United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: January 21, 1999
SBC COMMUNICATIONS INC.
A Delaware Corporation
Commission File No. 1-8610
IRS Employer No. 43-1301883
175 E. Houston, San Antonio, Texas 78205
Telephone Number (210) 821-4105
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Item 5. Other Events
On January 21, 1999, SBC Communications Inc. issued the following press release
reporting fourth-quarter and annual earnings for 1998.
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SBC Communications Inc.
News Release
For more information, contact:
Larry L. Solomon
Tel: 210/351-3990
Fax: 210/351-2903
Internet: [email protected]
SBC DELIVERS 19.3 PERCENT EARNINGS GROWTH IN 1998;
GROWS FOURTH-QUARTER EARNINGS 20 PERCENT
SAN ANTONIO, Jan. 21, 1999 - SBC Communications Inc. (NYSE: SBC) today
announced strong 1998 performance, reporting 20.0 percent earnings growth for
the fourth quarter and 19.3 percent earnings growth for the year on a normalized
basis.
Fourth-quarter earnings per diluted share increased 19.6 percent on a
normalized basis to $0.55 from $0.46 a share during the same period last year.
Full-year earnings per diluted share on a normalized basis increased 18.2
percent to $2.08 compared with $1.76 during 1997. The annual and fourth-quarter
normalized results are before an extraordinary loss and one-time items, and an
accounting change in the first quarter of 1998.
Solid core business performance and strong growth in data and vertical
services drove SBC's fourth-quarter and 1998 results.
Fourth-quarter revenues increased 7.9 percent to $7.7 billion, while
full-year 1998 revenues also increased 7.9 percent to $28.8 billion from $26.7
billion last year.
"We had an exceptional year as we grew our businesses while taking steps to
shape our future as an integrated, full-service global competitor that will
continue to build value for our shareowners," said Edward E. Whitacre Jr.,
chairman and chief executive officer.
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Page 2/SBC Grows Earnings
"We successfully completed our merger with Southern New England
Telecommunications (SNET) last fall. Going forward, our planned merger with
Ameritech will allow us to execute our national-local strategy to provide
customers wherever they are with competitive telecommunications services,"
Whitacre said. "We also announced the country's largest rollout of Asymmetrical
Digital Subscriber Line (ADSL) - a high-speed Internet access service - at
affordable prices to enable us to seize opportunities in the rapidly growing
data market."
Fourth-quarter 1998 earnings increased 20.0 percent to $1.1 billion before
an extraordinary loss of $60 million, or $0.03 per diluted share, for the early
retirement of debt and one-time costs totaling $433 million ($268 million after
tax, or $0.14 per diluted share) related to initiatives from the merger with
SNET. These results compare with fourth-quarter 1997 earnings of $903 million,
which exclude gains related to the sale of Bellcore and costs related to
strategic initiatives resulting from the merger integration process with Pacific
Telesis Group.
Full-year 1998 earnings increased 19.3 percent to $4.1 billion, before a
directory accounting change at SNET, one-time gains resulting from the sale of
certain non-core businesses, and the fourth-quarter extraordinary loss and
one-time costs related to the SNET merger. Earnings in 1997 were $3.5 billion,
before the impact of several regulatory rulings, settlement gains at Pacific
Telesis Group associated with lump-sum pension payments, the Bellcore gains, and
the costs for strategic initiatives resulting from the Pacific Telesis merger.
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Page 3/SBC Grows Earnings
On a reported basis, SBC's 1998 income before the extraordinary loss and
accounting change was $4.1 billion, or $2.05 per diluted share, compared with
$1.7 billion in 1997. Net income in 1998 was $4.0 billion. Fourth-quarter 1998
income before the extraordinary loss was $816 million, or $0.41 per diluted
share, compared with $642 million during the fourth quarter of 1997.
Fourth-quarter 1998 net income was $756 million.
Highlights of the year and fourth quarter included:
o Data Services: Data services revenues in 1998 increased 32 percent, exceeding
$2.2 billion for the year. Data revenues for the quarter reached $620
million, an increase of 27 percent over the same quarter a year ago,
reflecting strong customer demand for high-speed dedicated and switched
transport services.
o Vertical Services: Vertical services revenues increased nearly 20.0 percent
in 1998 to $1.9 billion, largely driven by SBC's success in marketing Caller
ID. During the year, SBC's subsidiaries added 1.7 million Caller ID
subscribers. In California, residential Caller ID penetration increased to
13.4 percent from 6.4 percent at the end of 1997.
o Access Lines: SBC's wireline operations added 308,000 access lines during
the quarter and 1.5 million during the year, resulting in 1998 access line
growth of 4.3 percent for SBC's switched services. Line growth on a
voice-grade equivalent basis, which includes the impact of both switched
services and non-switched high-speed data services such as DS1s, DS3s, was
9.7 percent during 1998. This growth rate, which will include Asymmetrical
Digital Subscriber Line (ADSL) services in the future, better reflects
total line growth as data services continue to replace traditional switched
access lines.
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Page 4/SBC Grows Earnings
o Wireless Subscribers: SBC's wireless operations added 384,000 net wireless
subscribers during the quarter, including 169,000 PCS customers in California
and Nevada, and 215,000 customers in its other wireless markets. California
and Nevada PCS operations added 469,000 customers during 1998, ending the
year with 809,000 customers, while other wireless operations added 431,000
net customers during 1998. SBC ended 1998 with a total of 6.9 million
wireless customers.
o Directory Revenues: Directory revenues for the fourth quarter increased 13.5
percent to $924 million, largely driven by changes in directory publishing
schedules that resulted in a net shift of revenues and expenses from the
third quarter to the fourth quarter. Revenues for the year increased 4.7
percent to $2.4 billion.
SBC Communications Inc. (www.sbc.com) is a global leader in the
telecommunications industry, with more than 37 million access lines and 6.9
million wireless customers across the United States, as well as investments in
telecommunications businesses in 11 countries. Under the Southwestern Bell,
Pacific Bell, SNET, Nevada Bell and Cellular One brands, SBC, through its
subsidiaries, offers a wide range of innovative services. SBC offers local and
long-distance telephone service, wireless communications, data communications,
paging, Internet access, and messaging, as well as telecommunications equipment,
and directory advertising and publishing. SBC has more than 129,000 employees
and its annual revenues rank it in the top 50 among Fortune 500 companies.
For more detailed information on SBC's fourth quarter results, visit our website
at http://www.sbc.com/Investor/earnings.html.
- Tables attached -
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<TABLE>
SBC Communications Inc.
Financial Summary and Comparisons
(dollars in millions, except per share amounts)
(unaudited)
-- FOURTH-QUARTER RESULTS --
<CAPTION>
EXCLUDING ONE-TIME ITEMS 1998 1997 CHANGE
- ------------------------ ---- ----- ------
<S> <C> <C> <C>
Operating revenues $7,684 $7,114 8.0%
Operating expenses $5,863 5,484 6.9%
Earnings before extraordinary loss $1,084 $903 20.0%
Diluted earnings per share before
extraordinary loss $0.55 $0.46 19.6%
ONE-TIME ITEMS $(268)1 $(261)2 -
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AS REPORTED
- -----------
Operating revenues $7,676 $7,114 7.9%
Operating expenses $6,285 $5,963 5.4%
Income before extraordinary loss $816 $642 27.1%
Extraordinary loss, net of tax $(60)3 - -
Net Income $756 $642 17.8%
Diluted earnings per share before
extraordinary loss $0.41 $0.33 24.2%
Diluted earnings per share $0.38 $0.33 15.2%
Weighted average common
shares outstanding (in millions) 1,957 1,951 0.3%
Weighted average common shares
outstanding with dilution (in millions) 1,987 1,975 0.6%
<FN>
1 Fourth quarter 1998 one-time items totaled $433 million ($268 million after
tax, or $0.14 per share) for costs related to initiatives from the merger with
SNET. These costs include recognition of an impairment of the assets related to
SNET's hybrid fiber coax network, charges for required changes in wireless
equipment inventories and sites, recognition of postemployment benefits,
primarily related to severance, and costs associated with closing down duplicate
operations, primarily contract cancellations. Other charges arising out of the
merger related to relocation, retraining and other effects of consolidating
certain operations will be recognized in the periods those charges are incurred.
2 Fourth quarter 1997 one-time items include gains related to the sale of
Bellcore and one-time costs related to strategic initiatives resulting from the
merger integration process with Pacific Telesis Group.
3 Extraordinary loss associated with the early retirement of debt.
</FN>
</TABLE>
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<TABLE>
SBC Communications Inc.
Financial Summary and Comparisons
(dollars in millions, except per share amounts)
(unaudited)
-- ANNUAL RESULTS --
<CAPTION>
EXCLUDING ONE-TIME ITEMS 1998 1997 CHANGE
- ------------------------ ---- ----- ------
<S> <C> <C> <C>
Operating revenues $28,785 $26,869 7.1%
Operating expenses $21,469 $20,553 4.5%
Earnings before extraordinary loss
and cumulative effect of
accounting change $4,117 $3,450 19.3%
Diluted earnings per share before
extraordinary loss and accounting change $2.08 $1.76 18.2%
ONE-TIME ITEMS $(49)1 $(1,776)2 -
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AS REPORTED
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Operating revenues $28,777 $26,681 7.9%
Operating expenses $21,891 $23,103 (5.2)%
Income before extraordinary loss and
cumulative effect of accounting change $4,068 $1,674 -
Extraordinary loss and cumulative
effect of accounting change, net of tax $(45)3 - -
Net Income $4,023 $1,674 -
Diluted earnings per share before
extraordinary loss and cumulative
and effect of accounting change $2.05 $0.85 -
Diluted earnings per share $2.03 $0.85 -
Weighted average common
shares outstanding (in millions) 1,957 1,945 0.6%
Weighted average common shares
outstanding with dilution (in millions) 1,984 1,962 1.1%
<FN>
1 One-time items in 1998 include:
- - Charges totaling $433 million ($268 million after tax) for costs related to
initiatives from the merger with SNET. These costs include recognition of an
impairment of the assets related to SNET's hybrid fiber coax network, charges
for required changes in wireless equipment inventories and sites, recognition of
postemployment benefits, primarily related to severance, and costs associated
with closing down duplicate operations, primarily contract cancellations. Other
charges arising out of the merger related to relocation, retraining and other
effects of consolidating certain operations will be recognized in the periods
those charges are incurred.
- - Gains during the third quarter totaling $219 million after tax for sales of
certain non-core businesses.
2 One-time items in 1997 include gains related to the sale of Bellcore, costs
related to strategic initiatives resulting from the merger integration process
with Pacific Telesis Group, the impact of several second quarter 1997 regulatory
rulings, and the first quarter 1997 settlement gain at Pacific Telesis Group
associated with lump sum pension payments.
3 Includes an extraordinary loss associated with the early retirement of debt
and impacts of changes in directory accounting at Southern New England Telephone
during the first quarter of 1998.
</FN>
</TABLE>
# # #
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SBC Communications Inc.
/s/ Randall Stephenson
-------------------------
Randall Stephenson
Vice President and Controller
January 21, 1999
