FORM 10-Q
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
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 1-8610
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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At April 30, 1998, 1,838,844,294 common shares were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SBC COMMUNICATIONS INC.
- --------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
Dollars in millions except per share amounts
(Unaudited)
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Three months ended
March 31,
-------------------------
1998 1997
- --------------------------------------------------------------------------
Operating Revenues
Local service:
Landline $ 2,480 $ 2,279
Wireless 776 692
Network access:
Interstate 1,094 1,038
Intrastate 454 456
Long-distance service 535 541
Directory advertising 493 470
Other 592 497
- --------------------------------------------------------------------------
Total operating revenues 6,424 5,973
- --------------------------------------------------------------------------
Operating Expenses
Cost of services and products 2,306 2,173
Selling, general and administrative 1,353 1,146
Depreciation and amortization 1,106 1,068
- --------------------------------------------------------------------------
Total operating expenses 4,765 4,387
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Operating Income 1,659 1,586
- --------------------------------------------------------------------------
Other Income (Expense)
Interest expense (233) (208)
Equity in net income of affiliates 53 27
Other income (expense) - net (38) (20)
- --------------------------------------------------------------------------
Total other income (expense) (218) (201)
- --------------------------------------------------------------------------
Income Before Income Taxes 1,441 1,385
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Income Taxes 529 528
- --------------------------------------------------------------------------
Net Income $ 912 $ 857
- --------------------------------------------------------------------------
Earnings Per Common Share $ 0.50 $ 0.47
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Earnings Per Common Share-Assuming Dilution $ 0.49 $ 0.47
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Weighted Average Number of Common
Shares Outstanding (in millions) 1,839 1,825
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Dividends Declared Per Common Share $ 0.23375 $ 0.22375
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See Notes to Consolidated Financial Statements.
<PAGE>
SBC COMMUNICATIONS INC.
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
Dollars in millions except per share amounts
- --------------------------------------------------------------------------------
March 31, December 31,
------------- -------------
1998 1997
- --------------------------------------------------------------------------------
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 674 $ 398
Short-term cash investments 176 320
Accounts receivable - net of allowances for
uncollectibles of $417 and $395 4,730 5,015
Prepaid expenses 509 349
Deferred income taxes 551 622
Deferred charges 77 82
Other current assets 252 276
- --------------------------------------------------------------------------------
Total current assets 6,969 7,062
- --------------------------------------------------------------------------------
Property, Plant and Equipment - at cost 66,228 65,286
Less: Accumulated depreciation and amortization 38,848 37,947
- --------------------------------------------------------------------------------
Property, Plant and Equipment - Net 27,380 27,339
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Intangible Assets - Net of Accumulated
Amortization of $1,037 and $1,002 3,238 3,269
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Investments in Equity Affiliates 2,581 2,740
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Other Assets 1,946 1,722
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Total Assets $ 42,114 $ 42,132
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Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 2,661 $ 1,953
Accounts payable and accrued liabilities 6,741 7,888
Dividends payable 430 411
- --------------------------------------------------------------------------------
Total current liabilities 9,832 10,252
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Long-Term Debt 11,758 12,019
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Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 1,922 1,639
Postemployment benefit obligation 4,820 4,929
Unamortized investment tax credits 399 417
Other noncurrent liabilities 1,954 1,984
- --------------------------------------------------------------------------------
Total deferred credits and other noncurrent
liabilities 9,095 8,969
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Corporation-obligated mandatorily redeemable
preferred securities of subsidiary trusts* 1,000 1,000
- --------------------------------------------------------------------------------
Shareowners' Equity
Common shares issued ($1 par value) 1,867 934
Capital in excess of par value 8,489 9,418
Retained earnings 1,629 1,146
Guaranteed obligations of employee stock (147) (183)
ownership plans
Deferred compensation - LESOP (119) (119)
Foreign currency translation adjustment (582) (574)
Treasury shares (at cost) (708) (730)
- --------------------------------------------------------------------------------
Total shareowners' equity 10,429 9,892
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Total Liabilities and Shareowners' Equity $ 42,114 $ 42,132
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* The trusts contain $1,030 in principal amount of the Subordinated Debentures
of Pacific Telesis Group.
See Notes to Consolidated Financial Statements.
<PAGE>
SBC COMMUNICATIONS INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in millions, increase (decrease) in cash and cash equivalents
(Unaudited)
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Three months ended
March 31,
------------------------
1998 1997
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Operating Activities
Net income $ 912 $ 857
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,106 1,068
Undistributed earnings from investments in
equity affiliates (8) (17)
Provision for uncollectible accounts 119 111
Amortization of investment tax credits (18) (19)
Deferred income tax expense 142 134
Other - net (1,167) (1,387)
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Total adjustments 174 (110)
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Net Cash Provided by Operating Activities 1,086 747
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Investing Activities
Construction and capital expenditures (1,066) (1,263)
Investments in affiliates - (10)
Purchase of short-term investments (40) (198)
Proceeds from short-term investments 184 323
Dispositions 94 329
Acquisitions - (25)
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Net Cash Used in Investing Activities (828) (844)
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Financing Activities
Net change in short-term borrowings with original
maturities of three months or less 824 712
Issuance of other short-term borrowings 3 120
Repayment of other short-term borrowings (5) (75)
Issuance of long-term debt 392 397
Repayment of long-term debt (783) (59)
Purchase of treasury shares (71) (80)
Issuance of treasury shares 69 15
Dividends paid (411) (393)
Other - (8)
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Net Cash Provided by Financing Activities 18 629
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Net increase in cash and cash equivalents 276 532
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Cash and cash equivalents beginning of year 398 314
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Cash and Cash Equivalents End of Period $ 674 $ 846
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Cash paid during the three months ended March 31 for:
Interest $ 316 $ 278
Income taxes $ 519 $ 350
See Notes to Consolidated Financial Statements.
<TABLE>
SBC COMMUNICATIONS INC.
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
Dollars in millions
(Unaudited)
<CAPTION>
Guaranteed Foreign
Capital in Obligations of Deferred Currency
Common Excess of Retained Employee Stock Compensation Translation Treasury
Shares Par Value Earnings Ownership Plans - LESOP Adjustment Shares
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ 934 $ 9,418 $ 1,146 $ (183) $ (119) $ (574) $ (730)
Net income - - 912 - - - -
Dividends to shareowners - - (430) - - - -
Two-for-one stock split 933 (933) - - - - -
Reduction of debt associated
with Employee Stock Ownership
Plans - - - 36 - - -
Foreign currency translation
adjustment - - - - - (8) -
Purchase of treasury shares - - - - - - (71)
Issuance of treasury shares - (18) - - - - 93
Other - 22 1 - - - -
- --------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1998 $ 1,867 $ 8,489 $ 1,629 $ (147) $ (119) $ (582) $ (708)
- --------------------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA*
<CAPTION>
At March 31, 1998, or for the three months then ended: 1998 1997
<S> <C> <C>
---------------------------------------
Return on weighted average shareowners' equity........... 34.91% 33.88%
Debt ratio............................................... 55.78% 56.25%
Network access lines in service (000).................... 33,934 32,291
Access minutes of use (000,000).......................... 33,919 31,313
Cellular customers (000)................................. 5,605 4,686
Number of employees......................................119,060 113,680
<FN>
*Operating data may be periodically revised to reflect the most current information.
</FN>
</TABLE>
<PAGE>
SBC COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Dollars in millions except per share amounts
1. BASIS OF PRESENTATION The consolidated financial statements have been
prepared by SBC Communications Inc. (SBC) pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, in the
opinion of management, include all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the results for the interim
periods shown. Certain information and footnote disclosures, normally
included in financial statements prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant to
such SEC rules and regulations. Certain reclassifications have been made to
the 1997 consolidated financial statements to conform with the 1998
presentation. The results for the interim periods are not necessarily
indicative of results for the full year. The consolidated financial
statements contained herein should be read in conjunction with the
consolidated financial statements and notes thereto included in SBC's 1997
Annual Report to Shareowners.
2. CONSOLIDATION The consolidated financial statements include the accounts of
SBC and its majority-owned subsidiaries. SBC's largest subsidiaries are
Southwestern Bell Telephone Company (SWBell), providing telecommunications
services in Texas, Missouri, Oklahoma, Kansas and Arkansas, and Pacific
Telesis Group (PAC), providing telecommunications services in California and
Nevada. PAC's subsidiaries include Pacific Bell (PacBell, which also includes
its subsidiaries) and Nevada Bell. (SWBell, PacBell and Nevada Bell are
collectively referred to as the Telephone Companies.) All significant
intercompany transactions are eliminated in the consolidation process.
Investments in partnerships, joint ventures and less than majority-owned
subsidiaries are principally accounted for under the equity method. Earnings
from foreign investments accounted for under the equity method are included
for periods ended within three months of the date of SBC's Consolidated
Statements of Income.
3. COMPREHENSIVE INCOME Effective with the first quarter of 1998, SBC is
reporting comprehensive income for the three months ended March 31, 1998 and
1997. The components of SBC's comprehensive income for each period presented
include net income and the adjustment to shareowners' equity for currency
translation adjustments.
Following is SBC's comprehensive income:
-------------------------------------------------------------------
Three Months Ended March 31, 1998 1997
-------------------------------------------------------------------
Net income $ 912 $ 857
Foreign currency translation
adjustment (8) 99
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Total comprehensive income $ 904 $ 956
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4. MERGER AGREEMENT WITH AMERITECH CORPORATION As disclosed in the Form 8-K
filed on May 11, 1998, SBC announced a definitive agreement to merge an SBC
subsidiary with Ameritech Corporation (Ameritech) in a transaction in which each
share of Ameritech common stock will be converted into and exchanged for 1.316
shares of SBC common stock. After the merger, Ameritech will be a wholly-owned
subsidiary of SBC. The transaction, which has been approved by the board of
directors of each company, is intended to be accounted for as a pooling of
interests and to be a tax-free reorganization. The merger agreement is subject
to certain regulatory approvals as well as approval by the stockholders of each
company.
SBC COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
Dollars in millions except per share amounts
5. MERGER AGREEMENT WITH SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION
(SNET) On January 5, 1998, SBC and SNET jointly announced a definitive agreement
to merge an SBC subsidiary with SNET, in a transaction in which each share of
SNET common stock will be converted into and exchanged for 1.7568 shares of SBC
common stock (equivalent to approximately 120 million shares, or 6.5% of SBC's
outstanding shares at December 31, 1997). After the merger, SNET will be a
wholly-owned subsidiary of SBC. The transaction is intended to be accounted for
as a pooling of interests and to be a tax-free reorganization. The shareowners
of SNET approved the merger on March 27, 1998; however, the merger is also
subject to certain regulatory approvals. If approvals are granted, the
transaction is expected to close by the end of 1998.
6. PACIFIC TELESIS GROUP FINANCIAL INFORMATION
The following tables present summarized financial information for PAC:
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March 31, December 31,
1998 1997
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Balance Sheets
Current assets $ 2,935 $ 2,835
Noncurrent assets 14,807 14,041
Current liabilities 4,243 4,513
Noncurrent liabilities 11,034 10,305
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Three Months Ended March 31, 1998 1997
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Income Statements
Operating revenues $ 2,793 $ 2,535
Operating income 610 701
Income before cumulative effect of
accounting changes 290 361
Net income 290 683
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SBC has not provided separate financial statements and other disclosures for
PAC as management has determined that such information is not material to the
holders of the Trust Originated Preferred Securities.
<PAGE>
7. EARNINGS PER SHARE
A reconciliation of the numerators and denominators of basic earnings per
share and diluted earnings per share for net income for the three months
ended March 31, 1998 and 1997 are shown in the table below.
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Three Months Ended March 31, 1998 1997
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Numerators
Numerator for basic earnings per share:
Net Income $ 912 $ 857
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Dilutive potential common shares:
Other stock-based compensation 1 -
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Numerator for diluted earnings
per share $ 913 $ 857
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Denominators
Denominator for basic earnings per share:
Weighted average number of common
shares outstanding (000) 1,838,595 1,824,881
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Dilutive potential common shares (000):
Stock options 19,719 9,313
Other stock-based compensation 5,235 3,882
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Denominator for diluted earnings
per share 1,863,549 1,838,076
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Basic earnings per share $ 0.50 $0.47
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Diluted earnings per share $ 0.49 $ 0.47
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8. SOFTWARE COSTS SBC currently expenses costs as incurred for software
purchased or developed for internal use, except for initial operating
software costs, which are capitalized and amortized over the lives of the
associated hardware. The American Institute of Certified Public Accountants
has issued a Statement of Position (SOP) that will require capitalization of
certain computer software expenditures beginning in 1999, with earlier
adoption permitted.
SBC did not elect to early adopt the provisions of the SOP. Management is
currently evaluating the impact of the change in accounting required by the
SOP, but is not able to quantify the effect at this time. The SOP would tend
to cause an increase in net income in the first year of adoption.
<PAGE>
SBC COMMUNICATIONS INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dollars in millions except per share amounts
RESULTS OF OPERATIONS
Overview Financial results for SBC Communications Inc. (SBC) for the first three
months of 1998 and 1997 are summarized as follows:
- --------------------------------------------------------------------------------
Three-Month Period
---------------------------
Percent
1998 1997 Change
- --------------------------------------------------------------------------------
Operating revenues $ 6,424 $ 5,973 7.6%
Operating expenses $ 4,765 $ 4,387 8.6%
Net income $ 912 $ 857 6.4%
================================================================================
SBC reported net income for the first quarter of 1998 of $912, or $.49 per share
assuming dilution, compared to $857, or $.47 per share assuming dilution, in the
first quarter of 1997. SBC's net income for the first quarter of 1997 includes a
$90 after-tax settlement gain at Pacific Telesis Group (PAC) associated with
lump-sum pension payments that exceeded the projected service and interest costs
for 1996 retirements. Excluding the settlement gain, SBC's net income increased
by $145, or 18.9% for the first quarter of 1998.
Excluding the settlement gain, the primary factors contributing to this increase
were growth in demand for services and products at Southwestern Bell Telephone
Company (SWBell), Pacific Bell (PacBell, which also includes its subsidiaries)
and Nevada Bell (collectively referred to as the Telephone Companies), increased
equity in net income of international investments and growth in demand at
Pacific Bell Directory (PB Directory). These increases were partially offset by
higher levels of expenses associated with Personal Communications Services (PCS)
operations in California and Nevada, merger related costs and increases in
employee compensation, including those resulting from higher force levels.
Revenues Components of operating revenues for the first quarters of 1998 and
1997 are as follows:
- --------------------------------------------------------------------------------
Three-Month Period
-------------------------------
Percent
1998 1997 Change
- --------------------------------------------------------------------------------
Local service:
Landline $ 2,480 $ 2,279 8.8%
Wireless 776 692 12.1
Network access:
Interstate 1,094 1,038 5.4
Intrastate 454 456 (0.4)
Long-distance service 535 541 (1.1)
Directory advertising 493 470 4.9
Other 592 497 19.1
- --------------------------------------------------------------------
Total $ 6,424 $ 5,973 7.6%
================================================================================
Local Service Landline local service revenues increased in the first
quarter of 1998 due primarily to increases in demand, including increases
in access lines and vertical services revenues. The number of access lines
increased by 5.1% since March 31, 1997, of which 49% was due to growth in
California and 35% was due to growth in Texas. Approximately 34% of
SBC COMMUNICATIONS INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dollars in millions except per share amounts
RESULTS OF OPERATIONS - Continued
SBC's access line growth was due to sales of additional access lines to
existing residential customers. Vertical services revenues for the first
quarter, which include custom calling services, call control options,
Caller ID and other services, increased by more than 16%. Additionally,
Federal payphone deregulation implemented in April 1997 increased local
service and decreased long-distance service, interstate network access and
other operating revenues; the overall impact was a slight increase in
total operating revenues.
Wireless local service revenues increased in the first quarter of 1998 due
primarily to growth in the number of customers of 19.6%, partially offset
by declines in average revenue per customer. Wireless local service
revenues increases included the expansion of PCS operations in California,
Nevada and Oklahoma. At March 31, 1998, SBC had 5,090,000 traditional
cellular customers, 69,000 resale customers and 446,000 PCS customers.
Network Access Interstate network access revenues increased in the first
quarter of 1998 due to increases in demand for access services by
interexchange carriers and growth in revenues from end-user charges
attributable to an increasing access line base. Also contributing to the
increase was the absence of the 1997 revenue offset required for net
payments for long-term support which were designed to subsidize universal
service. This change is discussed further in Cost of Services and Products
below. Partially offsetting these increases were the effects of 1997 rate
reductions related to the Federal productivity factor adjustment, as
discussed in the 1997 Annual Report to Shareowners, and payphone
deregulation referred to above in Local Service.
Intrastate network access revenues decreased slightly in the first quarter
of 1998 due to state regulatory rate orders and the implementation of the
February 1997 California high cost fund. These decreases were partially
offset by intrastate carrier usage.
Long-Distance Service revenues decreased in the first quarter of 1998 due
to the effect of price competition from alternative intraLATA toll
carriers, Federal payphone deregulation referred to in Local Service,
regulatory rate orders and the introduction and deployment of extended
area local service plans at SWBell. These decreases were somewhat offset
by growth in wireless revenues and increased demand resulting from
California's growing economy.
Directory Advertising revenues increased in the first quarter of 1998 due
mainly to increased demand at PB Directory.
Other operating revenues increased in the first quarter of 1998 due to
increased wireless and Caller ID equipment sales and revenues from other
business initiatives, primarily voice messaging services and Internet
services. Increased demand for PacBell and SWBell nonregulated services
and products also contributed to the increase. These increases were
slightly offset by payphone deregulation referred to in Local Service.
<PAGE>
Expenses Components of operating expenses for the first quarters of 1998 and
1997 are as follows:
- -------------------------------------------------------------------------------
Three-Month Period
-----------------------------
Percent
1998 1997 Change
- -------------------------------------------------------------------------------
Cost of services and products $ 2,306 $ 2,173 6.1%
Selling, general and administrative 1,353 1,146 18.1
Depreciation and amortization 1,106 1,068 3.6
- ---------------------------------------------------------------------
Total $ 4,765 $ 4,387 8.6%
===============================================================================
Cost of services and products for the first quarter of 1998 increased
$133, or 6.1% over the first quarter of 1997. The most significant factor
for the increase was higher levels of expenses associated with PCS
operations in California and Nevada. Another major factor contributing to
the increase resulted from the January 1, 1998 implementation of the
Federal Universal Service Fund which replaced the 1997 net payments for
long-term support which were accounted for as an offset against Interstate
Network Access Revenues. Also increasing expenses were the continuing
costs of local number portability implementation of $27, increased
employee compensation, including force additions, network expansion and
maintenance, and interconnection costs at the Telephone Companies. These
increases were partially offset by net reductions in costs related to
benefits, contract labor, and right-to-use fees.
Selling, general and administrative expense for the first quarter of 1997
reflects a $152 PAC settlement gain associated with lump-sum pension
payments that exceeded the projected service and interest costs for 1996
retirements. Excluding the settlement gain, selling, general and
administrative costs would have increased $55, or 4.2%. This increase was
due to costs associated with higher PCS related expenses, costs of merger
implementation and other costs associated with the consolidation of
operations since the merger. These increases were partially offset by a
decrease in contract labor.
Depreciation and amortization for the first quarter of 1998 increased $38,
or 3.6% over the first quarter of 1997. The increase was due primarily to
the launch of PCS services in California and Nevada that resulted in
higher plant levels and the amortization of PCS licenses. Other items
affecting the increase included overall higher plant levels at the
Telephone Companies and Southwestern Bell Mobile Systems, and slight
increases in effective composite rate of depreciation at SWBell. These
increases were partially offset by reduced depreciation at PacBell related
to analog switching equipment and reductions in the composite depreciation
rate.
Interest expense increased by $25 or 12.0% compared with the first quarter of
1997 primarily as a result of lower capitalization of interest during
construction. SBC capitalized interest on its PCS licenses prior to beginning
operations. SBC now provides service in all major markets covered under its
licenses. Higher average level of debt also contributed to the increase.
Equity in net income of affiliates increased $26 in the first quarter of 1998
due to SBC's May 1997 investment in Telkom SA Limited (Telkom) of South Africa
and writeoffs in the first quarter of 1997 taken by Telefonos de Mexico, S.A. de
C.V. (Telmex). Results also reflect expenses in new international investments
including long-distance in France, Switzerland and Israel, and cellular
communications in Taiwan.
Other income (expense) -net was a net expense of $38 for the first quarter of
1998, $18 higher than the first quarter of 1997. During the first quarter of
1998, various offsetting transactions impacted other income and expense. SBC
recognized other expense related to a write-down of an international investment
and a video investment of $133, the market valuation adjustment on the SBC debt
redeemable either in cash or Telmex L shares, and call premiums and unamortized
discount on early redemption of debt by SWBell and PacBell. These were offset by
income related to a special one-time dividend of $158 received from an affiliate
and gains on sales of Telmex L shares. The additional increase in net other
expense primarily resulted from lower interest income and higher minority
interest expenses.
Income taxes for 1997 included taxes on the pension settlement gain discussed in
Selling, General and Administrative expense and on conforming accounting changes
between SBC and PAC. These items reflected a higher composite federal and state
tax rate than for SBC as a whole. Excluding these items, income taxes were
higher in 1998 primarily due to higher income before income tax.
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS
COMPETITIVE AND REGULATORY ENVIRONMENT
Long-distance Applications - SBC continues to seek entry into interLATA
long-distance through the courts and by approval from the Federal Communications
Commission. SBC has section 271 applications pending to provide interLATA
long-distance service in Arkansas, California, Kansas, Oklahoma and Texas, and
applications are expected to be filed soon in Nevada and Missouri.
OTHER BUSINESS MATTERS
Acquisitions and Dispositions - In April 1998, SBC reached an agreement to sell
its interest in MTN, a South African national cellular company, to the remaining
shareholders of MTN. This agreement will fulfill SBC's obligation to divest MTN
as part of the acquisition of Telkom. MTN competes with Telkom in wireless
services. The transaction is expected to close in the third quarter of 1998.
SBC's 40% owned Swiss affiliate, diAx, has been awarded a wireless license by
the Swiss government. The target date for commencement of wireless services by
diAx in Switzerland is the fourth quarter of 1998.
Employees - Tentative labor agreements were reached on April 7, 1998 between the
Telephone Companies and the Communications Workers of America (CWA) to replace
contracts that would expire on August 8, 1998. The new agreements are subject to
ratification by CWA membership and cover approximately 75,000 employees of the
Telephone Companies through April 1, 2001. Among other items, the agreements
specify an 11% increase in wages over the life of the contracts.
SBC COMMUNICATIONS INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Dollars in millions except per share amounts
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS - Continued
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1998, as in 1997, SBC's primary source of funds
continued to be cash provided by operating activities. Additionally, SBC had
$674 in cash and cash equivalents available at March 31, 1998. SBC has entered
into agreements with several banks for lines of credit totaling $2,475, all of
which may be used to support commercial paper borrowings. SBC had no borrowings
outstanding under these lines of credit as of March 31, 1998. Commercial paper
borrowings as of March 31, 1998 totaled $2,091.
In February 1998, SBC called $630 of long-term debt for retirement, including
$175 at PacBell and $425 at SWBell, and issued $200 in notes due February 2008
at PacBell and $200 in debentures due March 2048 at SWBell.
<PAGE>
SBC COMMUNICATIONS INC.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During the first quarter of 1998, the Company sold shares of common stock to
non-employee directors pursuant to the Company's Non-Employee Director Stock and
Deferral Plan. Under the plan, a director may make an annual election to receive
all or part of his annual retainer or fees in the form of SBC shares or deferred
stock units ("DSUs") that are convertible into SBC shares. During this period,
an aggregate of 4,936 SBC shares and DSUs were purchased by non-employee
directors at prices ranging from $36.625 to $43.25, in each case the fair market
value of the shares on the date of purchase. The issuances of shares and DSUs
were exempt from registration pursuant to Section 4(2) of the Securities Act.
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting of Shareowners
(a) The annual meeting of the shareowners of SBC Communications Inc. (SBC)
was held on April 24, 1998, in San Antonio, Texas. Shareowners
representing 747,966,783 shares of common stock as of the February 23,
1998 record date (prior to the two-for- one stock split) were present in
person or were represented at the meeting by proxy.
(b) At the meeting, holders of common shares voted as indicated below to
elect the following persons to the Board of Directors for a three-year
term:
SHARES SHARES
DIRECTOR FOR WITHHELD*
-------- --- ---------
August A. Busch III 729,525,991 18,440,792
Royce S. Caldwell 730,249,885 17,716,898
Herman E. Gallegos 729,442,349 18,524,434
Jess T. Hay 729,301,229 18,665,554
Bobby R. Inman 728,505,779 19,461,004
S. Donley Ritchey 730,026,713 17,940,070
*Includes shares represented at the meeting by proxy where the
shareowner withheld authority to vote for the indicated director or
directors, as well as shares present at the meeting which were not voted
for such director or directors.
(c) Shareowners ratified the appointment of Ernst & Young LLP as independent
auditors of SBC for the year ended December 31, 1998. The vote was
739,859,021 FOR and 4,087,602 AGAINST, with 4,020,160 shares ABSTAINING.
(d) Shareowners approved the amendment of the restated certificate of
incorporation to increase the number of authorized common shares to
7,000,000,000. The vote was 566,236,874 FOR and 169,530,360 AGAINST, with
6,450,272 shares ABSTAINING.
(e) Shareowners voted not to adopt a shareowner proposal to require shareowner
approval of certain political contributions. The vote was 59,146,696 FOR
and 566,984,273 AGAINST, with 33,917,758 shares ABSTAINING.
(f) Shareowners voted not to adopt a shareowner proposal to limit certain
existing pension benefits for outside directors. The vote was 200,196,053
FOR and 439,860,974 AGAINST, with 19,991,700 shares ABSTAINING.
<PAGE>
SBC COMMUNICATIONS INC.
PART II - OTHER INFORMATION - CONTINUED
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3-a Restated Certificate of Incorporation, filed with the
Secretary of State of Delaware on April 28, 1998.
Exhibit 12 Computation of Ratios of Earnings to Fixed Charges.
Exhibit 27a Financial Data Schedule - March 31, 1996
Exhibit 27b Financial Data Schedule - June 30, 1996
Exhibit 27c Financial Data Schedule - September 30, 1996
Exhibit 27d Financial Data Schedule - December 31, 1996
Exhibit 27e Financial Data Schedule - March 31, 1997
Exhibit 27f Financial Data Schedule - June 30, 1997
Exhibit 27g Financial Data Schedule - September 30, 1997
Exhibit 27h Financial Data Schedule - March 31, 1998
(b) Reports on Form 8-K
On February 5, 1998, SBC filed a report on Form 8-K filing certain
financial statement information included in a January 28, 1998 press
release and filing exhibit 3-b, its Bylaws dated January 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SBC Communications Inc.
May 11, 1998 /s/ Donald E. Kiernan
-----------------------
Donald E. Kiernan
Senior Vice President, Treasurer
and Chief Financial Officer
EXHIBIT 3-a
RESTATED CERTIFICATE OF INCORPORATION
OF
SBC COMMUNICATIONS INC.
SBC COMMUNICATIONS INC., a Corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is SBC Communications Inc., and the name
under which the corporation was originally incorporated was Southwestern Bell
Corporation. The date of filing of its original Certificate of Incorporation
with the Secretary of State was October 5, 1983.
2. This Restated Certificate of Incorporation only restates and integrates
and does not further amend the provisions of the Restated Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The text of the Restated Certificate of Incorporation as amended or
supplemented heretofore is hereby restated and without further amendments or
changes to read as herein set forth in full:
ARTICLE ONE
The name of the corporation is SBC Communications Inc.
ARTICLE TWO
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of the registered agent of the corporation at such address is
The Corporation Trust Company.
ARTICLE THREE
The purpose of the corporation is to engage in any business, lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE FOUR
The corporation shall have perpetual existence.
ARTICLE FIVE
The aggregate number of shares which the corporation is authorized to
issue is 7,010,000,000 shares, consisting of 7,000,000,000 common shares having
a par value of $1 per share and 10,000,000 preferred shares having a par value
of $1 per share.
The preferred shares may be issued from time to time in one or more
series. The Board of Directors is authorized to establish by resolution the
number of preferred shares in each series, the designation thereof, the powers,
preferences, and rights and the qualifications, limitations or restrictions of
each series and the variations, if any, as between each series.
No holder of any class or series of shares shall have any preemptive right
to purchase any additional issue of shares of the corporation of any class or
series or any security convertible into any class or series of shares.
In accordance with this Article Five, the Board of Directors has
designated shares of Preferred Stock with the voting powers, preferences,
rights, qualifications, limitations, and restrictions as set forth on Exhibit A
hereto.
ARTICLE SIX
The business and affairs of the corporation shall be under direction of a
Board of Directors. The number of directors, their terms and the manner of their
election shall be fixed by the Bylaws of the corporation. The directors need not
be elected by written ballot unless required by the Bylaws of the corporation.
No director of this corporation shall be liable to this corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability 1) for any breach of the director's duty of loyalty to the
corporation or its stockholders; 2) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of the law; 3) under
Section 174 of the Delaware General Corporation Law; or 4) for any transaction
from which a director derived an improper benefit.
ARTICLE SEVEN
The Board of Directors is expressly authorized to adopt, amend or repeal
the Bylaws of the corporation, except that any Bylaw of the corporation
providing for the maximum number of Directors that may serve on the Board of
Directors, or providing for a classified Board of Directors with staggered terms
of office or requiring the approval by the shareholders or the Board of
Directors of any business combinations may only be amended or repealed by a
two-thirds majority vote of the total number of shares of stock of the
corporation then outstanding and entitled to vote.
ARTICLE EIGHT
Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the corporation, no action which is required to be taken or
which may be taken at any annual or special meeting of stockholders of the
corporation may be taken by written consent without a meeting, except where such
consent is signed by stockholders representing at least two-thirds of the total
number of shares of stock of the corporation then outstanding and entitled to
vote thereon.
ARTICLE NINE
The corporation reserves the right to amend and repeal any provision
contained in this Certificate of Incorporation in the manner prescribed by the
laws of the State of Delaware. All rights herein conferred are granted subject
to this reservation.
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors on April 24, 1998, in accordance with Section 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said SBC Communications Inc. has caused this Restated
Certificate of Incorporation to be signed by Edward E. Whitacre, Jr., its
Chairman of the Board of Directors, President and Chief Executive Officer, and
attested by Judith M. Sahm, its Secretary, this 24th day of April, 1998.
SBC COMMUNICATIONS INC.
(seal) /s/ Edward E.Whitacre, Jr.
Edward E. Whitacre, Jr.
Chairman of the Board, President
and Chief Executive Officer
Attest: /s/ Judith M. Sahm
Judith M. Sahm
Secretary
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
SOUTHWESTERN BELL CORPORATION1
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors on January 27, 1989, adopted the following resolution
creating a series of Preferred Stock designated as Series A Junior Participating
Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 8,000,0002.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the last day of April, July, October and January in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $5.00
or (b) subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $1.00 per share of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the Corporation shall at any
time after January 27, 1989 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $5.00 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the shareowners of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of the shareowners of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially
at a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of shareowners, and thereafter at annual
meetings of shareowners, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of Directors shall be
exercised unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy. The
absence of a quorum of the holders of Common Stock shall not affect the
exercise by the holders of Preferred Stock of such voting right. At any
meeting at which the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have the
right, voting as a class, to elect Directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two (2) Directors
or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred Stock
shall have the right to make such increase in the number of Directors as
shall be necessary to permit the election by them of the required number.
After the holders of the Preferred Stock shall have exercised their right
to elect Directors in any default period and during the continuance of
such period, the number of Directors shall not be increased or decreased
except by vote of the holders of Preferred Stock as herein provided or
pursuant to the rights of any equity securities ranking senior to or pari
passu with the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any shareowner or
shareowners owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the President,
a Vice-President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this paragraph (C) (iii) shall be given to
each holder of record of Preferred Stock by mailing a copy of such notice
to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20
days and not later than 60 days after such order or request or in default
of the calling of such meeting within 60 days after such order or request,
such meeting may be called on similar notice by any shareowner or
shareowners owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (C) (iii), no such special meeting shall be
called during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the shareowners.
(iv) In any default period, the holders of Common Stock, and other
classes of Stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of
Preferred Stock shall have exercised their right to elect two (2)
Directors voting as a class, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
Board of Directors may (except as provided in paragraph (C) (ii) of this
Section 3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of stock which elected the
Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class of
Stock shall include Directors elected by such Directors to fill vacancies
as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of
Directors shall be such number as may be provided for in the certificate
of incorporation or bylaws irrespective of any increase made pursuant to
the provisions of paragraph (C) (ii) of this Section 3 (such number being
subject, however, to change thereafter in any manner provided by law or in
the certificate of incorporation or bylaws). Any vacancies in the Board of
Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to Dividends or upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board Of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii)100 (as appropriately adjusted as set forth in subparagraph C
below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
Outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
- ----------------------------
1 Pursuant to an amendment to the Restated Certificate of Incorporation
effective April 28,1995, the name of the Corporation was changed to SBC
Communications Inc.
2 Pursuant to a Certificate of Increase effective March 28,1997, the
number of shares designated as Series A Junior Participating Preferred Stock was
increased from 4,000,000 shares to 8,000,000 shares.
<TABLE>
SBC COMMUNICATIONS INC. EXHIBIT 12
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Dollars in Millions
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Before Income Taxes, Extraordinary Loss
and Cumulative Effect of Accounting Changes* $ 1,433 $ 1,362 $ 2,237 $ 4,975 $ 4,383 $ 4,091 $ 2,070
Add: Interest Expense 233 208 947 812 957 935 1,005
Dividends on Preferred Securities 20 20 80 60 - - -
1/3 Rental Expense 34 34 130 108 77 85 81
---------- ---------- --------- -------- --------- --------- ---------
Adjusted Earnings $ 1,720 $ 1,624 $ 3,394 $ 5,955 $ 5,417 $ 5,111 $ 3,156
========== ========== ========= ======== ========= ========= =========
Total Interest Charges $ 250 $ 248 $ 1,067 $ 947 $ 957 $ 935 $ 1,005
Dividends on Preferred Securities 20 20 80 60 - - -
1/3 Rental Expense 34 34 130 108 77 85 81
---------- ---------- --------- -------- --------- --------- ---------
Adjusted Fixed Charges $ 304 $ 302 $ 1,277 $ 1,115 $ 1,034 $ 1,020 $ 1,086
========== ========== ========= ======== ========= ========= =========
Ratio of Earnings to Fixed Charges 5.66 5.38 2.66 5.34 5.24 5.01 2.91
<FN>
*Undistributed earnings on investments accounted for under the equity method have been excluded
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S MARCH 31, 1996 CONSOLIDATED FINANCIAL STATEMENTS, AS
RESTATED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 636
<SECURITIES> 328
<RECEIVABLES> 4,414
<ALLOWANCES> 310
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 6,022
<PP&E> 58,867
<DEPRECIATION> 34,295
<TOTAL-ASSETS> 37,688
<CURRENT-LIABILITIES> 8,692
<BONDS> 10,672
0
0
<COMMON> 934
<OTHER-SE> 7,908
<TOTAL-LIABILITY-AND-EQUITY> 37,688
<SALES> 0<F2>
<TOTAL-REVENUES> 5,564
<CGS> 0<F3>
<TOTAL-COSTS> 1,939
<OTHER-EXPENSES> 1,011
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 212
<INCOME-PRETAX> 1,293
<INCOME-TAX> 495
<INCOME-CONTINUING> 798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 90
<NET-INCOME> 888
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S JUNE 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS, AS
RESTATED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 422
<SECURITIES> 625
<RECEIVABLES> 4,579
<ALLOWANCES> 324
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 6,207
<PP&E> 59,686
<DEPRECIATION> 34,884
<TOTAL-ASSETS> 38,181
<CURRENT-LIABILITIES> 8,301
<BONDS> 10,684
0
0
<COMMON> 934
<OTHER-SE> 8,362
<TOTAL-LIABILITY-AND-EQUITY> 38,181
<SALES> 0<F2>
<TOTAL-REVENUES> 11,295
<CGS> 0<F3>
<TOTAL-COSTS> 3,882
<OTHER-EXPENSES> 2,029
<LOSS-PROVISION> 179
<INTEREST-EXPENSE> 425
<INCOME-PRETAX> 2,605
<INCOME-TAX> 1,004
<INCOME-CONTINUING> 1,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 90
<NET-INCOME> 1,691
<EPS-PRIMARY> .92
<EPS-DILUTED> .91
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S SEPTEMBER 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS, AS
RESTATED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 770
<SECURITIES> 425
<RECEIVABLES> 4,751
<ALLOWANCES> 347
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 6,599
<PP&E> 60,543
<DEPRECIATION> 35,374
<TOTAL-ASSETS> 38,966
<CURRENT-LIABILITIES> 8,700
<BONDS> 10,906
0
0
<COMMON> 934
<OTHER-SE> 8,659
<TOTAL-LIABILITY-AND-EQUITY> 38,966
<SALES> 0<F2>
<TOTAL-REVENUES> 17,243
<CGS> 0<F3>
<TOTAL-COSTS> 5,957
<OTHER-EXPENSES> 3,070
<LOSS-PROVISION> 293
<INTEREST-EXPENSE> 618
<INCOME-PRETAX> 3,992
<INCOME-TAX> 1,524
<INCOME-CONTINUING> 2,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 90
<NET-INCOME> 2,558
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.38
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S DECEMBER 31, 1996 CONSOLIDATED FINANCIAL STATEMENTS, AS
RESTATED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 314
<SECURITIES> 432
<RECEIVABLES> 4,995
<ALLOWANCES> 311
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 6,271
<PP&E> 61,786
<DEPRECIATION> 35,706
<TOTAL-ASSETS> 39,485
<CURRENT-LIABILITIES> 9,312
<BONDS> 10,930
0
0
<COMMON> 934
<OTHER-SE> 8,707
<TOTAL-LIABILITY-AND-EQUITY> 39,485
<SALES> 0<F2>
<TOTAL-REVENUES> 23,445
<CGS> 0<F3>
<TOTAL-COSTS> 8,250
<OTHER-EXPENSES> 4,109
<LOSS-PROVISION> 395
<INTEREST-EXPENSE> 812
<INCOME-PRETAX> 5,149
<INCOME-TAX> 1,960
<INCOME-CONTINUING> 3,189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 90
<NET-INCOME> 3,279
<EPS-PRIMARY> 1.78
<EPS-DILUTED> 1.77
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S MARCH 31, 1997 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 846
<SECURITIES> 307
<RECEIVABLES> 4,850
<ALLOWANCES> 316
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 6,621
<PP&E> 62,707
<DEPRECIATION> 36,317
<TOTAL-ASSETS> 40,020
<CURRENT-LIABILITIES> 9,241
<BONDS> 11,170
0
0
<COMMON> 934
<OTHER-SE> 9,220
<TOTAL-LIABILITY-AND-EQUITY> 40,020
<SALES> 0<F2>
<TOTAL-REVENUES> 5,973
<CGS> 0<F3>
<TOTAL-COSTS> 2,173
<OTHER-EXPENSES> 1,068
<LOSS-PROVISION> 111
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> 1,385
<INCOME-TAX> 528
<INCOME-CONTINUING> 857
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 857
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S JUNE 30, 1997 CONSOLIDATED FINANCIAL STATEMENTS, AS
RESTATED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 744
<SECURITIES> 241
<RECEIVABLES> 5,055
<ALLOWANCES> 355
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 7,430
<PP&E> 63,680
<DEPRECIATION> 37,247
<TOTAL-ASSETS> 41,246
<CURRENT-LIABILITIES> 11,901
<BONDS> 11,098
0
0
<COMMON> 934
<OTHER-SE> 8,111
<TOTAL-LIABILITY-AND-EQUITY> 41,246
<SALES> 0<F2>
<TOTAL-REVENUES> 11,894
<CGS> 0<F3>
<TOTAL-COSTS> 4,396
<OTHER-EXPENSES> 2,714
<LOSS-PROVISION> 265
<INTEREST-EXPENSE> 453
<INCOME-PRETAX> 198
<INCOME-TAX> 128
<INCOME-CONTINUING> 70
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S SEPTEMBER 30, 1997 CONSOLIDATED FINANCIAL STATEMENTS, AS
RESTATED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 705
<SECURITIES> 504
<RECEIVABLES> 5,258
<ALLOWANCES> 391
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 7,623
<PP&E> 64,310
<DEPRECIATION> 37,536
<TOTAL-ASSETS> 42,056
<CURRENT-LIABILITIES> 11,733
<BONDS> 11,636
0
0
<COMMON> 934
<OTHER-SE> 8,602
<TOTAL-LIABILITY-AND-EQUITY> 42,056
<SALES> 0<F2>
<TOTAL-REVENUES> 18,223
<CGS> 0<F3>
<TOTAL-COSTS> 6,760
<OTHER-EXPENSES> 3,800
<LOSS-PROVISION> 388
<INTEREST-EXPENSE> 693
<INCOME-PRETAX> 1,466
<INCOME-TAX> 580
<INCOME-CONTINUING> 886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 886
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.48
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBC
COMMUNICATIONS INC.'S MARCH 31, 1998 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 674
<SECURITIES> 176
<RECEIVABLES> 5,147
<ALLOWANCES> 417
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 6,969
<PP&E> 66,228
<DEPRECIATION> 38,848
<TOTAL-ASSETS> 42,114
<CURRENT-LIABILITIES> 9,832
<BONDS> 11,758
0
0
<COMMON> 1,867
<OTHER-SE> 8,562
<TOTAL-LIABILITY-AND-EQUITY> 42,114
<SALES> 0<F2>
<TOTAL-REVENUES> 6,424
<CGS> 0<F3>
<TOTAL-COSTS> 2,306
<OTHER-EXPENSES> 1,106
<LOSS-PROVISION> 119
<INTEREST-EXPENSE> 233
<INCOME-PRETAX> 1,441
<INCOME-TAX> 529
<INCOME-CONTINUING> 912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 912
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.49
<FN>
<F1> THIS AMOUNT IS IMMATERIAL.
<F2> NET SALES OF TANGIBLE PRODUCTS IS NOT MORE THAN 10% OF TOTAL OPERATING
REVENUES AND THEREFORE HAS NOT BEEN STATED SEPARATELY IN THE FINANCIAL
STATEMENTS PURSUANT TO REGULATION S-X, RULE 5-03(B). THIS AMOUNT IS
INCLUDED IN THE "TOTAL REVENUES" TAG.
<F3> COST OF TANGIBLE GOODS SOLD IS INCLUDED IN COST OF SERVICES AND PRODUCTS
IN THE FINANCIAL STATEMENTS AND THE "TOTAL-COST" TAG, PURSUANT TO
REGULATION S-X, RULE 5-03(B).
</FN>
</TABLE>
