AT&T (T) 8-K Results of Operations and Financial Condition

Financial Data

SBC COMMUNCIATIONS INC.

Consolidated Statements of Income

Dollars in millions except per share amounts

Unaudited          Three Months Ended             Twelve Months Ended

	12/31/2004		12/31/2003		% Chg		12/31/2004	12/31/2003		% Chg
Operating Revenues
Voice	$   5,092		$ 5,234		-2.7	%	$20,796	$ 21,986		-5.4	%
Data	2,877		2,604		10.5	%	10,984	10,150		8.2	%
Long-distance voice	868		703		23.5	%	3,297	2,561		28.7	%
Directory advertising	963		980		-1.7	%	3,832	3,894		-1.6	%
Other	487		455		7.0	%	1,878	1,907		-1.5	%
Total Operating Revenues	10,287		9,976		3.1	%	40,787	40,498		0.7	%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	4,580		4,354		5.2	%	17,383	16,739		3.8	%
Selling, general and administrative	2,596		2,507		3.6	%	9,939	9,605		3.5	%
Depreciation and amortization	1,864		1,945		-4.2	%	7,564	7,870		-3.9	%
Total Operating Expenses	9,040		8,806		2.7	%	34,886	34,214		2.0	%
Operating Income	1,247		1,170		6.6	%	5,901	6,284		-6.1	%
Interest Expense	318		269		18.2	%	1,023	1,242		-17.6	%
Interest Income	116		198		-41.4	%	492	603		-18.4	%
Equity in Net Income (Loss) of Affiliates	(193	)	80		-		978	1,253		-21.9	%
Other Income (Expense) - Net	60		132		-54.5	%	922	1,818		-49.3	%
Income Before Income Taxes	912		1,311		-30.4	%	7,270	8,716		-16.6	%
Income Taxes	158		423		-62.6	%	2,225	2,857		-22.1	%
Income From Continuing Operations	754		888		-15.1	%	5,045	5,859		-13.9	%
Income From Discontinued Operations, net of tax	-		24		-		908	112		-
Income Before Extraordinary Item and Cumulative
Effect of Accounting Changes	754		912		-17.3	%	5,953	5,971		-0.3	%
Extraordinary Item, net of tax	-		(7	)	-		-	(7	)	-
Cumulative Effect of Accounting Changes, net of tax	-		-		-		-	2,541		-
Net Income	$      754		$    905		-16.7	%	$  5,953	$   8,505		-30.0	%
Basic Earnings Per Share:
Income from Continuing Operations	$     0.23		$   0.27		-14.8	%	$    1.52	$     1.77		-14.1	%
Income Before Extraordinary Item and Cumulative
Effect of Accounting Changes	$     0.23		$   0.28		-17.9	%	$    1.80	$     1.80		-
Net Income	$     0.23		$   0.27		-14.8	%	$    1.80	$     2.56		-29.7	%
Weighted Average Common
Shares Outstanding (000,000)	3,307		3,308		-		3,310	3,318		-0.2	%
Diluted Earnings Per Share:
Income from Continuing Operations	$     0.23		$   0.27		-14.8	%	$    1.52	$     1.76		-13.6	%
Income Before Extraordinary Item and Cumulative
Effect of Accounting Changes	$     0.23		$   0.28		-17.9	%	$    1.79	$     1.80		-0.6	%
Net Income	$     0.23		$   0.27		-14.8	%	$    1.79	$     2.56		-30.1	%
Weighted Average Common
Shares Outstanding with Dilution (000,000)	3,317		3,320		-0.1	%	3,322	3,329		-0.2	%

Financial Data

SBC COMMUNCIATIONS INC.

Statements of Segment Income

Dollars in millions

Unaudited          Three Months Ended             Twelve Months Ended

Wireline	12/31/2004			12/31/2003			% Chg			12/31/2004			12/31/2003			% Chg
Segment Operating Revenues
Voice	$	5,091		$	5,234		-	2.7	%	$	20,796		$	21,986		-	5.4	%
Data		2,877			2,604			10.5	%		10,984			10,150			8.2	%
Long-distance voice		868			703			23.5	%		3,297			2,561			28.7	%
Other		470			439			7.1	%		1,810			1,843		-	1.8	%
Total Segment Operating Revenues		9,306			8,980			3.6	%		36,887			36,540			0.9	%
Segment Operating Expenses
Cost of sales		4,401			4,145			6.2	%		16,603			15,941			4.2	%
Selling, general and administrative
Selling		1,807			1,631			10.8	%		6,747			6,276			7.5	%
General and administrative		620			685		-	9.5	%		2,459			2,518		-	2.3	%
Selling, general and administrative		2,427			2,316			4.8	%		9,206			8,794			4.7	%
Depreciation and amortization		1,836			1,913		-	4.0	%		7,454			7,763		-	4.0	%
Total Segment Operating Expenses		8,664			8,374			3.5	%		33,263			32,498			2.4	%
Segment Income	$	642		$	606			5.9	%	$	3,624		$	4,042		-	10.3	%
Cingular *
Segment Operating Revenues
Service revenues	$	6,276		$	3,534			77.6	%	$	17,473		$	14,223			22.9	%
Equipment sales		806			378			-			1,963			1,260			55.8	%
Total Segment Operating Revenues		7,082			3,912			81.0	%		19,436			15,483			25.5	%
Segment Operating Expenses
Cost of services and equipment sales		2,923			1,516			92.8	%		7,487			5,683			31.7	%
Selling, general and administrative		2,946			1,495			97.1	%		7,347			5,422			35.5	%
Depreciation and amortization		1,390			572			-			3,079			2,089			47.4	%
Total Segment Operating Expenses		7,259			3,583			-			17,913			13,194			35.8	%
Segment Operating Income (Loss)		(177	)		329			-			1,523			2,289		-	33.5	%
Other Income (Expense) - Net		(387	)		(305	)	-	26.9	%		(1,360	)		(1,239	)		-9.8	%
Segment Income (Loss)	$	(564	)	$	24			-		$	163		$	1,050		-	84.5	%
* Results reflect 100% of Cingular Wireless' actual results
Directory
Segment Operating Revenues	$	953		$	948			0.5	%	$	3,759		$	3,773		-	0.4	%
Segment Operating Expenses
Cost of sales		225			219			2.7	%		890			847			5.1	%
Selling, general and administrative
Selling		115			110			4.5	%		367			412		-	10.9	%
General and administrative		93			90			3.3	%		387			378			2.4	%
Selling, general and administrative		208			200			4.0	%		754			790		-	4.6	%
Depreciation and amortization		2			5		-	60.0	%		9			21		-	57.1	%
Total Segment Operating Expenses		435			424			2.6	%		1,653			1,658		-	0.3	%
Segment Income	$	518		$	524		-	1.1	%	$	2,106		$	2,115		-	0.4	%
International
Segment Operating Revenues	$	5		$	7		-	28.6	%	$	22		$	30		-	26.7	%
Segment Operating Expenses		12			5			-			31			47		-	34.0	%
Segment Operating Income (Loss)		(7	)		2			-			(9	)		(17	)		47.1	%
Equity in Net Income of Affiliates		99			51			94.1	%		812			606			34.0	%
Segment Income	$	92		$	53			73.6	%	$	803		$	589			36.3	%

Financial Data

SBC COMMUNCIATIONS INC.

Consolidated Balance Sheets

Dollars in millions except per share amounts          12/31/2004                12/31/2003

Unaudited

Assets
Current Assets
Cash and cash equivalents	$	760		$	4,806
Short-term investments		99			378
Accounts receivable - net of allowances for
uncollectibles of $881 and $908		5,480			6,160
Prepaid expenses		746			760
Deferred income taxes		566			741
Other current assets		890			926
Assets of discontinued operations		-			252
Total current assets		8,541			14,023
Property, plant and equipment - at cost		136,177			133,923
Less: accumulated depreciation and amortization		86,131			81,795
Property, Plant and Equipment - Net		50,046			52,128
Goodwill - Net		1,625			1,611
Investments in Equity Affiliates		1,798			6,924
Investments in and Advances to Cingular Wireless		33,792			11,003
Other Assets		13,147			14,544
Total Assets	$	108,949		$	100,233
Liabilities and Shareowners' Equity
Current Liabilities
Debt maturing within one year	$	5,734		$	1,879
Accounts payable and accrued liabilities		10,038			10,658
Accrued taxes		1,487			402
Dividends payable		1,065			1,033
Liabilities of discontinued operations		610			328
Total current liabilities		18,934			14,300
Long-Term Debt		21,231			16,097
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes		15,660			15,070
Postemployment benefit obligation		9,076			12,691
Unamortized investment tax credits		188			220
Other noncurrent liabilities		3,290			3,607
Total deferred credits and other noncurrent liabilities		28,214			31,588
Shareowners' Equity
Common shares issued ($1 par value)		3,433			3,433
Capital in excess of par value		12,804			13,010
Retained earnings		29,418			27,635
Treasury shares (at cost)		(4,535	)		(4,698	)
Additional minimum pension liability adjustment		(190	)		(1,132	)
Accumulated other comprehensive income (loss)		(360	)		-
Total shareowners' equity		40,570			38,248
Total Liabilities and Shareowners' Equity	$	108,949		$	100,233

Financial Data

SBC COMMUNCIATIONS INC.

Consolidated Statements of Cash Flows

Dollars in millions, increase (decrease) in cash and cash equivlents

Unaudited          Twelve Months Ended

	12/31/2004			12/31/2003			12/31/2002
Operating Activities
Net income	$	5,953		$	8,505		$	5,653
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		7,564			7,870			8,578
Undistributed earnings from investments in equity affiliates		(647	)		(965	)		(1,586	)
Provision for uncollectible accounts		761			846			1,381
Amortization of investment tax credits		(32	)		(24	)		(30	)
Deferred income tax expense		685			3,446			2,474
Net gain on sales of investments		(939	)		(1,775	)		(794	)
Extraordinary item, net of tax		-			7			-
Cumulative effect of accounting changes, net of tax		-			(2,541	)		1,820
Income from discontinued operations, net of tax		(908	)		(112	)		(112	)
Retirement benefit funding		(2,232	)		(1,645	)		(3	)
Changes in operating assets and liabilities:
Accounts receivable		(81	)		(338	)		(530	)
Other current assets		(102	)		(14	)		472
Accounts payable and accrued liabilities		477			511			(1,919	)
Other - net		156			(414	)		(268	)
Total adjustments		4,702			4,852			9,483
Net Cash Provided by Operating Activities		10,655			13,357			15,136
Investing Activities
Construction and capital expenditures		(5,099	)		(5,219	)		(6,808	)
Investments in affiliates - net		(22,660	)		-			(139	)
Purchases of held-to-maturity securities		(135	)		(710	)		(1	)
Maturities of held-to-maturity securities		499			248			2
Dispositions		6,622			3,020			4,349
Acquisitions		(74	)		(8	)		(731	)
Proceeds from note repayment		50			-			-
Purchase of other investments		-			(436	)		-
Proceeds from sales of other investments		50			-			-
Net Cash Used in Investing Activities		(20,747	)		(3,105	)		(3,328	)
Financing Activities
Net change in short-term borrowings with
original maturities of three months or less		3,398			(78	)		(1,791	)
Issuance of other short-term borrowings		-			-			4,618
Repayment of other short-term borrowings		-			(1,070	)		(7,718	)
Issuance of long-term debt		6,461			-			2,251
Repayment of long-term debt		(881	)		(3,098	)		(1,499	)
Purchase of treasury shares		(448	)		(490	)		(1,456	)
Issuance of treasury shares		216			102			147
Issuance of preferred shares of subsidiaries		-			-			43
Dividends paid		(4,141	)		(4,539	)		(3,557	)
Other		-			-			(56	)
Net Cash Provided by (Used in) Financing Activities		4,605			(9,173	)		(9,018	)
Net increase (decrease) in cash and cash equivalents
from continuing operations		(5,487	)		1,079			2,790
Net increase in cash and cash equivalents
from discontinued operations		1,441			156			77
Net increase (decrease) in cash and cash equivalents		(4,046	)		1,235			2,867
Cash and cash equivalents beginning of year		4,806			3,571			704
Cash and Cash Equivalents End of Year	$	760		$	4,806		$	3,571

Non-GAAP Financial Data Reconciliation

SBC Communications Inc.

Adjusted Diluted EPS Reconciliation

Unaudited

2004	1Q04			2Q04			3Q04			4Q04			Total
EPS from Continuing Operations		0	.58		0	.34		0	.38		0	.23		1	.52
Adjustments:
Belgacom gain		(0	.22)			-			-			-		(0	.22)
Strike & labor settlement			-		0	.05			-			-		0	.05
Pension and severence costs			-			-			-		0	.05		0	.05
Impact of favorable tax adjustment			-			-			-		(0	.02)		(0	.02)
Cingular integration costs			-			-		0	.01		0	.03		0	.04
Cingular intangible amortization			-						-		0	.05		0	.05
Adjusted EPS from Continuing Operations		0	.36		0	.40		0	.38		0	.34		1	.47
EPS impact - income from disposed equity investments		(0	.02)		(0	.02)		(0	.01)			-		(0	.05)
Adjusted		0	.33		0	.38		0	.38		0	.34		1	.42

2003	1Q03			2Q03			3Q03			4Q03			Total
EPS from Continuing Operations		0	.73		0	.41		0	.36		0	.27		1	.76
Adjustments:
Cegetel gain		(0	.32)			-			-		-			(0	.32)
Severance costs			-			-			-		0	.03		0	.03
Belgacom pension transfer			-			-			-		0	.03		0	.03
Adjusted EPS from Continuing Operations		0	.41		0	.41		0	.36		0	.33		1	.51
EPS impact - income from disposed equity investments		(0	.02)		(0	.02)		(0	.03)		(0	.03)		(0	.10)
Adjusted		0	.39		0	.39		0	.32		0	.30		1	.41

The EPS impact of each line has been rounded to the nearest penny. Totals may not add due to rounding.

The adjustments above include items of a size and nature to be meaningful when comparing results to prior or prospective quarters. They reflect sizable gains on dispositions, costs arising from Cingular’s acquisition of AT&T Wireless, and certain employee related costs at SBC or its equity investments. Items in any individual quarter that had offsetting effects (e.g., gains and losses), were not adjusted when net impacts were small. Since Cingular integration costs are anticipated to occur in several quarters, the costs for 3Q04 have been identified in the adjustment above, even though the amounts for that quarter were not sizable. Adjustments to remove the income from equity investments completely disposed of during 2004 (TDC, Telkom South Africa, Belgacom) are also shown to be comparable to future quarters.

Non-GAAP Financial Data

SBC Communications Inc.

Supplemental Consolidated Income Statements

Dollars in millions

Unaudited

         Three Months Ended             Twelve Months Ended

	12/31/2004	12/31/2003		% Chg		12/31/2004		12/31/2003		% Chg
Total Operating Revenues	$17,226	$ 13,762		25.2	%	$ 59,648		$ 55,442		7.6	%
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)	7,360	5,744		28.1	%	24,295		21,883		11.0	%
Selling, general and administrative	5,542	4,002		38.5	%	17,286		15,027		15.0	%
Depreciation and amortization	3,254	2,517		29.3	%	10,643		9,959		6.9	%
Total Operating Expenses	16,156	12,263		31.7	%	52,224		46,869		11.4	%
Operating Income	1,070	1,499		-28.6	%	7,424		8,573		-13.4	%
Interest Expense	531	384		38.3	%	1,567		1,701		-7.9	%
Interest Income	35	112		-68.8		148		220		-32.7	%
Minority Interest	233	(26	)	-		(146	)	(523	)	-72.1	%
Equity in Net Income (Loss) of Affiliates	8	(17	)	-		452		317		42.6	%
Other Income (Expense) - Net	61	132		-53.8	%	925		1,847		-49.9	%
Income Before Income Taxes	876	1,316		-33.4	%	7,236		8,733		-17.1	%
Income Taxes	122	428		-71.5	%	2,191		2,874		-23.8	%
Income From Continuing Operations	754	888		-15.1	%	5,045		5,859		-13.9	%
Income From Discontinued Operations, net of tax	-	24		-		908		112		-
Income Before Extraordinary item and Cumulative
Effect of Accounting Changes	754	912		-17.3	%	5,953		5,971		-0.3	%
Extraordinary Item, net of tax	-	(7	)	-		-		(7	)	-
Cumulative Effect of Accounting Changes, net of tax	-	-		-		-		2,541		-
Net Income	$     754	$      905		-16.7	%	$   5,953		$   8,505		-30.0	%

As required by GAAP rules for joint ventures, SBC reflects Cingular’s results in the Equity in Net Income of Affiliates line of its consolidated income statement rather than in revenues and expenses. To facilitate peer comparisons, and in recognition of SBC’s majority economic ownership of the nation’s largest wireless provider and Cingular’s increased significance to SBC’s overall operations, starting with fourth-quarter 2004 results, SBC will provide a supplemental consolidated income statement that will include full consolidation of Cingular’s operating results. This supplemental information also includes reconciliations to SBC’s Consolidated Statements of Income on the following pages.

Non-GAAP Financial Data Reconciliation

SBC Communications Inc.

For the Three Months Ended 12/31/2004

Dollars in millions

Unaudited

Reported Non-GAAP

							Consolidating			Supplemental
	SBC			Cingular			Adjustments			Consolidated
Total Operating Revenues	$	10,287		$	7,082		$	(143	)	$	17,226
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		4,580			2,923			(143	)		7,360
Selling, general and administrative		2,596			2,946			-			5,542
Depreciation and amortization		1,864			1,390			-			3,254
Total Operating Expenses		9,040			7,259			(143	)		16,156
Operating Income		1,247			(177	)		-			1,070
Interest Expense		318			303			(90	)		531
Interest Income		116			9			(90	)		35
Minority Interest		1			2			230			233
Equity in Net Income (Loss) of Affiliates		(193	)		(97	)		298			8
Other Income (Expense) - Net		59			2			-			61
Income Before Income Taxes		912			(564	)		528			876
Income Taxes		158			(67	)		31			122
Income From Continuing Operations		754			(497	)		497			754
Income From Discontinued Operations, net of tax		-			-			-			-
Income Before Cumulative
Effect of Accounting Changes		754			(497	)		497			754
Extraordinary Item, net of tax		-			-			-			-
Cumulative Effect of Accounting Changes, net of tax		-			-			-			-
Net Income	$	754		$	(497	)	$	497		$	754

For the Three Months Ended 12/31/2003

Dollars in millions

Unaudited

Reported Non-GAAP

							Consolidating			Supplemental
	SBC			Cingular			Adjustments			Consolidated
Total Operating Revenues	$	9,976		$	3,912		$	(126	)	$	13,762
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		4,354			1,516			(126	)		5,744
Selling, general and administrative		2,507			1,495			-			4,002
Depreciation and amortization		1,945			572			-			2,517
Total Operating Expenses		8,806			3,583			(126	)		12,263
Operating Income		1,170			329			-			1,499
Interest Expense		269			204			(89	)		384
Interest Income		198			3			(89	)		112
Minority Interest		1			(17	)		(10	)		(26	)
Equity in Net Income (Loss) of Affiliates		80			(88	)		(9	)		(17	)
Other Income (Expense) - Net		131			1			-			132
Income Before Income Taxes		1,311			24			(19	)		1,316
Income Taxes		423			8			(3	)		428
Income From Continuing Operations		888			16			(16	)		888
Income From Discontinued Operations, net of tax		24			-			-			24
Income Before Extraordinary item and Cumulative
Effect of Accounting Changes		912			16			(16	)		912
Extraordinary Item, net of tax		(7	)		-			-			(7	)
Cumulative Effect of Accounting Changes, net of tax		-			-			-			-
Net Income	$	905		$	16		$	(16	)	$	905

Non-GAAP Financial Data Reconciliation

SBC Communications Inc.

Supplemental Consolidated Income Statements

For the Twelve Months Ended 12/31/2004

Dollars in millions

Unaudited

Reported Non-GAAP

						Consolidating			Supplemental
	SBC		Cingular			Adjustments			Consolidated
Total Operating Revenues	$	40,787	$	19,436		$	(575	)	$	59,648
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		17,383		7,487			(575	)		24,295
Selling, general and administrative		9,939		7,347			-			17,286
Depreciation and amortization		7,564		3,079			-			10,643
Total Operating Expenses		34,886		17,913			(575	)		52,224
Operating Income		5,901		1,523			-			7,424
Interest Expense		1,023		900			(356	)		1,567
Interest Income		492		12			(356	)		148
Minority Interest		1		(86	)		(61	)		(146	)
Equity in Net Income (Loss) of Affiliates		978		(390	)		(136	)		452
Other Income (Expense) - Net		921		4			-			925
Income Before Income Taxes		7,270		163			(197	)		7,236
Income Taxes		2,225		(63	)		29			2,191
Income From Continuing Operations		5,045		226			(226	)		5,045
Income From Discontinued Operations, net of tax		908		-			-			908
Income Before Cumulative
Effect of Accounting Changes		5,953		226			(226	)		5,953
Extraordinary Item, net of tax		-		-			-			-
Cumulative Effect of Accounting Changes, net of tax		-		-			-			-
Net Income	$	5,953	$	226		$	(226	)	$	5,953

For the Twelve Months Ended 12/31/2003

Dollars in millions

Unaudited

Reported Non-GAAP

							Consolidating			Supplemental
	SBC			Cingular			Adjustments			Consolidated
Total Operating Revenues	$	40,498		$	15,483		$	(539	)	$	55,442
Operating Expenses
Cost of sales (exclusive of depreciation
and amortization shown separately below)		16,739			5,683			(539	)		21,883
Selling, general and administrative		9,605			5,422			-			15,027
Depreciation and amortization		7,870			2,089			-			9,959
Total Operating Expenses		34,214			13,194			(539	)		46,869
Operating Income		6,284			2,289			-			8,573
Interest Expense		1,242			856			(397	)		1,701
Interest Income		603			14			(397	)		220
Minority Interest		(2	)		(101	)		(420	)		(523	)
Equity in Net Income (Loss) of Affiliates		1,253			(323	)		(613	)		317
Other Income (Expense) - Net		1,820			27			-			1,847
Income Before Income Taxes		8,716			1,050			(1,033	)		8,733
Income Taxes		2,857			28			(11	)		2,874
Income From Continuing Operations		5,859			1,022			(1,022	)		5,859
Income From Discontinued Operations, net of tax		112			-			-			112
Income Before Extraordinary item and Cumulative
Effect of Accounting Changes		5,971			1,022			(1,022	)		5,971
Extraordinary Item, net of tax		(7	)		-			-			(7	)
Cumulative Effect of Accounting Changes, net of tax		2,541			-			-			2,541
Net Income	$	8,505		$	1,022		$	(1,022	)	$	8,505