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 OF PUERTO RICO, INC. 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.
One AT&T Way, Bedminster, NJ 07921
AT&T of Puerto Rico, Inc.
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 of Puerto Rico, Inc. Long Term Savings Plan
For Management Employees
Content to Financial Statements and Supplemental Schedule
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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 of Puerto Rico, Inc. 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 of Puerto Rico, Inc. 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 financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits 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
July 14, 2003
AT&T of Puerto Rico, Inc. Long Term Savings Plan
for Management Employees
Statements of Net Assets Available for Benefits
As of December 31, 2002 and 2001
--------------------------------------------------------------------------------
2002 2001
(thousands of dollars)
Assets
Investments, at fair value
Investments in Group Trust $ 6,179 $ 6,899
Participant loans receivable 139 136
-------- --------
Total investments 6,318 7,035
Interfund receivable 6 9
Dividends and interest receivable 3 2
Other receivable 35 -
-------- --------
Total assets 6,362 7,046
-------- --------
Liabilities
Interfund payables 6 9
Accrued expenses - 1
-------- --------
Total liabilities 6 10
-------- --------
Net assets available for benefits $ 6,356 $ 7,036
-------- --------
The accompanying notes are an integral part of these financial statements.
AT&T of Puerto Rico, Inc. 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 $ 7,036
--------
Allotments, contributions and transfers
Employee allotments 269
Employing company contributions 119
Transfers of participants' balances from
other plans, net 449
--------
837
--------
Investment income (loss):
Dividends 9
Interest 213
Net depreciation in fair value of investments (943)
--------
(721)
--------
Distribution to participants (793)
Administrative expenses (3)
--------
(796)
--------
Net decrease (680)
--------
Net assets available for benefits,
December 31, 2002 $ 6,356
--------
The accompanying notes are an integral part of these financial statements.
AT&T of Puerto Rico, Inc. 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 of Puerto Rico, Inc. Long Term Savings Plan for Management
Employees (the "Plan" or "PRLTSPME") 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 defined at a monthly
or annual rate and whose positions are not subject to automatic wage
progression) to save on a regular and long-term basis. The PRLTSPME
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 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 or after-tax
allotments. All participant contributions and earnings thereon are
immediately vested and are not subject to forfeiture. Pre-tax
contributions may be made up to the Puerto Rico Department of Treasury
limit of $8,000 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 first 6% of the employee's
salary allotment. Employing company contributions are made in
accordance with the participant's elected investment direction.
Employing company contributions and earnings thereon are vested 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, employees 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 on the last business day of the month preceding the month the loan
was taken. Interest rates are fixed for the term of the loan. Interest
rates on participant loans outstanding range from 4.25 percent to 9.50
percent. Principal and interest are paid through payroll deductions or
participant-initiated payments.
When a participant terminates employment, the entire vested amount in
the participant's account will be distributed in a single payment or in
annual retiree withdrawals, as directed by the participant, 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. 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
PRLTSPME account in their own name.
There were no participant forfeitures in 2002. The total forfeited
non-vested account as of December 31, 2002 is $26,012. This account
will be used to reduce future employer contributions. During 2002
employer contributions were reduced by $273 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.
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 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 on 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 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.
Risk 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 Puerto Rico Department of Treasury has determined and informed AT&T
by letter dated May 31, 1995, that the Plan and related trust are
designed in accordance with applicable sections of the Puerto Rico
Income Tax Act of 1954 (the "Act"). The Plan has been amended since
receiving the determination letter. The Plan administrator, however,
believes that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the Act.
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
---------- ----------
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 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 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.
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 of Puerto Rico, Inc. 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% - 9.50%) $ 139
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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 OF PUERTO RICO, INC. LONG
TERM SAVINGS PLAN FOR MANAGEMENT EMPLOYEES
By Savings Plan Committee
/s/ Brian Byrnes
------------------------------
Brian Byrnes
Secretary of the Savings Plan Committee
Date: July 14, 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. 33-50819) of AT&T Corp. of our report dated July 14,
2003 relating to the financial statements and supplemental schedule of the AT&T
of Puerto Rico, Inc. Long Term Savings Plan for Management Employees, which
appears in this Form 11-K.
PricewaterhouseCoopers LLP
New York, NY
July 14, 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
AT&T Investment Management Corporation
June 30, 2003