis Group (the "Corporation") and its participating
subsidiaries (the "Employing Company") who have completed one year of
service. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Eligible employees may authorize a basic contribution of up to 16% of pay
in 1% increments. Employee contributions on a before-tax basis are limited
to an annual maximum, adjusted for inflation ($9,500 for 1997 and 1996).
Nonsalaried employees may elect to roll over a distribution from another
qualified plan.
Each participant's account is credited with the participant's
contributions and allocations of Plan earnings. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's account.
Each participant receives a "matching" allocation equal to 66-2/3% of the
employee's initial 6% contribution. The Plan and the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried Employees
incorporate a leveraged employee stock ownership plan called the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP) (the "LESOP") to provide for company
matching allocations.
Employing Company matching contributions made for the periods before March
1, 1990 were credited to the matching accounts under the Plan. Thereafter,
the Employing Company matching contributions are made through the LESOP.
Participants who retire and elect a cashout from the Pacific Telesis Group
Pension Plan for Salaried Employees (renamed the Pacific Telesis Group
Cash Balance Pension Plan for Salaried Employees) or the Pacific Telesis
Group Pension Plan may roll over the cashout to the Plan. Effective June
30, 1997, and subject to certain requirements, Plan participants are
permitted to transfer their account balances from the Pacific Telesis
Group Supplemental Retirement and Savings Plan for Salaried Employees to
the Plan.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. Plan Description (Continued)
Employees may direct that their payroll deductions be invested in any of
the following funds, in 1% increments, with elections totaling 100%:
(a) the Company Stock Fund;
(b) the Equity Fund;
(c) the Bond Fund;
(d) the Money Market Fund; and
(e) the Balanced Fund.
On April 1, 1997, the Corporation became a wholly-owned subsidiary of SBC
Communications Inc. (SBC). Each share of common stock of the Corporation
was exchanged for 0.73145 of a share of SBC common stock. The shares of
stock of the Corporation held under the Plan in the Company Stock Fund
were also exchanged.
Net assets available for benefits also include assets invested in the
Interest Income Fund which was closed to new contributions and investment
transfers as of December 31, 1992, and the AirTouch Stock Fund described
below. The other account is comprised of amounts pending distribution to
participants and rollover contributions pending allocation to the fund as
directed by the participant.
The AirTouch Stock Fund was closed to new contributions and investment
transfers as of April 1, 1994. The Plan allows fund transfers out of the
AirTouch Stock Fund to any other investment fund option, except the
Interest Income Fund, as of the end of any month.
All participant accounts are fully vested and nonforfeitable.
Once in any six-month period, a participant while still employed may elect
to withdraw all or part of his or her vested account balance attributable
to after-tax contributions, subject to certain restrictions. In the event
of hardship, amounts attributable to before-tax contributions may be
withdrawn. Upon reaching age 59 1/2, or termination of employment, single
sum or annuity payment distributions may be made to the participant or his
or her beneficiary in accordance with Plan provisions. A participant or
beneficiary may choose to receive cash or shares from amounts invested in
the Company Stock Fund or AirTouch Stock Fund.
Although it has not expressed any intent to do so, SBC has the right under
the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
Northern Trust Company is the trustee of the Plan.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Summary of Accounting Policies
The values of investments are determined as follows: investment in common
shares on the basis of the last published sales prices as reported on the
composite tape of the New York Stock Exchange and other exchanges;
contracts with insurance companies and other financial institutions at
contract value (principal plus reinvested interest) which approximates
fair value; State Street: Bond Market Fund, Money Market Fund, Balanced
Fund, and Equity Fund at net asset values per share obtained from
published sources; and temporary cash investments at cost which
approximates fair value.
Purchases and sales of securities are reflected as of the trade date.
Dividend income is recognized on the ex-dividend date. Interest earned on
investments is recognized on the accrual basis.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
The Bond Fund invests primarily in long-term obligations, including U.S.
Government and government agency debts and corporate bonds; the Money
Market Fund invests primarily in short-term debts of U.S. Government
agencies and corporations; the Balanced Fund invests in a predetermined
mix of large U.S. and international company stocks, high quality bonds,
and money market instruments; the Equity Fund invests primarily in a broad
mix of U.S. company common stocks.
The Interest Income Fund invests in fully benefit-responsive investment
contracts with insurance companies, banks or other financial institutions,
savings accounts, certificates of deposit, obligations of the U.S.
Government or other credit worthy organizations, commercial paper,
corporate bond or other debt obligations, as well as other fixed income
investments (subject to any guidelines adopted by the Corporation) which
guarantee by agreement the repayment of principal plus interest. Fair
value has been estimated based on a discounted cash flow analysis using a
current market rate at year end.
At December 31, 1997, the fixed crediting interest rates of the Plan's
fully benefit-responsive investment contracts ranged from 5.2% to 7.6% per
annum (4.9% to 7.5% per annum at December 31, 1996). The average yield for
the contracts was 6.5% for 1997 (6.3% for 1996).
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. Tax Status
The Internal Revenue Service has determined and informed the Corporation
by a letter dated May 16, 1996, that the Plan and related Trust are
designed in accordance with applicable sections of the Internal Revenue
Code (the "IRC"). A subsequent favorable determination letter was issued
on May 11, 1998 on the Plan as amended to April 1, 1997. The Plan
administrator believes that the Plan is designed and currently being
operated in compliance with the applicable requirements of the IRC.
4. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500 as of December 31 (dollars in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------------- ---------------
<S> <C> <C>
Net assets available for benefits per financial statements $ 1,589,135 $ 1,185,468
Less: Distributions payable to participants (10,026) (19,660)
-------------- ---------------
Net assets available for benefits per the Form 5500 $ 1,579,109 $ 1,165,808
============== ===============
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for years ended December 31, 1997
and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------- ---------------
<S> <C> <C>
Distributions to participants per financial statements $ 126,824 $ 152,152
Benefits due:
Beginning of year (19,660) (34,719)
End of year 10,026 19,660
-------------- ---------------
Distributions to participants per the Form 5500 $ 117,190 $ 137,093
============== ===============
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS (continued)
5. Related Party Transactions
Trustee fees, investment manager fees, fees charged by financial
institutions in connection with the investment of any funds under the
Plan, and certain administrative fees are charged to the applicable Plan
fund or prorated among the applicable Plan funds. Brokerage fees, transfer
taxes and other expenses incident to the purchase or sale of securities
are considered part of the cost of the securities or a reduction in the
sales price.
Pacific Telesis Group (PAC) common shares were an investment choice of
Plan participants until March 31, 1997 when the PAC shares were converted
to SBC common shares. Both PAC and SBC qualify as parties-in-interest to
the Plan. Certain Plan investments are shares of collective trusts managed
by State Street. State Street is the custodian as defined by the Plan and,
therefore, these transactions qualify as party-in-interest transactions.
Certain short-term Plan investments are shares of collective trust funds
of Northern Trust Collective Short-Term Investment Fund. Since Northern
Trust is trustee of the Plan, these transactions also qualify as
party-in-interest transactions.
6. Subsequent Event
On January 1, 1998 Bankers Trust became trustee of the Plan.
During 1998, participants will be instructed to transfer their funds in
the AirTouch Stock Fund to other investment fund options.
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
EIN: 94-2919931/PLAN#: 004
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1997
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue Rate of Interest, (e) Current
(a) Borrower,Lessor or Collateral, Par or (d) Cost Value
Similar Party Maturity Value
- -------- ----------------------- ------------------------------- --------------------- ----------------
<S> <C> <C> <C> <C>
* SBC Communications Inc. 10,201 common shares** $ 366,595 $ 747,254
* Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund 4,032 4,032
--------------- ------------------
$ 370,627 $ 751,286
=============== ==================
* AirTouch Communications,
Inc. 6,558 common shares $ 94,813 $ 272,587
* Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund 500 500
--------------- ------------------
$ 95,313 $ 273,087
================ ================
* State Street S&P 500 Fund - 1,374
Common/Commingled
Trust shares $ 117,095 $ 218,750
* Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund 1,206 1,206
--------------- ------------------
$ 118,301 $ 219,956
================ ================
* State Street Bond Market Fund - 1,509
Common/Commingled
Trust shares $ 17,527 $ 22,747
* Northern Trust Collective Short-Term
Investment Fund - 187 187
Collective Trust Fund
--------------- ------------------
$ 17,714 $ 22,934
================ ================
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
EIN: 94-2919931/PLAN#: 004
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES (continued)
December 31, 1997
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue, Borrower, Rate of Interest, (e) Current
(a) Lessor or Similar Party Collateral, Par or (d) Cost Value
Maturity Value
- -------- ------------------------------------ ---------------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
* State Street Money Market Fund $ 58,771 $ 58,771
* Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund 302 302
$ 59,073 $ 59,073
* State Street Balanced Fund - 6,945
Common/Commingled
Trust shares $ 84,793 $ 139,226
* Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund 864 864
---------------- ----------------
$ 85,657 $ 140,090
================ ================
* Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund $ (10) $ (10)
---------------- ----------------
$ (10) $ (10)
================ ================
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
EIN: 94-2919931/PLAN#: 004
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES (continued)
December 31, 1997
(Dollars and share or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue, Borrower, Rate of Interest, (e) Current
(a) Lessor or Similar Party Collateral, Par or (d) Cost Value
Maturity Value
- -------- ------------------------------------ ---------------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Contracts with insurance companies and banks:
Allstate $5,532 par value, 6.80%
due July 5, 2000 $ 5,532 $ 5,532
Cigna $5,122 par value, 6.00%
due December 31, 1999
5,122 5,122
CNA $5,781 par value, 6.75%
due June 30, 1999 5,781 5,781
CNA $10,246 par value, 6.02%
due June 30, 1999 10,246 10,246
Jackson National $6,523 par value, 6.80%
due June 30, 1999 6,523 6,523
Jackson National $4,742 par value, 6.90%
due June 29, 2000 4,742 4,742
John Hancock $14,216 par value, 6.66%
due June 29, 2001 14,216 14,216
Met Life $16,896 par value, 6.58%
due June 30, 2001 16,896 16,896
New York Life $6,517 par value, 6.72%
due June 30, 2001 6,517 6,517
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
EIN: 94-2919931/PLAN#: 004
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES (continued)
December 31, 1997
(Dollars and share or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue, Borrower, Rate of Interest, (e) Current
(a) Lessor or Similar Party Collateral, Par or (d) Cost Value
Maturity Value
- -------- ------------------------------------ ---------------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Contracts with insurance companies and banks (continued):
Principal $2,521 par value, 5.58%
due December 31, 1998
$ 2,521 $ 2,521
Provident $5,039 par value, 6.60%
due January 2, 1998 5,039 5,039
Prudential $13,220 par value, 7.55%
due June 30, 1999 13,220 13,220
Lotsoff $10,278 par value,
5.24% due June 30, 2000
(Synthetic Contract) 10,148 10,148
Security Life of Denver Wrapper for Lotsoff
Synthetic Contract 130 130
---------------- ----------------
Total contracts with insurance companies and banks 106,633 106,633
---------------- ----------------
* Northern Trust Collective Short-Term
Investment Fund -
Collective Trust Fund 7,153 7,153
---------------- ----------------
$ 113,786 $ 113,786
================ ================
Grand total $ 860,461 $ 1,580,202
================ ================
<FN>
* Party-in-interest to the Plan.
** Does not reflect two-for-one stock split declared in the first quarter of 1998.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
EIN: 94-2919931/PLAN#: 004
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1997
(Dollars in thousands)
Category (iii)
<CAPTION>
(h)
Current
Value of
(c) (d) Asset on
(a) Identity of (b) Description Purchase Selling (g) Cost Transaction (i) Net
Party Involved of Asset Price Price of Asset Date Gain/(Loss)
- --------------------- -------------------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
* SBC Communications
Inc. common shares $ 47,922 $ - $ 47,922 $ 47,922 $ -
* SBC Communications
Inc. common shares - 32,351 15,557 32,351 16,794
Northern Trust Collective
Short-Term
Investment Fund 214,300 - 214,300 214,300 -
- Collective
Trust Fund
Northern Trust Collective
Short-Term
Investment Fund - 220,983 220,983 220,983 -
- Collective
Trust Fund
<FN>
* Shares purchased/sold on the open market.
There were no category (i), (ii) or (iv) reportable transactions during 1997.
</FN>
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Benefit Plan Committee has duly caused this annual report to be signed by
the undersigned thereunto duly authorized.
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT
AND SAVINGS PLAN FOR NONSALARIED EMPLOYEES
By Benefit Plan Committee
By: /s/ Cassandra C. Carr
Cassandra C. Carr, Chairman
Dated: June 26, 1998
<PAGE>
EXHIBIT INDEX
Exhibit identified below, is filed herein as exhibit hereto.
Exhibit
Number .................................................................
23-a Consent of Independent Auditors Ernst & Young LLP.
<PAGE>
Ex-23a
Form 11-K for 1997
File No. 1-8610
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8, No. 33-54309 and 333-24295) pertaining to the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Nonsalaried Employees of our
report dated June 19, 1998, with respect to the financial statements and
supplemental schedules of the Pacific Telesis Group Supplemental Retirement and
Savings Plan for Nonsalaried Employees included in this Annual Report (Form
11-K) for the year ended December 31, 1997.
ERNST & YOUNG LLP
San Jose, California
June 25, 1998
Exhibit 99f
Form 10-K for 1997
File No. 1-8610
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number 1-8610
----------
PACIFIC TELESIS GROUP
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
----------
SBC Communications Inc.
175 E. Houston, San Antonio, Texas 78205
<PAGE>
TABLE OF CONTENTS
Description
Page
1. Financial Statements and Exhibits........................................1
<PAGE>
1. Financial Statements and Exhibits
(a) Financial Statements of Pacific Telesis Group Supplemental
Retirement and Savings Plan for Salaried and Nonsalaried Employees
(LESOP) (the "Plan") included herein:
Report of Ernst & Young LLP Independent Auditors
Financial Statements:
Statements of Net Assets Available for Benefits
- As of December 31, 1997 and 1996
Statements of Changes in Net Assets Available
for Benefits - For the Years Ended December 31,
1997 and 1996
Notes to Financial Statements
Schedules:
Line 27a - Schedule of Assets Held for
Investment Purposes
Line 27d - Schedule of Reportable Transactions
(b) Exhibits:
Exhibit 23a - Consent of Independent Auditors
Ernst & Young LLP.
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Savings Plans Committee
Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP):
We have audited the accompanying statements of net assets available for benefits
of the Pacific Telesis Group Supplemental Retirement and Savings Plan for
Salaried and Nonsalaried Employees (LESOP) as of December 31, 1997 and 1996, and
the related statements of changes in net assets available for benefits for the
years then ended. 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 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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP) at December 31, 1997 and 1996, and the changes in
its net assets available for benefits for the years then ended, in conformity
with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 1997 and of reportable transactions
for the year ended December 31, 1997, are presented for the purpose of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974 and are not
a required part of the basic financial statements. The supplemental schedules
have been subjected to the auditing procedures applied in our audits of the
basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
ERNST & YOUNG LLP
San Jose, California
June 19, 1998
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1997 and 1996
(Dollars in thousands)
ASSETS
<CAPTION>
1997 1996
------------------ ------------------
<S> <C> <C>
Investment - at fair value:
SBC Communications Inc. Common Shares $ 887,757 $ -
Pacific Telesis Group Common Shares - 677,014
Employer Receivable 48,000 62,367
Dividends and Interest Receivable 91 5,913
Short-Term Investments 19,021 24,353
------------------ ------------------
Total Assets 954,869 769,647
------------------ ------------------
LIABILITIES
Interest Payable $ 8,704 $ 13,582
Note Payable 129,053 206,975
------------------ ------------------
Total Liabilities 137,757 220,557
------------------ ------------------
Net Assets Available For Benefits $ 817,112 $ 549,090
================== ==================
NET ASSETS AVAILABLE FOR BENEFITS
Net Assets Allocated to Participants $ 671,103 $ 462,343
Net Assets Available for Future Allocations 146,009 86,747
------------------ ------------------
Net Assets Available for Benefits $ 817,112 $ 549,090
================== ==================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS
For The Years Ended December 31, 1997 and 1996
(Dollars in thousands)
<CAPTION>
1997 1996
------------------ ---------------
<S> <C> <C>
Net Assets Available for Benefits,
Beginning of The Year $ 549,090 $ 456,506
Additions to Net Assets Attributed to:
Investment Income
Dividends:
SBC Communications Inc. Common Shares 16,959 -
Pacific Telesis Group Common Shares - 28,437
Interest Income 730 880
Net Appreciation in Fair Value of
Investments 288,005 61,720
Employer Contributions 48,001 62,367
------------------ ---------------
Total Additions 353,695 153,404
------------------ ---------------
Deductions from Net Assets Attributed to:
Transfers out to the Pacific Telesis Group Supplemental Retirement and
Savings Plan for Salaried Employees 100 -
Distributions to Participants 76,869 47,238
Interest Expense 8,704 13,582
------------------ ---------------
Total Deductions 85,673 60,820
------------------ ---------------
Net Increase 268,022 92,584
------------------ ---------------
Net Assets Available for Benefits,
End of The Year $ 817,122 $ 549,090
================== ===============
See accompanying notes.
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
1. Plan Description
The Pacific Telesis Group Supplemental Retirement and Savings Plan for
Salaried and Nonsalaried Employees (LESOP) (the "LESOP" or the "Plan") was
established by Pacific Telesis Group in conjunction with the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried
Employees and the Pacific Telesis Group Supplemental Retirement and
Savings Plan for Nonsalaried Employees (the "Savings Plans") to provide a
convenient way for eligible employees to save for retirement on a regular
and long-term basis. The following description of the LESOP provides only
general information. The LESOP text and prospectus include complete
descriptions of LESOP provisions.
The Pacific Telesis Group (the "Corporation") originally adopted a
leveraged employee stock ownership plan, effective December 1, 1989, in
conjunction with the Savings Plans. The Plan covers all employees of
Pacific Telesis Group (the "Corporation") and its participating
subisidiaries (the "Employing Company") who have completed the service
requirement under the applicable Savings Plan. It is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
On December 28, 1989, the LESOP borrowed $691,052,400 from the Corporation
pursuant to a loan agreement and promissory note. Bankers Trust Company,
as Trustee of the Plan, using the proceeds of the loan, purchased
13,900,000 of the Corporation's treasury shares ("Shares") at a total
price of $691,052,400, or $49.25 per share plus accrued dividends. The
Shares were credited to a suspense account as required by U.S. Treasury
Regulations Section 54.4975-11(c).
Under the Savings Plans, eligible employees may authorize contributions of
up to 16% of salary in 1% increments. Employee contributions on a
before-tax basis are limited to an annual maximum, adjusted for inflation
($9,500 for 1997 and 1996). Each participant receives a "matching"
allocation equal to 66-2/3% of the employee's initial 6% contributions.
These matching contributions are used to repay the loan described above in
sufficient amounts to release the Shares from the suspense account.
If the Shares released from the suspense account by loan payments made
within a Plan year are more valuable than 66-2/3% of the participants'
basic contributions, the excess value will be allocated as of the last day
of the Plan year among those participants who made contributions during
the last month of the Plan year in proportion to their pay or salary for
such month.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
Units representing shares of stock ("Units") released from the suspense
account on behalf of a participant are credited to a "Savings Match Stock"
account maintained for a participant under the Plan. Participants are
entitled to the same voting, tender and shareholder rights as any other
shareholder related to any shares credited to their Savings Match Stock
account. Shares are released from the suspense account on a monthly basis
prior to the actual payment of principal and interest on the Plan loan.
The market value of shares released from the suspense account for the 1997
and 1996 plan years was $101,361,699 and $75,401,348, respectively. The
final loan payment for any Plan year is determined as of the end of such
year pursuant to the formula set forth in U.S. Treasury Regulations
Section 54.4975-7(b)(8), based on the number of shares of stock released
during each month of such year.
Dividends on shares purchased with the Plan loan may be used to repay the
loan, which will cause the release of shares from the suspense account.
Whenever dividends on shares credited to a participant's Savings Match
Stock account are used for this purpose, the Plan provides that shares
with a fair market value at least equal to the amount of the dividend are
allocated to the participant's Savings Match Stock account. These loan
payments and released shares are also taken into account when the final
calculation of principal and interest to be paid for the year is
performed.
On April 1, 1997, the Corporation became a wholly-owned subsidiary of SBC
Communications Inc. (SBC). Each share of common stock of the Corporation
was exchanged for 0.73145 of a share of SBC common stock.
Before-tax Savings Match Stock accounts attributable to the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried
Employees are fully vested and nonforfeitable at all times. After-tax
Savings Match Stock accounts attributable to the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried Employees and
after-tax Savings Match Stock accounts and before-tax Savings Match Stock
accounts attributable to the Pacific Telesis Group Supplemental Retirement
and Savings Plan for Nonsalaried Employees are fully vested and
nonforfeitable after a participant either completes three years of service
or reaches age 65 while employed. Savings Match Stock accounts are also
fully vested upon termination of employment due to retirement, disability,
termination under certain severance pay plans or termination due to
layoff.
Forfeitures from Savings Match Stock accounts are applied toward
subsequent matching allocations.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
Once in any six-month period, a participant while still employed may elect
to withdraw all or part of his or her vested account balance, subject to
certain restrictions in the Plan provisions. Upon reaching age 59 1/2, or
termination of employment, single sum or annuity payment distributions may
be made to the participant or his or her beneficiary in accordance with
Plan provisions. A participant or his or her beneficiary may elect to
receive his or her interest under the LESOP in cash or shares of SBC.
Although it has not expressed any intent to do so, SBC has the right under
the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event that the Plan is
terminated, subject to the conditions set forth by ERISA, the account
balances of all participants shall be 100% vested.
Northern Trust is trustee of the Plan.
2. Summary of Accounting Policies
The values of investments are determined as follows: investment in common
shares on the basis of the last published sales prices as reported on the
composite tape of the New York Stock Exchange and other exchanges.
Purchases and sales of securities are reflected as of the trade date.
Dividend income is recognized on the ex-dividend date. Interest earned on
investments is recognized on the accrual basis.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
3. Investment
The Plan invests its assets in SBC's common shares (PAC common shares
through March 31, 1997). As of December 31, 1997 and 1996, total
investment, including common shares in the Savings Stock Match account and
shares held in the suspense account, is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------ -------------------
<S> <C> <C>
Savings Stock Match Account $ 669,504 $ 457,274
Suspense Account 218,253 219,740
------------------ -------------------
Total $ 887,757 $ 677,014
================== ===================
</TABLE>
4. Note Payable
The 15-year promissory note is payable to the Corporation and matures
January 2, 2005. The interest rate on the note is based on the London
Interbank Offered Rate (LIBOR) and is adjusted quarterly (5.81% and 6.53%
at December 31, 1997 and 1996, respectively). The Plan paid $13,582,000
and $21,052,000 in interest and $77,922,000 and $94,216,000 in principal
on the outstanding loan balance during the years ended December 31, 1997
and 1996, respectively.
In accordance with the terms of the promissory note payable, principal
payments of $13,200,791 and $115,852,400 are due in years 2004 and 2005,
respectively.
Repayment of principal in subsequent years will follow the terms of the
note or may be accelerated according to management's discretion.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
5. Tax Status
The Internal Revenue Service has determined and informed the Corporation
by a letter dated July 18, 1995, that the Plan and related Trust are
designed in accordance with applicable sections of the Internal Revenue
Code (the "IRC"). A subsequent favorable determination letter was issued
on May 11, 1998 on the Plan as amended to April 1, 1997. The Plan
administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
6. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500 as of December 31 (dollars in
thousands):
<TABLE>
1997 1996
<CAPTION>
------------------ ----------------
<S> <C> <C>
Net assets available for benefits per financial statements $ 817,112 $ 549,090
Less: Distributions payable to
participants (7,008) (6,914)
------------------ ----------------
Net assets available for benefits
per the Form 5500 $ 810,104 $ 542,176
================== ================
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for years ended December 31, 1997
and 1996 (dollars in thousands):
<TABLE>
1997 1996
------------------ ------------------
<S> <C> <C>
Distributions to participants per
financial statements $ 76,869 $ 47,238
Benefits due:
Beginning of year (6,914) (7,682)
End of year 7,008 6,914
------------------ ------------------
Distributions to participants per
the Form 5500 $ 76,963 $ 46,470
================== ==================
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
7. Related Party Transactions
Administrative expenses of the Plan are paid by the Employing Company,
except that trustee fees and certain administrative expenses in connection
with the Plan may be charged to the income earned in the suspense account.
Brokerage fees, transfer taxes and other expenses incident to the purchase
or sale of securities are considered part of the cost of the securities or
a reduction in the sales price. Transfer taxes applicable to distributions
of shares are paid by the Employing Company.
8. Subsequent Event
On January 1, 1998, Bankers Trust became trustee for the Plan.
Effective July 1, 1998, the Savings Match Stock accounts of salaried
participants, together with a proportionate amount of the unallocated SBC
common shares and the remaining liability under the note payable, will be
transferred to the SBC Savings Plan.
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
EIN: 94-2919931/PLAN #: 017
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1997
(Dollars and shares in thousands)
<CAPTION>
(c) Description of investment
including maturity date, rate
of interest, collateral, par or
(b) Identity of issue borrower, maturity value (e) Current
lessor or similar party (d) Value
(a) Cost
- -------- ------------------------------------ --------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
* SBC Communications Inc. 12,120 Common shares** $ 530,739 $ 887,757
* Northern Trust Collective Short Term Investment
Fund - Collective Trust Fund
19,021 19,021
-------------- --------------
$ 549,760 $ 906,778
============== ==============
<FN>
* A party-in-interest to the Plan.
** Does not reflect two-for-one stock split declared in the first quarter of 1998.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
EIN: 94-2919931/PLAN #: 017
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1997
(Dollars in thousands)
Category (iii) reportable transactions
<CAPTION>
(h)
Current Value
(a) (c) (d) (g) of Asset on (i)
Identity of Party (b) Purchase Selling Cost of Transaction Net Gain
involved Description of Asset Price Price Asset Date or (Loss)
- ----------------------------- -------------------------------- ------------ ------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
* Pacific Telesis Group Common
Shares $ - $27,751 $22,022 $27,751 $ 5,729
* SBC Communications Inc. Common
Shares - 36,925 26,467 36,925 10,458
* SBC Communications Inc. Common
Shares 2 - 2 2 -
Northern Trust Collective Short-term
Investment Fund - Collective
Trust Fund 47,454 - 47,454 47,454 -
Northern Trust Collective Short-term
Investment Fund - Collective
Trust Fund - 52,787 52,787 52,787 -
<FN>
* Shares purchased/sold on the open market.
Note: There were no category (i), (ii) or (iv) reportable transactions during 1997.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Benefit
Plan Committee has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
Pacific Telesis Group Supplemental Retirement and
Savings Plan for Salaried and Nonsalaried
Employees (LESOP)
By Benefit Plan Committee
By /s/ Cassandra C. Carr
Cassandra C. Carr, Chairman
Date: June 26, 1998
<PAGE>
EXHIBIT INDEX
Exhibit identified below, is filed herein as exhibit hereto.
Exhibit
Number .................................................................
23-a Consent of Independent Auditors Ernst & Young LLP.
<PAGE>
Ex-23a
Form 11-K for 1997
File No. 1-8610
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8, No. 33-54309 and 333-24295) pertaining to the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried and Nonsalaried Employees
(LESOP) of our report dated June 19, 1998, with respect to the financial
statements and supplemental schedules of the Pacific Telesis Group Supplemental
Retirement and Savings Plan for Salaried and Nonsalaried Employees (LESOP)
included in this Annual Report (Form 11-K) for the year ended December 31,
1997.
ERNST & YOUNG LLP
San Jose, California
June 25, 1998
