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, 2003
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.
ONE AT&T WAY
BEDMINSTER, NJ 07921
AT&T Long Term Savings Plan for Management Employees
Financial Statements
and Supplemental Schedule
December 31, 2003
AT&T Long Term Savings Plan for Management Employees
Index
December 31, 2003 and 2002
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Page(s)
Report of Independent Registered Public Accounting Firm........................1
Financial Statements
Statements of Net Assets Available for Benefits................................2
Statement of Changes in Net Assets Available for Benefits......................3
Notes to Financial Statements................................................4-9
Supplemental Schedule
Schedule of Assets (Held at End of Year)......................................10
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
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 AT&T Long Term Savings Plan for Management Employees (the "Plan") at December
31, 2003 and 2002, and the changes in net assets available for benefits for the
year ended December 31, 2003 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards 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) as of December 31, 2003 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.
July 1, 2004
AT&T Long Term Savings Plan for Management Employees
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
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(thousands of dollars) 2003 2002
Assets
Investments, at fair value
Investment in Group Trust $ 6,939,310 $ 5,923,591
Participant loans receivable 84,017 89,465
---------------- -----------------
Total assets 7,023,327 6,013,056
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Liabilities
Total liabilities -- --
---------------- -----------------
Net assets available for benefits $ 7,023,327 $ 6,013,056
---------------- -----------------
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
Year Ended December 31, 2003
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Total
Net assets available for benefits, January 1, 2003 $ 6,013,056
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Additions
Additions to net assets attributed to
Net income from investment in Group Trust 1,133,002
Interest on participant loans 4,488
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1,137,490
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Contributions and transfers
Employee contributions 253,341
Employing company contributions 107,182
Transfers of participants' balances from other plans, net 31,481
------------------
392,004
------------------
Total additions 1,529,494
Deductions
Distributions to participants (519,223)
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Total deductions (519,223)
------------------
Net increase 1,010,271
------------------
Net assets available for benefits, December 31, 2003 $ 7,023,327
------------------
The accompanying notes are an integral part of these financial statements.
AT&T Long Term Savings Plan for Management Employees
Notes to Financial Statements
December 31, 2003
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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) of participating AT&T Companies 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 his/her contributions in one or more of the twenty-six (26)
different funds as set forth in the current Plan documents.
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.
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.
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 $12,000 in 2003. Immediately upon enrollment, the
employing company (AT&T or any AT&T subsidiary participating in the Plan)
will contribute an amount equal to 66-2/3% of the first six percent (6%) of
the employee's salary contributed. 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.
Employees who are age 50 or older on or before December 31st may be
eligible to make pre-tax contributions beyond the Internal Service pre-tax
limit. The 2003 catch-up contribution limit set by the Internal Revenue
Service is $2,000. No company matching contribution is made on catch-up
contributions.
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 on the last business day of the month preceding
the month in which the loan was initiated. Interest rates are fixed for the
term of the loan. Interest rates on participant loans outstanding at
December 31, 2003 range from 4.0 percent to 9.5 percent. Principal and
interest are paid through payroll deductions or participant-initiated
payments.
When a participant terminates employment, a single distribution will be
made of all vested amounts in the participant's account if the amount to be
distributed is $5,000 or less. 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 withdrawn or
distributed at the participant's request, or as minimum required
distributions beginning when the participant attains 70-1/2, or upon the
participant's death, whichever is earlier.
Participant forfeitures in 2003 were $3,136,506. The total forfeited
non-vested accounts as of December 31, 2003 is $3,464,136. Forfeitures will
be used to reduce future employer contributions and administrative
expenses. During 2003, employer contributions were reduced by $156,994 from
forfeited non-vested accounts.
For a complete description of the Plan, participants should refer to the
Plan Prospectus and Plan Summary Plan Description (SPD). 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 the last business day of the year. 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 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 date.
Investment Income
Dividend income is recorded on the ex-dividend date. Interest income is
accrued as earned.
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 the near term could materially affect
participants' future 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.
Certain amounts in prior periods have been reclassified to conform to the
current presentation.
3. Tax Status
The Internal Revenue Service (IRS) has determined and informed AT&T by a
letter dated December 19, 1995, that the Plan and related trust are
qualified in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended and restated since receiving the
determination letter. The Company has applied for a new determination
letter from the IRS on February 28, 2002, and the IRS is currently
reviewing the request. However, the Plan Administrator believes that the
Plan is qualified and is currently being operated in compliance with the
applicable requirements of the IRC.
4. Concentrations of Investment Risk
At December 31, 2003, Plan participants' accounts that 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, 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
In general, fees paid for Plan administration, including recordkeeping
(except for such services as are attributable to the participant loan
program), are paid from the trust, unless those expenses are paid by the
Company or participant(s). Fees for trustee services are paid out of trust
assets. Expenses attributable to the management and investment of each of
the investment options shall be charged against respective options.
7. Group Trust Investments
The following table presents the investments in the Group Trust held by
Fidelity Management Trust Company ("FMTC") as Trustee, at December 31, 2003
and 2002 (in thousands of dollars except for percentages).
December 31,
-------------------------------
Type of Group Trust Investments 2003 2002
Asset Allocation Strategies $ 560,314 $ 476,869
Index Funds 342,148 269,382
AT&T Custom Funds 3,979,005 3,601,076
Mutual Funds 2,708,720 1,969,665
Stock Funds 754,883 830,588
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Total Group Trust investments $ 8,345,070 $ 7,147,580
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Type of Group Trust Investments December 31, 2003
Government securities $ 16,572
Short-term securities 10,189
Corporate bonds 6,127
Common stocks 1,567,644
Mutual funds 2,795,255
Commingled funds 1,294,002
Investment contracts* 2,652,419
Cash 2,862
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Total Group Trust investments $ 8,345,070
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*Investment contracts include synthetic investment
contracts with a contract value of $2,294,485 wrapping
fixed income investments of $2,543,093.
December 31,
------------------------
Allocation of Group Trust Investments 2003 2002
AT&T Long Term Savings Plan for Management
Employees 83.15% 82.54%
AT&T Long Term Savings and Security Plan 16.54% 17.26%
AT&T Retirement Savings and Profit Sharing Plan 0.22% 0.10%
AT&T of Puerto Rico, Inc. Long Term Savings Plan
for Management Employees 0.08% 0.08%
AT&T of Puerto Rico, Inc. Long Term Savings and
Security Plan 0.01% 0.02%
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100.00% 100.00%
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Net appreciation in fair value of Group Trust investments December 31, 2003
Asset Allocation Strategies $ 106,330
Index Funds 48,591
AT&T Custom Funds 319,077
Mutual Funds 570,624
Stock Funds 107,681
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Total net appreciation in fair value of Group Trust
investments $ 1,152,303
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Investment income
Interest $ 168,492
Dividends 10,353
---------------
$ 178,845
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8. Litigation
AT&T 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 facts 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 in 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 transaction. At December 31, 2003, the total of these
investments amounted to $1,914,936,504 or approximately 23% of the Group
Trust.
In addition, the Plan invests in common shares of AT&T Corp. stock, which
qualifies as a related party transaction. At December 31, 2003, the total
of these investments amounted to $256,799,741 or approximately 3% of the
Group Trust.
10. Subsequent Events
1) Effective January 2, 2004, State Street Bank and Trust Company was
appointed as the Trustee to the Plan.
2) The Group Trust has been renamed the AT&T Savings Master Trust.
3) The Comcast Stock fund was liquidated in May 2004. Balances remaining
in these funds as of the liquidation date were transferred into the
AT&T Stable Value Fund.
AT&T Long Term Savings Plan for Management Employees
Schedule of Assets (Held at End of Year)
December 31, 2003
--------------------------------------------------------------------------------
(thousands of dollars)
Name of Issuer and Title of Issue Cost Value
Participant Loans Receivable (4.0% - 9.5%) $ 84,017 $ 84,017
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Group Trust $ -- $ 6,939,310
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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 PLAN
FOR MANAGEMENT EMPLOYEES
By Savings Plan Committee
/s/ Brian Byrnes
______________________________
Brian Byrnes
Secretary of the Savings Plan Committee
Date: July 2, 2004
Exhibit Index
Exhibit No.
23 Consent of PricewaterhouseCoopers LLP