SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934
(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For The Fiscal Year Ended December 31, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _________ to _________
Commission File Number 1-1105
AT&T Corp.
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
AT&T LONG TERM SAVINGS PLAN FOR MANAGEMENT EMPLOYEES
B. Name and issuer of the securities held pursuant to the plan and the
address of its principal executive office:
AT&T CORP.
32 AVENUE OF THE AMERICAS, NEW YORK, NY 10013-2412
AT&T Long Term Savings
Plan for Management
Employees
Financial Statements
As of December 31, 2002 and 2001 and
for the year ended December 31, 2002
and Supplemental Schedule
as of December 31, 2002
AT&T Long Term Savings Plan for Management Employees
Content to Financial Statements and Supplemental Schedule
Page(s)
Report of Independent Accountants 1
Financial Statements
Statements of Net Assets Available for Benefits
as of December 31, 2002 and 2001 2
Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 2002 3
Notes to Financial Statements 4-8
Supplemental Schedule
Schedule of Assets (Held at End of Year)
as of December 31, 2002 9
Report of Independent Accountants
To the Participants and Administrator of the
AT&T Long Term Savings Plan for Management Employees:
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the AT&T Long Term Savings Plan for Management Employees (the "Plan") as of
December 31, 2002 and 2001, and the changes in net assets available for benefits
for the year ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental schedule of Assets (Held at End of
Year) is presented for the purpose of additional analysis and is not a required
part of the basic financial statements but is supplementary information required
by the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. The supplemental
schedule is the responsibility of the Plan's management. The supplemental
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
PRICEWATERHOUSECOOPERS LLP
June 23, 2003
AT&T Long Term Savings Plan for Management Employees
Statements of Net Assets Available for Benefits
As of December 31, 2002 and 2001
(Thousands of Dollars) 2002 2001
Assets
Investments, at fair value:
Investment in Group Trust $5,899,063 $7,145,320
Participant loans receivable 89,465 98,489
---------- ----------
Total investments 5,988,528 7,243,809
Interfund receivable 5,140 9,862
Dividends and interest receivable 1,853 1,881
Other receivable 24,512 26
---------- ----------
Total assets 6,020,033 7,255,578
---------- ----------
Liabilities
Interfund payables 5,140 9,862
Accrued expenses 1,837 2,500
---------- ----------
Total liabilities 6,977 12,362
---------- ----------
Net assets available for benefits $6,013,056 $7,243,216
---------- ----------
The accompanying notes are an integral part of these financial statements.
AT&T Long Term Savings Plan for Management Employees
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2002
(Thousands of Dollars) Total
Net assets available for benefits,
January 1, 2002 $7,243,216
----------
Allotments, contributions and transfers
Employee allotments 257,397
Employing company contributions, net 108,209
Transfers of participants' balances from
other plans, net 39,158
----------
404,764
----------
Investment income (loss):
Dividends 6,062
Interest 129,357
Net depreciation in fair value of investments (1,142,980)
----------
(1,007,561)
----------
Distributions to participants (623,116)
Administrative expenses (4,247)
----------
(627,363)
Net decrease (1,230,160)
----------
Net assets available for benefits,
December 31, 2002 $6,013,056
----------
The accompanying notes are an integral part of these financial statements.
AT&T Long Term Savings Plan for Management Employees
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
1. Plan Description
The AT&T Long Term Savings Plan for Management Employees (the "Plan" or
"LTSPME") is a defined contribution plan established by AT&T Corp.
("AT&T") to provide a convenient way for management employees (i.e.,
employees whose pay is at monthly or annual fixed rates and whose wages
are not subject to automatic wage progression) to save on a regular and
long-term basis. The LTSPME participates in a master trust (the "Group
Trust"), for the investment of the pooled assets of various funds. Each
participating plan has an undivided interest in the Group Trust.
An eligible employee enters the Plan by authorizing a payroll allotment
to invest their contributions in one or more of the twenty-six (26)
different funds, in 10% increments. In 2001, the AT&T Wireless Stock
Fund and the Liberty Media Stock Fund were no longer employer
securities and were frozen for additional employee contributions.
On November 18, 2002, AT&T spun-off AT&T Broadband to AT&T shareholders
of record as of November 15, 2002. Immediately after the spin-off, AT&T
Broadband combined with the Comcast Corporation. For each share of AT&T
Corp. common stock, shareholders received .3235 shares of Comcast
Corporation Class A common stock as of the close on November 15, 2002.
As a result, a Comcast Stock Fund was added to the Group Trust in
November 2002. The Comcast Stock Fund is not an employer security and
is frozen to employee contributions.
Other receivable line item on the statement of net assets available for
benefits relates to securities sold for which cash has not been
received.
Employee allotments of 2% to 16% of salary may be authorized. An
employee may designate allotments as pre-tax allotments, as after-tax
allotments or as a combination of pre-tax and after-tax allotments. All
participant contributions and earnings thereon are immediately vested
and not subject to forfeiture. Pre-tax contributions may be made up to
the Internal Revenue Service limit of $11,000 in 2002. Immediately upon
enrollment, the employing company (AT&T or any subsidiary of AT&T
participating in the Plan) will contribute an amount equal to 66-2/3%
of the employee's basic salary allotment up to the first six percent
(6%) of salary. Employing company contributions are made in accordance
with the participants' elected investment direction. A participant
becomes 100 percent vested in the employing company contributions after
three years of credited service.
Loans are available to all participants in an amount not less than
$1,000, up to a maximum of the lesser of $50,000 minus the
participant's highest outstanding loan balance in the last twelve (12)
months or 50% of the participant's vested account balance. Upon
default, participants are considered to have received a distribution
and are subject to income taxes on the distributed amount. Loan
transactions are treated as a transfer to (from) the investment funds
from (to) the Participant Loan Account. The term of the loan shall not
exceed fifty-six (56) months. The loans are collateralized by the
balance in the participant's account and bear interest at the prime
rate determined monthly by the Plan administrator. Interest rates are
fixed for the term of the loan. Interest rates on participant loans
outstanding at December 31, 2002 range from 4.25 percent to 9.50
percent. Principal and interest are paid through payroll deductions or
participant-initiated payments.
When a participant meets the standard eligibility required for
retirement related benefits under the AT&T Management Pension Plan or
the AT&T Pension Plan or terminates employment because
AT&T Long Term Savings Plan for Management Employees
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
of disability, the entire amount in the participant's account will be
distributed, at the participant's election, in a single payment or in
annual retiree withdrawals as directed by the participant. If no
distribution election is made by the participant, the balance in the
account will remain in the Plan until a later date but not beyond age
70-1/2 when minimum required distributions will begin. When a
participant dies, the participant's beneficiary or beneficiaries may
elect their share of the participant's account balance as a single
payment or as a transfer to a LTSPME account in their own name.
In case of termination of employment (where the participant is not
entitled to retire on immediate pension or does not terminate because
of disability), a single distribution will be made of all vested
amounts in the participant's account if the amount to be distributed is
less than $5,000. However, if the amount to be distributed exceeds
$5,000, and the participant does not request the distribution, the
participant's account shall remain in the Plan and may be distributed
at the participant's request, or as minimum required distributions when
the participant attains age seventy and one-half (70-1/2), or upon the
participant's death, whichever is earlier.
Participant forfeitures in 2002 were $1,008,943. The total forfeited
non-vested accounts as of December 31, 2002 is $391,627. These accounts
will be used to reduce future employer contributions and administrative
expenses. During 2002, employer contributions were reduced by
$1,487,195 from forfeited non-vested accounts.
For a complete description of the Plan, participants should refer to
the Plan Prospectus. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
2. Accounting Policies
Basis of accounting
The financial statements of the Plan are prepared under the accrual
method of accounting.
Payments of benefits
Benefits are recorded when paid.
Valuation of investments
Income and assets of the Group Trust are allocated based on participant
balances. The net asset value of the Group Trust is calculated by the
Trustee. The Trustee determines the value of the underlying assets in
the investment manager portfolios, taking into account values supplied
by a generally accepted pricing or quotation service or quotations
furnished by one or more reputable sources, such as securities brokers,
dealers or investment bankers, mutual fund administrators, values of
comparable property, appraisals or other relevant information. .
Investments in AT&T common shares and other securities listed on
national stock exchanges are carried at fair value determined on the
basis of the last published sales price per share on December 31, or,
if no sales were made on that date, at the last published sales price
on the next preceding day on which sales were made. Securities traded
in over-the-counter markets and government obligations are carried at
fair value based on the last bid prices or closing prices on December
31, as listed in published sources if available or, if not available,
from other sources considered reliable. Contracts with insurance
companies and financial institutions, which are fully benefit
responsive, are carried at contract value (representing contributions
made under the contracts plus accumulated interest at the contract
rates). All other investments are carried at the fair value at the
close of business on
AT&T Long Term Savings Plan for Management Employees
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
December 31. Participant loans receivable are valued at cost which
approximates fair value. Participant loans are not part of the Group
Trust.
Purchases and sales of investments
Purchases and sales of securities are recorded as of the trade dates.
Investment income
Dividend income is recorded on securities held as of the ex-dividend
dates. Interest income is recorded on the accrual basis.
Net appreciation (depreciation) in the fair value of investments
The Plan presents in the statement of changes in net assets available
for benefits the net appreciation (depreciation) in the fair value of
investments, which consists of the realized gains (losses) and the
unrealized appreciation (depreciation) on those investments.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and changes therein, and disclosure of contingent assets
and liabilities. Actual results could differ from those estimates. The
most significant estimates relate to the valuation of the investments.
Risks and uncertainties
Investments held by the Group Trust are exposed to various risks, such
as interest rate, market and credit. Due to the level of risk
associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities,
it is at least reasonably possible that changes in risks in the near
term would materially affect participants' account balances and the
amounts reported in the statement of net assets available for benefits
and the statement of changes in net assets available for benefits.
3. Tax Status
The Internal Revenue Service has determined and informed AT&T by a
letter dated December 19, 1995, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Service Code (IRS). The Plan has been amended since receiving the
determination letter. Although the Company has requested an update to
the determination letter from the IRS on February 28, 2002, a response
has not yet been received. However, the Plan administrator believes
that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC.
4. Concentrations of Investment Risk
At December 31, 2002, Plan participants' accounts, which are invested
in the investment options mentioned herein, were exposed to market risk
in the event of a significant decline in the value of AT&T Corp. stock,
Liberty Media stock, AT&T Wireless stock and/or Comcast Stock.
AT&T Long Term Savings Plan for Management Employees
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
5. Plan Termination
Although it has not expressed any intent to do so, AT&T has the right
under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, the Plan provides that the net assets are to be
distributed to participating employees in amounts equal to their
respective interest in such assets.
6. Plan Expenses
Plan participants share the recordkeeping, accounting, and other
administrative costs of the Plan with the employing company. Brokerage,
investment manager and trustee fees are paid by the Plan, and are
primarily reflected in the calculation of a fund's net asset value per
unit.
7. Group Trust Investments
The following table presents the investments in the Group Trust held by
Fidelity Management Trust Company ("FMTC") at December 31, 2002 and
2001 (in thousands of dollars except for percentages).
2002 2001
Type of Group Trust investments
Asset Allocation Strategies $ 476,869 $ 664,756
Index Funds 269,382 322,792
AT&T Custom Funds 3,601,076 3,989,842
Mutual Funds 1,969,665 2,660,141
Stock Funds 830,588 2,154,884
----------- -----------
Total Group Trust investments $ 7,147,580 $ 9,792,415
----------- -----------
Allocation of Group Trust investments
As of December 31,
2002 2001
AT&T Long Term Savings Plan for
Management Employees 82.5368% 72.9679%
AT&T Long Tenn Savings and Security Plan 17.2603% 14.7674%
AT&T Retirement Savings and Profit
Sharing Plan 0.1000% 0.0812%
AT&T of Puerto Rico, Inc. Long Term
Savings Plan for Management Employees 0.0864% 0.0705%
AT&T of Puerto Rico, Inc. Long Term
Savings and Security Plan 0.0165% 0.0167%
AT&T Broadband Long Term Savings Plan * 12.0963%
*Plan was not a part of the Group Trust at December 31, 2002.
AT&T Long Term Savings Plan for Management Employees
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
For the
Year Ended
December 31, 2002
Net depreciation in fair value of
Group Trust investments:
Asset Allocation Strategies $ (56,775)
Index Funds (31,411)
AT&T Custom Funds (264,578)
Mutual Funds (587,001)
Stock Funds (721,205)
------------
Total net depreciation in fair value of
Group Trust investments $ (1,660,970)
------------
Investment income:
Interest $ 172,388
Dividends 10,743
------------
$ 183,131
------------
8. Litigation
The Company is involved in a class action lawsuit brought by former
employees on behalf of the LTSPME employees. The complaint alleges that
the Company and various members of the AT&T Board of Directors breached
their fiduciary duties to the Plan and the participants by permitting
the Plan to purchase and hold shares of the AT&T Stock Fund, and
misrepresented and failed to disclose material fact to the Plan and
participants in connections with the management of the Plan assets. The
Company believes it has substantial defenses to this litigation and
will vigorously defend against its assertions of liability, and that
any possible losses would not be material to the Company or the Plan.
9. Related Party Transactions and Party-in-Interest
Certain Plan investments are shares of mutual funds managed by Fidelity
Management and Research (FMR), the parent of FMTC. FMTC is the trustee
as defined by the Plan and, therefore, these transactions qualify as
party-in-interest.
In addition, the Plan invests in common shares of AT&T Corp. Stock,
which qualifies as a related party transaction. AT&T Wireless Stock and
Liberty Media Stock qualified as related party transactions until AT&T
Wireless Services, Inc and Liberty Media Corporation split-off from
AT&T Corp. on July 9, 2001 and August 10, 2001, respectively.
10. Subsequent Events
The AT&T Wireless Stock Fund and the Liberty Media Stock Fund were
liquidated as of January 2003 and February 2003, respectively. Any
balances remaining in these funds at the liquidation date were
transferred to the AT&T Stable Value Fund.
AT&T Long Term Savings Plan for Management Employees
Schedule of Assets (Held at End of Year)
As of December 31, 2002
(Thousands of Dollars)
Name of Issuer and Title of Issue Cost Value
Participant Loans Receivable (4.25% - 9.5%) $ ----- $ 89,465
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Plan Committee has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
AT&T LONG TERM SAVINGS PLAN FOR MANAGEMENT EMPLOYEES
By Savings Plan Committee
/s/ Brian Byrnes
------------------------------
Brian Byrnes
Secretary of the Savings Plan Committee
Date: June 30, 2003
Exhibit Index
Exhibit No.
23 Consent of PricewaterhouseCoopers LLP
99.1 Certification of Mirian M. Graddick-Weir, Executive Vice
President and Chairperson, Savings Plan Committee and Robert
Angelica, Chairman and Chief Executive Officer, AT&T
Investment Management Corporation
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-34264, 33-29256, 33-34264-1, and 33-21937) of
AT&T Corp. of our report dated June 23, 2003 relating to the financial
statements and supplemental schedule of the AT&T Long Term Savings Plan for
Management Employees, which appears in this Form 11-K.
PricewaterhouseCoopers LLP
New York, NY
July 2, 2003
Exhibit 99.1
CERTIFICATION
Each of the undersigned hereby certifies, for the purposes of section 1350 of
chapter 63 of title 18 of the United States Code, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, in the undersigned's capacity as an
officer of AT&T Corp. or its subsidiaries ("AT&T"), that, to the undersigned's
knowledge, the respective Annual Reports on Form 11-K for the period ended
December 31, 2002, for (i) AT&T Long Term Savings Plan for Management Employees,
(ii) AT&T Long Term Savings and Security Plan, (iii) AT&T Retirement Savings and
Profit Sharing Plan, (iv) AT&T of Puerto Rico, Inc. Long Term Savings Plan for
Management Employees, and (v) AT&T of Puerto Rico, Inc. Long Term Savings and
Security Plan each fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that the information contained in each such
report fairly presents, in all material respects the net assets available for
benefits and changes in net assets available for benefits of the respective
Plan. This written statement is being furnished to the Securities and Exchange
Commission as an exhibit to each such Form 11-K. A signed original of this
statement has been provided to AT&T and will be retained by AT&T and furnished
to the Securities and Exchange Commission or its staff upon request.
By: /s/ Mirian M. Graddick-Weir
--------------------------------
Mirian M. Graddick-Weir
Executive Vice President and
Chairperson, Savings Plan Committee
June 30, 2003
By: /s/ Robert Angelica
--------------------------------
Robert Angelica
Chairman and Chief Executive Officer
AT&T Investment Management Corporation
June 30, 2003