1
SBC COMMUNICATIONS INC.
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CONSOLIDATED STATEMENTS OF INCOME
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Dollars in millions except per share amounts
(Unaudited)
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Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
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Operating Revenues
Voice $ 5,487 $ 6,169 $ 16,857 $ 18,805
Data 2,576 2,441 7,546 7,257
Long-distance voice 668 594 1,858 1,773
Directory advertising 1,077 868 3,233 2,640
Other 431 484 1,282 1,446
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Total operating revenues 10,239 10,556 30,776 31,921
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Operating Expenses
Cost of sales (exclusive of depreciation and amortization
shown separately below) 4,244 4,136 12,320 12,142
Selling, general and administrative 2,433 2,243 7,274 6,964
Depreciation and amortization 1,952 2,148 5,925 6,440
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Total operating expenses 8,629 8,527 25,519 25,546
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Operating Income 1,610 2,029 5,257 6,375
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Other Income (Expense)
Interest expense (280) (356) (972) (1,046)
Interest income 126 137 405 427
Equity in net income of affiliates 337 729 1,173 1,616
Other income (expense) - net 22 2 1,687 227
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Total other income (expense) 205 512 2,293 1,224
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Income Before Income Taxes 1,815 2,541 7,550 7,599
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Income taxes 599 832 2,491 2,481
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Income Before Cumulative Effect
of Accounting Changes 1,216 1,709 5,059 5,118
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Cumulative effect of accounting changes, net of tax - - 2,548 (1,820)
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Net Income $ 1,216 $ 1,709 $ 7,607 $ 3,298
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Earnings Per Common Share:
Income Before Cumulative Effect
of Accounting Changes $ 0.37 $ 0.51 $ 1.52 $ 1.54
Net Income $ 0.37 $ 0.51 $ 2.29 $ 0.99
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Earnings Per Common Share - Assuming Dilution:
Income Before Cumulative Effect
of Accounting Changes $ 0.37 $ 0.51 $ 1.52 $ 1.53
Net Income $ 0.37 $ 0.51 $ 2.28 $ 0.99
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Weighted Average Number of Common
Shares Outstanding (in millions) 3,331 3,336 3,333 3,353
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SBC COMMUNICATIONS INC.
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Statements of Segment Income
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Dollars in millions
Unaudited
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Three Months Ended Nine Months Ended
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Wireline 9/30/03 9/30/02 % Chg 9/30/03 9/30/02 % Chg
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Segment Operating Revenues
Voice $ 5,472 $ 6,158 -11.1% $ 16,817 $ 8,780 -10.5%
Data 2,576 2,441 5.5% 7,546 7,257 4.0%
Long-distance voice 668 594 12.5% 1,858 1,773 4.8%
Other 410 456 -10.1% 1,234 1,357 -9.1%
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Total Segment Operating Revenues 9,126 9,649 -5.4% 27,455 29,167 -5.9%
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Segment Operating Expenses
Cost of sales 4,024 3,958 1.7% 11,691 11,623 0.6%
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Selling, general and administrative
Selling 1,499 1,450 3.4% 4,645 4,464 4.1%
General and administrative 645 616 4.7% 1,833 1,788 2.5%
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Selling, general and administrative 2,144 2,066 3.8% 6,478 6,252 3.6%
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Depreciation and amortization 1,928 2,117 -8.9% 5,850 6,335 -7.7%
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Total Segment Operating Expenses 8,096 8,141 -0.6% 24,019 24,210 -0.8%
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Segment Income $ 1,030 $ 1,508 -31.7% $ 3,436 $ 4,957 -30.7%
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Cingular *
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Segment Operating Revenues
Service revenues $ 3,571 $ 3,525 1.3% $ 10,448 $10,333 1.1%
Equipment sales 383 254 50.8% 882 737 19.7%
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Total Segment Operating Revenues 3,954 3,779 4.6% 11,330 11,070 2.3%
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Segment Operating Expenses
Cost of services and equipment sales 1,504 1,249 20.4% 3,926 3,572 9.9%
Selling, general and administrative 1,441 1,436 0.3% 3,927 4,110 -4.5%
Depreciation and amortization 521 478 9.0% 1,517 1,383 9.7%
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Total Segment Operating Expenses 3,466 3,163 9.6% 9,370 9,065 3.4%
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Segment Operating Income 488 616 -20.8% 1,960 2,005 -2.2%
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Other Income (Expense) - Net (305) (320) 4.7% (934) (938) 0.4%
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Segment Income $ 183 $ 296 -38.2% $ 1,026 $ 1,067 -3.8%
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* Results reflect 100% of Cingular Wireless' actual results.
Directory
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Segment Operating Revenues $ 1,056 $ 847 24.7% $ 3,184 $ 2,602 22.4%
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Segment Operating Expenses
Cost of sales 228 196 16.3% 668 585 14.2%
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Selling, general and administrative
Selling 155 127 22.0% 468 393 19.1%
General and administrative 94 91 3.3% 297 251 18.3%
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Selling, general and administrative 249 218 14.2% 765 644 18.8%
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Depreciation and amortization 5 7 -28.6% 16 23 -30.4%
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Total Segment Operating Expenses 482 421 14.5% 1,449 1,252 15.7%
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Segment Income $ 574 $ 426 34.7% $ 1,735 $ 1,350 28.5%
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International
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Segment Operating Revenues $ 9 $ 9 - $ 23 $ 26 -11.5%
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Segment Operating Expenses 10 17 -41.2% 42 58 -27.6%
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Segment Operating Income (Loss) (1) (8) 87.5% (19) (32) 40.6%
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Equity in Net Income of Affiliates 227 547 -58.5% 555 962 -42.3%
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Segment Income $ 226 $ 539 -58.1% $ 536 $ 930 -42.4%
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SBC COMMUNICATIONS INC.
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CONSOLIDATED BALANCE SHEETS
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Dollars in millions except per share amounts
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September 30, December 31,
2003 2002
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Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 4,940 $ 3,567
Accounts receivable - net of allowances for
uncollectibles of $1,056 and $1,427 6,140 8,540
Prepaid expenses 1,002 687
Deferred income taxes 1,511 704
Other current assets 1,297 591
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Total current assets 14,890 14,089
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Property, plant and equipment - at cost 132,637 131,755
Less: accumulated depreciation and amortization 80,654 83,265
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Property, Plant and Equipment - Net 51,983 48,490
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Goodwill - Net 1,622 1,643
Investments in Equity Affiliates 11,800 10,470
Notes Receivable from Cingular Wireless 5,885 5,885
Other Assets 15,128 14,480
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Total Assets $ 101,308 $ 95,057
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Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year $ 1,900 $ 3,505
Accounts payable and accrued liabilities 9,339 9,413
Accrued taxes 3,213 870
Dividends payable 1,267 895
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Total current liabilities 15,719 14,683
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Long-Term Debt 16,357 18,536
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Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes 13,186 10,726
Postemployment benefit obligation 14,340 14,094
Unamortized investment tax credits 216 244
Other noncurrent liabilities 3,598 3,575
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Total deferred credits and other noncurrent liabilities 31,340 28,639
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Shareowners' Equity
Common shares issued ($1 par value) 3,433 3,433
Capital in excess of par value 13,015 12,999
Retained earnings 27,769 23,802
Treasury shares (at cost) (4,596) (4,584)
Additional minimum pension liability adjustment (1,473) (1,473)
Accumulated other comprehensive loss (256) (978)
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Total shareowners' equity 37,892 33,199
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Total Liabilities and Shareowners' Equity $ 101,308 $ 95,057
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SBC COMMUNICATIONS INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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Dollars in millions, increase (decrease) in cash and cash equivalents
(Unaudited)
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Nine months ended
September 30,
2003 2002
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Operating Activities
Net income $ 7,607 $ 3,298
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,925 6,440
Undistributed earnings from investments in equity affiliates (913) (1,400)
Provision for uncollectible accounts 718 1,071
Amortization of investment tax credits (28) (26)
Deferred income tax expense 1,110 829
Gain on sales of investments (1,678) (316)
Cumulative effect of accounting changes, net of tax (2,548) 1,820
Retirement benefit funding (945) -
Changes in operating assets and liabilities:
Accounts receivable 35 (43)
Other current assets (290) 250
Accounts payable and accrued liabilities 1,723 (1,474)
Other - net (633) 293
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Total adjustments 2,476 7,444
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Net Cash Provided by Operating Activities 10,083 10,742
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Investing Activities
Construction and capital expenditures (3,235) (4,998)
Investments in affiliates - (138)
Purchases of marketable securities (578) -
Maturities of marketable securities 164 -
Purchases of other investments (436) -
Dispositions 2,855 1,166
Acquisitions - (571)
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Net Cash Provided by (Used in) Investing Activities (1,230) (4,541)
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Financing Activities
Net change in short-term borrowings with original
maturities of three months or less (77) (415)
Issuance of other short-term borrowings - 4,565
Repayment of other short-term borrowings (1,070) (7,357)
Issuance of long-term debt - 1,966
Repayment of long-term debt (2,826) (865)
Purchase of treasury shares (299) (1,398)
Issuance of treasury shares 63 126
Dividends paid (3,271) (2,660)
Other - 7
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Net Cash Used in Financing Activities (7,480) (6,031)
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Net increase (decrease) in cash and cash equivalents 1,373 170
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Cash and cash equivalents beginning of year 3,567 703
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Cash and Cash Equivalents End of Period $ 4,940 $ 873
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