<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-01223
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 3, 1996
$1,500,000,000
LUCENT TECHNOLOGIES
$750,000,000 6.90% NOTES DUE JULY 15, 2001 LOGO
$750,000,000 7.25% NOTES DUE JULY 15, 2006
------------------------
Interest on the Notes is payable on January 15 and July 15 of each year,
commencing January
15, 1997. The Notes are not redeemable prior to maturity. Each series of the
Notes will be represented by one or more global Notes registered in the name of
the nominee of The Depository Trust Company. Beneficial interests in the global
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by DTC and its participants. Except as described herein,
Notes in definitive form will not be issued. The Notes will be issued only in
denominations of $1,000 and integral multiples thereof. See "Description of
Notes".
Application will be made to list the Notes on the New York Stock Exchange.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Per 6.90% Note due 2001.......... 99.798% 0.550% 99.248%
Total............................ $748,485,000 $4,125,000 $744,360,000
Per 7.25% Note due 2006.......... 99.787% 0.650% 99.137%
Total............................ $748,402,500 $4,875,000 $743,527,500
</TABLE>
- ---------------
(1) Plus accrued interest from July 15, 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $650,000 payable by the Company.
------------------------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the Notes
will be ready for delivery in book-entry form only through the facilities of DTC
in New York, New York, on or about July 22, 1996, against payment therefor in
immediately available funds.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
------------------------
The date of this Prospectus Supplement is July 17, 1996.
<PAGE> 2
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by Lucent Technologies Inc. (the
"Company") with the Securities and Exchange Commission ("SEC") (File No.
1-11639) and are incorporated herein by reference.
(1) The Company's Registration Statement on Form 10 (No. 1-11639) filed
with the Commission on February 26, 1996 (the "Form 10") including
the exhibits thereto, as amended by Amendment No. 1 thereto filed on
Form 10/A on March 12, 1996 and Amendment No. 2 thereto filed on
Form 10/A on March 22, 1996 and Amendment No. 3 thereto filed on
Form 10/A on April 1, 1996.
(2) The Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1996.
(3) The Company's Current Report on Form 8-K dated April 4, 1996.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 ("Exchange Act") subsequent to the date of this
Prospectus Supplement and prior to the completion of the offering of the Notes
shall be deemed to be incorporated by reference in this Prospectus Supplement
and to be part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus Supplement to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus Supplement. The SEC maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding the Company. The address of such site is
http://www.sec.gov.
Copies of the above documents, other than exhibits unless specifically
incorporated by reference into the information that this Prospectus Supplement
or the Prospectus dated April 3, 1996 incorporates, may be obtained upon request
without charge from the Secretary's Department, Lucent Technologies Inc., 600
Mountain Avenue, Murray Hill, New Jersey 07974 (telephone number 908-582-8500).
------------------------
This Prospectus Supplement contains trademarks, service marks or registered
marks of the Company, AT&T Corp. ("AT&T"), their respective subsidiaries, and
other companies as indicated.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF EACH SERIES OF
NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
THE COMPANY
The following information with regard to the Company is qualified in its
entirety by and should be read together with the more detailed information and
financial statements included or incorporated by reference in this Prospectus
Supplement and the Prospectus dated April 3, 1996. As used herein, references to
the "Company" include the historical operating results and activities of, and
assets and liabilities assigned to, the businesses and operations which comprise
the Company as of the date hereof.
The Company is one of the world's leading designers, developers and
manufacturers of telecommunications systems, software and products. The Company
is a global market leader in the sale of public telecommunications systems, and
is a supplier of systems or software to 23 of the world's 25 largest network
operators. The Company is also a global market leader in the sale of business
communications systems and in the sale of microelectronic components for
communications applications to manufacturers of communications systems and
computers. Further, the Company is the largest supplier in the United States of
telecommunications products for consumers. In addition, the Company has provided
engineering, installation, maintenance or operations support services to over
250 network operators in 75 countries, over 1.4 million business locations in
the United States, and approximately 100,000 business locations in over 90 other
countries. The Company's research and development activities are conducted
through Bell Laboratories ("Bell Labs"), which consists of approximately
three-quarters of the total resources of the Bell Laboratories Division of AT&T,
one of the world's foremost industrial research and development organizations.
The Company's revenues of $21,413 million for the year ended December 31,
1995, were generated from the sale of systems for network operators (54% of
total revenues), business communications systems (24%), microelectronic products
(9%), consumer products (8%), and other systems and products, including
integrated systems for the United States government (5%). In 1995, approximately
77% of the Company's revenue was generated from sales in the United States and
approximately 23% internationally (including exports). For the year ended
December 31, 1995, the Company recorded a net loss of $867 million, including
restructuring and other charges of $2,801 million before taxes (or $1,847
million after taxes.)
SYSTEMS FOR NETWORK OPERATORS. The Company's systems and software enable
network operators to provide wireline and wireless local, long distance and
international voice, data and video communications services. The Company's
switching, transmission and cable systems are packaged and customized with
application software, operations support systems and associated professional
services, and range in size from small rural telephone systems to some of the
world's largest wireline and wireless networks. The Company's network operator
customers include local, long distance and international telecommunications
companies and cable television companies. The Company has a wireline local
access installed base (the number of access lines serviced by switches
manufactured by the Company) of approximately 110 million lines, representing
approximately 58% of the United States and 13% of the worldwide installed base.
The Company's wireless systems are in operation in nine of the top ten United
States Metropolitan Statistical Areas ("MSAs").
BUSINESS COMMUNICATIONS SYSTEMS. The Company's business systems are
primarily customer premises-based telecommunications systems which are used in
networks that enable businesses to communicate within and between locations. The
Company has the largest installed base in the United States of private branch
exchanges ("PBXs"), key systems, structured cabling systems and voice processing
systems. In addition, the Company's direct sales, installation and maintenance
force works with business customers to integrate the Company's hardware and
software into customized applications such as call centers, which support such
customer services as banking by telephone and airline reservations. The Company
serves over 1.4 million business locations in the United States and
approximately 100,000 business locations in over 90 other countries.
S-3
<PAGE> 4
MICROELECTRONIC PRODUCTS. The Company's microelectronic components include
high-performance integrated circuits ("ICs"), electronic power systems and
optoelectronic components for communications applications. These microelectronic
products are important components of many of the Company's own systems and
products. The Company also supplies these components to other manufacturers of
communications systems and computers. The Company is a market leader in several
IC product areas critical to communications applications, including digital
signal processors ("DSPs") for digital cellular telephones and standard-cell
application specific integrated circuits ("ASICs"). The Company's DSPs were
included in more than half of the world's digital cellular telephones shipped in
the year ended December 31, 1995.
CONSUMER PRODUCTS. The Company offers a wide range of corded, cordless and
cellular telephones, telephone answering systems and related accessories in the
United States for consumers and small businesses. In 1995, the Company sold 31%
of the corded telephones, 28% of the cordless telephones and 35% of the
telephone answering systems sold in the United States, approximately double the
market share of any single competitor in each of these categories.
RECENT DEVELOPMENTS
The Company was formed following the announcement in September 1995 by AT&T
of its intention to create a separate company comprised of the AT&T systems and
technology businesses and operations. On April 10, 1996 (the "IPO Closing
Date"), the Company issued 112,037,037 shares of its Common Stock in an initial
public offering("IPO"). Following the issuance of such shares, AT&T owns
approximately 82.4% of the Company's outstanding shares of Common Stock. AT&T
has also announced its intention to distribute to its shareholders by the end of
1996, which may be as early as the end of September, subject to certain
conditions, all of its remaining shares of the Company's Common Stock (the
"Distribution").
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Notes
towards refunding a portion of its outstanding commercial paper which was
originally issued by AT&T and assumed by the Company on the IPO Closing Date.
Such commercial paper had an effective average interest rate of 5.39% at June
28, 1996.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited ratios of earnings to fixed
charges of the Company and its subsidiaries.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1996 1995 1994 1993 1992 1991
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
* * 3.2 2.8 1.7 *
</TABLE>
For the purpose of calculating the ratio: (i) earnings have been calculated
by adding fixed charges to income before income taxes, and by deducting
therefrom interest capitalized during the period and the Company's share of the
undistributed income in less-than-fifty-percent-owned affiliates; and (ii) fixed
charges comprise total interest (including capitalized interest) and the portion
of rentals representative of the interest factor.
- ---------------
* For the quarter ended March 31, 1996, and the years ended December 31,
1995 and 1991, the ratio computations indicate that earnings were inadequate to
cover fixed charges by $176 million, $1,154 million and $1,529 million,
respectively. The years ended December 31, 1995 and 1991 include pre-tax
restructuring and other charges of $2,801 million and $1,006 million,
respectively.
S-4
<PAGE> 5
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company defined as short-term debt, long-term debt and stockholder's equity (i)
as of December 31, 1995, (ii) as of March 31, 1996, (iii) as of March 31, 1996,
adjusted to reflect the consummation of the IPO on a pro forma basis, and (iv)
as of March 31, 1996, adjusted to reflect on a pro forma basis consummation of
the IPO, the issuance of the Notes offered hereby and the application of the
estimated proceeds therefrom to repay a portion of the indebtedness assumed by
the Company on the IPO Closing Date. The historical consolidated balance sheet
data at December 31, 1995, set forth below is derived from, and is qualified by
reference to, the audited historical consolidated financial statements and notes
thereto in the Company's Current Report on Form 8-K dated April 4, 1996,
incorporated by reference in this document. The historical and pro-forma
consolidated balance sheet data at March 31, 1996, set forth below is derived
from, and is qualified by reference to, the unaudited consolidated financial
statements in the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1996, incorporated by reference in this document. The information set
forth below should be read in conjunction with those financial statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in the Company's Current Report on Form 8-K
dated April 4, 1996, and Quarterly Report on Form 10-Q for the period ended
March 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31, 1996
1995 (UNAUDITED)
----------------- ----------------------------------------
IPO DEBT
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
----------------- ---------- ------------ ----------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Short-term debt:
Debt maturing within one year....... $ 49 $ 72 $ 72 $ 72
Debt sharing amount in anticipation
of the commercial paper program... 3,842 3,842 --(c) --
Commercial paper program............ -- -- 3,701(c) 2,201(d)
Working capital facility............ -- 1,914 --(b) --
------ ------ -------- ------
Total short-term debt............... $ 3,891 $ 5,828 $ 3,773 $ 2,273
------ ------ -------- ------
Long-term debt........................... 123 132 273(c) 1,773(d)
Stockholder's equity
Common stock........................ -- -- 6(a) 6
Preferred stock (authorized but
unissued)......................... -- -- -- --
Additional paid-in capital.......... 1,406 (522) 2,359(a) 2,359
Foreign currency translation........ 28 (10) (10) (10)
Retained deficit.................... -- (31) (31) (31)
------ ------ -------- ------
Total stockholder's equity.......... 1,434 (563) 2,324 2,324
------ ------ -------- ------
Total capitalization..................... $ 5,448 $ 5,397 $ 6,370 $ 6,370
====== ====== ======== ======
</TABLE>
- ---------------
(a) Reflects the sale of 112,037,037 shares of Common Stock at the IPO price of
$27 per share, less underwriting discounts and commissions of $1.05 per
share and net of expenses. In addition, reflects the acquisition by AT&T on
April 2, 1996 of an additional 524,623,894 shares of Common Stock.
(b) Reflects the use of proceeds of the IPO to repay the $1,914 of indebtedness
outstanding under the working capital facility.
(c) The debt sharing amount shown as outstanding at March 31, 1996 was replaced
with commercial paper issued by AT&T and assumed by the Company on the IPO
Closing Date and other debt obligations to be assumed by the Company.
(d) Reflects the issuance of the $1,500 million of debt offered hereby and
application of the proceeds, prior to deduction of underwriting discounts
and expenses, to pay down a portion of the commercial paper program.
S-5
<PAGE> 6
SUMMARY FINANCIAL DATA AND DISCUSSION
SELECTED FINANCIAL DATA
The following table presents summary historical financial data of the
Company. The information set forth below should be read in conjunction with "Pro
Forma Condensed Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements and notes thereto in the Company's Current Report on Form 8-K dated
April 4, 1996 and Quarterly Report on Form 10-Q for the period ended March 31,
1996 incorporated by reference in this Prospectus Supplement. The consolidated
statement of operations data set forth below for each of the years ended
December 31, 1995, 1994 and 1993 and for the three months ended March 31, 1996
and 1995 are derived from, and are qualified by reference to, the audited
consolidated financial statements included in the Current Report on Form 8-K,
dated April 4, 1996, the unaudited consolidated financial statements in the
Quarterly Report on Form 10-Q for the period ended March 31, 1996 and in each
case incorporated by reference herein, and should be read in conjunction with
those financial statements and the notes thereto.
The historical financial information may not be indicative of the Company's
future performance and does not necessarily reflect what the financial position
and results of operations of the Company would have been had the Company
operated as a separate, stand-alone entity during the periods covered. Per share
data for net income and dividends have not been presented because the Company's
businesses were operated through various divisions and subsidiaries of AT&T for
the periods presented.
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------------------
1995 1994 1993 1996 1995
------- ------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
STATEMENT OF OPERATIONS DATA
Revenues............................... $21,413 $19,765 $17,734 $ 4,577 $ 4,159
Costs(1)............................... 12,945 11,337 10,088 2,753 2,309
Gross margin......................... 8,468 8,428 7,646 1,824 1,850
Operating expenses
Selling, general and administrative
expenses(1)....................... 7,083 5,360 5,016 1,341 1,255
Research and development
expenses(1)....................... 2,385 2,097 1,961 583 572
Operating income (loss)................ (1,000) 971 669 (100) 23
Interest expense....................... 302 270 243 76 81
Other income -- net.................... 164 83 193 7 21
Income (loss) before income taxes and
cumulative effects of accounting
changes.............................. (1,138) 784 619 (169) (37)
Income (loss) before cumulative effects
of accounting changes................ (867) 482 430 (103) (22)
Cumulative effects of accounting
changes.............................. -- -- (4,208) -- --
Net income (loss)(1)................... $ (867) $ 482 $(3,778) $ (103) $ (22)
STATEMENT OF CASH FLOWS DATA
Depreciation and amortization.......... $ 1,493 $ 1,311 $ 1,213 $ 305 $ 396
Capital expenditures................... 1,277 878 577 268 179
</TABLE>
- ---------------
(1) 1995 includes pre-tax restructuring and other charges of $2,801 ($1,847
after taxes) recorded as $892 of costs, $1,645 of selling, general and
administrative expenses and $264 of research and development expenses.
S-6
<PAGE> 7
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The unaudited pro forma condensed balance sheet set forth below has been
prepared assuming that the IPO and related transactions occurred on March 31,
1996. The unaudited pro forma balance sheet presented below does not purport to
represent what the Company's financial position actually would have been had the
IPO and related transactions occurred on the date indicated or to project the
Company's financial position for any future date. The unaudited pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable. The unaudited historical balance sheet and
the unaudited pro forma balance sheet should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the unaudited historical financial statements and the notes
thereto included in the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1996, incorporated by reference herein.
<TABLE>
<CAPTION>
AT MARCH 31, 1996
------------------------------------------------
IPO
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.......................................... $ 174 $ 1,473(a,b,c) $ 1,647
Accounts receivable -- net......................................... 4,789 4,789
Inventories........................................................ 3,497 3,497
Contracts in process............................................... 460 460
Deferred income taxes -- net....................................... 1,539 1,539
Other current assets............................................... 224 224
------------ ------------ ------------
Total current assets...................................... 10,683 1,473 12,156
Property, plant and equipment -- net............................... 4,516 4,516
Prepaid pension costs.............................................. 2,622 2,622
Deferred income taxes -- net....................................... 852 852
Capitalized software............................................... 360 360
Other assets....................................................... 914 914
------------ ------------ ------------
Total assets.............................................. $ 19,947 $ 1,473 $ 21,420
=========== =========== ===========
LIABILITIES
Accounts payable................................................... $ 1,671 $ -- $ 1,671
Payroll and benefit-related liabilities............................ 2,425 2,425
Postretirement and postemployment benefit liabilities.............. 221 221
Debt sharing amount in anticipation of the assumption of the
commercial paper program......................................... 3,842 (3,842)(d) --
Commercial paper program........................................... -- 3,701(d) 3,701
Working capital facility........................................... 1,914 (1,914)(b) --
Debt maturing within one year...................................... 72 72
Other current liabilities.......................................... 2,828 500(c) 3,328
------------ ------------ ------------
Total current liabilities................................. 12,973 (1,555) 11,418
Postretirement and postemployment benefit liabilities.............. 5,831 5,831
Long-term debt..................................................... 132 141(d) 273
Other liabilities.................................................. 1,574 1,574
------------ ------------ ------------
Total liabilities......................................... 20,510 (1,414) 19,096
STOCKHOLDER'S EQUITY
Common stock....................................................... -- 6(a) 6
Additional paid-in capital......................................... (522) 2,881(a) 2,359
Foreign currency translation....................................... (10) (10)
Retained deficit................................................... (31) (31)
------------ ------------ ------------
Total stockholder's equity................................ (563) 2,887 2,324
------------ ------------ ------------
Total Liabilities/Stockholder's Equity.................... $ 19,947 $ 1,473 $ 21,420
=========== =========== ===========
</TABLE>
- ---------------
(a) Reflects the sale of the 112,037,037 shares of Common Stock at the IPO price
of $27 per share, less underwriting discounts and commissions of $1.05 per
share and net of expenses. In addition, reflects the acquisition by AT&T on
April 2, 1996 of an additional 524,623,894 shares of Common Stock.
(b) Reflects the use of the proceeds of the IPO to repay the $1,914 of
indebtedness outstanding under the working capital facility.
(c) Gives effect to the prepayment by AT&T in April 1996 of $500 to be applied
to purchases by AT&T that are due and payable on or after January 1, 1997
for products, licensed materials and services from the Company.
(d) The debt sharing amount shown as outstanding at March 31, 1996 was replaced
with commercial paper issued by AT&T and assumed by the Company on the IPO
Closing Date and other debt obligations to be assumed by the Company.
S-7
<PAGE> 8
DISCUSSION
Prior to February 1, 1996, AT&T conducted the Company's businesses through
various divisions and subsidiaries. On February 1, 1996, AT&T began transferring
to the Company the assets and liabilities related to such businesses (the
"Separation") except that AT&T retained accounts receivable having a face amount
of approximately $2,000 million. The Separation was substantially completed,
including the transfer of substantially all the assets and liabilities, by the
IPO Closing Date. The transfer of certain international assets which are not
material to the Company in the aggregate is pending receipt of consents or
approvals or satisfaction of other applicable foreign requirements. The
Company's financial statements assume the consummation of all such transactions.
In addition, employee benefits assets are being held by AT&T or employee benefit
trusts subject to agreements to transfer these assets to the Company or trusts
established by the Company following the Distribution. After the completion of
the IPO, AT&T owns approximately 82.4% of the outstanding shares of Common
Stock.
The consolidated financial statements of the Company incorporated by
reference herein reflect the results of operations, financial position and cash
flows of the businesses transferred to the Company from AT&T in the Separation.
As a result, the consolidated financial statements of the Company have been
carved out from the financial statements of AT&T using the historical results of
operations and historical basis of the assets and liabilities of such
businesses. Additionally, the consolidated financial statements of the Company
include certain assets, liabilities, revenues and expenses which were not
historically recorded at the level of, but are primarily associated with, such
businesses. Management believes the assumptions underlying the Company's
financial statements to be reasonable.
The financial information included and incorporated by reference herein,
however, may not necessarily reflect the results of operations, financial
position and cash flows of the Company in the future or what the results of
operations, financial position and cash flows would have been had the Company
been a separate, stand-alone entity during the periods presented. This is due to
the historical operation of the Company as part of the larger AT&T enterprise.
The financial information included and incorporated by reference herein does not
reflect the many significant changes that will occur in the funding and
operations of the Company as a result of the Separation and the IPO.
There are a number of factors that contribute to variability in the
Company's business. This variability can produce wide fluctuations in revenues
and earnings quarter to quarter, and in some cases year to year. Variability is
not a new trend and the Company expects it to continue, and possibly intensify.
The factors contributing to variability include seasonality, multi-year
contracts and associated revenue recognition.
The Company's sales are highly seasonal. Most of the Company's large
customers delay a large and growing percentage of their capital expenditures
until the fourth quarter. The Company had placed an increased focus on the
completion of software releases by mid-year to allow for commercial availability
and delivery in the fourth quarter. These software releases require significant
research and development expenditures early in the year, with minimal offsetting
revenues, but are key contributors to the Company's profits during the fourth
quarter. Additionally, sales of consumer products in the retail markets are
generally stronger in the fourth quarter, corresponding to holiday buying.
As a result of growing competitive pressures among network operators (which
have led to an increasing emphasis on return on investment and the budgeting
process), along with the increasing prominence of software as a percentage of
the Company's revenues, the trend toward seasonality has been increasing.
The Company's revenues and net income have been strongest in the fourth
quarter of each year, representing 34.7% and 31.7% of consolidated revenues and
84.7% (before restructuring and other charges) and 83.6% of net income for the
periods ended December 31, in 1995 and 1994,
S-8
<PAGE> 9
respectively. Consequently, the Company's results of operations for the first
three quarters of each year have in the aggregate been significantly less
profitable than the fourth quarter and the Company has frequently experienced
net losses in the first quarter.
In recent years, the purchasing behavior of the Company's large customers
has increasingly been characterized by the use of fewer, larger contracts. This
trend is expected to intensify, and contributes to the variability of the
Company's results. Such larger purchase contracts typically involve longer
negotiating cycles, require the dedication of substantial amounts of working
capital and other Company resources, and in general require investments which
may substantially precede recognition of associated revenues. Moreover, in
return for larger, longer-term purchase commitments, customers often demand more
stringent acceptance criteria, which can also cause revenue recognition delays.
Certain multi-year contracts may relate to new technologies which may not have
been previously deployed on a large-scale commercial basis. The Company may
incur significant initial cost overruns and losses on such contracts which would
be recognized in the quarter in which they became ascertainable. Further profit
estimates on such contracts are revised periodically over the lives of the
contracts, and such revisions can have a significant impact on reported earnings
in any one quarter.
Revenue recognition for work on multi-year contracts is based upon the
specific terms and conditions of each contract which may vary markedly.
Therefore, the amount of purchases actually contracted for or deployed in a
period may differ substantially from the revenues realized for the same period.
BUSINESS
The Company is one of the world's leading designers, developers and
manufacturers of telecommunications systems, software and products. The Company
is a global market leader in the sale of public telecommunications systems, and
is a supplier of systems and software to 23 of the world's 25 largest network
operators. The Company is also a global market leader in the sale of business
communications systems and in the sale of microelectronic components for
communications applications to manufacturers of communications systems and
computers. Further, the Company is the largest supplier in the United States of
telecommunications products for consumers. In addition, the Company has provided
engineering, installation, maintenance or operation support services to over 250
network operators in 75 countries, over 1.4 million business locations in the
United States and approximately 100,000 business locations in over 90 other
countries. The Company's research and development activities are conducted
through Bell Labs, which consists of approximately three-quarters of the total
resources of AT&T's former Bell Laboratories division, one of the world's
foremost industrial research and development organizations.
The Company's revenues of $21,413 million for the year ended December 31,
1995, were generated from the sale of systems for network operators (54% of
total revenues), business communications systems (24%), microelectronic products
(9%), consumer products (8%), and other systems and products, including
integrated systems for the United States government (5%). In 1995, approximately
77% of the Company's revenue was generated from sales in the United States and
approximately 23% internationally (including exports). For the year ended
December 31, 1995, the Company recorded a net loss of $867 million, including
restructuring and other charges of $2,801 million before taxes (or $1,847
million after taxes).
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The following table sets forth the revenues by product line for each of the
five years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Systems for Network Operators.......... $11,459 $10,841 $ 9,367 $ 9,616 $ 9,028
Business Communications Systems........ 5,144 4,557 3,982 3,689 3,610
Microelectronic Products............... 1,864 1,461 1,323 1,167 781
Consumer Products...................... 1,787 1,924 1,816 1,934 1,934
Other Systems and Products............. 1,159 982 1,246 906 959
------- ------- ------- ----------- -----------
Total............................... $21,413 $19,765 $17,734 $17,312 $16,312
======== ======== ======== ========== ==========
</TABLE>
SYSTEMS FOR NETWORK OPERATORS
The Company designs, develops, manufactures and services systems and
software which enable network operators to provide wireline and wireless local,
long distance and international voice, data and video services and cable
television service. The Company's networks, which include switching,
transmission and cable systems, are packaged and customized with application
software, operations support systems and associated professional services.
Systems and Services
Telecommunications Networking Systems. The Company designs, develops,
manufactures and services advanced telecommunications networking systems, which
include equipment, software and associated professional services. These systems
connect, route, manage and store voice, data and video in any combination, and
are used for: wireline access; local and long distance switching; intelligent
network services and signaling; wireless communications, including both cellular
and personal communications services ("PCS"); and high-speed, broadband
multifunctional communications.
The Company is one of the world's largest suppliers in each of the five
broad elements that comprise telecommunications networks: switching systems,
which route information through the network; transmission systems, which provide
the communications path through the network that carries information between
points in the network; operation support systems, which enable service providers
to manage the work flow, planning, surveillance, management, provisioning and
continuous testing of their networks; intelligent network/application software,
which enables service providers to offer a broad array of enhanced and
differentiated services; and cable systems, which provide the transport media
between points in a network. These systems collectively comprise the
infrastructure that enables telecommunications network operators to provide
traditional narrowband voice and data services and that enables both new and
traditional network operators to offer broadband multifunctional services. The
Company's primary switching products are the 5ESS switch for local and long
distance switching and international gateways, and the 4ESS(TM) Digital Switch
for long distance and international switching.
Wireless Network Systems. The Company designs, develops, manufactures and
services wireless network infrastructure systems, which include the 5ESS switch,
base stations, wireless network software and operation support systems. These
systems provide network operators with the capability to offer a wide range of
cellular and other wireless communications services, including PCS, wireless
data and fixed wireless access. The Company's sales of wireless infrastructure
systems have grown as a percent of total revenues from 6.1% in 1993 to 10.3% in
1995.
The Company's primary wireless system is the AUTOPLEX(R) System 1000
product family, which includes the Series II base station. The base station
contains the radio transceiver that establishes wireless communications with a
mobile telephone. Base stations are arranged geographically so
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<PAGE> 11
that mobile customers can be "handed off " seamlessly from one base station to
the next as they travel. The network intelligence to accomplish this is housed
in the Company's Mobile Switching Center, which includes the 5ESS switch and
which connects the base stations to the public telephone network. The Company
also offers base stations for start-up applications and smaller markets, a
minicell product for rural and international markets and a microcell for
congested, high traffic areas.
Wireless technology is evolving from analog to digital. The Company
provides networks based on a variety of the leading air interface standards:
AMPS, CDMA, TDMA and GSM. In addition, the Company designs, develops,
manufactures and services fixed wireless access systems. The Company offers
Wireless Subscriber Systems, which support the AMPS standard, and the new
AIRLOOP(R) Wireless Local Loop system, which utilizes CDMA technology. Also, as
part of the acquisition of certain operations and subsidiaries of Philips
primarily in France and Germany, the Company acquired Philips' fixed wireless
system, which is based on the DECT (digital enhanced cordless telephone)
standard. All three systems enable network operators to expand their networks in
markets where traditional wireline systems are not cost justified, and to
provide telephone services as an alternative to traditional network operators.
The Company designs, develops, manufactures, and services CDPD-based
wireless data systems which enable wireless network operators to offer data
services as an overlay to their existing analog voice infrastructure without
acquiring additional spectrum or upgrading to a digital network. These systems
offer the increased reliability and efficiency of switched digital packet data
systems.
Due to the complexity of wireless systems, the Company also offers a broad
range of professional services, which include project management, site
acquisition, radio frequency engineering, microwave relocation, construction
management, cellular optimization and wireless data support.
Markets
The principal customers for the Company's systems are network operators
that provide wireline and wireless local, long distance and international
telecommunications services. The Company's systems for network operators are
installed to expand the capacity and features offered by existing networks, to
replace older technology in existing networks and to establish new networks for
entrants into deregulated or previously unserved markets.
The Company markets and sells its products worldwide primarily through a
direct sales force due to the complexity of these systems. Most of the Company's
sales of systems for network operators are made pursuant to general purchase
agreements, which establish the terms and conditions and provide for price
determination to be made on a contract bid basis. In addition, certain of the
large infrastructure projects are conducted under long-term, fixed-price
contracts.
As a result of the increased complexity of systems for network operators
and the high cost of developing and maintaining in-house expertise, network
operators demand complete, integrated and turn-key projects. Network operators
increasingly are seeking overall network or systems solutions that require an
increased software content which would enable them to deploy rapidly new and
differentiable services. In response, the Company has formed an organization
focused on turn-key network engineering projects for both public and private
sector customers. The Company markets integrated solutions whereby the Company
assumes full responsibility for the project, and engineers, designs and installs
the network, including equipment and software manufactured by both the Company
and third parties. In certain cases, operation of the network through contract
also may be included in the project.
S-11
<PAGE> 12
Competition
The Company believes that it enjoys a strong competitive position due to
its broad product line, large installed base, strong relationship with key
customers, technological expertise and new product development capabilities. The
primary competitors in the market for telecommunications systems, in addition to
the Company, are four very large European and North American companies which
have substantial technological and financial resources and which offer similar
broad product catalogs. These competitors are Alcatel Alsthom, Northern Telecom
Limited, Siemens AG and Telefonaktiebolaget LM Ericsson. In 1994, the Company
and these four competitors collectively accounted for over 35% of the world's
public network systems sales, of which the Company's sales of systems for
network operators accounted for 8%.
In addition, in all of the Company's product areas other than switching,
the Company faces significant competition from companies which do business in
one or a number of such product areas. For example, in wireless systems,
Motorola, Inc. and Nokia Corporation, both of which are very large companies
with substantial technological and financial resources, are significant
competitors. In transmission and cable systems, the markets are highly
fragmented and include hundreds of smaller competitors.
BUSINESS COMMUNICATIONS SYSTEMS
The Company designs, develops, manufactures and services telecommunications
systems and products for large and small business customers, home offices and
government agencies. The Company's business communications systems can be
upgraded regularly with new software releases, can support local and wide area
voice and data networking and are often integral components of global enterprise
networks. The Company's systems primarily are customer premises-based private
switching systems and products, call center systems, voice processing systems,
which include voice messaging and voice response systems, and the associated
application software and professional support services.
Markets
The Company markets its systems to large and small businesses and
government agencies. In the United States, the Company markets its systems
through the industry's largest direct sales force. Outside the United States,
the Company markets its systems directly and through a network of dealers and
distributors. The Company's systems are deployed in applications for customer
sales and service, conferencing and collaboration, mobility and distributed work
force, messaging and enterprise networking. The Company fields a large group of
application specialists to design call center, distance learning and other
customized applications.
Competition
The Company competes principally with three other large companies with
substantial technological and financial resources in the sale of business
communication systems. These competitors are Northern Telecom Limited, Siemens
AG (through its subsidiary Siemens Rolm Communications, Inc.) and Alcatel
Alsthom. Together with the Company, in 1994 these four competitors accounted for
approximately 40% of the sales of business communications systems globally, with
the Company accounting for approximately 8%. In addition, as the market
transforms to multifunctional systems, the Company expects that it also may
encounter competition from companies that design and manufacture data network
equipment.
MICROELECTRONIC PRODUCTS
The Company designs, manufactures and sells ICs, electronic power systems
and optoelectronic components for communications applications. These
microelectronic products are important components of many of the Company's own
systems and products. The Company also supplies
S-12
<PAGE> 13
these components to other manufacturers of communications systems and computers.
The Company is a market leader in several IC product areas critical to
communications applications, including DSPs for digital cellular phones and
standard-cell ASICs. The Company's DSPs were included in more than half of the
world's digital cellular telephones shipped in the year ended December 31, 1995.
Markets
The Company's microelectronic products are sold globally to manufacturers
of communications systems and computers. In addition, the Company's energy power
systems are sold directly to U.S. and foreign telephone companies. The Company's
customers are competing in markets characterized by rapid technological changes,
decreasing product life cycles, price competition and increased user
applications. These markets have experienced significant expansion in the number
and types of products they offer to end-users, particularly in personal
computing and portable access communication devices. As a result, the Company's
customers continue to demand components which are smaller, require less power,
are more complex, provide greater functionality, and are produced with shorter
design cycles and less manufacturing lead time. In 1995, more than half of the
Company's microelectronic production was sold to customers other than the
Company.
Competition
The Company believes that its success is due to technological leadership,
product leadership, and close relationships with key customers. The market for
microelectronic products is global and generally highly fragmented. The
Company's competitors differ widely among product categories. The Company's
competitors in certain IC product categories include Motorola, Inc. and Texas
Instruments Incorporated; in electronic power systems include Astec Industries,
Inc. and Unitech plc (through its subsidiary, NEMEC-Lambda); and in
optoelectronics include Fujitsu Limited and Northern Telecom Limited.
CONSUMER PRODUCTS
The Company designs, manufactures, services and leases communications
products for consumer, small office and home office use. In 1995, the Company
sold 31% of the corded telephones, 28% of the cordless telephones and 35% of the
telephone answering systems sold in the United States, approximately double the
market share of any single competitor in each of these categories. The Company
offers a broad range of cellular products which support all of the major United
States cellular standards.
Markets
The Company distributes its products in the United States through
approximately 900 retailers representing over 17,000 retail outlets, including
such national retailers as Wal-Mart Stores, Inc., Sears, Roebuck and Co.,
Circuit City Stores, Inc., Best Buy Co., Inc. and Service Merchandise Company.
Competition
The Company's competitors in consumer products are traditional consumer
electronic manufacturers. The industry is characterized by significant
consolidation within each product category, although the principal competitors
in each are different. In traditional telephone products, the Company's
principal competitors are Thomson Consumer Electronics (marketing under the GE
brand), U.S. Electronics, Inc. (marketing under the BellSouth brand), Panasonic
Co., USA and Sony Corporation which, together with the Company, accounted for
over 70% of market sales in the first three quarters of 1995, of which the
Company accounted for 31%.
S-13
<PAGE> 14
OTHER SYSTEMS AND PRODUCTS
The Company designs, develops and manufactures advanced technology systems
which support the United States federal government's need for specially designed
integrated systems for military and civilian use. The Company offers a full
range of products on a direct funding basis from the United States government.
These systems focus on undersea sensor systems, information processing and
secure communications. The funded research has generated commercial by-products
in lightwave transmission equipment, wireless communications systems and
multifunctional compression algorithms.
BELL LABORATORIES
Bell Labs consists of all of the operations of AT&T's former Bell
Laboratories division which support the businesses of the Company, and basic
research capability, which together comprise approximately three quarters of the
total resources of AT&T's former Bell Laboratories division. Bell Labs has made
significant discoveries and advances in communications science and technology,
software design and engineering, and networking. These contributions include the
invention of the transistor and the design and development of ICs and many types
of lasers. Areas of Bell Labs research and development work in recent years
include: networking software; lightwave transmission, which offers greater
transmission capacity than other transmission systems; electronic switching
technology, which enables rapid call processing, increased reliability and
reduced network costs; and microelectronics components, which bring the latest
advantages of very large scale integration to the full range of products offered
by the Company.
Since its founding in 1925, on average, one patent has been issued per
business day to Bell Labs. Further, seven Bell Labs scientists have received the
Nobel Prize for physics, seven have received the United States National Medal of
Science, and five have received the National Medal of Technology. In addition,
Bell Labs was the first institution to be awarded the National Medal of
Technology.
Bell Labs' research and development activities continue to focus on the
core technologies critical to the Company's success, which are software, network
design and engineering, microelectronics and photonics.
DESCRIPTION OF THE NOTES
The information herein concerning the Notes should be read in conjunction
with the statements under "Description of the Notes" in the Prospectus dated
April 3, 1996.
GENERAL
The 6.90% Notes due July 15, 2001 (the "Notes due 2001") and the 7.25%
Notes due July 15, 2006 (the "Notes due 2006") (collectively, the "Notes"), will
be issued under an indenture (the "Indenture"), dated as of April 1, 1996,
between the Company and The Bank of New York, as trustee (the "Trustee"). The
Notes due 2001 and the Notes due 2006 will each constitute a separate series
under the Indenture. The Notes due 2001 and the Notes due 2006 will mature on
July 15, 2001 and July 15, 2006, respectively. The Notes due 2001 will bear
interest at the rate of 6.90% per annum and the Notes due 2006 will bear
interest at the rate of 7.25% per annum. The Notes will be issued in fully
registered form only and in denominations of $1,000 and integral multiples
thereof.
Interest on the Notes will be paid from July 15, 1996 and will be payable
semiannually on each January 15 and July 15, commencing January 15, 1997, to the
persons in whose names the Notes are registered at the close of business on the
January 1 and July 1 as the case may be, prior to the payment date. Interest on
any Notes issued in definitive form (See "Book-Entry System" below), will be
payable at the office of the Trustee, 101 Barclay Street, New York, NY 10286, or
at such other
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<PAGE> 15
place or places as may be designated pursuant to the Indenture, provided that
the Company, at its option, may pay interest other than interest due at maturity
by check mailed to registered holders. At the maturity of the Notes, the
principal thereof, together with accrued interest thereon, will be payable in
immediately available funds upon surrender thereof at the office of the Trustee
or at such other place or places as may be designated pursuant to the Indenture.
The Notes will not be redeemable prior to maturity and will not be subject
to any sinking fund. The Notes will constitute unsecured and unsubordinated
indebtedness of the Company and will rank pari passu with the Company's other
unsecured and unsubordinated indebtedness.
BOOK-ENTRY SYSTEM
Each series of Notes will be represented by one or more global Notes (the
"Global Security"). Each Global Security will be deposited with, or on behalf
of, The Depository Trust Company (the "Depositary" or "DTC") and be registered
in the name of a nominee of the Depositary. Except under circumstances described
below, the Notes will not be issuable in definitive form.
Upon the issuance of a Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of persons designated
by the Underwriters with the respective principal amounts of the Notes
represented by the Global Security. Ownership of beneficial interests in a
Global Security will be limited to persons that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. Ownership of beneficial interests in a Global Security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary or its nominee (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons other than participants). The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by that Global
Security for all purposes under the Indenture. Except as provided below, owners
of beneficial interests in a Global Security will not be entitled to have Notes
represented by that Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Notes in definitive form and will
not be considered the owners or holders thereof under the Indenture.
Principal and interest payments on Notes registered in the name of the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the relevant Global Security. None of
the Company, the Trustee, any paying agent or the registrar for the Notes will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial interests in a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the relevant Global Security as shown on the records
of the Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interest in a Global Security held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name", and will be the responsibility of
such participants.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue Notes in definitive form in exchange for the entire
Global Security for each series of Notes. In addition, the
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<PAGE> 16
Company may at any time and in its sole discretion determine not to have Notes
represented by a Global Security and, in such event, will issue Notes in
definitive form in exchange for the entire Global Security relating to such
series of Notes. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
Notes represented by such Global Security equal in principal amount to such
beneficial interest and to have such Notes registered in its name. Notes so
issued in definitive form will be issued as registered Notes in denominations of
$1,000 and integral multiples thereof, unless otherwise specified by the
Company.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, and each of such Underwriters has severally agreed to
purchase, the respective principal amount of each series of Notes set forth
opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
OF NOTES OF NOTES
UNDERWRITER DUE 2001 DUE 2006
------------------------------------------------------- ------------- -------------
<S> <C> <C>
Goldman, Sachs & Co. .................................. $ 125,000,000 $ 125,000,000
Bear, Stearns & Co. Inc. .............................. 125,000,000 125,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................. 125,000,000 125,000,000
J.P. Morgan Securities Inc. ........................... 125,000,000 125,000,000
Morgan Stanley & Co. Incorporated...................... 125,000,000 125,000,000
Salomon Brothers Inc .................................. 125,000,000 125,000,000
-----------
Total........................................ $ 750,000,000 $ 750,000,000
===========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of both series of Notes, if
any are taken.
The Underwriters propose to offer each series of Notes in part directly to
the public at the respective initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain securities
dealers at such prices less a concession not to exceed 0.35% of the principal
amount of the Notes due 2001 and not to exceed 0.40% of the principal amount of
the Notes due 2006. The Underwriters may allow, and such dealers may reallow, a
concession not to exceed 0.25% of the principal amount of the Notes due 2001 and
not to exceed 0.25% of the principal amount of the Notes due 2006 to certain
brokers and dealers. After the Notes are released for sale to the public, the
offering prices and other selling terms may from time to time be varied by the
Underwriters.
Each series of Notes is a new issue of securities with no established
trading market. The Company has been advised by the Underwriters that the
Underwriters intend to make a market in each series of Notes but are not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for each
series of the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
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<PAGE> 17
LEGAL MATTERS
The validity of the Notes offered hereby and certain other legal matters
will be passed upon for the Company by Richard J. Rawson, Senior Vice President
and General Counsel of the Company. Certain legal matters will be passed upon
for the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The audited consolidated financial statements and financial statement
schedule included in the Company's Current Report on Form 8-K, dated April 4,
1996, have been incorporated herein by reference in this Prospectus Supplement
in reliance on the report of Coopers & Lybrand L.L.P., independent auditors,
given on the authority of that firm as experts in accounting and auditing.
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<PAGE> 18
PROSPECTUS
$3,500,000,000
LUCENT TECHNOLOGIES
NOTES AND WARRANTS
------------------------
Lucent Technologies Inc. (the "Company"), directly, through agents
designated from time to time, or through dealers or underwriters also to be
designated, may sell from time to time notes, debentures and other debt
securities (the "Notes") of the Company, and Warrants (the "Warrants") to
purchase Notes, for an aggregate offering price of up to $3,500,000,000, or the
equivalent thereof in one or more foreign currencies or currency units, on terms
to be determined at the time of sale. The specific designation, aggregate
principal amount, maturities, rates or method of calculating rates and time of
payment of interest, purchase price, any terms for redemption or repayment, the
currencies or currency units in which the Notes are denominated or payable,
whether the Notes are issuable in registered form or bearer form (with or
without interest coupons) or both, or in uncertificated form, whether Notes
initially will be represented by a single temporary or permanent global Note,
the duration, purchase price, exercise price and detachability of any Warrants,
and the agent, dealer or underwriter, if any, in connection with the sale of,
and any other terms with respect to, the Notes and/or Warrants in respect of
which this Prospectus is being delivered are set forth in the accompanying
Prospectus Supplement ("Prospectus Supplement"). The Company reserves the sole
right to accept and, together with its agents from time to time, to reject in
whole or in part any proposed purchase of Notes or Warrants to be made directly
or through agents.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
If an agent of the Company or a dealer or an underwriter is involved in the
sale of the Notes or Warrants in respect of which this Prospectus is being
delivered, the agent's commission or dealer's or underwriter's discount is set
forth in, or may be calculated from, the Prospectus Supplement and the net
proceeds to the Company from such sale will be the purchase price of such Notes
or Warrants less such commission in the case of an agent, the purchase price of
such Notes or Warrants in the case of a dealer or the public offering price less
such discount in the case of an underwriter, and less, in each case, the other
attributable issuance expenses. The aggregate proceeds to the Company from all
the Notes and Warrants will be the purchase price of Notes and Warrants sold,
less the aggregate of agents' commissions and dealers' and underwriters'
discounts and other expenses of issuance and distribution. The net proceeds to
the Company from the sale of Notes and Warrants are also set forth in the
Prospectus Supplement. See "Plan of Distribution" for possible indemnification
arrangements for the agents, dealers and underwriters.
------------------------
April 3, 1996
<PAGE> 19
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR
THE PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS
AND PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY ANY AGENT, DEALER OR UNDERWRITER. THE DELIVERY OF THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT SHALL NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS AND PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH THEY RELATE.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 ("Exchange Act") and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission ("SEC"). Such reports, proxy statements and other information filed
by the Company can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, and at the regional offices of the SEC located at 13th
Floor, 7 World Trade Center, New York, NY 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Such material can
also be inspected at the New York Stock Exchange. Copies of such material can
also be obtained at prescribed rates from the Public Reference Section of the
SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549.
------------------------
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the SEC (File
No. 1-11639) and are incorporated herein by reference.
(1) The Company's Registration Statement on Form 10 (No. 1-11639) filed
with the Commission on February 26, 1996 (the "Form 10") including the exhibits
thereto, as amended by Amendment No. 1 thereto filed on Form 10/A on March 12,
1996 and Amendment No. 2 thereto filed on Form 10/A on March 22, 1996 and
Amendment No. 3 thereto filed on Form 10/A on April 1, 1996.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Notes and Warrants shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in the accompanying Prospectus
Supplement modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
COPIES OF THE ABOVE DOCUMENTS, OTHER THAN EXHIBITS UNLESS SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THIS PROSPECTUS
INCORPORATES, MAY BE OBTAINED UPON REQUEST WITHOUT CHARGE FROM THE SECRETARY'S
DEPARTMENT, LUCENT TECHNOLOGIES INC., 600 MOUNTAIN AVENUE, MURRAY HILL, NEW
JERSEY 07974 (TELEPHONE NUMBER 908-582-8500).
2
<PAGE> 20
THE COMPANY
The Company was incorporated in November 1995 under the laws of the State
of Delaware and has its principal executive offices at 600 Mountain Avenue,
Murray Hill, New Jersey 07928 (telephone number 908-582-8500).
The Company is one of the world's leading designers, developers and
manufacturers of telecommunications systems, software and products. The Company
is a global market leader in the sale of public telecommunications network
systems, business communications systems and microelectronic components for
communications applications. Further, the Company is the largest supplier in the
United States of telecommunications products for consumers. In addition, the
Company supports network operators and businesses with engineering,
installation, maintenance and operations support services. The Company's
research and development activities are conducted through Bell Laboratories,
which consists of approximately three-quarters of the total resources of AT&T's
former Bell Laboratories division.
The Company's systems for network operators enable network operators to
provide wireline and wireless local, long-distance and international voice, data
and video services. The Company's networks include switching, transmission and
cable systems packaged and customized with application software, operations
support systems and associated professional services. The Company's business
systems are primarily customer premises-based telecommunications systems that
enable businesses to communicate within and between locations. The Company
designs, develops and sells high-performance integrated circuits, electronic
power systems and optoelectronic components for communications applications,
both for other manufacturers and for incorporation into its own systems and
products. In addition, the Company offers a wide range of communications
products in the United States for consumers and small businesses, including
corded, cordless and cellular telephones, telephone answering systems and
related accessories.
The Company is a majority owned subsidiary of AT&T Corp. ("AT&T"). AT&T has
announced its intention, subject to the satisfaction of certain conditions, to
divest its ownership interest in the Company by December 31, 1996 by means of a
tax-free distribution to its shareholders.
RECENT DEVELOPMENTS
The Company's business is highly seasonal, with revenue and net income
concentrated in the fourth quarter of the year. Consequently, during the three
quarters ending in March, June and September, the Company historically has not
been as profitable as in the quarter ending in December, and the Company
traditionally incurs losses in the first quarter. Such seasonality also causes
the Company's cash flow requirements to vary greatly from quarter to quarter.
In the first quarter of 1996, the Company expects to incur a net loss
before cumulative effects of accounting changes, net of taxes in the range of
$100 million to $140 million as compared to a net loss of $22 million in the
first quarter of 1995. For the second quarter of 1996, the Company expects that
it may earn substantially less than the $159 million earned in the second
quarter of 1995, resulting in a loss for the first half of 1996. There are
several factors influencing the significantly lower operating results
anticipated for the first half of 1996: (i) one-time expenses associated with
the Company's transition to operation as an independent publicly held company,
including replication and modification of information, payroll and financial
systems, and development of corporate identity programs; (ii) increased selling,
general and administrative expenses associated with plans that pre-date the
Company's restructuring decisions; (iii) the planned increase in expenditure by
the Company for research and development; and (iv) one-time costs associated
with the integration of the businesses purchased from Philips Electronics NV in
February 1996. The impact on selling, general and administrative expenses of the
actions taken in connection with the Company's strategic reorganization is not
expected to be realized until the second quarter of 1996 and subsequent periods.
USE OF PROCEEDS
The Company intends to use the proceeds from the sale of the Notes and
Warrants towards refunding of debt, capital expenditures and general corporate
purposes. The specific use of proceeds will be indicated in the
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<PAGE> 21
accompanying Prospectus Supplement hereto. The amount and timing of the sales of
the Notes and Warrants will depend on market conditions and the availability of
other funds to the Company.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratios of earnings
to fixed charges of the Company and its subsidiaries.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- ----------------------------------------
1995 1994 1993 1992 1991
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
-- 3.2 2.8 1.7 --
</TABLE>
For the purpose of calculating the ratio: (i) earnings have been calculated
by adding fixed charges to income before income taxes, and by deducting
therefrom interest capitalized during the period and the Company's share of the
undistributed income in less-than-fifty-percent-owned affiliates; and (ii) fixed
charges comprise total interest (including capitalized interest) and the portion
of rentals representative of the interest factor. For the years ended December
31, 1995 and 1991, the ratio computations indicate that earnings were inadequate
to cover fixed charges by $1,154 million and $1,529 million, respectively. The
years ended December 31, 1995 and 1991 include pre-tax restructuring and other
charges of $2,801 million and $1,006 million, respectively.
DESCRIPTION OF THE NOTES
The Notes are to be issued under an indenture (the "Indenture"), dated as
of April 1, 1996, between the Company and The Bank of New York, as Trustee (the
"Trustee").
A copy of the Indenture is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by, reference to all the provisions of the Indenture. References are to the
Indenture, and wherever particular provisions are referred to, such provisions
are incorporated by reference as part of the statement made, and the statement
is qualified in its entirety by such reference.
GENERAL
The Indenture does not limit the aggregate principal amount of Notes which
may be issued thereunder and provides that the Notes may be issued from time to
time in one or more series. Reference is made to the Prospectus Supplement which
accompanies this Prospectus for a description of the Notes being offered thereby
including: (1) the aggregate principal amount of such Notes; (2) the percentage
of their principal amount at which such Notes will be sold; (3) the date(s) on
which such Notes will mature, or whether such Notes are payable on demand; (4)
the rate(s) per annum at which such Notes will bear interest, if any, or the
method of calculating such rate or rates of interest; (5) the times at which
such interest, if any, will be payable; (6) the terms for redemption or early
repayment, if any; (7) the denominations in which such Notes are authorized to
be issued; (8) the coin or currency in which the Notes are denominated, which
may be a composite currency such as the European Currency Unit; (9) any
provision enabling payments of the principal of or any premium or interest on
the Notes in a coin or currency other than the currency in which the Notes are
denominated, including a non-U.S. dollar denominated currency; (10) the manner
in which the amount of payments of principal of and any premium or interest on
the Notes is to be determined if such determination is to be made with reference
to one or more indexes; (11) whether such Notes are issuable in registered form
("registered Notes") or bearer form (with or without interest coupons) ("bearer
Notes") or both, and whether such Notes shall be uncertificated; (12) whether
any series of Notes will be represented by one or more temporary or permanent
global securities and, if so, whether any such global securities will be in
registered or bearer form, the identity of the depository for such global
security or securities and the method of transferring beneficial interests in
such global security or securities; (13) if a temporary global security is to be
issued with respect to a series or any portion thereof, the terms upon which
interests in such temporary global security may be exchanged for interests in a
permanent global security or for definitive Notes of the series and the terms
upon which interest in a permanent global security, if any, may be exchanged for
definitive Notes of the series; (14) information with respect to book-entry
procedures, if any; (15) whether and under what
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<PAGE> 22
circumstances the Company will pay additional amounts on any Notes held by a
person who is not a United States person in respect of taxes or similar charges
withheld and, if so, whether the Company will have the option to redeem such
Notes rather than pay such additional amounts; and (16) any other terms,
including any terms which may be required by or advisable under United States
laws and regulations or advisable in connection with the marketing of the Notes
of such series, which will not be inconsistent with the provisions of the
Indenture.
Notes of any series may be registered Notes or bearer Notes or both as
specified in the terms of the series. Additionally, Notes of any series may be
represented by a single global note registered in the name of a depository's
nominee and, if so represented, beneficial interests in such global note will be
shown on, and transfers thereof will be effected only through, records
maintained by a designated depository and its participants. Notes of any series
may also be uncertificated. Unless otherwise indicated in the Prospectus
Supplement, no bearer Notes (including Notes in permanent global bearer form, as
described below) will be offered, sold, resold or delivered, directly or
indirectly, to persons who are within the United States or its possessions or to
any United States person in connection with their original issuance or their
exchange for a portion of a temporary or permanent global Note. For purposes of
this Prospectus, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or of any political subdivision
thereof, or an estate or trust the income of which is subject to United States
Federal income taxation regardless of its source.
Unless otherwise indicated in the Prospectus Supplement, principal and
interest, if any, will be payable at the office of one or more paying agents as
specified in the Prospectus Supplement; provided that payment of interest may be
made at the option of the Company by check mailed to the address of the person
entitled thereto as it appears in the register of the Notes. To the extent set
forth in the Prospectus Supplement, except in special circumstances set forth in
the Indenture, interest, if any, on bearer Notes will be payable only against
presentation and surrender of the coupons for the interest installments
evidenced thereby as they mature at the office of a paying agent of the Company
located outside of the United States and its possessions. The Company will
maintain one or more such agents for a period of two years after the principal
of such bearer Notes has become due and payable. During any period thereafter
for which it is necessary in order to conform to United States tax laws or
regulations, the Company will maintain a paying agent outside of the United
States and its possessions to which the bearer Notes and coupons related thereto
may be presented for payment and will provide the necessary funds therefor to
such paying agent upon reasonable notice.
Bearer Notes and the coupons related thereto will be transferable by
delivery. Unless otherwise indicated in the Prospectus Supplement, registered
Notes will be transferable at the office of one or more transfer or paying
agents as specified in the Prospectus Supplement.
The Notes will be unsecured obligations of the Company and will rank pari
passu with all other unsecured and unsubordinated indebtedness of the Company.
Unless otherwise indicated in the Prospectus Supplement, the Notes will be
issued only in denominations of $25,000, or the equivalent thereof in the case
of Notes denominated in a foreign currency or currency unit (rounded downward to
an integral multiple of 1,000 units of such foreign currency or currency unit),
and any integral multiple of $1,000 over $25,000, or, in the case of Notes
denominated in a foreign currency or currency unit, 1,000 units of such currency
or currency unit, or in such other denominations, not less than $25,000, as may
be specified in the terms of Notes of any particular series. No service charge
will be made for any transfer or exchange of such Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Notes may be issued as original issue discount Notes (bearing no interest
or interest at a rate which at the time of issuance is below market rates) to be
sold at a substantial discount below their stated principal amount. Federal
income tax consequences and other special considerations applicable to any such
original issue discount Notes will be described in the Prospectus Supplement
relating thereto.
Registered Notes may be exchanged for an equal aggregate principal amount
of registered Notes of the same series having the same date of maturity,
interest rate, original issue date and other terms in such authorized
denominations as may be requested upon surrender of the registered Notes to a
transfer agent of
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<PAGE> 23
the Company as specified in the Prospectus Supplement and upon fulfillment of
all other requirements of such agent.
To the extent permitted by the terms of a series of Notes authorized to be
issued in registered form and bearer form, bearer Notes may be exchanged for an
equal aggregate principal amount of registered or bearer Notes of the same
series having the same date of maturity, interest rate, original issue date and
other terms in such authorized denominations as may be requested upon delivery
of the bearer Notes with all unpaid coupons relating thereto to a transfer or
paying agent of the Company as specified in the Prospectus Supplement and upon
fulfillment of all other requirements of such agent. Registered Notes will not
be exchangeable for bearer Notes.
TEMPORARY GLOBAL NOTES
If so specified in the Prospectus Supplement, all or any portion of the
Notes of a series that are issuable as bearer Notes initially will be
represented by one or more temporary global Notes, without interest coupons, to
be deposited with a common depository in London for Morgan Guaranty Trust
Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear"), and CEDEL S.A. ("CEDEL") for credit to the respective accounts of
the beneficial owners of such Notes (or to such other accounts as they may
direct). On and after the exchange date determined as provided in any such
temporary global Note and described in the Prospectus Supplement, the interest
in such temporary global Note will be exchangeable for definitive Notes in
bearer form, registered form, or permanent global form, or any combination
thereof, as specified in the Prospectus Supplement.
The Prospectus Supplement will set forth the procedures by which interest
in respect of any portion of a temporary global Note payable in respect of an
Interest Payment Date (as defined in such Prospectus Supplement) occurring prior
to the issuance of definitive Notes will be paid.
PERMANENT GLOBAL NOTES
If any Notes of a series are issuable in either bearer or registered
permanent global form, the Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
permanent global Note may exchange such interests for Notes of such series and
of like tenor and principal amount in any authorized form and denomination. A
person having a beneficial interest in a permanent global Note, except with
respect to payment of principal of, premium, if any, and any interest on such
permanent global Note, will be treated as a holder of such principal amount of
outstanding Notes represented by such permanent global Note as shall be
specified in a written statement of the holder of such permanent global Note, or
in the case of a permanent global Note in bearer form, of Euroclear or CEDEL
which is produced to the Trustee by such person. Principal of, premium, if any,
and any interest on a permanent global Note will be payable in the manner
described in the Prospectus Supplement.
COVENANTS
Limitation on Secured Indebtedness. The Company covenants in the Indenture
that it will not, and will not permit any Restricted Subsidiary to, create,
assume, incur or guarantee any Secured Indebtedness without securing the Notes
equally and ratably with such Secured Indebtedness unless immediately thereafter
the aggregate amount of all Secured Indebtedness (not including Secured
Indebtedness with which the Notes are equally and ratably secured or Secured
Indebtedness which is concurrently being retired) and the discounted present
value of all net rentals payable under leases entered into in connection with
sale and leaseback transactions (as further described below) would not exceed
15% of Consolidated Net Tangible Assets. (Section 4.03)
Limitation on Sale and Leaseback Transactions. The Company covenants in
the Indenture that it will not, and will not permit any Restricted Subsidiary
to, enter into any lease longer than three years (not including leases of newly
acquired, improved or constructed property) covering any Principal Property of
or any Restricted Subsidiary that is sold to any other person in connection with
such lease, unless either (a) immediately thereafter, the sum of (i) the
discounted present value of all net rentals payable under all such leases
entered into after January 31, 1996 (except any such leases entered into by a
Restricted Subsidiary before the time it became a Restricted Subsidiary) and
(ii) the aggregate amount of all Secured Indebtedness
6
<PAGE> 24
(not including Secured Indebtedness with which the Notes are equally and ratably
secured) does not exceed 15% of Consolidated Net Tangible Assets, or (b) an
amount equal to the greater of (x) the net proceeds to the Company or a
Restricted Subsidiary from such sale and (y) the discounted present value of all
net rentals payable thereunder, is applied within 180 days to the retirement of
long-term debt of the Company or a Restricted Subsidiary (other than such debt
which is subordinate to the Notes or which is owing to the Company or a
Restricted Subsidiary). (Section 4.04)
Certain Definitions. "Secured Indebtedness" means indebtedness of the
Company or any Restricted Subsidiary for borrowed money secured by any lien upon
(or in respect of any conditional sale or other title retention agreement
covering) any Principal Property or the stock or indebtedness of a Restricted
Subsidiary, but excluding from such definition all indebtedness: (i) outstanding
on February 1, 1996 secured by liens (or arising from conditional sale or other
title retention agreements) existing on that date; (ii) incurred after January
31, 1996 to finance the acquisition, improvement or construction of such
property and either secured by purchase money mortgages or liens placed on such
property within 180 days of acquisition, improvement or construction or arising
from conditional sale or other title retention agreements; (iii) secured by
liens on Principal Property or the stock or indebtedness of Restricted
Subsidiaries and existing at the time of acquisition thereof; (iv) owing to the
Company or any other Restricted Subsidiary; (v) secured by liens existing at the
time a corporation becomes a Restricted Subsidiary; (vi) incurred to finance the
acquisition or construction of property secured by liens in favor of any country
or any political subdivision thereof; and (vii) constituting any replacement,
extension or renewal of any such indebtedness (to the extent such indebtedness
is not increased). "Principal Property" means land, land improvements, buildings
and associated factory, laboratory, office and switching equipment (excluding
all products marketed by the Company or any of its subsidiaries) constituting a
manufacturing, development, warehouse, service, office or operating facility
owned by or leased to the Company or a Restricted Subsidiary, located within the
United States and having an acquisition cost plus capitalized improvements in
excess of 1.25 per cent of Consolidated Net Tangible Assets as of the date of
such determination, other than any such property financed through the issuance
of tax-exempt governmental obligations, or which the Board of Directors
determines is not of material importance to the Company and its Restricted
Subsidiaries taken as a whole, or in which the interest of the Company and all
its subsidiaries does not exceed 50%. "Consolidated Net Tangible Assets" means
the total assets of the Company and its subsidiaries, less current liabilities
and certain intangible assets (other than product development costs).
"Restricted Subsidiary" means (i) any Subsidiary of the Company which has
substantially all its property in the United States, which owns or is a lessee
of any Principal Property and in which the investment of the Company and all its
Subsidiaries exceeds 1.25 per cent of Consolidated Net Tangible Assets as of the
date of such determination, other than certain financing Subsidiaries and
Subsidiaries formed or acquired after January 31, 1996 for the purpose of
acquiring the business or assets of another person and that do not acquire all
or any substantial part of the business or assets of the Company or any
Restricted Subsidiary and (ii) any other Subsidiary designated by the Board of
Directors of the Company as a Restricted Subsidiary. "Subsidiary" means any
corporation a majority of the voting shares of which are at the time owned or
controlled directly or indirectly, by the Company or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries. (Section 1.01)
Limitation on Consolidation, Merger, Sale or Conveyance of Assets. Nothing
in the Indenture shall prevent any consolidation of the Company with, or merger
of the Company into, any other corporation or corporations (whether or not
affiliated with the Company), or successive consolidations or mergers to which
the Company or its successor or successors shall be a party or parties, or shall
prevent any sale or conveyance of the property of the Company (including stock
of subsidiaries) as an entirety or substantially as an entirety to any other
corporation (whether or not affiliated with the Company) authorized to acquire
and own or operate the same; provided that the Company covenants in the
Indenture that upon any such consolidation, merger, sale or conveyance, the due
and punctual payment of the principal of (and premium, if any) and interest on
all of the Notes of each series, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
the Indenture to be performed or observed by the Company shall be expressly
assumed, by supplemental indenture executed and delivered to the Trustee by the
corporation formed by such consolidation, or into which the Company shall have
been merged, or which shall
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<PAGE> 25
have acquired such property. The Indenture does not contain any covenants or
provisions which would afford protection to Noteholders in the event of a highly
leveraged transaction. (Section 5.01)
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein in
respect of any series of Notes shall have happened and be continuing, either the
Trustee or the holders of 25% in principal amount of the outstanding Notes of
such series may declare the principal of all of the Notes of such series to be
due and payable. (Section 6.01).
Events of Default in respect of the Notes of any series are defined in the
Indenture as being: default for 90 days in payment of any interest installment
when due; unless otherwise specified in the Prospectus Supplement with respect
to the Notes of any series, default in payment of principal of or premium, if
any, on Notes of such series when due; default for 90 days after written notice
to the Company by the Trustee or by the holders of 25% in principal amount of
the outstanding Notes of such series in performance of any agreement in the
Notes or Indenture in respect of such series; and certain events of bankruptcy,
insolvency and reorganization. (Section 6.01)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Notes, give to the holders
of such series notice of all uncured and unwaived defaults known to it; provided
that, except in the case of default in payment on any of the Notes of such
series, the Trustee will be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of the
holders of such series. The term "default" for the purpose of this provision
means any event which is, or after notice or passage of time or both would be,
an Event of Default. (Section 7.05)
The Indenture contains provisions entitling the Trustee, subject to the
duty of the Trustee during an Event of Default in respect of any series of Notes
to act with the required standard of care, to refuse to perform any duty or
exercise any right or power unless it receives indemnity satisfactory to it.
(Section 7.01)
The Indenture provides that the holders of a majority in principal amount
of the outstanding Notes of any series may direct the time, method and place of
conducting proceedings for remedies available to the Trustee, or exercising any
trust or power conferred on the Trustee, in respect of such series. (Section
6.06)
In certain cases, the holders of a majority in principal amount of the
outstanding Notes of a series may on behalf of the holders of all Notes of such
series waive any past default or Event of Default, or compliance with certain
provisions of the Indenture, except among other things a default in payment of
the principal of, premium, if any, or interest on, any of the Notes of such
series. (Sections 6.01 and 6.06)
The terms for any series of Notes may provide that the holders of Notes of
such series shall act as one class together with the holders of Notes of one or
more other series in voting, giving notice, waiving, giving directions or taking
any other specified, permitted or authorized action.
DISCHARGE AND DEFEASANCE
Under terms satisfactory to the Trustee, the Company may discharge certain
obligations to holders of any series of Notes issued under the Indenture which
have not already been delivered to the Trustee for cancellation and which have
either become due and payable or are by their terms due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the Trustee as trust funds an amount in cash sufficient to pay at maturity
(or upon redemption) the principal of and interest on such Notes. (Section 8.01)
In the case of any series of Notes the exact amounts (including the
currency of payment) of principal of and interest due on such series can be
determined at the time of making the deposit referred to below, the Company at
its option may also (i) discharge any and all of its obligations to holders of
such series of Notes ("defeasance") on the 91st day after the conditions set
forth below have been satisfied, but may not thereby avoid its duty to register
the transfer or exchange of such series of Notes, to replace any temporary,
mutilated, destroyed, lost or stolen Notes of such series or to maintain an
office or agency in respect of such series of Notes, or (ii) be released with
respect to such series of Notes from the obligations imposed by the covenants
described under "Covenants" above ("covenant defeasance"). Defeasance and
covenant defeasance may be
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<PAGE> 26
effected only if, among other things, (i) the Company irrevocably deposits with
the Trustee as trust funds (a) money in an amount, (b) in the case of Notes
payable only in U.S. Dollars, U.S. Government Obligations which through the
payment of interest and principal in respect thereof will provide money in an
amount or (c) a combination of (a) and (b), certified by a nationally recognized
firm of independent public accountants to be sufficient to pay each installment
of principal of and interest on all outstanding Notes of such series on the
dates such installments of principal and interest are due; and (ii) the Company
delivers to the Trustee an opinion of independent counsel to the effect that the
holders of such series of Notes will not recognize gain or loss for United
States Federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to United States Federal income tax on the same
amount and in the same manner and at the same time as would have been the case
if such defeasance or covenant defeasance had not occurred (which opinion may
include or be based on a ruling to that effect received from or published by the
Internal Revenue Service). "U.S. Government Obligations" means (i) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged; or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America. (Sections 1.01 and 8.02)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of a majority in principal amount of the
outstanding Notes of each series affected thereby (with such series voting as a
separate class), to execute supplemental indentures adding any provisions to or
changing or eliminating any of the provisions of the Indenture or modifying the
rights of the holders of Notes of each such series, except that no such
supplemental indenture may, without the consent of each holder affected, among
other things, change the maturity of any Notes, or change the principal amount
thereof, or any premium thereon, or change the rate or change the time of
payment of interest thereon, make any Note payable in money other than that
stated in the Note, or reduce the aforesaid percentage of outstanding Notes.
(Sections 9.01 and 9.02)
CONCERNING THE TRUSTEE
The Company may from time to time maintain lines of credit, and have other
customary banking relationships, with The Bank of New York, the Trustee under
the Indenture.
DESCRIPTION OF THE WARRANTS
The Company may issue Warrants for the purchase of Notes. Warrants may be
issued independently or together with any Notes offered by any Prospectus
Supplement and may be attached to or separate from such Notes. The Warrants will
be issued under a Warrant Agreement to be entered into between the Company and a
bank or trust company, as Warrant Agent, and may be issued in one or more
series, all as set forth in the Prospectus Supplement relating to the particular
issue of Warrants. The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Warrants. The following summaries of certain provisions of the form of Warrant
Agreement do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, the provisions of the form of Warrant Agreement
(including the form of certificate evidencing the Warrants ("Warrant
Certificate")), copies of which are filed as exhibits to the Registration
Statement.
GENERAL
If Warrants are offered, the Prospectus Supplement will describe the
following terms of the Warrants offered hereby (to the extent such terms are
applicable to such Warrants): (i) the offering price; (ii) the coin or currency
for which Warrants may be purchased, which may be a composite currency such as
the European Currency Unit; (iii) the date on which the right to exercise the
Warrants shall commence and the date on which such right shall expire or, if the
Warrants are not continuously exercisable throughout such period, the specific
date or dates on which they will be exercisable; (iv) whether the Warrants will
be issuable in
9
<PAGE> 27
registered or bearer form or both and whether the Warrants will be issued in
temporary and/or permanent global form, or in uncertificated form; (v) the
designation, aggregate principal amount, currency or currency unit and other
terms of the Notes purchasable upon exercise of the Warrants and, if such Notes
are issuable in bearer form, restrictions applicable to the purchase of Notes in
bearer form upon exercise of the Warrants; (vi) the designation and terms of the
Notes with which the Warrants are issued and the number of Warrants issued with
each such Note; (vii) the date on and after which the Warrants and the related
Notes will be separately transferable; (viii) the principal amount of Notes
purchasable upon exercise of one Warrant and the price at which and currency or
currency units in which such principal amount of Notes may be purchased upon
such exercise; (ix) United States Federal income tax consequences; and (x) any
other terms of the Warrants, including any terms which may be required or
advisable under United States laws or regulations.
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations, may (if in registered form) be presented for
registration of transfer, and may be exercised at the corporate trust office of
the Warrant Agent or any other office indicated in the Prospectus Supplement.
Prior to the exercise of their Warrants, holders of Warrants will not have any
of the rights of holders of the Notes purchasable upon such exercise, including
the right to receive payments of principal of, premium, if any, or interest, if
any, on the Notes purchasable upon such exercise or to enforce covenants in the
Indenture.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase such principal amount of
Notes at such exercise price as shall in each case be set forth in, or
calculable from, the Prospectus Supplement relating to the Warrants. Warrants
may be exercised at any time up to 5:00 P.M. New York time on the date set forth
in the Prospectus Supplement relating to such Warrants. After such time on the
date (or such later date to which such date may be extended by the Company),
unexercised Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Warrants may be exercised
by delivery to the Warrant Agent of the Warrant Certificate evidencing such
Warrants properly completed and duly executed and of payment as provided in the
Prospectus Supplement of the amount required to purchase the Notes purchasable
upon such exercise. Warrants will be deemed to have been exercised upon receipt
of such Warrant Certificate and payment at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement and the
Company will, as soon as practicable thereafter, issue and deliver the Notes
purchasable upon such exercise. If fewer than all of the Warrants represented by
such Warrant Certificate are exercised, a new Warrant Certificate will be issued
for the remaining amount of the Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Notes and Warrants being offered hereby in four
ways: (i) directly to purchasers, (ii) through agents, (iii) through dealers, or
(iv) through underwriters. Any or all of the foregoing may be customers of,
engage in transactions with or perform services for the Company in the ordinary
course of business.
Offers to purchase the Notes and Warrants may be solicited directly by the
Company or by agents designated by the Company from time to time. Any such
agent, who may be deemed to be an underwriter as that term is defined in the
Securities Act of 1933, as amended (the "Securities Act"), involved in the offer
or sale of the Notes and/or Warrants in respect of which this Prospectus is
delivered will be named, and any commission payable by the Company to such agent
set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment. Agents may be entitled under agreements, which
may be entered into with the Company, to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act.
If a dealer is utilized in the sale of the Notes and/or Warrants in respect
of which this Prospectus is delivered, the Company will sell such Notes and/or
Warrants to the dealer, as principal. The dealer may then resell such Notes
and/or Warrants to the public (or to other dealers for resale to the public at
prices to be determined by such other dealers) at varying prices to be
determined by such dealer at the time of resale.
10
<PAGE> 28
Dealers may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act.
If the sale is accomplished through an underwriter or underwriters, the
Company will enter into an underwriting agreement with such underwriters at the
time of sale to them and the names of the underwriters and the terms of the
transaction will be set forth in the Prospectus Supplement, which will be used
by the underwriters to make resales of the Securities in respect of which this
Prospectus is delivered to the public. The underwriters may be entitled, under
the relevant underwriting agreement, to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Notes and/or Warrants from the Company at the public offering price set forth in
the Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on a specified future date. Institutions with
which Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, educational and charitable
institutions, and other institutions, but shall in all cases be subject to the
approval of the Company. Except as otherwise provided in the Prospectus
Supplement, Contracts will not be subject to any conditions except that the
purchase by an institution of the Notes covered by its Contract shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject. A commission indicated in the
Prospectus Supplement will be paid to agents and underwriters soliciting
purchases of the Notes and/or Warrants pursuant to Contracts accepted by the
Company.
The place and time of delivery for the Notes and/or Warrants in respect of
which this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
FOR FLORIDA RESIDENTS
AT&T, the parent of the Company, provides telecommunications services
between the United States and Cuba jointly with Empresa de Telecomunicaciones
Internacionales de Cuba ("EMTELCUBA"), the Cuban telephone company, pursuant to
all applicable U.S. laws and regulations. All payments due EMTELCUBA are handled
in accordance with the provisions of the Cuban Assets Control Regulations and
the Cuban Democracy Act of 1992 and specific licenses issued thereunder. AT&T is
the sole owner of the Cuban American Telephone and Telegraph Company ("CATT"), a
Cuban corporation. CATT owns cable facilities between the United States and Cuba
that were activated on November 25, 1994.
This information is accurate as of the date hereof. Current information
concerning the Company's and its affiliates' business dealings with the
government of Cuba or with any person or affiliate located in Cuba may be
obtained from the Division of Securities and Investor Protection of the Florida
Department of Banking and Finance, the Capitol, Tallahassee, Florida 32399-0350,
telephone number (904) 488-9805.
LEGAL OPINIONS
Richard J. Rawson, Senior Vice President and General Counsel of the
Company, is passing upon the legality of the Notes and Warrants for the Company.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company and its subsidiaries at December 31, 1995 and 1994 and for the years
ended December 31, 1995, 1994 and 1993 incorporated by reference in this
Prospectus and Registration Statement have been incorporated herein in reliance
upon the report of Coopers & Lybrand L.L.P., independent auditors, given on the
authority of that firm as experts in accounting and auditing.
11
<PAGE> 29
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Incorporation of Documents By
Reference............................ S-2
The Company............................ S-3
Recent Developments.................... S-4
Use of Proceeds........................ S-4
Ratio of Earnings to Fixed Charges..... S-4
Capitalization......................... S-5
Summary Financial Data and
Discussion........................... S-6
Business............................... S-9
Description of the Notes............... S-14
Underwriting........................... S-16
Legal Matters.......................... S-17
Experts................................ S-17
PROSPECTUS
Additional Information................. 2
Incorporation of Documents by
Reference............................ 2
The Company............................ 3
Recent Developments.................... 3
Use of Proceeds........................ 3
Ratio of Earnings to Fixed Charges..... 4
Description of the Notes............... 4
Description of the Warrants............ 9
Plan of Distribution................... 10
For Florida Residents.................. 11
Legal Opinions......................... 11
Experts................................ 11
</TABLE>
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$1,500,000,000
LUCENT TECHNOLOGIES INC.
$750,000,000
6.90% NOTES DUE JULY 15, 2001
$750,000,000
7.25% NOTES DUE JULY 15, 2006
------------------------
LOGO
LUCENT TECHNOLOGIES
Bell Labs Innovations
------------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
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