-----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, QURrce3eY75OcJci+KbVpqrnaPmLhqLVdXMCM9wbuoqFlksx96SSoDhSA49Xi+/B SDUITZrRA27baIcYXFKmWw== 0000893750-01-000084.txt : 20010212 0000893750-01-000084.hdr.sgml : 20010212 ACCESSION NUMBER: 0000893750-01-000084 CONFORMED SUBMISSION TYPE: 425 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010209 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCOM INC/GA// CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 SEC ACT: SEC FILE NUMBER: 001-10415 FILM NUMBER: 1529198 BUSINESS ADDRESS: STREET 1: 500 CLINTON CENTER DRIVE CITY: CLINTON STATE: MS ZIP: 39056 BUSINESS PHONE: 6014605600 FORMER COMPANY: FORMER CONFORMED NAME: MCI WORLDCOM INC DATE OF NAME CHANGE: 19980914 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCOM INC/GA// CENTRAL INDEX KEY: 0000723527 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 581521612 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 BUSINESS ADDRESS: STREET 1: 500 CLINTON CENTER DRIVE CITY: CLINTON STATE: MS ZIP: 39056 BUSINESS PHONE: 6014605600 FORMER COMPANY: FORMER CONFORMED NAME: MCI WORLDCOM INC DATE OF NAME CHANGE: 19980914 FORMER COMPANY: FORMER CONFORMED NAME: WORLDCOM INC /GA/ DATE OF NAME CHANGE: 19970127 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 425 1 0001.txt Filed by WorldCom, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: WorldCom, Inc. Commission File No. 0-11258 February 8, 2001 WORLDCOM, INC. REPORTS FOURTH QUARTER CASH EPS OF 35 CENTS WORLDCOM GROUP FOURTH QUARTER 2000 REVENUES UP 15 PERCENT CLINTON, Miss., - February 8, 2001 - WorldCom, Inc. (NASDAQ:WCOM) today announced financial results for the fourth quarter and full-year 2000 ending December 31, 2000. The solid results posted by WorldCom meet the performance expectations the Company announced on November 1 when it declared its intention to separate the Company's financial structure into two distinct groups: a high-growth unit focused on data, Internet and international operations and a high cash flow unit focused on mature businesses. FOURTH QUARTER 2000 WORLDCOM GROUP RESULTS WorldCom Group, which includes the Company's high-growth operations, reported fourth quarter 2000 revenues of $5.9 billion, a 15 percent increase from the same period in 1999. This strong result was driven by 28 percent year-over- year revenue growth in data and Internet services and 29 percent revenue growth in international services. Data and Internet services accounted for 45 percent of WorldCom Group's revenues in the fourth quarter, up from 40 percent of revenues in the fourth quarter of 1999. Revenue growth in these fast growing services continues to lead the industry and accounts for over 74 percent of the Group's incremental revenue growth since the year-ago quarter. International services now represent 26 percent of the Group's revenues, up from 23 percent last year. Business voice revenues declined 7 percent from the year-ago period and now represent 29 percent of the Group's fourth quarter revenues. WorldCom Group EBITDA (earnings before interest, taxes, depreciation and amortization) was $2.0 billion, versus $2.3 billion in the year-ago period. WorldCom Group EBITDA margin was 35 percent which includes the previously announced spending on growth initiatives, such as managed web hosting and Internet based private virtual networks, and increased employee retention and benefit spending. WorldCom Group reported cash earnings (earnings before goodwill amortization) of $812 million or 28 cents per share, versus $1.1 billion or 38 cents per share in the same period of 1999. WorldCom Group net income, after goodwill amortization, was $585 million or 20 cents per share in the quarter. FULL YEAR 2000 WORLDCOM GROUP RESULTS WorldCom Group reported total commercial services revenues of $22.8 billion in 2000, an increase of 19 percent from the $19.2 billion recorded in 1999. For the year, EBITDA increased 15 percent to $8.8 billion and cash earnings were $3.8 billion or $1.30 per share. Net income for 2000 was $2.9 billion or 98 cents per share, up from $2.3 billion or 78 cents per share in 1999. FOURTH QUARTER 2000 MCI GROUP RESULTS MCI Group, comprised of the WorldCom, Inc. businesses that primarily serve long distance voice customers, reported fourth quarter 2000 revenues of $3.8 billion, versus $4.2 billion in the same period last year. The MCI Group reported revenue growth in its consumer subscription long distance and local services businesses, outpacing its largest competitors. This growth was offset by reduced revenues from transaction brands and calling card services that are experiencing substitution from wireless services; and alternative channels, wholesale and resale services that are being de-emphasized as the Group shifts its focus from revenue growth to cash generation. -2- MCI Group direct EBITDA (EBITDA before inter-company cost allocations) was $735 million, versus $1.1 billion in the year-ago period. The MCI Group reported cash earnings of $191 million or 7 cents per share, versus $453 million or 15 cents per share in the fourth quarter of 1999. MCI Group net income was $125 million or 4 cents per share. FULL YEAR 2000 MCI GROUP RESULTS MCI Group revenues were $16.3 billion for the year, essentially unchanged from 1999. For the year, direct EBITDA was $5.0 billion, up from $4.5 billion in 1999. Cash earnings were $2.0 billion or 70 cents per share. Net income for 2000 was $1.8 billion or 61 cents per share, up from $1.6 billion or 56 cents per share in 1999. FOURTH QUARTER 2000 CONSOLIDATED WORLDCOM, INC. RESULTS Fourth quarter 2000 consolidated revenues were $9.6 billion, up from $9.3 billion in the same period of 1999. Consolidated EBITDA was $2.8 billion representing an EBITDA margin of 29 percent. Fourth quarter 2000 cash earnings were $1.0 billion, or 35 cents per share, versus $1.6 billion, or 54 cents per share in the year-ago period. Consolidated net income, after goodwill amortization, was $710 million or 25 cents per share in the quarter versus $1.3 billion or 44 cents per share in the same period a year ago. FULL YEAR 2000 CONSOLIDATED WORLDCOM, INC. RESULTS Full year consolidated WorldCom, Inc. revenues were $39.1 billion, up from $35.9 billion in 1999. Full-year consolidated EBITDA was $13.8 billion before charges, up from 1999 EBITDA of $12.2 billion. Full-year 2000 cash earnings were $5.8 billion or $2.00 per share, versus $5.1 billion or $1.74 per share in 1999. Consolidated net income before charges, was $4.6 billion or $1.59 per share. -3- MANAGEMENT'S COMMENTS "Since announcing our intention to separate the Company's businesses into growth and mature segments, WorldCom has made excellent progress. We are addressing those areas of our business that are mature and already have begun to manage them more appropriately -- focusing on cash returns," said Bernard J. Ebbers, president and CEO of WorldCom, Inc. "And in Internet, data and international services, we have completed our operations and sales realignment to further solidify WorldCom's leadership in e-business communications for today's businesses. We expect to use our strength in data and Internet services to offer our customers cost-saving and efficiency enhancing add-on services like web hosting, virtual private networks and web- based customer care centers." "In the more mature areas of our businesses represented by the MCI Group, our focus on cash generation is expected to yield positive future results. We have taken steps in the late third quarter and in the fourth quarter to de- emphasize unprofitable wholesale, resale and alternative channel services while we've continued to enjoy industry leading success in residential local and long distance services." MANAGEMENT'S OUTLOOK The following outlook contains forward-looking statements that are based on WorldCom management's best judgment at this time. Actual results could differ materially and are subject to various risks and uncertainties, many of which, such as economic factors, market demand and competitive pressures, are beyond the Company's control. The Company expects full-year 2001 WorldCom Group revenue growth of between 12 and 15 percent with quarterly growth increasing through the year. The Company expects WorldCom Group cash earnings of between $1.25 and $1.35 per share for the year. Because of the Company's intention to manage the MCI Group for cash profitability and its intention to de-emphasize unprofitable business segments, we expect declining, but stabilizing sequential revenues in the MCI Group. The Company expects MCI Group cash earnings of between $0.25 and $0.30 per share in 2001. In addition, the Company fully expects the MCI -4- Group to generate sufficient cash flow in 2001 to service its dividend and debt requirements. WorldCom, Inc. currently expects that full-year 2001 consolidated cash earnings will be in the Company's previous $1.55 to $1.65 per share guidance range. FORWARD-LOOKING STATEMENTS This document includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to the effects of vigorous competition; the impact of technological change on our business, new entrants and alternative technologies, and dependence on availability of transmission facilities; uncertainties associated with the success of acquisitions; risks of international business; regulatory risks in the United States and internationally; contingent liabilities; risks associated with Euro conversion efforts; uncertainties regarding the collectibility of receivables; risks associated with debt service requirements and interest rate fluctuations; and our financial leverage. More detailed information about those factors is contained in WorldCom's filings with the Securities and Exchange Commission. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. PROXY STATEMENT Investors and security holders are urged to read the Company's Registration Statement on Form S-4 relating to the tracking stocks, including the prospectus and proxy statement, when they become available. When these and other documents relating to the tracking stock transaction are filed with the SEC, they may be obtained without charge from the SEC's website at http://www.sec.gov. Holders of the Company's stock may also obtain each of these documents (when they become available) for free by directing their request to WorldCom, Inc., c/o Investor Relations Department, 500 Clinton Center Drive, Clinton, Mississippi 39056. This earnings release, and such proxy statement/prospectus does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of tracking stock in any state in which the offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that state. No offering of tracking stock will be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act. HISTORICAL QUARTERLY FINANCIAL STATEMENTS The Company has prepared additional statements that reflect the past eight quarters for both the WorldCom Group and MCI Group. These statements can be viewed under the historical financials heading in the investor relations section of WorldCom's web site at www.worldcom.com/ir. ABOUT WORLDCOM WorldCom (NASDAQ: WCOM) is a preeminent global communications company for the digital generation, operating in more than 65 countries with 2000 revenues of approximately $40 billion. WorldCom provides the innovative technologies and -5- services that are the foundation for business in the 21st century. For more information go to http://www.worldcom.com. WorldCom will conduct a conference call to discuss its financial results today, Thursday, February 8 at 7:30 AM (Central Time). The call will be available to all investors on the Internet at http://www.worldcom.com/ir. Editor's note: In the second quarter of 2000, WorldCom, Inc. recognized one- time after tax charges of $55 million associated with the termination of its merger agreement with Sprint. In the third quarter of 2000, WorldCom, Inc. recognized after tax charges of $405 million associated with specific domestic and international wholesale accounts that were no longer deemed collectible due to bankruptcies, litigation and settlements of contractual disputes that occurred in the third quarter. Results for all periods have been adjusted to reflect classification changes for reciprocal compensation and COBRA (central office based remote access) equipment sales, which are now being treated as offsets to costs of sales. Previously, WorldCom recorded these items on a gross basis as revenues. Revenues and line costs for all periods have also been adjusted to reflect the elimination of small business and consumer PICC (primary interexchange carrier charges) as a result of the Coalition for Affordable Local and Long Distance, or CALLS, legislation which eliminated single line PICC as of July 1, 2000. Also see the financial statements accompanying this release for the Company's statement on the adoption of SAB 101. On November 1, 2000, WorldCom, Inc. announced a realignment of its businesses with the distinct customer bases they serve. While WorldCom, Inc. will remain the name of the Company, it will create two separately traded tracking stocks: WorldCom Group, which will reflect the performance of the Company's core high-growth data, Internet, international and commercial voice businesses and MCI Group, which will reflect the performance of its high cash flow consumer, small business, wholesale long distance, wireless messaging and dial-up Internet access operations. ### -6- WORLDCOM GROUP COMBINED STATEMENTS OF OPERATIONS (Unaudited, In Millions, Except Per Share Data)
For the Three Months ended December 31, -------------------------- 2000 1999 ---- ---- Revenues: Voice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,708 $1,843 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,933 1,568 International . . . . . . . . . . . . . . . . . . . . . . . . . 1,540 1,192 Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 485 SAB 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) - ------ ------ Total revenues . . . . . . . . . . . . . . . . . . . . . . . . 5,861 5,088 ------ ------ Operating expenses: Line costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,338 1,760 Selling, general and administrative . . . . . . . . . . . . . . 1,483 989 Depreciation and amortization . . . . . . . . . . . . . . . . . 892 726 In-process research and development and other charges . . . . . - (8) ------ ------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,713 3,467 ------ ------ Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148 1,621 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . . . . . . . . (140) (91) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 58 189 ------ ------ Income before income taxes and minority interests . . . . . . . . . . . 1,066 1,719 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . 385 710 ------ ------ Income before minority interests . . . . . . . . . . . . . . . . . . . 681 1,009 Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . (80) (94) ------ ------ Net income before distributions on subsidiary trust and other mandatorily redeemable preferred securities and preferred dividend requirements . . . . . . . . . . . . . . . . . 601 915 Distributions on subsidiary trust and other mandatorily redeemable preferred securities . . . . . . . . . . . . . . . . . 16 16 Preferred dividend requirements . . . . . . . . . . . . . . . . . . . . - 2 ------ ------ Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 585 $ 897 ====== ====== Earnings per common share: Net income: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.32 ====== ====== Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.20 $ 0.31 ====== ====== Shares utilized in calculation: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,880 2,840 ====== ====== Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,893 2,931 ====== ======
-7- WORLDCOM GROUP COMBINED STATEMENTS OF OPERATIONS (Unaudited, In Millions, Except Per Share Data)
Financial Reporting Before Other Items ------------------- Year 2000 Year 1999 Year 2000 ------------------ --------- --------- Revenues: Voice . . . . . . . . . . . . . . . . . . . . . . $ 7,036 $ 7,433 $ 7,036 Data . . . . . . . . . . . . . . . . . . . . . . . 7,407 5,830 7,407 International . . . . . . . . . . . . . . . . . . 5,879 4,396 5,879 Internet . . . . . . . . . . . . . . . . . . . . . 2,466 1,554 2,466 SAB 101, other . . . . . . . . . . . . . . . . . . (9) 523 (33) ------- ------ ------ Total revenues . . . . . . . . . . . . . . . . . 22,779 19,736 22,755 ------- ------ ------ Operating expenses: Line costs . . . . . . . . . . . . . . . . . . . . 8,745 7,905 8,745 Selling, general and administrative . . . . . . . 5,255 4,195 5,689 Depreciation and amortization . . . . . . . . . . 3,280 3,013 3,280 In-process research and development and other charges. . . . . . . . . . . . . . . . . . . . . - (8) - ------- ------ ------ Total . . . . . . . . . . . . . . . . . . . . . 17,280 15,105 17,714 ------- ------ ------ Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 5,499 4,631 5,041 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . (458) (460) (458) Miscellaneous . . . . . . . . . . . . . . . . . . 385 237 385 ------- ------ ------ Income before income taxes, minority interests and cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . 5,426 4,408 4,968 Provision for income taxes . . . . . . . . . . . . . . . . . . . . 2,181 1,856 1,990 ------- ------ ------ Income before minority interests and cumulative effect of accounting change . . . . . . . . . . . 3,245 2,552 2,978 Minority interests . . . . . . . . . . . . . . . . . . . . . . . . (296) (186) (305) ------- ------ ------ Income before cumulative effect of accounting change . . . . . . . 2,949 2,366 2,673 Cumulative effect of accounting change (net of income tax of $43 in 2000) . . . . . . . . . . . . - - (75) ------- ------ ------ Net income before distributions on subsidiary trust and other mandatorily redeemable preferred securities and preferred dividend requirements . . . . . . . . . . . . . . 2,949 2,366 2,598 Distributions on subsidiary trust and other mandatorily redeemable preferred securities . . . . . . . . . . . . . . . . . . . . 64 63 64 Preferred dividend requirements . . . . . . . . . . . . . . . . . . 1 9 1 ------- ------ ------ -8- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,884 $2,294 $2,533 ======= ====== ====== Earnings per common share: Net income applicable to common shareholders before cumulative effect of accounting change: Basic . . . . . . . . . . . . . . . . . . . . . $ 1.01 $ 0.81 $ 0.91 ======= ====== ====== Diluted . . . . . . . . . . . . . . . . . . . . $ 0.99 $ 0.78 $ 0.90 ======= ====== ====== Cumulative effect of accounting change . . . . . . . . . . . . . . $ - $ - $(0.03) ======= ====== ====== Net income: Basic . . . . . . . . . . . . . . . . . . . . . $ 1.01 $ 0.81 $ 0.88 ======= ====== ====== Diluted . . . . . . . . . . . . . . . . . . . . $ 0.99 $ 0.78 $ 0.87 ======= ====== ====== Shares utilized in calculation: Basic . . . . . . . . . . . . . . . . . . . . . 2,868 2,821 2,868 ======= ====== ====== Diluted . . . . . . . . . . . . . . . . . . . . 2,912 2,925 2,912 ======= ====== ======
[FN] Excludes a pre-tax charge of $93 million ($55 million after tax) associated with the Sprint merger agreement, including regulatory, legal, accounting, and investment banking fees and other costs, and a $340 million pre-tax charge ($197 million after tax) associated with specific domestic and international wholesale accounts that were no longer deemed collectible due to bankruptcies, litigation and settlements of contractual disputes that occurred in the third quarter of 2000. Also excludes the retroactive effect of implementing SEC Staff Accounting Bulletin No. 101. During the fourth quarter of 2000, the Company implemented SAB 101 which requires certain activation and installation fee revenues to be amortized over the average life of the related service rather than be recognized immediately. As required by SAB 101, the Company retroactively adopted this accounting effective January 1, 2000. Costs directly related to these revenues may also be deferred and amortized over the customer contract life. Prior to the adoption of SAB 101, the Company deferred certain costs associated with the activation of domestic data customers and expensed the costs over the life of the customer. All other direct costs associated with customer activation were expensed as incurred. The retroactive adoption has the following effect on WorldCom Group's reported operating results: -9-
1Q 00 2Q 00 3Q 00 ----- ----- ----- Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6) $ (9) $ (9) Selling, general and administrative . . . . . . . . . . . . . . . . (3) 4 - ---- --- -- Operating income . . . . . . . . . . . . . . . . . . . . . . . . (3) (13) (9) Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . (1) (5) (4) ---- --- -- Income before minority interests . . . . . . . . . . . . . . . . . (2) (8) (5) Minority interests . . . . . . . . . . . . . . . . . . . . . . . . (3) (3) (3) ---- --- -- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5) $ (11) $ (8) ===== ===== ----
-10- WORLDCOM GROUP CONDENSED COMBINED BALANCE SHEETS (Unaudited, In Millions)
December 31, 2000 December 31, 1999 ----------------- ----------------- ASSETS Current assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 720 $ 806 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 4,980 3,737 Receivable from MCI group, net . . . . . . . . . . . . . . . . . 1,625 976 Other current assets . . . . . . . . . . . . . . . . . . . . . . 1,743 3,518 ------- ------ Total current assets . . . . . . . . . . . . . . . . . . . . . 9,068 9,037 ------- ------ Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,177 26,227 Goodwill and other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . 36,685 37,252 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,963 4,717 ------- ------ $85,893 $77,233 ======= ======= LIABILITIES AND ALLOCATED NET WORTH Current liabilities: Short-term debt and current maturities of long-term debt . . . . $ 4,200 $ 5,015 Accounts payable and accrued line costs . . . . . . . . . . . . 3,027 3,443 Other current liabilities . . . . . . . . . . . . . . . . . . . 3,986 4,236 ------- ------ Total current liabilities . . . . . . . . . . . . . . . . . . 11,213 12,694 ------- ------ Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,696 7,128 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,648 5,276 Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,592 2,599 Mandatorily redeemable preferred securities . . . . . . . . . . . . . . . . . . . 798 798 Allocated net worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,946 48,738 ------- ------ $85,893 $77,233 ======= =======
-11- WORLDCOM GROUP COMBINED STATEMENTS OF CASH FLOWS (Unaudited, In Millions)
For the Year Ended December 31, ------------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,598 $2,366 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change . . . . . . . . . . . . . 75 - Minority interests . . . . . . . . . . . . . . . . . . . . . . . 305 186 Depreciation and amortization . . . . . . . . . . . . . . . . . 3,280 3,013 Provision for losses on accounts receivable . . . . . . . . . . 1,091 330 Provision for deferred income taxes . . . . . . . . . . . . . . 1,410 2,510 Change in working capital items . . . . . . . . . . . . . . . . (2,995) (631) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (431) (422) ------ ------ Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . 5,333 7,352 ------ ------ Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (9,368) (7,036) Capital expenditures, Embratel and undersea cables . . . . . . . . (1,616) (893) Acquisitions and related costs . . . . . . . . . . . . . . . . . . (14) (786) Increase in intangible assets . . . . . . . . . . . . . . . . . . (771) (389) Proceeds from disposition of marketable securities and other long- term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 676 3,580 Increase in other assets . . . . . . . . . . . . . . . . . . . . . (1,696) (1,956) Decrease in other liabilities . . . . . . . . . . . . . . . . . . (823) (565) ------ ------ Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . (13,612) (8,045) ------ ------ Cash flows from financing activities: Principal borrowings (repayments) on debt, net . . . . . . . . . . 6,377 (2,894) Common stock issuance . . . . . . . . . . . . . . . . . . . . . . 585 886 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65) (72) Redemption of Series C preferred stock . . . . . . . . . . . . . . (190) - Advances from MCI group, net . . . . . . . . . . . . . . . . . . . 1,589 2,097 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84) - ------ ------ Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . 8,212 17 Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . (19) (221) ------ ------ Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . (86) (897) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . 806 1,703 ------ ------ Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . $ 720 $ 806 ======= ======
-12- MCI GROUP COMBINED STATEMENTS OF OPERATIONS (Unaudited, In Millions, Except Per Share Data)
For the Three Months ended December 31, --------------------------- 2000 1999 ---- ---- Revenues: Wholesale and consumer . . . . . . . . . . . . . . . . . . . . . $2,622 $2,974 Alternative channels and small business . . . . . . . . . . . . 749 832 Dial-up Internet . . . . . . . . . . . . . . . . . . . . . . . . 403 428 SAB 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) - ------ ------ Total revenues . . . . . . . . . . . . . . . . . . . . . . . . 3,773 4,234 ------ ------ Operating expenses: Line costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,865 1,956 Selling, general and administrative . . . . . . . . . . . . . . 1,336 1,295 Depreciation and amortization . . . . . . . . . . . . . . . . . 230 207 ------ ------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,431 3,458 ------ ------ Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 776 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . . . . . . . . (131) (127) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . - - ------ ------ Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 649 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 261 ------ ------ Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125 $ 388 ====== ====== Earnings per common share: Net income: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.04 $ 0.14 ====== ====== Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.04 $ 0.13 ====== ====== Shares utilized in calculation: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,880 2,840 ====== ====== Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,893 2,931 ====== ======
-13- MCI GROUP COMBINED STATEMENTS OF OPERATIONS (Unaudited. In Millions, Except Per Share Data)
Financing Reporting Before Other Items ------------------- Year 2000 Year 1999 Year 2000 ------------------ --------- --------- Revenues: Wholesale and consumer . . . . . . . . . . . . . . . $11,170 $11,533 $11,170 Alternative channels and small business . . . . . . 3,541 3,142 3,541 Dial-up Internet . . . . . . . . . . . . . . . . . . 1,628 1,497 1,628 Other . . . . . . . . . . . . . . . . . . . . . . . (1) - (4) ------- ------- ------- Total revenues . . . . . . . . . . . . . . . . . . 16,338 16,172 16,335 ------- ------- ------- Operating expenses: Line costs . . . . . . . . . . . . . . . . . . . . . 7,177 7,087 7,177 Selling, general and administrative . . . . . . . . 4,781 5,071 5,162 Depreciation and amortization . . . . . . . . . . . 884 757 884 ------- ------- ------- Total . . . . . . . . . . . . . . . . . . . . . . 12,842 12,915 13,223 ------- ------- ------- Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . 3,496 3,257 3,112 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . . (512) (506) (512) Miscellaneous - 5 - ------- ------- ------- Income before income taxes and cumulative effect of accounting change 2,984 2,756 2,600 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . 1,188 1,109 1,035 ------- ------- ------- Income before cumulative effect of accounting change . . . . . . . . 1,796 1,647 1,565 Cumulative effect of accounting change (net of income tax of $7 in 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (10) ------- ------- ------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,796 $1,647 $1,555 ======= ======= ====== Earnings per common share: Net income applicable to common shareholders before cumulative effect of accounting change: Basic . . . . . . . . . . . . . . . . . . . . . . $ 0.63 $ 0.58 $ 0.55 ======= ======= ====== Diluted . . . . . . . . . . . . . . . . . . . . . $ 0.62 $ 0.56 $ 0.54 ======= ======= ====== Cumulative effect of accounting change . . . . . . . . . . . . . . . $ - $ - $ - ======= ======= ====== Net income: Basic . . . . . . . . . . . . . . . . . . . . . . $ 0.63 $ 0.58 $ 0.54 ======= ======= ====== Diluted . . . . . . . . . . . . . . . . . . . . . $ 0.62 $ 0.56 $ 0.53 ======= ======= ====== Shares utilized in calculation: Basic . . . . . . . . . . . . . . . . . . . . . . . 2,868 2,821 2,868 ======= ======= ====== Diluted . . . . . . . . . . . . . . . . . . . . . . 2,912 2,925 2,912 ======= ======= ======
-14- [FN] Excludes a $345 million pre-tax charge ($208 million after tax) associated with specific wholesale accounts that were no longer deemed collectible due to bankruptcies, litigation and settlements of contractual disputes that occurred in the third quarter of 2000. Also excludes the retroactive effect of implementing SEC Staff Accounting Bulletin No. 101. During the fourth quarter of 2000, the Company implemented SAB 101 which requires certain activation and installation fee revenues to be amortized over the average life of the related service rather than be recognized immediately. As required by SAB 101, the Company retroactively adopt ed this accounting effective January 1, 2000. Costs directly related to these revenues may also be deferred and amortized over the customer contract life. Prior to the adoption of SAB 101, the Company deferred certain costs associated with the activation of domestic data customers and expensed the costs over the life of the customer. All other direct costs associated with customer activation were expensed as incurred. The retroactive adoption has the following effect on WorldCom Group's reported operating results:
1Q 00 2Q 00 3Q 00 ----- ----- ----- Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $ (1) $ (1) Selling, general and administrative . . . . . . . . . . . . . . . . 12 12 12 ----- --- --- Operating income . . . . . . . . . . . . . . . . . . . . . . . . (13) (13) (13) Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . (5) (6) (5) ----- --- --- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (8) $ (7) $ (8) ===== ===== ====
-15- MCI GROUP CONDENSED COMBINED BALANCE SHEETS (Unaudited. In Millions)
December 31, 2000 December 31, 1999 ----------------- ----------------- ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 41 $ 70 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 1,835 2,009 Other current assets . . . . . . . . . . . . . . . . . . . . . . 436 184 -------- -------- Total current assets . . . . . . . . . . . . . . . . . . . . . 2,312 2,263 -------- -------- Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,246 2,391 Goodwill and other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . 9,909 10,056 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 105 -------- -------- $ 14,635 $ 14,815 ======== ======== LIABILITIES AND ALLOCATED NET WORTH Current liabilities: Payable to WorldCom Group, net . . . . . . . . . . . . . . . . . $ 1,625 $ 976 Accounts payable and accrued line costs . . . . . . . . . . . . 1,962 2,835 Other current liabilities . . . . . . . . . . . . . . . . . . . 1,498 1,680 -------- -------- Total current liabilities . . . . . . . . . . . . . . . . . . 5,085 5,491 -------- -------- Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 6,000 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . 1,087 824 Allocated net worth . . . . . . . . . . . . . . . . . . . . . . 2,463 2,500 -------- -------- $ 14,635 $ 14,815 ======== ========
-16- MCI GROUP COMBINED STATEMENTS OF CASH FLOWS (Unaudited. In Millions)
For the Year Ended December 31, ------------------------------ 2000 1999 ---- ---- Cash flows from operating activities: Net income $1,555 $ 1,647 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change . . . . . . . . . . . . . 10 -- Depreciation and amortization . . . . . . . . . . . . . . . . . 884 757 Provision for losses on accounts receivable . . . . . . . . . . 774 621 Provision for deferred income taxes . . . . . . . . . . . . . . 239 393 Change in working capital items . . . . . . . . . . . . . . . . (1,129) 224 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 11 ------ ----- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 2,333 3,653 ------ ----- Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (500) (787) Sale of short-term investments, net . . . . . . . . . . . . . . 4 4 Acquisitions and related costs . . . . . . . . . . . . . . . . . -- (292) Increase in intangible assets . . . . . . . . . . . . . . . . . (167) (354) Decrease (increase) in other assets . . . . . . . . . . . . . . (94) 4 Decrease in other liabilities . . . . . . . . . . . . . . . . . (16) (85) ------ ----- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . (773) (1,510) ------ ----- Cash flows from financing activities: Advances to WorldCom group, net . . . . . . . . . . . . . . . . (1,589) (2,097) ------ ----- Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . (1,589) (2,097) ------ ----- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . (29) 46 Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 70 24 ------ ----- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 41 $ 70 ====== =======
-17- WORLDCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited. In Millions, Except Per Share Data)
For the Three Months ended December 31, -------------------------- 2000 1999 ---- ---- Revenues: Voice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,708 $ 1,843 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,933 1,568 International . . . . . . . . . . . . . . . . . . . . . . . . . 1,540 1,192 Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 485 ------ ------- Commercial services . . . . . . . . . . . . . . . . . . . . . 5,870 5,088 Wholesale and consumer . . . . . . . . . . . . . . . . . . . . . 2,622 2,974 Alternative channels and small business . . . . . . . . . . . . 749 832 Dial-up Internet . . . . . . . . . . . . . . . . . . . . . . . . 403 428 SAB 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) -- ------ ------- Total revenues . . . . . . . . . . . . . . . . . . . . . . . . 9,634 9,322 ------ ------- Operating expenses: Line costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,086 3,650 Selling, general and administrative . . . . . . . . . . . . . . 2,750 2,195 Depreciation and amortization . . . . . . . . . . . . . . . . . 1,308 1,088 In-process research and development and other charges . . . . . -- (8) ------ ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,144 6,925 ------ ------- Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,490 2,397 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . . . . . . . . (271) (218) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 58 189 ------ ------- Income before income taxes and minority interests . . . . . . . . . . . . . . . . 1,277 2,368 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 471 971 ------ ------- Income before minority interests . . . . . . . . . . . . . . . . . . . . . . . . 806 1,397 Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80) (94) ------ ------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 726 1,303 Distributions on subsidiary trust and other mandatorily redeemable preferred securities . . . . . . . . . . . . . . . . 16 16 Preferred dividend requirement . . . . . . . . . . . . . . . . . . . . . . . . . -- 2 ------ ------- Net income applicable to common shareholders . . . . . . . . . . . . . . . . . . $ 710 $ 1,285 ====== ======= Earnings per common share: Net income applicable to common shareholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.45 ====== ======= Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.25 $ 0.44 ====== ======= -18- Shares utilized in calculation: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,880 2,840 ====== ======= Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,893 2,931 ====== =======
-19- WORLDCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited. In Millions, Except Per Share Data)
Financial Reporting Before Other Items ------------------- Year 2000 Year 1999 Year 2000 ------------------ --------- --------- Revenues: Voice . . . . . . . . . . . . . . . . . . . . . . $ 7,036 $ 7,433 $ 7,036 Data . . . . . . . . . . . . . . . . . . . . . . . 7,407 5,830 7,407 International . . . . . . . . . . . . . . . . . . 5,879 4,396 5,879 Internet . . . . . . . . . . . . . . . . . . . . . 2,466 1,554 2,466 ------- ------- ------- Commercial services . . . . . . . . . . . . . . 22,788 19,213 22,788 Wholesale and consumer . . . . . . . . . . . . . . 11,170 11,533 11,170 Alternative channels and small business . . . . . 3,541 3,142 3,541 Dial-up Internet . . . . . . . . . . . . . . . . . 1,628 1,497 1,628 SAB 101, other . . . . . . . . . . . . . . . . . . (10) 523 (37) ------- ------- ------- Total revenues . . . . . . . . . . . . . . . . . 39,117 35,908 39,090 ------- ------- ------- Operating expenses: Line costs . . . . . . . . . . . . . . . . . . . . 15,462 14,739 15,462 Selling, general and administrative . . . . . . . 9,782 8,935 10,597 Depreciation and amortization . . . . . . . . . . 4,878 4,354 4,878 In-process research and development and other charges . . . . . . . . . . . . . . . . . . . . -- (8) -- ------- ------- ------- Total . . . . . . . . . . . . . . . . . . . . . 30,122 28,020 30,937 ------- ------- ------- Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 8,995 7,888 8,153 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . (970) (966) (970) Miscellaneous . . . . . . . . . . . . . . . . . . 385 242 385 ------- ------- ------- Income before income taxes, minority interests and cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . 8,410 7,164 7,568 Provision for income taxes . . . . . . . . . . . . . . . . . . . . 3,369 2,965 3,025 ------- ------- ------- Income before minority interests and cumulative effect of accounting change . . . . . . . . . . . 5,041 4,199 4,543 Minority interests . . . . . . . . . . . . . . . . . . . . . . . . (296) (186) (305) ------- ------- ------- Income before cumulative effect of accounting change . . . . . . . 4,745 4,013 4,238 Cumulative effect of accounting change (net of income tax of $50 in 2000) . . . . . . . . . . . . -- -- (85) ------- ------- ------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,745 4,013 4,153 Distributions on subsidiary trust and other mandatorily redeemable preferred securities . . . . . . . . . . . . . . . . . . . . 64 63 64 Preferred dividend requirement . . . . . . . . . . . . . . . . . . 1 9 1 ------- ------- ------- -20- Net income applicable to common shareholders . . . . . . . . . . . $ 4,680 $ 3,941 $ 4,088 ======= ======= ======= Earnings per common share: Net income applicable to common shareholders before cumulative effect of accounting change: Basic . . . . . . . . . . . . . . . . . . . . . $ 1.63 $ 1.40 $ 1.46 ======= ======= ======= Diluted . . . . . . . . . . . . . . . . . . . . $ 1.61 $ 1.35 $ 1.43 ======= ======= ======= Cumulative effect of accounting change . . . . . . . . . . . . . . $ -- $ -- $ (0.03) ======= ======= ======= Net income applicable to common shareholders: Basic . . . . . . . . . . . . . . . . . . . . . $ 1.63 $ 1.40 $ 1.43 ======= ======= ======= Diluted . . . . . . . . . . . . . . . . . . . . $ 1.61 $ 1.35 $ 1.40 ======= ======= ======= Shares utilized in calculation: Basic . . . . . . . . . . . . . . . . . . . . . 2,868 2,821 2,868 ======= ======= ======= Diluted . . . . . . . . . . . . . . . . . . . . 2,912 2,925 2,912 ======= ======= =======
____________________ [FN] Excludes a pre-tax charge of $93 million ($55 million after tax) associated with the Sprint merger agreement, including regulatory, legal, accounting and investment banking fees and other costs, and a $685 million pre-tax charge ($405 million after tax) associated with specific domestic and international wholesale accounts that were no longer deemed collectible due to bankruptcies, litigation and settlements of contractual disputes that occurred in the third quarter of 2000. Also excludes the retroactive effect of implementing SEC Staff Accounting Bulletin No. 101. During the fourth quarter of 2000, the Company implemented SAB 101 which requires certain activation and installation fee revenues to be amortized over the average life of the related service rather than be recognized immediately. As required by SAB 101, the Company retroactively adopted this accounting effective January 1, 2000. Costs directly related to these revenues may also be deferred and amortized over the customer contract life. Prior to the adoption of SAB 101, the Company deferred certain costs associated with the activation of domestic data customers and expensed the costs over the life of the customer. All other direct costs associated with customer activation were expensed as incurred. The retroactive adoption has the following effect on reported operating results:
1Q 00 2Q 00 3Q 00 ----- ----- ----- Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7) $(10) $(10) Selling, general and administrative . . . . . . . . . . . . . . . . 9 16 12 ----- ----- ----- Operating income . . . . . . . . . . . . . . . . . . . . . . . . . (16) (26) (22) ----- ----- ----- -21- Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . (6) (11) (9) ----- ----- ----- Income before minority interests . . . . . . . . . . . . . . . . . (10) (15) (13) Minority interests . . . . . . . . . . . . . . . . . . . . . . . . (3) (3) (3) ----- ----- ----- Net income . . . . . . . . . . . . . . . . . . . . $(13) $(18) $(16) ===== ===== =====
-22- WORLDCOM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited. In Millions)
December 31, 2000 December 31, 1999 ----------------- ----------------- ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 761 $ 876 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 6,815 5,746 Other current assets . . . . . . . . . . . . . . . . . . . . . . 2,179 3,702 -------- -------- Total current assets . . . . . . . . . . . . . . . . . . . . . 9,755 10,324 -------- -------- Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,423 28,618 Goodwill and other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . 46,594 47,308 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,131 4,822 -------- -------- $ 98,903 $ 91,072 ======== ======== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Short-term debt and current maturities of long-term debt . . . . $ 4,200 $ 5,015 Accounts payable and accrued line costs . . . . . . . . . . . . 4,989 6,278 Other current liabilities . . . . . . . . . . . . . . . . . . . 5,484 5,916 -------- -------- Total current liabilities . . . . . . . . . . . . . . . . . . 14,673 17,209 -------- -------- Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,696 13,128 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,735 6,100 Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,592 2,599 Mandatorily redeemable preferred securities . . . . . . . . . . . . . . . . . . . 798 798 Total shareholders' investment . . . . . . . . . . . . . . . . . . . . . . . . . 55,409 51,238 -------- -------- $ 98,903 $ 91,072 ======== ========
-23- WORLDCOM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited. In Millions)
For the Year Ended December 31, --- 2000 1999 ---- ---- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,153 $ 4,013 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change . . . . . . . . . . . . 85 -- Minority interests . . . . . . . . . . . . . . . . . . . . . . 305 186 Depreciation and amortization . . . . . . . . . . . . . . . . 4,878 4,354 Provision for losses on accounts receivable . . . . . . . . . 1,865 951 Provision for deferred income taxes . . . . . . . . . . . . . 1,649 2,903 Change in working capital items . . . . . . . . . . . . . . . (4,838) (991) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (431) (411) ------- ------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 7,666 11,005 ------- ------- Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (9,868) (7,823) Capital expenditures, Embratel and undersea cables . . . . . . . (1,616) (893) Acquisitions and related costs . . . . . . . . . . . . . . . . . (14) (1,078) Increase in intangible assets . . . . . . . . . . . . . . . . . (938) (743) Proceeds from disposition of marketable securities and other long-term assets . . . . . . . . . . . . 680 3,584 Increase in other assets . . . . . . . . . . . . . . . . . . . . (1,790) (1,952) Decrease in other liabilities . . . . . . . . . . . . . . . . . (839) (650) ------- ------- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . (14,385) (9,555) ------- ------- Cash flows from financing activities: Principal borrowings (repayments) on debt, net . . . . . . . . . 6,377 (2,894) Common stock issuance . . . . . . . . . . . . . . . . . . . . . 585 886 Dividends paid on preferred stock . . . . . . . . . . . . . . . (65) (72) Redemption of Series C preferred stock . . . . . . . . . . . . . (190) -- Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84) -- ------- ------- Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . 6,623 (2,080) Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . (19) (221) ------- ------- Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . (115) (851) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 876 1,727 ------- -------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 761 $ 876 ======= ========
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