United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: April 25, 2000
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 exhibits are a press release issued by SBC Communications Inc. on
April 25, 2000 announcing first quarter earnings for 2000 and unaudited pro
forma condensed financial statements and notes thereto displaying the effect of
the wireless joint venture with BellSouth on the financial statements of SBC.
Item 7. Financial Statements and Exhibits
99-a April 25, 2000 Press Release-SBC First-Quarter EPS Grows 14.3% to $0.56
Compared with $0.49 a Year Ago, Before One-Time Items
99-b SBC Communications Inc. Unaudited Pro Forma Condensed Financial
Statements
<PAGE>
EXHIBIT INDEX
Exhibit Number
99-a April 25, 2000 Press Release-SBC First-Quarter EPS Grows 14.3% to $0.56
Compared with $0.49 a Year Ago, Before One-Time Items
99-b SBC Communications Inc. Unaudited Pro Forma Condensed Financial
Statements
<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/ Robert B. Pickering
-----------------------------
Robert B. Pickering
Senior Vice President-Finance
(Corporate)
April 25, 2000
Exhibit 99-a
SBC First-Quarter EPS Grows 14.3% to $0.56
Compared with $0.49 a Year Ago, Before One-Time Items
Revenues Increase 8.4% Fueled by Strong First-Quarter Growth in
Data Communications and Wireless Operations
SAN ANTONIO, April 25, 2000 - SBC Communications Inc. (NYSE: SBC) today
reported strong first-quarter growth driven by continued rapid expansion in its
data communications, wireless and international operations. First-quarter
earnings before one-time items grew 11.9 percent to $1.9 billion, from $1.7
billion in the first quarter of last year, and diluted earnings per share before
one-time items increased 14.3 percent to $0.56, compared with $0.49 during the
first quarter of 1999. First-quarter revenues grew 8.4 percent to $12.6 billion.
Highlights of SBC's first-quarter growth include:
o 40.8 percent growth in data revenues, to $1.6 billion.
o 301,000 total Digital Subscriber Lines (DSL) sold at the end of the
quarter, up from 169,000 at year-end 1999.
o 30.1 percent growth in domestic wireless subscriber revenues to
$1.5 billion.
o A 338,000 net gain in wireless customers before additions by
acquisition.
o 19.2 percent growth in equity income from international investments.
"SBC's first-quarter performance demonstrates that our planning and hard
work are paying off as we successfully execute on our major growth initiatives
to take advantage of increased worldwide demand for telecommunications
services," said Edward E. Whitacre Jr., chairman and CEO. "Data, wireless and
international operations together with our core wireline business delivered
strong earnings and cash flows."
<PAGE>
Page 2/SBC First-Quarter Earnings
Whitacre noted that recently SBC took three major strategic steps: the
announcement of a joint venture with BellSouth to form the second-largest U.S.
wireless company; the acquisition of Sterling Commerce, one of the world's
leading providers of business-to-business e-commerce solutions; and a strategic
marketing and sales alliance with Cisco Systems designed to accelerate delivery
of broadband services to customers.
"Our wireless joint venture will make SBC an even stronger national
leader in the exploding wireless voice and data businesses. Adding Sterling
Commerce immediately established SBC as a leader in the fast-growing,
business-to-business e-commerce market, and the Cisco alliance further enhances
SBC's relationship with one of the world's premier Internet companies," Whitacre
said. "These steps add depth and breadth to SBC's product portfolio while
further strengthening our ability to offer business and residential customers
the voice and data communications services they need, all from one company. SBC
will continue to create and capitalize on growth opportunities to build customer
and shareowner value."
Whitacre reiterated SBC's goal of delivering double-digit revenue growth
and midteens earnings growth beginning in 2001.
Additional first-quarter highlights:
o Data Services: Data services revenue growth continues to be driven
by business customers' strong demand for high-capacity data transport
services. SBC's strong first-quarter DSL growth was fueled by customer
demand. DSL lines in service increased to 201,000 at the end of the first
quarter, up about 75 percent from year-end 1999. SBC's DSL installation
rate has climbed significantly over the past few months as the service has
been launched in new markets and more technicians have been trained.
At the end of March, SBC's per-day installation run rate was approximately
2,600, up from about 1,100 three months earlier. As of April 25, the
per-day installation run rate had risen to about 3,000. SBC's
first-quarter market surveys confirm that the company already has
achieved No. 1 market share in five of its seven top markets in California
and the Southwest, despite a head start by cable modem competitors.
<PAGE>
Page 3/SBC First-Quarter Earnings
o Wireless: SBC's net gain of 338,000 domestic wireless subscribers marked one
of its best internally generated first-quarter customer gains in recent
years. This total excludes customers added through SBC's March acquisition
of Radiofone, which has customers in Louisiana and Michigan. SBC ended the
quarter with 11.7 million domestic wireless subscribers, up 29.7 percent
compared with the year-ago quarter. On April 5, SBC announced a joint
venture with BellSouth to form the second-largest U.S. wireless company,
which will cover 175 million POPs and serve more than 16 million
subscribers.
o International: SBC's broad international portfolio continues to be a
powerful contributor to earnings growth. First-quarter equity in net income
from SBC's international investments increased 19.2 percent over the
comparable quarter a year ago, to $199 million. On a proportionate
ownership basis, total revenues associated with SBC's international
holdings during the first quarter increased 56 percent to $1.9 billion.
Companies including Bell Canada, Telmex, Tele Danmark and Belgacom continue
to contribute to SBC's international performance. SBC now has investments
in 22 countries beyond the United States, and is the largest non-European
investor in European telecommunications.
o National Expansion: During the first quarter, SBC announced the acceleration
of its national expansion into 30 new metropolitan area markets beyond its
traditional regions. SBC now plans to enter nine of the 30 markets this year
and the remaining 21 markets by year-end 2001, several months faster than
originally planned. The national expansion will give SBC a local presence in
all of the top 50 U.S. markets. The company targets the initiative to add an
incremental $1 billion in revenue by 2002.
In early April, SBC supplemented its application to the Federal
Communications Commission to provide long-distance service in Texas with
additional information. While SBC believes that its original application was the
most comprehensive the FCC has ever received, SBC supplemented its original
application so that regulators have the most current data before ruling on the
application, which is expected to occur by early July.
<PAGE>
Page 4/ SBC First-Quarter Earnings
Results including one-time items
SBC's first-quarter earnings before one-time items exclude a number of
items, including costs related to the Ameritech merger integration process and
the acquisition of Sterling Commerce.
Including one-time items, SBC's reported net income for the first
quarter of 2000 was $1.8 billion, or $0.53 diluted earnings per share, compared
with $2.0 billion, or $0.51 per share, in the first quarter of 1999.
Reported net income for the first quarter of 2000 includes the following
one-time items: settlement gains of approximately $161 million primarily related
to employees who terminated employment during 1999; write-offs of approximately
$132 million related to in-process research and development resulting from the
acquisition of Sterling Commerce; and costs of approximately $117 million
associated with strategic initiatives and adjustments resulting from the merger
integration process with Ameritech. Net income for the first quarter of 1999
included a gain of $207 million from changing directory accounting.
Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release 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 news release based
on new information or otherwise.
SBC Communications Inc. (www.sbc.com) is a global communications leader. Through
its subsidiaries' trusted brands - Southwestern Bell, Ameritech, Pacific Bell,
SBC Telecom, Nevada Bell, SNET and Cellular One - and world-class network, SBC's
subsidiaries provide local and long-distance phone service, wireless and data
communications, paging, high-speed Internet access and messaging, cable and
satellite television, security services and telecommunications equipment, as
well as directory advertising and publishing. In the United States, the company
currently has 94.1 million voice grade equivalent lines, 11.7 million wireless
customers and is undertaking a national expansion program that will bring SBC
service to an additional 30 markets. Internationally, SBC has telecommunications
investments in 22 countries. With more than 208,000 employees, SBC is the
13th-largest employer in the U.S., with annual revenues that rank it among the
largest Fortune 500 companies.
For more detailed information on SBC's first-quarter results, visit our website
at http://www.sbc.com/Investor/earnings.html.
- Table attached -
<PAGE>
<TABLE>
SBC Communications Inc.
Financial Summary and Comparisons
(dollars in millions, except per share amounts)
(unaudited)
-- FIRST-QUARTER RESULTS --
EXCLUDING ONE-TIME ITEMS: 2000 1999 CHANGE
- ------------------------- ---- ---- ------
<S> <C> <C> <C>
Operating revenues $12,582 $11,609 8.4%
Operating expenses $9,483 $8,674 9.3%
Income before cumulative effect of
accounting change $1,910 $1,707 11.9%
Diluted earnings per share before
cumulative effect of accounting change $0.56 $0.49 14.3%
AS REPORTED
Operating revenues $12,582 $11,819 6.5%
Operating expenses $9,506 $8,768 8.4%
Income before cumulative effect of
accounting change $1,822 $1,773 2.8%
Cumulative effect of accounting change,
net of tax 1 - $207 -
Net Income $1,822 $1,980 -8.0%
Diluted earnings per share before
cumulative effect of accounting change $0.53 $0.51 3.9%
Weighted average common
shares outstanding (in millions) 3,396 3,408 -0.4%
Weighted average common shares
outstanding with dilution (in millions) 3,432 3,458 -0.8%
1 Change in directory accounting at Ameritech Corporation during the first
quarter of 1999.
</TABLE>
Exhibit 99-b
Unaudited Pro Forma Condensed Financial Statements
SBC Communications Inc.
In April 2000, SBC Communications Inc. (SBC) and BellSouth Corporation
(BellSouth) announced a joint venture agreement to combine their domestic
wireless operations. Ownership in the new company will be 60% for SBC and 40%
for BellSouth, based on the value of the assets both are contributing to the
venture. The new wireless company will be managed independently, with a
four-seat board of directors (two seats from each company). The transaction
requires the approval of both the Federal Communications Commission and the
European Union, as well as the review of the United States Department of
Justice. Divestitures of some overlapping properties will be required. The
companies expect to close the transaction by the end of the fourth quarter of
2000.
The unaudited pro forma condensed financial statements and notes thereto are
presented for purposes of displaying the effect of the wireless joint venture on
the financial statements of SBC assuming the joint venture had been consummated
on the dates indicated and for the periods presented. The unaudited pro forma
condensed balance sheets reflect the historical balance sheets of SBC and its
domestic wireless operations at March 31, 2000 and December 31, 1999. The
unaudited pro forma condensed income statements reflect the historical operating
results of SBC and its domestic wireless operations for the three months ended
March 31, 2000 and for the years ended December 31, 1999 and 1998. The unaudited
pro forma condensed income statements assume that SBC's 60% equity in net income
from the joint venture would be materially the same as its historical earnings
from its domestic wireless operations.
The unaudited pro forma condensed financial statements do not reflect pro forma
results of other SBC acquisitions and dispositions which occurred during the
periods presented, nor do they reflect the dispositions of overlapping cellular
licenses that may be required as a result of the joint venture, as the nature of
the dispositions or the consideration which may be received is unknown. The
unaudited pro forma condensed financial statements are not necessarily
indicative of the results of operations or financial position that actually
would occur had the joint venture been consummated on the dates indicated or
that may be obtained in the future. The unaudited pro forma condensed financial
statements should be read in conjunction with the historical consolidated
financial statements and notes thereto included in SBC's 1999 Annual Report to
Shareowners incorporated by reference in this Form 8-K.
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------
SBC Communications Inc.
Unaudited Pro Forma Condensed Statement of Income
For the Three Months Ended March 31, 2000
- -----------------------------------------------------------------------------------------------------------
Historical Pro Forma SBC
SBC Adjustments Pro Forma
(in millions, except per share data)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total operating revenues $ 12,582 (1,861) $ 10,721
Total operating expenses 9,506 (1,451) 8,055
- -----------------------------------------------------------------------------------------------------------
Operating Income 3,076 (410) 2,666
- -----------------------------------------------------------------------------------------------------------
Interest Expense (356) 4 (352)
Equity in net income of affiliates 200 222 2a 422
Other income(expense) - net 41 35 76
- -----------------------------------------------------------------------------------------------------------
Income Before Income Taxes 2,961 (149) 2,812
- -----------------------------------------------------------------------------------------------------------
Income taxes 1,139 (149) 990
- -----------------------------------------------------------------------------------------------------------
Net Income $ 1,822 - $ 1,822
- -----------------------------------------------------------------------------------------------------------
Earnings Per Common Share-Basic:
Net Income $ 0.54 $ 0.54
- -----------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares Outstanding 3,396 3,396
- -----------------------------------------------------------------------------------------------------------
Earnings Per Common Share-Assuming Dilution:
Net Income $ 0.53 $ 0.53
- -----------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares Outstanding 3,432 3,432
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------
SBC Communications Inc.
Unaudited Pro Forma Condensed Statement of Income
For the Year Ended December 31, 1999
- -----------------------------------------------------------------------------------------------------------
Historical Pro Forma SBC
SBC Adjustments Pro Forma
(in millions, except per share data)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total operating revenues $ 49,489 (7,450) $ 42,039
Total operating expenses 37,891 (6,041) 31,850
- -----------------------------------------------------------------------------------------------------------
Operating Income 11,598 (1,409) 10,189
- -----------------------------------------------------------------------------------------------------------
Interest Expense (1,430) 18 (1,412)
Equity in net income of affiliates 912 700 2a 1,612
Other income(expense) - net (227) 197 (30)
- -----------------------------------------------------------------------------------------------------------
Income Before Income Taxes, Extraordinary Gain
and Cumulative Effect of Accounting Change 10,853 (494) 10,359
- -----------------------------------------------------------------------------------------------------------
Income taxes 4,280 (494) 3,786
- -----------------------------------------------------------------------------------------------------------
Income Before Extraordinary Gain and Cumulative
Effect of Accounting Change 6,573 - 6,573
- -----------------------------------------------------------------------------------------------------------
Extraordinary gain, net of tax 1,379 - 2b 1,379
- -----------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change, net of tax 207 - 207
- -----------------------------------------------------------------------------------------------------------
Net Income $ 8,159 - $ 8,159
- -----------------------------------------------------------------------------------------------------------
Earnings Per Common Share-Basic:
Income Before Extraordinary Gain and Cumulative
Effect of Accounting Change $ 1.93 $ 1.93
- -----------------------------------------------------------------------------------------------------------
Net Income $ 2.39 $ 2.39
- -----------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares Outstanding 3,409 3,409
- -----------------------------------------------------------------------------------------------------------
Earnings Per Common Share-Assuming Dilution:
Income Before Extraordinary Gain and Cumulative
Effect of Accounting Change $ 1.90 $ 1.90
- -----------------------------------------------------------------------------------------------------------
Net Income $ 2.36 $ 2.36
- -----------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares Outstanding 3,458 3,458
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------
SBC Communications Inc.
Unaudited Pro Forma Condensed Statement of Income
For the Year Ended December 31, 1998
- -----------------------------------------------------------------------------------------------------------
Historical Pro Forma SBC
SBC Adjustments Pro Forma
(in millions, except per share data)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total operating revenues $ 46,207 (6,519) $ 39,688
Total operating expenses 34,984 (5,335) 29,649
- -----------------------------------------------------------------------------------------------------------
Operating Income 11,223 (1,184) 10,039
- -----------------------------------------------------------------------------------------------------------
Interest Expense (1,605) 5 (1,600)
Equity in net income of affiliates 613 556 2a 1,169
Other income(expense) - net 1,884 235 2,119
- -----------------------------------------------------------------------------------------------------------
Income Before Income Taxes, Extraordinary Loss
and Cumulative Effect of Accounting Change 12,115 (388) 11,727
- -----------------------------------------------------------------------------------------------------------
Income taxes 4,380 (388) 3,992
- -----------------------------------------------------------------------------------------------------------
Income Before Extraordinary Loss and Cumulative
Effect of Accounting Change 7,735 - 7,735
- -----------------------------------------------------------------------------------------------------------
Extraordinary loss, net of tax (60) - (60)
- -----------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change, net of tax 15 - 15
- -----------------------------------------------------------------------------------------------------------
Net Income $ 7,690 - $ 7,690
- -----------------------------------------------------------------------------------------------------------
Earnings Per Common Share-Basic:
Income Before Extraordinary Loss and Cumulative
Effect of Accounting Change $ 2.27 $ 2.27
- -----------------------------------------------------------------------------------------------------------
Net Income $ 2.26 $ 2.26
- -----------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares Outstanding 3,406 3,406
- -----------------------------------------------------------------------------------------------------------
Earnings Per Common Share-Assuming Dilution:
Income Before Extraordinary Loss and Cumulative
Effect of Accounting Change $ 2.24 $ 2.24
- -----------------------------------------------------------------------------------------------------------
Net Income $ 2.23 $ 2.23
- -----------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares Outstanding 3,450 3,450
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------
SBC Communications Inc.
Unaudited Pro Forma Condensed Balance Sheet
As of March 31, 2000
- ------------------------------------------------------------------------------------------------------------
Historical Pro Forma SBC
SBC Adjustments Pro Forma
(in millions)
- ------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 678 $ (73) $ 605
Accounts receivable - net 8,759 (802) 7,957
Other current assets 2,549 (235) 2,314
- ------------------------------------------------------------------------------------------------------------
Total current assets 11,986 (1,110) 10,876
- ------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment - Net 47,132 (4,259) 42,873
- ------------------------------------------------------------------------------------------------------------
Intangible Assets - Net 11,194 (6,497) 4,697
- ------------------------------------------------------------------------------------------------------------
Investments in Equity Affiliates 11,084 4,917 2c 16,001
- ------------------------------------------------------------------------------------------------------------
Other Assets 8,005 (188) 7,817
- ------------------------------------------------------------------------------------------------------------
Total Assets $ 89,401 $ (7,137) $ 82,264
- ------------------------------------------------------------------------------------------------------------
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 8,356 $ (2,161) $ 6,195
Other current laibilities 15,313 (1,456) 13,857
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 23,669 (3,617) 20,052
- ------------------------------------------------------------------------------------------------------------
Long-Term Debt 16,973 (564) 16,409
- ------------------------------------------------------------------------------------------------------------
Postemployment benefit obligation 9,647 (109) 9,538
- ------------------------------------------------------------------------------------------------------------
Other noncurrent liabilities 10,181 (2,847) 7,334
- ------------------------------------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable preferred
securities of subsidiary trusts* 1,000 - 1,000
- ------------------------------------------------------------------------------------------------------------
Shareowners' Equity
Common shares 3,433 - 3,433
Capital in excess of par value 12,544 - 12,544
Retained earnings 14,774 - 14,774
Guaranteed obligations of employee stock ownership plans (58) - (58)
Deferred compensation - LESOP (66) - (66)
Treasury shares (at cost) (1,535) - (1,535)
Accumulated other comprehensive income (1,161) - (1,161)
- ------------------------------------------------------------------------------------------------------------
Total shareowners' equity 27,931 - 27,931
- ------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity $ 89,401 $ (7,137) $ 82,264
- ------------------------------------------------------------------------------------------------------------
* The trusts contain assets of $1,030 in principal amount of the Subordinated Debentures of Pacific Telesis Group.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------
SBC Communications Inc.
Unaudited Pro Forma Condensed Balance Sheet
As of December 31, 1999
- ------------------------------------------------------------------------------------------------------------
Historical Pro Forma SBC
SBC Adjustments Pro Forma
(in millions)
- ------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 495 $ (59) $ 436
Accounts receivable - net 9,378 (897) 8,481
Other current assets 2,057 (180) 1,877
- ------------------------------------------------------------------------------------------------------------
Total current assets 11,930 (1,136) 10,794
- ------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment - Net 46,571 (4,231) 42,340
- ------------------------------------------------------------------------------------------------------------
Intangible Assets - Net 6,796 (5,684) 1,112
- ------------------------------------------------------------------------------------------------------------
Investments in Equity Affiliates 10,648 4,808 2c 15,456
- ------------------------------------------------------------------------------------------------------------
Other Assets 7,270 (298) 6,972
- ------------------------------------------------------------------------------------------------------------
Total Assets $ 83,215 $ (6,541) $ 76,674
- ------------------------------------------------------------------------------------------------------------
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 3,374 $ (798) $ 2,576
Other current laibilities 15,939 (2,709) 13,230
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 19,313 (3,507) 15,806
- ------------------------------------------------------------------------------------------------------------
Long-Term Debt 17,475 (580) 16,895
- ------------------------------------------------------------------------------------------------------------
Postemployment benefit obligation 9,612 (103) 9,509
- ------------------------------------------------------------------------------------------------------------
Other noncurrent liabilities 9,089 (2,351) 6,738
- ------------------------------------------------------------------------------------------------------------
Corporation-obligated mandatorily redeemable preferred
securities of subsidiary trusts* 1,000 - 1,000
- ------------------------------------------------------------------------------------------------------------
Shareowners' Equity
Common shares 3,433 - 3,433
Capital in excess of par value 12,453 - 12,453
Retained earnings 13,798 - 13,798
Guaranteed obligations of employee stock ownership plans (106) - (106)
Deferred compensation - LESOP (73) - (73)
Treasury shares (at cost) (1,717) - (1,717)
Accumulated other comprehensive income (1,062) - (1,062)
- ------------------------------------------------------------------------------------------------------------
Total shareowners' equity 26,726 - 26,726
- ------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareowners' Equity $ 83,215 $ (6,541) $ 76,674
- ------------------------------------------------------------------------------------------------------------
* The trusts contain assets of $1,030 in principal amount of the Subordinated Debentures of Pacific Telesis Group.
</TABLE>
<PAGE>
Notes To Unaudited Pro Forma Condensed Financial Statements
Note 1 - Basis of Presentation
The accompanying unaudited pro forma condensed financial statements include the
historical financial statements of SBC Communications Inc. (SBC) and its
domestic wireless operations and are intended to reflect the impact of the
wireless joint venture with BellSouth Corporation (BellSouth) on SBC's
historical financial statements. In April 2000, SBC and BellSouth announced a
joint venture agreement to combine their domestic wireless operations. Ownership
in the new company will be 60% for SBC and 40% for BellSouth, based on the value
of the assets both are contributing to the venture. The new wireless company
will be managed independently with a four-seat board of directors (two seats
from each company). The transaction requires approval of the Federal
Communications Commission and the European Union, and the review of the United
States Department of Justice. Divestitures of some overlapping properties will
be required. The companies expect to close the transaction by the end of the
fourth quarter of 2000.
The accompanying unaudited pro forma condensed financial statements reflect the
joint venture as if it had been in effect on January 1, 2000, 1999 and 1998. The
unaudited pro forma condensed income statements assume that SBC's 60% equity in
net income from the joint venture would be materially the same as its historical
earnings from its domestic wireless operations. The unaudited pro forma
condensed financial statements do not reflect pro forma results of other SBC
acquisitions and dispositions which occurred during the periods presented, nor
do they reflect the dispositions of overlapping cellular licenses that may be
required as a result of the joint venture, as the nature of the dispositions or
the consideration which may be received is unknown. The unaudited pro forma
condensed financial statements are not necessarily indicative of the results of
operations or financial position that actually would occur had the joint venture
been consummated on the dates indicated or that may be obtained in the future.
The results for the interim periods are not necessarily indicative of results
for the full year. The unaudited pro forma condensed financial statements should
be read in conjunction with the historical consolidated financial statements and
notes thereto included in SBC's 1999 Annual Report to Shareowners incorporated
by reference in this Form 8-K.
Note 2 - Pro Forma Adjustments
a. Equity in net income of affiliates - Equity in net income earned from
the joint venture is assumed to be the same as SBC's historical domestic
wireless earnings.
b. Extraordinary gain - The 1999 extraordinary gain on the required
disposition of 20 Midwestern cellular properties was reported as an
extraordinary item because it was a condition of the Ameritech merger
and was material to SBC.
c. Investments in Equity Affiliates - SBC's investment in the joint venture
is assumed to be the same as SBC's historical domestic wireless assets.
