-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NuizSdX6N3Hy2XbTowG2zhy9P0g9hwJiSmngQEJj7SgUw0b8zh37H5k15kN845hZ hM0IVndd7TwakNTCcB+7og== 0000950123-02-005710.txt : 20020529 0000950123-02-005710.hdr.sgml : 20020529 20020528173727 ACCESSION NUMBER: 0000950123-02-005710 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020528 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020529 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CORP CENTRAL INDEX KEY: 0000005907 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 134924710 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01105 FILM NUMBER: 02663987 BUSINESS ADDRESS: STREET 1: 295 NORTH MAPLE AVENUE CITY: BASKING RIDGE STATE: NJ ZIP: 07920 BUSINESS PHONE: 9082214000 MAIL ADDRESS: STREET 1: 295 NORTH MAPLE AVENUE CITY: BASKING RIDGE STATE: NJ ZIP: 07920 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN TELEPHONE & TELEGRAPH CO DATE OF NAME CHANGE: 19920703 8-K 1 y61051e8vk.txt AT&T CORP. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: May 28, 2002 AT&T CORP. A New York Commission File I.R.S. Employer Corporation No. 1-1105 No.13-4924710 32 Avenue of the Americas, New York, New York 10013-3412 Telephone Number (212) 387-5400 Form 8-K AT&T Corp. May 28, 2002 ITEM 5 OTHER EVENTS. AT&T is filing unaudited pro forma combined condensed financial information included in Exhibit 99 as follows: 1. Unaudited Pro Forma introductory paragraphs. 2. Unaudited Pro Forma Combined Condensed Balance Sheet at March 31, 2002. 3. Unaudited Pro Forma Combined Condensed Statements of Operations for the three months ended March 31, 2002 and 2001. 4. Unaudited Pro Forma Combined Condensed Statements of Operations for the years ended December 31, 2001, 2000 and 1999. 5. Notes to the Unaudited Pro Forma Combined Condensed Financial Statements. ITEM 7 Financial Statements and Exhibits. c) Exhibits. Exhibit 99 AT&T Corp. unaudited pro forma combined condensed financial results at and for the three months ended March 31, 2002, and for the years ended December 31, 2001, 2000 and 1999. Form 8-K AT&T Corp. May 28, 2002 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. /s/ N. S. Cyprus ---------------------------------- By: N. S. Cyprus Vice President and Controller May 28, 2002 EX-99 3 y61051exv99.txt UNAUDITED PRO FORMA CONDENSED FINANCIAL RESULTS EXHIBIT 99 AT&T UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS The unaudited pro forma combined condensed financial statements set forth below for AT&T give effect to - the Liberty Media Group distribution - the AT&T Broadband Group distribution (collectively, the AT&T restructuring events), as if such events had been completed on January 1, 1999 for income statement purposes, and at March 31, 2002 for balance sheet purposes, subject to the assumptions and adjustments in the accompanying notes to the pro forma financial statements. Upon the distribution of AT&T Broadband Group, AT&T will report AT&T Broadband Group as a Discontinued Operation, in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." For accounting purposes, the spin-off (the distribution) of AT&T Broadband Group is considered a non pro-rata distribution and is expected to be recorded at fair value resulting in the recognition of a gain or loss by the remaining AT&T entity upon the distribution date. The split-off of Liberty Media Group, which was completed on August 10, 2001, was a pro-rata distribution and was therefore recorded at historical cost. Since Liberty Media Group was split-off from AT&T on August 10, 2001, no first quarter 2002 balance sheet or income statement pro forma adjustments were made for Liberty Media Group. See the Notes to the Unaudited Pro Forma Combined Condensed Financial Statements for additional disclosure of potential material nonrecurring charges and credits directly attributable to the events as noted above which are not reflected in the pro forma financial statements. Note (i) to the AT&T Unaudited Pro Forma Combined Condensed Financial Statements includes the impacts to earnings per share of the proposed one-for-five reverse stock split of AT&T common stock. The pro forma adjustments included herein are based on available information and certain assumptions that management believes are reasonable and are described in the accompanying notes to the pro forma financial statements. The Unaudited Pro Forma Combined Condensed Financial Statements do not necessarily represent what AT&T's financial position or results of operations would have been had the AT&T Broadband distribution or the Liberty Media Group distribution occurred on such dates or to project AT&T's financial position or results of operations at or for any future date or period. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made. The Unaudited Pro Forma Combined Condensed Financial Statements should be read in conjunction with the historical financial statements of AT&T. If the AT&T Consumer Services Group tracking stock proposal is approved, AT&T currently intends to dividend AT&T Consumer Services Group tracking stock to current AT&T shareholders representing some or all of the financial performance and economic value of AT&T Consumer Services Group at such time as AT&T determines that there is sufficient market receptivity and support for such a distribution. Due to the accumulated deficit that exists at AT&T Corp., the dividend will be reflected as a reduction of additional paid-in capital for the fair value of AT&T Consumer Services with a corresponding increase in par value of AT&T Consumer Services Group tracking stock and additional paid-in capital. The issuance of the AT&T Consumer Services Group tracking stock has no impact on the pro forma balance sheet or pro forma income statements other than to result in the attribution of net income to AT&T Consumer Services Group and therefore to reduce income and earnings attributable to AT&T Common Stock Group. For purposes of these pro forma financial statements we have assumed distribution of all of the AT&T Consumer Services Group tracking stock. AT&T UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT MARCH 31, 2002
AT&T BROADBAND HISTORICAL GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ------- --------------- -------------- ---- (DOLLARS IN MILLIONS) ASSETS Cash and cash equivalents..................................... $ 2,343 $ -- $ 70 $ 2,413 5,956 (f) (5,956)(f) Receivables-net............................................... 8,867 (549) (156) 8,162 Investments................................................... 477 (477) -- -- Deferred income taxes......................................... 1,175 -- (89) 1,086 Other current assets.......................................... 737 (584) 419 572 5,956 (f) (5,956)(f) Property, plant and equipment-net............................. 40,829 (14,588) -- 26,241 Franchise costs-net........................................... 41,381 (41,381) -- -- Goodwill-net.................................................. 24,668 (19,361) -- 5,307 Other purchased intangibles- net.............................. 2,145 (1,514) -- 631 Investments and related advances.............................. 21,790 (20,625) -- 1,165 Prepaid pension costs......................................... 3,391 -- (1) 3,390 Other assets.................................................. 5,004 (1,767) 64 3,301 (3,826)(c) 3,826 (c) --------- ------------ ------ ---------- Total Assets......................................... 152,807 (100,846) 307 52,268 ========= =========== ====== ========== LIABILITIES Accounts payable.............................................. 3,866 (620) 72 3,318 Payroll and benefit-related liabilities....................... 1,602 (442) -- 1,160 Debt maturing within one year................................. 5,233 (7,746) -- -- 5,956 (f) (3,443)(f) Other current liabilities..................................... 5,273 (1,633) 169 3,809 Long-term debt................................................ 39,070 (15,523) -- 21,034 (2,513)(f) Long-term benefit-related liabilities......................... 3,590 -- (136) 3,454 Deferred income taxes......................................... 27,762 (25,447) 136 2,451 Other long-term liabilities and deferred credits.............. 7,691 (813) 199 7,256 179 (d) --------- ----------- ------ ---------- Total Liabilities.................................... 94,087 (52,045) 440 42,482 Minority interest............................................. 2,732 (2,507) -- 225 Company-obligated convertible quarterly income preferred securities of subsidiary trust holding solely subordinated debt securities of AT&T....................................... 4,723 (4,723) -- -- SHAREOWNERS' EQUITY Common Stock: AT&T common stock, $1 par value, authorized 6,000,000,000 shares; issued and outstanding 3,566,313,758 shares....................................... 3,566 32 (d) -- 3,598 Additional paid-in capital.................................... 52,682 (41,872) (203) 14,222 3,826 (c) (1,300)(d) (179)(d) 1,268 (d) Accumulated deficit........................................... (4,459) (3,826)(c) 70 (8,215) Accumulated other comprehensive loss.......................... (524) 480 (44) --------- ----------- ------ ---------- Total shareowners' equity............................ 51,265 (41,571) (133) 9,561 Total Liabilities & Shareowners' Equity.............. $ 152,807 $ (100,846) $ 307 $ 52,268 ========= =========== ====== ==========
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002
AT&T BROADBAND HISTORICAL GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ------- --------------- -------------- ---- (DOLLARS IN MILLIONS) Revenue........................................... $ 12,023 $(2,439) $ 85 $9,669 OPERATING EXPENSES Costs of services and products.................... 3,290 (1,308) 104 2,086 Access and other connection....................... 2,808 -- (19) 2,789 Selling, general and administrative............... 2,585 (625) -- 1,960 Depreciation and amortization..................... 1,895 (720) -- 1,175 Net restructuring and other charges............... 56 (56) -- -- --------- ------- ---------- ---- Total operating expenses.......................... 10,634 (2,709) 85 8,010 Operating income.................................. 1,389 270 -- 1,659 Other (expense) income............................ (162) 102 -- (60) Interest expense.................................. 767 (366) -- 401 Income from continuing operations before income taxes, minority interest and (losses) earnings related to equity investments........ 460 738 -- 1,198 Provision for income taxes........................ 266 229 (2) 493 Minority interest (expense) income................ (57) 77 -- 20 Net losses related to other equity investments.... (297) 20 -- (277) ---------- ------- ---------- ------- Net (loss) earnings from continuing operations attributable to common shareowners............ $ (160) $ 606 $ 2 $ 448 ========= ======= ========== ====== AT&T COMMON STOCK GROUP: Loss from continuing operations................... $ (160) $ (51)(h) Weighted average shares outstanding - (basic & diluted).............................. 3,546 3,578 Basic and diluted loss per share.................. (0.05) (0.01)(i)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001
LIBERTY MEDIA AT&T BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ------- --------------- --------------- -------------- ---- (DOLLARS IN MILLIONS) Revenue........................................... $ 13,551 $ -- $ (2,587) $ 63 $ 11,027 OPERATING EXPENSES Costs of services and products.................... 3,572 -- (1,465) 66 2,173 Access and other connection....................... 3,151 -- -- (3) 3,148 Selling, general and administrative............... 2,794 -- (698) -- 2,096 Depreciation and amortization..................... 2,412 -- (1,283) -- 1,129 Net restructuring and other charges............... 808 -- (808) -- -- --------- ------- ---------- ------ --------- Total operating expenses.......................... 12,737 -- (4,254) 63 8,546 Operating income.................................. 814 -- 1,667 -- 2,481 Other (expense) income............................ (783) -- 953 -- 170 Interest expense.................................. 879 -- (479) -- 400 (Loss) income from continuing operations before income taxes, minority interest and (losses) earnings related to equity investments........ (848) -- 3,099 -- 2,251 Provision for income taxes........................ 218 -- 744 -- 962 Minority interest income.......................... 640 -- (549) -- 91 Equity losses from Liberty Media Group............ (697) 697 -- -- -- Net losses related to other equity investments.... (57) -- (49) -- (106) (Loss) income from continuing operations.......... (1,180) 697 1,757 -- 1,274 Dividend requirements of preferred stock.......... 181 -- -- -- 181 --------- ------- ---------- ------ --------- Net (loss) earnings from continuing operations attributable to common shareowners............ $ (1,361) $ 697 $ 1,757 $ -- $ 1,093 ========= ======= ========== ====== ========= AT&T COMMON STOCK GROUP: (Loss) earnings from continuing operations........ $ (664) $ 326(h) Weighted average shares outstanding- basic ....... 3,805 3,845 Basic (loss) earnings per share................... (0.17) 0.08(i) (Loss) earnings from continuing operations........ $ (664) $ 326(h) Weighted average shares outstanding- diluted...... 3,805 3,851 Diluted (loss) earnings per share................. (0.17) 0.08(i) LIBERTY MEDIA GROUP: Basic and diluted loss per share.................. $ (0.27)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001
LIBERTY MEDIA AT&T BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ------- --------------- --------------- -------------- ---- (DOLLARS IN MILLIONS) Revenue........................................... $ 52,550 $ -- $ (10,132) $ 247 $ 42,665 OPERATING EXPENSES Costs of services and products.................... 13,960 -- (5,459) 298 8,799 Access and other connection....................... 12,136 -- -- (51) 12,085 Selling, general and administrative............... 10,832 -- (2,582) -- 8,250 Depreciation and amortization..................... 9,338 -- (4,780) -- 4,558 Net restructuring and other charges............... 2,530 -- (1,494) -- 1,036 --------- ------- ---------- ------ --------- Total operating expenses.......................... 48,796 -- (14,315) 247 34,728 Operating income.................................. 3,754 -- 4,183 -- 7,937 Other (expense) income............................ (1,547) -- 2,874 -- 1,327 Interest expense.................................. 3,242 -- (1,735) -- 1,507 (Loss) income from continuing operations before income taxes, minority interest and (losses) earnings related to equity investments........ (1,035) -- 8,792 -- 7,757 (Benefit) provision for income taxes.............. (791) -- 3,857 (90) 2,976 Minority interest income.......................... 963 -- (833) -- 130 Equity losses from Liberty Media Group............ (2,711) 2,711 -- -- -- Net losses related to other equity investments.... (4,850) -- 69 -- (4,781) (Loss) income from continuing operations.......... (6,842) 2,711 4,171 90 130 Dividend requirements of preferred stock.......... 652 -- -- -- 652 Premium on exchange of AT&T Wireless tracking stock................................ 80 -- -- -- 80 --------- ------- ---------- ------ --------- Net loss from continuing operations attributable to common shareowners......................... $ (7,574) $ 2,711 $ 4,171 $ 90 $ (602) ========= ======= ========== ====== ========= AT&T COMMON STOCK GROUP: Loss from continuing operations................... $ (4,863) $ (3,475)(h) Weighted average shares outstanding (basic & diluted)............................. 3,643 3,695 Basic and diluted loss per share.................. (1.33) (0.94)(i) LIBERTY MEDIA GROUP: Basic and diluted loss per share.................. $ (1.05)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000
AT&T LIBERTY MEDIA BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ------- --------------- --------------- -------------- ---- (DOLLARS IN MILLIONS) Revenue........................................... $ 55,533 $ -- $ (8,445) $ 116 $ 47,204 OPERATING EXPENSES Costs of services and products.................... 12,795 -- (4,600) 117 8,312 Access and other connection....................... 13,140 -- -- (1) 13,139 Selling, general and administrative............... 9,752 -- (2,180) -- 7,572 Depreciation and amortization..................... 8,589 -- (4,051) -- 4,538 Net restructuring and other charges............... 7,029 -- (6,270) -- 759 --------- ------- ---------- ------ --------- Total operating expenses.......................... 51,305 -- (17,101) 116 34,320 Operating income.................................. 4,228 -- 8,656 -- 12,884 Other income...................................... 1,150 -- 39 -- 1,189 Interest expense.................................. 2,964 -- (1,323) -- 1,641 Income from continuing operations before income taxes, minority interest and (losses) earnings related to equity investments................. 2,414 -- 10,018 -- 12,432 Provision for income taxes........................ 3,284 -- 1,183 -- 4,467 Minority interest income.......................... 4,103 -- (4,062) -- 41 Equity earnings from Liberty Media Group.......... 1,488 (1,488) -- -- -- Net (losses) earnings related to other equity investments.... .............................. (588) -- 597 -- 9 --------- ------- ---------- ------ --------- Net income from continuing operations attributable to common shareowners............ $ 4,133 $(1,488) $ 5,370 $ -- $ 8,015 ========= ======== ========== ====== ========= AT&T COMMON STOCK GROUP: Earnings from continuing operations............... $ 2,645 $ 3,903(h) Weighted average shares outstanding--basic........ 3,486 3,526 Basic earnings per share.......................... 0.76 1.11 Earnings from continuing operations............... 2,677 3,903(h) Weighted average shares outstanding--diluted...... 3,545 3,545 Diluted earnings per share........................ 0.75 1.10(i) LIBERTY MEDIA GROUP: Basic and diluted earnings per share.............. $ 0.58
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements AT&T UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999
AT&T LIBERTY MEDIA BROADBAND HISTORICAL GROUP GROUP OTHER PRO FORMA AT&T(a) DISTRIBUTION(b) DISTRIBUTION(e) ADJUSTMENTS(g) AT&T ------- --------------- --------------- -------------- ---- (DOLLARS IN MILLIONS) Revenue........................................... $ 54,973 $ -- $ (5,080) $ 32 $ 49,925 OPERATING EXPENSES Costs of services and products.................... 11,013 -- (2,686) 32 8,359 Access and other connection....................... 14,439 -- -- -- 14,439 Selling, general and administrative............... 10,894 -- (1,253) -- 9,641 Depreciation and amortization..................... 6,194 -- (1,674) -- 4,520 Net restructuring and other charges............... 975 -- (644) -- 331 --------- ------- ---------- ------ --------- Total operating expenses.......................... 43,515 -- (6,257) 32 37,290 Operating income.................................. 11,458 -- 1,177 -- 12,635 Other income...................................... 826 -- (50) -- 776 Interest expense.................................. 1,503 -- (705) -- 798 Income from continuing operations before income taxes, minority interest and (losses) earnings related to equity investments................. 10,781 -- 1,832 -- 12,613 Provision for income taxes........................ 4,016 -- 465 -- 4,481 Minority interest expense......................... (126) -- 126 -- -- Equity losses from Liberty Media Group............ (2,022) 2,022 -- -- -- Net losses related to other equity investments.... (756) -- 707 -- (49) --------- ------- ---------- ------ --------- Net income from continuing operations attributable to common shareowners......................... $ 3,861 $ 2,022 $ 2,200 $ -- $ 8,083 ========= ======= ========== ====== ========= AT&T COMMON STOCK GROUP: Earnings from continuing operations............... $ 5,883 $ 3,450(h) Weighted average shares outstanding--basic........ 3,082 3,115 Basic earnings per share.......................... 1.91 1.11 Earnings from continuing operations............... 5,909 3,450(h) Weighted average shares outstanding--diluted...... 3,152 3,152 Diluted earnings per share........................ 1.87 1.09(i) LIBERTY MEDIA GROUP: Basic and diluted loss per share.................. $ (0.80)
See Notes To AT&T Unaudited Pro Forma Combined Condensed Financial Statements NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (a) These columns reflect the historical results of operations and financial position of AT&T Corp. (b) These adjustments deduct the historical results of operations of Liberty Media Group to reflect the split-off of Liberty Media Group from AT&T. (c) This entry reflects the fair value adjustment for accounting purposes which we anticipate will be recorded upon the distribution of AT&T Broadband Group. Comcast currently owns shares of AT&T common stock ("T"). In the event Comcast retains these shares at the time of the AT&T Broadband Group distribution, pursuant to certain provisions of the merger agreement, these shares will be converted into exchangeable preferred stock of AT&T and Comcast will not participate in the AT&T Broadband Group distribution. Therefore the distribution would be a non pro-rata transaction among the "T" shareholders accounted for at fair value. Additionally, the timing of the issuance of the AT&T Consumer Services Group tracking stock is uncertain. However, in the event the AT&T Consumer Services Group tracking stock is created and distributed prior to the distribution of AT&T Broadband Group, shareowners of the AT&T Consumer Services Group tracking stock would not receive shares of AT&T Broadband Group, therefore the distribution of AT&T Broadband Group would also be a non pro-rata transaction in these circumstances. The distribution has been reflected in the pro forma balance sheet at fair value, resulting in a nonrecurring loss or gain upon distribution equal to the deficiency or excess of the fair value of AT&T Broadband Group over AT&T's carrying value of the net assets of AT&T Broadband Group to be distributed. The actual loss or gain will be determined upon distribution based on the stock price of the Comcast shares received pursuant to the merger agreement. Based on the closing share price of Comcast Corp. on May 24, 2002, the distribution results in a loss. Due to the fact that the loss is a one-time event, its effects have not been included as a pro forma adjustment to the income statement; however it has been included as a pro forma adjustment to retained earnings on the pro forma balance sheet. The estimated loss is calculated as follows (dollars in millions): Fair value of Comcast Corp. shares to be received in the transaction (1,235,000,000 shares at a closing stock price of $31.56 per share on May 24, 2002)....................................................... $ 38,977 Carrying value of AT&T Broadband Group net assets to be distributed..... 42,803 --------- Loss on distribution ................................................... $ (3,826) =========
In the event Comcast does not hold any AT&T shares at the time of the AT&T Broadband Group distribution and if the AT&T Consumer Services Group tracking stock is not issued prior to the distribution of AT&T Broadband Group, the distribution would be a pro-rata transaction. This treatment would still result in the recognition of a loss in the event the carrying value of AT&T Broadband Group exceeded the fair value of the Comcast shares received in the transaction pursuant to the provisions of SFAS No. 144, paragraph 29, however, in the event the fair value of the Comcast shares received in the transaction exceeded the carrying value of AT&T Broadband Group, no gain would be recorded in a pro-rata transaction. (d) These entries represent adjustments to AT&T Broadband Group combined attributed net assets pursuant to the Merger Agreement. The Merger Agreement calls for the redemption by AT&T of approximately $2.1 billion in TCI Pacific Preferred Stock for AT&T Common Stock, of which a balance of $1.3 billion remained at March 31, 2002. AT&T expects to issue approximately 52 million shares of common stock (par value $1 per share) for the redemption, of which approximately 20 million shares were issued in the first quarter of 2002. In addition, the Merger Agreement stipulates that AT&T will retain certain liabilities currently reflected in the AT&T Broadband Group financial statements. Accordingly, these liabilities were transferred to AT&T along with the related deferred income taxes. (e) These adjustments deduct the historical results of operations and the historical financial position of AT&T Broadband Group to reflect the spin-off of AT&T Broadband from AT&T. The distribution is being accounted for as a fair value transaction and as such the fair value of the net assets of AT&T Broadband Group have been recorded as a reduction to additional paid-in capital, given the deficit that exists in retained earnings. (f) These adjustments reflect the repayment of the intercompany loan balance from AT&T Broadband Group. The repayment of intercompany indebtedness is contained in the Separation and Distribution Agreement between AT&T and AT&T Broadband Corp. (g) Reflects certain Inter-Group transactions appropriately reflected in the separate financial statements of AT&T after excluding the AT&T Broadband Group on a pro forma basis that were eliminated in the AT&T consolidated financial statements and were therefore not reflected in AT&T's historical results and financial position. These transactions include adjustments to properly reflect the stand-alone tax rates of AT&T subsequent to the distribution of the AT&T Broadband Group. These entries also reflect the reclassification of certain items appropriately reflected on the separate financial statements of AT&T Broadband Group. (h) Income attributable to the AT&T Common Stock Group shareholders has been reduced by $499 and $767 for the three months ended March 31, 2002 and 2001, respectively, and by $2,873, $4,112 and $4,633 for the years ended December 31, 2001, 2000 and 1999, respectively, to reflect the income attributable to the AT&T Consumer Services Group tracking stock shareholders. (i) Adjusted for the proposed one-for-five reverse stock split of AT&T common stock, (loss) earnings per basic share would have been $(0.07) and $0.42 for the three months ended March 31, 2002 and 2001, respectively, and $(4.70), $5.53 and $5.54 for the years ended December 31, 2001, 2000 and 1999, respectively. (Loss) earnings per diluted share on the same basis would have been $(0.07) and $0.42 for the three months ended March 31, 2002 and 2001, respectively, and $(4.70), $5.50 and $5.47 for the years ended December 31, 2001, 2000 and 1999, respectively. Additionally, pursuant to the Merger Agreement, prior to the AT&T Broadband spin-off, shares of AT&T common stock held by Comcast (currently 41.5 million shares) will be exchanged on a one-for-one basis into a newly created series of AT&T exchangeable preferred stock. The AT&T exchangeable preferred stock will be mandatorily exchangeable after the closing of the Comcast merger into shares of AT&T common stock utilizing a conversion formula. The conversion formula will provide Comcast with an interest in AT&T that is equal in value to the interest Comcast held in AT&T prior to the Comcast merger, subject to a maximum share issuance of 10% of the outstanding shares of AT&T common stock. The conversion formula is computed as the combination of average post closing AT&T Comcast Class A common stock and AT&T common stock trading values divided by average AT&T common stock trading values utilizing ten randomly selected trading days after the closing of the Comcast merger. At March 31, 2002, assuming a one-for-five reverse stock split of AT&T common stock, the maximum additional shares that Comcast could receive would be approximately 64 million shares, resulting in (loss) earnings per basic share of $(0.07) and $0.39 for the three months ended March 31, 2002 and 2001, respectively, and $(4.33), $5.08 and $5.02 for the years ended December 31, 2001, 2000 and 1999, respectively. (Loss) earnings per diluted share on the same basis would be $(0.07) and $0.39 for the three months ended March 31, 2002 and 2001, respectively, and $(4.33), $5.05 and $4.97 for the years ended December 31, 2001, 2000 and 1999, respectively. At March 31, 2002, assuming no reverse stock split of AT&T common stock, the maximum additional shares that Comcast could receive would be approximately 318 million shares, resulting in (loss) earnings per basic share of $(0.01) and $0.08 for the three months ended March 31, 2002 and 2001, respectively, and $(0.87), $1.02 and $1.00 for the years ended December 31, 2001, 2000 and 1999, respectively. (Loss) earnings per diluted share on the same basis would be $(0.01) and $0.08 for the three months ended March 31, 2002 and 2001, respectively, and $(0.87), $1.01 and $0.99 for the years ended December 31, 2001, 2000 and 1999, respectively. -----END PRIVACY-ENHANCED MESSAGE-----