-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZXdp68uOskmY1nkxQZ4BZ8p92KrsQKRaZxddiypLtj3qbOxEjmARZvWTxcXk8j64 2TcdxpcZ0tEiQpF4gXKktQ== 0000005907-94-000008.txt : 19940328 0000005907-94-000008.hdr.sgml : 19940328 ACCESSION NUMBER: 0000005907-94-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN TELEPHONE & TELEGRAPH CO CENTRAL INDEX KEY: 0000005907 STANDARD INDUSTRIAL CLASSIFICATION: 4813 IRS NUMBER: 134924710 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-01105 FILM NUMBER: 94517947 BUSINESS ADDRESS: STREET 1: 32 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 100132412 BUSINESS PHONE: 2126055500 10-K 1 AT&T FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, 1993 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 AMERICAN TELEPHONE AND TELEGRAPH COMPANY A NEW YORK I.R.S. EMPLOYER CORPORATION NO. 13-4924710 32 Avenue of the Americas, New York, New York 10013-2412 Telephone Number 212-387-5400 Securities registered pursuant to Section 12(b) of the Act: See attached SCHEDULE A. Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes.....x... No.......... Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) At February 28, 1994, the aggregate market value of the voting stock held by non-affiliates was $71,183,656,635. At February 28, 1994, 1,356,931,753 common shares were outstanding. DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the registrant's annual report to security holders for the year ended December 31, 1993 (Part II) (2) Portions of the registrant's definitive proxy statement dated March 1, 1994, issued in connection with the annual meeting of shareholders (Part III) SCHEDULE A Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Shares # New York, Boston, Midwest, (Par Value $1 Per Share) ## Philadelphia and Pacific Stock # Exchanges # Two Year Fixed/Floating Rate Notes, # due May 4, 1995 # # Three Year 4-1/2% Notes, # due February 15, 1996 # # Thirty-Four Year 4-3/8% Debentures, # due October 1, 1996 # # Thirty-Seven Year 4-3/4% Debentures, # due June 1, 1998 # # Thirty-Six Year 4-3/8% Debentures, # due May 1, 1999 # # Thirty-Three Year 6% Debentures, # due August 1, 2000 # # Thirty-Five Year 5-1/8% Debentures, ## New York Stock Exchange due April 1, 2001 # # Ten Year 7-1/8% Notes, # due January 15, 2002 # # Thirty Year 8-1/8% Debentures, # due January 15, 2022 # # Thirty-Two Year 8-1/8% Debentures, # due July 15, 2024 # # Forty Year 8-5/8% Debentures, # due December 1, 2031 # # TABLE OF CONTENTS PART I Item Description Page 1. Business ........................................................ 1 2. Properties ...................................................... 14 3. Legal Proceedings ............................................... 15 4. Submission of Matters to a Vote of Security Holders ............. 15 PART II Description 5. Market for Registrant's Common Equity and Related Stockholder Matters ....................................................... 17 6. Selected Financial Data ......................................... 17 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ......................................... 17 8. Financial Statements and Supplementary Data ..................... 17 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...................................... 17 PART III Description 10. Directors and Executive Officers of the Registrant .............. 17 11. Executive Compensation .......................................... 17 12. Security Ownership of Certain Beneficial Owners and Management .. 17 13. Certain Relationships and Related Transactions .................. 17 PART IV Description 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 18 See page 16 for "Executive Officers of the Registrant." PART I Item 1. Business. GENERAL American Telephone and Telegraph Company ("AT&T" or "Company") was incorporated in 1885 under the laws of the State of New York and has its principal executive offices at 32 Avenue of the Americas, New York, New York 10013-2412 (telephone number 212-387-5400). AT&T is a major participant in two industries: the global information movement and management industry and the financial services and leasing industry. In the global information movement and management industry, the Company's services and products include: voice, data and image telecommunications services that can be used with the telecommunications and information products or systems of AT&T and others; telecommunications products and systems, ranging from voice instruments to complex network switching and transmission systems; computer products and systems; products which combine communications and computing; installation, maintenance and repair services for communication and computer products; optical fiber and cable; and components for high-technology products and systems. The above-described services and products are designed to meet the needs of broad categories of customers: the users of telecommunications and information services, including residential, business and government customers; the providers of telecommunications and information services, including telephone companies and other telecommunications agencies around the world; and the manufacturers of telecommunications, data processing and other electronic equipment. In the financial services and leasing industry, the Company provides direct financing and finance leasing programs for its own products and the products of other companies, leases products to customers under operating leases, and is in the general-purpose credit card business. AT&T markets its services, products and systems throughout the United States. It also markets many of its services, products and systems outside of the United States. The Company sells its services and products directly to all types of customers through its own direct sales force. The Company also sells certain of its products to distributors and other intermediaries who may resell these products to others. Some of the Company's services are also sold to businesses that resell them, usually in conjunction with other services, to others. For information about the Company's industry and geographic segments, see Note 16 to the Consolidated Financial Statements. Such information is incorporated herein by reference, pursuant to General Instruction G(2). - 2 - AGREEMENT WITH MCCAW CELLULAR COMMUNICATIONS, INC. On August 16, 1993, AT&T and McCaw Cellular Communications, Inc. ("McCaw") entered into a definitive agreement to merge McCaw and a subsidiary of AT&T, making McCaw a wholly owned subsidiary of AT&T (the "Merger"). In the Merger, each share of McCaw's Class A and Class B common stock will be converted into one share of AT&T common stock. However, if the average of the last reported sales price on the New York Stock Exchange for the 20 most recent trading days ending on the fifth day prior to the date of the closing of the Merger (the "Closing Date Market Price") of one share of AT&T common stock is less than $53 per share, the conversion ratio will be adjusted upward to provide shares of AT&T common stock having an aggregate market price of $53 for each share of McCaw common stock, subject to a maximum of 1.111 shares of AT&T common stock. If the Closing Date Market Price of one share of AT&T common stock is greater than $71.73 per share, the conversion ratio will be adjusted downward to provide shares of AT&T common stock having an aggregate market price of $71.73 for each share of McCaw common stock, subject to a minimum of .909 of a share of AT&T common stock. Pursuant to a separate agreement, AT&T has granted McCaw the right, in the event the Merger does not close, to require AT&T to purchase from McCaw $600 million of McCaw's Class A common stock at a price of $51.25 per share. The Merger is subject to a number of conditions, including the receipt of regulatory approvals, expiration of the waiting period under the Hart- Scott-Rodino Antitrust Improvements Act (the "HSR Act"), receipt of opinions that the Merger will be tax free and will be accounted for as a pooling of interests, and McCaw stockholder approval. McCaw stockholders holding a majority of the voting power of the McCaw common stock, including members of the McCaw family and British Telecommunications plc, have agreed to vote in favor of the Merger. Regulatory Approvals HSR Act and Antitrust. AT&T and McCaw must observe the notification and waiting period requirements of the HSR Act before the Merger may be consummated. The HSR Act provides for an initial 30-calendar day waiting period following the filing with the Federal Trade Commission (the "FTC") and the Antitrust Division of the U. S. Department of Justice (the "Antitrust Division") of certain Notification and Report Forms by the parties to the Merger and certain other parties. The HSR Act further provides that if, within the initial 30-calendar-day waiting period, the FTC or the Antitrust Division issues a request for additional information or documents, the waiting period will be extended until 11:59 p.m. on the twentieth day after the date of substantial compliance by the filing parties with such request. On September 22, 1993, AT&T and McCaw each received an extensive request from the Antitrust Division for additional information and documents with respect to the Merger and the telecommunications industry. Accordingly, the waiting period under the HSR Act has been extended and will not expire until the twentieth calendar day after AT&T and McCaw have each substantially complied with such request for additional information and documents. Each of AT&T and McCaw is responding to the request as rapidly as practicable but cannot predict when substantial compliance will be achieved. - 3 - On December 2, 1993, BellSouth Corporation ("BellSouth") filed a motion in the case entitled United States v. Western Electric Co. Inc. et al., Civil Action No. 82-0192, for a declaratory ruling that the Merger would violate Section I(D) of the Modification of Final Judgment (the "Decree"), United States v. American Tel. and Tel. Co., 552 F. Supp. 131, 266-34 (D.D.C. 1982), aff'd mem. sub. nom Maryland v. United States, 450 U.S. 1001 (1982) and cannot be consummated without a modification of the Decree. On January 5, 1994, the U.S. Department of Justice filed a response that supported BellSouth's contention that a waiver of the Decree is required. On January 27, 1994, AT&T filed for a determination that a waiver is not required under the Decree or, in the alternative, for waiver of any relevant Decree provisions. AT&T and McCaw believe that BellSouth is not entitled to the relief sought but that a waiver, if necessary, can be obtained. There can be no assurance that AT&T will prevail with respect to the BellSouth challenge or any other challenge to the Merger that may be made on antitrust grounds. FCC. On August 23, 1993, AT&T and Craig O. McCaw filed various applications seeking consent of the FCC to the proposed transfer of control of radio licenses held by McCaw to AT&T, which consent is required prior to consummation of the Merger. The FCC has issued public notices concerning these applications and has established a schedule, pursuant to which (i) interested parties were permitted to petition to deny the applications by November 1, 1993, (ii) responses to those petitions were due by December 2, 1993 and (iii) replies to such responses were due by January 18, 1994. Various petitions, responses and replies have been filed and the matter is now pending before the FCC. There can be no assurance that the FCC will give such consent. State Governmental Authorities. Pursuant to various applicable statutes, AT&T and McCaw were required to file applications with nine state regulatory commissions seeking approval and/or a statement of non- opposition to the Merger. Such applications were filed in Alaska, California, Hawaii, Louisiana, Maine, New York, Nevada, Ohio and West Virginia. The commissions of all of the foregoing states, except California, have approved the applications or issued statements of non- opposition; the California application is still pending. In December 1993, AT&T and McCaw entered into a settlement agreement (the "California Settlement") with all of the original opposing parties in California regarding the provision of cellular and interexchange services to customers in California. However, there are no assurances that the California commission will approve the California Settlement, or, if approved, when such approval will be granted. There also can be no assurance that additional challenges will not be made or that, if such a challenge is made, AT&T and McCaw will prevail. GLOBAL INFORMATION MOVEMENT AND MANAGEMENT To meet the needs of its customers and the demands of the complex and rapidly changing information movement and management industry, AT&T maintains business units that develop, engineer, market, and maintain telecommunications services and business units that develop, manufacture, market, provide, install and service information movement and management products and systems. - 4 - To better serve the needs of customers, AT&T's businesses are clustered into functional groups as follows: Communications Services Group The Communications Services Group addresses the needs of large and small businesses, the Federal government, state and local governments and consumers for voice, data and image telecommunications services. Business units within this group provide regular and custom long distance communications services, including message telecommunications services ("MTS"), wide area telecommunications services ("WATS"), satellite transponder services, AT&T EasyReach# 700 services, toll-free or 800 services, 900 services, private line services, Software Defined Network services ("SDN"), and integrated services digital network ("ISDN") technology based services. They also provide special long distance services, including AT&T Calling Card services and special calling plans and the Company's domestic and international operators. AT&T provides communications services internationally, including transaction services, global networks, network management and value added network services (i.e., services offered over communications transmission facilities that employ computer processing applications) and sells and maintains submarine cable systems. AT&T provides interstate and intrastate long distance telecommunications services throughout the continental United States and provides, or joins in providing with other carriers, interstate telecommunications services to and from Alaska, Hawaii, Puerto Rico and the Virgin Islands and international telecommunications services to and from virtually all nations and territories around the world. In the continental United States, AT&T provides long distance telecommunications services over its own network. Virtually all switched services are computer controlled and digitally switched and interconnected by a packet switched signaling network. Transmission facilities consist of approximately 2 billion circuit-miles using lightwave, satellite, wire and coaxial cable and microwave radio technology. International telecommunications services are provided via multiple international transoceanic submarine cable (primarily lightwave) systems and via international satellite and radio facilities. AT&T is subject to the jurisdiction of the Federal Communications Commission ("FCC") with respect to interstate and international rates, lines and services, and other matters. For many years prior to July 1, 1989, the system of regulation used by the FCC for AT&T was rate-of-return regulation. Effective July 1, 1989, the FCC adopted a new system of regulating AT&T known as "price caps" under which AT&T's prices, rather than its earnings, are limited. The FCC decided in June 1993 to continue price caps for residential services instead of reducing regulation of AT&T. ____________ # Registered service mark of AT&T - 5 - AT&T's intrastate telecommunications services are subject to regulation in many states by public service commissions or similar state authorities having regulatory power over intrastate rates, lines and services and other matters. The system of regulation used in many states, at least for some of AT&T's services, is rate-of-return regulation. In recent years, recognizing the competitive nature of AT&T's services, many states have adopted different systems of regulation, such as: complete removal of rate-of-return regulation, pricing flexibility rules for some or all of AT&T's services, price caps, and incentive regulation. AT&T Global Information Solutions Company AT&T Global Information Solutions Company ("AT&T GIS" formerly known as NCR Corporation) develops, manufactures, markets, supports and services business information systems for worldwide markets. AT&T GIS's services and products consist of: industry-specific products, including industry-specific workstations and processors for retail, financial, manufacturing, and other markets; small computer systems and workstations, including small servers, personal computers, office automation workstations, and video display workstations; mid-range computer systems, including workgroup servers, small, medium and large departmental servers, and systems for interactive and batch processing; large computer systems for on-line transaction processing, decision support, and batch processing; imaging systems; communication processors which process information between large computer systems and a variety of data communication devices such as terminals; and synergistic products and services, including semiconductors, data centers, field engineering, software services, business forms and supplies, and education. Multimedia Products and Services Group The Multimedia Products and Services Group addresses the equipment needs of large and emerging businesses, the Federal government, state and local governments, international distributors and consumers. Business units in this group offer products such as private branch exchanges ("PBXs") including the Definity* communications system, voice processing systems and voice messaging systems including the AUDIX* and Conversant* systems, electronic mail, electronic data interchanges and enhanced facsimile services through AT&T EasyLink* services, video conferencing systems, installations, maintenance and repair services and other business communications systems, corded and cordless telephones, cellular telephones, answering systems, security systems, facsimile machines, modems, multiplexers, data transceivers, the Merlin* and Partner* communications systems, videophone, and imaging and personal communicator products. The Multimedia Products and Services Group also includes AT&T Ventures Corporation. AT&T Ventures Corporation, a wholly owned subsidiary of AT&T, is an internal venture capital business. The mission of this organization is to identify and nurture new markets for the application of AT&T-developed technologies. AT&T Ventures Corporation creates and grows new businesses in markets not addressed by existing business units. On June 14, 1993, AT&T exchanged its 77% interest in UNIX System Laboratories for approximately 3% ownership of Novell, Inc., a leading software development company. ____________ * Registered trademark of AT&T - 6 - Network Systems Group The Network Systems Group includes business units that primarily manufacture, market, engineer, install and maintain switching systems, transmission systems, cable and wire products, cellular systems, and operations systems for AT&T, local exchange carriers, other carriers, private businesses, government agencies, overseas telephone administrations and others. Switching systems include the 5ESS* switch; transmission systems include lightwave and digital radio products, digital cross connect and multiplex products, and digital loop carrier products; cable and wire products include optical fiber, copper and optical fiber cable and related apparatus; and operations systems include mechanized systems for managing telecommunications networks. The Network Systems Group also includes AT&T Microelectronics, a business unit that produces three broad categories of components: integrated circuits, photonics and other electronic components such as discrete components, power systems and printed wiring boards, which are included in most AT&T products and systems. Certain of these components and many other specially designed components are sold commercially to other companies. International In 1993, the WorldPartners alliance was formed by AT&T, Kokusai Denshin Denwa Company, Ltd of Japan and Singapore Telecommunications to provide global companies with a new level of service and convenience. WorldPartners expects to be joined by Australia's long distance company Telstra, Unitel of Canada, Korea Telecom, and others, including European partners. AT&T has numerous subsidiary companies and offices throughout the world. In 1993, AT&T announced its intention to implement an international organizational structure, along regional lines, to complement the functional groups described above and to promote shared accountability between regional units and those groups. Three regional units, representing all AT&T businesses, are being formed: Latin America, with headquarters in Coral Gables, Florida; Asia/Pacific, with headquarters in Hong Kong; and Europe/Middle East/Africa, with headquarters in Brussels. AT&T has established a number of international alliances, ventures and manufacturing facilities. Among these alliances, ventures and manufacturing facilities are the following: Asia/Pacific Region AT&T owns 60% of AT&T Taiwan Telecommunications Co., Ltd., a joint venture with the Taiwanese government and others in Taiwan which manufactures switching and transmission systems. AT&T owns approximately 15% of United Fiber Optic Communications Inc., a venture with Pacific Electric Wire and Cable Ltd., Chiao Tung Bank and others in Taiwan which manufactures fiber cable and transmission equipment. AT&T owns AT&T Telecommunications Products (Thai) Ltd., a Thai company which manufactures telephones. ____________ * Registered trademark of AT&T - 7 - AT&T owns semiconductor assembly and test facilities and telephone manufacturing facilities in Singapore and a manufacturing facility on Batam Island, Indonesia which produces cordless telephones. AT&T owns 80% of AT&T Software Japan, Ltd., a joint venture with Industrial Bank of Japan and Software Research Associates, which provides software development. AT&T owns approximately 60% of AT&T Jens Corporation, a joint venture with 22 major Japanese companies which provides value added network services. AT&T owns 44% of a joint venture with the Goldstar group of the Republic of Korea which manufactures and markets switching products. AT&T, through joint ventures, operates manufacturing facilities in the People's Republic of China for the production of copper and fiber cable, switching systems, and transmission equipment. Europe/Middle East/Africa Region AT&T owns AT&T ISTEL Limited, a United Kingdom based company, which owns numerous subsidiaries, that manufactures software and provides software related services. AT&T Network Systems International B.V. is a joint venture between AT&T International Inc., which owns approximately 94% of the equity and Compagnia Telefonica Nacional de Espana, the national telephone company of Spain, which owns approximately 6%. It designs, develops, manufactures and markets Network Systems' products in Europe and elsewhere. In addition, the joint venture itself has established businesses and participates in joint ventures in a number of countries, including: the Netherlands, Belgium, the People's Republic of China, the Czech Republic, France, Germany, Ireland, Italy, Poland, the Russian Federation and Kazakhstan. AT&T owns 20% of Societa Italiana Telecommunicazioni S.p.A. ("Italtel"), a subsidiary of STET-Societa' Finaziaria Telefonica-per Azioni ("STET"), a telecommunications holding company controlled by the government of Italy, which manufactures and sells telecommunications equipment. AT&T and STET have entered into a cooperation agreement involving the development and marketing of certain public and private telecommunications equipment for Italy, other European countries, the United States and certain other markets. AT&T owns Gretag Data Systems AG, a Swiss company that manufactures security-encryption equipment for the financial market. AT&T owns 19.5% of UTEL, a Ukrainian joint venture company with PTT Telecom and the Ukrainian State Committee of Communications, which provides services and products to improve Ukraine's domestic and international telecommunications services. AT&T owns AT&T Wireless Communications Products Limited (formerly "Shaye Communications Limited"), a United Kingdom company engaged in research, development and marketing of products for the ultra low power, portable, radio-based telecommunications market. - 8 - AT&T owns in excess of 90% of Barphone S.A., a French company engaged principally in the development, design, manufacture and marketing of small PBXs and related equipment. AT&T owns 75% of LYCOM A/S, a Danish company engaged principally in the manufacture of optical fiber. AT&T owns 50% of A/O Telmos, a Russian joint venture company with Moscow City Telephone Company which will own and operate a subscriber network in Moscow. AT&T owns various controlling interests in joint ventures in the Czech Republic, Hungary, Poland and the Slovak Republic which market key systems, PBXs and related equipment. AT&T owns AT&T Microelectronica de Espana S.A., a Spanish company which manufactures integrated circuits. In addition, AT&T, through joint ventures, operates manufacturing facilities in Ireland, Korea, the People's Republic of China, Taiwan and Thailand. Latin America Region AT&T owns four manufacturing companies in Mexico. One company manufactures microelectronics products, a second company produces telephone answering machines, a third company is being converted to manufacture corded telephones and a fourth company repairs various items of AT&T's consumer products business unit. AT&T owns 51% of AT&T Elecon Telesistemas C.A., a Venezuelan joint venture with Electra Finance, which manufactures copper cable for the Venezuelan market. AT&T owns 5% of VenWorld Telecom, C.A., a Venezuelan joint venture company with GTE Corporation and three Venezuelan corporations, which owns 40% of the Venezuelan Post Telephone and Telegraph Company ("PT&T"), Compania Anonima Nacional Telefonos de Venezuela ("CANTV"). Canada AT&T owns 20% of Unitel Communications, Inc., a Canadian long distance carrier. AT&T Bell Laboratories AT&T Bell Laboratories provides support to all business units. It designs and develops new products, systems, software and services, and carries out a broad program of fundamental research, to provide the technology base for AT&T's future. AT&T Bell Laboratories has made significant contributions to information science and technology since its founding in 1925. These contributions include the invention of the transistor, the development of the nationwide microwave radio network, and the design and development of - 9 - integrated circuits and many types of lasers. Areas of AT&T Bell Laboratories research and development work in recent years include lightwave transmission, which offers greater transmission capacity than other transmission systems; electronic switching technology, which enables faster call processing, increased reliability and reduced network costs; and microelectronics components, which bring the latest advantages of scale of integration to the full range of products offered by AT&T. Other advances achieved by AT&T Bell Laboratories include: the development of the Karmarkar Algorithm, a mathematical optimization technique which is being applied to the efficient layout of AT&T's long distance telecommunications network; the development of optical amplifiers that dramatically increase the distance messages can be transmitted optically before they must be reamplified, and the invention of a self-electro optic effect device ("SEED") useful for optical storage, optical switching and optical logic, thus advancing the future of photonic technologies; the development of polysilicon memory structures widely used in dynamic random access memories ("DRAMS"); the development of speech recognizers which provide for the human control of complex systems with verbal commands; and improvements to AT&T's ACCUNET* T1.5 service (a wideband, all-digital, customer-dedicated service that combines voice, data and video communications) that permit customer control of reconfigurations. AT&T Bell Laboratories also undertakes the architectural effort required to see that AT&T products can be integrated within a framework of national and international standards. An emphasis on use of the UNIX@ Operating System, "C" language and other software suited to open architecture and easy connectivity facilitates this architectural effort. AT&T Bell Laboratories has also made significant contributions to the efficient coding of television pictures and to wireless communications technology. In order to increase focus on customers and to create more nimble organizations, much of the AT&T Bell Laboratories systems engineering and development resource has been more formally aligned with business units. The newly aligned organizations remain AT&T Bell Laboratories, but they receive day-to-day guidance from the business units they support. Competition and Regulation In the global information movement and management industry, AT&T serves markets that are highly competitive and subject to rapid changes in technology and customer needs. Regulatory and court decisions, as well as new technology, have expanded the types of available information movement and management services and products and increased the number of competitors offering such services and products. Many of AT&T's competitors are large companies which have substantial capital, technological and marketing resources. The FCC has ruled that most business and residential customers must select a preferred long distance carrier. In the course of the conversion to "equal access" by a telephone company (equal access permits a customer to use the service of any available long distance carrier, without the need to dial a special access code), customers that fail to select a carrier ____________ * Registered trademark of AT&T @ Registered trademark of Novell, Inc. - 10 - will have one selected for them, based on the percentage distribution of customers having made selections. During 1989, as a result of Federal court orders, most owners of premises on which telephone company owned public telephones are located selected a long distance carrier. Premises owners who did not select a long distance carrier had a carrier selected for them through an allocation process similar to that used for business and residential customers. The FCC's "price caps" system of regulation, which applies to AT&T's residential and small business outbound services, and all inbound 800 services, is designed to maximize the incentive for AT&T to increase productivity and lower costs and increases AT&T's flexibility to respond to market conditions. AT&T's price capped services are subject to price ceilings, defined by indices based on AT&T's price levels at the initiation of price cap regulation and adjusted annually to reflect changes in inflation and certain other costs of doing business. The price ceilings for services are also subject to a 3% annual decrease, which reflects a 2.5% productivity level that the FCC says AT&T has achieved historically plus an additional 0.5%. AT&T may raise prices of individual services, but must stay within the ceilings overall. Generally AT&T is prohibited from raising or lowering the overall price of particular service categories by more than 5% annually. In 1991, the FCC adopted an order in its "interexchange competition" proceeding (CC Docket No. 90-132), confirming that the interexchange market is largely competitive. As a result, the order streamlined the regulation of most AT&T outbound business services. These services are no longer subject to price cap regulation; AT&T can file tariff revisions for these services on 14 days notice; and AT&T can offer individually negotiated contract-based rates for these services. On May 21, 1993, following the implementation of 800 number portability, the regulation of AT&T's 800 services, with the exception of 800 Directory Assistance Service, were streamlined and AT&T was permitted to include these services in its individually negotiated contracts. Three bills have been introduced into Congress that concern the telecommunications industry, two in the House of Representatives and one in the Senate. One of the House bills, H.R. 3626, establishes the FCC and U. S. Department of Justice tests the Regional Bell Operating Companies ("RBOCs") must meet before they can provide long distance service. These tests vary with the segment of the long distance market the RBOC seeks to enter. This bill also outlines the conditions for RBOC entry into manufacturing of telecommunications equipment. The second House bill, H.R. 3636, would require local telephone companies ("LECs") to provide interconnection equal access to their exchanges. In exchange, the LECs will be permitted to provide cable television services. The Senate bill, S. 1822, combines many of the features of the House bills. It includes a test which the RBOCs must meet before they would be permitted to provide long distance service. This test requires that there "be no substantial possibility the RBOC could use its monopoly power to impede competition" in the market it seeks to enter. In areas where the - 11 - RBOC provides local service, they must also prove that they face "actual and demonstrable competition" before they could offer long distance service. S. 1822 would also permit the RBOCs into manufacturing immediately, but such activities would be subject to extensive post-entry safeguards. Finally, like H.R. 3636, S. 1822 would permit the LECs to enter the cable television market, but only in exchange for allowing competitors into their local service market. FINANCIAL SERVICES AND LEASING The Company's operations in the financial services and leasing industry are conducted through AT&T Capital Corporation ("AT&T Capital"), a majority owned subsidiary of AT&T, and AT&T Universal Card Services Corp. ("AT&T Universal Card Services"), a wholly owned subsidiary of AT&T. AT&T Capital On November 19, 1992, the Company announced that AT&T Capital had begun taking the legal and financial steps necessary to become more financially independent of AT&T. On August 4, 1993, an initial public offering combined with a management stock offering took place, which totaled approximately 14 percent of AT&T Capital's common stock. As a result of the stock offerings, approximately 86 percent of the outstanding common stock of AT&T Capital is owned by AT&T indirectly through subsidiaries. AT&T Capital is a full-service diversified equipment leasing and finance company including captive programs, general and specialized leasing throughout the United States and in Canada, Europe and Hong Kong. AT&T Capital works side by side with AT&T and its affiliates to provide customized financing for AT&T customers acquiring AT&T and associated equipment. AT&T Capital also provides: financing in connection with general equipment used by AT&T entities; the AT&T affiliate investment recovery program; and AT&T's employee vehicle leasing program. AT&T Capital's captive programs are partially dependent upon sales of products by AT&T and its affiliates and the continued acceptance of these products in the marketplace. AT&T Capital's general and specialized financial products are diversified. These financial products include: small and middle ticket general equipment leasing, computer leasing and remarketing, comprehensive fleet vehicle management and asset management. AT&T Capital has expanded its international focus through equipment leasing and financial services to customers in Canada, Europe, and Hong Kong. Competition The leasing and finance industry is highly competitive. Participants in the industry compete through price (including the ability to control costs), risk management, innovation and customer service. Principal cost factors include the cost of funds, the cost of selling to or acquiring new end-user customers, and the cost of managing portfolios (including, for example, billing, collection, property and sales tax, residual management, etc.). - 12 - In its leasing and financing operations and programs, AT&T Capital competes with captive or related leasing companies (such as General Electric Capital Corporation and IBM Credit Corporation), independent leasing companies (such as Comdisco, Inc.), certain banks engaged in leasing, lease brokers and investment banking firms that arrange for the financing of leased equipment, and manufacturers and vendors who lease their own products to customers. In addition, AT&T Capital competes with all banking and other financial institutions, manufacturers, vendors and others who extend or arrange credit for the acquisition of equipment and, in a sense, with the available cash resources of end-users (i.e., end-users may use their available cash resources to purchase equipment otherwise financeable by AT&T Capital). Many of the competitors of AT&T Capital are large companies that have substantial capital, technological and marketing resources; some of these competitors are significantly larger than AT&T Capital and have access to capital at a lower cost. The activities of AT&T Capital are partially dependent upon sales of products by AT&T and its affiliates. AT&T is subject to substantial competition in the broad markets in which it competes. Thus, there is no assurance as to the volume of financing opportunities that will be generated by sales or leases of equipment by AT&T and its affiliates. AT&T Universal Card Services AT&T Universal Card Services began operations in early 1990. The AT&T Universal Card is a combined general-purpose consumer credit card and AT&T Calling Card that at year-end had receivables in the amount of $9.2 billion in 1993, $6.6 billion in 1992, $3.8 billion in 1991, and $1.6 billion in 1990. The AT&T Universal Card is offered directly through AT&T Universal Financial Corp., a Utah industrial loan company which is wholly owned by AT&T, and under an affinity relationship with Universal Bank in Columbus, Georgia, a subsidiary of Synovus Financial Corp. AT&T Universal Card Services provides marketing and customer support for the AT&T Universal Card program and it purchases cardholder receivables from Universal Bank. The consumer credit card industry is highly competitive and some seasonality exists, with a higher number of purchases occurring during the year-end holiday season. The Company believes that the AT&T Universal Card program is one of the top two or three bankcard/credit card programs, based on generally available industry information, and on the number of cardholder accounts in the United States. In May 1990, four major United States banks filed complaints with the FCC alleging, among other things, that the AT&T Universal Card program illegally discriminated against AT&T customers not holding AT&T Universal Cards, as well as credit card issuers in that the AT&T Universal Card program provides for a 10% discount on AT&T calling card rates. These banks also filed petitions with the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board ("FRB"), and the Georgia Department of Banking and Finance alleging that the AT&T Universal Card program, in its current form, violated certain banking laws and regulations. The Georgia Department of Banking and Finance, the FDIC and the FRB considered these complaints and decided not to take any action in connection with the AT&T Universal Card program. On December 21, 1993, the FCC released its Memorandum Opinion and Order concluding that there is no merit to the arguments of the banks that the AT&T Universal Card venture is unlawful under the Communications Act or the Commission's Rules and relevant decisions. - 13 - On October 9, 1990, VISA U.S.A. announced changes in its affinity card regulations which would limit the operations of affinity card programs. VISA U.S.A. further announced that it will apply these rule changes on a prospective basis, i.e., only to affinity card programs that commenced after October 8, 1990. However, VISA U.S.A. stated that affinity card programs which commenced prior to October 8, 1990, including the AT&T Universal Card program, will be reviewed in the coming months to decide if these new rules should be applied retroactively to such programs. On or about November 29, 1990, VISA U.S.A. established a temporary moratorium, in effect through June 4, 1991, on eligibility for membership in the VISA association by financial institutions owned by nonbanking companies. VISA U.S.A. noted that its moratorium on membership in VISA by financial institutions owned by nonbanks also applies to the acquisition of an existing member by a nonbanking organization. Under this moratorium, any institution which would not be eligible to join VISA directly would be precluded from joining indirectly through an acquisition, unless the acquisition is approved by three-quarters of the VISA U.S.A. board of directors. VISA U.S.A. deferred consideration of these matters until its Board meeting of February 10-11, 1992, when it set aside the moratorium, established an increased fee structure for new members and set forth new affinity rules for card programs that commence after February 11, 1992. In a briefing paper provided by VISA U.S.A. to the press, it confirmed that the new membership rules have no impact on the AT&T Universal Card program. OPERATING REVENUE AND RESEARCH AND DEVELOPMENT EXPENSE INFORMATION For information about the consolidated operating revenues contributed by the Company's major classes of products and services and about consolidated research and development expenses, see revenue tables and descriptions on pages 24 thru 27 and Consolidated Statements of Income on page 31, of the Company's annual report to security holders for the year ended December 31, 1993. Such information is incorporated herein by reference, pursuant to General Instruction G(2). EMPLOYEE RELATIONS AT&T employs approximately 308,700 persons in its operations. About 35% of the employees of AT&T are represented by unions. Of those so represented about 80% are represented by the Communications Workers of America ("CWA"), which is affiliated with the AFL-CIO, about 19% by the International Brotherhood of Electrical Workers ("IBEW"), which is also affiliated with the AFL-CIO, and the remainder by other unions. Labor agreements with these unions extend through May 27, 1995. ENVIRONMENTAL MATTERS The operations of the Company involve the release of materials to the environment that are subject to regulation under environmental protection laws. The Company is involved in a number of remedial actions to clean up hazardous wastes in accordance with the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA", or "Superfund"), the Resource Conservation and Recovery Act ("RCRA") and state environmental laws. Such statutes require that certain parties fund remedial actions regardless of fault. During 1993, as in prior years, the Company has been making capital expenditures for environmental control facilities. - 14 - An estimate of the costs of remedial actions or the amounts of capital expenditures for future periods is subject to a number of uncertainties including the following: the developing nature of administrative regulations being promulgated under CERCLA, RCRA and other environmental protection laws; the availability of other responsible parties at a site; the availability of information regarding conditions at potential sites; uncertainty as to how the laws and regulations may be applied to such sites; multiple choices and costs associated with diverse technologies that may be used in corrective actions at such sites; the eventual outcome of claims for insurance coverage; and the time periods (which may be quite lengthy) over which eventual remediation may occur. In the opinion of the Company's management, capital expenditures and expenses in connection with remedial actions to comply with the present environmental protection laws will not have a material effect upon the Company's future expenditures, earnings or competitive position beyond that provided for at year-end. Item 2. Properties. The properties of AT&T consist primarily of plant and equipment used to provide long distance telecommunications services, manufacturing plants at which the Company's products and systems are produced and administrative office buildings. Telecommunications plant and equipment consists of: central office equipment, including switching and transmission equipment; connecting lines (cables, wires, poles, conduits, etc.); land and buildings; and miscellaneous properties (work equipment, furniture, plant under construction, etc.). The majority of the connecting lines are on or under public roads, highways and streets and international and territorial waters. The remainder are on or under private property. AT&T operates 97 manufacturing facilities located throughout the United States and abroad which at December 31, 1993, had a total of about 33 million square feet. Approximately 30 million square feet are in owned facilities and the remaining 3 million square feet are in leased premises. Some of the non-U.S. operations are operated through joint ventures with other parties (see the discussion of international alliances and ventures contained in Item 1. Business). AT&T also operates a number of sales offices, service, repair and distribution centers, and other facilities, such as research and development laboratories. AT&T continues to manage the deployment and utilization of its assets in order to meet its global growth objectives while at the same time, ensuring that these assets are generating economic value added for the shareholder. AT&T will continue to manage its asset base consistent with globalization initiatives, marketplace forces, productivity growth and technology change. - 15 - A substantial number of the administrative offices of AT&T are in leased buildings. Substantially all of the important communications facilities are in buildings owned by AT&T or leased from the regional holding companies created at divestiture. Substantially all of the major manufacturing plants and major centers are in owned buildings. Many of the smaller facilities are in rented quarters. Most of the important buildings are on land held in fee, but a few are on land held under long-term leases. Item 3. Legal Proceedings. In the normal course of business, AT&T is subject to proceedings, lawsuits and other claims, including proceedings under government laws and regulations related to environmental and other matters. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, AT&T is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters at December 31, 1993. While these matters could affect operating results of any one quarter when resolved in future periods, it is management's opinion that after final disposition, any monetary liability or financial impact to AT&T beyond that provided for at year-end would not be material to AT&T's annual consolidated financial statements. On July 31, 1991, the United States Environmental Protection Agency Region III issued a complaint pursuant to Section 3008a of the Resource Conservation and Recovery Act alleging violations of various waste management regulations at the Company's Richmond Works, Richmond, Virginia. The complaint seeks a total of $4,184,304 in penalties. The Company is contesting both liability and the penalties. In addition, on July 31, 1991, the United States Environmental Protection Agency filed a civil complaint in the U.S. District Court for the Southern District of Illinois against the Company and nine other parties seeking enforcement of its CERCLA Section 106 cleanup order, issued in November 1990 for the NL Granite City Superfund site, Granite, Illinois, past costs, civil penalties of $25,000 per day and treble damages related to certain United States' costs. The Company is contesting liability. On January 31, 1994, the Company pleaded guilty to a misdemeanor and paid a fine of $175,000 in connection with environmental violations at the Company's facilities in Reading, Pennsylvania. The foregoing environmental proceedings are not material to the consolidated financial statements or business of the Company and would not be reported but for Instruction 5 C. of Item 103 of Regulation S-K, which requires disclosure of such matters. See also the discussion herein in Item 1. Business, for additional information about environmental matters. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted to a vote of security holders in the fourth quarter of the fiscal year covered by this report. - 16 - Executive Officers of the Registrant (as of February 1, 1994) Became AT&T Executive Officer Name Age on Robert E. Allen* ....... 59 Chairman of the Board and Chief Executive Officer ............ 9-86 Richard S. Bodman ...... 55 Senior Vice President, Corporate Strategy and Development ..... 8-90 Harold W. Burlingame ... 53 Senior Vice President, Human Resources .................... 9-86 Robert M. Kavner ....... 50 Executive Vice President AT&T and Chief Executive Officer, Multimedia Products and Services Group ............... 3-89 Marilyn Laurie ......... 54 Senior Vice President, Public Relations and Employee Information .................. 2-87 Alex J. Mandl .......... 50 Executive Vice President AT&T and Chief Executive Officer, Communications Services Group 8-91 William B. Marx, Jr. ... 54 Executive Vice President AT&T and Chief Executive Officer, Network Systems Group ........ 7-89 John S. Mayo ........... 63 President, AT&T Bell Laboratories ................. 7-91 Richard W. Miller ...... 53 Executive Vice President AT&T and Chief Financial Officer .. 8-93 Victor A. Pelson** ..... 56 Executive Vice President AT&T and Chairman Global Operations Team ......................... 3-89 Jerre L. Stead ......... 51 Executive Vice President AT&T and Chief Executive Officer, AT&T Global Information Solutions Company ...................... 9-91 Sam R. Willcoxon ....... 63 Group Executive AT&T and President, Telephone Pioneers of America ................... 3-89 John D. Zeglis ......... 46 Senior Vice President - General Counsel and Government Affairs ...................... 9-86 ____________ *Member of the Board of Directors and Chairman of the Executive and Proxy Committees. **Member of the Board of Directors. All of the above executive officers have held high level managerial positions with AT&T or its affiliates for more than the past five years, except Messrs. Bodman, Mandl, Miller and Stead who have been officers of AT&T since August 23, 1990, August 1, 1991, August 9, 1993 and September 1, 1991, respectively. Mr. Bodman was President of Washington National Investment Corp., an investment company, for more than five years prior to joining AT&T. Prior to joining AT&T, Mr. Mandl was Chairman and Chief Executive Officer of Sea-Land Service, Inc., an ocean transportation and distribution services company, for three years. Prior to becoming an - 17 - executive officer of AT&T, Mr. Miller was with Wang Laboratories, Inc. from 1989 through 1993 serving as President and Chief Operating Officer and later as Chairman, President and Chief Executive Officer. Prior to that, Mr. Miller held several Executive Management positions with RCA and General Electric. Prior to becoming Chief Executive Officer of AT&T Global Information Solutions, Mr. Stead was President of AT&T Business Communication Systems for two years. Mr. Stead was with Square D Company, a worldwide leader in industrial control and electronical distribution products, systems and services, from 1987 to 1991. He became president of Square D in 1987, and was elected to the additional positions of chief executive officer and chairman of the board in 1989. Officers are not elected for a fixed term of office but hold office until their successors have been elected. PART II Items 5 through 8. The information required by these items is included in pages 21 through 44 and on the inside back cover of the Company's annual report to security holders for the year ended December 31, 1993. The referenced pages of the Company's annual report to security holders have been filed as Exhibit 13 to this document. Such information is incorporated herein by reference, pursuant to General Instruction G(2). Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There have been no changes in independent auditors and no disagreements with independent auditors on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure during the last two years. PART III Items 10 through 13. Information regarding executive officers required by Item 401 of Regulation S-K is furnished in a separate disclosure in Part I of this report because the Company did not furnish such information in its definitive proxy statement prepared in accordance with Schedule 14A. The other information required by Items 10 through 13 is included in the Company's definitive proxy statement dated March 1, 1994, on page 6, the first paragraph on page 7, the last paragraph on page 7 through page 13, and the last paragraph on page 42 through page 56. Such information is incorporated herein by reference, pursuant to General Instruction G(3). - 18 - PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Documents filed as a part of the report: (1) Financial Statements: Pages Report of Management ................................ * Report of Independent Auditors ...................... * Statements: Consolidated Statements of Income ............... * Consolidated Balance Sheets ..................... * Consolidated Statements of Cash Flows ........... * Notes to Consolidated Financial Statements ...... * (2) Financial Statement Schedules: Report of Independent Auditors ...................... 22 Schedules: II--Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other than Related Parties................... 23 V--Property, Plant and Equipment ................. 28 VI--Accumulated Depreciation ...................... 32 VIII--Valuation and Qualifying Accounts ............. 34 IX--Debt Maturing Within One Year ................. 36 X--Supplementary Income Statement Information .... 37 Schedules other than those listed above have been omitted because such schedules are not required or applicable. Separate financial statements of subsidiaries not consolidated and 50 percent or less owned persons are omitted since no such entity constitutes a "significant subsidiary" pursuant to the provisions of Regulation S-X, Article 3-09. ____________ *Incorporated herein by reference to the appropriate portions of the Company's annual report to security holders for the year ended December 31, 1993. (See Part II.) - 19 - (3) Exhibits: Exhibits identified in parentheses below, on file with the Securities and Exchange Commission ("SEC"), are incorporated herein by reference as exhibits hereto. Exhibit Number (3)a Restated Certificate of Incorporation of the registrant, dated January 10, 1989, Certificate of Change to Restated Certificate of Incorporation dated March 18, 1992, and Certificate of Amendment to Restated Certificate of Incorporation dated June 1, 1992 (Exhibit 4B to Form SE dated July 21, 1992, File No. 1-1105). (3)b By-Laws of the registrant, as amended April 20, 1993 (Exhibit 3.02 to Form S-4 dated February 1, 1994 Registration No. 33-52119, File No. 1-1105). (4) No instrument which defines the rights of holders of long term debt, of the registrant and all of its consolidated subsidiaries, is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument to the SEC upon request. (10)(iii)(A)1 AT&T Short Term Incentive Plan as amended December 16, 1992 (Exhibit (10)(iii)(A)1 to Form SE, dated March 24, 1993, File No. 1-1105). (10)(iii)(A)2 AT&T 1987 Long Term Incentive Program as amended July 17, 1989 (Exhibit (10)(iii)(A)2 to Form SE dated March 24, 1993, File No. 1-1105). (10)(iii)(A)3 AT&T Senior Management Individual Life Insurance Program dated January 1, 1987 (Exhibit (10)(iii)(A)1 to Form SE, dated March 25, 1987, File No. 1-1105). (10)(iii)(A)4 AT&T Senior Management Long Term Disability and Survivor Protection Plan dated February 23, 1984 (Exhibit (10)(iii)(A)1 to Form SE, dated February 21, 1986, File No. 1-1105). (10)(iii)(A)5 AT&T Senior Management Financial Counseling Program dated March 14, 1994. (10)(iii)(A)6 AT&T Deferred Compensation Plan for Non-Employee Directors, as amended December 15, 1993. (10)(iii)(A)7 AT&T Directors Individual Life Insurance Program dated January 1, 1987 (Exhibit (10)(iii)(A)3 to Form SE, dated March 25, 1987, File No. 1-1105). - 20 - Exhibit Number (10)(iii)(A)8 AT&T Plan for Non-Employee Directors' Travel Accident Insurance (Exhibit (10)(iii)(A)8 to Form 10-K for 1990, File No. 1-1105). (10)(iii)(A)9 Extract from AT&T (formerly Bell System) Management Pension Plan regarding limitations on and payments of pension amounts which exceed the limitations contained in The Employee Retirement Income Security Act, with amendments effective October 1, 1985 (Exhibit (10)(iii)(A)2 to Form SE, dated February 21, 1986, File No. 1-1105). (10)(iii)(A)10 AT&T Non-Qualified Pension Plan, (with amendments effective June 1, 1988) (Exhibit 10(iii)(A)10 to Form SE, dated March 26, 1990, File No. 1-1105). (10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan, as amended December 18, 1991. (10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective January 1, 1988, including AT&T Mid-Career Pension Plan, as amended May 15, 1985 (Exhibit (10)(iii)(A)4 to Form SE, dated March 25, 1988, File No. 1-1105). (10)(iii)(A)13 AT&T 1984 Stock Option Plan, as modified December 19, 1984 (Exhibit 10(t) to Form SE, dated February 27, 1985, File No. 0-13247). (10)(iii)(A)14 Form of Indemnification Contract for Officers and Directors (Exhibit (10)(iii)(A)6 to Form SE, dated March 25, 1987, File No. 1-1105). (10)(iii)(A)15 Pension Plan for AT&T Non-Employee Directors revised February 20, 1989. (10)(iii)(A)16 AT&T Senior Management Basic Life Insurance Program (Exhibit (10)(iii)(A)16 to Form 10-K for 1990, File No. 1-1105). (10)(iii)(A)17 Form of AT&T Benefits Protection Trust Agreement (Exhibit (10)(iii)(A)17 to Form SE, dated March 25, 1992, File No. 1-1105). (10)(iii)(A)18 Employment Agreement between American Telephone and Telegraph Company and Alex J. Mandl dated August 1, 1991. (10)(iii)(A)19 Employment Agreement between American Telephone and Telegraph Company and Jerre L. Stead dated July 31, 1991, supplemented October 18, 1991 and March 29, 1993. - 21 - Exhibit Number (12) Computation of Ratio of Earnings to Fixed Charges. (13) Specified portions (pages 21 through 44 and the inside back cover) of the Company's Annual Report to security holders for the year ended December 31, 1993. (21) List of subsidiaries of AT&T. (23) Consent of Coopers & Lybrand. (24)a Powers of Attorney executed by officers and directors who signed this report. (24)b Board of Directors' Resolution. Annual reports on Forms 11-K for the AT&T Long Term Savings Plan for Management Employees, the AT&T Long Term Savings and Security Plan, the AT&T Retirement Savings and Profit Sharing Plan and the NCR Corporation Savings Plan will be filed separately, on or before April 29, 1994. AT&T will furnish, without charge, to a security holder upon request a copy of the annual report to security holders and the proxy statement, portions of which are incorporated herein by reference thereto. AT&T will furnish any other exhibit at cost. (b) Reports on Form 8-K: Forms 8-K dated August 16, 1993, as amended, and October 8, 1993 were filed pursuant to Item 5. (Other Events) and Item 7. (Financial Statements, Pro Forma Financial Information and Exhibits), and Form 8-K dated December 30, 1993 was filed pursuant to Item 5. (Other Events). - 22 - REPORT OF INDEPENDENT AUDITORS To the Shareowners of American Telephone and Telegraph Company: Our report on the consolidated financial statements of American Telephone and Telegraph Company and subsidiaries has been incorporated by reference in this Form 10-K from page 30 of the 1993 Annual Report to the Shareowners of American Telephone and Telegraph Company. In connection with our audits of such financial statements, we have also audited the related consolidated financial statement schedules listed in the index on page 18 of this Form 10-K. In our opinion, the consolidated financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in our report referred to above and in Note 2 to the consolidated financial statements, in 1993 the Company changed its methods of accounting for postretirement benefits, postemployment benefits and income taxes. COOPERS & LYBRAND 1301 Avenue of the Americas New York, New York January 27, 1994 - 23 - Schedule II--Sheet 1
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES - -------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - -------------------------------------------------------------------------------------------------------------------------- Balance at Balance at Deductions End of Period Name of Debtor Beginning Additions -------------------------------------------------- of Period (1) (2) (1) (2) Amounts Amounts Collected Written Off Current Not Current - -------------------------------------------------------------------------------------------------------------------------- Year 1993 Thomas C. Wajnert (a) $200,000 $ 0 $ 0 $ 0 $ 50,000 $ 150,000 (f) 0 2,616,403 3,580 0 2,612,823 Richard A. McGinn (b) 300,000 305,590 605,590 0 0 0 David K. Hunt (c) 0 1,200,000 350,000 0 0 850,000 Ron J. Ponder (d) 0 550,800 0 0 200,800 350,000 Daniel L. Clark (e) 0 340,000 0 0 113,333 226,667 The Notes on Sheets 4 and 5 are an integral part of this schedule.
- 24 - Schedule II--Sheet 2
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES - -------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - -------------------------------------------------------------------------------------------------------------------------- Balance at Balance at Deductions End of Period Name of Debtor Beginning Additions -------------------------------------------------- of Period (1) (2) (1) (2) Amounts Amounts Collected Written Off Current Not Current - -------------------------------------------------------------------------------------------------------------------------- Year 1993 Edward Andrews (f) $ 0 $ 714,418 $ 4,506 $ 0 $ 0 $ 709,912 William Bridges (f) 0 168,527 266 0 0 168,261 Sterling Chadwick (f) 0 690,577 3,780 0 0 686,797 Frank Chartier (f) 0 457,226 3,125 0 0 454,101 Edward Cherney (f) 0 1,094,723 1,870 0 0 1,092,853 Nicholas Cyprus (f) 0 478,715 755 0 0 477,960 Michael DeBernardi (f) 0 451,366 2,847 0 0 448,519 George Deehan (f) 0 756,198 477 0 0 755,721 Edward Dwyer (f) 0 478,715 755 0 0 477,960 Geraldine Gold (f) 0 544,993 1,827 0 0 543,166 Timothy Hammill (f) 0 645,898 1,068 0 0 644,830 Ann Henry (f) 0 146,534 231 0 0 146,303 Robert Ingato (f) 0 149,475 236 0 0 149,239 Michelle Langstaff (f) 0 290,149 458 0 0 289,691 Madelyn Law (f) 0 283,574 485 0 0 283,089 G. Daniel McCarthy (f) 0 896,872 1,414 0 0 895,458 Kenneth Miltenberger (f) 0 488,987 3,084 0 0 485,903 Ruth Morey (f) 0 817,744 5,158 0 0 812,586 The Notes on Sheets 4 and 5 are an integral part of this schedule.
- 25 - Schedule II--Sheet 3
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES - -------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - -------------------------------------------------------------------------------------------------------------------------- Balance at Balance at Deductions End of Period Name of Debtor Beginning Additions -------------------------------------------------- of Period (1) (2) (1) (2) Amounts Amounts Collected Written Off Current Not Current - -------------------------------------------------------------------------------------------------------------------------- Year 1993 Judith Pfister (f) $ 0 $ 132,736 $ 0 $ 0 $ 0 $ 132,736 Irving Rothman (f) 0 1,121,106 1,768 0 0 1,119,338 Derek Soper (f) 0 871,665 6,029 0 0 865,636 Maureen Tart (f) 0 896,871 1,414 0 0 895,457 James Tenner (f) 0 642,481 366 0 0 642,115 Charles Van Sickle (f) 0 989,212 5,415 0 0 983,797 Charles Whittaker (f) 0 149,475 205 0 0 149,270 Carolyn Zachary (f) 0 146,534 802 0 0 145,732 William Zadrozny (f) 0 666,490 599 0 0 665,891 Year 1992 Thomas C. Wajnert (a) $200,000 -- -- -- -- $ 200,000 Richard A. McGinn (b) -- $ 600,000 $300,000 -- $300,000 -- Year 1991 Thomas C. Wajnert (a) -- $ 200,000 -- -- -- $ 200,000 The Notes on Sheets 4 and 5 are an integral part of this schedule.
- 26 - Schedule II--Sheet 4
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES ____________ (a) On September 20, 1991, AT&T granted a demand loan of $200,000 with interest compounded monthly to Thomas J. Wajnert, Chairman of the Board and Chief Executive Officer--AT&T Capital Corporation (a subsidiary of AT&T), as a result of a compensation negotiation between AT&T and Mr. Wajnert. The interest rate for any month in which there is an unpaid balance shall be the rate established by the Internal Revenue Service ("IRS"), under Section 1274(d) of the Internal Revenue Code, as the applicable Federal short-term interest rate in effect for such month (3.8% for December 1993, 4% for December 1992). Mr. Wajnert made two interest payments on each of the following dates: 9/30/92 and 9/30/93. Principal payments of $50,000 each plus accumulated interest are due and payable on the following four dates: 9/30/94, 9/30/95, 9/30/96 and 9/30/97. (b) On September 23, 1992, AT&T granted Richard A. McGinn, President and Chief Operating Officer--Network Systems Group, a $300,000 demand loan for a period of 150 days with interest compounded monthly at the interest rate established by the IRS, under Section 1274(d) of the Internal Revenue Code, as the applicable Federal short-term interest rate. This loan was paid in full in October 1992. On December 7, 1992, AT&T granted Mr. McGinn a 150 day demand loan for $300,000 with interest compounded monthly based on the rate established by the IRS as the applicable Federal short-term interest rate (4% for December 1992). Full repayment of principal and interest was due and payable on 5/5/93. On May 26, 1993, AT&T granted Mr. McGinn a demand loan in the amount of $305,590 with interest compounded monthly on the unpaid balance to satisfy the principal and interest on the December 7, 1992 loan. The interest rate for any month in which there was an unpaid balance was the rate established by the IRS, under Section 1274(d) of the Internal Revenue Code, as the applicable Federal short-term interest rate in effect for such month (3.8% for December 1993). Full repayment of principal and interest was made on 12/31/93. (c) On May 7, 1993, AT&T granted a loan of $1,200,000 with an interest rate of 5.33% compounded monthly to David K. Hunt, President and Chief Executive Officer--Universal Card Services, to exercise stock options at his former employer, Signet Banking Corp. On 7/14/93, Mr. Hunt repaid $350,000 in principal and $12,074 in interest. He rolled over the balance of $850,000 into two new loans. a) $701,000 effective 7/15/93 with interest compounded monthly on the unpaid balance. The loan was to exercise stock options at Signet Banking Corp. Payment on this loan consists of two installments. The first payment of $350,500 plus interest is due on 7/15/96. The second payment of $350,500 plus interest is due on 7/15/98. This loan is secured by 52,720 shares of Signet Banking Corp. common stock. b) $149,000 effective 7/15/93 with interest compounded monthly on the unpaid balance. The loan was to pay taxes on the stock option exercise. Principle plus interest is due on 7/15/95. The interest rate on these loans for any month in which there is an unpaid balance shall be the rate established by the IRS, under Section 1274(d) of the Internal Revenue Code, as the applicable Federal mid-term interest rate in effect for the month of July 1993 (5.4%).
- 27 - Schedule II--Sheet 5
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES ____________ (d) On July 1, 1993, AT&T granted an interest free loan of $200,800 to Ron J. Ponder, Senior Vice President AT&T and Chief Information Officer, for monies owed to his former employer U.S. Sprint. Full repayment of the principle balance shall be due and payable on 6/30/94 (one year from the effective date of the loan). On July 30, 1993, AT&T granted an interest free loan of $350,000 to Ron J. Ponder to purchase a home. Full repayment of the principle balance shall be due and payable on 7/30/98 (five years from the effective date of the loan). (e) On November 17, 1993, AT&T granted a loan of $340,000 plus interest compounded monthly to Daniel L. Clark, Vice President--Consumer Communications Services, for monies owed to his former employer MCI, Inc. ("MCI"). Mr. Clark was required to pay off his loan from MCI prior to working for AT&T. Payments of $113,333.33 plus accumulated interest are due on the following dates: 11/1/94, 11/1/95 and 11/1/96. The interest rate for any month in which there is an unpaid balance shall be the rate established by the IRS, under Section 1274(d) of the Internal Revenue Code, as the applicable Federal mid-term interest rate in effect for the month of November 1993 (4.8%). (f) The loans, made by AT&T Capital Corporation to its managers, represent seven year full recourse loans bearing interest at a rate of 6% per annum payable at maturity, except to the extent mandatory payments of interest are required by the AT&T Capital Corporation 1993 Leveraged Stock Purchase Plan ("LSPP"). The loans were made to participants in the AT&T Capital Corporation LSPP to fund a significant portion of the purchase price of equity securities of AT&T Capital Corporation. The purchased shares are pledged to AT&T Capital Corporation to secure repayment of the loan.
- 28 - Schedule V--Sheet 1
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT (Millions of Dollars) - --------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E COL. F - --------------------------------------------------------------------------------------------------------------------------- Balance at Other Balance at Beginning Additions Retire- Changes End of Classification of Period at Cost (a) ments Add(Deduct)(b) Period - --------------------------------------------------------------------------------------------------------------------------- Year 1993 Land and improvements ..................... $ 690 $ 10 $ 12 $ 58 $ 746 Buildings and improvements ................ 8,243 466 197 0 8,512 Machinery, electronic and other equipment ............................... 31,117 3,481(c) 2,531(d) (432) 31,635 ------- ------ ------ ----- ------- Total (e) ............................... $40,050 $3,957 $2,740 $(374) $40,893 ======= ====== ====== ===== ======= The Notes on Sheet 4 are an integral part of this Schedule.
- 29 - Schedule V--Sheet 2
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT (Millions of Dollars) - --------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E COL. F - --------------------------------------------------------------------------------------------------------------------------- Balance at Other Balance at Beginning Additions Retire- Changes End of Classification of Period at Cost (a) ments Add(Deduct)(b) Period - --------------------------------------------------------------------------------------------------------------------------- Year 1992 Land and improvements ..................... $ 684 $ 23 $ 8 $ (9) $ 690 Buildings and improvements ................ 8,229 406 89 (303) 8,243 Machinery, electronic and other equipment ............................... 30,979 3,814(c) 3,432(d) (244) 31,117 ------- ------ ------ ----- ------- Total (e) ............................... $39,892 $4,243 $3,529 $(556) $40,050 ======= ====== ====== ===== ======= The Notes on Sheet 4 are an integral part of this Schedule.
- 30 - Schedule V--Sheet 3
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT (Millions of Dollars) - --------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E COL. F - --------------------------------------------------------------------------------------------------------------------------- Balance at Other Balance at Beginning Additions Retire- Changes End of Classification of Period at Cost (a) ments Add(Deduct)(b) Period - --------------------------------------------------------------------------------------------------------------------------- Year 1991 Land and improvements ..................... $ 652 $ 6 $ 2 $ 28 $ 684 Buildings and improvements ................ 8,302 365 185 (253) 8,229 Machinery, electronic and other equipment ............................... 32,492 3,722(c) 4,962(d) (273) 30,979 ------- ------ ------ ----- ------- Total (e) ............................... $41,446 $4,093 $5,149 $(498) $39,892 ======= ====== ====== ===== ======= The Notes on Sheet 4 are an integral part of this Schedule.
- 31 - Schedule V--Sheet 4 AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT (Millions of Dollars) (a) The additions shown in column C are stated at original cost plus capitalized interest. (b) Includes changes in lease classification, reclassifications between accounts, currency translation adjustments and, in 1993, relating to the consolidation of the $137 USG investment, and in 1992, $57 relating to the merger with Teradata. (c) Represents purchases of machinery and equipment, principally telephone plant. (d) Includes retirements of telecommunications network plant of approximately $1,400, $2,000 and $3,100 in 1993, 1992 and 1991, respectively. (e) See Note (1) to the Consolidated Financial Statements for a description of depreciation policies. - 32 - Schedule VI--Sheet 1
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION (Millions of Dollars) - ----------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E COL. F - ----------------------------------------------------------------------------------------------------------------------- Additions Balance at Charged to Other Balance at Beginning Costs and Retire- Changes End of Description of Period Expenses ments Add(Deduct)(a) Period - ----------------------------------------------------------------------------------------------------------------------- Year 1993 Land improvements ......................... $ 97 $ 8 $ 7 $ 8 $ 106 Buildings and improvements ................ 2,990 312 80 41 3,263 Machinery, electronic and other equipment ............................... 17,605 3,306 2,471 (313) 18,127 ------- ------ ------ ------ ------- Total ................................... $20,692 $3,626 $2,558 $(264)(b) $21,496 ======= ====== ====== ====== ======= Year 1992 Land improvements ......................... $ 128 $ 6 $ -- $ (37) $ 97 Buildings and improvements ................ 2,234 266 112 602 2,990 Machinery, electronic and other equipment ............................... 18,841 3,268 3,351 (1,153) 17,605 ------- ------ ------ ------- ------- Total ................................... $21,203 $3,540 $3,463 $ (588)(b) $20,692 ======= ====== ====== ======= ======= The Notes on Sheet 2 are an integral part of this Schedule. /TABLE - 33 - Schedule VI--Sheet 2
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION (Millions of Dollars) - ----------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E COL. F - ----------------------------------------------------------------------------------------------------------------------- Additions Balance at Charged to Other Balance at Beginning Costs and Retire- Changes End of Description of Period Expenses ments Add(Deduct)(a) Period - ----------------------------------------------------------------------------------------------------------------------- Year 1991 Land improvements ......................... $ 121 $ 5 $ -- $ 2 $ 128 Buildings and improvements ................ 2,912 356 177 (857) 2,234 Machinery, electronic and other equipment ............................... 19,752 3,484 4,765 370 18,841 ------- ------ ------ ------- ------- Total ................................... $22,785 $3,845 $4,942 $ (485)(b) $21,203 ======= ====== ====== ======= ======= ____________ (a) Includes changes in lease classification, reclassifications between accounts, and currency translation adjustments. (b) Includes $(67) in 1993, $(232) in 1992 and $(193) in 1991 for the utilization of reserves established in 1988 for costs associated with the accelerated digitization of AT&T's telecommunications network.
- 34 - Schedule VIII--Sheet 1
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS (Millions of Dollars) - ----------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------- Additions ------------------------ (1) (2) Balance at Charged to Charged Balance Beginning Costs and to Other at End Description of Period Expenses Accounts Deductions(a) of Period - ----------------------------------------------------------------------------------------------------------------------- Year 1993 Allowances for doubtful accounts (b) ..... $ 982 $1,635 $66(c) $1,495 $1,188 Reserves related to business restructuring and facility consolidation (d) ...................... $2,006 $ 416 $ 5 $ 987(e) $1,440 Year 1992 Allowances for doubtful accounts (b) ..... $1,024 $1,945 $31(c) $2,018 $ 982 Reserves related to business restructuring, including force and facility consolidation (d) ......... $2,792 $ 64 $ 8 $ 858 $2,006 The Notes on Sheet 2 are an integral part of this Schedule.
- 35 - Schedule VIII--Sheet 2
AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS (Millions of Dollars) - ----------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------- Additions ------------------------ (1) (2) Balance at Charged to Charged Balance Beginning Costs and to Other at End Description of Period Expenses Accounts Deductions(a) of Period - ----------------------------------------------------------------------------------------------------------------------- Year 1991 Allowances for doubtful accounts (b) ..... $ 592 $1,233 $ 7(c) $ 808 $1,024 Reserves related to business restructuring, including force and facility consolidation (d) ......... $ 536 $3,067 $-- $ 811 $2,792 ____________ (a) Amounts written off as uncollectible, payments and reversals. (b) Includes allowances for doubtful accounts on long-term receivables of $185, $153 and $88 in 1993, 1992 and 1991, respectively (included in Finance receivables in the Consolidated Balance Sheets). (c) Amounts previously written off which were credited directly to this account when recovered. (d) Included primarily in Other current liabilities and in Other liabilities in the Consolidated Balance Sheets. (e) Upon adoption in 1993 of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," $412 of business restructuring reserves established before 1993 were reclassified to postemployment benefit liabilities.
- 36 - AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE IX--DEBT MATURING WITHIN ONE YEAR (Millions of Dollars) - ------------------------------------------------------------------------------ COL. A COL. B COL. C - ------------------------------------------------------------------------------ Weighted Amount Average at December 31 Interest Rate -------------------------- ---------------------- 1993 1992 1991 1993 1992 1991 ------ ------ ------ ------ ------ ------ Notes Payable: Commercial paper ... $ 8,761 $6,053 $4,775 3.3% 3.8% 6.0% Other notes ........ 231 281 384 10.0% 10.9% 10.6% Current portion of long-term lease obligations ........ 52 108 92 Current portion of long-term debt ..... 1,860 1,158 1,802 ------- ------ ------ Total(a) .... $10,904 $7,600 $7,053 ======= ====== ====== Amount for the Year 1993 1992 1991 ------ ------ ------ Average amounts of Notes Payable outstanding during the year ........... $8,010 $5,117 $4,299 3.7%(b) 4.4%(b)6.8%(b) Maximum amounts of Notes Payable at any month end during the year .... $9,959 $6,334 $5,159 ____________ (a) See Note (5) to the Consolidated Financial Statements. (b) Computed by dividing the average face amount of notes payable into the aggregate related interest expense. - 37 - AMERICAN TELEPHONE AND TELEGRAPH COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION (Millions of Dollars) - ----------------------------------------------------------------------------- COL. A COL. B - ----------------------------------------------------------------------------- Item Charged to Costs and Expenses - ----------------------------------------------------------------------------- 1993 1992 1991 -------- -------- -------- Maintenance and repairs .................... $2,187 $2,164 $1,842 Taxes, other than payroll and income taxes . $ 657 $ 702 $ 710 Advertising ................................ $1,665 $1,270 $1,244 - 38 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN TELEPHONE AND TELEGRAPH COMPANY By S. L. Prendergast Vice President and Treasurer March 24, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Principal Executive Officer: # # Robert E. Allen Chairman # of the Board # # # Principal Financial Officer: # # Richard W. Miller Chief Financial # Officer # # Principal Accounting Officer: # # Maureen B. Tart Vice President ## By S. L. Prendergast and Controller # (attorney-in-fact)* # Directors: # # March 24, 1994 Robert E. Allen # M. Kathryn Eickhoff # Walter Y. Elisha # Philip M. Hawley # Carla A. Hills # Belton K. Johnson # Drew Lewis # Donald F. McHenry # Victor A. Pelson # Donald S. Perkins # Henry B. Schacht # Michael I. Sovern # Franklin A. Thomas # Joseph D. Williams # Thomas H. Wyman # 1 EXHIBIT INDEX The exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Exhibit Number (3)a Restated Certificate of Incorporation of the registrant, as dated January 10, 1989, Certificate of Change to Restated Certificate of Incorporation dated March 18, 1992, and Certificate of Amendment to Restated Certificate of Incorporation dated June 1, 1992 (Exhibit 4B to Form SE dated July 21, 1992, File No. 1-1105). (3)b By-Laws of the registrant, as amended April 20, 1993 (Exhibit 3.02 to Form S-4 dated February 1, 1994 Registration No. 33-52119, File No. 1-1105). (4) No instrument which defines the rights of holders of long term debt, of the registrant and all of its consolidated subsidiaries, is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument to the SEC upon request. (10)(iii)(A)1 AT&T Short Term Incentive Plan as amended December 16, 1992 (Exhibit (10)(iii)(A)1 to Form SE, dated March 24, 1993, File No. 1-1105). (10)(iii)(A)2 AT&T 1987 Long Term Incentive Program as amended July 17, 1989 (Exhibit (10)(iii)(A)2 to Form SE dated March 24, 1993, File No. 1-1105). (10)(iii)(A)3 AT&T Senior Management Individual Life Insurance Program dated January 1, 1987 (Exhibit (10)(iii)(A)1 to Form SE, dated March 25, 1987, File No. 1-1105). (10)(iii)(A)4 AT&T Senior Management Long Term Disability and Survivor Protection Plan dated February 23, 1984 (Exhibit (10)(iii)(A)1 to Form SE, dated February 21, 1986, File No. 1-1105). (10)(iii)(A)5 AT&T Senior Management Financial Counseling Program dated March 14, 1994. (10)(iii)(A)6 AT&T Deferred Compensation Plan for Non-Employee Directors, as amended December 15, 1993. 2 Exhibit Number (10)(iii)(A)7 AT&T Directors Individual Life Insurance Program dated January 1, 1987 (Exhibit (10)(iii)(A)3 to Form SE, dated March 25, 1987, File No. 1-1105). (10)(iii)(A)8 AT&T Plan for Non-Employee Directors' Travel Accident Insurance (Exhibit (10)(iii)(A)8 to Form 10-K for 1990, File No. 1-1105). (10)(iii)(A)9 Extract from AT&T (formerly Bell System) Management Pension Plan regarding limitations on and payments of pension amounts which exceed the limitations contained in The Employee Retirement Income Security Act, with amendments effective October 1, 1985 (Exhibit (10)(iii)(A)2 to Form SE, dated February 21, 1986, File No. 1-1105). (10)(iii)(A)10 AT&T Non-Qualified Pension Plan, (with amendments effective June 1, 1988) (Exhibit 10(iii)(A)10 to Form SE, dated March 26, 1990, File No. 1-1105). (10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan, as amended December 18, 1991. (10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective January 1, 1988, including AT&T Mid-Career Pension Plan, as amended May 15, 1985 (Exhibit (10)(iii)(A)4 to Form SE, dated March 25, 1988, File No. 1-1105). (10)(iii)(A)13 AT&T 1984 Stock Option Plan, as modified December 19, 1984 (Exhibit 10(t) to Form SE, dated February 27, 1985, File No. 0-13247). (10)(iii)(A)14 Form of Indemnification Contract for Officers and Directors (Exhibit (10)(iii)(A)6 to Form SE, dated March 25, 1987, File No. 1-1105). (10)(iii)(A)15 Pension Plan for AT&T Non-Employee Directors revised February 20, 1989. (10)(iii)(A)16 AT&T Senior Management Basic Life Insurance Program (Exhibit (10)(iii)(A)16 to Form 10-K for 1990, File No. 1-1105). (10)(iii)(A)17 Form of AT&T Benefits Protection Trust Agreement (Exhibit (10)(iii)(A)17 to Form SE, dated March 25, 1992, File No. 1-1105). (10)(iii)(A)18 Employment Agreement between American Telephone and Telegraph Company and Alex J. Mandl dated August 1, 1991. (10)(iii)(A)19 Employment Agreement between American Telephone and Telegraph Company and Jerre L. Stead dated July 31, 1991, supplemented October 18, 1991 and March 29, 1993. 3 Exhibit Number (12) Computation of Ratio of Earnings to Fixed Charges. (13) Specified portions (pages 21 through 44 and the inside back cover) of the Company's Annual Report to security holders for the year ended December 31, 1993. (21) List of subsidiaries of AT&T. (23) Consent of Coopers & Lybrand. (24)a Powers of Attorney executed by officers and directors who signed this report. (24)b Board of Directors' Resolution. EX-10 2 EXHIBIT 10A5 Exhibit (10)(iii)(A) 5 AT&T Form 10-K SENIOR MANAGEMENT FINANCIAL COUNSELING PROGRAM GENERAL DESCRIPTION OF SERVICES AT&T offers a financial counseling program to all active Senior Managers. This program is extended to retired Senior Managers during the first year of retirement. In addition, eligibility is extended to the spouse and/or immediate family members in the event of death of a participating Senior Manager. Participation in the program is voluntary. Upon election to participate in the program, the Senior Manager can select from three financial counseling firms utilized by AT&T, all of which have nation-wide branches; Asset Management Group (AMG), The AYCO Corporation and Coopers & Lybrand. AMG has a base office in Englewood, Colorado and a local office in Parsippany, New Jersey. Ayco Corporation is based in Albany, New York, and has a local office in Florham Park, New Jersey. Coopers & Lybrand, has a local office in Parsippany, New Jersey. Upon selection of a firm, the Senior Manager is assigned a personal counselor who will schedule a preliminary interview which is primarily a get acquainted session. During the interview, the counselor will outline the services offered by the firm and describe the type of personal information and documents the Senior Manager will need to provide to the counselor. The types of documents and personal information include items such as wills, deeds, insurance policies and trusts, as well as complete data on the Senior Manager's financial status. All information is held strictly confidential between the financial counseling firm and the Senior Manager. The counselor will schedule a follow-up interview at which time an in depth examination of the financial goals and objectives of the Senior Manager and the spouse is completed. After all pertinent data has been analyzed, the counselor will prepare a comprehensive report for presentation to the Senior Manager. The report outlines the Senior Manager's current financial status, indicates areas requiring adjustments, if any, and recommends future financial actions. 2 The types of services provided in the program include: * COMPANY PROVIDED BENEFITS PLANNING * ESTATE PLANNING * INSURANCE PLANNING * INVESTMENT PLANNING * INCOME TAX PLANNING In addition to the above services, the Senior Management Financial Counseling Program covers the cost of personal income tax preparation and the preparation of wills and trusts associated with estate planning. Although AMG, AYCO and Coopers & Lybrand provide tax preparation services, the Senior Manager may engage their own attorney or tax accounting firm for both estate planning and tax preparation. Attached is a summary of the current financial counseling fees by firm and type of service. Each of the three firms bills AT&T Executive Human Resources, who in turn pays the bills and charges the expense to each individual Senior Manager's budget. The amount of each financial counseling invoice paid on behalf of a Senior Manager by AT&T, is treated as imputed income to the Senior Manager. The imputed amount is reflected in the Senior Manager's paycheck and appropriate federal and state taxes are withheld from the imputed income at "flat" tax rates. Every February, a tax allowance payment is made to each Senior Manager to offset any adverse tax effects as a result of the non- deductibility of all or a portion of the financial counseling fees paid by AT&T on their behalf. The tax allowance payment is considered taxable income in the year in which the payment is received. This program is administered by Kathy Convery of Executive Human Resources. Kathy can be reached on (908) 221-4444. 03/14/94 3 AT&T SENIOR MANAGEMENT FINANCIAL COUNSELING PROGRAM CONTACTS AT FINANCIAL COUNSELING FIRMS THE AYCO CORPORATION - -------------------- Dick Cummins The Ayco Corporation One Wall Street Albany, NY 12205 (518) 464-2000 Joel Schaller The Ayco Corporation 325 Columbia Turnpike Florham Park, NJ 07932 (201) 514-2120 ASSET MANAGEMENT GROUP - ---------------------- Todd Cleary Asset Management Group 10 Sylvan Way Parsippany, NJ 07054 (201) 644-2656 COOPERS AND LYBRAND - ------------------- Tom Ross Coopers and Lybrand One Sylvan Way Parsippany, NJ 07054 (201) 829-9226 3/94 4
1994 FEE SCHEDULE (Annual Fee Per Participant) Type of Service Counseling Firms --------------- ---------------- AYCO# AMG C&L ----- --- --- New Participant (First Year) $10,550 $10,500 $10,500 (NOTE: AMG's First Year fee includes income tax preparation) Continued Counseling $ 5,300 $ 9,825 $ 6,500 Income Tax Preparation $ 1,700* $ 2,950 $ 2,500* - -------------- * Variable -- 1993 average amount. # Fees are subject to a 15% surcharge for all participants who are serviced out of the California Regional Office due to the higher cost of conducting business. 3/94 /TABLE EX-10 3 EXHIBIT 10A6 Exhibit (10)(iii)(A)6 AT&T Form 10-K AMERICAN TELEPHONE AND TELEGRAPH COMPANY DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS 1. Eligibility ----------- Each member of the Board of Directors ("Board") of the American Telephone and Telegraph Company ("Company") who is not an employee of the Company, or of any of its subsidiaries, is eligible to participate in a Deferred Compensation Plan for Non-Employee Directors ("Plan"). 2. Participation ------------- (a) Prior to the beginning of any calendar year, or in the case of newly elected Directors, within 90 days of such election, each eligible Director may elect to participate in the Plan by directing that all or any part of the compensation which would otherwise have been payable currently for services as a Director (including fees payable for services as a member of a committee of the Board) during such calendar year, or, in the case of newly elected Directors, during the remainder of such calendar year, shall be credited to a deferred compensation account subject to the terms of the Plan. (b) Such an election to participate in the Plan shall be in the form of a document executed by the Director and filed with the Secretary of the Company. An election related to fees otherwise payable currently in any calendar year shall become irrevocable on the last day prior to the beginning of such calendar year, or, in the case of new Directors, on the 90th day after becoming a Director. An election shall continue until a Director ceases to be a Director or until he or she terminates or modifies such election by written notice. Any such termination or modification shall become effective as of the end of the calendar year in which such notice is given with respect to all fees otherwise payable in subsequent calendar years. A Director who has filed a termination of election may thereafter again file an election to participate for any calendar year or years subsequent to the filing of such election. (c) Also, a Director's deferred compensation account automatically shall be credited with that part of the Director's compensation for any calendar year (including fees for services as a member of the Board), which the Board has directed to be credited under this Plan. Such compensation shall be credited at the time that the related compensation is or would otherwise have been paid currently. - 2 - 3. Deferred Compensation Accounts ------------------------------ (a) At the time of election to participate in the Plan under Item 2(a) above, a Director shall also designate the percentage of such deferred amounts to be credited to the AT&T Shares portion of the Director's deferred account and the percentage to be credited to the Cash portion of such account. All deferred amounts credited under Item 2(c) above shall be credited to the AT&T Shares portion of the Director's deferred account. (b) Deferred AT&T Shares. Deferred amounts credited to the AT&T Shares portion of a Director's account on the date the related compensation is or would be otherwise be paid shall be converted to a number of deferred AT&T Shares, determined by dividing the amount of such compensation by the price of AT&T common shares, as determined in the last sentence of this paragraph. The Director's account shall also be credited on each dividend payment date for AT&T Shares with an amount equivalent to the dividend payment on the number of AT&T common shares equal to the number of deferred AT&T Shares in the Director's account on the record date for such dividend. Such amount shall then be converted to a number of additional deferred AT&T Shares determined by dividing such amount by the price of AT&T common shares, as determined in the last sentence of this paragraph. The price of AT&T common shares related to any compensation or dividend payment date shall be the average of the daily high and low sale prices of AT&T common shares on the New York Stock Exchange ("NYSE")for the period of five trading days ending on such date, or the period of five trading days immediately preceding such date, if the NYSE is closed on such date. In the event of any change in outstanding AT&T common shares by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the AT&T Board of Directors shall make such adjustments, if any, that it deems appropriate in the number of deferred AT&T Shares then credited to Director's accounts. Any and all such adjustments shall be conclusive and binding upon all parties concerned. The maximum number of deferred AT&T Shares that may be maintained in the AT&T Shares portion of all Directors' deferred compensation account may not exceed 2 million. This number is subject to adjustment to take into consideration adjustment in the number of outstanding AT&T common shares as described in the preceding paragraph. - 3 - (c) Deferred Cash. Deferred amounts credited to the Cash portion of a Director's account shall bear interest from the date the related compensation is or would otherwise be paid. The interest credited to the Cash portion of the account will be compounded quarterly at the end of each calendar quarter. For all amounts whenever credited, the rate of interest credited thereon, as of the end of each calendar quarter ending after December 31, 1985, shall be equal to the average ten-year U.S. Treasury note rate for the previous calendar quarter plus 5% or such other rate as shall be determined from time to time by the Board of Directors. 4. Distribution ------------- (a) At the time of election to participate in the Plan, a Director shall also make elections with respect to the distribution (during the Director's lifetime or in the event of the Director's death) of amounts deferred under the Plan plus accumulated earnings. Such elections shall be contained in the document referred to in Item 2(b), executed by the Director and filed with the Secretary of the Company. The election with respect to the distribution during the Director's lifetime, of fees for any calendar year, shall become irrevocable on the last day prior to the beginning of such calendar year. The election related to the distribution in the event of the Director's death, including the designation of a beneficiary or beneficiaries, may be changed by the Director at any time, by filing the appropriate document with the Secretary of the Company. (b) A Director may elect to receive amounts credited to his or her account in one payment or in some other number of equal annual installments (not exceeding 20), provided, however, that the number of annual installments may not extend beyond the life expectancy of the Director, determined as of the date the first installment is paid. The election shall direct that the first installment (or the single payment if the Director has so elected) be paid on the first day of the calendar year immediately following either (1) the year in which Director ceases to be a Director of the Company, or (2) the later of the year in which the Director ceases to be a Director of the Company or the year in which the Director attains the age specified in such election, which age shall not be later than age 70-1/2. Each distribution shall be made pro-rata from amounts credited to the Cash portion and to the AT&T Shares portion of the Director's account on the applicable payment date. (c) All distributions shall be in cash. For this purpose, the value of deferred AT&T Shares distributed on any payment date shall be determined by multiplying the number of such deferred AT&T Shares by the price of AT&T common stock, as determined in the following sentence. The price of AT&T common shares related to any payment date shall be the average of the daily high and low sale prices of AT&T common shares on the New York Stock Exchange ("NYSE") for the period of five trading days ending on such date, or the period of five trading days immediately preceding such date, if the NYSE is closed on such date. - 4 - (d) Not withstanding an election pursuant to Item 4(b), in the event a Director engages in any competitive activity, as determined in accordance with and pursuant to the terms and conditions of the AT&T Non-Competition Guideline, or becomes employed by any governmental agency having jurisdiction over the activities of the Company or any of its subsidiaries, the entire balance in the Director's deferred account, including earnings, shall be paid immediately in a single payment. (e) A Director may elect that, in the event the Director should die before full payment of all amounts credited to the Director's deferred account, the balance of the deferred amounts shall be distributed in one payment or in some other number of approximately qual annual installments (not exceeding 10) to the beneficiary or beneficiaries designated in writing by the Director, or if no designation has been made, to the estate of the Director. The first installment (or the single payment if the Director has so elected) shall be paid on the first day of the calendar year following the year of death. (f) Installments subsequent to the first installment to the Director, or to a beneficiary or to the Director's estate, shall be paid on the first day of each succeeding calendar year until the entire amount credited to the Director's deferred account shall have been paid. Deferred amounts held pending distribution shall continue to be credited with earnings, determined in accordance with Item 3. 5. Miscellaneous ------------- (a) The right of a Director to any deferred fees and/or earnings thereon shall not be subject to assignment by the Director. (b) All deferred amounts shall be held in the general funds of the Company. The Company shall not be required to reserve, or otherwise set aside, funds for the payment of its obligations hereunder. (c) Copies of the Plan and any and all amendments thereto shall be made available at all reasonable times at the office of the Secretary of the Company to all Directors. December 15, 1993 EX-10 4 EXHIBIT 10A11 Exhibit (10)(iii)(A)11 AT&T Form 10-K AT&T SENIOR MANAGEMENT INCENTIVE AWARD DEFERRAL PLAN (as amended December 18, 1991) 1. Eligibility Any Senior Manager (as defined in the AT&T 1987 Long Term Incentive Program [the "1987 Plan"]) of American Telephone and Telegraph Company ("AT&T") or an Affiliate (as defined in the 1987 Plan) who is eligible for an award under the AT&T Short Term Incentive Plan (the "Short Term Incentive Plan") and/or who has been granted a Performance Award under the AT&T Senior Management Long Term Incentive Plan (the "Long Term Incentive Plan") or the 1987 Plan, or who is eligible for an award under the AT&T Paradyne GMT Short Term Incentive Plan (the "Paradyne Plan"), shall be eligible to participate in this AT&T Senior Management Incentive Award Deferral Plan (the "Plan"). For purposes of the Plan, AT&T and any Affiliate shall be referred to as a "Participating Company". Prior to January 1, 1984, the Plan was named the Bell System Senior Management Incentive Award Deferral Plan. 2. Participation (a) Prior to the beginning of any calendar year, any Senior Manager may elect to participate in the Plan by directing that (i) all or part of the awards under the Short Term Incentive Plan or the Paradyne Plan, or the Performance Awards under the Long Term Incentive Plan or the 1987 Plan and/or (ii) all or part of the dividend equivalent payments under the Long Term Incentive Plan or the 1987 Plan, which such employee's Participating Company would otherwise pay currently to such employee in such calendar year and subsequent calendar years, shall be credited to a deferred account subject to the terms of the Plan. However, in no event shall the part of an award under any plan credited during any calendar year be less than $1,000 (based on a valuation at the time the award would otherwise be paid). There shall be no such minimum limitation on amounts credited during any calendar year that are related to dividend equivalent payments. (b) Such an election to participate in the Plan shall be in the form of a document executed by the employee and filed with the employee's Participating Company. An election related to awards and/or dividend equivalent payments otherwise payable currently in any calendar year shall become irrevocable on the last day prior to the beginning of such calendar year. (c) An election shall continue until the employee terminates or modifies such election by written notice. Any such termination or modification shall become effective as of the end of the calendar year in which such notice is given with respect to all awards and/or dividend equivalents otherwise payable in subsequent calendar years. -2- (d) An eligible employee who has filed a termination of election may thereafter again file an election to participate with respect to awards and/or dividend equivalent payments otherwise payable in calendar years subsequent to the filing of such election. 3. Deferred Accounts (a) (i) Deferred amounts related to awards and/or dividend equivalent payments which would otherwise have been distributed in cash by a Participating Company shall be credited to the employee's account and shall bear interest from the date the awards and/or dividend equivalent payments would otherwise have been paid. The interest credited to the account will be compounded at the end of each calendar quarter, and the annual rate of interest applied at the end of any calendar quarter shall be determined by the AT&T Board of Directors from time to time. (ii) Furthermore, if an employee made an election described in Section 2, which election was effective on December 31, 1983, then such employee's account shall also be credited during 1984 with an amount equal to the deferred amounts which would have been credited to the employee's account during 1984 had the company which employed the employee on December 31, 1983 continued to be a Participating Company during 1984, and such amount shall bear interest in accordance with (a)(i) above from the date such amount would have been credited -3- had such company continued to be a Participating Company during 1984. (b) Deferred amounts related to awards which would otherwise have been distributed in AT&T common shares by a Participating Company shall be credited to the employee's account as deferred AT&T shares. Furthermore, if an employee made an election described in Section 2, which election was effective on December 31, 1983, then such employee's account shall also be credited during 1984 with the deferred AT&T Shares which would have been credited to the employee's account had the company which employed the employee on December 31, 1983 continued to be a Participating Company in the Plan and in the Long Term Incentive Plan during 1984. The employee's account shall also be credited on each dividend payment date for AT&T shares with an amount equivalent to the dividend payable on the number of AT&T common shares equal to the number of deferred AT&T shares in the employee's account on the record date for such dividend. Such amount shall then be converted to a number of additional deferred AT&T shares determined by dividing such amount by the price of AT&T common shares, as determined in the following sentence. The price of AT&T common shares related to any dividend payment date shall be the average of the daily high and low sale prices of AT&T common shares on the New York Stock Exchange ("NYSE") for the period of five trading days ending on such dividend payment date, -4- or the period of five trading days immediately preceding such dividend payment date if the NYSE is closed on the dividend payment date. (c) In the event of any change in outstanding AT&T common shares by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the AT&T Board of Directors shall make such adjustments, if any, that it deems appropriate in the number of deferred AT&T shares then credited to employees' accounts. Any and all such adjustments shall be conclusive and binding upon all parties concerned. 4. Distribution (a) At the time an eligible employee makes an election to participate in the Plan, the employee shall also make an election with respect to the distribution (during the employee's lifetime or in the event of the employee's death) of the amounts credited to the employee's deferred account. Such an election related to awards otherwise payable currently in any calendar year shall become irrevocable on the last day prior to the beginning of such calendar year. Amounts credited as cash plus accumulated interest shall be distributed in cash; amounts credited as deferred AT&T shares shall be distributed in the form of an equal number of AT&T common shares. -5- (b) An employee may elect to receive the amounts credited to the employee's account in one payment or in some other number of approximately equal annual installments (not exceeding 20), provided however, that the number of annual installments may not extend beyond the life expectancy of the employee, determined as of the date the first installment is paid. The employee's election shall also specify that the first installment (or the single payment if the employee has so elected) shall be paid either (1) on the first day of the calendar quarter next following the end of the month in which the employee attains the age specified in such election, which age shall not be earlier than age 55 or later than age 70-1/2, or (2) on the first day of the calendar quarter next following the end of the month in which the employee retires from a Participating Company or otherwise terminates employment with any Participating Company (except for a transfer to another Participating Company). (c) Notwithstanding an election pursuant to Paragraph (b) of this Section 4, the entire amount then credited to an employee's account shall be paid immediately in a single payment (a) if the employee is discharged for cause by his or her Participating Company, (b) if the Board of Directors of such Participating Company determined that the employee engaged in misconduct in connection with the employee's employment with the Participating Company, (c) if the employee without the consent of -6- the Board of Directors of his or her Participating Company, while employed by such Participating Company or after the termination of such employment, becomes associated with, employed by, or renders services to, or owns an interest in, any business that is in competition with any Participating Company or with any business in which a Participating Company has a substantial interest (other than as a shareholder with a non-substantial interest in such business), or (d) the employee becomes employed by a governmental agency having jurisdiction over the activities of a Participating Company or any of its subsidiaries. (d) An employee may elect that, in the event the employee should die before full payment of all amounts credited to the employee's account, the balance of the deferred amounts shall be distributed in one payment or in some other number of approximately equal annual installments (not exceeding 10) to the beneficiary or beneficiaries designated in writing by the employee, or if no designation has been made, to the estate of the employee. The first installment (or the single payment if the employee has so elected) shall be paid on the first day of the calendar quarter next following the month of death. (e) Installments subsequent to the first installment to the employee, or to a beneficiary or to the employee's estate, shall be paid on the first day of the applicable calendar quarter in each succeeding calendar year until the entire amount credited -7- to the employee's deferred account shall have been paid. Deferred amounts held pending distribution shall continue to be credited with interest or additional deferred AT&T shares, as applicable, determined in accordance with Section 3(a) and (b). (f) In the event an employee, or the employee's beneficiary after the employee's death, incurs a severe financial hardship, the AT&T Board of Directors or the Compensation Committee of such Board, in its sole discretion, may accelerate or otherwise revise the payment schedule from the employee's account to the extent reasonably necessary to eliminate the severe financial hardship. For the purpose of this subsection (f), a severe financial hardship must have been caused by an accident, illness, or other event beyond the control of the employee or, if applicable, the beneficiary. (g) The obligation to make a distribution of deferred amounts credited to an employee's account during any calendar year plus the additional amounts credited on such deferred amounts pursuant to Section 3(a) and (b) shall be borne by the Participating Company which otherwise would have paid the related award currently. However, the obligation to make distribution with respect to deferred amounts which are related to amounts credited to an employee's account under Section 3(a)(ii) and under the second sentence of Section 3(b), and with respect to -8- which no Participating Company would otherwise have paid the related award currently, shall be borne by the Participating Company which employed the employee on January 1, 1984. 5. Miscellaneous (a) The deferred amounts shall be held in the general funds of the Participating Companies. The Participating Companies shall not be required to reserve, or otherwise set aside, funds for the payment of such amounts. (b) The rights of an employee to any deferred amounts plus the additional amounts credited pursuant to Section 3(a) and (b) shall not be subject to assignment by the employee. (c) The Senior Vice President - Human Resources of AT&T shall have the authority to administer and to interpret the Plan. (d) The AT&T Board of Directors may at any time amend the Plan or terminate the Plan, but such amendment or termination shall not adversely affect the rights of any employee, without his or her consent, to any benefit under the Plan to which such employee may have previously become entitled prior to the effective date of such amendment or termination. The Senior Vice President - Human Resources of AT&T with the concurrence of the Senior Vice President and General Counsel of AT&T shall be authorized to make minor or administrative changes to the Plan, as well as amendments required by applicable federal or state law (or authorized or made desirable by such statutes). -9- EX-10 5 EXHIBIT 10A15 Exhibit (10)(iii)(A)(15) AT&T Form 10-K PENSION PLAN FOR AT&T NON-EMPLOYEE DIRECTORS (Revised February 20, 1989) PENSION PLAN FOR AT&T NON-EMPLOYEE DIRECTORS TABLE OF CONTENTS SECTION 1. STATEMENT OF PURPOSE 1 SECTION 2. DEFINITIONS 1 SECTION 3. ADMINISTRATION 3 SECTION 4. NON-EMPLOYEE DIRECTOR BENEFITS 5 1. Participation 5 2. Mandatory Retirement Age 5 3. Eligibility 6 a. Service Benefit 6 b. Disability Benefit 6 4. Benefits Amounts 6 a. Service Benefit 6 b. Disability Benefit 7 c. Payment Periods 7 d. Duration of Payments 7 SECTION 5. GENERAL PROVISIONS 8 SECTION 6. PLAN MODIFICATION 10 SECTION 1. STATEMENT OF PURPOSE The purpose of the Pension Plan for AT&T Non-Employee Directors is to provide pension payments to such non-employee members of the AT&T Board of Directors, pursuant to the terms and conditions of this Plan. SECTION 2. DEFINITIONS 1. The words "AT&T" or "Company" shall mean the American Telephone and Telegrah Company, New York Corporation, or its successors. 2. The words "Chairman of the Board," "President" and "Board of Directors" or "Board" shall mean the Chairman of the Board of Directors, the President and the Board of Directors, respectively, of the Company. 3. The word "Committee" shall mean the Employees' Benefit Committee appointed by the Company to administer or arrange for the administration of the Plan (and which also administers the Pension Plan). 4. The term "Mandatory Retirement Age" shall mean age seventy (70). - 1 - 5. The terms "Non-Employee Director" or "Participant" shall mean a member of the Company's Board of Directors on or after January 1, 1987, who is not at time of retirement from service on the Board, nor was ever, employed as a Senior Manager of AT&T or any subsidiary or affiliate of AT&T. 6. The term "Pension Act" shall mean the Employee Retirement Income Security Act of 1974 (ERISA) as may be amended from time to time. 7. The term "Pension Plan" shall mean the AT&T Management Pension Plan. 8. The word "Plan" shall mean this Pension Plan for Non- Employee Directors. 9. The term "Retainer" shall mean the annual amount payable to a Non-Employee Director as compensation for service on the Board, excluding any additional compensation earned for service as Committee Chairman, and all meeting fees, whether for Board or Committee meetings. 10. The term "Senior Manager" shall mean an employee of the Company who holds at the time of employment termination a position that the Company's Board of Directors or Committee of such Board has designated to be within the Senior Management Group. - 2 - 11. The use in the Plan of personal pronouns of the masculine gender is intended to include both the masculine and feminine genders. 12. The use in the Plan of singular or plural nouns is intended to have individual or collective meaning as applicable to the context as used therein and is in no way to be construed narrowly or such as to limit the Plan or any of its provisions. SECTION 3. ADMINISTRATION 1. The Company shall be considered the Sponsor of the Plan as that term is defined in the Pension Act. The Company shall appoint the Employees' Benefit Committee to administer the Plan ("Committee"). The Committee shall have the administrative responsibilities set forth below. 2. The Committee shall have the specific powers elsewhere herein granted to it and shall have such other powers as may be necessary in order to enable it to administer the Plan, except for powers herein specifically granted or provided to be granted to others. 3. The procedures for the adoption of by-laws and rules of procedure for the employment of a Secretary and assistants with - 3 - authority relating to claims of Participants, shall be the same as the procedures set forth in the Pension Plan. The Secretary is hereby designated as agent for service of legal process with respect to any claims arising under the Plan. 4. The Committee shall grant or deny claims for benefits under the Plan and shall authorize disbursements according to the Plan. Adequate notice, pursuant to applicable law and prescribed Company practices, shall be provided in writing to any Participant whose claim has been denied setting forth the specific reasons for such denial. 5. The review and appeal procedures for claims for entitlements under the Plan shall be the same as those procedures set forth in the Pension Plan. 6. The Committee shall determine conclusively for all parties all questions arising in the administration of the Plan, and any decision of such Committee shall not be subject to further review. 7. The expenses of the Committee in administering the Plan shall be borne by the Company. 8. The Company and the Committee are each a named fiduciary as that term is used in the Pension Act with respect to the - 4 - particular duties and responsibilities herein provided to be allocated to each of them. 9. The Company may allocate responsibilities for the operation and administration of the Plan consistent with the Plan's terms. The Company and other named fiduciaries may designate in writing other persons to carry out their respective responsibilities under the Plan and may employ persons to advise them with regard to any such responsibilities. 10. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. SECTION 4. NON-EMPLOYEE DIRECTOR BENEFITS 1. Participation. All persons who are Non-Employee Directors, as defined in Section 2 of the Plan, are deemed participants in this Plan. 2. Mandatory Retirement Age. Each Non-Employee Director, whether or not eligible for benefits under the Plan, shall cease to be eligible for continued service on the Board no later than the date of the annual meeting of shareholders next following the date on which such Non-Employee Director attains the Mandatory Retirement Age. - 5 - 3. Eligibility. a) Service Benefit. Subject to the provisions set forth elsewhere in this Plan, a Participant who has served a minimum of five (5) years on the Board is eligible for a Service Benefit pursuant to Section 4 of the Plan and will become fully vested in all benefits under the Plan at that time. b) Disability Benefit. In the event a Non-Employee Director becomes disabled, as defined according to the terms of the Pension Plan (except for provisions requiring fifteen (15) years of employment for eligibility), before becoming fully vested in all benefits under the Plan pursuant to Section 4.3(a) above, the Board, in its sole discretion, may authorize the payment of a Disability Benefit pursuant to Section 4.4(b) of this Plan. The Board may require the Participant to furnish from time to time proof of continued disability. 4. Benefit Amounts. a) Service Benefits. The annual benefit of each eligible Non-Employee Director who retires on or after January 1, 1987, shall equal the amount of such Non-Employee Director's annual Retainer in effect as of retirement from service on the Board. Such annual benefit shall be payable in a lump sum each January (for the applicable year, in advance) following commencement of benefits, as specified in subparagraph 4(d) below. - 6 - b) Disability Benefit. At the full discretion of the Board, Disability Benefit payments for eligible Participants shall be paid in an amount and pursuant to the same terms and conditions as are set forth in Section 4.4(a) of this Plan, or in such other amounts, terms and conditions as determined by the Board. c) Payment Periods. Service and Disability pension benefits payable under this Section 4 of the Plan shall commence at such time as is specified in subparagraph 4(d) below and be payable annually in a lump sum each January of the year for which paid or at such other periods as the Committee may determine in each case. d) Duration of Payments. Except as may be otherwise determined by the Company, Service and Disability Benefits granted under this Section 4 of the Plan shall commence on the January next following the date of each Participant's seventieth (70) birthday whether actual termination of service occurred prior to age 70 or at such other time as is herein provided for payment of a Disability Benefit, and shall continue only to the death of such Participant, at which time all benefit entitlements under this Plan shall cease. - 7 - SECTION 5. GENERAL PROVISIONS 1. Effective Date. This Plan is effective December 16, 1987 for Participants who are actively serving on the Board on or after January 1, 1987. 2. Right to Benefits. Subject to the provision of Section 5.3 below, all Participants who have satisfied the Eligibility provision contained in Section 4.3 above, whether or not currently receiving benefits under the Plan, shall have nonforfeitable and noncancellable rights in all benefits provided pursuant to this Plan. 3. Forfeiture of Benefits. Notwithstanding eligibility or right to benefits of a Participant under any provision or paragraph of the Plan, all benefits for which a Participant would be otherwise eligible hereunder may be forfeited, at the discretion of the Board or based on a recommendation of the AT&T Management Committee of the Company, as applicable, when such Participant (i) engages in misconduct in connection with the Participant's service on the Board (as determined by the Board): (ii) without the Company's consent becomes associated with, employed by or renders services to, or owns an interest in, any business that is competitive with the Company or with any business with which AT&T has a substantial interest (other than as a shareholder with a nonsubstantial interest in such business) - 8 - as determined by the AT&T Board; or (iii) engages in activity in conflict with or adverse to the interests of the Company under the standards of the AT&T Non-Competition Guideline and as determined by the AT&T Management Committee. 4. Assignment or Alienation. Assignment or alienation of any and all benefits under the Plan will not be permitted or recognized except as otherwise required by law. 5. Determination of Eligibility. In all questions relating to eligibility for any benefit hereunder the decision of the Committee based upon the Plan and upon the records of the Company and insofar as permitted by applicable law, shall be final. 6. Method of Payment. Payments under the Plan shall be made in the same manner as set forth under the Pension Plan. All benefits payable pursuant to the Plan shall be paid from Company operating expenses or through the purchase of insurance from an insurance company, as the Company may determine. 7. Amounts Accrued Prior to Death. Benefit amounts accrued but not actually paid at the time of death of a Participant shall be paid in a lump sum within sixty (60) days of the Participant's death in accordance with the standards and procedures under the Pension Plan. - 9 - 8. Payments to Others. Benefits payable to a Participant unable to execute a proper receipt may be paid to other person(s) in accordance with the standards and procedures set forth in the Pension Plan. 9. Damage Claims or Suits. Should any Participant in the Plan commence litigation against the Company or any successor thereof regarding the alleged violation by the Company or any successor of the nonforfeitability, non-cancellation and vesting provisions of the Plan, the Company or any successor which is the defendant in any such lawsuit shall pay all costs and expenses (including attorney fees) of any such Participant unless (1) the court in which the litigation is filed or any higher court to which an appeal is taken finds the Company or successor to be without liability on material substantive issues raised in the lawsuit or (2) the lawsuit is frivolous in nature. SECTION 6. PLAN MODIFICATION. The Board may from time to time make changes in the Plan and the Board may terminate the Plan as it deems appropriate, without notice to Participants. In addition, the Senior Vice President - Personnel of AT&T (or any successor to that officer's responsibilities) with the concurrence of the Senior Vice President and General Counsel of AT&T (or any successor to that officer's responsibilities) shall be authorized to make minor or - 10 - administrative amendments to the Plan, as well as amendments required by applicable federal or state law (or authorized or made desirable by such statutes). Such amendments or termination shall not affect the rights of any Participant without his written consent, to any benefit under the Plan to which such Participant may have previously become entitled as a result of Disability or Service on the Board which occurred prior to the effective date of such amendment or termination. - 11 - EX-10 6 EXHIBIT 10A18 EXHIBIT(10)(iii)(A)18 AT&T Form 10-K 7/31/91 EMPLOYMENT AGREEMENT THIS AGREEMENT, dated as of August 1, 1991, by and between the American Telephone and Telegraph Company, A New York Corporation with its headquarters at 550 Madison Avenue, New York, New York 10022 (hereinafter called the "Company"), and Alex J. Mandl (hereinafter called the "Employee"). WHEREAS the Employee was employed as a senior executive with another company; and WHEREAS the Employee has accepted employment with the Company; and WHEREAS the Company has assigned and appointed the Employee to a Senior Management position as Chief Financial Officer and Group Executive. In such capacity, Employee would report to the Chairman and be a member of the Company's Executive Committee; and WHEREAS, it is of special importance for the Company to mitigate the impact of early departure from the Employee's prior employer; -1- NOW, therefore, for and in consideration of the promises and the mutual agreements hereinafter contained, the Company and Employee do hereby agree as follows: 1. Employment. Subject to the provisions set forth elsewhere in this Agreement, the Company hereby employs the Employee and the Employee hereby accepts employment with the Company as a Senior Manager for the term set forth in Section 2 of this Agreement. Employee represents and warrants that there are no agreements or arrangements, whether written or oral, in effect which would prevent him from rendering exclusive services to the Company during the term hereof, and that he has not made and will not make any commitment, agreement or arrangement, or do any act in conflict with this Agreement. Such employment shall be upon the terms and conditions hereinafter contained. 2. Term of Agreement. The term of employment hereunder shall be at the will of each party to this Agreement and subject to the terms and conditions thereof commencing on August 1, 1991. Except as expressly set forth herein, the Employee shall have no further rights or entitlements beyond the terms of this Agreement, including but not limited to the right of continued employment. -2- 3. Employee's Compensation and Benefits. Except as otherwise provided in this Agreement and as more fully set forth hereinbelow, the Employee shall be treated in the same manner as and be entitled to such benefits and other perquisites and terms and conditions of employment as other Senior Managers of the Company at a similar level and with comparable responsibilities. (a) Base Salary. The Company agrees to pay and the Employee agrees to accept for services to be rendered hereunder and during the term of this Agreement a base salary of not less than $450,000.00 per year, payable in installments on a monthly or other periodic basis in accordance with the prevailing payroll practices of the Company. (b) Perquisites. During the term of this Agreement, the company shall (i) provide the Employee with perquisites of employment as are commonly provided to an Employee of the Company at a similar level and with comparable responsibilities, and (ii) reimburse the Employee for reasonable and necessary business expenses incurred in connection with his employment, in accordance with employee business expense practices applicable to employees of the company at a similar level and with comparable responsibilities. -3- (c) Benefits. Subject to the terms and provisions of this Agreement, the Employee shall be entitled to coverage under or benefits in accordance with those employee and Senior Management benefit plans and programs as are made available or which may subsequently become applicable to other Senior Managers of the Company at comparable levels. The Employee shall be entitled to five (5) weeks of annual vacation applicable to 1991 and subsequent years. The Employee shall also be entitled to relocate under the terms of the AT&T Management Relocation Plan. Moreover, the AT&T Management Relocation Plan provision which calls for a participant to complete his relocation within 12 months of his employment date will be extended to 24 months for Employee. (d) Incentive Plans. During the term of this Agreement, the Employee will be eligible for consideration for both long and short term awards pursuant to the terms of the Company's 1987 Long Term Incentive Program and short-term annual incentive arrangements, respectively, (the "Incentive Plans") under the terms of such Incentive Plans as are in effect from time to time. Short-term annual incentives for AT&T Senior Managers currently take the form of AT&T Performance Awards (APA) and Merit Awards (MA). Award levels under the APA program are predicated on overall corporate performance and award levels under the MA program are determined by individual and team contributions. The Company cannot make any definitive representations regarding the continuation of the APA/MA incentive format, -4- or the size of Employee's APA and MA awards in any given year, if any. The following information, however, will provide a frame of reference regarding the potential size of Employee's annual incentive opportunity. Employee's 1991 Standard APA is $201,000 and Standard MA is $72,000. Actual APA and MA awards paid to individual Senior Managers are determined with reference to such Standard Awards. For example, the APA payouts for performance years 1988, 1989 and 1990 were 117%, 119.9% and 126.6%, respectively. Moreover, based on annualized Company performance through the end of the second quarter, the projected 1991 APA Award for a Senior Manager with a $201,000 Standard APA Award would be $260,300 (i.e., 129.5% of such Standard APA Award). A Senior Manager's actual MA is determined by his/her supervisor. Although there are no specified minimum or maximum amounts governing the size of such individual awards, the pool of funds available for such awards in 1991 is limited to 36% of the sum of actual APA awards made to each Senior Manager. Employee's actual 1991 APA and MA, if any, will not be prorated to reflect partial service in such year. The Company will award 8,195 Performance Shares to the Employee as of the effective date of the Agreement under the Company's 1987 Long Term Incentive Program covering the 1991-1993 performance period. In addition and in accordance with the terms of this award, the Employee shall receive quarterly Dividend Equivalents. Distributions of Long Term Performance Shares will be in accordance with the applicable 1987 Long Term -5- Incentive Program and award provisions. Also, as of the effective date of this Agreement, 19,987 Stock Options will be granted to the Employee under the Company's 1987 Long Term Incentive Program. In addition to the above awards of Performance Shares and Stock Options which represent the 1991 standard grants to a Senior Manager at Employee's level, the Company's Compensation Committee of the Board will be asked at their next meeting (scheduled for October 16, 1991) to approve a special grant of Company Stock Options and Performance Shares. Specifically, such special grant would include: (1) 7,766 Performance Shares attributable to the 1989-1991 performance period and 6,070 Performance Shares attributable to the 1990-92 performance period. Employee shall receive quarterly Dividend Equivalents on these special Performance Share Awards. (2) 77,000 Stock Options, which will become fully vested ("cliff" vesting) three years after such special grant. (e) Within thirty business days of his employment with the Company, Employee will be provided a one-time lump sum hiring bonus of $200,000. This hiring bonus will not be included in the base for calculating any employee or Senior Management benefits. (f) Successor Plans and Programs. In the event that after the date of this Agreement the Company establishes any new, replacement or additional pension, retirement, disability or annuity plans, programs or -6- practices of incentive compensation for Senior Managers of the Company at comparable levels, the Employee shall also be eligible, at the Company's discretion, for coverage under such pension, retirement, disability and annuity plans, programs or incentive compensation practices in accordance with the terms thereof. 4. Special Pension Arrangement In the event the Employee's employment is terminated for any reason other than for a Company-initiated termination for "Cause" (as hereinafter defined) on or after Employee's 55th birthday, the Company agrees to provide an immediate pension benefit based on (1) the greater of the pension amounts reflected in Appendix A or (2) actual Company Net Credited Service and calculated under the then-existing Company qualified and non-qualified pension formulas, but without reference to age and service eligibility requirements. Non-qualified pensions affected by these practices would include those provided under the AT&T Non-Qualified Pension Plan, the AT&T Mid-Career Pension Plan but specifically would exclude the Minimum Retirement Benefit and Surviving Spouse Benefit payable under the AT&T Senior Management Long-Term Disability and Survivor Protection Plan. Special pension payments shall be paid to the Employee from company operating income. The total pension amount which results from application of this Section 4 will be reduced by all amounts actually received by Employee under any other AT&T or subsidiary or affiliated company's -7- qualified or non-qualified pension, retirement, disability or annuity plan, program or practice, except the AT&T Long-Term Savings Plan for Management Employees and the AT&T Senior Management Incentive Award Deferral Plan. Pension benefits payable under this Section 4 will be afforded the same "ad hoc" inflation adjustments as may be applicable to the AT&T Non-Qualified Pension Plan from time to time. Moreover, Employee's Company-paid senior Management Basic Life Insurance Program ("SMBLIP") benefit, equal to one times base salary, will be maintained after such termination as if Employee was eligible for a Service Pension under the AT&T Management Pension Plan. All other terms and conditions of the SMBLIP will continue to apply. Moreover and pursuant to a termination under this Section 4, Employee will be entitled to the following post-termination ancillary entitlements, administered in a manner consistent with the then-current treatment of service Pension eligible Senior Managers and in accordance with the terms and conditions applicable to each Senior Management plan or practice: - COBRA entitlements (as mandated by Federal statutes) - 1 - 1-1/2 times base salary Senior Management Individual Life Insurance (Split Dollar - contributory) - Continuation of outstanding Company Stock Options and Performance Shares - Continuation of Senior Management Telephone Concession Service -8- 5. Powers and Duties. The Employee shall devote his full time, interests and abilities to the performance of duties under this Agreement, it being understood in connection therewith that he may, in his discretion and subject to not interfering with his duties and responsibilities hereunder, devote time to civic, public and professional activities and may serve as a Director of other business corporations not engaged in competition with the Company or any subsidiary or affiliate of the Company; provided, however, that he shall not accept directorships on more than three boards of other business corporations; and provided, further, that for purposes of the immediately preceding clause, directorships on the boards of two or more companies with at least 50% common ownership shall count as a single company. 6. Operation of Agreement. Notwithstanding any other term or provision to the contrary, all rights, benefits and entitlements available under and in accordance with the terms of this Agreement, except for those provided in Sections 4 and 8, are contingent and dependent upon the Employee maintaining and continuing employment as a Senior Manager of the Company. 7. Restrictive Covenants. (a) Competition. Notwithstanding any other provisions of this Agreement, any and all payments (except those made from Company- sponsored Tax Qualified Pension or Welfare Plans), benefits or other -9- entitlements to which the Employee may be eligible in accordance with the terms hereof, may be forfeited, whether or not in pay status, at the discretion of the Company, if the Employee, at any time without the consent of the Company is employed by, becomes associated with, renders service to, or owns an interest in any business that is competitive with the Company, any subsidiary or affiliate of the Company, or any business in which the Company or any such subsidiary or affiliate has a substantial interest (other than as a shareholder with a non-substantial interest in such business), all as determined by the Company. Appendix B is a copy of the Non-Competition Guideline. (b) Confidentiality. The Employee agrees that he will not, at any time during his employment pursuant to this Agreement or thereafter, disclose or use any trade secret, proprietary or confidential information of the Company or any subsidiary or affiliate of the Company, obtained during the course of his employment, except as required in the course of such employment or with the written permission of the Company or, as applicable, any subsidiary or affiliate of the Company. Further, the Employee agrees not to disclose or discuss the terms and provisions of this Agreement with anyone except for his legal and financial advisors and members of his immediate family. -10- The Employee agrees that at the time of the termination of his employment with the Company, whether at the instance of the Employee or the Company, and regardless of the reasons therefore, he will deliver to the Company, and not keep or deliver to anyone else, any and all notes, files, memoranda, papers and, in general, any and all physical matter containing information, including any and all documents significant to the conduct of the business of the Company or any subsidiary or affiliate of the Company, except for any documents for which the Company or any subsidiary or affiliate of the company has given written consent to removal at the time of the termination of the Employee's employment. (c) Violation by the Employee of any of the provisions of this Section 7 may result, at the discretion of the Company, in the cancellation of all rights and entitlements of the Employee hereunder and shall give the Company any other rights it may have under applicable law to restrict the use of any information and/or documents and/or for the return of any such information and/or documents. 8. Termination Provisions. (a) If at any time during the period beginning from the effective date of this Agreement and ending on the day prior to the Employee's 55th birthday, Employee is terminated by the Company for any -11- reason other than Cause, the Employee will be entitled to the greater of (1) $450,000 or (2) 200% of Employee's annual base salary rate in effect as of the date of Employee's termination. (b) The Company may terminate the Employee for Cause after written notice specifying the cause of such action shall have been given to Employee by the Company. For purposes of this Agreement, Cause shall mean: (i) Employee's breach of any of the terms of this Agreement; (ii) Employee's commission of act(s) or omission(s) which have, have had, or are likely to have a material adverse effect on the business, operations, financial conditions or reputation of the Company, its subsidiaries or affiliates; (iii) Employee's conviction (including a plea of guilty or nolo contenders) of a felony or any crime of theft, dishonesty or moral turpitude; (iv) Gross omission or gross dereliction of any statutory or common law duty of loyalty to the Company. -12- (c) If the Employee terminates his employment with the Company at any time for personal or other reasons or if Employee dies or is terminated because of long-term disability or is terminated by the Company for Cause, as specified in Section 8(b) hereinabove, and except as provided in Section 4 of this Agreement, he will be treated in the same manner as any other Senior Manager of the Company without reference to any provision of this Agreement. (d) Any payments made pursuant to this Section 8 are: (1) subject to the provisions, restrictions and limitations of section 7 above, (2) payable in twelve (12) equal monthly installments commencing the month after the month of termination and (3) subject to Employee signing a standard Release and Agreement not to sue the Company then in use by the Company in connection with terminated Senior Managers. 9. Dispute Resolution. At the option of the Employee or the company, any dispute, controversy, or question arising under, out of or relating to this Contract or the breach thereof, shall be referred for decision by arbitration in the State of New Jersey by a neutral arbitrator selected by the parties hereto. The proceeding shall be governed by the Rules of the American Arbitration Association then in effect or such rules last in effect (in the event such Association is no longer in existence). If the parties are unable to agree upon such a neutral arbitrator within thirty (30) days after each party has given the other written notice of the -13- desire to submit the dispute, controversy or question for decision as aforesaid, then either party may apply to the American Arbitration Association for the appointment of a neutral arbitrator, or, if such Association is not then in existence or does not desire to act in the matter, either party may apply to the Presiding Judge of the Superior court of any county in New Jersey for the appointment of a neutral arbitrator to hear the parties and settle the dispute, controversy or question, and such Judge is hereby authorized to make such appointment. In the event that either party exercises the right to submit a dispute arising hereunder to arbitration, the decision of the neutral arbitrator shall be final, conclusive and binding on all interested persons and no action at law or in equity shall be instituted or, if instituted, further prosecuted by either party other than to enforce the award of the neutral arbitrator. In the event that the Employee is successful in pursuing any claim or dispute arising out of this Contract, the Company shall pay all of the Employee's attorneys' fees and costs, including the compensation and expenses of any Arbitrator, unless (1) the Arbitrator, or any court in which litigation is filed finds the Company to be without liability on material issues raised or (2) the dispute or lawsuit is frivolous in nature. In any other case, the Employee and the Company shall each bear all their own costs and attorney fees, except that the Company shall pay the costs of any Arbitrator appointed hereunder. -14- 10. Assignment. (a) Employee. This Agreement is a personal contract and the rights and interests of the Employee hereunder may not be sold, transferred, assigned, pledged or hypothecated by him. (b) Company. This Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including but not limited to any subsidiary or affiliate of the Company to which the Employee may be employed or assigned, by or with the consent of the Company. If the Employee is assigned to or becomes employed by any subsidiary or affiliate of the Company during the term of this Agreement, such subsidiary or affiliate shall be considered to have been assigned all rights of the Company and accepted all obligations of the Company hereunder. 11. Taxes. It is understood that all payments and benefits provided under this Agreement are subject to withholding for applicable federal, state and local income (or similar) taxes. 12. Entire Agreement; Amendments. This Agreement comprises 16 pages, 13 Sections and two (2) attached Appendices which represents the entire Agreement between Employee and the Company in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any -15- party hereto. No amendments or modifications to this Agreement may be made except in writing signed by the Company, through its authorized representative, and the Employee. 13. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of New Jersey. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and the Company has affixed its corporate seal as of the day and year first above written. Company: By: H. W. Burlingame Date: August 21, 1991 Witnessed: Ailene Durham Date: August 21, 1991 Employee: Alex J. Mandl Date: August 15, 1991 Witnessed: Mary Blessing Date: August 15, 1991 -16- Appendix A MINIMUM PENSION SCHEDULE (Amounts Assume 50% Joint and Survivor Pension is not declined)* Retirement Age# Total Monthly Pension** --------------- --------------------- 55 $30,432 56 33,280 57 36,396 58 39,802 59 43,528 60 47,602 61 52,057 62 56,930 63 62,258 64 68,086 65 74,459 * If survivor annuity is declined, amounts will be increased to reflect practices in effect upon employee's termination. ** The above Minimum Pension Schedule will be offset by the following: (1) All AT&T or subsidiary or associated company's qualified and non- qualified pension plans (e.g., AT&T Non-Qualified Pension Plan, AT&T Mid-Career Pension Plan, AT&T Senior Management Long-Term Disability and survivor Protection Plan), (2) any pensions payable from former employers (i.e., Boise Cascade, CSX Corporation [and subsidiaries]). If such offsets exceed the Minimum Pension amount, no benefit under this schedule is payable. Qualified and non-qualified savings plans are not offsets to the Minimum Pension Schedule, e.g., AT&T Long-Term Savings Plan and AT&T Senior Management Incentive Award Deferral Plan. # Minimum Pension amounts will be prorated to the nearest whole month. 7/31/91 EX-10 7 EXHIBIT 10A19 EXHIBIT (10)(iii)(A)19 AT&T Form 10-K LOGO Harold W. Burlingame Room 444511 Senior Vice President 295 North Maple Avenue Basking Ridge, NJ 07920 908 221-6033 Mr. Jerre Stead 71 Skyline Drive Bernardsville, New Jersey 07924 Dear Jerre: This will supplement my July 31, 1991 and October 18, 1991 letters to you detailing the terms and conditions of your employment with AT&T. In line with our previous discussions, the incentive arrangements described in the "Special Incentive Program" section of Attachment A to my July 31, 1991 letter are null and void in their entirety. As a substitute for this "Special Incentive Program", you have been awarded a total of 70,000 AT&T Restricted Shares as reflected in the attached agreement. Within 10 business days, you will receive a dividend equivalent check in the amount of $115,500 this amount, in effect, assumes you were awarded the 70,000 Restricted Shares effective back to January 1, 1992, the start of the performance period incorporated in the attached Restricted Share agreement. Accordingly, it reflects four quarterly dividends through the December 31, 1992 dividend record date and related February 1, 1993 dividend payment date. For the next dividend record date and related dividend payment date, (i.e. March 31, 1993 and May 3, 1993) you will receive actual dividends rather than dividend equivalents. Your signature below will indicate your acceptance of this proposal. Sincerely, H. W. Burlingame Attachment Jerre L Stead 3/29/93 - ------------- ------- Jerre L. Stead Date LOGO Harold W. Burlingame Room 29-3500 Senior Vice President 550 Madison Avenue New York, NY 10022-3297 212-644-1000 October 18, 1991 M. Jerre L. Stead 71 Skyline Drive Bernardsville, NJ 07924 Dear Jerre: This will supplement my July 31, 1991 letter to you detailing the terms and conditions of your employment with AT&T. Subsequent to my July 31, 1991 letter, we advised you that our Legal organization felt it was inappropriate for you to serve on the board of directors of Household International as they considered this organization a competitor of AT&T's Universal Card business. We understand this means forgoing annual compensation in the order of $31,000 per year plus 350 Household International common shares. In view of this situation, each year on the anniversary of your employment with AT&T, you will receive a lump sum payment of $51,000. These payments will not be included in the base for calculating benefits under any AT&T employee or Senior Management benefit plan and will cease the earlier of (1) such time as you secure a position on the board of a company not in competition with AT&T or (2) termination of your employment with AT&T. A final prorated payment will be made on the number of completed business days for a partially completed 12-month period. Your signature below will indicate your acceptance of this addition to the terms of your employment. Sincerely, Harold W. Burlingame Jerre L. Stead October 27, 1991 - -------------- ---------------- Jerre L. Stead Date LOGO Harold W. Burlingame Room 29-3314 Senior Vice President 55 Madison Avenue New York, NY 10022-3297 July 31, 1991 Mr. Jerre L. Stead 110 Rolling Green Drive Barrington IL 60010 Dear Jerre: It gives me great pleasure to offer you a Senior Management position as President of AT&T's Business Communications Systems. In addition to confirming my offer, this letter will further detail the terms and conditions of your employment and outline the major features of AT&T's compensation and benefit plans and practices as well as the arrangements we developed especially for you. SALARY AND INCENTIVES: Attachment A outlines the salary and incentive arrangements we are offering to you. As discussed, your current employer may not be granting you a prorated annual incentive for 1991. If such is the case, your 1991 AT&T annual incentives (APA and MA) will not be prorated to reflect a partial years' service here. HIRING BONUS: You will receive a hiring bonus of $380,000 payable within 30 days of your employment date. This payment is to compensate you for certain forfeitures when you leave your current employer. This payment will not be includable in the calculation of any benefits under the benefit plans of AT&T. In addition, at their next meeting, the AT&T Board's Compensation Committee will be requested to award you a special grant of 15,700 AT&T Shares. EMPLOYEE AND SPECIAL MID-CAREER BENEFITS: You will be eligible to be relocated from Barrington, Illinois to the Basking Ridge, New Jersey area under the AT&T Management Relocation Program. This Program includes a Miscellaneous Allowance equal to 10% of your starting base salary. (Attachment B is an outline of AT&T's Management Relocation Plan.) If you decide to join us, we will make arrangements to have a counselor immediately available to assist you with your relocation and we will assist you in securing a mortgage. -2- You will, of course be eligible for the employee benefit programs available to all management employees. In addition, under the terms of the AT&T Mid-Career Hire Program, you would be entitled to a one-time payment (grossed up to reflect taxes) equivalent to six months' premiums for the Company Medical and Dental Plans. Although you will have to make your own arrangement for dental coverage during your first six months, you may immediately enroll (and pay for coverage) under the Company's Medical Expense Plan. After this initial six month period, you will be eligible for the Company paid medical, dental, and vision care coverage provided to all management employees. Attachment C summarizes how the Mid-Career Program's medical, death and disability benefits combine with our general employee benefit plans to protect you and your family in these important areas. In addition, this attachment outlines the features of the AT&T Savings Plans as well as our Senior Management financial counseling and telephone concession programs, which are also available to you. AT&T MID-CAREER PENSION PLAN: Under the Plan's current terms and conditions, a participant hired at age 48 and retiring at age 65 would receive extra pension credit for 16 years at approximately one half the rate under the AT&T Management Pension Plan. See also Special Pension Arrangement. SPECIAL PENSION ARRANGEMENT: This arrangement would provide you with special Ancillary Post-Termination Benefits and a Special Pension Arrangement in the event of (1) an employee initiated termination or (2) a Company initiated termination (other than for cause), on or after age 55 (but prior to age 65, the age you would normally become eligible for immediate pension benefits). -- Ancillary Post-Termination Benefits: - COBRA entitlements - 1 times salary Senior Management "Basic" life insurance - 1-1 1/2 times salary Senior Management "Split Dollar" (contributory) life insurance - Same ad-hoc inflation adjustments accorded to AT&T Non-Qualified "Service Pensioners" - Continuation of outstanding Stock Options and Performance Shares if such treatment continues to be available to Service Pension eligible Senior Managers. - Senior Management telephone concession service -3- -- Special Pension Arrangement: - Provided you remain employed with AT&T until at least age 55, you will receive an accrued pension benefit payable immediately upon retirement. Such accrued pension benefit will be calculated under then existing AT&T qualified and non-qualified pension formulas (including the AT&T Mid Career Pension Plan) using actual AT&T service at termination but ignoring age and service requirements. (However, the age and service requirements for the Minimum Retirement Benefit and Surviving Spouse Benefit payable under the AT&T Senior Management Long Term Disability and Survivor Protection Plan will not be waived.) In the event such accrued pension amounts are lower than a minimum annual pension schedule reflected in Attachment D, you will receive the higher pension amount called for in this Minimum Pension Schedule. Of course, such minimum annual pension will be reduced by any actual AT&T qualified and non-qualified pensions payable to you as well as the other offsets indicated in Attachment D. Since I will be abroad for two weeks, if you have any questions concerning this offer, please call Rich Evans on 908- 221-2112. This letter completely replaces my July 29, 1991 offer letter to you. Your signature below will indicate your acceptance of this offer. Sincerely, Rich Evens for HWB Attachments Jerre L. Stead 8/9/91 - -------------- ------ Jerre L. Stead Date Attachment A JERRE L. STEAD Current Proposed Target Max Target Per-to-Date ------ --- ------ ----------- Annual Base Salary: $ 600 $ 600 $ 550 $ 550 1991 AT&T Performance Award (APA): 258 334 191 Merit Award (MA): 450 600 93 120 ----- ----- ------ ----- Total Cash Compensation: $1050 $1200 $ 901 $1004 Long Term Incentives- Standard 1991 Grants: 540 780 - - 1991-1993 Performance Shares (PV of 10640 Shares) 396 534 - - Annual Dividend Equivalents 14 - - 1991 Stock Options (PV of 25,970 Options) 395 395 Total Compensation: $1590 $1980 $1692 $1933 Seasoned Performance Shares - - 1990-1992 (7888 Shares) 360 289 - - 1989-1991 (10,104 Shares) 350 364 SPECIAL INCENTIVE PROGRAM: 3- year program ties to performance of Mr. Stead's business. - - Incremental earnings opportunity during the period: For achievements of each $100MM* in position MOI (i.e., MOI improvements break even): $200K cash payment 150K 5-yr restricted stock For each achievement of specified improvements in key non-MOI measures such as net operating cash flow (NOCF), R&D expenditures as a percent of sales, customer satisfaction index, etc.: $200K cash payment 150K 5-yr restricted Residual earnings opportunity: - -Achievement of target MOI by end of period: $700K cash - -Achievement of target non-MOI measures by end of period: $700K cash - -Payable when achieved *Example target; actual targets to be jointly agreed to by Mr. Stead and AT&T. Plan design will produce a target earnings potential of $3.5MM over the period ($70OK/year incremental bonuses + $1.4MM residual bonus). Additional earnings potential for above-target performance will be available and, if earned, would be delivered in restricted stock at the end of the performance period. NOTES: Performance share and stock option present values assume 12%/year stock price growth for 5 years and an 8.5% discount rate. Performance-to-date figures for performance shares based on $38.00 share price and results through 2Q. Does not account for any accrued forfeitures which may be incurred. Attachment B OUTLINE OF MANAGEMENT RELOCATION PLAN Lump Sum Payment Paid in advance based on an individual formula which includes home search trips, interim living costs, meals, transportation, lodging, etc., for employee and family. Miscellaneous Household Allowance 10% of new salary* Home Sale Assistance I Sale to Company at fair market value as determined by the average of two professional appraisals II If employee finds buyer, 3% of the sale price is paid to the employee as an incentive Loss On Sale of Home Limited to the lower of the actual loss or 10% of the sum of the original purchase price and one-half of eligible capital improvements to the home Loan for Down Payment (Equity Advance) Interest free loan up to 95% of equity in prior home Closing Cost Most fees paid, e.g., attorneys, recording, mortgage origination, etc. Moving/Storage Packing, moving household goods and unpacking Differentials If applicable, the greater of a Mortgage Interest Differential or High Housing Cost Differential, prior house to new house, for 36 months. Maximum aggregate payment equal to 30% and 10.8% of salary, respectively Difference in real estate taxes, prior house to new house, for 36 months, no maximum Tax Gross-up For non-deductible moving expense reimbursements (Misc. Allowance, Home Sale Incentive and Differentials not included) *6% of new salary if renting at the new location The above is only a brief outline of such benefits. Any benefits or rights will be determined by the specific plan provisions as they apply in each case. Attachment C BENEFIT SUMMARY# MEDICAL Coverage and tax gross-up during first six months ... thereafter, eligible to Medical@, Dental@, Vision Care Plans for employees generally DEATH BENEFITS Minimum 15% of Pay* for spouse's life-time until pension plan for employees generally exceeds such percentage - 1 x Salary Company Paid Basic Life Insurance - 1 x Pay* Company Paid Pension Death Benefit to mandatory beneficiary - Up to 3 x Salary Employee Paid Group Term - Up to 1 and 1/2 x Salary Company/Employee Paid "Split Dollar" Insurance SICKNESS DISABILITY 52 weeks at full Salary LONG TERM DISABILITY 60% of Salary LTD benefit to age 65 provided by the Company or option to elect 70% with employee contribution for the additional 10% VACATIONS 5 weeks SAVINGS PLAN After one year's service, Company matches 2/3 of employee contribution up to 6% of Salary (Plan includes pretax 401k feature) DEFERRAL PLAN Option to defer Short and Long Term Incentives. Current interest rate is 10 year U.S. Treasury notes plus 5% interest** FINANCIAL COUNSELING Tax, estate planning and investment advice Preparation of will and trusts Income tax preparation TELEPHONE CONCESSION 100% of inter-LATA long distance charges AUTOMOBILE Company provided leased automobile or chauffeur service for business and commutation PENSION See AT&T MID-CAREER PENSION # Includes Mid-Career, Senior Management and Employee Benefits @ Under the Company Flex Plan, there are different levels of coverage from which to elect * Base salary plus Short Term Awards **Interest rate established by AT&T Board and subject to change from time to time. Terms and Conditions of Employee Benefit, Mid-Career Benefit and Executive Benefit Plans subject to change by the Company. The above is only a very brief outline of such benefits. Any benefits or rights will be determined by the specific plan provisions as they apply in each case. 7/19/91 Attachment D MINIMUM PENSION SCHEDULE# (Amounts Assume 50% Joint and Survivor Pension is declined)* Retirement Age** Total Annual Pension*** 55 $384,639 56 422,228 57 462,330 58 505,060 59 550,526 60 598,839 61 650,107 62 704,429 63 761,909 64 822,640 65 886,716 * If survivor annuity is elected, employee's minimum pension amount will be reduced to reflect practices in effect upon employee's termination and such reduction will assume that the proportion of accrued qualified and non-qualified pensions applies to amounts paid under this Minimum Pension Schedule. ** Pension amounts will be prorated to the nearest whole month. *** Amounts paid under this Minimum Pension Schedule will be reduced by the following offsets: (1) All AT&T's or subsidiary or associated company's qualified and non-qualified pension plans (e.g., AT&T Management Pension Plan, AT&T Non-Qualified Pension Plan, AT&T Mid-Career Pension Plan, AT&T Senior Management Long- Term Disability and Survivor Protection Plan), (2) any pensions payable from former employers (e.g., Honeywell), and (3) 50% of the Primary Social Security Maximum Benefit. If such offsets exceed the Minimum Pension amount, no benefit under this schedule is payable. Qualified and non qualified savings plans are not offsets to the Minimum Pension Schedule, e.g., AT&T Long-Term Savings Plan and AT&T Senior Management Incentive Award Deferral Plan. The Minimum Pension, all other AT&T non-qualified pensions and benefits, as well as all short and long term incentives, are subject to the AT&T Non-Competition Guideline (attached). 7/31/91 EX-12 8 EXHIBIT 12 Exhibit (12) AT&T Form 10-K AMERICAN TELEPHONE AND TELEGRAPH COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Millions) (Unaudited) For the Year Ended December 31, 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Earnings Before Income Taxes $6,204 $5,958 $ 883 $4,879 $4,731 Less Interest Capitalized During the Period 72 62 79 79 89 Less Undistributed Earnings of Less Than 50% Owned Affiliates (16) 23 49 39 31 Add Fixed Charges 1,528 1,621 1,781 1,864 1,400 ------ ------ ------ ------ ------ Total Earnings $7,676 $7,494 $2,536 $6,625 $6,011 ====== ====== ====== ====== ====== Fixed Charges Total Interest Expense Including Capitalized Interest $1,181 $1,247 $1,294 $1,267 $ 997 Interest Portion of Rental Expenses 347 374 487 597 403 ------ ------ ------ ------ ------ Total Fixed Charges $1,528 $1,621 $1,781 $1,864 $1,400 ====== ====== ====== ====== ====== Ratio of Earnings to Fixed Charges 5.0 4.6 1.4 3.6 4.3 ====== ====== ====== ====== ====== EX-13 9 EXHIBIT 13 1 Exhibit (13) AT&T Form 10-K OUR GROWTH COMES FROM COMPETING SUCCESSFULLY WORLDWIDE IN BOTH OLD AND NEW MARKETS, OFFERING NEW TECHNOLOGY AND HIGH-QUALITY PRODUCTS AND SERVICES. FINANCIAL SECTION A DISCUSSION AND ANALYSIS OF OUR RESULTS AND OPERATIONS.......... Global economic conditions improved in 1993, but growth was still sluggish. In Europe and Japan the weak conditions of 1991 and 1992 continued this past year. Against this backdrop, we reported a 3.5% increase in total revenues in 1993, a pickup from the 2.9% increase in 1992. We made three accounting changes this past year. Because new rules apply to all U.S. companies, we changed our accounting for retiree benefits, postemployment benefits and income taxes. The net after-tax charge to bring our financial statements in line with the new accounting methods caused us to report a net loss for the year. Excluding that net charge and the increase in 1993 expenses caused by the change in accounting for postemployment benefits and a fourth-quarter restructuring charge, our per share earnings were $3.15 in 1993. These accounting changes do not affect cash flows; they only change the expenses we report. CONSOLIDATED INCOME STATEMENT INFORMATION Dollars in millions 1993 1992 1991 - ----------------------------------------------------------------- Total revenues $67,156 $64,904 $63,089 Total costs 40,569 39,710 38,825 _________________________________________________________________ Gross margin 26,587 25,194 24,264 Provisions for business restructuring 498 64 3,572 Other operating expenses 19,851 18,861 19,334 _________________________________________________________________ Operating income $ 6,238 $ 6,269 $ 1,358 ================================================================= Income before cumulative effects of accounting changes $ 3,974 $ 3,807 $ 522 Cumulative effects of accounting changes (7,768) - - _________________________________________________________________ Net Income (Loss) $(3,794) $ 3,807 $ 522 ================================================================= Gross margin percentage 39.6% 38.8% 38.5% Operating margin percentage 9.3% 9.7% 2.2% ================================================================= -21-(Cont'd) 2 In our new accounting for retiree benefits, we estimate and book expenses for retiree benefits during the years employees are working and accumulating these future benefits. When we used the former "pay-as-you-go" accounting, we simply booked our contributions to trust funds for life insurance benefits and the actual claims for benefits such as health care and telephone concessions as they occurred. To use the new method, we made assumptions about trends in health care costs, interest rates and average life expectancy. Then we estimated the future payments for benefits to all present retirees and for accumulated benefits of active employees. We then placed this $11.3 billion liability on the books to reflect those estimated future obligations at January 1, 1993, expressed in today's dollars. From now on, we will continue to record the expenses as employees accumulate future benefits so that our liability for retiree benefits is always up to date. We expect our annual expenses to be at about the same level we recorded before this accounting change. ***************************************************************** WHY DO WE MAKE ACCOUNTING CHANGES? The goal of financial reporting and our objective at AT&T is to give investors the information they need to understand how we're doing over time and in comparison with other companies. Sometimes accounting rule-makers issue new rules for all companies. At other times, we decide to change our methods because of trends in our business or industry. HOW DO WE MAKE THE CHANGES? We first figure out what our balance sheet would look like if we had always used the new accounting methods. Then we make all the adjustments needed to catch up with those new methods. Our income statement shows the net impact of all those adjustments as "cumulative effects on prior years of changes in accounting." WHAT DO THE CHANGES MEAN TO RESULTS? Accounting changes sometimes have a large effect on reported earnings in the year of a change, but the effects on future earnings may be quite small once we bring the balance sheet up to date. Because the cumulative effects come from earlier years, many investors set them aside when looking at current results. The income statement format allows investors to see our results easily with or without these cumulative effects of accounting changes. ***************************************************************** -21- 3 *****************************************************************
AT&T VERSUS S&P 500 TOTAL SHAREHOLDER RETURNS ASSUMING REINVESTMENT OF DIVIDENDS In Dollars 600 * 500 * # 400 * # * * # *# # 300 * *# # * # # # * 200 *# * *# *# *# *# # * * * # # 100 *# *# # 0 -------------------------------------------------------------------- 1/84 84 85 86 87 88 89 90 91 92 93 * AT&T # S&P Your investment has outperformed the S&P 500 for the past decade. Assumes $100 invested in the new AT&T Common Stock and in the S&P 500 Index on January 1, 1984 and all dividends reinvested.
***************************************************************** Our new accounting for postemployment benefits, including payments for separations and disabilities, is very similar to our new accounting for retiree benefits. We must book expenses for future separations during the years employees are working and accumulating service with the company, and for disability benefits when the disabilities occur. Using the former method, we booked expenses for separations when we identified them and expenses for disabilities when we made payments. We used our experience over the past five years to estimate future separations. In the future, we will adjust our estimates based on the number of employees who actually leave our payroll with these payments. Because we book expenses every quarter using this accounting method instead of booking expenses when we make plans to restructure our business, this change increased our costs and expenses by $301 million in 1993, and reduced our earnings by $171 million, or $0.13 per share. We expect our earnings in 1994 to be similarly reduced. -22-(Cont'd) 4 Our new accounting for income taxes uses the enacted tax rates to compute both deferred and current taxes. That means we must refigure our deferred tax assets and liabilities whenever Congress changes tax rates. Using our former method, we held deferred tax assets and liabilities at their original values even when tax rates changed. Because federal corporate tax rates are lower now than they were before the 1986 Tax Act, we had a gain when we changed to the new accounting method. Apart from the effects of changes in statutory tax rates, we do not expect the new accounting to affect future earnings materially. AN OVERVIEW OF OUR BUSINESS OPERATIONS Our core business is to meet the communications and computing needs of our customers by using networks to move and manage information. We divide the revenues and costs of this core business into three categories on our income statement: telecommunications services, products and systems, and rentals and other services. AT&T Capital Corporation (AT&T Capital) and AT&T Universal Card Services Corp. (Universal Card) are partners with our core business units as well as innovators in the financial services industry. We include their revenues and costs in a separate category on our income statement: financial services and leasing. Customer demand for the products and services of our core business continues to grow despite weak economic conditions worldwide. Technological advances and brisk competition are making electronic communications and computing ever more useful and economical. Our financial services businesses are also growing because we are investing in new assets. We look forward to greater revenue growth in 1994 than in 1993 because of a strengthening economy and the expected completion of our merger with the fast-growing McCaw Cellular Communications, Inc. (McCaw). ***************************************************************** OUR MERGER WITH MCCAW AIMS TO GIVE OUR CUSTOMERS A MORE COMPREHENSIVE SERVICE OFFERING AND OUR INVESTORS FASTER GROWTH AND HIGHER LONG-TERM RETURNS ON THEIR INVESTMENT. Our plan is for McCaw's owners to exchange their McCaw stock for new AT&T stock. Then all owners of the post-merger AT&T will share in the benefits and risks of the combined operations. The people, assets and capital of the two firms won't change just because of this merger. In mergers like this, we simply add up the earnings, assets, liabilities and equity of the two companies and become one company. We used this same method, called a "pooling of interests," for the merger of AT&T and NCR in 1991. After a merger, financial statements and all other financial information show the combined amounts as if there had always been only one company. To help you picture this, we included some of these combined amounts at the bottom of the ten-year summary of selected financial data. We computed these amounts assuming the merger was already completed using a one-for-one exchange of shares as AT&T and McCaw proposed in the merger agreement. ***************************************************************** -22- 5
TEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA (UNAUDITED) Dollars in millions (except per share amounts) Jan. 1, 1993* 1992 1991* 1990 1989 1988* 1987 1986* 1985 1984 1984 - ------------------------------------------------------------------------------------------------------------------------------ RESULTS OF OPERATIONS Total revenues $67,156 $64,904 $63,089 $62,191 $61,100 $61,756 $60,530 $61,906 $63,130 $60,318 Research and development expenses 3,069 2,911 3,114 2,935 3,098 2,988 2,810 2,599 2,527 2,477 Operating income (loss) 6,238 6,269 1,358 5,496 5,024 (2,275) 4,281 999 3,569 2,824 Income before cumulative effects of accounting changes 3,974 3,807 522 3,104 3,109 (1,230) 2,463 651 1,872 1,713 Net income (loss) (3,794) 3,807 522 3,104 3,109 (1,230) 2,463 476 1,872 1,713 Earnings (loss) per common share before cumulative effects of accounting changes 2.94 2.86 0.40 2.42 2.40 (0.94) 1.82 0.42 1.31 1.23 Earnings (loss) per common share (2.80) 2.86 0.40 2.42 2.40 (0.94) 1.82 0.29 1.31 1.23 Dividends declared per common share 1.32 1.32 1.32 1.32 1.20 1.20 1.20 1.20 1.20 1.20 - ------------------------------------------------------------------------------------------------------------------------------ ASSETS AND CAPITAL Property, plant and equipment - net $19,397 $19,358 $18,689 $18,661 $17,023 $16,394 $21,866 $22,061 $23,133 $22,167 $21,416 Total assets 60,766 57,188 53,355 48,322 42,187 39,869 44,014 43,617 44,683 43,418 39,156 Long-term debt including capital leases 6,812 8,604 8,484 9,354 8,377 8,350 8,027 7,789 8,026 8,943 9,462 Common shareowners' equity 13,850 18,921 16,228 15,883 14,723 13,705 16,617 15,946 16,951 15,839 14,413 Net capital expenditures 3,701 3,933 3,860 4,018 3,951 4,288 3,805 3,904 4,295 3,685 - ------------------------------------------------------------------------------------------------------------------------------
-23-(Cont'd) 6
TEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA (Cont'd) (UNAUDITED) Dollars in millions (except per share amounts) Jan. 1, 1993* 1992 1991* 1990 1989 1988* 1987 1986* 1985 1984 1984 - ------------------------------------------------------------------------------------------------------------------------------ OTHER INFORMATION Operating income (loss) as a percentage of revenues 9.3% 9.7% 2.2% 8.8% 8.2% (3.7)% 7.1% 1.6% 5.7% 4.7% Net income (loss) as a percentage of revenues (5.6)% 5.9% 0.8% 5.0% 5.1% (2.0)% 4.1% 0.8% 3.0% 2.8% Return on average common equity (29.0)% 21.1% 3.1% 19.7% 21.8% (7.2)% 15.0% 2.2% 10.7% 10.5% Data at year-end except last column: Stock price per share $52.50 $51.00 $39.125 $30.125 $45.50 $28.75 $27.00 $25.00 $25.00 $19.50 $17.875 Book value per common share $10.24 $14.12 $12.39 $12.46 $11.54 $10.55 $12.66 $11.91 $12.58 $12.00 $11.39 Debt ratio 56.1% 46.1% 48.9% 47.6% 43.0% 41.6% 36.1% 34.4% 34.5% 36.5% 40.1% Debt ratio excluding financial services 28.3% 25.4% 34.7% 38.3% 36.3% 37.3% 32.5% 32.2% 32.9% 36.2% 40.1% Employees 308,700 312,700 317,100 328,900 339,500 364,700 365,000 378,900 399,600 427,200 435,000 - ------------------------------------------------------------------------------------------------------------------------------ PROFORMA INFORMATION REFLECTING THE PROSPECTIVE MERGER OF AT&T AND MCCAW Total revenues $69,351 $66,647 $64,455 $63,228 $61,604 $62,067 $60,726 $61,975 $63,159 $60,326 Total costs and expenses 62,853 60,119 62,981 57,684 56,720 64,496 56,585 61,000 59,689 57,501 Net income (loss) (5,906) 3,442 171 3,666 2,820 (1,527) 2,374 434 1,856 1,712 Earnings (loss) per common share (3.83) 2.27 0.12 2.50 1.96 (1.07) 1.64 0.30 1.29 1.22 Total assets 69,392 66,104 62,072 57,036 45,228 41,945 45,583 44,305 44,824 43,461 Total long-term debt 11,802 14,166 13,683 14,579 10,116 10,172 9,060 8,234 8,104 8,963 Common shareowners' equity 13,373 20,312 17,972 17,928 15,727 13,694 16,913 15,849 16,945 15,852 - ------------------------------------------------------------------------------------------------------------------------------ * 1993 data reflect a $7.8 billion net charge for three accounting changes. 1991 data reflect $4.5 billion of business restructuring and other charges. 1988 data reflect a $6.7 billion charge due to accelerated digitization of the long distance network. 1986 data reflect $3.2 billion of charges for business restructuring, an accounting change and other items.
-23- 7 CHANGES IN OUR COMPETITIVE LANDSCAPE ***************************************************************** MULTIMEDIA NETWORKS WILL LEAD TO NEW WAYS OF COMMUNICATING AND COMPUTING AND NEW FORMS OF EDUCATION AND ENTERTAINMENT. Telephone and cable television firms are forming alliances to speed their delivery of multimedia services to the home. A notable example is the proposed merger of Bell Atlantic Corp. and Tele- Communications Inc. Focusing on the programming to be provided by these networks, QVC Network Inc. and Viacom Inc. were competing to acquire Paramount Communications Inc., the entertainment company, at year-end. Several firms are announcing major new networks. Pacific Bell's planned $16 billion network is a good example. AT&T, as a supplier of network systems and services and a provider of multimedia products and services, will be a supplier as well as a customer and competitor of these firms. The new alliances and networks, increasing competition, and changes in technology and regulation are all leading to more choices for customers. These trends should also lower our costs to reach customers over local networks. Success in this new multimedia environment will depend on innovation and giving customers value for their purchases. COMPETITION IS GLOBAL AND INCREASINGLY BETWEEN MULTINATIONAL FIRMS WITH PARTNERS FROM DIFFERENT NATIONS. To offer one-stop shopping for telecommunications services to companies that do business globally, we formed WorldPartners with Kokusai Denshin Denwa Co. Ltd. of Japan and Singapore Telephone. We intend to also find European partners or build networks there ourselves, spending as much as $350 million. British Telecom Plc and MCI Communications Corp.(MCI) also formed an alliance, as did Germany's Deutsche Bundespost Telekom and France Telecom. British Telecom applied to the FCC to provide long distance service in the U.S. We applied to provide service in the U.K. and also asked the FCC to prevent non-U.S. carriers from operating in the U.S. unless we can compete in their home markets. We extended our rivalry with MCI to Canada through an alliance with Unitel Communications, Inc. MCI is allied with the Stentor consortium there. Mexico will open long distance services to competition from U.S. carriers in 1996 as part of the North American Free Trade Agreement (NAFTA). NAFTA should also aid our sales of network systems to Mexico. In 1993 we signed an important agreement with the People's Republic of China, where we will compete with Canada's Northern Telecom Ltd., France's Alcatel Alsthom S.A., Sweden's Telefon AB L.M. Ericsson and possibly others. This past year we also won our first contract to supply switching equipment to Japan, a market that is dominated by Fujitsu Ltd. and NEC Corp. ***************************************************************** -24-(Cont'd) 8 Cost controls, coupled with our revenue growth, caused our gross margin percentage to improve the past two years. Operating expenses grew 7.5% in 1993, mainly because of marketing and sales efforts for telecommunications services and provisions for business restructuring. Such marketing and sales expenses also rose in 1992, but total operating expenses declined because of restructuring and other charges in 1991. To increase our presence outside the U.S., we are hiring employees, building plants and forming joint ventures. However, during the past two years the economies of Europe and Japan were very weak and we needed to restructure some of our overseas operations. For these reasons we reported an operating loss in our operations outside the U.S. both years. Nevertheless, we continue to believe that these operations and markets provide excellent opportunities for future growth in revenues and earnings. All our business units face stiff competition. Prices and technology are under continual pressure. Such market conditions, along with a slow-growing economy, make the ongoing need for active cost controls even more urgent. Managers must continuously assess their resource needs and consider further steps to reduce costs. Sometimes these steps will include consolidating facilities, disposing of assets, reducing work force or withdrawing from markets. Like other manufacturers, we use, dispose of and clean up substances that are regulated under environmental protection laws. We also have been named a potentially responsible party (PRP) at a number of Superfund sites. At most of these sites, our share is very limited and there are other PRPs who can be expected to contribute to the cleanup costs. We review potential cleanup costs and costs of compliance with environmental laws and regulations regularly. Using engineering estimates of total cleanup costs, we estimate our potential liability for all currently and previously owned properties where some cleanup may be required, including each Superfund site where we are named a PRP. We provide reserves for these potential costs and regularly review the adequacy of our reserves. In addition, we forecast our expenses and capital expenditures for existing and planned compliance programs as part of our regular corporate planning process. Despite these procedures, it is very difficult to estimate the future impact of actions regarding environmental matters, including potential liabilities to us. However, we believe that cleanup costs and costs related to environmental proceedings and ongoing compliance with present laws will not have a material effect on our future expenditures, earnings or competitive position beyond that provided for at year-end. Many of our employees are represented by unions. In 1992 AT&T management and union bargainers negotiated innovative labor agreements with provisions for employees' career security and well-being as well as higher wages and increased employee ownership of the business. Under the wage portion of the agreements, employees at the top of each wage schedule received increases of 4% in 1992 and 3.9% in 1993, and will receive an increase of 3.9% in 1994. Pensions are increased by 13% for those who retire after May 31, 1992. The agreements also retained management flexibility to react to business conditions while enhancing education, training and job-changing opportunities for employees. -24- 9 TELECOMMUNICATIONS SERVICES...................................... These revenues grew 0.7% in 1993 and 2.0% in 1992, driven by volume growth. Billed minutes for switched services rose 5.5% in 1993 and 6% in 1992, paced by business services. Volume growth exceeds revenue growth as customers select more of the higher- value, lower-priced services made possible by our greater efficiency. This shift in the mix of services that customers select lowers average per-minute revenues. In the latter half of 1993 we raised some of our prices and fees - about $500 million on an annual basis. These increases were primarily for services where customer demand is not very sensitive to price. In late December we filed for 1994 price increases of $750 million on an annual basis and also announced a new discount plan for high- volume callers. We expect the effects on revenues of this discount plan and those 1994 price increases to offset each other. In January 1994 we also proposed to raise prices for some business services by $165 million on an annual basis. We expect improving economic conditions and higher prices to cause our telecommunications services to grow faster in 1994 than in 1993. TELECOMMUNICATIONS SERVICES Dollars in millions 1993 1992 1991 - ----------------------------------------------------------------- Total revenues $39,863 $39,580 $38,805 _________________________________________________________________ Costs Access and other interconnection costs 17,709 18,132 18,395 Other costs 7,009 7,135 6,881 _________________________________________________________________ Total costs 24,718 25,267 25,276 _________________________________________________________________ Gross margin $15,145 $14,313 $13,529 ================================================================= Gross margin percentage 38.0% 36.2% 34.9% ================================================================= This past year we announced AT&T TrueVoice(#) service, a new, patented technology to improve the sound quality on calls placed within the continental U.S. and Canada. We expect to complete the national rollout by April 1994 so that AT&T TrueVoice service will operate automatically on every call placed on our network. We believe it gives us a competitive advantage that will help us attract and keep customers. Markets for telecommunications services are extremely competitive. AT&T is the market leader, but we saw another small decline in our market share this past year. Our own data and the data of the Federal Communications Commission (FCC) show that our market share is about 60% of the minutes billed for inter-LATA switched services. We withstood an important challenge to our market position when the FCC allowed customers of inbound "800" services to switch carriers without penalties for a 90-day period in 1993. We retained 95% of our 531 largest customers and won contracts away from our competitors. Many of these customers signed long-term contracts, so we emerged from this "Fresh Look" period with signed contracts having a greater dollar value than those we had before. (#) Registered Trademark -25-(Cont'd) 10 The FCC and state utility commissions regulate our services, and many more rules are imposed on us than on our competitors. Because of fierce competition and rapid changes in technology and customer needs, the FCC adopted "price caps" in 1989, increasing our flexibility to respond to those market conditions. Since then, the FCC has removed all limits on our prices for many business services. However, the FCC decided in June 1993 to continue price caps for residential services instead of reducing regulation of AT&T. Total costs of telecommunications services declined this past year; costs in 1992 were about level with those in 1991. Despite higher calling volumes, access and other interconnection costs dropped both years largely because of lower prices from telephone companies to reach customers over local networks. The 1993 decrease in other costs was mainly due to lower uncollectibles. We also had lower depreciation expense because we reduced plant additions. The 1992 increase in other costs was associated with higher service volumes. We also had higher uncollectibles because of fraud and the weak economy. PRODUCTS AND SYSTEMS............................................. Despite a weak global economy and intense price competition, our sales grew 8.0% in 1993 and 3.3% in 1992. Sales outside the U.S. grew at a faster rate than U.S. sales and contributed more than half the increase in both years. Based on our current expectations for the global economy, we expect greater sales growth in 1994. PRODUCTS AND SYSTEMS Dollars in millions 1993 1992 1991 - ----------------------------------------------------------------- Revenues Telecommunications network products and systems $ 8,345 $ 7,691 $ 7,490 Computer products and systems 3,597 3,433 3,667 Communications products and systems 3,438 3,098 2,852 Microelectronics products, special-design products for U.S. government, and other* 2,418 2,251 1,932 _________________________________________________________________ Products and systems 17,798 16,473 15,941 _________________________________________________________________ Total costs 10,809 9,846 9,134 _________________________________________________________________ Gross margin $ 6,989 $ 6,627 $ 6,807 ================================================================= Gross margin percentage 39.3% 40.2% 42.7% ================================================================= * "Other" is composed principally of media, predominantly for use with automated teller machines and point-of-sale equipment, and business forms. -25- 11 Revenues from sales of telecommunications network products and systems grew 8.5% in 1993 and 2.7% in 1992. The 1993 increase came chiefly from higher sales of wireless products, switching equipment and operations systems. In 1992 the growth came mainly from higher sales of cable systems and switching equipment. Sales outside the U.S. rose both years while U.S. sales grew in 1993. Orders were heavily weighted toward the 1991 start of a seven- year, $600 million contract to supply GTE Corporation with wireless equipment, so U.S. sales were lower in 1992. Many countries are modernizing their communications networks. This will lead to many sales opportunities in the years ahead. We expect to partner with these countries because we provide a full range of integrated products and services and, sometimes, assistance in financing their equipment purchases. In February 1993 we signed an agreement with the State Planning Commission of the People's Republic of China. Under that proposed partnership, we expect to engage in local research, development and manufacturing of central office switching equipment, cellular communications systems and telecommunications networks for use in that country. Sales to the regional Bell companies grew in 1993 after staying about level in 1992. In 1993 Pacific Bell announced plans to construct a broadband network over seven years. We were selected as a critical supplier and systems integrator for the project, and expect up to $5 billion in revenues from the project. Other regional carriers also have plans to modernize their networks. Because we provide the latest digital technology and services, we expect to win some sizable contracts. Revenues from sales of computer products and systems rose 4.8% in 1993 after falling 6.4% in 1992. The growth in 1993 came mainly from higher U.S. sales of workstations, automated teller machines, and mid-range and high-end systems for enterprise-wide computing. The decline in 1992 was mainly due to the loss of sales from some products that were phased out after the 1991 merger of AT&T and NCR Corporation (NCR). In both years we faced fierce competitive pricing, particularly for lower-end computer products, and weak economic and market conditions in Europe and Japan. We recorded no revenues from UNIX System Laboratories, Inc. (USL) in 1993 because we sold our ownership interest and included USL's net results in other income-net. USL's revenues from computer products were $74 million in 1992 and $71 million in 1991. Revenues from sales of communications products and systems grew 11.0% in 1993 and 8.6% in 1992. About two-thirds of the growth in 1993 came from higher sales of business communications products and systems. We also had higher sales of consumer- oriented products, submarine cables and data communications equipment. The growth in revenues from consumer communications products reflected higher sales of cellular products, corded telephones, telephone answering devices and non-AT&T products such as pagers and electronic games, which was partially offset by lower sales of cordless telephones. The increase in sales of consumer-oriented products was larger in 1992, driven by higher sales of cordless telephones and telephone answering systems. Sales of submarine cables, business communications systems and data communications equipment also contributed to the growth in revenues that year. [GRAPHIC](See appendix for description) -26-(Cont'd) 12 In total, revenues from sales of microelectronics products, special-design products for the federal government, and other products and systems grew 7.4% in 1993 and 16.5% in 1992. Growth in both years came mainly from higher sales of microelectronics components and power systems to original equipment manufacturers outside the U.S. Sales of media and business forms were steady in 1993 after rising in 1992. Because of reduced spending by the U.S. federal government, sales of special-design products, such as secure phones, declined both years. Higher sales levels caused costs of products and systems to increase both years. Pricing pressures and changes in our product sales mix caused the gross margin percentage to decline. RENTALS AND OTHER SERVICES....................................... These revenues were about level the last three years. Higher revenues from newer telecommunications services and maintenance contracts for communications systems were offset by the continuing and expected decline in rentals of communications equipment. The fast-growing revenues from "other rentals and services" come from many different services, such as network management and satellite services, which generate small revenue streams. We expect the principal trends in this revenue category to continue in 1994. RENTALS AND OTHER SERVICES Dollars in millions 1993 1992 1991 - ----------------------------------------------------------------- Revenues Computer products and systems $2,514 $2,667 $2,676 Communications products and systems rentals 1,174 1,409 1,674 Communications products and systems services 1,457 1,375 1,299 Other* 1,846 1,506 1,310 _________________________________________________________________ Rentals and other services 6,991 6,957 6,959 _________________________________________________________________ Total costs 3,331 3,287 3,344 _________________________________________________________________ Gross margin $3,660 $3,670 $3,615 ================================================================= Gross margin percentage 52.4% 52.8% 51.9% ================================================================= * "Other" is composed principally of global messaging and electronic mail services, telemarketing services, information technology services and facility rentals. Although the gross margin percentage improved since 1991 because of a smaller work force, the continuing shift in revenue mix to other services from higher-margin rentals led to a decline in the margin percentage in 1993. -26- 13 ***************************************************************** DEBT TO EQUITY ANALYSIS AT&T Consolidated and AT&T's Core Business In Billions of Dollars 40 #D 30 #D #D #D #D #D #D #D @D #D @D #D 20 #D @D #E @D #D #E @D #E @E #D @D #E @E #E @E #E @D 10 #E @E #E @E #E @E #E @E #E @E #E @E #E @E #E @E #E @E 0 #E @E #E @E #E @E 1991 1992 1993 ------------------------------------------------ D: Debt E: Equity #: AT&T including Financial Services and Leasing @: AT&T's Core Business Most of our debt is for Universal Card and AT&T Capital. Our goal is a 30% debt ratio for our core business. The accounting changes reduced our equity in 1993. ***************************************************************** FINANCIAL SERVICES AND LEASING................................... These revenues grew 32.2% in 1993 and 36.8% in 1992. Both Universal Card and AT&T Capital contributed to the growth by profitably expanding their portfolios of earning assets. We expect continuing growth in these revenues, earnings and assets in 1994. FINANCIAL SERVICES AND LEASING In millions 1993 1992 1991 - ----------------------------------------------------------------- Revenues AT&T Capital $ 1,360 $ 1,266 $ 1,160 Universal Card 1,228 831 475 Eliminations, adjustments and other* (84) (203) (251) _________________________________________________________________ Total revenues $ 2,504 $ 1,894 $ 1,384 Total costs 1,711 1,310 1,071 _________________________________________________________________ Gross margin $ 793 $ 584 $ 313 ================================================================= Gross margin percentage 31.7% 30.8% 22.6% Operating income (loss) $ 339 $ 193 $ (34) Operating margin percentage 13.5% 10.2% (2.5)% Assets $17,033 $14,003 $ 9,809 ================================================================= Universal Card Information: Finance receivables $ 9,154 $ 6,606 $ 3,786 Accounts 11.7 10.3 7.6 ================================================================= * "Other" is composed principally of revenues from certain lease finance assets AT&T retained when AT&T Capital was reorganized. -27-(Cont'd) 14 Universal Card is the second largest competitor in its industry measured by customer accounts. Since its start in 1990 Universal Card pioneered a variety of innovative promotions to add new accounts, many involving the transfer of balances from other credit cards. But our credit approval and monitoring have kept our percentage of delinquent balances and write-offs below industry norms. Universal Card became profitable in 1992, well ahead of our projection when we entered the business. After an initial public offering of its common stock in August 1993, AT&T Capital became the largest publicly owned equipment leasing and financing company in the U.S. AT&T still owns about 86% of its stock, so its results are still fully consolidated in our financial statements. We unconditionally guaranteed all of AT&T Capital's outstanding debt at the end of March 1993, before its legal reorganization. Since then, all AT&T Capital debt has been issued using its own credit. This change makes it financially independent and permits us to focus on the financing needs of our core business. The growth in costs of financial services and leasing over the last two years came from the higher volume of financing and credit card transactions. The improved gross margin percentage mainly reflects the maturation of the credit card receivables portfolio. A lower cost of funds due to lower interest rates in 1993 also contributed to the improved margin percentage. By 1995 we must change our accounting for the loans we make to customers. Under the new rules we must consider delays or reduced payments of interest as well as principal when we value loans that may not be fully repaid. We do not expect this change to affect our costs or expenses materially. OPERATING EXPENSES............................................... Selling, general and administrative expenses increased 5.2% in 1993, largely because of advertising and promotions, and sales and sales support activities to protect our core business. Such spending, and costs to expand outside the U.S. and into new markets, will continue to grow. These expenses also rose in 1992, but the increase was not evident because 1991 expenses included $501 million in charges related to business restructuring activities and the merger of AT&T and NCR. Research and development expenses increased 5.4% in 1993, but decreased 6.5% in 1992. The increase was mainly for work on cellular technology, advanced communications services and devices, and projects aimed at international growth. In 1992 we streamlined development work on telecommunications network systems and consolidated development activities for computer systems following the merger of AT&T and NCR. In 1993 AT&T Global Information Solutions (formerly NCR) offered an early retirement program and a voluntary separation program to its U.S.-based employees. That unit expects to reduce its work force by about 15%, or 7,500 employees, in 1994. About 2,200 employees accepted the early retirement offer. Employees accepting the voluntary separation package must respond before February 1994. -27- 15 Our 1993 provisions for business restructuring cover special benefits provided to employees accepting early retirement offers as well as other costs of closing facilities and relocating employees. In addition to the changes at AT&T Global Information Solutions, we are re-engineering and centralizing support services for telecommunications services. These ongoing efforts to raise productivity are part our commitment to meet the challenge of intense competition. Our 1991 provisions for business restructuring were primarily for costs to make changes in our computer and business equipment operations and in our use of leased and owned space. The changes in our computer operations were initiated because of the merger of AT&T and NCR. OTHER INCOME STATEMENT ITEMS..................................... Other income-net depends mostly on our cash balance and the results and changes in our investments and joint ventures. Over the last two years we reduced our balance of cash and temporary cash investments because we have easy access to financing when we need it. Our interest income declined over the past two years because we had less cash on hand and interest rates were lower. Income from our equity investments, coupled with our sharing of earnings from AT&T subsidiaries that are partly owned by other companies, declined in 1993 after increasing in 1992. Miscellaneous pretax gains and losses caused the largest shifts in other income-net over the three years: -In 1993 we had a $217 million gain when we exchanged our remaining 77% interest in UNIX System Laboratories, Inc. (USL) for about 3% ownership of Novell, Inc., a leading software development company. -We sold our remaining interest in Compagnie Industriali Riunite S.p.A. (CIR) in 1993 for a slight gain. Because of declines in its market value, we wrote down that investment by $68 million in 1992 and by $218 million in 1991. CIR's value had declined along with the Italian securities market and because of lower earnings from its principal holding, Ing. C. Olivetti & C., S.p.A. -In 1991 we had a $171 million gain from selling our investment in Sun Microsystems, Inc. Sales of stock by our subsidiaries produced a $9 million loss in 1993 and a $43 million gain in 1991. The 1993 loss came from deducting recourse loans made to AT&T Capital's senior management so they would purchase shares and take a larger personal stake in the success of the business following the initial public offering. When the loans are repaid in seven years, we expect to report a net $6 million gain on this offering. The $43 million gain in 1991 came from USL selling stock to other companies to encourage their support for open computing standards. Interest expense declined over the past two years because of benefits from refinancing long-term debt at favorable rates and reduced requirements for contingent liabilities. The benefits of refinancing, which were partly offset by costs of that refinancing such as call premiums, were responsible for about half of the decline in 1993 and two-thirds of the decline in 1992. -28-(Cont'd) 16 INCOME TAXES INFORMATION Dollars in millions 1993 1992 1991 - ----------------------------------------------------------------- Income before income taxes and cumulative effects of accounting changes $6,204 $5,958 $ 883 Provision for income taxes* 2,230 2,151 361 ================================================================= Effective income tax rate 36.0% 36.1% 40.9% Income taxes paid $1,675 $ 697 $1,308 ================================================================= * The cumulative effects of accounting changes include the tax effects of those adjustments. The provisions for income taxes increased the past two years mainly because of higher "book income," that is, the income before income taxes and cumulative effects of accounting changes. The effective tax rate was at about the same level in 1993 and 1992. The rate was much higher in 1991 because the tax effects of restructuring charges were magnified by the lower income before income taxes. Congress increased the federal statutory tax rate to 35% in August 1993 and made the change retroactive to January 1, 1993. We recognized a $73 million benefit from adjusting our deferred tax assets for the new rate. But that benefit was mostly offset by the increase in taxes on 1993 taxable income, caused by the higher rate. Consequently, this change in rates did not affect our 1993 net income materially. TOTAL ASSETS, WORKING CAPITAL AND LIQUIDITY...................... Net working capital - current assets less current liabilities - is a measure of our ability to cover short-term liabilities with assets that we expect to convert to cash soon. For example, collecting receivables helps us to pay our suppliers. We reduced our cash balance and working capital in 1993 to lower our "opportunity" costs of maintaining that capital. Our financial condition gives us easy access to financing when we need it, so we now target a cash balance under $800 million. BALANCE SHEET INFORMATION Dollars in millions 1993 1992 Change - ----------------------------------------------------------------- Working capital $ 4,404 $ 5,128 $ (724) Cash and temporary cash investments 532 1,310 (778) Total assets 60,766 57,188 3,578 Total debt 17,716 16,204 1,512 Total shareowners' equity 13,850 18,921 (5,071) ================================================================= Days sales outstanding for core business 59.5 63.2 (3.7) Inventory turnover 3.4 3.2 0.2 ================================================================= -28-(Cont'd) 17 The growth in accounts receivable comes from our higher sales levels. Days sales outstanding in our core business, defined as average accounts receivable divided by average daily revenues in our core business, declined because of improved receivables management. To spur further growth in revenues and earnings for financial services and leasing, we invested in additional finance receivables from our credit card and equipment financing and leasing businesses. We keep a close watch on account status, which has helped us maintain a low level of delinquent balances and write-offs. Higher inventory levels are associated with our sales growth, which we expect to continue in 1994. Improved inventory management in 1993 led to increased inventory turnover. Making better use of existing capacity on our long distance network, we reduced capital expenditures in 1993. Our plant additions were at about the same level as depreciation, leaving property, plant and equipment, net of accumulated depreciation, essentially unchanged. The fair value of our pension plan assets is greater than our projected pension obligations. Those plan assets are earning a return that exceeds the growth in pension liabilities. In addition, we are amortizing a transition asset related to our 1986 change in pension accounting over 15.9 years, which produces about $500 million of income each year. Consequently, we had pension income that added to our prepaid pension costs. Under an agreement with unions representing many of our employees, we transferred some of these excess pension assets over the past two years to fund retiree health care benefits. Before 1993, we included these prepaid health care costs in other assets. However, when we added the liabilities for retiree benefits to our balance sheet in 1993, because of the new accounting rule, we netted these prepaid costs with the liabilities. We did something similar when we netted the trusts for disability payments with liabilities for separations and disabilities. Our net liabilities for postretirement and postemployment liabilities are now combined on our balance sheet. Our recognition of these liabilities created additional deferred tax assets. The increase in investments mainly reflects a $400 million purchase of McCaw stock in February 1993. We also acquired shares in Novell, Inc. and Unitel Communications, Inc. (Unitel). In 1994 we must change the way we report and account for investments in equity securities that have readily determinable fair values and all debt securities. We do not expect this change to have a material effect on our earnings or financial position. Accounts payable are lower because of reduced access and other interconnection costs. Payroll and benefit-related liabilities are higher mainly due to increases in the associated expenses and benefit costs. Other current liabilities declined because some restructuring reserves were reclassified to postemployment liabilities (because of our accounting change) and others were used for restructuring. -28- 18 Higher debt maturing within one year chiefly reflects commercial paper we issued to support financial services. Lower long-term debt, including capital leases, was the net result of our refinancing and redemption activities. Our recognition of predivestiture retirees' benefits led to higher other liabilities. Minority interests, which represent other companies' ownership interests in our net assets, increased mainly because of the sale of 14% ownership in AT&T Capital in August 1993. Despite the increase in income before cumulative effects of accounting changes, operating cash flows declined in 1993 after growing the year before. The decline was mainly due to higher inventories and accounts receivable. The greater cash flow in 1992 reflected a smaller increase in working capital requirements and higher earnings compared with 1991. For the three years operating cash flows covered our net capital expenditures and dividend payments. We expect such cash flows to continue covering capital expenditures and dividends in 1994. INVESTING ACTIVITIES............................................. Net capital expenditures were $3.7 billion in 1993, compared with $3.9 billion the two previous years. Most of our capital expenditures are for the AT&T Worldwide Intelligent Network. In 1993 we reduced capital expenditures for the network because technological advances permit us to use existing capacity more efficiently. Net expenditures for the network, at market price, were $2.2 billion in 1993, compared with $3.0 billion in 1992 and $2.5 billion in 1991. These additions provide for growth, modernization and enhanced reliability. Other capital expenditures are for equipment and facilities used in leasing operations, manufacturing, and research and development. We expect our net capital expenditures for the network and in total to remain at about the same level in 1994. We are also investing in finance receivables, particularly credit card receivables, to increase revenues and earnings from our financial services businesses. These capital requirements will continue growing in 1994. In 1993 we made a $400 million investment in McCaw and reached a definitive agreement on a merger. Our alliance will undertake joint projects and marketing efforts. We also acquired a 20% equity interest in Unitel for cash and advanced telecommunications equipment valued at approximately $120 million. In 1991 equity investments were a net source of cash because we had net proceeds of $687 million from selling our shares in Sun Microsystems, Inc. [GRAPHIC] (See appendix for description) We have a 49% interest in a joint venture with GTE, called AG Communications Systems Corporation, which is developing new technology and capabilities for GTE's digital switching systems. By agreement, our ownership will increase to 80% in 1994 and to 100% in 2004. When we raise our ownership in 1994, we will fully consolidate this venture in our financial statements. -29-(Cont'd) 19 FINANCING ACTIVITIES AND CAPITALIZATION.......................... The growth of our financial services and leasing business over the past three years was the primary reason for the increase in total debt outstanding and for most of our financing needs. We expect increasing capital requirements for financial services in 1994. Over the past three years we took advantage of favorable levels of interest rates to extend debt maturities by refinancing a substantial amount of long-term debt. Much of the financing activity shown on our statements of cash flows relates to these refinancing activities. The ratio of total debt to total capital (total debt plus total equity) increased to 56.1% at December 31, 1993, compared with 46.1% at December 31, 1992, primarily because of the effects on equity of adopting accounting changes. Excluding financial services and leasing operations, the debt ratio increased to 28.3% at December 31, 1993, compared with 25.4% at December 31, 1992. For the past three years we have issued new shares of common stock in our shareowner and employee plans. In connection with the merger in 1991, NCR sold 6.3 million shares of common stock held as Treasury stock (approximately 17.9 million shares of AT&T common stock after conversion). The proceeds from all newly issued shares were used for general corporate purposes. The dilution in earnings per share from new issuances was not material. We sell equity interests in AT&T subsidiaries only when opportunities or circumstances warrant. We have no present plans to sell material interests in subsidiaries. Excluding the cumulative effects of the 1993 accounting changes, return on equity was 19.2%, compared with 21.1% in 1992. -29- 20 REPORT OF MANAGEMENT ........................................ Management is responsible for the preparation, integrity and objectivity of the financial statements and all other financial information included in this report. Management is also responsible for maintaining a system of internal controls as a fundamental requirement for the operational and financial integrity of results. The financial statements, which reflect the consolidated accounts of AT&T and subsidiaries, and other financial information shown were prepared in conformity with generally accepted accounting principles. Estimates included in the financial statements were based on judgments of qualified personnel. To maintain its system of internal controls, management carefully selects key personnel and establishes the organizational structure to provide an appropriate division of responsibility. We believe it is essential to conduct business affairs in accordance with the highest ethical standards as set forth in the AT&T Code of Conduct. These guidelines and other informational programs are designed and used to ensure that policies, standards and managerial authorities are understood throughout the organization. Our internal auditors monitor compliance with the system of internal controls by means of an annual plan of internal audits. On an ongoing basis, the system of internal controls is reviewed, evaluated and revised as necessary in light of the results of constant management oversight, internal and independent audits, changes in AT&T's business and other conditions. Management believes that the system of internal controls, taken as a whole, provides reasonable assurance that (1) financial records are adequate and can be relied upon to permit the preparation of financial statements in conformity with generally accepted accounting principles, and (2) access to assets occurs only in accordance with management's authorizations. The Audit Committee of the Board of Directors, which is composed of directors who are not employees, meets periodically with management, the internal auditors and the independent auditors to review the manner in which these groups of individuals are performing their responsibilities and to carry out the Audit Committee's oversight role with respect to auditing, internal controls and financial reporting matters. Periodically, both the internal auditors and the independent auditors meet privately with the Audit Committee. These auditors also have access to the Audit Committee and its individual members at any time. The financial statements in this annual report have been audited by Coopers & Lybrand, Independent Auditors. Their audits were conducted in accordance with generally accepted auditing standards and include consideration of the internal control structure and selective tests of transactions. Their report follows. Richard W. Miller Robert E. Allen Executive Vice President, Chairman of the Board, Chief Financial Officer Chief Executive Officer -30-(Cont'd) 21 REPORT OF INDEPENDENT AUDITORS .................................. To the Shareowners of American Telephone and Telegraph Company: We have audited the consolidated balance sheets of American Telephone and Telegraph Company (AT&T) and subsidiaries at December 31, 1993 and 1992, and the related consolidated statements of income and cash flows for the years ended December 31, 1993, 1992 and 1991. These financial statements are the responsibility of AT&T's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AT&T and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for the years ended December 31, 1993, 1992 and 1991, in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, in 1993 AT&T changed its methods of accounting for postretirement benefits, postemployment benefits and income taxes. Coopers & Lybrand 1301 Avenue of the Americas New York, New York January 27, 1994 -30- 22 CONSOLIDATED AT&T AND SUBSIDIARIES STATEMENTS OF INCOME Years ended December 31 Dollars in millions (except per share amounts) 1993 1992 1991 ========================================================================== SALES AND REVENUES Telecommunications services $39,863 $39,580 $38,805 Products and systems 17,798 16,473 15,941 Rentals and other services 6,991 6,957 6,959 Financial services and leasing 2,504 1,894 1,384 __________________________________________________________________________ TOTAL REVENUES 67,156 64,904 63,089 __________________________________________________________________________ COSTS Telecommunications services Access and other interconnection costs 17,709 18,132 18,395 Other costs 7,009 7,135 6,881 __________________________________________________________________________ Total telecommunications services 24,718 25,267 25,276 Products and systems 10,809 9,846 9,134 Rentals and other services 3,331 3,287 3,344 Financial services and leasing 1,711 1,310 1,071 __________________________________________________________________________ TOTAL COSTS 40,569 39,710 38,825 __________________________________________________________________________ GROSS MARGIN 26,587 25,194 24,264 __________________________________________________________________________ OPERATING EXPENSES Selling, general and administrative expenses 16,782 15,950 16,220 Research and development expenses 3,069 2,911 3,114 Provisions for business restructuring 498 64 3,572 __________________________________________________________________________ TOTAL OPERATING EXPENSES 20,349 18,925 22,906 __________________________________________________________________________ OPERATING INCOME 6,238 6,269 1,358 Other income-net 541 352 208 Gain (loss) on sale of stock by subsidiaries (9) - 43 Interest expense 566 663 726 __________________________________________________________________________ INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 6,204 5,958 883 Provision for income taxes 2,230 2,151 361 __________________________________________________________________________ Income before cumulative effects of accounting changes 3,974 3,807 522 __________________________________________________________________________ Cumulative effects on prior years of changes in accounting for: Postretirement benefits (net of income tax benefit of $4,294) (7,023) - - Postemployment benefits (net of income tax benefit of $681) (1,128) - - Income taxes 383 - - __________________________________________________________________________ Cumulative effects of accounting changes (7,768) - - __________________________________________________________________________ NET INCOME (LOSS) $(3,794) $ 3,807 $ 522 ========================================================================== Weighted average common shares outstanding (millions) 1,353 1,332 1,293 PER COMMON SHARE: Income before cumulative effects of accounting changes $ 2.94 $ 2.86 $ .40 Cumulative effects of accounting changes (5.74) - - __________________________________________________________________________ NET INCOME (LOSS) $(2.80) $ 2.86 $ .40 ========================================================================== The notes on pages 34 through 43 are an integral part of the consolidated financial statements. *(Page numbers refer to the Company's Annual Report to security holders.) -31- 23 CONSOLIDATED AT&T AND SUBSIDIARIES BALANCE SHEETS at December 31 Dollars in millions (except per share amount) 1993 1992 ========================================================================== ASSETS Cash and temporary cash investments $ 532 $ 1,310 Receivables, less allowances of $1,003 and $829 Accounts receivable 11,933 11,040 Finance receivables 11,370 8,569 Inventories 3,187 2,659 Deferred income taxes 2,079 2,118 Other current assets 637 818 __________________________________________________________________________ TOTAL CURRENT ASSETS 29,738 26,514 __________________________________________________________________________ Property, plant and equipment-net 19,397 19,358 Investments 1,503 864 Finance receivables 3,815 3,643 Prepaid pension costs 3,576 3,480 Other assets 2,737 3,329 __________________________________________________________________________ TOTAL ASSETS $60,766 $57,188 ========================================================================== LIABILITIES AND DEFERRED CREDITS Accounts payable $ 4,694 $ 5,045 Payroll and benefit-related liabilities 3,746 3,336 Postretirement and postemployment benefit liabilities 1,301 - Debt maturing within one year 10,904 7,600 Dividends payable 448 443 Other current liabilities 4,241 4,962 __________________________________________________________________________ TOTAL CURRENT LIABILITIES 25,334 21,386 __________________________________________________________________________ Long-term debt including capital leases 6,812 8,604 Postretirement and postemployment benefit liabilities 9,082 - Other liabilities 4,298 2,634 Deferred income taxes 275 4,660 Unamortized investment tax credits 270 350 Other deferred credits 263 181 __________________________________________________________________________ TOTAL LIABILITIES AND DEFERRED CREDITS 46,334 37,815 __________________________________________________________________________ MINORITY INTERESTS 582 452 __________________________________________________________________________ SHAREOWNERS' EQUITY Common shares par value $1 per share 1,352 1,340 Authorized shares: 2,000,000,000 Outstanding shares: 1,352,398,000 at December 31, 1993; 1,339,831,000 at December 31, 1992 Additional paid-in capital 12,028 11,425 Guaranteed ESOP obligation (355) (407) Foreign currency translation adjustments (32) 65 Retained earnings 857 6,498 __________________________________________________________________________ TOTAL SHAREOWNERS' EQUITY 13,850 18,921 __________________________________________________________________________ TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $60,766 $57,188 ========================================================================== The notes on pages 34 through 43 are an integral part of the consolidated financial statements. *(Page numbers refer to the Company's Annual Report to security holders.) -32- 24 CONSOLIDATED AT&T AND SUBSIDIARIES STATEMENTS OF CASH FLOWS Years ended December 31 Dollars in millions 1993 1992 1991 ========================================================================== OPERATING ACTIVITIES Net income $(3,794) $ 3,807 $ 522 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effects of accounting changes 7,768 - - Depreciation 3,626 3,540 3,568 Provision for uncollectibles 1,635 1,945 1,233 Provisions for business restructuring 498 64 3,572 (Increase) in accounts receivable (2,082) (1,489) (2,108) (Increase) decrease in inventories (540) 551 (59) (Decrease) increase in accounts payable (331) 30 109 Net (increase) in other operating assets and liabilities (52) (1,084) (1,382) Other adjustments for non-cash items-net 401 510 560 __________________________________________________________________________ NET CASH PROVIDED BY OPERATING ACTIVITIES 7,129 7,874 6,015 __________________________________________________________________________ INVESTING ACTIVITIES Capital expenditures net of proceeds from sale or disposal of property, plant and equipment of $241, $250 and $119 (3,701) (3,933) (3,860) Increase in finance receivables, net of lease-related repayments of $3,633, $4,325 and $3,521 (3,483) (3,878) (3,052) Net (increase) decrease in investments (540) (12) 473 Acquisitions, net of cash acquired (414) (202) (29) Other investing activities-net (201) (167) 69 __________________________________________________________________________ NET CASH USED IN INVESTING ACTIVITIES (8,339) (8,192) (6,399) __________________________________________________________________________ FINANCING ACTIVITIES Proceeds from long-term debt issuance 2,456 2,928 1,300 Retirements of long-term debt (3,483) (3,684) (1,196) Issuance of common shares 619 689 1,164 Dividends paid (1,774) (1,748) (1,563) Increase in short-term borrowings-net 2,586 1,341 969 Other financing activities-net 25 (72) 2 __________________________________________________________________________ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 429 (546) 676 __________________________________________________________________________ Effect of exchange rate changes on cash 3 26 (19) __________________________________________________________________________ Net (decrease) increase in cash and temporary cash investments (778) (838) 273 Cash and temporary cash investments at beginning of year 1,310 2,148 1,875 __________________________________________________________________________ Cash and temporary cash investments at end of year $ 532 $ 1,310 $ 2,148 ========================================================================== The notes on pages 34 through 43 are an integral part of the consolidated financial statements. *(Page numbers refer to the Company's Annual Report to security holders.) -33- 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AMERICAN TELEPHONE AND TELEGRAPH COMPANY (AT&T) AND SUBSIDIARIES 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ............................ CONSOLIDATION Ownership of affiliates Accounting method _____________________________________________________________________ More than 50% Fully consolidated 20% to 50% Equity method Less than 20% Cost method _____________________________________________________________________ We include the accounts of operations located outside the U.S. on the basis of their fiscal years, ended either November 30 or December 31. CURRENCY TRANSLATION For the business we transact in currencies other than U.S. dollars, we translate income statement amounts at average exchange rates for the year, and we translate assets and liabilities at year-end exchange rates. We show the adjustments from balance sheet translation as a separate component of shareowners' equity. REVENUE RECOGNITION Revenue from Basis of recognition _____________________________________________________________________ Telecommunications Minutes of traffic processed and Services contracted fees Products and Systems Upon performance of contractual obligations Rentals and Other Proportionately over contract Services period or as services are performed Financial Services Over the life of the finance and Leasing receivables using the interest method _____________________________________________________________________ RESEARCH AND DEVELOPMENT We expense research and development expenditures as incurred (including development costs of software that we plan to sell) until technological feasibility is established. After that time, we capitalize the remaining software production costs as other assets and amortize them to product costs over the estimated period of sales. INTEREST EXPENSE Interest expense is the interest on short-term and long-term debt and accrued liabilities, excluding the interest related to our financial services operations, which is included in cost of financial services and leasing, and net of interest capitalized in connection with construction. -34-(Cont'd) 26 INVESTMENT TAX CREDITS For financial reporting purposes, we amortize investment tax credits as a reduction to the provision for income taxes over the useful lives of the property that produced the credits. EARNINGS PER SHARE We use the weighted average number of shares of common stock and common stock equivalents outstanding during each period to compute earnings per common share. Common stock equivalents are stock options that we assume to be exercised for the purposes of this computation. TEMPORARY CASH INVESTMENTS We consider temporary cash investments to be cash equivalents for cash flow reporting purposes. They are highly liquid and have original maturities generally of three months or less. INVENTORIES We state inventories at the lower of cost or market. We determine cost principally on a first-in, first-out (FIFO) basis. PROPERTY, PLANT AND EQUIPMENT We state property, plant and equipment at cost and determine depreciation using either the group or unit method. The unit method is used primarily for factory facilities, laboratory equipment, large computer systems, and certain international earth stations and submarine cables. The group method is used for most other depreciable assets. When we dispose of assets that were depreciated using the unit method, we include the gains or losses in operating results. When we sell or retire plant that was depreciated using the group method, we deduct the original cost from the plant account and from accumulated depreciation. We use accelerated depreciation methods for factory facilities and digital equipment used in the telecommunications network, except switching equipment placed in service before 1989. All other plant and equipment is depreciated on a straight-line basis. GOODWILL Goodwill is the difference between the purchase price and the fair value of net assets acquired in business combinations treated as purchases. We amortize goodwill on a straight-line basis over the periods benefited, principally in the range of 10 to 15 years. RECLASSIFICATIONS We reclassified certain amounts for previous years to conform with the 1993 presentation. -34- 27 2. CHANGES IN ACCOUNTING PRINCIPLES ...................................... POSTRETIREMENT BENEFITS We adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1993. This standard requires us to accrue estimated future retiree benefits during the years employees are working and accumulating these benefits. Previously, we expensed health care benefits as claims were incurred and life insurance benefits as plans were funded. When we adopted the new standard, we had an accumulated liability related to past service from retirees and active employees. A portion of that liability was provided for by group life insurance benefits and trusts for health care benefits funded before 1993. We also reimburse the divested regional Bell companies for a portion of their costs to provide health care benefits, increases in pensions and other benefits to predivestiture retirees under the terms of the Divestiture Plan of Reorganization. Through 1992 we expensed these reimbursements as incurred. In January 1993 we recognized this liability in connection with the adoption of SFAS No. 106. We elected to record a one-time pretax charge of $11,317 million to record the unfunded portions of these liabilities. That charge reflects $12,986 million of liabilities less $1,669 million of plan assets and amounts previously recorded. After taxes, that charge was $7,023 million ($5.19 per share), including $1,375 million for predivestiture retirees. Apart from these cumulative effects on prior years of the accounting change, our change in accounting had no material effect on net income in 1993 and is not expected to affect net income materially in future periods. This change does not affect cash flows. POSTEMPLOYMENT BENEFITS We also adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," effective January 1, 1993. Analogous to SFAS No. 106, this standard requires us to accrue for estimated future postemployment benefits, including separation payments, during the years employees are working and accumulating these benefits, and for disability payments when the disabilities occur. Before this change in accounting, we recognized costs for separations when they were identified and disability benefits when they were paid. When we adopted the new standard, we had an accumulated liability for payments to employees who were then disabled and for benefits related to the past service of active employees. We recorded a one-time pretax charge of $1,809 million to record the unprovided portion of these liabilities. That charge reflects $2,221 million of liabilities less $412 million of reserves for business restructuring activities that were established before 1993 and reclassified to postemployment liabilities as part of this accounting change. After taxes, that charge was $1,128 million ($0.83 per share). The change in accounting reduced operating income by $301 million, and net income by $171 million ($0.13 per share) in 1993. This change does not affect cash flows. -35-(Cont'd) 28 INCOME TAXES We also adopted SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1993. Among other provisions, this standard requires us to compute deferred tax accounts using the enacted corporate income tax rates for the years in which the taxes will be paid or refunds received. Before 1993 our deferred tax accounts reflected the rates in effect when we made the deferrals. Because corporate income tax rates in 1993 were lower than the rates that existed before the 1986 Tax Act, our adoption of the new standard raised net income by $383 million ($0.28 per share). Apart from this benefit, the new accounting method had no material effect on net income in 1993. Unless Congress changes tax rates, we do not expect this change to affect net income materially in future periods. This change does not affect cash flows. 3. PROSPECTIVE ACCOUNTING CHANGES ........................................ DEBT AND EQUITY SECURITIES In 1994 we must adopt SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." This standard addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. We do not expect this new standard to affect net income materially at or after adoption, and it will not affect cash flows. IMPAIRED LOANS By 1995 we must adopt SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." This standard requires us to compute present values for impaired loans when determining our allowances for credit losses. We do not expect this new standard to affect net income materially at or after adoption, and it will not affect cash flows. 4. PROSPECTIVE MERGER WITH MCCAW CELLULAR COMMUNICATIONS, INC. (MCCAW) ... On August 16, 1993 AT&T and McCaw entered into a definitive agreement to merge McCaw and a subsidiary of AT&T, making McCaw a wholly owned subsidiary of AT&T. In the merger, each share of McCaw's Class A and Class B common stock will be converted into one share of AT&T common stock. However, if the 20- day-average market price of the AT&T common stock as of five business days before the merger is less than $53 per share, the conversion ratio will be adjusted upward to provide shares of AT&T common stock having an aggregate market price of $53 for each share of McCaw common stock, subject to a maximum of 1.111 shares of AT&T common stock. If the 20-day-average market price of AT&T common stock as of five business days before the merger is greater than $71.73 per share, the conversion ratio will be adjusted downward to provide shares of AT&T common stock having an aggregate market price of $71.73 for each share of McCaw common stock, subject to a minimum of .909 of a share of AT&T common stock. Pursuant to a separate agreement, AT&T has granted McCaw the right, in the event the merger does not close, to require AT&T to purchase from McCaw $600 million of McCaw's Class A common stock at a price of $51.25 per share. -35- 29 The merger is subject to a number of conditions, including the receipt of regulatory approvals, expiration of the waiting period under the Hart- Scott-Rodino Antitrust Improvements Act (HSR Act), receipt of opinions that the merger will be tax free and will be accounted for as a pooling of interests, and McCaw stockholder approval. McCaw stockholders holding a majority of the voting power of the McCaw common stock, including members of the McCaw family and British Telecommunications plc, have agreed to vote in favor of the merger. The waiting period under the HSR Act will not expire until 20 days after AT&T and McCaw have substantially complied with a September 1993 request from the U.S. Department of Justice (DOJ) for additional information and documents. In August 1993 AT&T and McCaw filed applications seeking consent of the FCC to the proposed transfer of control of McCaw's radio licenses to AT&T. A number of AT&T's competitors have sought to have conditions imposed on the merger or to deny FCC consent. Final comments were filed in January 1994. AT&T and McCaw filed applications with nine state regulatory commissions seeking approval or a statement of non-opposition to the merger. All of the states, except California have done so. In California, AT&T and McCaw entered into a settlement agreement with the original opposing parties regarding the provision of cellular and interexchange services in that state. In January 1994 AT&T and McCaw filed a reply to objections to the settlement. BellSouth Corp. (BellSouth) filed a motion in federal court in December 1993 contending that AT&T requires a waiver of the antitrust consent decree to proceed with the merger. In January 1994 the DOJ filed a response that supported that motion in part. AT&T is seeking expedited determination of the issues raised by BellSouth's motion or, alternatively, an expedited waiver of any relevant decree provisions. 5. SUPPLEMENTARY FINANCIAL INFORMATION ................................... SUPPLEMENTARY INCOME STATEMENT INFORMATION Dollars in millions 1993 1992 1991 ==================================================================== INCLUDED IN COSTS OF PRODUCTS AND SYSTEMS Amortization of software production costs $ 359 $ 315 $ 311 ==================================================================== COSTS OF FINANCIAL SERVICES AND LEASING Interest expense $ 506 $ 485 $ 445 Depreciation, allowance for losses, etc. 1,205 825 626 ____________________________________________________________________ Costs of financial services and leasing $1,711 $1,310 $1,071 ==================================================================== INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Amortization of goodwill $ 76 $ 68 $ 52 ==================================================================== OTHER INCOME-NET Interest income $ 119 $ 149 $ 170 Royalties and dividends 59 48 55 Earnings applicable to minority interests (9) 56 (1) Miscellaneous-net 372 99 (16) ____________________________________________________________________ Other income-net $ 541 $ 352 $ 208 ==================================================================== DEDUCTED FROM INTEREST EXPENSE Capitalized interest $ 72 $ 62 $ 79 ==================================================================== -36-(Cont'd) 30 SUPPLEMENTARY BALANCE SHEET INFORMATION Dollars in millions at December 31 1993 1992 =========================================================== INVENTORIES Completed goods $ 1,893 $ 1,689 Work in process and raw materials 1,294 970 ___________________________________________________________ Inventories $ 3,187 $ 2,659 =========================================================== PROPERTY, PLANT AND EQUIPMENT Land and improvements $ 746 $ 690 Buildings and improvements 8,512 8,243 Machinery, electronic and other equipment 31,635 31,117 ___________________________________________________________ Total property, plant and equipment 40,893 40,050 Less: Accumulated depreciation 21,496 20,692 ___________________________________________________________ Property, plant and equipment-net $19,397 $19,358 =========================================================== INVESTMENTS Accounted for by the equity method $ 698 $ 627 Stated at lower of cost or market 805 237 ___________________________________________________________ Investments $ 1,503 $ 864 =========================================================== OTHER ASSETS Unamortized software production costs $ 413 $ 521 Goodwill, net of accumulated amortization 894 766 Prepaid postretirement healthcare costs - 773 Deferred charges and other 1,430 1,269 ___________________________________________________________ Other assets $ 2,737 $ 3,329 =========================================================== DEBT MATURING WITHIN ONE YEAR Commercial paper $ 8,761 $ 6,053 Long-term debt 1,860 1,158 Long-term lease obligations 52 108 Other notes 231 281 ___________________________________________________________ Debt maturing within one year $10,904 $ 7,600 =========================================================== -36- 31 SUPPLEMENTARY CASH FLOW INFORMATION Dollars in millions 1993 1992 1991 ==================================================================== Interest payments net of amounts capitalized $ 1,284 $ 1,118 $ 1,058 Income tax payments 1,675 697 1,308 ==================================================================== The following table displays the non-cash items excluded from the consolidated statements of cash flows: Dollars in millions 1993 1992 1991 ==================================================================== Machinery and equipment acquired under capital lease obligations $ 15 $ 60 $ 114 ==================================================================== EXCHANGE OF STOCK Net assets $ (43) - - Investments 260 - - ____________________________________________________________________ $ 217 - - ==================================================================== ACQUISITION ACTIVITIES Net receivables $ 12 $ 130 $ 3 Inventories 1 48 5 Property, plant and equipment 139 76 36 Accounts payable (7) (37) (30) Short- and long-term debt (3) (93) (4) Other operating assets and liabilities-net 272 78 19 ____________________________________________________________________ Net non-cash items 414 202 29 Net cash used for acquisitions $ 414 $ 202 $ 29 ==================================================================== 6. BUSINESS RESTRUCTURING AND OTHER CHARGES............................... Provisions for business restructuring include the estimated costs of specific plans to close offices, consolidate facilities, relocate employees and fulfill contractual obligations, and of other activities involved in restructuring operations. These provisions also cover separation payments made as a result of special offers related to defined benefit plans. Before we changed our accounting for postemployment benefits in 1993, costs for other types of separation payments were also included in these provisions. Our $498 million in provisions for business restructuring in 1993 covered $227 million of costs at AT&T Global Information Solutions (including, in millions, $137 for special termination benefits, $43 for closing facilities, $18 for employee relocation, $19 for contractual obligations and $10 for other related expenses). We also provided $215 million for reengineering customer support functions for telecommunications services (including, in millions, $55 for employee relocation, $25 for outplacement costs, $30 for legal contingencies and $105 for closing facilities, lease terminations and asset abandonments associated with centralizing support services). The remaining provisions consist of $23 million related to closing plants for manufacturing telecommunications network systems, and $33 million for employee relocation, outplacement services and legal liabilities related to restructuring operations that service the U.S. federal government. In 1991 we recorded approximately $4.5 billion of business restructuring and other charges, reducing net income by $2,863 million ($2.21 per share). The charges covered estimated costs of changes in our computer operations, PBX operations and product distribution processes; consolidating operations in leased and owned buildings and recognizing costs of vacant space; -37-(Cont'd) 32 eliminating a future subsidy to an Alaskan long distance company; writing down an investment; and other restructuring-related activities, merger- related expenses and other charges. We recorded these charges as $3,572 million in provisions for business restructuring; $501 million as selling, general and administrative expenses; $123 million as cost of products and systems; and the remainder as other costs and expenses, including other income - net. Charges included in other accounts in 1991 were primarily for expenses related to the restructuring activities, writing down impaired assets and merger-related expenses. The remaining reserves for separation payments at January 1, 1993, were included in the cumulative effect of the change in accounting for postemployment benefits. We believe that the balance of reserves for all other business restructuring activities, $1,440 million at December 31, 1993, is adequate for the completion of those activities. 7. OTHER INCOME-NET....................................................... In June 1993 we sold our remaining 77% interest in UNIX System Laboratories, Inc. to Novell, Inc. (Novell) in exchange for approximately 3% of Novell common stock. Our gain on the sale was $217 million. We sold our remaining interest in Compagnie Industriali Riunite S.p.A. in 1993 for a slight gain. We reduced the carrying value of that investment by $68 million in 1992 and by $218 million in 1991 because of a sustained decline in its market value. In 1991 we had a $171 million gain from selling our 19% equity investment in Sun Microsystems, Inc. 8. SALE OF STOCK BY SUBSIDIARIES ........................................ In August 1993 AT&T Capital Corporation sold 5,750,000 shares of common stock in an initial public offering and approximately 850,000 shares of common stock in a management offering. That was about 14% of the shares outstanding, so our ownership is now about 86%. The shares were sold at $21.50 per share, yielding net proceeds of $115 million excluding $18 million of recourse loans attributable to the management offering. Because of these loans, we recorded a $9 million loss on the sale. When the loans are collected in seven years, we expect to report a net $6 million gain from this sale of stock. In 1991 UNIX Systems Laboratories, Inc. sold about 20% of its stock to other companies to encourage their support for open computing standards. We had a $43 million gain on that sale. Proceeds from the sale were in cash and we did not provide for deferred taxes on the gain. -37-(Cont'd) 33 9. INCOME TAXES ......................................................... This table shows the principal reasons for the difference between the effective tax rate and the United States Federal statutory income tax rate: Dollars in millions 1993 1992 1991 ==================================================================== U.S. Federal statutory income tax rate 35% 34% 34% Federal income tax at statutory rate $2,171 $2,026 $ 300 Amortization of investment tax credits (92) (221) (142) State and local income taxes, net of federal income tax effect 247 230 63 Foreign rate differential 45 75 54 Taxes on repatriated and accumulated foreign income, net of tax credits (20) 67 (12) Research credits (47) (18) (5) Capital loss carryforward - (13) 32 Effect of tax rate change on deferred tax assets (73) - - Other differences-net (1) 5 71 ____________________________________________________________________ Provision for income taxes $2,230 $2,151 $ 361 ==================================================================== Effective income tax rate 36.0% 36.1% 40.9% ==================================================================== The U.S. and foreign components of income before income taxes and the provision for income taxes are presented in this table: Dollars in millions 1993 1992 1991 ============================================================== INCOME BEFORE INCOME TAXES United States $5,906 $5,628 $ 373 Foreign 298 330 510 ______________________________________________________________ $6,204 $5,958 $ 883 ============================================================== PROVISION FOR INCOME TAXES CURRENT Federal $ 878 $ 503 $ 820 State and local 200 124 192 Foreign 169 215 302 ______________________________________________________________ 1,247 842 1,314 ______________________________________________________________ DEFERRED Federal 924 1,387 (829) State and local 180 225 (96) Foreign (41) (85) 140 ______________________________________________________________ 1,063 1,527 (785) ______________________________________________________________ Deferred investment tax credits-net* (80) (218) (168) ______________________________________________________________ Provision for income taxes $2,230 $2,151 $ 361 ============================================================== * Net of amortization of $92 in 1993, $221 in 1992 and $142 in 1991. Deferred tax liabilities are taxes we expect to pay in future periods. Similarly, deferred tax assets are taxes we expect to get refunded in future periods. Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. -37- 34 This table shows the December 31, 1993 amounts of deferred tax assets and liabilities, which include the effects of our January 1, 1993 accounting changes: Dollars in millions Assets Liabilities ============================================================== Property, plant and equipment $ - $3,492 Business restructuring charges 666 - Employee, postretirement and postemployment benefits 4,056 56 Reserves and allowances 1,053 - Unamortized investment tax credits 119 - Other 152 494 Valuation allowance (201) - ______________________________________________________________ Deferred income taxes $5,845 $4,042 ============================================================== Prior year financial statements were not restated to reflect the new accounting standards. This table shows the principal sources of deferred taxes in prior years: Dollars in millions 1992 1991 ============================================================== Property, plant and equipment $ 929 $ 511 Business restructuring charges 218 (1,103) Employee pensions and other benefits 234 (26) Reserves and allowances 108 (208) Other timing differences-net 38 41 ______________________________________________________________ Deferred income taxes $1,527 $ (785) ============================================================== 10. LEASES ............................................................... AS LESSOR We provide financing on sales of our products and those of other companies and lease our products to customers under sales-type leases. This table displays our net investment in direct financing and sales-type leases: Dollars in millions at December 31 1993 1992 =========================================================== Minimum lease payments receivable $4,226 $3,780 Estimated unguaranteed residual values 543 484 Unearned income (797) (736) Allowance for credit losses (110) (91) ___________________________________________________________ Net investment $3,862 $3,437 =========================================================== This table shows the scheduled maturities of the $4,226 million minimum lease payments receivable on these leases at December 31, 1993: 1994 1995 1996 1997 1998 Later Years =========================================================== $1,434 $1,080 $797 $489 $234 $192 =========================================================== -38-(Cont'd) 35 We lease airplanes, energy-producing facilities and transportation equipment under leveraged leases having original terms ranging from 10 to 30 years, expiring in various years from 1994 through 2020. This table shows our net investment in leveraged leases: Dollars in millions at December 31 1993 1992 =========================================================== Rentals receivable (net of principal and interest on non-recourse notes) $1,010 $1,021 Estimated residual value of leased property 782 784 Unearned and deferred income (537) (626) Allowance for credit losses (22) (19) ___________________________________________________________ Investment in leveraged leases 1,233 1,160 Deferred taxes (994) (719) ___________________________________________________________ Net investment $ 239 $ 441 =========================================================== We lease equipment to others through operating leases, the majority of which are cancelable. This table shows our net investment in operating leases: Dollars in millions at December 31 1993 1992 =========================================================== Machinery, electronic and other equipment $2,694 $2,839 Less: Accumulated depreciation 1,230 1,364 ___________________________________________________________ Net investment $1,464 $1,475 =========================================================== This table shows the $557 million of future minimum rentals receivable under noncancelable operating leases at December 31, 1993: 1994 1995 1996 1997 1998 Later Years =========================================================== $251 $157 $83 $32 $11 $23 =========================================================== AS LESSEE We lease land, buildings and equipment through contracts that expire in various years through 2025. Our rental expense under operating leases, in millions, was $1,041 in 1993, $1,121 in 1992 and $1,461 in 1991. The table below shows our future minimum lease payments due under noncancelable leases at December 31, 1993. Such payments total $3,004 million for operating leases. The net present value of such payments on capital leases was $163 million after deducting estimated executory costs of $1 million and imputed interest of $23 million. 1994 1995 1996 1997 1998 Later Years ===================================================================== Operating leases $650 $488 $328 $281 $225 $1,032 Capital leases 91 44 22 17 8 5 _____________________________________________________________________ Minimum lease payments $741 $532 $350 $298 $233 $1,037 ===================================================================== -38- 36 11. SHAREOWNERS' EQUITY .................................................. Foreign Additional Currency Common Paid-in Translation Retained Dollars in millions Shares Capital Adjustments Earnings ===================================================================== At December 31, 1990 $1,275 $ 9,497 $ 50 $ 5,580 1991 Net income - - - 522 Dividends declared - - - (1,612) Shares issued: Under employee plans 6 120 - 34 Under shareowner plans 11 381 - - In private placement 18 629 - - Shares repurchased (1) (3) - (20) Translation adjustments - - 108 - Other changes - - - 95 _____________________________________________________________________ At December 31, 1991 1,309 10,624 158 4,599 1992 Net income - - - 3,807 Dividends declared - - - (1,759) Shares issued: Under employee plans 10 298 - - Under shareowner plans 10 402 - - For merger with Teradata 11 103 - - Teradata balance recorded - - - (178) Shares repurchased - (2) - - Translation adjustments - - (93) - Other changes - - - 29 _____________________________________________________________________ At December 31, 1992 1,340 11,425 65 6,498 1993 Net income - - - (3,794) Dividends declared - - - (1,780) Shares issued: Under employee plans 4 157 - - Under shareowner plans 8 450 - - Shares repurchased - (4) - - Translation adjustments - - (97) - Other changes - - - (67) _____________________________________________________________________ At December 31, 1993 $1,352 $12,028 $ (32) $ 857 ===================================================================== In 1992 we recorded the retained earnings of Teradata Corporation (Teradata) as of January 1, after making adjustments associated with the merger. In September 1991 NCR Corporation (NCR) issued 6.3 million shares of NCR common stock in connection with the merger with AT&T. The shares were converted into approximately 17.9 million shares of our common stock upon consummation of the merger. In March 1990 we issued 13.4 million new shares of common stock in connection with the establishment of an ESOP feature for the non-management savings plan. The shares are being allocated to plan participants over ten years commencing in July 1990 as contributions are made to the plan. We have 100 million authorized shares of preferred stock at $1 par value. No preferred stock is currently issued or outstanding. -39-(Cont'd) 37 12. LONG-TERM DEBT OBLIGATIONS ........................................... This table shows the outstanding long-term debt obligations in millions at December 31: Interest Rates Maturities 1993 1992 =================================================================== DEBENTURES 4 3/8% to 4 3/4% 1996-1999 $ 750 $ 750 5 1/8% to 7 1/8% 2000-2001 500 1,673 8 1/8% to 9% 2022-2031 1,676 2,576 NOTES 4 1/4% to 7 3/4% 1994-2004 3,605 2,515 7 4/5% to 8 19/20% 1994-2006 445 740 9% to 12 7/8% 1994-2020 616 1,036 Variable rate 1994-1999 923 191 ___________________________________________________________________ 8,515 9,481 Long-term lease obligations 163 302 Other 89 148 Less: Unamortized discount-net 43 61 ___________________________________________________________________ 8,724 9,870 Less: Amounts maturing within one year 1,912 1,266 ___________________________________________________________________ Total long-term obligations $6,812 $8,604 =================================================================== This table shows the maturities, at December 31, 1993, of the $8,515 million in debentures and notes: 1994 1995 1996 1997 1998 Later Years =================================================================== $1,860 $1,245 $902 $198 $665 $3,645 =================================================================== A consortium of lenders provides revolving credit facilities of $6 billion to AT&T and $2 billion to AT&T Capital Corp. (AT&T Capital). These facilities are intended for general corporate purposes, which include support for AT&T's and AT&T Capital's commercial paper. They were unused at December 31, 1993. 13. EMPLOYEE BENEFIT PLANS ............................................... PENSION PLANS We sponsor non-contributory defined benefit plans covering the majority of our employees. Benefits for management employees are principally based on career-average pay. Benefits for occupational employees are not directly pay-related. Pension contributions are principally determined using the aggregate cost method and are primarily made to trust funds held for the sole benefit of plan participants. We compute pension cost using the projected unit credit method and assumed a long-term rate of return on plan assets of 9.0% in 1993, 9.0% in 1992 and 8.6% in 1991. Pension cost includes the following components: -39- 38 Dollars in millions 1993 1992 1991 ==================================================================== Service cost-benefits earned during the period $ 536 $ 452 $ 303 Interest cost on projected benefit obligation 2,294 2,225 2,136 Amortization of unrecognized prior service costs 251 346 310 Credit for expected return on plan assets* (3,108) (2,973) (2,728) Amortization of transition asset (502) (502) (502) Charges for special pension options 74 11 108 ____________________________________________________________________ Net pension cost (credit) $ (455) $ (441) $ (373) ==================================================================== *The actual return on plan assets was $5,068 in 1993, $2,153 in 1992 and $6,980 in 1991. This table shows the funded status of the defined benefit plans: Dollars in millions at December 31 1993 1992 ==================================================================== Actuarial present value of accumulated benefit obligation, including vested benefits of $28,119 and $24,818, respectively $30,943 $27,316 ==================================================================== Plan assets at fair value $41,481 $38,767 Less: Actuarial present value of projected benefit obligation 32,680 28,719 ____________________________________________________________________ Excess of assets over projected benefit obligation 8,801 10,048 Unrecognized prior service costs 2,052 2,200 Unrecognized transition asset (3,960) (4,463) Unrecognized net gain (3,513) (4,613) Net minimum liability of non-qualified plans (72) (45) ____________________________________________________________________ Prepaid pension costs $ 3,308 $ 3,127 ==================================================================== We used these rates and assumptions to calculate the projected benefit obligation: At December 31 1993 1992 ==================================================================== Weighted-average discount rate 7.5% 8.3% Rate of increase in future compensation levels 5.0% 5.0% ____________________________________________________________________ The prepaid pension costs shown above are net of pension liabilities for plans where accumulated plan benefits exceed assets. Such liabilities are included in other liabilities in the consolidated balance sheets. We are amortizing over approximately 15.9 years the unrecognized transition asset related to our 1986 adoption of SFAS No. 87, "Employers' Accounting for Pensions." We amortize prior service costs primarily on a straight-line basis over the average remaining service period of active employees. Our plan assets consist primarily of listed stocks (including $378 million and $451 million of AT&T common stock at December 31, 1993 and 1992, respectively), corporate and governmental debt, real estate investments, and cash and cash equivalents. -40-(Cont'd) 39 SAVINGS PLANS We sponsor savings plans for the majority of our employees. The plans allow employees to contribute a portion of their pretax and/or after-tax income in accordance with specified guidelines. We match a percentage of the employee contributions up to certain limits. Our contributions in millions amounted to $347 in 1993, $331 in 1992 and $279 in 1991. 14. POSTRETIREMENT BENEFITS .............................................. Our benefit plans for retirees include health care benefits, life insurance coverage and telephone concessions. This table shows the components of the net postretirement benefit cost: Dollars in millions 1993 =========================================================== Service cost-benefits earned during the period $ 95 Interest cost on accumulated postretirement benefit obligation 868 Credit for expected return on plan assets* (180) Amortization of unrecognized prior service costs 29 Charge for special options 29 ___________________________________________________________ Net postretirement benefit cost $841 =========================================================== * The actual return on plan assets was $243. We did not restate our 1991 and 1992 financial statements to reflect the change in accounting for retiree benefits. This table shows our actual postretirement benefit costs on a pay-as-you-go basis in those years: Dollars in millions at December 31, 1992 1991 ===================================================================== Cost of health care benefits for retirees $532 $532 Cost of life insurance benefits for retirees 3 26 Cost of telephone concessions and other benefits 39 35 Payments to regional Bell companies for predivestiture retirees 145 125 _____________________________________________________________________ Postretirement benefit cost $719 $718 ===================================================================== We had approximately 142,200 retirees in 1993, 141,200 in 1992 and 138,500 in 1991. Our plan assets consist primarily of listed stocks, corporate and governmental debt, cash and cash equivalents and life insurance contracts. This table shows the funded status of our postretirement benefit plans reconciled with the amounts recognized in the consolidated balance sheet: Dollars in millions at December 31 1993 =========================================================== Accumulated postretirement benefit obligation Retirees $ 8,928 Fully eligible active plan participants 893 Other active plan participants 2,092 ___________________________________________________________ Accumulated postretirement benefit obligation 11,913 Plan assets at fair value 2,900 ___________________________________________________________ Unfunded postretirement obligation 9,013 Unrecognized prior service costs 283 Unrecognized net loss 569 ___________________________________________________________ Accrued postretirement benefit obligation $ 8,161 =========================================================== -40- 40 We made these assumptions in valuing our postretirement benefit obligation at December 31, 1993: =========================================================== Weighted-average discount rate 7.5% Expected long-term rate of return on plan assets 9.0% Assumed rate of increase in the per capita cost of covered health care benefits 9.4% =========================================================== We assumed that the growth in the per capita cost of covered health care benefits (the health care cost trend rate) would gradually decline after 1994 to 5.6% by the year 2021 and then remain level. This assumption greatly affects the amounts reported. To illustrate, increasing the assumed trend rate by 1% in each year would raise our accumulated postretirement benefit obligation at December 31, 1993 by $758 million and our 1993 postretirement benefit costs by $64 million. 15. STOCK OPTIONS ........................................................ In our Long Term Incentive Program, we grant stock options, stock appreciation rights (SARs), either in tandem with stock options or free-standing, and other awards. On January 1 of each year, 0.6% of the outstanding shares of our common stock become available for grant. The exercise price of any stock option is equal to or greater than the stock price when the option is granted. When granted in tandem, exercise of an option or SAR cancels the other to the extent of such exercise. Option transactions are shown below: Number of Shares 1993 1992 1991 =================================================================== Balance at January 1 25,588,351 24,877,209 19,657,362 Options assumed in merger with Teradata - 1,848,642 - Options granted 4,729,651 4,948,371 8,312,922 Options and SARs exercised (3,994,569) (5,752,053) (2,874,129) Average price $27.62 $20.44 $19.53 Options forfeited (162,996) (333,818) (218,946) At December 31: Options outstanding 26,160,437 25,588,351 24,877,209 Average price $36.78 $32.58 $29.77 Options exercisable 17,942,984 17,832,355 17,713,781 Shares available for grant 19,626,553 16,592,924 13,852,914 =================================================================== During 1993 167,747 SARs were exercised and no SARs were granted. At December 31, 1993, 925,210 SARs remained unexercised and all of these were exercisable. Before our mergers with NCR and Teradata, stock options were granted under the separate stock option plans of those companies. No new options can be granted under those plans. -41-(Cont'd) 41 16. SEGMENT INFORMATION .................................................. INDUSTRY SEGMENTS Our operations in the global information movement and management industry involve providing long distance telecommunications services, business information processing systems, and other systems, products and services that combine communications and computers. Our operations in the financial services and leasing industry involve direct financing and finance leasing programs for our products and the products of other companies, leasing products to customers under operating leases and being in the general- purpose credit card business. Miscellaneous other activities, including the distribution of computer equipment through retail outlets, in the aggregate, represent less than 10% of revenues, operating income and identifiable assets and are included in the information movement and management segment. Revenues between industry segments are not material. Dollars in millions 1993 1992 1991 ==================================================================== REVENUES Information movement and management $64,652 $63,010 $61,705 Financial services and leasing 2,504 1,894 1,384 ____________________________________________________________________ $67,156 $64,904 $63,089 ==================================================================== OPERATING INCOME Information movement and management $ 6,509 $ 6,840 $ 2,008 Financial services and leasing 339 193 (34) Corporate and non-operating (644) (1,075) (1,091) ____________________________________________________________________ Income before income taxes $ 6,204 $ 5,958 $ 883 ==================================================================== ASSETS Information movement and management $43,515 $41,987 $41,307 Financial services and leasing 17,033 14,003 9,809 Corporate assets 934 1,607 2,533 Eliminations (716) (409) (294) ____________________________________________________________________ $60,766 $57,188 $53,355 ==================================================================== DEPRECIATION AND AMORTIZATION Information movement and management $ 3,682 $ 3,541 $ 3,852 Financial services and leasing 431 352 160 ==================================================================== CAPITAL EXPENDITURES Information movement and management $ 3,232 $ 3,286 $ 3,372 Financial services and leasing 457 633 472 ____________________________________________________________________ TOTAL LIABILITIES Financial services and leasing $15,329 $12,250 $ 8,720 ==================================================================== -41-(Cont'd) 42 GEOGRAPHIC SEGMENTS Transfers between geographic areas are on terms and conditions comparable with sales to external customers. The methods followed in developing the geographic area data require the use of estimation techniques and do not take into account the extent to which product development, manufacturing and marketing depend upon each other. Thus the information may not be indicative of results if the geographic areas were independent organizations. Dollars in millions 1993 1992 1991 ===================================================================== REVENUES-EXTERNAL CUSTOMERS United States $61,580 $59,234 $57,647 Other geographic areas 5,576 5,670 5,442 _____________________________________________________________________ $67,156 $64,904 $63,089 ===================================================================== TRANSFERS BETWEEN GEOGRAPHIC AREAS (ELIMINATED IN CONSOLIDATION) United States $ 1,374 $ 1,077 $ 870 Other geographic areas 1,125 911 884 _____________________________________________________________________ $ 2,499 $ 1,988 $ 1,754 ===================================================================== OPERATING INCOME United States $ 7,095 $ 7,081 $ 1,578 Other geographic areas (247) (48) 396 Corporate and non-operating (644) (1,075) (1,091) _____________________________________________________________________ Income before income taxes $ 6,204 $ 5,958 $ 883 ===================================================================== ASSETS United States $54,738 $51,735 $46,863 Other geographic areas 6,901 5,373 4,931 Corporate assets 934 1,607 2,533 Eliminations (1,807) (1,527) (972) _____________________________________________________________________ $60,766 $57,188 $53,355 ===================================================================== Data on other geographic areas pertain to operations that are located outside of the U.S. Our revenues from all international activities, including those in the table, international telecommunications services and exports, provided 25.2% of consolidated revenues in 1993. Business restructuring and other charges were taken primarily in the information movement and management segment and the U.S. geographic area. Corporate assets are principally cash and temporary cash investments. 17. FINANCIAL INSTRUMENTS ................................................ We use various financial instruments in the normal course of our business. By their nature all such instruments involve risk, and our maximum potential loss may exceed the amount recognized in our balance sheet. As is customary for these types of instruments, we usually do not require collateral or other security from other parties to these instruments. However, because we control our exposure to credit risk through credit approvals, credit limits and monitoring procedures, we believe that our reserves for losses are adequate. -41- 43 COMMITMENTS TO EXTEND CREDIT We participate in the general-purpose credit card business through AT&T Universal Card Services Corp., a wholly owned subsidiary. We purchase essentially all cardholder receivables under an agreement with the Universal Bank, a subsidiary of Synovus Financial Corporation, which issues the cards. LETTERS OF CREDIT Letters of credit are purchased guarantees that ensure our performance or payment to third parties in accordance with specified terms and conditions. GUARANTEES OF DEBT From time to time, we guarantee the financing for product purchases by customers outside the U.S., and the debt of certain unconsolidated joint ventures. INTEREST RATE SWAP AGREEMENTS We enter into interest rate swap agreements to manage our exposure to changes in interest rates. The agreements generally involve the exchange of fixed or floating interest payments without the exchange of the underlying principal amounts. FOREIGN EXCHANGE CONTRACTS We enter into foreign currency exchange contracts, including forward, option and swap contracts, to manage our exposure to changes in currency exchange rates. FAIR VALUES OF FINANCIAL INSTRUMENTS Financial instrument Valuation method ===================================================================== Universal Card finance receivables Carrying amounts. These accrue interest at a prime-based rate. All other finance receivables Future cash flows discounted at market rates. Debt excluding capital leases Market quotes or based on rates available to us for debt with similar terms and maturities. Commitments to extend credit Receivables we would need to purchase if all Universal Card accounts were used up to their full credit limits. Letters of credit Fees paid to obtain the obligations. Guarantees of debt Costs to terminate agreements. Interest rate swap agreements Costs to terminate agreements. Foreign exchange contracts Market quotes. ===================================================================== -42-(Cont'd) 44 The table below shows the carrying or contract/notional amounts and estimated fair values of material financial instruments used in the normal course of our business. Dollars in millions 1993 1992 ===================================================================== CARRYING FAIR Carrying Fair AMOUNT VALUE Amount Value ===================================================================== ON BALANCE SHEET Finance receivables other than leases $10,320 $10,337 $ 7,798 $ 7,803 Debt excluding capital leases 17,553 17,883 15,902 16,126 ===================================================================== CONTRACT/ Contract/ NOTIONAL Notional AMOUNT Amount ===================================================================== OFF BALANCE SHEET* Commitments to extend credit $64,864 $39,934 Letters of credit 680 455 Guarantees of debt 455 271 Interest rate swap agreements 3,685 1,713 Foreign exchange: Forward contracts 783 972 Swap contracts 361 369 Option contracts - 35 ===================================================================== *The fair values of off-balance-sheet instruments are negligible. 18. CONTINGENCIES ........................................................ In the normal course of business we are subject to proceedings, lawsuits and other claims, including proceedings under government laws and regulations related to environmental and other matters. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters at December 31, 1993. While these matters could affect the operating results of any one quarter when resolved in future periods, we believe that after final disposition, any monetary liability or financial impact to us beyond that provided for at year-end would not be material to our annual consolidated financial statements. 19. AT&T CREDIT HOLDINGS, INC. ........................................... In connection with the March 31, 1993 legal restructuring of AT&T Capital Holdings, Inc. (formerly AT&T Capital Corporation), we issued a direct, full and unconditional guarantee of all the outstanding public debt of AT&T Credit Holdings, Inc. (formerly AT&T Credit Corporation). AT&T Credit Holdings, Inc. holds the majority of AT&T's investment in AT&T Capital Corporation and the lease finance assets of the former AT&T Credit Corporation. The table below shows summarized consolidated financial information for AT&T Credit Holdings, Inc., which consolidates the accounts of AT&T Capital Corporation. Financial information for prior periods was restated for the legal restructuring. The summarized financial information includes transactions with AT&T that are eliminated in consolidation. -42- 45 Dollars in millions 1993 1992 =============================================================== Total revenue $1,432 $1,351 Interest expense 284 293 Operating and administrative expense 384 375 Income before cumulative effect of change in accounting 70 100 Cumulative effect of change in accounting (SFAS No. 109) 22 - Net income 48 100 =============================================================== Finance receivables $6,220 $5,565 Net investment in operating lease assets 978 1,099 Total assets 7,886 7,252 Total debt 4,639 4,633 Total liabilities 6,867 6,422 Minority interest 251 110 Total shareowner's equity 768 720 =============================================================== 20. QUARTERLY INFORMATION (UNAUDITED) .................................... Quarters-Dollars in millions FIRST SECOND THIRD FOURTH ================================================================== 1993 Total revenues $15,719 $16,316 $16,662 $18,459 Gross margin 6,202 6,547 6,581 7,257 Income before cumulative effects of accounting changes 936 1,005 1,051 982 Net income (loss) (6,832) 1,005 1,051 982 Per common share: Income before cumulative effects of accounting changes .69 .74 .78 .72 Net income (loss) (5.07) .74 .78 .72 Dividends declared .33 .33 .33 .33 Stock price*: High 59 1/8 63 7/8 65 61 3/8 Low 50 1/8 53 3/4 57 3/8 52 Quarter-end close 56 3/4 63 58 7/8 52 1/2 ================================================================== 1992 Total revenues $15,375 $15,845 $16,180 $17,504 Gross margin 5,912 6,185 6,269 6,828 Net income 883 961 963 1,000 Per common share: Net Income .67 .72 .72 .75 Dividends declared .33 .33 .33 .33 Stock price*: High 41 3/8 44 5/8 45 3/8 53 1/8 Low 36 5/8 40 1/8 42 40 5/8 Quarter-end close 40 3/4 43 43 5/8 51 =================================================================== * Stock prices obtained from the Composite Tape. The number of weighted average shares outstanding increases as we issue new common shares for employee plans, shareowner plans and other purposes. For this reason, the sum of quarterly earnings per common share may not be the same as earnings per common share for the year, and the per share effects of unusual items in a quarter may differ from the per share effects of those same items for the year. -43-(Cont'd) 46 In the second quarter of 1993, we recorded $278 million in provisions for business restructuring activities. The effect of these provisions was offset by the $217 million gain from selling UNIX System Laboratories, Inc. and other miscellaneous credits. In the fourth quarter of 1993, we recorded a $190 million provision for business restructuring at AT&T Global Information Solutions, which reduced net income by $119 million ($0.09 per share). As a result of adopting SFAS No. 112, data for the first three quarters of 1993 were restated. The following table shows the net effects of this accounting change, which represent the differences between the amounts shown and the amounts originally reported: Quarters-Dollars in millions First Second Third ===================================================================== Gross margin $ (39) $ (39) $ (42) Income before cumulative effects of accounting changes (60) (39) (22) Cumulative effect of accounting change (1,128) - - Net income (loss) (1,188) (39) (22) Per common share: Income before cumulative effects of accounting changes (.05) (.03) (.02) Cumulative effect of accounting change (.83) - - Net income (loss) (.88) (.03) (.02) ===================================================================== -43- 47 BOARD OF DIRECTORS ROBERT E. ALLEN, 58 Chairman of the Board and Chief Executive Officer of AT&T since 1988. Director since 1984. 6,8 M. KATHRYN EICKHOFF, 54 President of Eickhoff Economics, Inc., a business consulting firm. Elected to Board in 1987. 3,5 WALTER Y. ELISHA, 61 Chairman and Chief Executive Officer of Springs Industries, Inc., a textile manufacturing firm. Director since 1987. 2,4,7 Phillip M. Hawley, 68 Retired Chairman and Chief Executive Officer of Carter Hawley Hale Stores, Inc., retail department stores. Director since 1982. 2,3,4 CARLA A. HILLS, 59 Chairman and Chief Executive Officer of Hills & Company consulting firm and former U.S. Trade Representative. Elected to Board in 1993. 1,5 BELTON K. JOHNSON, 64 Chairman of Belton K. Johnson Interests. Director since 1974. 3,5,6,8 DREW LEWIS, 62 Chairman and Chief Executive Officer of Union Pacific Corp., a transportation, natural resources and environmental services company. Elected to Board in 1989. 1,2,5 DONALD F. McHENRY, 57 President of IRC Group, international relations consultants; educator and former U.S. Ambassador to the United Nations. Director since 1986. 3,7 VICTOR A. PELSON, 56 Chairman of AT&T Global Operations Team and Executive Vice President of AT&T. Elected to Board in 1993. DONALD S. PERKINS, 66 Retired Chairman and Chief Executive Officer of Jewel Companies, Inc., a diversified retailer. Director since 1979. 1,2,6,7,8 HENRY B. SCHACHT, 59 Chairman and Chief Executive Officer of Cummins Engine Company, Inc., manufacturer of diesel engines. Elected to Board in 1981. 1,5 MICHAEL I. SOVERN, 62 President Emeritus and Chancellor Kent Professor of Law at Columbia University. Director since 1984. 1,4 -44-(Cont'd 48 FRANKLIN A. THOMAS, 59 President of The Ford Foundation. Elected to Board in 1988. 1,2,5 JOSEPH D. WILLIAMS, 67 Retired Chairman and Chief Executive Officer of Warner-Lambert Co., a pharmaceutical, health care and consumer products company. Director since 1984. 4,6,7 THOMAS H. WYMAN, 64 Chairman of S.G. Warburg & Co. Inc., investment bankers. Director since 1981. 2,4,7 1. Audit Committee 2. Committee on Directors 3. Committee on Employee Benefits 4. Compensation Committee 5. Corporate Public Policy Committee 6. Executive Committee 7. Finance Committee 8. Proxy Committee OUR THANKS and best wishes go to three people who left our Board in 1993. Gil Williamson retired as CEO of NCR. Lou Gerstner became chairman and CEO of IBM. Randy Tobias was elected chairman and CEO of Eli Lilly and Co. We welcome new Board members Ambassador Carla Hills and AT&T's Vic Pelson. We expect that Craig O. McCaw, chairman and chief executive officer of McCaw Cellular, will join our Board when the merger of our companies is completed in 1994. MANAGEMENT EXECUTIVE COMMITTEE ROBERT E. ALLEN, 58 Chairman of the Board and Chief Executive Officer since 1988. In 36-year AT&T career, has been chairman of Chesapeake and Potomac Telephone Companies, AT&T chief financial officer, chairman and CEO of AT&T Information Systems, and president and chief operating officer of AT&T. RICHARD S. BODMAN, 55 Senior Vice President of Corporate Strategy and Development since 1990. Previously president of Washington National Investment Corporation and CEO of Comsat General Corporation. Also held positions at E.I. du Pont de Nemours & Company, in the federal government and at Touche Ross & Company. HAROLD W. BURLINGAME, 53 Senior Vice President of Human Resources since 1987. During 32- year AT&T career, has been vice president of public relations for AT&T Information Systems and senior vice president of public relations for the corporation. ROBERT M. KAVNER*, 50 Executive Vice President and Chief Executive Officer of Multimedia Products and Services since 1993. Headed AT&T's Communications Products and Data Systems Groups. Joined AT&T as chief financial officer in 1984 after 18 years with Coopers & Lybrand. -44-(Cont'd 49 MARILYN LAURIE, 54 Senior Vice President of Public Relations and Employee Information since 1987. Chairman of the AT&T Foundation. Headed public relations at AT&T Bell Laboratories and AT&T Communications. A notionally recognized environmentalist, she joined AT&T in 1971. ALEX J. MANDL*, 50 Executive Vice President and Chief Executive Officer of Communications Services since 1993. Joined AT&T in 1991 as chief financial officer. Formerly chairman and CEO of Sea-Land Service, Inc. Held senior positions at CSX Corporation and Boise Cascade Corporation. WILLIAM B. MARX, JR.*, 54 Executive Vice President and Chief Executive Officer of Network Systems since 1989. Responsible for AT&T's world-wide purchasing and global manufacturing planning. Joined AT&T in 1961. Held engineering, sales and marketing positions at the former Western Electric Company. Headed AT&T Computer Systems from 1986 to 1987. JOHN S. MAYO, 63 President of AT&T Bell Laboratories since 1991. Joined AT&T in 1955. Headed product development at AT&T Network Systems and was senior vice president for network systems and network services at Bell Labs. Recipient of the National Medal of Technology for role in providing the technological foundation for Information Age communications. RICHARD W. MILLER*, 53 Executive Vice President and Chief Financial Officer since 1993. Formerly chairman and CEO of Wang Laboratories, Inc., senior vice president and general manager for consumer electronics at General Electric Company and chief financial officer for RCA. VICTOR A. PELSON*, 56 Executive Vice President and Chairman of the Global Operations Team since 1993. Responsible for the effectiveness of AT&T's operations worldwide. Joined AT&T in 1959 as an engineer. Named head of Communications Services Group in 1989. Has held executive positions in virtually every part of the company. JERRE L. STEAD*, 50 Executive Vice President and Chief Executive Officer of AT&T Global Information Solutions since 1993. Joined AT&T in 1991 as president of Global Business Communications Systems. Formerly chairman and CEO of Square D Company, and held various management positions at Honeywell, Inc. SAM R. WILLCOXON, 62 Group Executive of AT&T and President of Telephone Pioneers of America since 1993. Joined AT&T as an engineer in 1952. Served as executive vice president of AT&T Communications and Pacific Telephone and Telegraph Co. -44- 50 JOHN D. ZEGLIS, 46 Senior Vice President-General Counsel and Government Affairs since 1986 and 1989, respectively. Joined AT&T in 1984. Formerly a partner at the law firm of Sidley & Austin. *Also a member of the Global Operations Team. The Management Executive Committee leads the development and implementation of AT&T's mission, values and strategic intent, while the Global Operations Team is responsible for the effectiveness of AT&T's operations worldwide. ___________________________________________________________________ ROGER F. DAVIS, 50 Vice President and Controller S. LAWRENCE PRENDERGAST, 52 Vice President and Treasurer ROBERT E. SCANNELL, 54 Vice President-Law and Secretary GENERAL INFORMATION GENERAL QUESTIONS General questions or comments about AT&T may be addressed to the office of Vice President-Law and Secretary at: AT&T Corporate Headquarters 32 Avenue of the Americas Room 2420E New York, NY 10013-2412 FORM 10-K Form 10-K (AT&T's annual report to the Securities and Exchange Commission) is available without charge from AT&T Shareowner Relations at the corporate headquarters address above. OTHER REPORTS AT&T Capital Corporation's annual report and Form 10-K are available without charge by calling 1 800 235-4288, or writing: AT&T Capital Corporation Corporate Communications 44 Whippany Road Morristown, NJ 07962-1983 Report on Corporate Citizenship AT&T Foundation Department AR P.O. Box 45284 Jacksonville, FL 32232-5284 -45-(Cont'd 51 AT&T Environment and Safety Report Department AR 131 Morristown Road Room 1336 Basking Ridge, NJ 07920 HELPFUL INFORMATION FOR INVESTORS SHAREOWNER SERVICES First Chicago Trust, our shareowner services and transfer agent, will be happy to answer questions about your account and help you with transactions. You may call them toll-free at: 1800 348-8288. Persons using a telecommunications device for the deaf (TDD) or a teletypewriter (TTY) may call: 1 800 822-2794. From outside the United States, call us collect at: 201 324-0293. Our mailing address is: AT&T c/o First Chicago Trust Co. of NY P.O. Box 2575 Jersey City, NJ 07303-2575 The First Chicago Trust address to which banks and brokers may deliver certificates for transfer is 14 Wall Street in New York City. DIVIDEND REINVESTMENT The Dividend Reinvestment and Stock Purchase Plan provides owners of common stock a convenient way to purchase additional shares. If interested, please call or write First Chicago Trust for a prospectus and enrollment form. STREET NAME ACCOUNTS Shareowners whose stock is held by banks or brokerage firms and who wish to receive AT&T quarterly reports directly from the company should contact First Chicago Trust to be placed on the mailing list. INVESTOR RELATIONS Security analysts and other members of the professional financial community are invited to contact AT&T Corporate Investor Relations with questions. Call 1 800 972-0784. STOCK DATA AT&T is listed on the New York Stock Exchange (ticker symbol "T"). AT&T also is listed on the Boston, Midwest, Pacific and Philadelphia stock exchanges in the U.S., and on stock exchanges in Brussels, London, Paris, Geneva and Tokyo. Shareowners of record (as of December 31, 1993): 2,344,160 1994 ANNUAL MEETING The 109th Annual Shareowners Meeting will be held 9:30 a.m., Wednesday, April 20, 1994, at the Georgia World Congress Center in Atlanta. -45- 52 APPENDIX On page 26 of the Company's Annual Report to security holders a pie chart appears containing the following information: 1993 SOURCES OF REVENUES In Percentages of Total Revenues 8.3% INTERNATIONAL REVENUES - From operations located in other countries 16.9% INTERNATIONAL REVENUES - From U.S. operations (international telecommunications services, and exports) 74.8% U.S. REVENUES Because we have gained a foothold in many markets that are growing faster than those in the U.S., we expect international revenues to contribute strongly to our revenue growth. On page 29 of the Company's Annual Report to security holders a pie chart appears containing the following information: 1993 INVESTING ACTIVITIES In Percentages of $8.3 Billion Net Cash Flows 44.4% NET CAPITAL EXPENDITURES Worldwide Intelligent Network Research and Development facilities Manufacturing facilities Other 41.8% NET INCREASE IN FINANCE RECEIVABLES AT&T Universal Card AT&T Capital Corp. finance programs 13.8% EQUITY INVESTMENTS AND OTHER McCaw Communications, Inc. Unitel Communications, Inc. Others (e.g.,WorldPartners, The ImagiNation Network, Inc., General Magic Corp.) Investments in our network, financial operations and alliances pave the way for further growth in revenues and earnings. EX-21 10 EXHIBIT 21 Exhibit (21) AT&T Form 10-K List of Subsidiaries of American Telephone and Telegraph Company Jurisdiction of Incorporation AT&T Capital Holdings, Inc. ............................ Delaware AT&T Communications, Inc. .............................. Delaware AT&T Communications of California, Inc. ................ California AT&T Communications of Delaware, Inc. .................. Delaware AT&T Communications of Illinois, Inc. .................. Illinois AT&T Communications of Indiana, Inc. ................... Indiana AT&T Communications of Maryland, Inc. .................. Maryland AT&T Communications of Michigan, Inc. .................. Michigan AT&T Communications of the Midwest, Inc. ............... Iowa AT&T Communications of the Mountain States, Inc. ....... Colorado AT&T Communications of Nevada, Inc. .................... Nevada AT&T Communications of New England, Inc. ............... New York AT&T Communications of New Hampshire, Inc. ............. New Hampshire AT&T Communications of New Jersey, Inc. ................ New Jersey AT&T Communications of New York, Inc. .................. New York AT&T Communications of Ohio, Inc. ...................... Ohio AT&T Communications of the Pacific Northwest, Inc. ..... Washington AT&T Communications of Pennsylvania, Inc. .............. Pennsylvania AT&T Communications of the South Central States, Inc. .. Delaware AT&T Communications of the Southern States, Inc. ....... New York AT&T Communications of the Southwest, Inc. ............. Delaware AT&T Communications of Virginia, Inc. .................. Virginia AT&T Communications of Washington, D.C. Inc. ........... New York AT&T Communications of West Virginia, Inc. ............. West Virginia AT&T Communications of Wisconsin, Inc. ................. Wisconsin AT&T Credit Holdings, Inc. ............................. Delaware AT&T Global Information Solutions Company .............. Maryland AT&T International Inc. ................................ Delaware AT&T Microelectronica de Espana S.A. ................... Spain AT&T Nassau Metals Corporation ......................... New York AT&T Network Systems International B.V. ................ Netherlands AT&T Paradyne Corporation .............................. Delaware AT&T of Puerto Rico, Inc. .............................. New York AT&T Resource Management Corporation ................... New York AT&T Universal Card Services Corp. ..................... Delaware AT&T of the Virgin Islands, Inc. ....................... Delaware Actuarial Sciences Associates, Inc. .................... Delaware American Transtech Inc. ................................ Delaware Istel Group, Ltd. ...................................... United Kingdom Teradata Corporation ................................... Delaware EX-23 11 EXHIBIT 23 Exhibit (23) AT&T Form 10-K CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the registration statements of American Telephone and Telegraph Company ("AT&T" or the "Company") on Form S-3 for the Shareowner Dividend Reinvestment and Stock Purchase Plan (Registration No. 33-49093), Form S-8 for the AT&T 1984 Stock Option Plan (Registration No. 2-90983), Form S-8 for the AT&T Long Term Savings and Security Plan (Registration Nos. 33-34265 and 33-31362), Form S-8 for the AT&T Long Term Savings Plan for Management Employees (Registration Nos. 33-34264, 33-29256, 33-21937 and 33-14373), Form S-8 for the AT&T Retirement Savings and Profit Sharing Plan (Registration No. 33-39708), Form S-8 for Shares Issuable Under the Stock Option Plan of the AT&T 1987 Long Term Incentive Program (Registration No. 33-20276), Form S-8 for the Shares for Growth Program (Registration No. 33-49089), Form S-4 for the Consent Solicitation Statement/Prospectus (Registration No. 33-52119), Form S-8 for the NCR Corporation Savings Plan (Registration No. 33-42917), Form S-8 for the 1992 NCR Employee Stock Purchase Plan (Registration No. 33-48845), Form S-8 for the AT&T Capital Corporation Retirement and Savings Plan (Registration No. 33-50821), Form S-8 for the AT&T of Puerto Rico, Inc. Long Term Savings Plan for Management Employees (Registration No. 33- 50819), Form S-8 for the AT&T of Puerto Rico, Inc. Long Term Savings and Security Plan (Registration No. 33-50817), Form S-8 for the AGCS Savings Plan (Registration No. 33-50827), Form S-8 for the AGCS Hourly Savings Plan (Registration No. 33-50829), Form S-3 for the AT&T $2,500,000,000 Notes and Warrants to Purchase Notes (Registration No. 33-44438), and Form S-3 for the AT&T $2,600,000,000 Notes and Warrants to Purchase Notes (Registration No. 33-49589), and in the Post-Effective Amendment Nos. 1, 2 and 3 on Form S-8 to Form S-4 Registration Statement (Registration No. 33-42150) for the NCR Corporation 1989 Stock Compensation Plan (Registration No. 33-42150-01), the NCR Corporation 1984 Stock Option Plan (Registration No. 33-42150-02) and the NCR Corporation 1976 Stock Option Plan (Registration No. 33-42150-03), respectively, the Post-Effective Amendment Nos. 1, 2 and 3 on Form S-8 to Form S-4 Registration Statement (Registration No. 33-26801) for the Eaton Financial Corporation Amended and Restated Non-Statutory Directors' Stock Option Plan (Registration No. 33-26801-01), the Eaton Financial Corporation Amended and Restated Employees' Incentive Stock Option Plan (Registration No. 33-26801-02) and the Eaton Financial Corporation Amended and Restated 1988 Nonqualified Stock Option Plan (Registration No. 33-26801-03), respectively, and the Post-Effective Amendment Nos. 1 and 2 on Form S-8 to Form S-4 Registration Statement (Registration No. 33-45302) for the Teradata Corporation 1987 Incentive and Other Stock Option Plan (Registration No. 33-45302-01) and the Teradata Corporation Directors' Stock Option Plan (Registration No. 33-45302-02), respectively, of our reports, which include an explanatory paragraph regarding the change in 1993 in methods of accounting for postretirement benefits, postemployment benefits and income taxes, dated January 27, 1994, on our audits of the consolidated financial statements and consolidated financial statement schedules of the Company and its subsidiaries at December 31, 1993 and 1992, and for the years ended December 31, 1993, 1992 and 1991, which reports are incorporated by reference or included in this Annual Report on Form 10-K. COOPERS & LYBRAND 1301 Avenue of the Americas New York, New York March 24, 1994 EX-24 12 EXHIBIT 24 Exhibit (24)a Form 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is both an officer and a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him and in his name, place and stead, and in his capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 14th day of March, 1994. R. E. Allen Chairman of the Board and Director - 2 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is an officer of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him and in his name, place and stead, and in his capacity as an officer of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 11th day of March, 1994. R. W. Miller Chief Financial Officer - 3 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is an officer of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for her and in her name, place and stead, and in her capacity as an officer of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 17th day of March, 1994. M. B. Tart Controller - 4 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 16th day of March, 1994. M. Kathryn Eickhoff Director - 5 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 14th day of March, 1994. Walter Y. Elisha Director - 6 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 16th day of March, 1994. Philip M. Hawley Director - 7 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 16th day of March, 1994. Carla A. Hills Director - 8 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 14th day of March, 1994. Belton K. Johnson Director - 9 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 10th day of March, 1994. Drew Lewis Director - 10 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 16th day of March, 1994. Donald McHenry Director - 11 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 12th day of March, 1994. Victor A. Pelson Director - 12 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 13th day of March, 1994. Donald S. Perkins Director - 13 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of March, 1994. Henry B. Schacht Director - 14 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 14th day of March, 1994. Michael I. Sovern Director - 15 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of March, 1994. Franklin A. Thomas Director - 16 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 12th day of March, 1994. Joseph D. Williams Director - 17 - POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director of the Company: NOW, THEREFORE, the undersigned hereby constitutes and appoints R. W. MILLER, M. B. TART and S. L. PRENDERGAST, and each of them, as attorneys for him or her and in his or her name, place and stead, and in his or her capacity as a director of the Company, to execute and file such annual report, and thereafter to execute and file any amendment or amendments thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 15th day of March, 1994. Thomas H. Wyman Director EX-24 13 EXHIBIT 24B Exhibit (24)b AT&T Form 10-K Mr. Williams, Chairman of the Finance Committee, reported that the Finance Committee had met earlier in the day. He reported that it reviewed matters relating to the proposed filing by the Company of its Annual Report on Form 10-K for 1993 with the Securities and Exchange Commission and had voted to recommend for approval by the Board of Directors the resolution appearing below. He stated that the Form 10-K must be filed on or before March 31, 1994. Mr. Williams noted that Securities and Exchange Commission regulations require that the Form 10-K be signed by certain officers of the Company and by at least a majority of the members of the Company's Board of Directors. He also noted that each of the Board members had been given a power of attorney to appoint certain officers of the Company as his or her attorneys-in-fact to execute the Form 10-K on behalf of the Director. Whereupon, on motion, it was RESOLVED: that the form of the Company's Annual Report on Form 10-K for the year ended December 31, 1993, submitted to the meeting, is approved, and each of the officers and directors of the Company signing the Form 10-K is authorized to execute such report, personally or by attorney-in-fact, in the name of and on behalf of the Company, and to file such report with the Securities and Exchange Commission, with such changes therein as the officers and directors signing such report shall approve, such approval to be conclusively evidenced by the signing thereof, and to cause to be filed any amendments or supplements to the foregoing, and to do all other acts and things, and to execute, personally or by attorney-in-fact, any and all other documents necessary or advisable in connection therewith. -----END PRIVACY-ENHANCED MESSAGE-----