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 AND SECURITY PLAN
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 and Security Plan
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 and Security Plan
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 4-9
Supplemental Schedule
Schedule of Assets (Held at End of Year)
as of December 31, 2002 10
Report of Independent Accountants
To the Participants and Administrator of the
AT&T Long Term Savings and Security Plan
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 and Security Plan ("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 basic
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 and Security Plan
Statements of Net Assets Available for Benefits
As of December 31, 2002 and 2001
(thousands of dollars) 2002 2001
Assets
Investments, at fair value:
Investments in Group Trust $ 1,233,693 $ 1,446,089
Participant loans receivable 39,175 44,786
Other investments
AT&T Corp. common shares
allocated to participants - 121,762
Temporary cash investments - 1,987
----------- -----------
Total investments 1,272,868 1,614,624
----------- -----------
Interfund receivable 1,080 1,996
Dividends and interest receivable 706 983
Other receivable 9,840 -
Employee allotments - 6
----------- -----------
Total assets 1,284,494 1,617,609
----------- -----------
Liabilities
Interfund payables 1,080 1,996
Accrued expenses 248 431
----------- -----------
Total liabilities 1,328 2,427
----------- -----------
Net assets available for benefits 1,283,166 1,615,182
----------- -----------
The accompanying notes are an integral part of these financial statements.
AT&T Long Term Savings and Security Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2002
Total
Net assets available for benefits, January 1, 2002 $ 1,615,182
-----------
Allotments, contributions and transfers
Employee allotments 58,474
Employing company contributions 27,633
Transfers of participants' balances
from other plans, net 6,717
-----------
92,824
-----------
Investment income (loss):
Dividends 2,625
Interest 33,265
Net depreciation in fair value of investments (274,730)
-----------
(238,840)
Distributions to participants (185,232)
Administrative expenses (768)
-----------
Net decrease (332,016)
-----------
Net assets available for benefits,
December 31, 2002 $ 1,283,166
-----------
The accompanying notes are an integral part of these financial statements.
AT&T Long Term Savings and Security Plan
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
1. Plan Description
The AT&T Long Term Savings and Security Plan (the "Plan" or "LTSSP") is
a defined contribution plan established by AT&T Corp. ("AT&T") to
provide a convenient way for non-management employees (i.e., employees
who are not salaried management employees and whose positions are
subject to automatic wage progression) to save on a regular and
long-term basis. The LTSSP 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.
Prior to 2002, the Plan held assets of the Leveraged ESOP outside the
Group Trust. In February 2002, these assets of $117 million moved into
the Group Trust.
An eligible employee enters the Plan by authorizing a payroll allotment
to invest their contributions in one or more of 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. After one year of
service, 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 allotment up to the first six percent (6%) of
salary. A participant becomes 100% vested in the employing company
contributions after three years of credited service. Company
contributions are made in accordance with the participants' elected
investment direction. The Plan provides that Company Matching
Contributions associated with a participant's contribution to the
International Brotherhood of Electrical Workers (IBEW) Sponsored Trust
for Savings be invested in the AT&T Stock Fund.
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 employee'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 fund from (to) the 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 prime rate determined monthly by the Plan administrator.
Interest rates are fixed for the term of the loan. Interest rates
AT&T Long Term Savings and Security Plan
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
on participant loans outstanding as of December 31, 2002 range from 4.25
percent to 10 percent. Principal and interest are paid through payroll
deductions or participant-initiated payments.
The Plan allows participants to direct the investment of Company
Matching Contributions, and to diversify the amounts held in the
Employer Shares Fund. Thereafter, all Employer Matching Contributions
shall be made in cash. Such contributions shall be transferred to the
Trustee and invested by the Trustee in investment options designated by
the participant. A participant may change the allocation of existing
accounts by transferring the portion relating to the Company Matching
Contribution account in increments of 5% of the participant's balance in
a fund to another fund. A participant becomes 100 percent vested in the
employing company contributions after five years of credited service.
When a participant retires with eligibility for retirement related
benefits from the AT&T Pension Plan or terminates employment because of
disability, the entire amount in the participant's account will be
distributed, at the participant's election, in a single payment or in an
annual retiree withdrawal of at least $500 per calendar year 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 an LTSSP account in their own
name.
In case of other termination of employment (when 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 70-1/2, or upon the participant's death, whichever is
earlier.
Participant forfeitures in 2002 were $198,847. The total forfeited
non-vested accounts as of December 31, 2002 is $269,104. These accounts
will be used to reduce future employer contributions and administrative
expenses. During 2002, employer contributions were reduced by $981,975
due to 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.
Payment of benefits
Benefits are recorded when paid.
Valuation of investments
Income and assets of the Group Trust are allocated to the Plan based on
participant balances. The net asset value of the Group Trust is
calculated by the Trustee. The trustee determines the value of
AT&T Long Term Savings and Security Plan
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
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 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
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 consist 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 and the Plan 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.
AT&T Long Term Savings and Security Plan
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
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
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.
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).
Type of Group Trust investments 2002 2001
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
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Total Group Trust investments $ 7,147,580 $ 9,792,415
----------- -----------
AT&T Long Term Savings and Security Plan
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
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 Term 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.
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. 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 a 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.
AT&T Long Term Savings and Security Plan
Notes to Financial Statements
For the Year Ended December 31, 2002 and 2001
9. 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 and Security Plan
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% - 10%) $ $ 39,175
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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 AND SECURITY PLAN
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 (No. 333-47257) 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 and Security Plan, 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