-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GDUWIz1Ab3Gbw/v2S2fwoUWmOqQ2CUn8LlhDsrrd175jgkrDCpNo+l+XeDckzrPQ vSFSufmORu7ZIwfWN+Bckw== 0000005907-96-000031.txt : 19961115 0000005907-96-000031.hdr.sgml : 19961115 ACCESSION NUMBER: 0000005907-96-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: BSE SROS: CSX SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CORP CENTRAL INDEX KEY: 0000005907 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 134924710 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01105 FILM NUMBER: 96661329 BUSINESS ADDRESS: STREET 1: 32 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10013 BUSINESS PHONE: 2123875400 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TELEPHONE & TELEGRAPH CO DATE OF NAME CHANGE: 19920703 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ..X.. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR ..... TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________to _____________ Commission file number 1-1105 AT&T CORP. A New York I.R.S. Employer Corporation No. 13-4924710 32 Avenue of the Americas, New York, New York 10013-2412 Telephone - Area Code 212-387-5400 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 ..... At October 31, 1996, 1,620,284,000 common shares were outstanding. 2 AT&T Form 10-Q - Part I PART I - FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF INCOME (Dollars in Millions Except Per Share Amounts) (Unaudited) For the Three For the Nine Months Ended Months Ended September 30, September 30, 1996 1995 1996 1995 Revenues Communications services.................. $12,832 $12,335 $37,651 $36,068 Financial services ...................... 396 585 1,295 1,710 Total revenues........................... 13,228 12,920 38,946 37,778 Operating Expenses Access and other interconnection......... 4,086 4,364 12,106 13,299 Network and other communications services................ 1,880 1,741 5,604 5,021 Depreciation and amortization ........... 744 662 2,054 1,901 Selling, general and administrative ..... 3,913 3,219 11,049 9,334 Total communications services expenses.. 10,623 9,986 30,813 29,555 Financial services expenses.............. 431 538 1,227 1,519 Total operating expenses ................ 11,054 10,524 32,040 31,074 Operating income ........................ 2,174 2,396 6,906 6,704 Other income - net ...................... 83 117 290 226 Interest expense ........................ 72 135 292 350 Income from continuing operations before income taxes ................... 2,185 2,378 6,904 6,580 Provision for income taxes .............. 826 853 2,538 2,427 Income from continuing operations ....... 1,359 1,525 4,366 4,153 Discontinued Operations: Income(loss) from discontinued operations net of taxes of $18, ($417), ($354) and ($412), respectively......... 73 (1,263) (81) (1,338) Net income .............................. $ 1,432 $ 262 $ 4,285 $ 2,815 Weighted average common shares outstanding (millions)................ 1,618 1,594 1,613 1,588 Earnings per common share: Income from continuing operations ...... $ 0.84 $ 0.96 $ 2.71 $ 2.61 Income(loss) from discontinued operations 0.05 (0.80) (0.05) (0.84) Net income ............................. $ 0.89 $ 0.16 $ 2.66 $ 1.77 Dividends declared per common share.......................... $ 0.33 $ 0.33 $ 0.99 $ 0.99 See Notes to Consolidated Financial Statements 3 AT&T Form 10-Q - Part I CONSOLIDATED BALANCE SHEETS (Dollars in Millions Except Share Amounts) (Unaudited) September 30, December 31, 1996 1995 ASSETS Cash and cash equivalents .............. $ 568 $ 129 Receivables less allowances of $1,286 and $1,252, respectively Accounts receivable................... 9,309 8,359 Finance receivables................... 6,528 10,665 Deferred income taxes................... 1,578 2,437 Other current assets.................... 957 498 Total current assets.................... 18,940 22,088 Property, plant and equipment, net of accumulated depreciation of $18,538 and $17,621, respectively...... 17,725 16,083 Licensing costs, net of accumulated amortization of $880 and $743, respectively................ 8,143 8,056 Investments............................. 3,785 3,646 Long-term finance receivables........... 753 768 Prepaid pension costs................... 1,973 1,793 Other assets............................ 2,401 2,535 Net assets of discontinued operations... 2,758 7,426 TOTAL ASSETS............................ $56,478 $62,395 (CONT'D) 4 AT&T Form 10-Q - Part I CONSOLIDATED BALANCE SHEETS (CONT'D) (Dollars in Millions Except Share Amounts) (Unaudited) September 30, December 31, 1996 1995 LIABILITIES Accounts payable....................... $ 5,557 $ 5,089 Payroll and benefit-related liabilities.......................... 2,614 2,908 Debt maturing within one year.......... 3,261 12,176 Dividends payable...................... 534 527 Other current liabilities.............. 4,276 3,880 Total current liabilities.............. 16,242 24,580 Long-term debt......................... 7,851 8,542 Long-term benefit-related liabilities.. 3,088 2,871 Deferred income taxes.................. 4,535 5,446 Other long-term liabilities and deferred credits..................... 3,709 3,682 Total liabilities ..................... 35,425 45,121 SHAREOWNERS' EQUITY Common stock - par value $1 per share.. 1,619 1,596 Authorized shares: 2,000,000,000 Outstanding shares: 1,619,380,000 at September 30, 1996 1,596,005,351 at December 31, 1995 Additional paid-in capital............. 17,635 16,614 Guaranteed ESOP obligation............. (96) (254) Foreign currency translation adjustments.......................... (70) 5 Retained earnings (deficit)............ 1,965 (687) Total shareowners' equity.............. 21,053 17,274 TOTAL LIABILITIES & SHAREOWNERS' EQUITY $56,478 $62,395 See Notes to Consolidated Financial Statements. 5 AT&T Form 10-Q - Part I CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Millions) (Unaudited) For the Nine Months Ended September 30, 1996 1995 Operating Activities Net income .............................. $ 4,285 $ 2,815 Add: loss from discontinued operations .. 81 1,338 Income from continuing operations ....... 4,366 4,153 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Depreciation and amortization for communications services............. 2,054 1,901 Provision for uncollectibles.......... 1,629 1,550 Increase in accounts receivable....... (1,770) (1,767) Increase in accounts payable.......... 324 367 Net (increase) decrease in other operating assets and liabilities.... (496) 141 Other adjustments for non-cash items - net......................... 63 174 Net cash provided by operating activities of continuing operations.... 6,170 6,519 Investing Activities Capital expenditures................... (3,792) (2,566) Proceeds from sale or disposal of property, plant and equipment........ 58 139 Decrease (increase) in finance receivables.................. 779 (1,032) Proceeds from securitization of finance receivables.................. 3,000 998 Acquisitions of licenses............... (215) (1,878) Net increase in investments............ (278) (56) Disposition (acquisition) of businesses 160 (185) Other investing activities - net....... 20 69 Net cash used in investing activities of continuing operations................ (268) (4,511) (CONT'D) 6 AT&T Form 10-Q - Part I CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D) (Dollars in Millions) (Unaudited) For the Nine Months Ended September 30, 1996 1995 Financing Activities Proceeds from long-term debt issuances. - 2,389 Retirements of long-term debt.......... (956) (661) Issuance of common shares.............. 1,165 973 Dividends paid......................... (1,588) (1,563) (Decrease) increase in short-term borrowings - net..................... (4,805) 1,647 Other financing activities - net....... 1,913 25 Net cash (used in) provided by financing activities of continuing operations.... (4,271) 2,810 Effect of exchange rate changes on cash........................ (25) 2 Net cash used in discontinued operations................ (1,167) (1,514) Net increase in cash and cash equivalents.................... 439 3,306 Cash and cash equivalents at beginning of year................... 129 220 Cash and cash equivalents at end of period....................... $ 568 $ 3,526 See Notes to Consolidated Financial Statements 7 AT&T Form 10-Q - Part I NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Millions Except Per Share Amounts) (Unaudited) (a) BASIS OF PRESENTATION The consolidated financial statements have been prepared by AT&T Corp. ("AT&T" or the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of man- agement, include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the consolidated re- sults of operations, financial position and cash flows for each period presented. The consolidated results for interim periods are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with AT&T's 1995 Annual Report to Shareowners, Form 10-K for the year ended December 31, 1995, Form 8-K dated March 21, 1996 and the current year's previously issued Forms 10-Q. (b) DISCONTINUED OPERATIONS On September 20, 1995, AT&T Corp. announced a plan, subject to certain conditions, to separate into three independent, publicly held, global companies: communications services (AT&T), communications systems and technologies (Lucent Technologies Inc., "Lucent") and transaction-intensive computing (NCR Corporation, "NCR"). On April 10, 1996, Lucent sold 112 million shares of common stock in an initial public offering ("IPO"), representing 17.6% of the Lucent common stock outstanding. Because of AT&T's plan to spin-off its remaining 82.4% interest in Lucent, the sale of the Lucent stock was recorded as an equity transaction, resulting in an increase in AT&T's Additional Paid-In Capital at the time of the IPO of $2.6 billion. In addition, in connection with the restructuring, Lucent assumed $3.7 billion of AT&T debt. On September 30, 1996, AT&T distributed to AT&T shareowners of record as of September 17, 1996, the remaining Lucent common stock held by AT&T. The shares were distributed on the basis of .324084 of a share of Lucent for each AT&T share outstanding. As a result of this distribution, AT&T's shareowners' equity was reduced by $2.7 billion. The net impact of the Lucent IPO and the distribution of the remaining Lucent common stock was a reduction of $109 million to AT&T's shareowners' equity. The distribution of Lucent common stock to AT&T shareowners was a noncash transaction which did not affect the Company's results of operations. As of October 1, 1996, Lucent's results of operations will no longer be included in the income from discontinued operations. AT&T intends to distribute its 100% interest in NCR by the end of 1996 to AT&T shareowners. 8 AT&T Form 10-Q - Part I NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Millions Except Per Share Amounts) (Unaudited) Also announced as part of the plan was the Company's intent to pursue the sale of its remaining approximate 86% interest in AT&T Capital Corporation ("AT&T Capital"). On October 1, 1996, AT&T sold its remaining interest in AT&T Capital for approximately $1.8 billion. Pursuant to Accounting Principles Board Opinion No. 30 "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB 30"), the consolidated financial statements of AT&T have been restated to reflect the dispositions of Lucent and AT&T Capital and the planned dispositions of NCR and other businesses as discontinued operations. Accordingly, the revenues, costs and expenses, assets and liabilities, and cash flows of Lucent, NCR, AT&T Capital and other businesses have been excluded from the respective captions in the Consolidated Statements of Income, Consolidated Balance Sheets and Consolidated Statements of Cash Flows, and have been reported as "Income (loss) from discontinued operations", net of applicable income taxes; as "Net assets of discontinued operations"; and as "Net cash used by discontinued operations" for all periods presented. In addition, the consolidated results for continuing operations have been reclassified to reflect the results of the ongoing AT&T businesses and to improve comparability within the communications services industry. 9 AT&T Form 10-Q - Part I NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Millions Except Per Share Amounts) (Unaudited) Summarized financial information for the discontinued operations is as follows: For the Three For the Nine Months Ended Months Ended September 30, September 30, 1996 1995 1996 1995 Revenues $7,259 $ 6,784 $20,147 $19,700 Income (loss) before income taxes 91 (1,680) (435) (1,750) Net income (loss) $ 73 $(1,263) $ (81) $(1,338) At Sept. At Dec. 30, 1996* 31, 1995 Current Assets $ 7,196 $17,415 Total Assets 16,005 34,181 Current Liabilities 8,155 14,787 Total Liabilities 13,247 26,755 Net assets of discontinued operations $ 2,758 $ 7,426 * Excludes Lucent due to the completion of the spin-off on September 30, 1996. The income (loss) before income taxes includes allocated interest expense of $3 million and $33 million for the quarters ended September 30, 1996 and September 30, 1995, respectively, and $35 million and $87 million for the nine months ended September 30, 1996 and 1995, respectively. Interest expense is allocated to discontinued operations based on a ratio of net assets of discontinued operations to total AT&T consolidated assets. The net loss for the third quarter of 1995 includes restructuring and other charges for NCR of $1,597 million ($1,172 million or $.74 per share, net of taxes). 10 AT&T Form 10-Q - Part I NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Millions Except Per Share Amounts) (Unaudited) (c) CREDIT HOLDINGS In connection with a March 31, 1993 legal restructuring of AT&T Capital Holdings, Inc. (formerly AT&T Capital Corporation), AT&T issued a direct, full and unconditional guarantee of all the public debt of AT&T Credit Holdings, Inc. (formerly AT&T Credit Corporation) and certain public debt of its majority owned subsidiary, AT&T Capital Corporation, outstanding at March 31, 1993. At September 30, 1996 $339.5 million of the guaranteed debt remained outstanding. AT&T Credit Holdings, Inc. holds the majority of AT&T's investment in AT&T Capital Corporation (which was sold on October 1, 1996) and the lease finance assets of the former AT&T Credit Corporation. The following table shows summarized consolidated financial information for AT&T Credit Holdings, Inc., which consolidates the accounts of AT&T Capital Corporation. Consistent with AT&T's presentation, the net operating results and net assets of AT&T Capital have been reported as "Discontinued Operations". The summarized financial information includes transactions with AT&T that are eliminated in consolidation. For the Nine Months Ended September 30, 1996 1995 Total revenue from continuing operations $ 136 $ 132 Interest expense 7 8 Selling, general and administrative expense 7 7 Income from continuing operations 9 14 Income from discontinued operations 84 62 Net income $ 93 $ 76 11 AT&T Form 10-Q - Part I NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Millions Except Per Share Amounts) (Unaudited) At At September 30, December 31, 1996 1995 Finance receivables $1,144 $1,149 Net assets of discontinued operations 916 835 Total assets 2,453 2,355 Total debt 90 100 Total liabilities 1,387 1,343 Total shareowner's equity $1,066 $1,012 (d) OPERATING EXPENSES OF FINANCIAL SERVICES Operating expenses of the financial services segment, which excludes AT&T Capital, are comprised of the following: For the Three For the Nine Months Ended Months Ended September 30, September 30, 1996 1995 1996 1995 Interest expense $ 88 $ 165 $ 317 $ 489 Provision for losses 124 206 374 550 Other costs 101 103 303 328 Selling, general and administrative 118 64 233 152 Total $ 431 $ 538 $1,227 $1,519 (e) RECLASSIFICATIONS Prior period amounts have been reclassified to conform to the current presentation. 12 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW On September 20, 1995, AT&T Corp. ("AT&T" or the "Company") announced a plan, subject to certain conditions, to separate into three independent, publicly held, global companies: communication services (AT&T), communications systems and technology (Lucent Technologies Inc., "Lucent") and transaction-intensive computing (formerly Global Information Solutions, now NCR Corporation, "NCR"). On April 10, 1996, Lucent sold 112 million shares of common stock in an initial public offering ("IPO"), representing 17.6% of the Lucent common stock outstanding. Because of AT&T's plan to spin off its remaining interest in Lucent, the sale of Lucent stock was recorded as an equity transaction, resulting in an increase in AT&T's Additional Paid-In Capital at the time of the IPO of $2.6 billion. In addition, in connection with the restructuring, Lucent assumed $3.7 billion of AT&T debt. On July 18, 1996, AT&T's board of directors approved the distribution of the remaining 524,624,894 shares of Lucent common stock to AT&T's shareowners. On September 30, 1996, AT&T distributed to AT&T shareowners of record as of September 17, 1996 the Lucent common stock held by AT&T. The Lucent shares were distributed on the basis of .324084 of a share of Lucent for each AT&T share outstanding. As a result of this distribution AT&T's shareowners' equity was reduced by $2.7 billion. Thus, the net impact of the Lucent IPO and the distribution of the remaining Lucent common stock was a reduction of $109 million to AT&T's shareowners' equity. The distribution of Lucent common stock to AT&T shareowners was a noncash transaction which did not affect AT&T's results of operations. As of October 1, 1996, Lucent's results of operations will no longer be included in the income from discontinued operations. AT&T shareowners received stock certificates for whole shares of Lucent and cash payments for fractional shares. AT&T received a favorable Private Letter Ruling from the Internal Revenue Service on March 21, 1996 that confirmed the tax-free status of the Lucent distribution. Therefore the dividend qualified as tax-free for federal tax purposes, except to the extent that cash was received instead of fractional shares. AT&T intends to distribute its 100% interest in NCR by the end of 1996 to AT&T shareowners. AT&T and NCR have also received a favorable Private Letter Ruling from the Internal Revenue Service confirming the tax-free status of the planned NCR distribution. Also announced as part of the plan was the Company's intent to pursue the sale of its remaining approximate 86% interest in AT&T Capital Corporation ("AT&T Capital"). On October 1, 1996, AT&T sold its remaining interest in AT&T Capital for approximately $1.8 billion. 13 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION AT&T's Board of Directors also reviewed the AT&T dividend policy and has decided to maintain its regular quarterly dividend of $.33 per share. The declaration and payment of future dividends, however, is subject to the discretion of the Board of Directors and will depend on the results of operations, financial condition, cash requirements and future prospects of AT&T, general economic conditions and other factors deemed relevant by the Board of Directors. Separately, AT&T and Lucent declared third quarter dividends of $.33 and $.075 per common share respectively, payable November 1, 1996, to shareowners of record on September 12, 1996. AT&T received payment of approximately 82.4% of the Lucent dividend, because the record date of September 12, 1996 was prior to the September 30, 1996 spin-off of AT&T's remaining interest in Lucent. The Company believes that the spin-offs of Lucent and NCR and the sale of AT&T Capital will enhance AT&T's ability to focus on strategic businesses that add value to customers, to take advantage of new opportunities and to improve operating efficiencies. However, upon separation, the ongoing AT&T will no longer have the benefits of vertical integration of its manufacturing and services businesses (i.e., the ability to purchase equipment at cost to manufacture). Accordingly, AT&T's equipment purchase costs and related depreciation associated with the AT&T network will increase over time. As a result of the above activities, AT&T has restated its Consolidated Financial Statements pursuant to Accounting Principles Board Opinion No. 30 "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB 30") to reflect the dispositions of Lucent and AT&T Capital and the planned dispositions of NCR and other businesses as discontinued operations. Accordingly, the revenues, costs and expenses, assets and liabilities, and cash flows of Lucent, NCR, AT&T Capital and other businesses have been excluded from the respective captions in the Consolidated Statements of Income, Consolidated Balance Sheets and Consolidated Statements of Cash Flows, and have been reported as "Income (loss) from discontinued operations", net of applicable income taxes; as "Net assets of discontinued operations"; and as "Net cash used by discontinued operations". In addition, the consolidated results for continuing operations have been reclassified to reflect the results of the ongoing AT&T businesses, to improve comparability within the communications services industry and to conform to the current presentation. For a detailed discussion of the results for Lucent, NCR and AT&T Capital, refer to their separate Form 10-Qs and other reports filed with the Securities and Exchange Commission. 14 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Revenues from continuing operations grew 2.4% to $13,228 million for the quarter ended September 30, 1996 compared to $12,920 million in the third quarter of 1995. For the nine months ended September 30, 1996, revenues from continuing operations increased 3.1% to $38,946 million from $37,778 million in the nine-month period of 1995. This growth was achieved amidst heightened competition, especially in our consumer services business. It is likely that competitive pressures will continue and may increase. Operating income decreased 9.2% to $2,174 million for the third quarter of 1996, down $222 million from $2,396 million in the third quarter of 1995. Operating margin for the third quarter when compared to the same period in 1995 decreased to 16.4% from 18.5% primarily due to higher selling, general and administrative expenses partially offset by lower access and other interconnection expenses. Operating income for the nine months ended September 30, 1996 was $6,906 million, an increase of $202 million or 3.0% from $6,704 million in the nine-month period of 1995. For the nine months ended September 30, 1996, operating margin remained flat at 17.7% when compared to the same period in 1995, primarily due to lower access and other interconnection expenses offset by higher selling, general and administrative expenses as well as higher network and other communications services expenses. Quarterly income from continuing operations was $1,359 million, or $.84 per share. This represents a 10.9% decrease in income from continuing operations and a 12.2% decrease in earnings per share compared with income from continuing operations of $1,525 million, or $.96 per share, in the third quarter of 1995. For the nine months ended September 30, 1996, income from continuing operations increased 5.1% to $4,366 million from $4,153 million in the nine-month period of 1995. 15 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS COMMUNICATIONS SERVICES Communications services revenues increased $497 million or 4.0% for the quarter compared with the third quarter of 1995, and $1,583 million or 4.4% for the nine-month period of 1996 compared with the same period in 1995. Three months Nine months ended ended September 30, September 30, $ In millions 1996 1995 1996 1995 Wireline services revenue $11,552 $11,298 $34,106 $33,014 Wireless services revenue 892 758 2,539 2,134 Products and other services revenue 388 279 1,006 920 Total communications services revenues $12,832 $12,335 $37,651 $36,068 Operating income 2,209 2,349 6,838 6,513 Operating margin 17.2% 19.0% 18.2% 18.1% Wireline services revenue, which includes toll calling, network management, satellite services, messaging and other network enabled services, increased $254 million or 2.2% compared with the third quarter of 1995. The revenue increase quarter over quarter was driven by volume growth of 5.1%. This volume growth was led by strong growth in business inbound services. For the nine months ended September 30, 1996, revenues increased by $1,092 million or 3.3% compared to the same period in 1995, led again by volume growth in business inbound services. Overall revenue growth was limited by continued slower consumer services revenue growth due to relatively flat volume growth. Volume growth for the quarter slowed from the more than 8.5% growth for the third quarter of 1995, reflecting competitive pressures from traditional sources in the consumer markets as well as non-traditional sources such as third-tier and dial-around resellers. The increased competition in the consumer markets may also impact the volume growth for the fourth quarter of 1996. Total volume growth exceeded revenue growth for the quarter by 2.9% reflecting the use of promotional discounts, the increased movement of customers to optimal calling plans, the impact of targeted pricing actions and increased competition. 16 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Wireless services revenue, which includes cellular, messaging services and air-to-ground services, grew 17.7% to $892 million in the third quarter of 1996 compared to the third quarter of 1995. Cellular revenue rose 15.1% to $834 million, while consolidated cellular subscribers increased 33.3% to 4.8 million at the end of the quarter from 3.6 million at the end of the third quarter 1995. During the quarter, consolidated subscribers increased 245,000, representing a 15.7% increase over third quarter 1995 net additions. Wireless services revenues grew 19.0% to $2,539 million for the nine months ended September 30, 1996 compared with the same period in 1995. The revenue growth in both the quarterly and year to date periods was fueled by additional cellular service subscribers. Total cellular customers served by companies in which AT&T has or shares a controlling interest increased 31.2% to 6.6 million at September 30, 1996 from 5.0 million at September 30, 1995. Average revenue per cellular subscriber continued to decline in the third quarter of 1996 reflecting industry wide pricing pressures, as well as lower average usage per subscriber. The lower average usage per subscriber is attributed to growth in subscribers who are more casual users (e.g. for emergency and other personal use). Average revenue per subscriber is expected to continue to decline in the fourth quarter of 1996. Products and other services revenue increased 38.8% to $388 million in the third quarter 1996 compared with the third quarter 1995 led by higher revenues from business value added services, consulting and outsourcing services from AT&T Solutions and on-line services. For the nine months ended September 30, 1996, products and other services revenue grew 9.2% to $1,006 million compared with the same period in 1995. The increase was led by higher revenues from on-line services, business value added services and consulting and outsourcing services, partially offset by decreased sales of cellular phones associated with AT&T's de-emphasis of this product. Operating expenses for communications services increased 6.4% to $10,623 million from $9,986 million in the third quarter of 1995 and increased 4.3% to $30,813 million for the nine-month period of 1996 compared with the same period in 1995. The expense increases for both periods were driven by higher levels of selling, general and administrative expenses and network and other communications services expenses, partially offset by lower access and other interconnection expenses. The operating margin for communications services decreased 1.8 percentage points to 17.2% for the third quarter of 1996 from 19.0% for the third quarter of 1995 and increased .1 percentage point to 18.2% for the nine months ended September 30, 1996 from 18.1% for the same period in 1995. 17 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Access and other interconnection expenses decreased $278 million or 6.4% from the third quarter of 1995 and $1,193 million or 9.0% from the nine months ended September 30, 1995. The reductions reflect lower unit costs in access, reductions in international settlements and improved access efficiencies. The decrease for the nine-month period of 1996 when compared to the same period in 1995 was also partially due to a second quarter 1996 accounting adjustment to previously estimated accruals to reflect actual billing. Access and other interconnection expenses as a percentage of wireline services revenue declined quarter over quarter to 35.4% from 38.6%, and to 35.5% from 40.3% for the year to date period. As a percentage of communications services revenues, these expenses declined to 31.8% for the quarter from 35.4% for the third quarter of 1995, and to 32.2% for the nine-month period of 1996 from 36.9% for the same period in 1995. Network and other communications services expenses increased $139 million or 8.0% from the third quarter of 1996. The increase was mainly attributable to higher provisions for uncollectibles; costs for AT&T Solutions offers, local services, and WorldNet* services; higher gross receipt taxes; and higher operator services expenses; partially offset by lower network operating expenses. For the nine-month period of 1996, network and other communications services expenses increased $583 million or 11.6% compared with the same period in 1995 due to higher provisions for uncollectibles; costs for AT&T Solutions offers, local services, and WorldNet services; higher gross receipt taxes; and higher operator services expenses. Depreciation and amortization increased $82 million, or 12.2%, from the third quarter of 1995 and $153 million, or 8.0%, for the nine-month period of 1996 reflecting increased capital expenditures for the AT&T network, as well as the amortization of goodwill and licenses acquired in the purchase of the remaining 48% of LIN Broadcasting in the fourth quarter of 1995. These increases were partially offset by decreased depreciation from assets written off as part of the fourth quarter 1995 charge. Selling, general and administrative expenses ("SG&A") increased $694 million, or 21.6%, from the third quarter of 1995 and $1,715 million, or 18.4% from the nine-month period of 1995. SG&A as a percentage of communications services revenue was 30.5% for the third quarter, up 4.4 percentage points from the third quarter of 1995 and 29.3% for the nine-month period of 1996, up 3.5 percentage points from the nine-month period in 1995. The higher SG&A expenses for both periods are due to higher * (Service mark of AT&T) 18 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION marketing and sales expenses primarily for consumer services, initiatives for our AT&T Solutions and WorldNet businesses, local service entry, customer care, and additions to the cellular subscriber base. FINANCIAL SERVICES Financial services revenues decreased $189 million, or 32.2%, on a quarterly basis and $415 million, or 24.3% on a year to date basis. The declines were primarily a result of the Universal Card Services Corp. ("Universal Card") securitization program but also reflect lower card usage and greater use of promotional pricing. Lower rate offers continue to decrease margins. Universal Card securitized $1.0 billion of cardholder receivables in the third quarter of 1996 in order to further diversify its sources for funding receivables growth. This brings the total receivables securitized to $6.5 billion since August of 1995. We expect lower rate offers to continue, which may impact operating income in the near future. FINANCIAL SERVICES Three months Nine months ended ended September 30, September 30, In millions 1996 1995 1996 1995 Financial services revenue $396 $585 $1,295 $1,710 Operating income $(35) $ 47 $ 68 $ 191 Operating margin (8.8%) 7.9% 5.3% 11.2% Universal Card Information: At September 30, In millions 1996 1995 Total book finance receivables $ 6,548 $11,970 Total managed finance receivables $13,048 $12,970 Cardholder accounts 18.1 16.8 Universal Card book receivables, which exclude the $6.5 billion of receivables securitized, were $6.5 billion at the end of the third quarter. Universal Card retained the servicing and customer relationships of the securitized credit card accounts. 19 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Financial services expenses decreased $107 million, or 20.0%, for the quarter ended September 30, 1996 and $292 million, or 19.2% for the nine months ended September 30, 1996. This reflects a decrease in direct portfolio expenses (interest, provisions for losses, and other related costs) of $161 million for the third quarter of 1996, and $373 million for the nine-month period of 1996, due to decreased receivable balances associated with the securitization program and lower card usage. The decreases in direct portfolio expenses were partially offset by increases in net charge-offs as a percentage of average credit card receivables outstanding ("charge-off rate") associated with the continued decline in portfolio credit performance. The charge-off rate for credit card receivables was 6.2% for the year to date period, up 1.5 percentage points from the same period in 1995. Selling, general and administrative expenses increased $54 million quarter over quarter and $81 million for the nine months ended September 30, 1996 compared with the prior year primarily due to customer loyalty programs. Financial services operating income decreased $82 million compared to the third quarter of 1995 and $123 million for the nine months ended September 30, 1996 compared with the prior year. The operating margin percentage decreased to (8.8%) compared with 7.9% for the third quarter of 1995 and to 5.3% compared with 11.2% for the nine-month period of 1995. The lower operating margins were primarily due to the continued decline in portfolio credit performance, as well as increased selling, general and administrative expenses. OTHER INCOME STATEMENT ITEMS Other income decreased $34 million quarter over quarter primarily due to gains from the sale of certain cellular properties in 1995. For the nine- month period of 1996, other income increased $64 million, reflecting gains on the sale of cellular interests in Mexico, the sale of a real estate joint venture, increases in earnings from equity investments and other miscellaneous items in 1996, partially offset by gains from the sale of cellular properties in 1995. Interest expense decreased $63 million, or 46.4%, from the third quarter of 1995 and $58 million, or 16.3%, for the nine months ended September 30, 1996 primarily reflecting lower levels of average debt outstanding for both periods. The provision for income taxes decreased $27 million for the quarter reflecting lower income before income taxes partially offset by a higher effective tax rate. The increase in the effective tax rate to 37.8% from 20 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 35.9% quarter over quarter, is primarily associated with certain non-recurring items in the third quarter of 1995. For the nine months ended September 30, 1996, the provision for income taxes increased $111 million primarily due to higher income before income taxes. The effective tax rate remained essentially flat at 36.8% when compared to the same period of 1995. The 1996 effective tax rate was impacted by tax benefits to AT&T from various legal entity restructurings while the 1995 effective tax rate was favorably impacted by certain non-recurring items in the third quarter of 1995. Income from discontinued operations increased to $73 million from a loss of $1,263 million in the third quarter of 1995 and the loss from discontinued operations decreased to $81 million from $1,338 million in the nine-month period of 1995. The net loss in the third quarter of 1995 includes restructuring and other charges for NCR of $1,172 million, net of taxes. The income (loss) from discontinued operations includes the results of Lucent, NCR, AT&T Capital and other businesses. Discontinued operations also includes the elimination of intercompany transactions, an allocation of AT&T's interest expense (based on a ratio of net assets of discontinued operations to total AT&T consolidated assets), and a portion of AT&T's consolidated taxes attributable to discontinued businesses. Included in the year to date loss from discontinued operations is a non-recurring tax benefit of $155 million recorded in the first quarter of 1996. This benefit is the result of reversing deferred tax liabilities on the undistributed earnings of Lucent's non-United States consolidated subsidiaries. The subsidiaries have the ability and specific intention to permanently reinvest such undistributed earnings. These deferred tax liabilities reduced income from discontinued operations in earlier years. FINANCIAL CONDITION SEPTEMBER 30, 1996 VERSUS DECEMBER 31, 1995 Total assets, including net assets of discontinued operations, decreased $5.9 billion, or 9.5% in the nine months ended September 30, 1996. Assets attributable to continuing operations decreased $1.3 billion, or 2.3%. This decrease is primarily due to a decline in current assets of $3.1 billion partially offset by an increase in net property, plant and equipment. The current asset decline was driven by decreases in finance receivables and current deferred income tax assets, partially offset by increases in accounts receivable, other current assets and cash. 21 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Finance receivables decreased from December 31, 1995 mainly due to Universal Card securitizations of $3.0 billion in 1996, the normal seasonal decline as a result of higher levels of consumer purchases in the fourth quarter of 1995 and continued lower card usage. The decrease in current deferred income tax assets is due to long-term deferred income tax liabilities at December 31, 1995 becoming current deferred income tax liabilities mainly in the first quarter of 1996. Since current deferred income taxes are in a net asset position, this results in a decrease in current deferred income tax assets and a decrease in long-term deferred income tax liabilities. The increase in accounts receivable reflects $377 million of receivables from Lucent no longer eliminated in consolidation as well as normal business activity. The increase in other current assets is primarily due to prepaid equipment purchases of $500 million from Lucent pursuant to a purchase agreement. Net property, plant and equipment increased $1.6 billion from December 31, 1995 reflecting current year expenditures for the AT&T network partially offset by current year depreciation. Working capital, defined as current assets less current liabilities, increased $5.2 billion from year-end driven by an $8.9 billion decrease in debt maturing within one year, partially offset by the decline in current assets discussed previously. Debt maturing within one year decreased primarily due to lower levels of debt for Universal Card due to the securitization program, the assignment of debt to Lucent and Lucent directly obtaining external financing in the second quarter of 1996 (as opposed to AT&T obtaining financing on Lucent's behalf). Long-term deferred income tax liabilities declined $911 million due to the reclassification of deferred income taxes to current as discussed previously. Long term debt decreased $691 million reflecting amounts becoming current and therefore reclassified to short term debt, and the repayment of certain long term debt. Shareowner's equity increased $3.8 billion reflecting year to date net income of $4.3 billion and shares issued primarily under employee plans, partially offset by dividends paid. Net assets of discontinued operations decreased $4.7 billion primarily due to the assignment of debt to Lucent as noted previously, and the completion of the Lucent spin-off which occurred on September 30, 1996. 22 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The ratio of total debt to total capital (total debt and equity) decreased to 34.5% at September 30, 1996, compared with 54.5% at December 31, 1995. Excluding financial services operations, the debt ratio was 21.8% at September 30, 1996 compared with 41.3% at December 31, 1995. The decrease is primarily due to lower average debt outstanding as discussed previously. In the normal course of business, AT&T uses certain derivative financial instruments, mainly interest rate swaps and foreign currency exchange rate contracts. The interest rate swaps and foreign currency contracts and options allow the Company to manage its exposures to changing interest rates and currency exchange rates. AT&T does not use derivative financial instruments for speculative purposes. Credit policies are designed to limit the risks of dealing with other parties to these instruments. In management's view, the risks to AT&T from using these derivative financial instruments are minimal and the benefits include more stable earnings and cash flows in periods when interest rates and currency exchange rates are changing. CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1995 Cash flows provided by operating activities from continuing operations decreased $349 million compared with the nine-month period of 1995 primarily due to the prepayment of equipment purchases from Lucent in 1996 and payments of $292 million related to the 1995 restructuring and other charges. Of the 17,000 positions related to continuing operations included in the fourth quarter of 1995 restructuring charges, approximately 5,200 people have left the payroll as of September 30, 1996. The increased use of cash was partially offset by an increase in income from continuing operations of $213 million. For the nine months ended September 30, 1996, net cash used in investing activities of continuing operations of $268 million decreased $4,243 million compared with the $4,511 million net cash used in the nine-month period of 1995. This year over year decrease is due to increased Universal Card securitizations, a lower level of license acquisitions, and declining finance receivables. These changes were partially offset by increases in cash outflows for capital expenditures related to the AT&T network. 23 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Net cash used in financing activities of $4,271 million increased $7,081 million compared to net cash provided of $2,810 million for the comparable period of 1995. The change was due to decreases in both short term debt borrowings and long term debt issuances as well as increases in repayments of long term debt. These changes in debt activity reflect the use of alternative sources of funding, such as securitizations and cash collections of the $2.0 billion in accounts receivable retained by AT&T continuing operations as part of the restructuring plan, as well as the impact of Lucent obtaining its own external financing in the second quarter of 1996. Future financing is contemplated to be arranged as necessary to meet AT&T's capital and other requirements with the timing of issue, principal amount and form depending on the Company's needs, prevailing market and general economic conditions. AT&T anticipates obtaining all necessary external financing through issuances of commercial paper, long-term debt and equity, asset-backed financings (i.e., securitizations) and available lines of credit. RECENT PRONOUNCEMENTS In June, 1996 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities". This statement requires that liabilities incurred or obtained by transferors as part of a transfer of financial assets be initially measured at fair value, if practical. It also requires that servicing assets and other retained interests in the transferred assets be recognized and measured by allocating the previous carrying amount between the assets sold and retained interests based upon their relative fair values at the date of transfer. The statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996, and early adoption is prohibited. Management does not expect the adoption of this standard to have a material impact on AT&T's consolidated financial statements. 24 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION LEGISLATIVE AND REGULATORY DEVELOPMENTS In February 1996, the Telecommunications Act of 1996 (the "Telecommunications Act") became law. The Telecommunications Act, among other things, was designed to foster local exchange competition by establishing a regulatory framework to govern the provision of local and long-distance telecommunications services. The Telecommunications Act will permit Regional Bell Operating Companies ("RBOCs") to provide interexchange services after demonstrating to the FCC that such provision is in the public interest and satisfying the conditions for developing local competition established by the Telecommunications Act. In August 1996, the FCC adopted rules and regulations (the "Implementing Rules") to implement the local competition provisions of the Telecommunications Act, including with respect to the terms and conditions of interconnection with local exchange carrier ("LEC") networks and the standards governing the purchase of unbundled elements and wholesale services from LECs. The Implementing Rules rely on each state to develop the specific rates and procedures in such state within the framework prescribed by the FCC for developing such rates and procedures. In October 1996, the 8th Circuit Court of Appeals ordered a stay of the effectiveness of those provisions of the Implementing Rules addressed to the pricing of unbundled network elements and wholesale services ("Pricing Rules"), among others, until such court resolves the challenges to the Implementing Rules by local telephone companies and telephone regulators in several states. The court has scheduled argument on the challenges in January 1997 and will issue its decision some time thereafter. AT&T believes that the stay of the Pricing Rules may inhibit the prompt establishment of appropriate rates for the provision of network elements and wholesale services. Absent full effectiveness of the Implementing Rules, each state will determine the applicable rates and procedures independent of the framework of the Pricing Rules. As a result, there can be no assurance that the prices adopted in each state will provide for effective local service entry and competition or provide AT&T with new market opportunities. A significant factor for successful entry by AT&T and others will be the adoption, at the state level, of acceptable rates and procedures for entrants, including certification by state regulatory agencies and LEC interconnection agreements arbitrated and approved by state regulatory agencies. 25 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION AT&T has applied for permission to provide local service in all 50 states. At October 31, 1996, AT&T had received authority to provide service in 37 states and anticipates that it will receive the remaining approvals as the other states take the actions contemplated by the Telecommunications Act. While the Telecommunications Act makes clear that no state can prohibit AT&T or any other entity from providing local services, AT&T cannot be certain as to when it will receive certification in each state and the conditions that might attach to each such certification. In addition to the matters referred to above, various other factors, including market acceptance, start-up and ongoing costs associated with the provision of new services and local conditions and obstacles, could adversely affect the timing and success of AT&T's entrance into the local exchange services market and AT&T's ability to offer combined service packages that include local service. Because it is widely anticipated that substantial numbers of long-distance customers will seek to purchase local, interexchange and other services from a single carrier as part of a combined or full service package, any competitive disadvantage, inability to profitably provide local service at competitive rates or delays in providing local service or combined service packages could adversely affect AT&T's future revenues and earnings. In addition, the simultaneous entrance of numerous new competitors for interexchange and combined service packages is likely to adversely affect AT&T's long-distance revenues and could adversely affect earnings. COMPETITION AT&T currently faces significant competition and expects that the level of competition will continue to increase. The Telecommunications Act has already begun to intensify the competitive environment in recent months. Non-RBOC LECs, which are not required to implement the Telecommunications Act competitive checklist prior to offering long-distance in their home markets, have begun integrating their local service offerings with long-distance offerings in advance of AT&T being able to offer combined local and long-distance service in these areas. If such non-RBOC LECs continue to offer combined services without offering reasonable terms of interconnection and service elements at competitive rates, AT&T's revenues and earnings in these service regions will be adversely affected. Similarly, to the extent that the RBOCs obtain in-region interLATA authority before the Telecommunications Act s checklist of conditions have been fully implemented and adequate facilities-based local exchange competition exists, there is a substantial risk that AT&T and other interexchange service providers would be at a disadvantage to the RBOCs in 26 AT&T Form 10-Q - Part I MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION providing both local service and combined service packages. Furthermore, the recently announced merger of British Telecommunications PLC and MCI Communications Corp. will create a large, well-capitalized competitor for AT&T's offerings, domestically as well as internationally, with substantial financial, technical, marketing and other resources and a large worldwide installed base of customers. FORWARD LOOKING STATEMENTS Except for the historical statements and discussions contained herein, statements contained in this Report on Form 10-Q constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any Form 10-K, Annual Report to Shareowners, Form 10-Q or Form 8-K of AT&T may include forward looking statements. In addition, other written or oral statements which constitute forward looking statements have been made and may in the future be made by or on behalf of AT&T. These forward-looking statements rely on a number of assumptions concerning future events, and are subject to a number of uncertainties and other factors, many of which are outside AT&T's control, that could cause actual results to differ materially from such statements. Readers are cautioned not to put undue reliance on such forward looking statements. These factors and uncertainties include the adoption of balanced and effective rules and regulations by the state public regulatory agencies, AT&T's ability to achieve a significant market penetration in new markets and the related costs thereof, and competitive pressures. For a more detailed description of the uncertainties and other factors that could cause actual results to differ materially from such forward-looking statements, see the discussion thereof contained in the Company's Form 10-Q for the quarter ended June 30, 1996 under the section entitled "Forward Looking Statements". AT&T disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 27 AT&T Form 10-Q - Part II Part II - Other Information Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit: Exhibit Number 12 Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule (b) Reports on Form 8-K: Form 8-K dated July 18, 1996 was filed pursuant to Item 5 (Other Events) and Item 7 (Financial Statements and Exhibits). Form 8-K dated August 19, 1996 was filed pursuant to Item 5. Form 8-K dated September 18, 1996 was filed pursuant to Items 5 and 7. Form 8-K dated September 24, 1996 was filed pursuant to Item 2 (Acquisition or Disposition of Assets) and Items 5 and 7. 28 AT&T Form 10-Q SIGNATURES Pursuant to the requirements 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. AT&T Corp. Date November 12, 1996 M. B. Tart Vice President and Controller (Principal Accounting Officer) 29 AT&T Form 10-Q EXHIBIT INDEX EXHIBIT NUMBER 12 Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule EX-12 2 1 Exhibit 12 Form 10-Q For the Nine Months Ended September 30, 1996 AT&T Corp. Computation of Ratio of Earnings to Fixed Charges (Dollars in Millions) (Unaudited) For the Nine Months Ended September 30, 1996 Earnings Before Income Taxes .......................... $6,904 Less Interest Capitalized during the Period........................................... 141 Less Undistributed Earnings of Less than 50% Owned Affiliates..................................... 120 Add Fixed Charges...................................... 921 Total Earnings......................................... $7,564 Fixed Charges Total Interest Expense Including Capitalized Interest.. $ 764 Interest Portion of Rental Expense..................... 157 Total Fixed Charges................................ $ 921 Ratio of Earnings to Fixed Charges..................... 8.2 EX-27 3
5 This schedule contains summary financial information extracted from the unaudited balance sheet of AT&T at September 30, 1996 and the unaudited consolidated statement of income for the nine-month period ended September 30, 1996 and is qualified in its entirety by reference to such financial statemnts. 1,000,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 568 0 10,595 1,286 0 18,940 36,263 18,538 56,478 16,242 7,851 0 0 1,619 19,434 56,478 0 38,946 0 32,040 0 1,629 292 6,904 2,538 4,366 (81) 0 0 4,285 $2.66 0
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