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 RETIREMENT SAVINGS AND PROFIT SHARING PLAN
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 Retirement Savings and Profit Sharing Plan
Financial Statements
and Supplemental Schedule
December 31, 2003
AT&T Retirement Savings and Profit Sharing Plan
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................................................4-8
Supplemental Schedule
Schedule of Assets (Held at End of Year).......................................9
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
AT&T Retirement Savings and Profit Sharing 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 AT&T Retirement Savings and Profit Sharing Plan (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 Retirement Savings and Profit Sharing Plan
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 $ 18,423 $ 7,167
Participant loans receivable 259 185
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Total assets 18,682 7,352
Liabilities
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Total liabilities -- --
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Net assets available for benefits $ 18,682 $ 7,352
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The accompanying notes are an integral part of these financial statements.
AT&T Retirement Savings and Profit Sharing Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2003
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(thousands of dollars)
Net assets available for benefits, January 1, 2003 $ 7,352
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Additions
Additions to net assets attributed to
Net income from investment in Group Trust 2,169
Interest on participant loans 10
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2,179
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Contributions and transfers
Employee contributions 5,761
Employing company contributions, net 3,660
Transfers of participants' balances from other plans, net 615
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10,036
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Total additions 12,215
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Deductions
Distributions to participants (885)
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Total deductions (885)
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Net increase 11,330
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Net assets available for benefits, December 31, 2003 $ 18,682
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The accompanying notes are an integral part of these financial statements.
AT&T Retirement Savings and Profit Sharing Plan
Notes to Financial Statements
December 31, 2003
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1. Plan Description
The AT&T Retirement Savings and Profit Sharing Plan (the "Plan" or "RSPSP")
is a defined contribution plan established by AT&T Corp. ("AT&T") to
provide a convenient way for employees of certain participating companies
of AT&T to save on a regular and long-term basis. The RSPSP 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 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, after-tax allotments or as
a combination of pre-tax and 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 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 6% of the
employee's salary contributed. Employing company contributions are made in
accordance with the participant's elected investment direction. A
participant becomes 100% 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 Revenue 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.
The employing company may make quarterly or an annual discretionary
profit-sharing contribution of up to 6% of each participant's eligible
compensation for participants with at least six months of service with a
participating company. A participant becomes vested in the profit-sharing
contribution on a 5-year graduated schedule (20% per year of credited
service). In 2003, 4 of the participating companies made profit-sharing
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 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 as of
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, the entire vested amount in the
participant's account will be distributed in a single payment, 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 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 RSPSP account in the beneficiary's name.
Participant forfeitures in 2003 were $54,397. The total forfeited
non-vested accounts as of December 31, 2003 is $136,180. Forfeitures will
be used to reduce future employer contributions and administrative
expenses. During 2003 there were no reductions in employer contributions
due to forfeited non-vested accounts.
For a complete description of the Plan and its profit sharing component,
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 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 services 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 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 the business day 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 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 the
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 March 4, 1996, 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 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).
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.
Allocation of Group Trust Investments December 31,
-----------------------
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
investment $ 1,152,303
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Investment income
Interest $ 168,492
Dividends 10,353
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$ 178,845
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8. 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.
9. 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 Retirement Savings and Profit Sharing Plan
Schedule of Assets (Held at End of Year)
December 31, 2003
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(thousands of dollars)
Name of Issuer and Title of Issue Cost Value
Participant Loans Receivable (4.0%-9.5%) $ 259 $ 259
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Group Trust $ $ 18,423
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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 RETIREMENT SAVINGS
AND PROFIT SHARING PLAN
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