<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
..X.. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
..... TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to _____________
Commission file number 1-1105
AT&T CORP.
A New York I.R.S. Employer
Corporation No. 13-4924710
32 Avenue of the Americas, New York, New York 10013-2412
Telephone - Area Code 212-387-5400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ..X No .....
At April 28, 1995 1,582,254,000 common shares were outstanding.
<PAGE>
<PAGE> 2 AT&T Form 10-Q - Part I
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
For the Three
Months Ended
March 31,
1995 1994(b)
Sales and Revenues
Telecommunications services.......... $11,388 $10,951
Products and systems................. 4,537 4,074
Rentals and other services........... 1,443 1,381
Financial services and leasing....... 894 691
Total revenues....................... 18,262 17,097
Costs
Telecommunications services
Access and other
interconnection costs............ 4,453 4,536
Other costs........................ 1,976 1,983
Total telecommunications services.... 6,429 6,519
Products and systems................. 2,842 2,460
Rentals and other services........... 794 714
Financial services and leasing....... 652 452
Total costs.......................... 10,717 10,145
Gross margin......................... 7,545 6,952
Operating Expenses
Selling, general and
administrative expenses............ 4,769 4,355
Research and development expenses.... 847 762
Total operating expenses............. 5,616 5,117
Operating income..................... 1,929 1,835
Other income - net................... 126 117
Interest expense .................... 130 195
Income before income taxes........... 1,925 1,757
Provision for income taxes........... 727 683
Net Income .......................... $ 1,198 $ 1,074
Weighted average common shares
outstanding (millions)............ 1,580 1,558
Earnings per common share............ $ .76 $ .69
Dividends declared per
common share...................... $ .33 $ .33
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 3 AT&T Form 10-Q - Part I
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions Except Per Share Amount)
(Unaudited)
March 31, December 31,
1995 1994
ASSETS
Cash and temporary cash investments.... $ 1,070 $ 1,208
Receivables less allowances
of $1,334 and $1,251
Accounts receivable.................. 13,110 13,671
Finance receivables.................. 14,607 14,952
Inventories (f)........................ 4,073 3,633
Deferred income taxes.................. 3,073 3,030
Other current assets................... 976 1,117
Total current assets................... 36,909 37,611
Property, plant and equipment, net
of accumulated depreciation of
$23,593 and $23,519 (c).............. 21,040 21,279
Licensing cost, net of accumulated
amortization of $643 and $613........ 4,489 4,251
Investments............................ 2,816 2,708
Long-term finance receivables.......... 4,917 4,513
Net investment in operating leases
of finance subsidiaries (c).......... 749 756
Prepaid pension costs.................. 4,270 4,151
Other assets........................... 4,366 3,993
TOTAL ASSETS........................... $79,556 $79,262
(CONT'D)
<PAGE>
<PAGE> 4 AT&T Form 10-Q - Part I
CONSOLIDATED BALANCE SHEETS (CONT'D)
(Dollars in Millions Except Per Share Amount)
(Unaudited)
March 31, December 31,
1995 1994
LIABILITIES AND DEFERRED CREDITS
Accounts payable....................... $ 5,712 $ 6,011
Payroll and benefit-related
liabilities.......................... 3,084 4,105
Postretirement and postemployment
benefit liabilities.................. 887 1,029
Debt maturing within one year.......... 10,820 13,666
Dividends payable...................... 524 518
Other current liabilities.............. 6,414 5,601
Total current liabilities.............. 27,441 30,930
Long-term debt including capital
leases............................... 13,355 11,358
Postretirement and postemployment
benefit liabilities.................. 8,790 8,754
Other liabilities...................... 4,365 4,285
Deferred income taxes.................. 4,024 3,913
Unamortized investment tax credits..... 222 232
Other deferred credits................. 799 776
Total liabilities & deferred credits... 58,996 60,248
Minority interests..................... 1,160 1,093
SHAREOWNERS' EQUITY
Common stock - par value $1 per share.. 1,581 1,569
Authorized shares: 2,000,000,000
Outstanding shares:
1,581,374,000 at March 31, 1995
1,569,006,000 at December 31, 1994
Additional paid-in capital............. 16,394 15,825
Guaranteed ESOP obligation............. (280) (305)
Foreign currency translation
adjustments.......................... 346 145
Retained earnings...................... 1,359 687
Total shareowners' equity.............. 19,400 17,921
TOTAL LIABILITIES/SHAREOWNERS' EQUITY.. $79,556 $79,262
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 5 AT&T Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
For the Three
Months Ended
March 31,
1995 1994(d)
Operating Activities
Net income .............................. $ 1,198 $ 1,074
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and licensing cost
amortization........................ 1,031 1,009
Provision for uncollectibles.......... 558 428
Decrease (increase) in accounts
receivable.......................... 247 (190)
(Increase) in inventories............. (511) (694)
(Decrease) increase in accounts
payable............................. (300) 385
Net change in other operating
assets and liabilities.............. (427) 460
Other adjustments for non-cash
items - net......................... (100) (194)
Net cash provided by operating
activities............................. 1,696 2,278
Investing Activities
Capital expenditures net of proceeds
from sale or disposal of property,
plant and equipment of $40 and $28... (926) (737)
Decrease (increase) in finance
assets, net of lease-related
repayments of $974 and $807.......... 232 (215)
Net (increase) in licensing costs...... (268) (21)
Net (increase) in investments.......... (79) (5)
Dispositions/(acquisitions), net of
cash acquired........................ 275 (114)
Other investing activities - net....... 92 61
Net cash (used in) investing activities.. (674) (1,031)
Financing Activities
Proceeds from long-term debt issuance.. 2,570 1,046
Retirements of long-term debt.......... (401) (349)
Issuance of common shares.............. 581 248
Dividends paid......................... (516) (451)
(Decrease)in short-term
borrowings - net..................... (3,442) (1,392)
Other financing activities - net....... (10) (21)
Net cash (used in)financing activities... (1,218) (919)
(CONT'D)
<PAGE>
<PAGE> 6 AT&T Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
(Dollars in Millions)
(Unaudited)
For the Three
Months Ended
March 31,
1995 1994(d)
Effect of exchange rate
changes on cash........................ 58 10
Net (decrease) increase in cash and
temporary cash investments............. (138) 338
Cash and temporary cash investments
at beginning of year................... 1,208 671
Cash and temporary cash investments
at end of period....................... $ 1,070 $ 1,009
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 7 AT&T Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(a) ACCOUNTING POLICIES - The consolidated financial statements have been
prepared by AT&T Corp. ("AT&T" or the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") and,
in the opinion of management, include all adjustments, consisting of
only normal recurring adjustments, necessary for a fair statement of
the consolidated results of operations, financial position and cash
flows for each period presented. The consolidated results for interim
periods are not necessarily indicative of results for the full year.
These financial statements should be read in conjunction with AT&T's
1994 Annual Report to Shareowners and Form 10-K for the year ended De-
cember 31, 1994.
(b) INCOME STATEMENT RESTATEMENTS AND RECLASSIFICATIONS - Previously re-
ported results were restated to reflect the merger with McCaw Cellular
Communications, Inc. ("McCaw") which was accounted for as a pooling of
interests. Also, in the first quarter of 1995, previously reported
results were reclassified to conform to the current presentation in-
cluding: 1) The reclassification of certain revenues and related costs
from Rentals and other services to Telecommunications services to
improve the comparability of reported results within the industry.
2) The reclassification of certain amortization expenses for the wire-
less services unit from Other income - net to Costs of Telecommunica-
tions services. These reclassifications did not affect net income for
the periods. The impact of the latter reclassification on operating
income was not material.
(c) BALANCE SHEET RESTATEMENTS AND RECLASSIFICATIONS - In 1995, finance
lease assets were reclassified from Property, plant and equipment -
net to Net investment in operating leases of finance subsidiaries.
This presentation improves the comparability of reported results with-
in the industry.
(d) STATEMENT OF CASH FLOWS RESTATEMENTS AND RECLASSIFICATIONS - Previous-
ly reported results were restated to reflect the merger with McCaw and
the results of the balance sheet reclassification. (See also Note c.)
<PAGE>
<PAGE> 8 AT&T Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(e) CHANGES IN ACCOUNTING PRINCIPLES - Effective January 1, 1995, AT&T
adopted Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan." This standard was
adopted prospectively and requires us to compute present values for
impaired loans when determining our allowances for credit losses. The
new standard did not have a material impact on AT&T's results of
operations or financial position.
(f) INVENTORIES - Inventories at March 31, 1995 and December 31, 1994 were
as follows:
March 31, December 31,
1995 1994
Completed goods .............. $2,226 $2,022
Work-in-process and raw
materials ................. 1,847 1,611
Total inventories ............ $4,073 $3,633
(g) AT&T CREDIT HOLDINGS, INC. - In connection with a March 31, 1993 legal
restructuring of AT&T Capital Holdings, Inc. (formerly AT&T Capital
Corporation), AT&T issued a direct, full and unconditional guarantee
of all the outstanding public debt of AT&T Credit Holdings, Inc.
(formerly AT&T Credit Corporation) existing at March 31, 1993.
AT&T Credit Holdings, Inc. holds the majority of AT&T's investment in
AT&T Capital Corporation and the lease finance assets of the former
AT&T Credit Corporation. The table following shows summarized
consolidated financial information for AT&T Credit Holdings, Inc.,
which consolidates the accounts of AT&T Capital Corporation. The
summarized financial information includes transactions with AT&T that
are eliminated in consolidation.
<PAGE>
<PAGE> 9 AT&T Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(g) AT&T CREDIT HOLDINGS, INC. (cont'd)
For the Three
Months Ended
March 31,
1995 1994
Total revenue $ 404 $ 342
Interest expense 97 69
Selling, general and
administrative expense 106 95
Net Income 25 18
At At
March 31, December 31,
1995 1994
Finance receivables $8,255 $7,726
Net investment in operating
leases 957 903
Total assets 9,950 9,468
Total debt 6,191 5,682
Total liabilities 8,759 8,299
Minority interest 273 270
Total shareholder's equity 918 899
<PAGE>
<PAGE> 10 AT&T Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(h) SUBSEQUENT EVENTS - On April 7, 1995, the Board of Directors of AT&T
and the Board of Directors of McCaw decided to proceed with the
acquisition of the outstanding shares of LIN Broadcasting Corporation
("LIN").
LIN is 52% owned by AT&T indirectly through McCaw. Under a Private
Market Value Guarantee agreement ("PMVG"), McCaw has the right to
acquire the remaining 48% of LIN shares at the private market value
per share of LIN determined by independent appraisers. On March 7,
1995, the private market value was determined to be $127.50 per share.
Based on more than 25 million shares of LIN held by non-affiliates of
McCaw, the total purchase price will be approximately $3.3 billion.
On April 26, 1995, a merger agreement was entered into whereby LIN
would become a wholly-owned subsidiary of McCaw. The merger agreement
was approved by the LIN board of directors with six voting in favor,
three opposed and two abstaining.
The acquisition is subject to the approval of the holders of a
majority of the LIN shares held by non-affiliates of McCaw.
<PAGE>
<PAGE> 11 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
AT&T reported quarterly net income of $1.198 billion, or $.76 per share.
Net income grew 11.6 percent compared with year-ago quarterly net income of
$1.074 billion, or $.69 per share.
Total revenues rose to $18.262 billion in the quarter, a 6.8 percent
increase from $17.097 billion in the same period of 1994. The increase
primarily resulted from solid growth in sales of products and systems,
gains in telecommunications services, including wireless services, and very
strong growth in financial services and leasing revenues.
Total costs increased $572 million compared with the first quarter of 1994,
largely as a result of higher sales of products and systems and growth in
financial services and leasing. Compared with the same period in 1994,
operating income increased 5.1 percent for the quarter. The overall gross
margin percentage increased to 41.3 percent in the quarter from 40.7
percent in the same period of 1994, reflecting revenues growing at a faster
rate than costs.
The more detailed discussion that follows is based on a comparison of the
three months ended March 31, 1995 with the comparable period of 1994,
unless otherwise noted.
RESULTS OF OPERATIONS
AT&T is a major participant in two industries: the global information
movement and management industry and the financial services and leasing
industry. AT&T's main business is to meet the communications and computing
needs of its customers by using networks to move and manage information.
The revenues and costs of this business are divided into three categories
on the income statement: telecommunications services, products and systems,
and rentals and other services. AT&T Capital Corporation ("AT&T Capital")
and AT&T Universal Card Services Corp. ("Universal Card") are partners with
AT&T's communications and computing business units as well as innovators in
the financial services industry. The revenues and costs for financial
services and leasing operations are displayed as a separate category on the
income statement.
<PAGE>
<PAGE> 12 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
TELECOMMUNICATIONS SERVICES
Telecommunications services revenues and costs now include certain services
that were previously reported as "Rental and other services." Revenues and
related costs for prior periods were restated to reflect this change in
classification, making reported amounts comparable. (See also Note b.)
Telecommunications services revenues, including McCaw's wireless services
revenues, rose to $11.388 billion, a 4.0 percent increase from the first
quarter of 1994, principally as a result of higher volumes. The volumes
of billed minutes for switched long distance services, increased nearly 8.5
percent from the year-ago period. Telecommunications services revenues,
excluding wireless services, grew 2.8 percent from the year-ago period.
Volume growth exceeded revenue growth primarily due to the increased usage
by residential customers of discount calling plans.
Wireless services revenues, including cellular, messaging and air-to-ground
services revenues, grew to $652 million, a 29.8 percent increase compared
with year-ago quarterly revenues of $502 million driven by continued strong
increase in subscribers. Cellular subscribers served by companies in which
AT&T has or shares a controlling interest increased to 4.4 million at March
31, 1995 from 3.3 million a year-ago.
Cost of telecommunications services decreased $90 million for the
quarter compared with the year-ago quarter, largely reflecting lower access
and other interconnection costs of $83 million. These costs decreased
primarily because of lower prices for connections. The reduction of these
costs improved the gross margin percentage to 43.5 percent in the quarter
from 40.5 percent in the same period of 1994.
<PAGE>
<PAGE> 13 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
PRODUCTS AND SYSTEMS
Sales of products and systems increased 11.3 percent for the quarter
compared with the first quarter of 1994, driven by substantially higher
sales of computer products and systems, and strong growth in communications
products and systems and microelectronics products.
Three months
ended
March 31
Revenues in millions 1995 1994(1)
Telecommunications network
products and systems $1,981 $1,897
Computer products and systems 852 663
Communications products
and systems 1,041 938
Microelectronic products,
special-design products for
U.S. government, and other* 663 576
Products and Systems $4,537 $4,074
(1) Reclassified to conform with current presentation.
*"Other" is composed principally of media, predominantly for use with
automated teller machines and point-of-sale equipment, and business forms.
Telecommunications network products and systems revenues increased 4.4
percent compared with the year-ago quarter, primarily due to higher sales
of wireless products and cable systems. Revenues from sales outside of the
U.S. continued to experience double-digit growth compared with a year-ago
quarter, particularly in the Asia/Pacific and Europe/Middle East/Africa
regions. AT&T expects sales outside the U.S. to remain strong for all of
1995. Sales in the U.S. were relatively flat as higher sales to
independent telephone companies, cable companies and competitive access
providers were offset by lower sales to the Regional Bell Operating
Companies ("RBOCs").
Revenues from computer products and systems sales increased 28.5 percent
for the quarter compared with the same year-ago quarter, led by higher
sales of personal computer products and automated teller machines at AT&T
Global Information Solutions ("GIS"). Despite GIS's strong revenue growth
and significant decrease in operating expenses as a percentage of revenues,
GIS reported an operating loss of $143 million compared to a loss of $57
million in the year-ago period primarily because of a shift in product
sales to a higher percentage of lower margin products.
<PAGE>
<PAGE> 14 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Revenues from sales of communications products and systems increased 11.0
percent for the quarter compared with the same quarter of 1994. The
increases were led by higher sales of business communications equipment
both in and outside of the U.S. and strong consumer products sales of
cellular telephones. Revenues from sales of cordless telephones were up
slightly, but corded telephone and telephone answering machine sales
declined, reflecting competitive pricing pressures.
As a category, sales of microelectronics products, special-design products
for the federal government and other product sales increased 15.1 percent
for the quarter compared with the same year-ago quarter. The increase was
led by continued strong growth in sales of microelectronic components both
in and outside of the U.S. but was partially offset by lower purchases of
AT&T's special-design products for the U.S. government compared with the
year-ago quarter primarily because of reduced spending for defense.
The increase in cost of products and systems for the quarter compared with
the same year-ago quarter was primarily the result of higher sales. The
gross margin percentage declined to 37.3 percent compared with 39.6 percent
in the first quarter of 1994. The decrease was principally due to
competitive pricing pressures and shifts in the product sales mix to lower
margin products.
RENTALS AND OTHER SERVICES
Rentals and other services revenues increased 4.5 percent for the quarter
compared with the same prior year quarter, as increases in computer
products and systems and services revenues for communications products were
partially offset by a decrease in communications products and systems
revenues. Rentals and services revenues for computer products and systems
increased for the quarter largely because of significant increases in
professional services, as well as increases from traditional maintenance
services. The increase in service revenues for communications products and
systems was largely due to the continued growth in maintenance contract
revenues for business customers. The decrease in rentals revenues for
communications products and systems was largely due to the continued
erosion of the base of rental customers. Other rentals and services
revenues declined for the quarter compared with the same prior year
quarter.
<PAGE>
<PAGE> 15 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three months
ended
March 31,
Revenues in millions 1995 1994(1)
Computer products and systems $ 665 $ 579
Communications products and
systems rentals 204 258
Communications products and
systems services 414 378
Other* 160 166
Rentals and Other Services $1,443 $1,381
(1) Reclassified to conform with current presentation.
*"Other" is composed principally of telemarketing services, information
technology services and facility rentals.
Cost of rentals and other services increased for the quarter compared with
the same year-ago quarter. The gross margin percentage decreased to 45.0
percent in the quarter from 48.3 percent in the first quarter of 1994
because of erosion of the communications products rental base and the
partial spin-off of LIN's broadcasting television operations at the end of
1994. In addition, there continues to be a shift in revenue mix from
rentals to lower-margin services.
FINANCIAL SERVICES AND LEASING
Financial services and leasing revenues increased 29.3 percent for the
quarter compared with the same year-ago quarter led by continued strong
growth from Universal Card and growth at AT&T Capital. Both Universal Card
and AT&T Capital continue to contribute to the growth by profitably
expanding their portfolios of earning assets.
<PAGE>
<PAGE> 16 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Three Months
ended
March 31,
In millions 1995 1994
AT&T Capital $ 363 $ 326
Universal Card 551 372
Eliminations, adjustments
and other* (20) ( 7)
Total revenues $ 894 $ 691
Total costs 652 452
Gross margin $ 242 $ 239
Gross margin percentage 27.1% 34.6%
Universal Card Information:
Finance receivables $11,811 $ 8,970
Accounts 15.5 12.0
* "Other" is composed principally of revenues from certain lease finance
assets AT&T retained when AT&T Capital was reorganized.
Universal Card receivables and accounts increased by approximately $2.8
billion and 3.5 million, respectively, since March 31, 1994, reflecting
continued credit card portfolio growth and a strong customer response to
the Something Extra@ program which began during 1994. The program offers
customer rewards for outstanding balances as well as new purchases. The
percentage of revolving accounts continues to increase.
The increase in cost of financial services and leasing was due primarily to
the higher volume of financing and credit card transactions for the
quarter. The gross margin percentage decreased for the quarter mainly due
to higher provisions for uncollectibles. The higher provisions for
uncollectibles reflect the higher percentage of revolving cardholder
receivables and the growth of the earning asset portfolios. Higher
interest rates also reduced the gross margin percentage for the quarter
compared with the same year-ago quarter. The financial services and
leasing businesses limit exposure to credit risks by diversifying business
across customers, geographic locations and lease maturities. The allowance
for credit losses is determined by analyzing previous experience on losses,
current delinquencies, and present and future economic conditions.
OPERATING EXPENSES
Total operating expenses increased 9.7 percent for the quarter compared
with the same quarter of 1994, largely because of increased spending for
advertising and promotions, for sales and sales support activities focused
towards telecommunications services markets and for expenses related to
global expansion. Research and development expenses were up for the
quarter mainly as the result of work related to broadband networks,
wireless technologies and enhanced services.
@ Registered service mark of AT&T
<PAGE>
<PAGE> 17 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
INTEREST EXPENSE AND PROVISION FOR INCOME TAXES
Interest expense declined $65 million compared with the same year-ago
quarter. The decline reflects the benefits associated with lower interest
rates after debt refinancings in the fourth quarter of 1994 and lower
interest on contingencies.
The provision for income taxes increased $44 million for the quarter
largely because of higher income before income taxes. The effective tax
rate decreased to 37.8% in the quarter from 38.9% in the year-ago quarter,
reflecting the non-deductibility of preferred stock dividends of a
subsidiary of LIN in the first quarter of 1994.
TOTAL ASSETS, WORKING CAPITAL AND LIQUIDITY
Total assets remained flat from year-end 1994. Working capital, defined as
current assets less current liabilities, increased about $2.8 billion from
year-end primarily due to decreases in debt maturing within one year and
payroll and benefit-related liabilities.
The cash balance exceeded management's target at the end of March 1995
because of a change in strategy to finance global opportunities and
pending re-investments in projects. Management targets a cash balance of
approximately $1 billion. Inventories increased reflecting the planned
seasonal build-up in anticipation of higher product and system sales later
in the year.
In March 1995, The Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." The standard requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. This
standard must be adopted for fiscal years beginning after December 15,
1995; for AT&T, that would be 1996. Management is currently assessing the
impact of the adoption on AT&T's results of operations and financial
position.
The decline in payroll and benefit-related liabilities primarily reflects
the first-quarter payment of the 1994 employee compensation awards. The
decrease in debt maturing within one year was primarily related to the
repayment of commercial paper. The increase in other current liabilities
primarily reflects an increase of income tax liabilities.
The increase in long-term debt, including capital leases, primarily
reflects the issuance of notes to replace the short-term debt outstanding.
<PAGE>
<PAGE> 18 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
CASH FLOWS
Cash flows provided by operating activities decreased primarily due to an
increase in other assets in the first quarter of 1995 compared with a
decrease in the same year-ago quarter.
The decrease in cash flows used in investing activities is largely the
result of a decline in the first quarter of 1995 in finance receivables,
net of business acquisitions, compared with an increase in the same year-
ago quarter. The decrease was offset somewhat by increases of capital
expenditures and licensing costs. The increase in capital expenditures is
primarily due to enhancing and expanding our wireless services.
On March 13, 1995, the Federal Communications Commission ("FCC") announced
the conclusion of the broadband Personal Communications Services ("PCS")
auction which commenced on December 5, 1994. AT&T was the successful
bidder for wireless licenses covering 21 major trading areas with aggregate
winning bids totaling $1.68 billion. AT&T was allowed to apply the $78.4
million payment made last year to participate in the auction against the
$336 million (20 percent of the $1.68 billion) due in March 1995. The
remaining 80 percent payment must be paid when the licenses are granted.
In accordance with the PMVG between McCaw and LIN, McCaw had the right to
acquire all LIN shares not owned by McCaw at the private market price per
share of LIN determined by independent appraisers. On March 7, 1995, the
Private Market Price was determined to be $127.50 per share. On April 7,
1995, the Board of Directors of AT&T and the Board of Directors of McCaw
decided to proceed with the acquisition of the outstanding LIN shares.
Based on the more than 25 million shares of LIN held by non-affiliates of
McCaw, the total purchase price will be approximately $3.3 billion. On
April 26, 1995, a merger agreement was entered into whereby LIN would
become a wholly-owned subsidiary of McCaw. The merger agreement was
approved by the LIN board of directors with six voting in favor, three
opposed and two abstaining.
The acquisition is subject to the approval of the holders of a majority of
the LIN shares held by non-affiliates of McCaw.
Cash flows used in financing activities increased compared with the same
period in 1994 primarily because of the repayment of the short-term debt
outstanding which was largely offset by a higher issuances of new long-term
debt.
The ratio of total debt to total capital (total debt and equity) decreased
to 55.5 percent at March 31, 1995, compared with 58.3 percent at December
31, 1994, primarily as a result of higher equity from 1994 earnings.
Excluding financial services and leasing operations, the debt ratio was
29.9 percent at March 31, 1995 compared with 34.1 percent at December 31,
1994.
<PAGE>
<PAGE> 19 AT&T Form 10-Q - Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
LEGISLATIVE AND REGULATORY DEVELOPMENTS
AT&T currently faces significant competition in its markets and expects
that the level of competition will continue to increase. As regulatory,
legislative or technological changes occur, AT&T anticipates that new and
different competitors will enter the communications services markets.
These may include entrants from other segments of the telecommunications
and information services industries seeking to expand their market
opportunities. Such new competitors may enter with a strong market
presence, well recognized names and pre-existing direct customer
relationships. Depending on the timing of, circumstances of, and any
competitive inequities not addressed by regulatory or legislative
conditions or restrictions placed on the entry of these competitors into
the market, AT&T's future revenues and net income could be adversely
affected.
Some of the same regulatory and technological changes that AT&T anticipates
will increase competition in its historic markets, also may open new
markets for AT&T in different segments of communications services,
end-to-end services, value-added services and multimedia services. AT&T's
competitive strategy includes using its networking capabilities, respected
brand name and other resources to take advantage of these new opportunities
as they arise.
In addition to the bill currently introduced in the Senate, additional
telecommunications legislation has been proposed by certain committees of
the House of Representatives. All these bills, under various conditions,
safeguards and schedules, would permit the RBOCs to provide interexchange
services and would also provide certain mechanisms to facilitate local
exchange competition.
On April 28, 1995, the U.S. District Court for the District of Columbia
("District Court") entered an Order which specifies the conditions and
limitations under which and a procedure whereby RBOCs may become authorized
to resell interexchange services to cellular subscribers. The conditions
and limitations include ensuring that there are at least two competitive
providers of access between the cellular switches and the long distance
point of presence. One Regional Bell Operating Company has applied to the
Department of Justice for such authority.
On April 3, 1995, the United States Department of Justice ("DOJ") filed a
motion with the District Court for a modification of the Modification of
Final Judgment. The modification would allow Ameritech Corporation to
resell interexchange services to customers in the Chicago, Illinois and
Grand Rapids, Michigan LATAs. This reselling would be conducted under the
supervision of the DOJ only after local competition is found to exist and
would be subject to separate subsidiary, nondiscrimination and marketing
safeguards. AT&T has consented to the entry of this modification and has
applied to the respective state commissions to provide local service in
these LATAs.
<PAGE>
<PAGE> 20
AT&T Form 10-Q - Part II
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security-Holders.
(a) The annual meeting of the shareholders of the registrant was held on
April 19, 1995.
(b) Election of Directors
Votes
(Millions)
Nominee For Withheld
Robert E. Allen 1,252 14
M. Kathryn Eickhoff 1,253 13
Walter Y. Elisha 1,253 13
Philip M. Hawley 1,251 15
Carla A. Hills 1,251 14
Belton K. Johnson 1,252 13
Drew Lewis 1,253 13
Donald F. McHenry 1,251 15
Victor A. Pelson 1,253 13
Donald S. Perkins 1,252 14
Henry B. Schacht 1,250 15
Michael I. Sovern 1,252 13
Franklin A. Thomas 1,252 14
Joseph D. Williams 1,249 17
Thomas H. Wyman 1,252 14
(c) Holders of common shares voted at this meeting on the following
matters, which were set forth in the registrant's proxy statement
dated February 28, 1995.
(i) Ratification of Auditors
For Against Abstain
Ratification of the firm 1,251 6 9
of Coopers & Lybrand L.L.P. (99.5%) (.5%)
as the independent auditors
to audit the registrant's
financial statements for
the year 1995.(*)
(ii) Directors Proposals
For Against Abstain
That the Shareholders 1,212 32 22
approve the McCaw Cellular (76.7%) (2.0%) (1.4%)
Communications, Inc.
Employee Stock Purchase
Plan.(**)
*Percentages are based on the total common shares voted. Approval of
this proposal required a majority of the common shares voted.
**Percentages are based on total number of outstanding common shares.
Approval of this proposal required a majority of the outstanding
common shares.
<PAGE>
<PAGE> 21 AT&T Form 10-Q - Part II
(iii)Shareholder Proposals
Broker
For Against Abstain Non-Votes
That the management 66 976 33 190
will be required to (6.3%) (93.7%)
advise the share-
holders how many
corporate dollars are
being spent for
political purposes and
to specify what political
causes the management
seeks to promote with
these funds.(*)
That the board require 77 965 33 190
the Committee on Directors (7.4%) (92.6%)
to nominate two candidates
for each directorship to
be filled by the voting of
stockholders at annual
meetings. In addition to
customary personal back-
ground information, Proxy
Statements shall include a
statement by each candidate
as to why he or she believes
they should be elected.(*)
*Percentages are based on the total common shares voted. Approval of
this proposal required a majority of the common shares voted.
<PAGE>
<PAGE> 22 AT&T Form 10-Q - Part II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K:
Forms 8-K dated January 24, 1995 and as amended on January 26, 1995,
February 15, 1995 and March 7, 1995, were filed pursuant to Item 5
(Other Events). Form 8-K dated March 9,1995 was filed pursuant to
Item 5 and Item 7 (Financial Statements and Exhibits) and Form 8-K
dated March 13, 1995 was filed pursuant to Item 5.
<PAGE>
<PAGE> 23 AT&T Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AT&T Corp.
Date May 11, 1995
M. B. Tart
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
<PAGE> 24 AT&T Form 10-Q
Exhibit Index
Exhibit
Number
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
<PAGE> 1
Exhibit 12
Form 10-Q
For the Three
Months Ended
March 31, 1995
AT&T Corp.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Millions)
(Unaudited)
For the Three
Months Ended
March 31, 1995
Earnings Before Income Taxes .......................... $1,925
Less Interest Capitalized during
the Period........................................... 17
Less Undistributed Earnings of Less than 50%
Owned Affiliates..................................... 6
Add Fixed Charges...................................... 516
Total Earnings......................................... $2,418
Fixed Charges
Total Interest Expense Including Capitalized Interest.. $ 413
Interest Portion of Rental Expense..................... 103
Total Fixed Charges................................ $ 516
Ratio of Earnings to Fixed Charges..................... 4.7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited balance sheet of AT&T at March 31, 1995 and the unaudited
consolidated statement of income for the three-month period ended
March 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,070
<SECURITIES> 237
<RECEIVABLES> 13,110
<ALLOWANCES> 1,334
<INVENTORY> 4,073
<CURRENT-ASSETS> 36,909
<PP&E> 44,633
<DEPRECIATION> 23,593
<TOTAL-ASSETS> 79,556
<CURRENT-LIABILITIES> 27,441
<BONDS> 13,355
<COMMON> 1,581
0
0
<OTHER-SE> 17,819
<TOTAL-LIABILITY-AND-EQUITY> 79,556
<SALES> 4,537
<TOTAL-REVENUES> 18,262
<CGS> 2,842
<TOTAL-COSTS> 10,717
<OTHER-EXPENSES> 5,616
<LOSS-PROVISION> 558
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> 1,925
<INCOME-TAX> 727
<INCOME-CONTINUING> 1,198
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,198
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0
</TABLE>
