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: October 27, 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
<PAGE>
Item 5. Other Events
Attached as an exhibit is an Investor Briefing issued by SBC Communications Inc.
on October 27, 1999 announcing third quarter earnings and containing unaudited
pro forma combined financial statements reflecting the merger of a subsidiary of
SBC and Ameritech Corporation (Ameritech), which was completed on October 8,
1999. The merger with Ameritech was accounted for as a "pooling of interests"
and, accordingly financial statements for all prior periods have been restated.
Unaudited pro forma financial information is included for December 31, 1996
through September 30, 1999.
Item 7. Financial Statements and Exhibits
23 Consent of Arthur Andersen LLP
99-a October 27, 1999 Investor Briefing - SBC Reports Strong Third Quarter
Earnings
99-b Ameritech Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 1-8612) is incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
Exhibit
Number
23 Consent of Arthur Andersen LLP
99-a October 27, 1999 Investor Briefing - SBC Reports Strong Third Quarter
Earnings
99-b Ameritech Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 1-8612) is incorporated herein by reference.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SBC Communications Inc.
/s/ Donald E. Kiernan
-------------------------
Donald E. Kiernan
Senior Executive Vice President
and Chief Financial Officer
October 29, 1999
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Current Report (Form 8-K) of our reports dated January 21,
1999, included and incorporated by reference in Ameritech Corporation's Annual
Report on Form 10-K for the year ended December 31, 1998, and to all references
to our firm included in this Current Report.
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 29, 1999
EXHIBIT 99-a
SBC Reports Strong Third-Quarter Earnings
EPS increases 20.8 percent to $0.64 on a pre-merger basis,and 16.3 percent
to $0.57 on a pro forma normalized basis,including Ameritech
Data services,wireless operations and international investments drive results
SBC Communications Inc. (NYSE: SBC), which acquired Ameritech on Oct. 8, 1999,
today reported pro forma combined third-quarter results for the two companies.
Diluted earnings per share grew 16.3 percent to $0.57 from $0.49 in the third
quarter last year, while earnings increased 17.4 percent to $2.0 billion from
$1.7 billion, excluding one-time items in both periods. Third-quarter revenues
increased 9.4 percent to $12.5 billion from $11.4 billion last year, before
one-time items.
"These results confirm our confidence that by bringing SBC and Ameritech
together, we have joined two strong businesses capable of performing very well
for our customers and shareowners," said Edward E. Whitacre Jr., SBC chairman
and chief executive officer. "We now have the size and scale necessary to
compete beyond our traditional markets and to become one of the few truly
global, full-service telecommunications providers."
Whitacre noted that SBC has already moved quickly to capitalize on the new
opportunities made possible by the acquisition, including the launch of Project
Pronto, an initiative that will allow SBC to provide high-speed Digital
Subscriber Line (DSL) service to more than 80 percent of its customers by the
end of 2002. The project calls for an investment of $6 billion over the next
three years to transform SBC's local network into a next-generation,
packet-switched, designed-for-the-Internet platform to deliver advanced
broadband services, including always-on, super-fast Internet access. Pronto is
projected to generate $1.5 billion in annual cost savings and $3.5 billion in
new annual revenues within five years.
"Our broadband initiative and national expansion plans are only the first of
many benefits that our customers and shareowners can expect from the new SBC,"
Whitacre said. "We also expect that application of best practices across all
segments of our combined operations will translate into improved top-line
performance, increased operating efficiencies and added value for shareowners.
We are moving forward rapidly with post-merger integration and expect the first
phase of the process to be completed this year."
SBC's normalized consolidated pro forma third-quarter results in both 1999 and
1998 exclude the incremental operating impacts of overlapping wireless
properties sold in the fourth quarter of 1999. Normalized results also exclude
two one-time items. The first is a special charge in the third quarter of 1999
of $883 million, or $0.25 per share, resulting from synchronizing accounting
estimation techniques and valuation assumptions between SBC and Ameritech, and
the impairment of a portion of the accounting goodwill associated with
Ameritech's security business. The second is an after-tax gain in the third
quarter of 1998 of $219 million, or $0.06 per share, from the sale of certain
non-core businesses, principally the required disposition of SBC's investment in
MTN, a cellular company in South Africa.
On a pro forma consolidated basis, reported net income including all one-time
items was $1.1 billion compared with $1.9 billion a year ago, and diluted
earnings per share were $0.33 compared with $0.56 a year ago.
Pro Forma Consolidated Operating Revenues
Normalized third-quarter operating revenues increased 9.4 percent to $12.5
billion compared with $11.4 billion in the third quarter of 1998. Major drivers
of this growth were strong gains in wireless revenues, data services, vertical
calling features and directories.
Wireline segment revenue represents over three-fourths of total SBC revenue and
contributed more than half of SBC's overall revenue growth. Third-quarter
wireline segment revenue was $9.5 billion, up 6.2 percent compared with the
prior-year quarter. Strong data services growth contributed 80 percent of
revenue growth within the segment, driven in part by revenues from the Anixter
and Clover Technologies acquisitions. Vertical services contributed 17 percent
of the growth. These growth drivers were partially offset by the impacts of
intraLATA dialing parity and the continued erosion in public telephone revenues.
Wireless segment revenues, representing approximately 15 percent of total SBC
revenue, contributed 37 percent of overall revenue growth for SBC. Driving this
growth were the continued strong performance by SBC's California PCS operations
and the acquisition of Comcast Cellular Corporation.
Revenues for the Information and Entertainment segment, dominated by directory
operations, grew 11.2 percent. Revenue growth for this segment benefited from
strong results for individual "Yellow Page" directories and the rescheduling of
several books. Ameritech's cable operations also contributed strong revenue
growth.
Pro Forma Consolidated Operations and Support Expenses
SBC's normalized pro forma operations and support expenses were $7.1 billion, an
increase of 8.6 percent compared with the third quarter of 1998. Individual
segment expense growth ranged from a high of 16.6 percent for wireless to 4.4
percent for wireline.
Operations and support expense growth in SBC's wireless operations was primarily
due to specific initiatives designed to fuel growth in the company's still young
PCS operations throughout California, and the fact that year-ago expenses did
not include costs from Comcast's cellular operations.
Information and Entertainment operating and support expenses increased 11.9
percent, largely reflecting start-up expenses at Ameritech's cable television
business and the effects of directory schedule changes.
Operating and support expenses for the wireline segment were positively impacted
by software capitalization and solid expense control, with offsetting increases
in expenses related to DSL market growth and reciprocal compensation payments to
ISP providers.
Discussion of Business Segments' Financial Performance
Wireline Segment (Pro Forma Consolidated)
SBC's pro forma wireline segment revenue grew to $9.5 billion in the third
quarter, up 6.2 percent from the third quarter a year ago. This segment includes
results from SBC's telephone operations including Ameritech, Southwestern Bell,
Pacific Bell, Southern New England Telephone and Nevada Bell. The segment also
includes results from SBC's long-distance, Internet and voice-messaging
businesses.
Landline Local Service Revenue
Third-quarter local service revenues, which make up over half of total revenues
for this segment, grew 12.3 percent compared with the year-ago quarter. This
growth was driven by continued strong demand for data services and vertical
calling features.
The local service growth rate also reflects a reclassification of public
telephone revenue from local service revenue to Other Revenue. As SBC disclosed
last quarter, year-over-year declines in public telephone revenue have dampened
wireline segment revenue growth. This trend continues. This reclassification,
which was applied retroactively, more appropriately moves the issue and
discussion to the Other Revenue section.
Total data service revenues increased more than 43 percent in the quarter to
$1.5 billion, representing over 15 percent of total wireline revenues and more
than 80 percent of revenue growth for the wireline segment. Included in data
revenue, and significantly boosting the growth rate, are the acquired network
integration operations of Anixter and Clover. Excluding these revenues,
year-over-year growth would have been about 30 percent.
Data volumes grew solidly during the quarter. ISDN channels increased 39.1
percent compared with the third quarter of 1998. DS1 channels increased 30.4
percent. DS3 channels increased 28.6 percent, the second highest percentage
increase in the last two years. DS3 revenue increased 36.4 percent compared to
the prior year quarter.
Business voice grade equivalent lines, which combine voice lines and data
connections, grew a strong 17.1 percent. Total voice grade equivalents grew 10.7
percent. These VGE gains are the best in SBC's past two years of combined
results.
In business markets, SBC expects to see a continuing migration from voice access
lines to data circuits and from low-capacity circuits to high-speed data
circuits. SBC has also begun to see a similar trend in consumer markets where
customers are looking for Internet access and work-at-home connections.
Increasingly, in both business and consumer markets, customers are choosing DSL
options for high-speed, always-on connections.
To accelerate growth in data services, SBC embarked early this year on plans to
dramatically increase DSL availability across its local phone operations. SBC is
ahead of schedule in its initiative to make broadband DSL services available to
nearly 10 million customers by year-end. SBC has already sold DSL service to
approximately 100,000 subscribers.
In the fourth quarter, SBC expects to realize additional gains in DSL
subscribers from its marketing alliance with America Online. AOL plans to use
SBC's DSL service to offer a premium upgrade to its members. In addition to this
potentially powerful distribution channel, SBC continues the ramp-up of direct
mail, e-mail, online and mass-media advertising efforts to promote DSL service.
To further accelerate growth in DSL, SBC in October launched a nationwide
alliance to provide high-speed DSL Internet access to thousands of E*TRADE's
most active investors, and announced it will provide as many as 15,000 IBM
telecommuting employees remote access to IBM's corporate network via SBC's
"always-on" DSL service in select areas.
In addition to progress in data, gains in local service revenues also were
driven by growth in vertical services such as Caller ID, voice mail and call
waiting; revenues from these services were up 12.4 percent this quarter compared
with the third quarter a year ago. Voice mailboxes increased more than 16
percent compared with the third quarter of 1998. The encouraging results from
unique vertical service features such as Ameritech's Privacy Manager present
additional revenue growth opportunity when applied to all of SBC's wireline
operations.
The number of features per access line increased 18 percent over the last year
to 1.3. Features per access line growth is a strong indicator of SBC's success
in offering bundles of value-added products to its customers. Product bundling
is a key ingredient in SBC's long-term customer retention strategy. Simple
Solutions, SBC's newest and broadest service bundle, has exceeded early
expectations.
Network Access Revenues
Network access revenues totaled $2.6 billion in the third quarter, up 7.4
percent from the third quarter a year ago. Network access revenue accounts for
about 27 percent of total revenues for the wireline segment.
This line was positively impacted by local number portability (LNP) surcharge
payments totaling nearly $50 million for the quarter. These LNP surcharge
payments were almost completely negated by rate reductions at Pacific Bell and
at Southwestern Bell. Southwestern Bell reduced intrastate access rates in Texas
by 1 cent per minute starting Sept. 1, 1999. A further 2-cent reduction is
planned when Southwestern Bell achieves approval to offer long-distance service
in Texas, or on July 1, 2000, whichever is first. In addition to changes in
access rates, recent Texas legislation gives Southwestern Bell improvements in
pricing and packaging flexibility for both consumer and business markets.
Long-Distance Revenue
Long-distance revenues in the wireline segment totaled $864 million in the third
quarter, down 9.2 percent from a year ago. This line, which represents 9 percent
of the segment's total pro forma combined revenues, reflects competitive impacts
from intraLATA dialing parity in virtually all of SBC's markets.
To date, the revenue loss associated with intraLATA dialing parity has been less
than management estimates, reflecting the success of SBC's customer retention
strategies. These strategies include aggressive deployment of Local-Plus dialing
plans, accelerated deployment of bundling strategies, targeted direct mail
programs and Ameritech's proactive win-back program.
The success of SBC's Local-Plus product has actually accelerated the decline of
long-distance revenue. Local-Plus expands local calling areas and has proven
effective in retaining customers and usage. However, revenues associated with
Local-Plus are included in the local service line. Adjusting for the shift to
local service revenue from Local-Plus and shifts to local service revenue caused
by California rate rebalancing, long distance revenue declined about five
percent, representing the estimated impact from intraLATA dialing parity.
Other Revenue
Other revenues in the wireline segment totaled $1.2 billion in the third
quarter, down 5.5 percent from a year ago. The major driver of the decline in
revenue in this category was the company's public telephone, or coin business.
This revenue was previously categorized in local service revenue, but has been
reclassified to other revenue both historically and prospectively. Revenue from
SBC's public telephone operations declined $55 million compared to last year's
third quarter, with these declines experienced throughout SBC's wireline
operations. The major contributor to the decline in revenue was consumers' use
of wireless phones as an alternative to wireline pay phones. The reduction in
per-call compensation rates also negatively affects coin telephone revenue.
Wireless Segment (Pro Forma Consolidated)
Wireless segment revenues increased 27.1 percent during the third quarter to
$1.9 billion. SBC ended the quarter with 10.3 million domestic wireless
subscribers. SBC now markets wireless services in 119 U.S. markets covering a
total population of 113 million, including nine of the nation's 10 largest
metropolitan areas.
When the impacts of the Comcast acquisition and the divestiture of overlapping
Illinois and Missouri properties in conjunction with the Ameritech acquisition
are excluded from comparisons, SBC added 126,000 wireless subscribers during the
quarter, 1.2 million during the past year, for a 14.3-percent annual growth
rate.
Results at Pacific Bell's PCS operations continue to be very strong, ending the
third quarter with about 1.3 million customers, almost double the total a year
ago. Of special note, Pacific Bell's PCS business turned net-income positive
this quarter, well ahead of original projections.
To deliver high-quality service on a feature-rich platform, SBC continues to
move high-value customers to digital service. More than 3 million of SBC's
wireless customers, 29 percent of SBC's total, now have digital service. That's
up from 14 percent a year ago. More than 60 percent of total wireless network
minutes of use now are digital, up from about 35 percent a year ago.
Average revenue per subscriber for SBC was in the upper-$40 range, down slightly
from the prior year.
Information and Entertainment Segment (Pro Forma Consolidated)
The information and entertainment segment includes SBC's 13-state directory
business, as well as security monitoring operations and Ameritech's cable
television business. The directory business dominates this segment, accounting
for 85 percent of third-quarter revenue. SBC's directory operations produce
842 books annually under the Southwestern Bell, Pacific Bell, Ameritech, SNET
and Nevada Bell brands. Ameritech's cable television operations have 264,000
customers, up 52.6 percent over the past year, and franchises in 113 communities
covering a total population of 4.3 million.
Revenue for the information and entertainment segment grew to $1.1 billion for
the third quarter, up 11.2 percent compared with the prior year. Revenue from
SBC's directory operations grew at a pace consistent with the overall segment,
contributing almost 90 percent of the segment's year-over-year revenue growth.
The rescheduling and extension of numerous directories continues to affect
year-over-year comparisons. Normalizing for these schedule changes, total
segment revenue would have grown about 5 percent.
Operations and support expense for the segment grew to $659 million for the
third quarter, up 11.9 percent compared to the prior year. Excluding the affects
of changes in directory schedules, expenses would have grown 7.4 percent
compared to the prior year quarter reflecting in part Ameritech's cable
television start-up expenses. The electronic security monitoring business
continued to make solid operational progress in the third quarter moving toward
its goal of achieving a 40-percent service margin. Security operations are
focused on expanding the customer base while building more efficient, scalable
customer service platforms.
International Segment (Pro Forma Consolidated)
SBC's broad international holdings continued to make outstanding progress and
contributed more than one-fifth of the company's total normalized third-quarter
pre-tax earnings growth. SBC now has investments in 22 countries beyond the
United States, is the largest non-European investor in European
telecommunications, and has an international portfolio with a current market
value estimated at $22 billion.
SBC's international investments are accounted for primarily in the Equity in Net
Income of Affiliates line, which increased 65 percent in the quarter to $208
million. The 20-percent equity stake in Bell Canada (acquired in the second
quarter of 1999) accounted for about one-third of this growth. SBC's investments
in Telmex and Tele Danmark performed strongly during the quarter, producing more
than one-half of third quarter equity income for the international segment, and
more than 40 percent of the growth in equity income compared with the third
quarter of 1998. Other noteworthy contributors to growth in equity income
included SBC's investments in TransAsia (Taiwan), diAx (Switzerland), SFR
(France) and MATAV (Hungary).
On a proportionate ownership basis, SBC's equity investments serve more than 7
million access lines and almost 3 million wireless subscribers. Normalizing for
acquisitions (i.e., Bell Canada) and dispositions, these access line and
subscriber levels represent year-over-year growth of 4 percent and 72 percent,
respectively.
Pro Forma Consolidated Interest Expense
SBC's normalized interest expense for the third quarter was down 4 percent
compared with the third quarter of 1998. This positive comparison reflects,
among other things, a fourth-quarter 1998 early redemption of $1.3 billion in
long-term debt.
Pro Forma Consolidated Taxes
SBC's normalized effective tax rates for the third quarter and year-to-date 1999
were 36.4 percent and 36.2 percent, respectively. These effective tax rates are
consistent with expectations for the entire year.
Pro Forma Consolidated Capital Expenditures
Year-to-date capital expenditures through the third quarter for pro forma SBC
were $7 billion, an increase of 10.9 percent compared with the first nine months
of 1998. This growth in capital expenditures is consistent with SBC's
stand-alone guidance provided in the second-quarter 1999 earnings Investor
Briefing. As mentioned last quarter, most of the growth in capital expenditures
relates to the impact of software capitalization, incremental spending for DSL
and National-Local deployment, and undersea Asian cable projects. For 1999, SBC
is targeting capital expenditure growth of 11 percent, or approximately $10
billion in total capital expenditures.
As described in the Project Pronto announcement on Oct. 18, 1999, SBC plans to
spend additional capital over the next three years to deploy broadband
capabilities in its network. Project Pronto, including success-based capital
associated with DSL additions, is expected to increase 2000 capital expenditures
by approximately $2.7 billion.
Pre-Merger SBC Earnings
On a stand-alone basis, SBC's third-quarter earnings grew 22.5 percent to $1.3
billion, up from $1.0 billion in the third-quarter 1998 before an after-tax gain
of $219 million related to sales of certain non-core businesses, principally the
required disposition of SBC's MTN investment in South Africa. Diluted earnings
per share was $0.64 for the quarter, up 20.8 percent before one-time items.
Conforming Accounting Adjustments
Consolidated SBC pro forma results include the effect of retroactively
conforming accounting methodologies between SBC and Ameritech. Among other
items, non-cash adjustments were made to conform accounting for pension and
post-retirement benefits between the companies and to immediately expense
certain items previously deferred and amortized by Ameritech, including customer
acquisition costs. The effects of all of these conforming changes decreased
third-quarter 1999 net income by approximately $48 million. Prospectively, these
conforming issues will have the effect of lowering annual pro forma SBC diluted
earnings per share by approximately $0.06.
Overlapping Wireless Properties
Consolidated SBC pro forma results also include a normalizing item related to
the incremental impacts of overlapping wireless properties sold in the fourth
quarter of 1999. These operational impacts are normalized in prior periods in
order to make these periods comparable to post-disposition periods.
Prospectively, SBC diluted earnings per share will be approximately $0.05 lower
because of the disposition of overlapping wireless properties.
Pro Forma Earnings Guidance
SBC is anticipating normalized diluted earnings per share for fourth quarter of
1999 to be in the range of $0.50 to $0.54, and SBC's full year diluted earnings
per share to be in the range of $2.12 to $2.17. For 2000, SBC is targeting
mid-single digit growth in normalized diluted earnings per share, or a range of
$2.20 to $2.30.
These near-term expectations for both the fourth quarter and 2000 include the
effects of SBC's principal growth initiatives - accelerated ramp-up of the
National-Local strategy and accelerated roll-out of our DSL offering as part of
Project Pronto. The acceleration of National-Local, coupled with other
conditions associated with Ameritech merger approval, is expected to reduce 2000
earnings by approximately $0.10. The overall earnings dilution associated with
DSL and other revenue opportunities from Project Pronto is about $0.06 to $0.08
in 2000.
These growth initiatives are clearly the right thing to do from a value-creation
perspective. Project Pronto alone is projected to create $10 billion dollars of
value on an NPV basis. And, driven by these initiatives, SBC's goal is to
achieve year-over-year revenue growth of 10 percent or more, and earnings growth
of 15 percent or better beginning in 2001.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this Investor Briefing contains financial estimates and
other forward-looking statements that are subject to risks and uncertainties.
A discussion of factors that may affect future results is contained in SBC's
filings with the Securities and Exchange Commission. SBC disclaims any
obligation to update or revise statements contained in this Investor Briefing
based on new information or otherwise.
SBC Refines Segments, Makes Other Changes in Financial Statements
In conjunction with the Ameritech acquisition, SBC has implemented a number of
changes in its financial statements:
o Results reflect the Ameritech acquisition as a pooling of interests and
include conforming accounting adjustments. Specifically, combined pro
forma results include the effect of retroactively conforming accounting
methodologies between SBC and Ameritech. Among other items, non-cash
adjustments were made to conform accounting for pension and
post-retirement benefits between the two companies and to immediately
expense certain items routinely deferred and amortized by Ameritech,
including customer acquisition costs. The effects of all of these
conforming changes decreased third quarter 1999 net income by
approximately $48 million and increased third quarter 1998 net income
by $19 million.
o To better reflect the broadened scope of its operations, SBC has adjusted
its segment reporting structure, announced at the beginning of 1999. SBC
now reports results for four segments: Wireline, Wireless, Information and
Entertainment, and International. These segments build on our previous
reporting structure with two significant changes.
The most important change is designed to provide a clearer picture of
results from our extensive international holdings. The International
segment replaces the Other segment and includes only our holdings in 22
countries beyond the United States - in Europe, Asia, Africa and the
Americas. Miscellaneous items that formerly were included with our
international investments in the Other segment have been moved to
Corporate, Adjustments, and Eliminations.
Second, a new segment called Information and Entertainment expands on what
we formerly called the Directory segment. This new segment contains all
operations that were formerly in the Directory segment plus our electronic
security business along with Ameritech's cable television operations.
A detailed outline of SBC's reporting segments and revenue lines is on
page 11.
o We also have reclassified a number of items within segments including
moving pay phone revenues to Other from Landline local service and moving
wireless out-collect roaming revenues from Wireless Subscriber Revenue to
Other Revenue. The reclassifications have no net income impact.
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<TABLE>
<CAPTION>
Segment Definitions
- -----------------------------------------------------------------------------------
<S> <C>
Wireline Segment
Provides landline telecommunications services including: Revenue Line
Exchange access lines, including resold lines
Vertical services, including voice messaging Local Service
Local data transport services including Asymmetrical
Digital Subscriber Line (ADSL)
- -----------------------------------------------------------------------------------
Usage-based switched access
Dedicated transport for special access
Access line related charges, e.g., Subscriber Line
Charges (SLC), Presubscribed Interexchange Carrier Network Access
Charges (PICC)
Net Federal Universal Service Fund (USF) activity
Wireless Interconnection revenues
- -----------------------------------------------------------------------------------
Intralata toll traffic Long-Distance Service
Interlata long-distance voice and data services
provided to Connecticut customers
- -----------------------------------------------------------------------------------
Public (coin) telephone services
Consumer customer premise equipment
Business systems
Network integration
Internet access Other
Inside wire maintenance contracts
Billing and collection agreements
Enhanced consumer white-page listings
- -----------------------------------------------------------------------------------
Wireless Segment
Provides domestic wireless services including: Revenue Line
Cellular and PCS local, long-distance, in-collect
roaming services and paging Subscriber Revenues
Out-collect roaming revenues Other Revenues
Cellular and PCS handsets
- -----------------------------------------------------------------------------------
Information and Entertainment Segment
Provides directory-related, security monitoring and cable Revenue Line
services including:
Selling and publishing yellow-pages advertising
Publishing white-page directories
Selling enhanced business white-pages listings Operating Revenues
Providing non-directory-related advertising, e.g.,
Internet services, coupon, design, production and
distribution
Providing security monitoring equipment installation
and services
Providing cable TV programming and services
- -----------------------------------------------------------------------------------
International Segment
Includes: Income Statement Line
International Operations Various lines, including Equity
in Net Income of Affiliates
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE OF CONTENTS
THIRD-QUARTER AND NINE-MONTHS COMPARATIVE ANALYSIS
Pro Forma Consolidated Statements of Income - Normalized
Pro Forma Consolidated Statements of Income - By Segment
Pro Forma Supplementary Financial and Operating Data
Pro Forma Consolidated Statements of Income
Pro Forma Consolidated Balance Sheets
Pro Forma Consolidated Statements of Cash Flows
Pre-Merger Consolidated Statements of Income - Normalized
Pre-Merger Consolidated Statements of Income
Pre-Merger Consolidated Balance Sheets
Pre-Merger Consolidated Statements of Cash Flows
RESTATED PRO FORMA ANALYSIS 1999-1996
Pro Forma Consolidated Statements of Income - Normalized
Pro Forma Consolidated Statements of Income - Wireline Segment
Pro Forma Consolidated Statements of Income - Wireless Segment
Pro Forma Consolidated Statements of Income - Information and
Entertainment Segment
Pro Forma Consolidated Statements of Income - International Segment
Pro Forma Supplementary Financial and Operating Data
Pro Forma Consolidated Statements of Income
Pro Forma Consolidated Balance Sheets
Pro Forma Consolidated Statements of Cash Flows
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------------------------
Supplemental Pro Forma Consolidated Statements of Income - Normalized
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------------------------
<CAPTION>
Unaudited Three Months Ended Nine Months Ended
-------------------------- --------------------------
9/30/99 9/30/98 % Chg 9/30/99 9/30/98 % Chg
- ------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $ 4,903 $ 4,362 12.4% $ 14,172 $ 12,795 10.8%
Wireless subscriber 1,525 1,222 24.8% 4,032 3,508 14.9%
Network access 2,552 2,382 7.1% 7,613 7,164 6.3%
Long distance service 860 949 -9.4% 2,658 2,773 -4.1%
Directory advertising 926 868 6.7% 2,746 2,588 6.1%
Other 1,684 1,598 5.4% 4,843 4,544 6.6%
- ------------------------------------------------------------------- --------------------------
Total Operating Revenues 12,450 11,381 9.4% 36,064 33,372 8.1%
- ------------------------------------------------------------------- --------------------------
Operating Expenses
Operations and support 7,125 6,562 8.6% 20,765 19,158 8.4%
- ------------------------------------------------------------------- --------------------------
EBITDA * 5,325 4,819 10.5% 15,299 14,214 7.6%
- ------------------------------------------------------------------- --------------------------
Depreciation and amortization 2,083 1,891 10.2% 5,966 5,585 6.8%
- ------------------------------------------------------------------- --------------------------
Total Operating Expenses 9,208 8,453 8.9% 26,731 24,743 8.0%
- ------------------------------------------------------------------- --------------------------
Operating Income 3,242 2,928 10.7% 9,333 8,629 8.2%
- ------------------------------------------------------------------- --------------------------
Interest Expense 364 379 -4.0% 1,058 1,209 -12.5%
- ------------------------------------------------------------------- --------------------------
Equity in Net Income of Affiliates 220 134 64.2% 574 441 30.2%
- ------------------------------------------------------------------- --------------------------
Other Income (Expense) - Net 1 (58) - (85) (163) -47.9%
- ------------------------------------------------------------------- --------------------------
Income Before Income Taxes and
Cumulative Effect of Accounting Change 3,099 2,625 18.1% 8,764 7,698 13.8%
- ------------------------------------------------------------------- --------------------------
Income Taxes 1,128 946 19.2% 3,176 2,798 13.5%
- ------------------------------------------------------------------- --------------------------
Income Before Cumulative Effect of
Accounting Change 1,971 1,679 17.4% 5,588 4,900 14.0%
- ------------------------------------------------------------------- --------------------------
Cumulative Effect of Accounting
Change, net of tax - - - 207 15 -
- ------------------------------------------------------------------- --------------------------
Net Income $ 1,971 $ 1,679 17.4% $ 5,795 $ 4,915 17.9%
=================================================================== ==========================
Basic Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.58 $ 0.49 18.4% $ 1.64 $ 1.44 13.9%
Net Income $ 0.58 $ 0.49 18.4% $ 1.70 $ 1.44 18.1%
Diluted Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.57 $ 0.49 16.3% $ 1.62 $ 1.42 14.1%
Net Income $ 0.57 $ 0.49 16.3% $ 1.68 $ 1.43 17.5%
- ------------------------------------------------------------------- --------------------------
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
<FN>
Normalized 1999 results excluded the following special items:
1Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($39)
-- Reduction of a charge to cover the cost of consolidating security
monitoring centers and company-owned cellular retail stores ($27)
2Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($28)
3Q -- Costs related to synchronizing accounting estimation techniques and
valuation assumptions and the impairment of a portion of the
accounting goodwill associated with Ameritech's security business $883
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($47)
Normalized 1998 results excluded the following special items:
1Q -- Charge to cover the cost of consolidating security monitoring centers and
company-owned cellular retail stores $64
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($19)
2Q -- Gain on sale of Telecom Corp of New Zealand (TCNZ) shares ($1,012)
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($30)
3Q -- Gains on sales of certain non-core businesses, principally the required
disposition of SBC's interest in Mobile Telephone Networks (MTN), a South
African national cellular company, due to SBC's investment in Telkom
SA Limited (Telkom) ($219)
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($28)
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ------------------------------------------------------------------------------------
Supplemental Pro Forma Consolidated Statements of Income - Normalized
Dollars in millions
- ------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Nine Months Ended
----------------------- --------------------------
Wireline 9/30/99 9/30/98 % Chg 9/30/99 9/30/98 % Chg
- ------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Local service $ 4,913 $ 4,375 12.3% $ 14,204 $ 12,775 11.2%
Network access 2,571 2,394 7.4% 7,675 7,243 6.0%
Long distance service 864 952 -9.2% 2,669 2,778 -3.9%
Other 1,196 1,265 -5.5% 3,551 3,555 -0.1%
- ------------------------------------------------------- --------------------------
Total Operating Revenues 9,544 8,986 6.2% 28,099 26,351 6.6%
- ------------------------------------------------------- --------------------------
Operating Expenses
Operations and support 5,354 5,126 4.4% 15,662 14,816 5.7%
- ------------------------------------------------------- --------------------------
EBITDA * 4,190 3,860 8.5% 12,437 11,535 7.8%
- ------------------------------------------------------- --------------------------
Depreciation and amortization 1,726 1,629 6.0% 5,052 4,787 5.5%
- ------------------------------------------------------- --------------------------
Total Operating Expenses 7,080 6,755 4.8% 20,714 19,603 5.7%
- ------------------------------------------------------- --------------------------
Operating Income 2,464 2,231 10.4% 7,385 6,748 9.4%
- ------------------------------------------------------- --------------------------
Interest Expense 291 311 -6.4% 877 928 -5.5%
- ------------------------------------------------------- --------------------------
Other Income (Expense) - Net 20 8 - 67 14 -
- ------------------------------------------------------- --------------------------
Income Before Income Taxes $ 2,193 $ 1,928 13.7% $ 6,575 $ 5,834 12.7%
======================================================= ==========================
Wireless
- ------------------------------------------------------- --------------------------
Operating Revenues
Subscriber Revenues $ 1,506 $ 1,221 23.3% $ 4,013 $ 3,508 14.4%
Other 355 243 46.1% 911 652 39.7%
- ------------------------------------------------------- --------------------------
Total Operating Revenues 1,861 1,464 27.1% 4,924 4,160 18.4%
- ------------------------------------------------------- --------------------------
Operating Expenses
Operations and support 1,178 1,010 16.6% 3,303 2,952 11.9%
- ------------------------------------------------------- --------------------------
EBITDA * 683 454 50.4% 1,621 1,208 34.2%
- ------------------------------------------------------- --------------------------
Depreciation and amortization 255 176 44.9% 625 521 20.0%
- ------------------------------------------------------- --------------------------
Total Operating Expenses 1,433 1,186 20.8% 3,928 3,473 13.1%
- ------------------------------------------------------- --------------------------
Operating Income 428 278 54.0% 996 687 45.0%
- ------------------------------------------------------- --------------------------
Interest Expense 65 47 38.3% 149 144 3.5%
- ------------------------------------------------------- --------------------------
Equity in Net Income of
Affiliates 12 9 33.3% 28 19 47.4%
- ------------------------------------------------------- --------------------------
Other Income (Expense) - Net (56) (64)-12.5% (153) (153) -
- ------------------------------------------------------- --------------------------
Income Before Income Taxes $ 319 $ 176 81.3% $ 722 $ 409 76.5%
======================================================= ==========================
Information and Entertainment
- ------------------------------------------------------- --------------------------
Operating Revenues $ 1,071 $ 963 11.2% $ 3,132 $ 2,891 8.3%
- ------------------------------------------------------- --------------------------
Operating Expenses
Operations and support 659 589 11.9% 2,022 1,766 14.5%
- ------------------------------------------------------- --------------------------
EBITDA * 412 374 10.2% 1,110 1,125 -1.3%
- ------------------------------------------------------- --------------------------
Depreciation and amortization 49 53 -7.5% 141 146 -3.4%
- ------------------------------------------------------- --------------------------
Total Operating Expenses 708 642 10.3% 2,163 1,912 13.1%
- ------------------------------------------------------- --------------------------
Operating Income 363 321 13.1% 969 979 -1.0%
- ------------------------------------------------------- --------------------------
Interest Expense 13 10 30.0% 37 30 23.3%
- ------------------------------------------------------- --------------------------
Other Income (Expense) - Net 2 2 - 8 6 33.3%
- ------------------------------------------------------- --------------------------
Income Before Income Taxes $ 352 $ 313 12.5% $ 940 $ 955 -1.6%
======================================================= ==========================
International
- ------------------------------------------------------- --------------------------
Operating Revenues $ 49 $ 30 63.3% $ 138 $ 114 21.1%
- ------------------------------------------------------- --------------------------
Operating Expenses 64 43 48.8% 170 136 25.0%
- ------------------------------------------------------- --------------------------
Operating Income (Loss) (15) (13) 15.4% (32) (22) 45.5%
- ------------------------------------------------------- --------------------------
Interest Expense 68 74 -8.1% 236 203 16.3%
- ------------------------------------------------------- --------------------------
Equity in Net Income of
Affiliates 208 126 65.1% 546 423 29.1%
- ------------------------------------------------------- --------------------------
Other Income (Expense) - Net 24 5 - 222 88 -
- ------------------------------------------------------- --------------------------
Income Before Income Taxes $ 149 $ 44 - $ 500 $ 286 74.8%
======================================================= ==========================
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------------------
Pro Forma Supplementary Financial and Operating Data
Dollars in millions except per share amounts
- --------------------------------------------------------------------------------------------
<CAPTION>
Unaudited Three Months Ended Nine Months Ended
-------------------------- ----------------------------
9/30/99 9/30/98 % Chg 9/30/99 9/30/98 % Chg
- ------------------------------------------------------------- ----------------------------
Analytical and Operating Information
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditures $ 2,523 $ 2,195 14.9% $ 7,006 $ 6,317 10.9%
Capital Expenditures - Wireline $ 2,123 $ 1,936 9.7% $ 5,996 $ 5,363 11.8%
Capital Expenditures - Wireless $ 323 $ 162 99.4% $ 738 $ 659 12.0%
Dividends Declared Per Share 1 $ 0.24375 $ 0.23375 4.3% $ 0.73125 $ 0.70125 4.3%
Weighted Average Common
Shares Outstanding (000,000) 3,414 3,406 0.2% 3,411 3,406 0.1%
Weighted Average Common Shares
Outstanding With Dilution (000,000) 3,463 3,447 0.5% 3,461 3,448 0.4%
End of Period Common Shares
Outstanding (000,000) 3,413 3,405 0.2%
Debt Ratio 47.54% 49.08% -154 BP
Total Employees 203,270 199,750 1.8%
Access Lines Served (000) 60,218 58,423 3.1%
Residence 37,123 36,207 2.5%
Business 22,322 21,433 4.1%
Other 773 783 -1.3%
Voice Grade Equivalents (000) 87,269 78,826 10.7%
Residence 37,509 36,213 3.6%
Business 48,987 41,830 17.1%
Other 773 783 -1.3%
Resold Lines (000) 1,484 1,222 21.4%
Access Minutes of Use (000,000) 67,013 63,001 6.4% 196,393 184,066 6.7%
Domestic Wireless Operations 2
- -----------------------------
Wireless Customers (000) 10,311 8,268 24.7% 10,311 8,268 24.7%
Net Adds (000) 988 194 - 1,625 712 -
POPs (000,000) 113 104 8.7% 113 104 8.7%
SBC International
- -----------------------------
Total customers of SBC International's affiliates
Access Lines (000) 3, 6 37,923 25,442 49.1%
Wireless-Consolidated (000): 4
Subscribers 375 - -
Net Adds 375 - -
Wireless-Equity Owned (000): 5
Subscribers 18,091 9,161 97.5%
Net Adds 7,842 3,916 -
Video Subscribers (000) 6 1,274 1,610 -20.9%
SBC's proportionate interest of SBC International's affiliates
Access Lines (000) 3, 6 7,261 4,841 50.0%
Wireless-Equity Owned (000): 5
Subscribers 2,793 1,495 86.8%
Net Adds 1,153 769 49.9%
Video Subscribers (000) 6 567 672 -15.6%
<FN>
1 Dividends declared by SBC's Board of Directors; these amounts do not include
dividends declared and paid by Ameritech Corporation and Southern New
England Telecommunications Corporation prior to their respective mergers
with SBC.
2 All periods exclude overlapping cellular properties sold in October 1999,
and 1999 includes approximately 862,000 customers related to Comcast
Cellular Corporation acquired in July 1999.
3 1999 includes nearly 11 million access lines from SBC's investments in Bell
Canada acquired in May 1999.
4 Amounts related to the acquisition of Cellular Communications of Puerto Rico
in August 1999.
5 1999 includes approximately 1.6 million subscribers from SBC's investments
in Bell Canada acquired in May 1999.
6 1998 includes customer amounts related to SBC's investments in Chile sold in
June 1999.
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ---------------------------------------------------------------------------------------------
Supplemental Pro Forma Consolidated Statements of Income
Dollars in millions except per share amounts
- ---------------------------------------------------------------------------------------------
<CAPTION>
Unaudited Three Months Ended Nine Months Ended
-------------------------- -------------------------
9/30/99 9/30/98 % Chg 9/30/99 9/30/98 % Chg
- ------------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $ 4,843 $ 4,362 11.0% $ 14,112 $ 12,795 10.3%
Wireless subscriber 1,706 1,408 21.2% 4,564 4,056 12.5%
Network access 2,535 2,382 6.4% 7,596 7,164 6.0%
Long distance service 860 949 -9.4% 2,658 2,773 -4.1%
Directory advertising 926 868 6.7% 2,746 2,588 6.1%
Other 1,664 1,637 1.6% 4,916 4,666 5.4%
- ------------------------------------------------------------------ -------------------------
Total Operating Revenues 12,534 11,606 8.0% 36,592 34,042 7.5%
- ------------------------------------------------------------------ -------------------------
Operating Expenses
Operations and support 7,629 6,696 13.9% 21,474 19,685 9.1%
- ------------------------------------------------------------------ -------------------------
EBITDA * 4,905 4,910 -0.1% 15,118 14,357 5.3%
- ------------------------------------------------------------------ -------------------------
Depreciation and amortization 2,443 1,916 27.5% 6,378 5,661 12.7%
- ------------------------------------------------------------------ -------------------------
Total Operating Expenses 10,072 8,612 17.0% 27,852 25,346 9.9%
- ------------------------------------------------------------------ -------------------------
Operating Income 2,462 2,994 -17.8% 8,740 8,696 0.5%
- ------------------------------------------------------------------ -------------------------
Interest Expense 365 383 -4.7% 1,069 1,223 -12.6%
- ------------------------------------------------------------------ -------------------------
Equity in Net Income of Affiliates 220 134 64.2% 574 441 30.2%
- ------------------------------------------------------------------ -------------------------
Other Income (Expense) - Net (29) 292 - (129) 1,721 -
- ------------------------------------------------------------------ -------------------------
Income Before Income Taxes and
Cumulative Effect of Accounting Change 2,288 3,037 -24.7% 8,116 9,635 -15.8%
- ------------------------------------------------------------------ -------------------------
Income Taxes 1,153 1,111 3.8% 3,270 3,491 -6.3%
- ------------------------------------------------------------------ -------------------------
Income Before Cumulative Effect of
Accounting Change 1,135 1,926 -41.1% 4,846 6,144 -21.1%
- ------------------------------------------------------------------ -------------------------
Cumulative Effect of Accounting
Change, net of tax - - - 207 15 -
- ------------------------------------------------------------------ -------------------------
Net Income $ 1,135 $ 1,926 -41.1% $ 5,053 $ 6,159 -18.0%
================================================================== =========================
Basic Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.33 $ 0.57 -42.1% $ 1.42 $ 1.80 -21.1%
Net Income $ 0.33 $ 0.57 -42.1% $ 1.48 $ 1.81 -18.2%
Diluted Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.33 $ 0.56 -41.1% $ 1.40 $ 1.78 -21.3%
Net Income $ 0.33 $ 0.56 -41.1% $ 1.46 $ 1.79 -18.4%
- ------------------------------------------------------------------ -------------------------
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- -------------------------------------------------------------------------------
Supplemental Pro Forma Consolidated Balance Sheets
Dollars in millions except per share amounts
- -------------------------------------------------------------------------------
<CAPTION>
Unaudited 09/30/99 12/31/98
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 532 $ 599
Accounts receivable - net of allowances
for uncollectibles of $1,043 and $810 8,903 9,783
Prepaid expenses 868 843
Deferred income taxes 922 685
Other current assets 752 787
- -------------------------------------------------------------------------------
Total current assets 11,977 12,697
- -------------------------------------------------------------------------------
Property, Plant and Equipment - at cost 115,375 109,778
Less: Accumulated depreciation and amortization 69,335 65,584
- -------------------------------------------------------------------------------
Property, Plant and Equipment - Net 46,040 44,194
- -------------------------------------------------------------------------------
Intangible Assets - Net of Accumulated
Amortization of $1,308 and $1,111 7,197 5,161
Investments in Equity Affiliates 10,632 7,412
Other Assets 6,000 5,517
- -------------------------------------------------------------------------------
Total Assets $ 81,846 $ 74,981
===============================================================================
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 6,424 $ 4,178
Accounts payable and accrued liabilities 10,292 10,642
Accrued taxes 2,509 2,611
Dividends payable 831 809
- -------------------------------------------------------------------------------
Total current liabilities 20,056 18,240
- -------------------------------------------------------------------------------
Long-Term Debt 17,418 17,170
- -------------------------------------------------------------------------------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 4,933 2,861
Postemployment benefit obligation 9,265 9,193
Unamortized investment tax credits 410 474
Other noncurrent liabilities 3,456 3,269
- -------------------------------------------------------------------------------
Total deferred credits and other
noncurrent liabilities 18,064 15,797
- -------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable
preferred securities of subsidiary trusts 1,000 1,000
- -------------------------------------------------------------------------------
Shareowners' Equity
Common shares issued ($1 par value) 3,433 3,434
Capital in excess of par value 12,430 12,439
Retained earnings 11,518 8,948
Guaranteed obligations of employee stock
ownership plans (128) (261)
Deferred Compensation - LESOP (78) (82)
Treasury shares (at cost) (692) (882)
Accumulated other comprehensive income (1,175) (822)
- -------------------------------------------------------------------------------
Total shareowners' equity 25,308 22,774
- -------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity $ 81,846 $ 74,981
===============================================================================
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------
Supplemental Pro Forma Consolidated Statement of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
- --------------------------------------------------------------------------
<CAPTION>
Unaudited Nine months ended
9/30/99 9/30/98
- --------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 5,053 $ 6,159
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,378 5,661
Undistributed earnings from investments
in equity affiliates (343) (108)
Provision for uncollectible accounts 824 629
Amortization of investment tax credits (64) (73)
Deferred income tax expense 662 482
Gain on sale of TCNZ shares - (1,543)
Cumulative effect of accounting change,
net of tax (207) (15)
Other - net (397) (1,415)
- --------------------------------------------------------------------------
Total adjustments 6,853 3,618
- --------------------------------------------------------------------------
Net Cash Provided by Operating Activities 11,906 9,777
- --------------------------------------------------------------------------
Investing Activities
Construction and capital expenditures (7,006) (6,317)
Investments in affiliates (32) (48)
Purchase of short-term investments (26) (41)
Proceeds from short-term investments 6 324
Dispositions 1,448 2,316
Acquisitions (4,792) (3,182)
Other 2 6
- --------------------------------------------------------------------------
Net Cash Used in Investing Activities (10,400) (6,942)
- --------------------------------------------------------------------------
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less 2,214 (1,759)
Issuance of other short-term borrowings - 2
Repayment of other short-term borrowings - (8)
Issuance of long-term debt 738 2,880
Repayment of long-term debt (2,140) (1,341)
Issuance of common shares - 57
Issuance of preferred shares in subsidiaries 3 322
Purchase of treasury shares (428) (630)
Issuance of treasury shares 504 515
Dividends paid (2,464) (2,339)
- --------------------------------------------------------------------------
Net Cash Used in Financing Activities (1,573) (2,301)
- --------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (67) 534
- --------------------------------------------------------------------------
Cash and cash equivalents beginning of year 599 649
- --------------------------------------------------------------------------
Cash and Cash Equivalents End of Period $ 532 $ 1,183
==========================================================================
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------------------------
Consolidated Statements of Income - Normalized
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------------------------
<CAPTION>
Unaudited Three Months Ended Nine Months Ended
---------------------------- ---------------------------
9/30/99 9/30/98 % Chg 9/30/99 9/30/98 % Chg
- ----------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $ 2,940 $ 2,832 3.8% $ 8,667 $ 8,291 4.5%
Wireless subscriber 1,299 975 33.2% 3,391 2,797 21.2%
Network access 1,713 1,614 6.1% 5,116 4,861 5.2%
Long distance service 522 608 -14.1% 1,631 1,791 -8.9%
Directory advertising 546 503 8.5% 1,537 1,489 3.2%
Other 745 684 8.9% 2,135 1,872 14.0%
- ----------------------------------------------------------------- ---------------------------
Total Operating Revenues 7,765 7,216 7.6% 22,477 21,101 6.5%
- ----------------------------------------------------------------- ---------------------------
Operating Expenses
Operations and support 4,280 4,072 5.1% 12,532 11,929 5.1%
- ----------------------------------------------------------------- ---------------------------
EBITDA * 3,485 3,144 10.8% 9,945 9,172 8.4%
- ----------------------------------------------------------------- ---------------------------
Depreciation and amortization 1,378 1,241 11.0% 3,898 3,677 6.0%
- ----------------------------------------------------------------- ---------------------------
Total Operating Expenses 5,658 5,313 6.5% 16,430 15,606 5.3%
- ----------------------------------------------------------------- ---------------------------
Operating Income 2,107 1,903 10.7% 6,047 5,495 10.0%
- ----------------------------------------------------------------- ---------------------------
Interest Expense 205 244 -16.0% 641 760 -15.7%
- ----------------------------------------------------------------- ---------------------------
Equity in Net Income of Affiliates 97 55 76.4% 251 181 38.7%
- ----------------------------------------------------------------- ---------------------------
Other Income (Expense) - Net 6 (71) - (74) (149) -50.3%
- ----------------------------------------------------------------- ---------------------------
Income Before Income Taxes and Cumulative
Effect of Accounting Change 2,005 1,643 22.0% 5,583 4,767 17.1%
- ----------------------------------------------------------------- ---------------------------
Income Taxes 727 600 21.2% 2,014 1,734 16.1%
- ----------------------------------------------------------------- ---------------------------
Income Before Cumulative Effect of
Accounting Change 1,278 1,043 22.5% 3,569 3,033 17.7%
- ----------------------------------------------------------------- ---------------------------
Cumulative Effect of Accounting
Change, net of tax - - - - 15 -
- ----------------------------------------------------------------- ---------------------------
Net Income $ 1,278 $ 1,043 22.5% $ 3,569 $ 3,048 17.1%
================================================================= ===========================
Basic Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.65 $ 0.53 22.6% $ 1.82 $ 1.55 17.4%
Net Income $ 0.65 $ 0.53 22.6% $ 1.82 $ 1.56 16.7%
Diluted Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.64 $ 0.53 20.8% $ 1.79 $ 1.53 17.0%
Net Income $ 0.64 $ 0.53 20.8% $ 1.79 $ 1.54 16.2%
- ----------------------------------------------------------------- ---------------------------
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
<FN>
Normalized 1998 results excluded the following special items:
3Q -- Gains on sales of certain non-core businesses, principally the required
disposition of SBC's interest in Mobile Telephone Networks (MTN), a South
African national cellular company, due to SBC's investment in Telkom
SA Limited (Telkom) ($219)
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- -----------------------------------------------------------------------------------------------
Consolidated Statements of Income
Dollars in millions except per share amounts
- -----------------------------------------------------------------------------------------------
<CAPTION>
Unaudited Three Months Ended Nine Months Ended
------------------------ -------------------------
9/30/99 9/30/98 % Chg 9/30/99 9/30/98 % Chg
- -------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $ 2,940 $ 2,832 3.8% $ 8,667 $ 8,291 4.5%
Wireless subscriber 1,299 975 33.2% 3,391 2,797 21.2%
Network access 1,713 1,614 6.1% 5,116 4,861 5.2%
Long distance service 522 608 -14.1% 1,631 1,791 -8.9%
Directory advertising 546 503 8.5% 1,537 1,489 3.2%
Other 745 684 8.9% 2,135 1,872 14.0%
- -------------------------------------------------------------------- -------------------------
Total Operating Revenues 7,765 7,216 7.6% 22,477 21,101 6.5%
- -------------------------------------------------------------------- -------------------------
Operating Expenses
Operations and support 4,280 4,072 5.1% 12,532 11,929 5.1%
- -------------------------------------------------------------------- -------------------------
EBITDA * 3,485 3,144 10.8% 9,945 9,172 8.4%
- -------------------------------------------------------------------- -------------------------
Depreciation and amortization 1,378 1,241 11.0% 3,898 3,677 6.0%
- -------------------------------------------------------------------- -------------------------
Total Operating Expenses 5,658 5,313 6.5% 16,430 15,606 5.3%
- -------------------------------------------------------------------- -------------------------
Operating Income 2,107 1,903 10.7% 6,047 5,495 10.0%
- -------------------------------------------------------------------- -------------------------
Interest Expense 205 244 -16.0% 641 760 -15.7%
- -------------------------------------------------------------------- -------------------------
Equity in Net Income of Affiliates 97 55 76.4% 251 181 38.7%
- -------------------------------------------------------------------- -------------------------
Other Income (Expense) - Net 6 287 - (74) 209 -
- -------------------------------------------------------------------- -------------------------
Income Before Income Taxes and Cumulative
Effect of Accounting Change 2,005 2,001 0.2% 5,583 5,125 8.9%
- -------------------------------------------------------------------- -------------------------
Income Taxes 727 739 -1.6% 2,014 1,873 7.5%
- -------------------------------------------------------------------- -------------------------
Income Before Cumulative Effect
of Accounting Change 1,278 1,262 1.3% 3,569 3,252 9.7%
- -------------------------------------------------------------------- -------------------------
Cumulative Effect of Accounting
Change, net of tax - - - - 15 -
- -------------------------------------------------------------------- -------------------------
Net Income $ 1,278 $ 1,262 1.3% $ 3,569 $ 3,267 9.2%
==================================================================== =========================
Basic Earnings Per Share:
Income Before Cumulative Effect
of Accounting Change $ 0.65 $ 0.65 - $ 1.82 $ 1.66 9.6%
Net Income $ 0.65 $ 0.65 - $ 1.82 $ 1.67 9.0%
Diluted Earnings Per Share:
Income Before Cumulative Effect
of Accounting Change $ 0.64 $ 0.64 - $ 1.79 $ 1.64 9.1%
Net Income $ 0.64 $ 0.64 - $ 1.79 $ 1.65 8.5%
- -------------------------------------------------------------------- -------------------------
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
Dollars in millions except per share amounts
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited 09/30/99 12/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 267 $ 460
Accounts receivable - net of allowances for
uncollectibles of $487 and $472 5,524 5,790
Prepaid expenses 628 414
Deferred income taxes 663 489
Other current assets 451 385
- --------------------------------------------------------------------------------
Total current assets 7,533 7,538
- --------------------------------------------------------------------------------
Property, Plant and Equipment - at cost 76,832 73,466
Less: Accumulated depreciation and amortization 45,635 43,546
- --------------------------------------------------------------------------------
Property, Plant and Equipment - Net 31,197 29,920
- --------------------------------------------------------------------------------
Intangible Assets - Net of Accumulated
Amortization of $893 and $741 5,758 3,087
Investments in Equity Affiliates 2,510 2,514
Other Assets 2,138 2,007
- --------------------------------------------------------------------------------
Total Assets $ 49,136 $ 45,066
================================================================================
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $2,622 $1,551
Accounts payable and accrued liabilities 6,332 6,774
Accrued taxes 1,809 1,206
Dividends payable 480 458
- --------------------------------------------------------------------------------
Total current liabilities 11,243 9,989
- --------------------------------------------------------------------------------
Long-Term Debt 11,266 11,612
- --------------------------------------------------------------------------------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 2,745 1,990
Postemployment benefit obligation 5,117 5,220
Unamortized investment tax credits 311 359
Other noncurrent liabilities 2,170 2,116
- --------------------------------------------------------------------------------
Total deferred credits and other
noncurrent liabilities 10,343 9,685
- --------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable
preferred securities of subsidiary trusts 1,000 1,000
- --------------------------------------------------------------------------------
Shareowners' Equity
Common shares issued ($1 par value) 1,988 1,988
Capital in excess of par value 9,229 9,139
Retained earnings 5,529 3,396
Guaranteed obligations of employee stock
ownership plans (91) (147)
Deferred Compensation - LESOP (78) (82)
Treasury shares (at cost) (692) (882)
Accumulated other comprehensive income (601) (632)
- --------------------------------------------------------------------------------
Total shareowners' equity 15,284 12,780
- --------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity $ 49,136 $ 45,066
================================================================================
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- -------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
- -------------------------------------------------------------------------------
<CAPTION>
Unaudited Nine months ended
9/30/99 9/30/98
- -------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 3,569 $ 3,267
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,898 3,677
Undistributed earnings from investments
in equity affiliates (181) (26)
Provision for uncollectible accounts 374 373
Amortization of investment tax credits (48) (54)
Deferred income tax expense 442 344
Cumulative effect of accounting change, net of tax - (15)
Other - net (588) (1,510)
- -------------------------------------------------------------------------------
Total adjustments 3,897 2,789
- -------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 7,466 6,056
- -------------------------------------------------------------------------------
Investing Activities
Construction and capital expenditures (4,741) (4,191)
Investments in affiliates (45) (54)
Purchase of short-term investments (26) (41)
Proceeds from short-term investments 6 324
Dispositions 475 733
Acquisitions (1,134) -
Other 2 6
- -------------------------------------------------------------------------------
Net Cash Used in Investing Activities (5,463) (3,223)
- -------------------------------------------------------------------------------
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less 948 (197)
Issuance of other short-term borrowings - 2
Repayment of other short-term borrowings - (8)
Issuance of long-term debt 6 394
Repayment of long-term debt (1,909) (1,019)
Issuance of common shares - 57
Purchase of treasury shares (21) (497)
Issuance of treasury shares 197 176
Dividends paid (1,417) (1,350)
- -------------------------------------------------------------------------------
Net Cash Used in Financing Activities (2,196) (2,442)
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (193) 391
- -------------------------------------------------------------------------------
Cash and cash equivalents beginning of year 460 410
- -------------------------------------------------------------------------------
Cash and Cash Equivalents End of Period $ 267 $ 801
===============================================================================
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- -----------------------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized
Dollars in millions except per share amounts
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
-------------------------- To Date
3/31/99 6/30/99 9/30/99 9/30/99
- ----------------------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C>
Operating Revenues
Landline local service $ 4,484 $ 4,785 $ 4,903 $ 14,172
Wireless subscriber 1,189 1,318 1,525 4,032
Network access 2,509 2,552 2,552 7,613
Long distance service 903 895 860 2,658
Directory advertising 971 849 926 2,746
Other 1,535 1,624 1,684 4,843
- ----------------------------------------------------------------------------------------- --------
Total Operating Revenues 11,591 12,023 12,450 36,064
- ----------------------------------------------------------------------------------------- --------
Operating Expenses
Operations and support 6,739 6,901 7,125 20,765
- ----------------------------------------------------------------------------------------- --------
EBITDA * 4,852 5,122 5,325 15,299
- ----------------------------------------------------------------------------------------- --------
Depreciation and amortization 1,917 1,966 2,083 5,966
- ----------------------------------------------------------------------------------------- --------
Total Operating Expenses 8,656 8,867 9,208 26,731
- ----------------------------------------------------------------------------------------- --------
Operating Income 2,935 3,156 3,242 9,333
- ----------------------------------------------------------------------------------------- --------
Interest Expense 358 336 364 1,058
- ----------------------------------------------------------------------------------------- --------
Equity in Net Income of Affiliates 172 182 220 574
- ----------------------------------------------------------------------------------------- --------
Other Income (Expense) - Net (71) (15) 1 (85)
- ----------------------------------------------------------------------------------------- --------
Income Before Income Taxes and
Cumulative Effect of Accounting Change 2,678 2,987 3,099 8,764
- ----------------------------------------------------------------------------------------- --------
Income Taxes 971 1,077 1,128 3,176
- ----------------------------------------------------------------------------------------- --------
Income Before Cumulative Effect of Accounting Change 1,707 1,910 1,971 5,588
- ----------------------------------------------------------------------------------------- --------
Cumulative Effect of Accounting Change, net of tax 207 - - 207
- ----------------------------------------------------------------------------------------- --------
Net Income $ 1,914 $ 1,910 $ 1,971 $ 5,795
========================================================================================= ========
Basic Earnings Per Share:
Income Before Cumulative Effect of Accounting Change $ 0.50 $ 0.56 $ 0.58 $ 1.64
Net Income $ 0.56 $ 0.56 $ 0.58 $ 1.70
Diluted Earnings Per Share:
Income Before Cumulative Effect of Accounting Change $ 0.49 $ 0.55 $ 0.57 $ 1.62
Net Income $ 0.55 $ 0.55 $ 0.57 $ 1.68
- ----------------------------------------------------------------------------------------- --------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
<FN>
Normalized 1999 results excluded the following special items:
1Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($39)
-- Reduction of a charge to cover the cost of consolidating security
monitoring centers and company-owned cellular retail stores ($27)
2Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($28)
3Q -- Costs related to synchronizing accounting estimation techniques and
valuation assumptions and the impairment of a portion of the accounting
goodwill associated with Ameritech's security business $883
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($47)
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ---------------------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized
Dollars in millions except per share amounts
- ---------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
----------------------------------- Ended
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
- --------------------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $ 4,103 $ 4,330 $ 4,362 $ 4,441 $ 17,236
Wireless subscriber 1,086 1,200 1,222 1,183 4,691
Network access 2,342 2,440 2,382 2,417 9,581
Long distance service 912 912 949 900 3,673
Directory advertising 930 790 868 1,341 3,929
Other 1,452 1,494 1,598 1,669 6,213
- --------------------------------------------------------------------------------------- --------
Total Operating Revenues 10,825 11,166 11,381 11,951 45,323
- --------------------------------------------------------------------------------------- --------
Operating Expenses
Operations and support 6,256 6,340 6,562 7,162 26,320
- --------------------------------------------------------------------------------------- --------
EBITDA * 4,569 4,826 4,819 4,789 19,003
- --------------------------------------------------------------------------------------- --------
Depreciation and amortization 1,825 1,869 1,891 1,931 7,516
- --------------------------------------------------------------------------------------- --------
Total Operating Expenses 8,081 8,209 8,453 9,093 33,836
- --------------------------------------------------------------------------------------- --------
Operating Income 2,744 2,957 2,928 2,858 11,487
- --------------------------------------------------------------------------------------- --------
Interest Expense 427 403 379 375 1,584
- --------------------------------------------------------------------------------------- --------
Equity in Net Income of Affiliates 152 155 134 172 613
- --------------------------------------------------------------------------------------- --------
Other Income (Expense) - Net (78) (27) (58) 7 (156)
- --------------------------------------------------------------------------------------- --------
Income Before Income Taxes, Extraordinary Loss
and Cumulative Effect of Accounting Change 2,391 2,682 2,625 2,662 10,360
- --------------------------------------------------------------------------------------- --------
Income Taxes 878 974 946 951 3,749
- --------------------------------------------------------------------------------------- --------
Income Before Extraordinary Loss and
Cumulative Effect of Accounting Change 1,513 1,708 1,679 1,711 6,611
- --------------------------------------------------------------------------------------- --------
Extraordinary Loss, net of tax - - - (60) (60)
Cumulative Effect of Accounting Change, net of tax 15 - - - 15
- --------------------------------------------------------------------------------------- --------
Net Income $ 1,528 $ 1,708 $ 1,679 $ 1,651 $ 6,566
======================================================================================= ========
Basic Earnings Per Share:
Income Before Extraordinary Loss
and Cumulative Effect of Accounting Change $ 0.44 $ 0.50 $ 0.49 $ 0.50 $ 1.94
Net Income $ 0.45 $ 0.50 $ 0.49 $ 0.48 $ 1.93
Diluted Earnings Per Share:
Income Before Extraordinary Loss
and Cumulative Effect of Accounting Change $ 0.44 $ 0.50 $ 0.49 $ 0.50 $ 1.92
Net Income $ 0.44 $ 0.50 $ 0.49 $ 0.48 $ 1.90
- --------------------------------------------------------------------------------------- --------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
<FN>
Normalized 1998 results excluded the following special items:
1Q -- Charge to cover the cost of consolidating security monitoring centers
and company-owned cellular retail stores $64
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($19)
2Q -- Gain on sale of Telecom Corp of New Zealand (TCNZ) shares ($1,012)
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($30)
3Q -- Gains on sales of certain non-core businesses, principally the required
disposition of SBC's interest in Mobile Telephone Networks (MTN), a
South African national cellular company, due to SBC's investment in
Telkom SA Limited (Telkom) ($219)
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($28)
4Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($46)
-- Charges related to strategic initiatives resulting from the merger
integration process with SNET $268
-- Gain on sale of assets to Century Telephone Enterprises Inc. ($102)
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
----------------------------------- Ended
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
- ---------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $ 3,840 $ 3,955 $ 4,027 $ 4,181 $ 16,003
Wireless subscriber 965 1,066 1,111 1,121 4,263
Network access 2,399 2,444 2,409 2,393 9,645
Long distance service 917 910 911 880 3,618
Directory advertising 854 736 873 1,152 3,615
Other 1,191 1,330 1,353 1,415 5,289
- ---------------------------------------------------------------------------- --------
Total Operating Revenues 10,166 10,441 10,684 11,142 42,433
- ---------------------------------------------------------------------------- --------
Operating Expenses
Operations and support 5,962 6,096 6,370 6,780 25,208
- ---------------------------------------------------------------------------- --------
EBITDA * 4,204 4,345 4,314 4,362 17,225
- ---------------------------------------------------------------------------- --------
Depreciation and amortization 1,738 1,730 1,766 1,843 7,077
- ---------------------------------------------------------------------------- --------
Total Operating Expenses 7,700 7,826 8,136 8,623 32,285
- ---------------------------------------------------------------------------- --------
Operating Income 2,466 2,615 2,548 2,519 10,148
- ---------------------------------------------------------------------------- --------
Interest Expense 359 360 381 405 1,505
- ---------------------------------------------------------------------------- --------
Equity in Net Income of Affiliates 104 138 140 142 524
- ---------------------------------------------------------------------------- --------
Other Income (Expense) - Net (24) (35) 33 26 -
- ---------------------------------------------------------------------------- --------
Income Before Income Taxes 2,187 2,358 2,340 2,282 9,167
- ---------------------------------------------------------------------------- --------
Income Taxes 819 858 842 812 3,331
- ---------------------------------------------------------------------------- --------
Net Income $ 1,368 $ 1,500 $ 1,498 $ 1,470 $ 5,836
============================================================================ ========
Basic Earnings Per Share $ 0.40 $ 0.44 $ 0.44 $ 0.43 $ 1.72
Diluted Earnings Per Share $ 0.40 $ 0.44 $ 0.44 $ 0.43 $ 1.71
- ---------------------------------------------------------------------------- --------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
<FN>
Normalized 1997 results excluded the following special items:
1Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($24)
-- Settlement gains associated with lump-sum pension payments primarily
related to 1996 retirements at Pacific Telesis ($90)
2Q -- Costs related to strategic initiatives resulting from the merger
integration process with Pacific Telesis Group $1,595
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($28)
-- AIT share of workforce restucturing at Belgacom $87
3Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($17)
-- Costs related to strategic initiatives resulting from the merger
integration process with Pacific Telesis Group $10
4Q -- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($20)
-- Costs related to strategic initiatives resulting from the merger
integration process with Pacific Telesis Group $294
-- Gain on the sale of interests in Bell Communications Research Inc.
(Bellcore) ($58)
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Year
Ended
12/31/96
- ----------------------------------------------------------------------------------------
<S> <C>
Operating Revenues
Landline local service $14,772
Wireless subscriber 3,610
Network access 9,321
Long distance service 3,813
Directory advertising 3,419
Other 4,818
- ----------------------------------------------------------------------------------------
Total Operating Revenues 39,753
- ----------------------------------------------------------------------------------------
Operating Expenses
Operations and support 23,132
- ----------------------------------------------------------------------------------------
EBITDA * 16,621
- ----------------------------------------------------------------------------------------
Depreciation and amortization 6,723
- ----------------------------------------------------------------------------------------
Total Operating Expenses 29,855
- ----------------------------------------------------------------------------------------
Operating Income 9,898
- ----------------------------------------------------------------------------------------
Interest Expense 1,398
- ----------------------------------------------------------------------------------------
Equity in Net Income of Affiliates 470
- ----------------------------------------------------------------------------------------
Other Income (Expense) - Net (19)
- ----------------------------------------------------------------------------------------
Income Before Income Taxes and Cumulative Effect of Accounting Change 8,951
- ----------------------------------------------------------------------------------------
Income Taxes 3,308
- ----------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Change 5,643
- ----------------------------------------------------------------------------------------
Cumulative Effect of Accounting Change, net of tax 90
- ----------------------------------------------------------------------------------------
Net Income $5,733
========================================================================================
Basic Earnings Per Share:
Income Before Cumulative Effect of Accounting Change $ 1.66
Net Income $ 1.68
Diluted Earnings Per Share:
Income Before Cumulative Effect of Accounting Change $ 1.65
Net Income $ 1.67
- ----------------------------------------------------------------------------------------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
<FN>
Normalized 1996 results excluded the following special items:
-- Incremental impacts of overlapping wireless properties required to be
sold in October 1999 ($62)
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized Wireline
Dollars in Millions
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited
Nine
Three Months Ended Months
----------------------- Ended
3/31/99 6/30/99 9/30/99 9/30/99
- ------------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $4,494 $4,797 $4,913 $14,204
Network access 2,529 2,575 2,571 7,675
Long distance service 906 899 864 2,669
Other 1,149 1,206 1,196 3,551
- ------------------------------------------------------------- -------
Total Operating Revenues 9,078 9,477 9,544 28,099
- ------------------------------------------------------------- -------
Operating Expenses
Operations and support 5,085 5,223 5,354 15,662
- ------------------------------------------------------------- -------
EBITDA * 3,993 4,254 4,190 12,437
- ------------------------------------------------------------- -------
Depreciation and amortization 1,642 1,684 1,726 5,052
- ------------------------------------------------------------- -------
Total Operating Expenses 6,727 6,907 7,080 20,714
- ------------------------------------------------------------- -------
Operating Income 2,351 2,570 2,464 7,385
- ------------------------------------------------------------- -------
Interest Expense 292 294 291 877
- ------------------------------------------------------------- -------
Other Income (Expense) - Net 34 13 20 67
- ------------------------------------------------------------- -------
Income Before Income Taxes $2,093 $2,289 $2,193 $6,575
============================================================= =======
Three Months Ended Year
------------------------------- Ended
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
- --------------------------------------------------------------------- -------
Operating Revenues
Landline local service $4,111 $4,289 $4,375 $4,450 $17,225
Network access 2,378 2,471 2,394 2,434 9,677
Long distance service 913 913 952 901 3,679
Other 1,135 1,155 1,265 1,283 4,838
- --------------------------------------------------------------------- -------
Total Operating Revenues 8,537 8,828 8,986 9,068 35,419
- --------------------------------------------------------------------- -------
Operating Expenses
Operations and support 4,838 4,852 5,126 5,575 20,391
- --------------------------------------------------------------------- -------
EBITDA * 3,699 3,976 3,860 3,493 15,028
- --------------------------------------------------------------------- -------
Depreciation and amortization 1,568 1,590 1,629 1,653 6,440
- --------------------------------------------------------------------- -------
Total Operating Expenses 6,406 6,442 6,755 7,228 26,831
- --------------------------------------------------------------------- -------
Operating Income 2,131 2,386 2,231 1,840 8,588
- --------------------------------------------------------------------- -------
Interest Expense 304 313 311 322 1,250
- --------------------------------------------------------------------- -------
Other Income (Expense) - Net (5) 11 8 (34) (20)
- --------------------------------------------------------------------- -------
Income Before Income Taxes $1,822 $2,084 $1,928 $1,484 $7,318
===================================================================== =======
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized Wireline
Dollars in Millions
- ----------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
---------------------------------- Ended
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
- ---------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $3,821 $3,930 $4,002 $4,139 $15,892
Network access 2,415 2,455 2,424 2,407 9,701
Long distance service 917 910 910 879 3,616
Other 1,018 1,156 1,130 1,143 4,447
- ---------------------------------------------------------------- ---------
Total Operating Revenues 8,171 8,451 8,466 8,568 33,656
- ---------------------------------------------------------------- ---------
Operating Expenses
Operations and support 4,764 4,867 4,995 5,170 19,796
- ---------------------------------------------------------------- ---------
EBITDA * 3,407 3,584 3,471 3,398 13,860
- ---------------------------------------------------------------- ---------
Depreciation and amortization 1,535 1,515 1,521 1,587 6,158
- ---------------------------------------------------------------- ---------
Total Operating Expenses 6,299 6,382 6,516 6,757 25,954
- ---------------------------------------------------------------- ---------
Operating Income 1,872 2,069 1,950 1,811 7,702
- ---------------------------------------------------------------- ---------
Interest Expense 288 285 308 317 1,198
- ---------------------------------------------------------------- ---------
Other Income (Expense) - Net (13) 2 44 21 54
- ---------------------------------------------------------------- ---------
Income Before Income Taxes $1,571 $1,786 $1,686 $1,515 $6,558
================================================================ =========
Year
Ended
12/31/96
- ---------------------------------------------------------------- ---------
Operating Revenues
Landline local service $14,705
Network access 9,338
Long distance service 3,814
Other 4,273
- ---------------------------------------------------------------- ---------
Total Operating Revenues 32,130
- ---------------------------------------------------------------- ---------
Operating Expenses
Operations and support 18,790
- ---------------------------------------------------------------- ---------
EBITDA * 13,340
- ---------------------------------------------------------------- ---------
Depreciation and amortization 5,969
- ---------------------------------------------------------------- ---------
Total Operating Expenses 24,759
- ---------------------------------------------------------------- ---------
Operating Income 7,371
- ---------------------------------------------------------------- ---------
Interest Expense 1,107
- ---------------------------------------------------------------- ---------
Other Income (Expense) - Net 71
- ---------------------------------------------------------------- ---------
Income Before Income Taxes $6,335
================================================================ =========
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized Wireless
Dollars in Millions
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited
Nine
Three Months Ended Months
----------------------- Ended
3/31/99 6/30/99 9/30/99 9/30/99
- ------------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Subscriber Revenues $1,189 $1,318 $1,506 $4,013
Other 256 300 355 911
- ------------------------------------------------------------- -------
Total Operating Revenues 1,445 1,618 1,861 4,924
- ------------------------------------------------------------- -------
Operating Expenses
Operations and support 1,045 1,080 1,178 3,303
- ------------------------------------------------------------- -------
EBITDA * 400 538 683 1,621
- ------------------------------------------------------------- -------
Depreciation and amortization 180 190 255 625
- ------------------------------------------------------------- -------
Total Operating Expenses 1,225 1,270 1,433 3,928
- ------------------------------------------------------------- -------
Operating Income 220 348 428 996
- ------------------------------------------------------------- -------
Interest Expense 48 36 65 149
- ------------------------------------------------------------- -------
Equity in Net Income of Affiliates 6 10 12 28
- ------------------------------------------------------------- -------
Other Income (Expense) - Net (46) (51) (56) (153)
- ------------------------------------------------------------- -------
Income Before Income Taxes $132 $271 $319 $722
============================================================= =======
Three Months Ended Year
------------------------------- Ended
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
- --------------------------------------------------------------------- -------
Operating Revenues
Subscriber Revenues $1,086 $1,201 $1,221 $1,183 $4,691
Other 189 220 243 286 938
- --------------------------------------------------------------------- -------
Total Operating Revenues 1,275 1,421 1,464 1,469 5,629
- --------------------------------------------------------------------- -------
Operating Expenses
Operations and support 944 998 1,010 1,039 3,991
- --------------------------------------------------------------------- -------
EBITDA * 331 423 454 430 1,638
- --------------------------------------------------------------------- -------
Depreciation and amortization 170 175 176 186 707
- --------------------------------------------------------------------- -------
Total Operating Expenses 1,114 1,173 1,186 1,225 4,698
- --------------------------------------------------------------------- -------
Operating Income 161 248 278 244 931
- --------------------------------------------------------------------- -------
Interest Expense 50 47 47 45 189
- --------------------------------------------------------------------- -------
Equity in Net Income of Affiliates 2 8 9 6 25
- --------------------------------------------------------------------- -------
Other Income (Expense) - Net (41) (48) (64) (50) (203)
- --------------------------------------------------------------------- -------
Income Before Income Taxes $72 $161 $176 $155 $564
===================================================================== =======
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized Wireless
Dollars in Millions
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
---------------------------------- Ended
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
- -------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Subscriber Revenues $965 $1,066 $1,111 $1,121 $4,263
Other 167 180 201 212 760
- -------------------------------------------------------------------- ---------
Total Operating Revenues 1,132 1,246 1,312 1,333 5,023
- -------------------------------------------------------------------- ---------
Operating Expenses
Operations and support 797 897 963 1,112 3,769
- -------------------------------------------------------------------- ---------
EBITDA * 335 349 349 221 1,254
- -------------------------------------------------------------------- ---------
Depreciation and amortization 135 140 166 166 607
- -------------------------------------------------------------------- ---------
Total Operating Expenses 932 1,037 1,129 1,278 4,376
- -------------------------------------------------------------------- ---------
Operating Income 200 209 183 55 647
- -------------------------------------------------------------------- ---------
Interest Expense 34 35 47 49 165
- -------------------------------------------------------------------- ---------
Equity in Net Income of Affiliates 6 4 4 (5) 9
- -------------------------------------------------------------------- ---------
Other Income (Expense) - Net (25) (42) (22) (30) (119)
- -------------------------------------------------------------------- ---------
Income (Loss) Before Income Taxes $147 $136 $118 $ (29) $372
==================================================================== =========
Year
Ended
12/31/96
- -------------------------------------------------------------------- ---------
Operating Revenues
Subscriber Revenues $3,610
Other 557
- -------------------------------------------------------------------- ---------
Total Operating Revenues 4,167
- -------------------------------------------------------------------- ---------
Operating Expenses
Operations and support 2,893
- -------------------------------------------------------------------- ---------
EBITDA * 1,274
- -------------------------------------------------------------------- ---------
Depreciation and amortization 504
- -------------------------------------------------------------------- ---------
Total Operating Expenses 3,397
- -------------------------------------------------------------------- ---------
Operating Income 770
- -------------------------------------------------------------------- ---------
Interest Expense 126
- -------------------------------------------------------------------- ---------
Equity in Net Income of Affiliates 22
- -------------------------------------------------------------------- ---------
Other Income (Expense) - Net (107)
- -------------------------------------------------------------------- ---------
Income Before Income Taxes $559
==================================================================== =========
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized
Information & Entertainment
Dollars in Millions
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited
Nine
Three Months Ended Months
----------------------- Ended
3/31/99 6/30/99 9/30/99 9/30/99
- ------------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Operating Revenues $1,077 $984 $1,071 $3,132
- ------------------------------------------------------------- -------
Operating Expenses
Operations and support 698 665 659 2,022
- ------------------------------------------------------------- -------
EBITDA * 379 319 412 1,110
- ------------------------------------------------------------- -------
Depreciation and amortization 46 46 49 141
- ------------------------------------------------------------- -------
Total Operating Expenses 744 711 708 2,163
- ------------------------------------------------------------- -------
Operating Income 333 273 363 969
- ------------------------------------------------------------- -------
Interest Expense 12 12 13 37
- ------------------------------------------------------------- -------
Other Income (Expense) - Net 3 3 2 8
- ------------------------------------------------------------- -------
Income Before Income Taxes $324 $264 $352 $940
============================================================= =======
Three Months Ended Year
--------------------------------- Ended
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
- --------------------------------------------------------------------- -------
Operating Revenues $1,012 $916 $963 $1,454 $4,345
- --------------------------------------------------------------------- -------
Operating Expenses
Operations and support 593 584 589 754 2,520
- --------------------------------------------------------------------- -------
EBITDA * 419 332 374 700 1,825
- --------------------------------------------------------------------- -------
Depreciation and amortization 39 54 53 55 201
- --------------------------------------------------------------------- -------
Total Operating Expenses 632 638 642 809 2,721
- --------------------------------------------------------------------- -------
Operating Income 380 278 321 645 1,624
- --------------------------------------------------------------------- -------
Interest Expense 18 2 10 12 42
- --------------------------------------------------------------------- -------
Other Income (Expense) - Net 4 - 2 2 8
- --------------------------------------------------------------------- -------
Income Before Income Taxes $366 $276 $313 $635 $1,590
===================================================================== =======
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized
Information and Entertainment
Dollars in Millions
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
---------------------------------- Ended
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
- -------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues $868 $777 $912 $1,262 $3,819
- -------------------------------------------------------------------- ---------
Operating Expenses
Operations and support 523 502 551 710 2,286
- -------------------------------------------------------------------- ---------
EBITDA * 345 275 361 552 1,533
- -------------------------------------------------------------------- ---------
Depreciation and amortization 30 33 35 51 149
- -------------------------------------------------------------------- ---------
Total Operating Expenses 553 535 586 761 2,435
- -------------------------------------------------------------------- ---------
Operating Income 315 242 326 501 1,384
- -------------------------------------------------------------------- ---------
Interest Expense 11 12 14 17 54
- -------------------------------------------------------------------- ---------
Other Income (Expense) - Net 5 4 7 4 20
- -------------------------------------------------------------------- ---------
Income Before Income Taxes $309 $234 $319 $488 $1,350
==================================================================== =========
Year
Ended
12/31/96
- -------------------------------------------------------------------- ---------
Operating Revenues $3,499
- -------------------------------------------------------------------- ---------
Operating Expenses
Operations and support 2,037
- -------------------------------------------------------------------- ---------
EBITDA * 1,462
- -------------------------------------------------------------------- ---------
Depreciation and amortization 98
- -------------------------------------------------------------------- ---------
Total Operating Expenses 2,135
- -------------------------------------------------------------------- ---------
Operating Income 1,364
- -------------------------------------------------------------------- ---------
Interest Expense 32
- -------------------------------------------------------------------- ---------
Other Income (Expense) - Net 19
- -------------------------------------------------------------------- ---------
Income Before Income Taxes $1,351
==================================================================== =========
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized International
Dollars in Millions
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited
Nine
Three Months Ended Months
----------------------- Ended
3/31/99 6/30/99 9/30/99 9/30/99
- ------------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Operating Revenues $65 $24 $49 $138
- ------------------------------------------------------------- -------
Operating Expenses
Operations and support 67 30 53 150
- ------------------------------------------------------------- -------
EBITDA * (2) (6) (4) (12)
- ------------------------------------------------------------- -------
Depreciation and amortization 5 4 11 20
- ------------------------------------------------------------- -------
Total Operating Expenses 72 34 64 170
- ------------------------------------------------------------- -------
Operating Income (Loss) (7) (10) (15) (32)
- ------------------------------------------------------------- -------
Interest Expense 77 91 68 236
- ------------------------------------------------------------- -------
Equity in Net Income of Affiliates 167 171 208 546
- ------------------------------------------------------------- -------
Other Income (Expense) - Net 68 130 24 222
- ------------------------------------------------------------- -------
Income Before Income Taxes $151 $200 $149 $500
============================================================= =======
Three Months Ended Year
------------------------------- Ended
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
- --------------------------------------------------------------------- -------
Operating Revenues $57 $27 $30 $35 $149
- --------------------------------------------------------------------- -------
Operating Expenses
Operations and support 47 37 38 87 209
- --------------------------------------------------------------------- -------
EBITDA * 10 (10) (8) (52) (60)
- --------------------------------------------------------------------- -------
Depreciation and amortization 4 5 5 4 18
- --------------------------------------------------------------------- -------
Total Operating Expenses 51 42 43 91 227
- --------------------------------------------------------------------- -------
Operating Income (Loss) 6 (15) (13) (56) (78)
- --------------------------------------------------------------------- -------
Interest Expense 60 69 74 79 282
- --------------------------------------------------------------------- -------
Equity in Net Income of Affiliates 152 145 126 165 588
- --------------------------------------------------------------------- -------
Other Income (Expense) - Net 111 (28) 5 137 225
- --------------------------------------------------------------------- -------
Income Before Income Taxes $209 $33 $44 $167 $453
===================================================================== =======
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income - Normalized International
Dollars in Millions
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
---------------------------------- Ended
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
- ---------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues $50 $17 $22 $33 $122
- ---------------------------------------------------------------------- --------
Operating Expenses
Operations and support 40 28 31 48 147
- ---------------------------------------------------------------------- --------
EBITDA * 10 (11) (9) (15) (25)
- ---------------------------------------------------------------------- --------
Depreciation and amortization 4 5 4 5 18
- ---------------------------------------------------------------------- --------
Total Operating Expenses 44 33 35 53 165
- ---------------------------------------------------------------------- --------
Operating Income (Loss) 6 (16) (13) (20) (43)
- ---------------------------------------------------------------------- --------
Interest Expense 22 25 29 28 104
- ---------------------------------------------------------------------- --------
Equity in Net Income of Affiliates 123 144 130 131 528
- ---------------------------------------------------------------------- --------
Other Income (Expense) - Net (5) 5 75 56 131
- ---------------------------------------------------------------------- --------
Income Before Income Taxes $102 $108 $163 $139 $512
====================================================================== ========
Year
Ended
12/31/96
- ---------------------------------------------------------------------- --------
Operating Revenues $110
- ---------------------------------------------------------------------- --------
Operating Expenses
Operations and support 92
- ---------------------------------------------------------------------- --------
EBITDA * 18
- ---------------------------------------------------------------------- --------
Depreciation and amortization 15
- ---------------------------------------------------------------------- --------
Total Operating Expenses 107
- ---------------------------------------------------------------------- --------
Operating Income 3
- ---------------------------------------------------------------------- --------
Interest Expense 113
- ---------------------------------------------------------------------- --------
Equity in Net Income of Affiliates 495
- ---------------------------------------------------------------------- --------
Other Income (Expense) - Net (26)
- ---------------------------------------------------------------------- --------
Income Before Income Taxes $359
====================================================================== ========
* EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- --------------------------------------------------------------------------------
Pro Forma Financial and Operating Data
Dollars in millions except per share amounts
- --------------------------------------------------------------------------------
<CAPTION>
Unaudited Year To
Date
3/31/99 6/30/99 9/30/99 9/30/99
- --------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C>
Analytical and Operating Information
As of or for the period ended:
Capital Expenditures $2,139 $ 2,344 $ 2,523 $ 7,006
Capital Expenditures - Wireline $ 1,847 $2,026 $ 2,123 $ 5,996
Capital Expenditures - Wireless $ 194 $ 221 $ 323 $ 738
Dividends Declared Per Share 1 $0.24375$0.24375$0.24375 $0.73125
Weighted Average Common Shares
Outstanding (000,000) 3,408 3,411 3,414 3,411
Weighted Average Common Shares
Outstanding With Dilution (000,000) 3,458 3,461 3,463 3,461
End of Period Common Shares
Outstanding (000,000) 3,408 3,413 3,413 3,413
Debt Ratio 45.53% 46.43% 47.54% 47.54%
Total Employees 200,700 201,650 203,270 203,270
Access Lines Served (000) 59,534 59,800 60,218 60,218
Residence 36,889 36,955 37,123 37,123
Business 21,865 22,067 22,322 22,322
Other 780 778 773 773
Voice Grade Equivalents (000) 82,748 84,698 87,269 87,269
Residence 36,948 37,139 37,509 37,509
Business 45,020 46,781 48,987 48,987
Other 780 778 773 773
Resold Lines (000) 1,322 1,341 1,484 1,484
Access Minutes of Use (000,000) 63,640 65,740 67,013 196,393
Domestic Wireless Operations 2
- -------------------------------
As of or for the period ended:
Wireless Customers (000) 9,007 9,323 10,311 10,311
Net Adds (000) 321 316 988 1,625
POPs (000,000) 104 104 113 113
SBC International
- -------------------------------
As of or for the period ended:
Total customers of SBC International's affiliates
Access Lines (000) 3,6 26,250 37,725 37,923 37,923
Wireless-Consolidated (000): 4
Subscribers - - 375 375
Net Adds - - 375 375
Wireless-Equity Owned (000): 5
Subscribers 12,312 15,564 18,091 18,091
Net Adds 2,063 3,252 2,527 7,842
Video Subscribers (000) 6 1,632 1,264 1,274 1,274
SBC's proportionate interest of SBC International's affiliates
Access Lines (000) 3,6 4,951 7,238 7,261 7,261
Wireless-Equity Owned (000): 5
Subscribers 1,938 2,407 2,793 2,793
Net Adds 298 469 386 1,153
Video Subscribers (000) 6 681 563 567 567
<FN>
1 Dividends declared by SBC's Board of Directors; these amounts do not include
dividends declared and paid by Ameritech Corporation prior to the merger with
SBC.
2 All periods exclude overlapping cellular properties sold in October 1999, and
the 3rd Quarter includes approximately 862,000 customers related to Comcast
Cellular Corporation acquired in July 1999.
3 2nd Quarter 1999 includes nearly 11 million access lines from SBC's
investments in Bell Canada acquired in May 1999.
4 Amounts related to the acquisition of Cellular Communications of Puerto Rico
in August 1999.
5 2nd Quarter 1999 includes approximately 1.6 million subscribers from SBC's
investments in Bell Canada acquired in May 1999.
6 1st Quarter 1999 includes customer amounts related to SBC's investments in
Chile sold in June 1999.
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- -----------------------------------------------------------------------------------
Pro Forma Financial and Operating Data
Dollars in millions except per share amounts
- -----------------------------------------------------------------------------------
<CAPTION>
Unaudited Year
Ended
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
- ------------------------------------------------------------------------ --------
Analytical and Operating Information
<S> <C> <C> <C> <C> <C>
As of or for the period ended:
Capital Expenditures $ 1,833 $ 2,289 $ 2,195 $ 2,565 $ 8,882
Capital Expenditures - Wireline $ 1,532 $ 1,895 $ 1,936 $ 2,108 $ 7,471
Capital Expenditures - Wireless $ 215 $ 282 $ 162 $ 319 $ 978
Dividends Declared Per Share 1 $0.23375$0.23375$0.23375 $0.23375 $0.93500
Weighted Average Common Shares
Outstanding (000,000) 3,404 3,407 3,406 3,408 3,406
Weighted Average Common Shares
Outstanding With Dilution (000,000) 3,446 3,450 3,447 3,456 3,450
End of Period Common Shares
Outstanding (000,000) 3,406 3,407 3,405 3,406 3,406
Debt Ratio 56.54% 51.79% 49.08% 47.31% 47.31%
Total Employees 201,890 202,110 199,750 200,380 200,380
Access Lines Served (000) 57,377 57,874 58,423 58,845 58,845
Residence 35,720 35,917 36,207 36,423 36,423
Business 20,879 21,175 21,433 21,639 21,639
Other 778 782 783 783 783
Voice Grade Equivalents (000) 75,782 77,214 78,826 80,597 80,597
Residence 35,721 35,919 36,213 36,442 36,442
Business 39,283 40,513 41,830 43,371 43,371
Other 778 782 783 784 784
Resold Lines (000) 1,079 1,143 1,222 1,254 1,254
Access Minutes of Use (000,000) 59,130 61,935 63,001 63,531 247,597
Domestic Wireless Operations 2
- ---------------------------------
As of or for the period ended:
Wireless Customers (000) 7,770 8,074 8,268 8,686 8,686
Net Adds (000) 214 304 194 418 1,130
POPs (000,000) 104 104 104 104 104
SBC International
- ---------------------------------
As of or for the period ended:
Total customers of SBC International's affiliates
Access Lines (000) 3, 4 24,769 25,106 25,442 25,847 25,847
Wireless-Equity Owned (000): 4
Subscribers 7,161 8,027 9,161 10,249 10,249
Net Adds 1,916 866 1,134 1,088 5,004
Video Subscribers (000) 3 1,429 1,575 1,610 1,633 1,633
SBC's proportionate interest of SBC International's affiliates
Access Lines (000) 3, 4 4,721 4,782 4,841 4,915 4,915
Wireless-Equity Owned (000): 4
Subscribers 1,227 1,340 1,495 1,640 1,640
Net Adds 501 113 155 145 914
Video Subscribers (000) 3 587 656 672 681 681
<FN>
1 Dividends declared by SBC's Board of Directors; these amounts do not include
dividends declared and paid by Ameritech Corporation and Southern New England
Telecommunications Corporation prior to their respective mergers with SBC.
2 All periods exclude overlapping cellular properties sold in October 1999.
3 All periods include customer amounts for SBC's investments in Chile sold in
June 1999.
4 All periods include approximately 3.3 million access lines and 900,000
wireless subscribers for SBC's Investments in Tele Danmark acquired in
January 1998.
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- -----------------------------------------------------------------------------------
Pro Forma Financial and Operating Data
Dollars in millions except per share amounts
- -----------------------------------------------------------------------------------
<CAPTION>
Unaudited Year
Ended
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
- ------------------------------------------------------------------------- -------
Analytical and Operating Information
<S> <C> <C> <C> <C> <C>
As of or for the period ended:
Capital Expenditures $ 1,879 $ 2,262 $ 2,130 $ 2,585 $ 8,856
Capital Expenditures - Wireline $ 1,592 $ 1,875 $ 1,789 $ 2,058 $ 7,314
Capital Expenditures - Wireless $ 218 $ 263 $ 227 $ 358 $ 1,066
Dividends Declared Per Share 1 $0.22375$0.22375$0.22375 $0.22375 $0.89500
Weighted Average Common Shares
Outstanding (000,000) 3,389 3,389 3,390 3,394 3,391
Weighted Average Common Shares
Outstanding With Dilution (000,000) 3,415 3,415 3,419 3,432 3,420
End of Period Common Shares
Outstanding (000,000) 3,390 3,394 3,387 3,398 3,398
Debt Ratio 55.15% 56.79% 57.04% 54.90% 54.90%
Total Employees 189,290 195,580 197,130 202,440 202,440
Access Lines Served (000) 54,598 55,107 55,814 56,616 56,616
Residence 34,369 34,533 34,856 35,256 35,256
Business 19,466 19,801 20,182 20,582 20,582
Other 763 773 776 778 778
Voice Grade Equivalents (000) 69,455 70,721 72,025 73,708 73,708
Residence 34,369 34,533 34,856 35,256 35,256
Business 34,322 35,414 36,394 37,675 37,675
Other 764 774 775 777 777
Resold Lines (000) 154 345 639 930 930
Access Minutes of Use (000,000) 54,462 56,888 58,007 58,943 228,300
Domestic Wireless Operations 2
- ---------------------------------
As of or for the period ended:
Wireless Customers (000) 6,395 6,777 7,136 7,556 7,556
Net Adds (000) 377 382 359 420 1,538
POPs (000,000) 79 87 104 104 104
SBC International
- ---------------------------------
As of or for the period ended:
Total customers of SBC International's affiliates
Access Lines (000) 3 20,151 20,448 20,691 21,034 21,034
Wireless-Equity Owned (000):
Subscribers 3,542 4,007 4,513 5,245 5,245
Net Adds 466 465 506 732 2,169
Video Subscribers (000) 3 610 630 663 668 668
SBC's proportionate interest of SBC International's affiliates
Access Lines (000) 3 3,114 3,166 3,209 3,263 3,263
Wireless-Equity Owned (000):
Subscribers 478 541 605 726 726
Net Adds 64 63 64 121 312
Video Subscribers (000) 3 248 255 266 268 268
<FN>
1 Dividends declared by SBC's Board of Directors; these amounts do not include
dividends declared and paid by Ameritech Corporation, Southern New England
Telecommunications Corporation, and Pacific Telesis Group prior to their
respective mergers with SBC.
2 All periods exclude overlapping cellular properties sold in October 1999.
3 All periods include customer amounts for SBC's investments in Chile sold in
June 1999.
</FN>
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ------------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income
Dollars in millions except per share amounts
- ------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
-------------------------- To Date
3/31/99 6/30/99 9/30/99 9/30/99
- ------------------------------------------------------------------------------ --------
<S> <C> <C> <C> <C>
Operating Revenues
Landline local service $4,484 $4,785 $4,843 $14,112
Wireless subscriber 1,357 1,501 1,706 4,564
Network access 2,509 2,552 2,535 7,596
Long distance service 903 895 860 2,658
Directory advertising 971 849 926 2,746
Other 1,578 1,674 1,664 4,916
- ------------------------------------------------------------------------------ --------
Total Operating Revenues 11,802 12,256 12,534 36,592
- ------------------------------------------------------------------------------ --------
Operating Expenses
Operations and support 6,809 7,036 7,629 21,474
- ------------------------------------------------------------------------------ --------
EBITDA * 4,993 5,220 4,905 15,118
- ------------------------------------------------------------------------------ --------
Depreciation and amortization 1,942 1,993 2,443 6,378
- ------------------------------------------------------------------------------ --------
Total Operating Expenses 8,751 9,029 10,072 27,852
- ------------------------------------------------------------------------------ --------
Operating Income 3,051 3,227 2,462 8,740
- ------------------------------------------------------------------------------ --------
Interest Expense 357 347 365 1,069
- ------------------------------------------------------------------------------ --------
Equity in Net Income of Affiliates 172 182 220 574
- ------------------------------------------------------------------------------ --------
Other Income (Expense) - Net (77) (23) (29) (129)
- ------------------------------------------------------------------------------ --------
Income Before Income Taxes and Cumulative
Effect of Accounting Change 2,789 3,039 2,288 8,116
- ------------------------------------------------------------------------------ --------
Income Taxes 1,016 1,101 1,153 3,270
- ------------------------------------------------------------------------------ --------
Income Before Cumulative Effect of
Accounting Change 1,773 1,938 1,135 4,846
- ------------------------------------------------------------------------------ --------
Cumulative Effect of Accounting Change
net of tax 207 - - 207
- ------------------------------------------------------------------------------ --------
Net Income $1,980 $1,938 $1,135 $5,053
============================================================================== ========
Basic Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.52 $ 0.57 $ 0.33 $ 1.42
Net Income $ 0.58 $ 0.57 $ 0.33 $ 1.48
Diluted Earnings Per Share:
Income Before Cumulative Effect of
Accounting Change $ 0.51 $ 0.56 $ 0.33 $ 1.40
Net Income $ 0.57 $ 0.56 $ 0.33 $ 1.46
- ------------------------------------------------------------------------------ --------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- -----------------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income
Dollars in millions except per share amounts
- -----------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
----------------------------------- Ended
3/31/98 6/30/98 9/30/98 12/31/98 12/31/98
- ----------------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $4,103 $4,330 $4,362 $4,439 $17,234
Wireless subscriber 1,261 1,387 1,408 1,362 5,418
Network access 2,341 2,441 2,382 2,411 9,575
Long distance service 912 912 949 900 3,673
Directory advertising 930 790 868 1,341 3,929
Other 1,491 1,538 1,637 1,712 6,378
- ----------------------------------------------------------------------------------- --------
Total Operating Revenues 11,038 11,398 11,606 12,165 46,207
- ----------------------------------------------------------------------------------- --------
Operating Expenses
Operations and support 6,502 6,487 6,696 7,458 27,143
- ----------------------------------------------------------------------------------- --------
EBITDA * 4,536 4,911 4,910 4,707 19,064
- ----------------------------------------------------------------------------------- --------
Depreciation and amortization 1,851 1,894 1,916 2,180 7,841
- ----------------------------------------------------------------------------------- --------
Total Operating Expenses 8,353 8,381 8,612 9,638 34,984
- ----------------------------------------------------------------------------------- --------
Operating Income 2,685 3,017 2,994 2,527 11,223
- ----------------------------------------------------------------------------------- --------
Interest Expense 431 409 383 382 1,605
- ----------------------------------------------------------------------------------- --------
Equity in Net Income of Affiliates 152 155 134 172 613
- ----------------------------------------------------------------------------------- --------
Other Income (Expense) - Net (83) 1,512 292 163 1,884
- ----------------------------------------------------------------------------------- --------
Income Before Income Taxes, Extraordinary Loss
and Cumulative Effect of Accounting Change 2,323 4,275 3,037 2,480 12,115
- ----------------------------------------------------------------------------------- --------
Income Taxes 855 1,525 1,111 889 4,380
- ----------------------------------------------------------------------------------- --------
Income Before Extraordinary Loss and
Cumulative Effect of Accounting Change 1,468 2,750 1,926 1,591 7,735
- ----------------------------------------------------------------------------------- --------
Extraordinary Loss, net of tax - - - (60) (60)
Cumulative Effect of Accounting Change, net of tax 15 - - - 15
- ----------------------------------------------------------------------------------- --------
Net Income $1,483 $2,750 $1,926 $1,531 $7,690
=================================================================================== ========
Basic Earnings Per Share:
Income Before Extraordinary Loss
and Cumulative Effect of Accounting Change $ 0.43 $ 0.81 $ 0.57 $ 0.47 $ 2.27
Net Income $ 0.44 $ 0.81 $ 0.57 $ 0.45 $ 2.26
Diluted Earnings Per Share:
Income Before Extraordinary Loss
and Cumulative Effect of Accounting Change $ 0.43 $ 0.80 $ 0.56 $ 0.46 $ 2.24
Net Income $ 0.43 $ 0.80 $ 0.56 $ 0.44 $ 2.23
- ------------------------------------------------------------------------------ --------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Three Months Ended Year
----------------------------------- Ended
3/31/97 6/30/97 9/30/97 12/31/97 12/31/97
- ---------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues
Landline local service $3,840 $3,941 $4,027 $4,180 $15,988
Wireless subscriber 1,142 1,252 1,296 1,304 4,994
Network access 2,398 2,291 2,409 2,393 9,491
Long distance service 917 908 911 880 3,616
Directory advertising 854 735 874 1,152 3,615
Other 1,215 1,340 1,392 1,455 5,402
- ---------------------------------------------------------------------------- --------
Total Operating Revenues 10,366 10,467 10,909 11,364 43,106
- ---------------------------------------------------------------------------- --------
Operating Expenses
Operations and support 5,937 7,844 6,543 7,403 27,727
- ---------------------------------------------------------------------------- --------
EBITDA * 4,429 2,623 4,366 3,961 15,379
- ---------------------------------------------------------------------------- --------
Depreciation and amortization 1,761 2,345 1,791 1,880 7,777
- ---------------------------------------------------------------------------- --------
Total Operating Expenses 7,698 10,189 8,334 9,283 35,504
- ---------------------------------------------------------------------------- --------
Operating Income 2,668 278 2,575 2,081 7,602
- ---------------------------------------------------------------------------- --------
Interest Expense 363 391 386 410 1,550
- ---------------------------------------------------------------------------- --------
Equity in Net Income of Affiliates 104 51 140 142 437
- ---------------------------------------------------------------------------- --------
Other Income (Expense) - Net (28) (66) 30 113 49
- ---------------------------------------------------------------------------- --------
Income (Loss) Before Income Taxes 2,381 (128) 2,359 1,926 6,538
- ---------------------------------------------------------------------------- --------
Income Taxes 899 26 854 672 2,451
- ---------------------------------------------------------------------------- --------
Net Income (Loss) $1,482 $ (154) $1,505 $1,254 $4,087
============================================================================ ========
Basic Earnings (Loss) Per Share $ 0.44 $(0.05) $ 0.44 $ 0.37 $ 1.21
Diluted Earnings (Loss) Per Share $ 0.43 $(0.05) $ 0.44 $ 0.37 $ 1.20
- ---------------------------------------------------------------------------- --------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Income
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------------------
<CAPTION>
Unaudited
Year
Ended
12/31/96
- ----------------------------------------------------------------------------------------
<S> <C>
Operating Revenues
Landline local service $14,772
Wireless subscriber 4,282
Network access 9,321
Long distance service 3,813
Directory advertising 3,419
Other 4,903
- ----------------------------------------------------------------------------------------
Total Operating Revenues 40,510
- ----------------------------------------------------------------------------------------
Operating Expenses
Operations and support 23,653
- ----------------------------------------------------------------------------------------
EBITDA * 16,857
- ----------------------------------------------------------------------------------------
Depreciation and amortization 6,808
- ----------------------------------------------------------------------------------------
Total Operating Expenses 30,461
- ----------------------------------------------------------------------------------------
Operating Income 10,049
- ----------------------------------------------------------------------------------------
Interest Expense 1,418
- ----------------------------------------------------------------------------------------
Equity in Net Income of Affiliates 470
- ----------------------------------------------------------------------------------------
Other Income (Expense) - Net (28)
- ----------------------------------------------------------------------------------------
Income Before Income Taxes and Cumulative Effect of Accounting Change 9,073
- ----------------------------------------------------------------------------------------
Income Taxes 3,368
- ----------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Change 5,705
- ----------------------------------------------------------------------------------------
Cumulative Effect of Accounting Change, net of tax 90
- ----------------------------------------------------------------------------------------
Net Income $5,795
========================================================================================
Basic Earnings Per Share:
Income Before Cumulative Effect of Accounting Change $ 1.67
Net Income $ 1.70
Diluted Earnings Per Share:
Income Before Cumulative Effect of Accounting Change $ 1.66
Net Income $ 1.69
- ----------------------------------------------------------------------------------------
*EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------
Pro Forma Consolidated Balance Sheets
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------
<CAPTION>
Unaudited 09/30/99 06/30/99 03/31/99
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 532 $ 1,140 $ 1,214
Accounts receivable - net of allowances for
uncollectibles of $1,043, $832 and $839 8,903 8,978 8,998
Prepaid expenses 868 939 986
Deferred income taxes 922 923 876
Other current assets 752 689 722
- ----------------------------------------------------------------------------
Total current assets 11,977 12,669 12,796
- ----------------------------------------------------------------------------
Property, Plant and Equipment - Net 46,040 44,970 44,498
- ----------------------------------------------------------------------------
Intangible Assets - Net of Accumulated
Amortization of $1,308, $1,215 and $1,159 7,197 5,106 5,068
Investments in Equity Affiliates 10,632 10,319 7,068
Other Assets 6,000 5,881 5,610
- ----------------------------------------------------------------------------
Total Assets $81,846 $78,945 $75,040
============================================================================
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 6,424 $ 4,906 $ 3,706
Accounts payable and accrued liabilities 12,801 13,405 12,922
Dividends payable 831 831 833
- ----------------------------------------------------------------------------
Total current liabilities 20,056 19,142 17,461
- ----------------------------------------------------------------------------
Long-Term Debt 17,418 17,507 16,925
- ----------------------------------------------------------------------------
Deferred Credits and Other Noncurrent
Liabilities
Deferred income taxes 4,933 3,405 3,088
Postemployment benefit obligation 9,265 9,228 9,140
Unamortized investment tax credits 410 433 453
Other noncurrent liabilities 3,456 3,368 3,293
- ----------------------------------------------------------------------------
Total deferred credits and other
noncurrent liabilities 18,064 16,434 15,974
- ----------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable
preferred securities of subsidiary trusts 1,000 1,000 1,000
- ----------------------------------------------------------------------------
Shareowners' Equity
Common shares issued ($1 par value) 3,433 3,434 3,433
Capital in excess of par value 12,430 12,478 12,428
Retained earnings 11,518 11,212 10,102
Guaranteed obligations of employee stock
ownership plans (128) (146) (164)
Deferred Compensation - LESOP (78) (78) (78)
Treasury shares (at cost) (692) (721) (803)
Accumulated other comprehensive income (1,175) (1,317) (1,238)
- ----------------------------------------------------------------------------
Total shareowners' equity 25,308 24,862 23,680
- ----------------------------------------------------------------------------
Total Liabilities and
Shareowners' Equity $81,846 $78,945 $75,040
============================================================================
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------------
Pro Forma Consolidated Balance Sheets
Dollars in millions except per share amounts
- ----------------------------------------------------------------------------------
<CAPTION>
Unaudited 12/31/98 12/31/97 12/31/96
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 599 $ 649 $ 469
Accounts receivable - net of allowances for
uncollectibles of $810, $737 and $659 9,783 8,422 8,079
Prepaid expenses 843 705 578
Deferred income taxes 685 771 381
Other current assets 787 1,549 1,126
- ----------------------------------------------------------------------------------
Total current assets 12,697 12,096 10,633
- ----------------------------------------------------------------------------------
Property, Plant and Equipment - Net 44,194 42,932 41,188
- ----------------------------------------------------------------------------------
Intangible Assets - Net of Accumulated
Amortization of $1,111, $1,485 and $971 5,161 6,080 5,330
Investments in Equity Affiliates 7,412 4,453 4,226
Other Assets 5,517 4,356 4,388
- ----------------------------------------------------------------------------------
Total Assets $74,981 $69,917 $65,765
==================================================================================
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $4,178 $5,180 $ 5,710
Accounts payable and accrued liabilities 13,253 12,317 10,500
Dividends payable 809 771 734
- ----------------------------------------------------------------------------------
Total current liabilities 18,240 18,268 16,944
- ----------------------------------------------------------------------------------
Long-Term Debt 17,170 17,787 16,536
- ----------------------------------------------------------------------------------
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 2,861 2,116 994
Postemployment benefit obligation 9,193 9,513 9,979
Unamortized investment tax credits 474 570 685
Other noncurrent liabilities 3,269 2,800 2,893
- ----------------------------------------------------------------------------------
Total deferred credits and other
noncurrent liabilities 15,797 14,999 14,551
- ----------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable
preferred securities of subsidiary trusts 1,000 1,000 1,000
- ----------------------------------------------------------------------------------
Shareowners' Equity
Common shares issued ($1 par value) 3,434 3,428 3,430
Capital in excess of par value 12,439 12,375 12,468
Retained earnings 8,948 4,429 3,338
Guaranteed obligations of employee stock
ownership plans (261) (409) (535)
Deferred Compensation - LESOP (82) (119) (161)
Treasury shares (at cost) (882) (730) (985)
Accumulated other comprehensive income (822) (1,111) (821)
- ----------------------------------------------------------------------------------
Total shareowners' equity 22,774 17,863 16,734
- ----------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity $74,981 $69,917 $65,765
==================================================================================
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ---------------------------------------------------------------------------------
Pro Forma Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
- ---------------------------------------------------------------------------------
<CAPTION>
Unaudited Nine Six Three
months months months
ended ended ended
9/30/99 6/30/99 3/31/99
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 5,053 $ 3,918 $ 1,980
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,378 3,935 1,942
Undistributed earnings from investments
in equity affiliates (343) (150) (155)
Provision for uncollectible accounts 824 403 206
Amortization of investment tax credits (64) (41) (21)
Deferred income tax expense 662 324 44
Cumulative effect of accounting change,
net of tax (207) (207) (207)
Other - net (397) (231) (312)
- ---------------------------------------------------------------------------------
Total adjustments 6,853 4,033 1,497
- ---------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 11,906 7,951 3,477
- ---------------------------------------------------------------------------------
Investing Activities
Construction and capital expenditures (7,006) (4,483) (2,139)
Investments in affiliates (32) (38) (30)
Purchase of short-term investments (26) - -
Proceeds from short-term investments 6 5 5
Dispositions 1,448 1,427 862
Acquisitions (4,792) (3,653) (8)
Other 2 2 1
- ---------------------------------------------------------------------------------
Net Cash Used in Investing Activities (10,400) (6,740) (1,309)
- ---------------------------------------------------------------------------------
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less 2,214 512 (651)
Issuance of long-term debt 738 738 5
Repayment of long-term debt (2,140) (406) (128)
Issuance of preferred shares in subsidiaries 3 3 3
Purchase of treasury shares (428) (258) (152)
Issuance of treasury shares 504 376 175
Dividends paid (2,464) (1,635) (805)
- ---------------------------------------------------------------------------------
Net Cash Used in Financing Activities (1,573) (670) (1,553)
- ---------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (67) 541 615
- ---------------------------------------------------------------------------------
Cash and cash equivalents beginning of year 599 599 599
- ---------------------------------------------------------------------------------
Cash and Cash Equivalents End of Period $ 532 $ 1,140 $ 1,214
=================================================================================
</TABLE>
<PAGE>
<TABLE>
SBC Communications Inc.
- ----------------------------------------------------------------------------
Pro Forma Consolidated Statements of Cash Flows
Dollars in millions, increase (decrease) in cash and cash equivalents
- ----------------------------------------------------------------------------
<CAPTION>
Unaudited Twelve months ended
12/31/98 12/31/97 12/31/96
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $7,690 $4,087 $ 5,795
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,841 7,777 6,808
Undistributed earnings from investments
in equity affiliates (256) (172) (248)
Provision for uncollectible accounts 898 938 875
Amortization of investment tax credits (96) (115) (119)
Deferred income tax expense 840 553 721
Gain on sale of TCNZ shares (1,543) - -
Early extinguishment of debt, net of tax 60 - -
Cumulative effect of accounting
change, net of tax (15) - (90)
Other - net (1,938) (887) (1,983)
- ----------------------------------------------------------------------------
Total adjustments 5,791 8,094 5,964
- ----------------------------------------------------------------------------
Net Cash Provided by Operating Activities 13,481 12,181 11,759
- ----------------------------------------------------------------------------
Investing Activities
Construction and capital expenditures (8,882) (8,856) (8,304)
Investments in affiliates (77) (29) (76)
Purchase of short-term investments (42) (916) (1,005)
Proceeds from short-term investments 355 1,029 816
Dispositions 2,727 1,000 152
Acquisitions (3,261) (2,190) (1,364)
Other 11 13 19
- ----------------------------------------------------------------------------
Net Cash Used in Investing Activities (9,169) (9,949) (9,762)
- ----------------------------------------------------------------------------
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less (588) (761) (171)
Issuance of other short-term borrowings 2 1,079 209
Repayment of other short-term borrowings (8) (805) (134)
Issuance of long-term debt 2,890 2,246 1,258
Repayment of long-term debt (2,860) (999) (577)
Early extinguishment of debt and related call
premiums (765) (6) -
Issuance of trust originated preferred securities - - 1,000
Purchase of fractional shares - (15) -
Issuance of common shares 64 - 111
Issuance of preferred shares 322 250 -
Purchase of treasury shares (997) (689) (1,142)
Issuance of treasury shares 709 623 247
Dividends paid (3,131) (2,966) (2,936)
Other - (9) (101)
- ----------------------------------------------------------------------------
Net Cash Used in Financing Activities (4,362) (2,052) (2,236)
- ----------------------------------------------------------------------------
Net increase in cash and cash equivalents (50) 180 (239)
- ----------------------------------------------------------------------------
Cash and cash equivalents beginning of year 649 469 708
- ----------------------------------------------------------------------------
Cash and Cash Equivalents End of Period $ 599 $ 649 $ 469
============================================================================
</TABLE>
