-----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, HOrrzCi4oO+woLRY7TCGzmmgXSyYMHkwTa9Nh58Nd/q3V29G5wn+dTpT4ZhoBs/V Xl0jeGGX1nOE06CldorX5w== 0000950134-98-006299.txt : 19980805 0000950134-98-006299.hdr.sgml : 19980805 ACCESSION NUMBER: 0000950134-98-006299 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980804 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980804 SROS: NASD FILER: 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: 8-K SEC ACT: SEC FILE NUMBER: 000-11258 FILM NUMBER: 98676711 BUSINESS ADDRESS: STREET 1: 515 EAST AMITE ST CITY: JACKSON STATE: MS ZIP: 39201-2702 BUSINESS PHONE: 6013608600 FORMER COMPANY: FORMER CONFORMED NAME: LDDS COMMUNICATIONS INC /GA/ DATE OF NAME CHANGE: 19930916 FORMER COMPANY: FORMER CONFORMED NAME: RESURGENS COMMUNICATIONS GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CENTRAL CORP /GA/ DATE OF NAME CHANGE: 19890523 8-K 1 FORM 8-K 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 4, 1998 WORLDCOM, INC. (Exact Name of Registrant as Specified in its Charter) Georgia 0-11258 58-1521612 (State or Other (Commission File (IRS Employer Jurisdiction of Number) (Identification Number) Incorporation) 515 East Amite Street Jackson, Mississippi 39201-2702 (Address of Principal Executive Office) Registrant's telephone number, including area code: (601) 360-8600 - ------------------------------------------------------------------------------- 2 ITEM 5. OTHER EVENTS. (1) On October 1, 1997, WorldCom, Inc. ("WorldCom" or the "Company") announced its intention to commence an exchange offer to acquire all of the outstanding shares of MCI common stock, par value $.10 per share ("MCI Common Stock"), for $41.50 of WorldCom Common Stock, subject to adjustment in certain circumstances as set forth in materials filed by WorldCom with the Securities and Exchange Commission (the "Commission"). On November 9, 1997, WorldCom entered into an Agreement and Plan of Merger (the "MCI/WorldCom Merger Agreement") with MCI and MCI Merger Sub, providing for the merger (the "MCI/WorldCom Merger"), with MCI Merger Sub surviving as a wholly owned subsidiary of WorldCom. As a result of the MCI/WorldCom Merger, the separate corporate existence of MCI will cease, and MCI Merger Sub (which will be renamed "MCI Communications Corporation") will succeed to all the rights and be responsible for all the obligations of MCI in accordance with the Delaware General Corporation Law. Subject to the terms and conditions of the MCI/WorldCom Merger Agreement, each share of MCI Common Stock outstanding immediately prior to the effective time of the MCI/WorldCom Merger (the "MCI/WorldCom Effective Time"), other than shares owned by WorldCom or held by MCI, will be converted into the right to receive that number of shares of WorldCom Common Stock equal to the MCI Exchange Ratio (as defined below), and each share of MCI Class A common stock, par value $.10 per share ("MCI Class A Common Stock"), outstanding immediately prior to the MCI/WorldCom Effective Time will be converted into the right to receive $51.00 in cash, without interest thereon. The "MCI Exchange Ratio" means the quotient (rounded to the nearest 1/10,000) determined by dividing $51.00 by the average of the high and low sales prices of WorldCom Common Stock (the "MCI/WorldCom Average Price") as reported on The Nasdaq National Market on each of the 20 consecutive trading days ending with the third trading day immediately preceding the MCI/WorldCom Effective Time; provided, however, that the MCI Exchange Ratio will not be less than 1.2439 or greater than 1.7586. Cash will be paid in lieu of the issuance of any fractional share of WorldCom Common Stock in the MCI/WorldCom Merger. Based on the number of shares of MCI Common Stock outstanding as of March 31, 1998 and assumed MCI Exchange Ratios of 1.2439 and 1.7586, approximately 731,890,172 shares and 1,034,731,133 shares, respectively, of WorldCom Common Stock would be issued in the MCI/WorldCom Merger. In addition, as of March 31, 1998, outstanding options to purchase shares of MCI Common Stock would be converted in the MCI/WorldCom Merger to options to acquire an aggregate of approximately 103,019,687 shares and 145,647,095 shares, respectively, of WorldCom Common Stock, and the exercise price would be adjusted to reflect the MCI Exchange Ratio, so that, on exercise, the holders would receive, in the aggregate, the same number of shares of WorldCom Common Stock as they would have received had they exercised prior to the MCI/WorldCom Merger, at the same exercise price. The MCI/WorldCom Merger was approved by the MCI stockholders and the WorldCom shareholders at separate meetings held on March 11, 1998. The MCI/WorldCom Merger was subsequently conditionally approved by the U.S. Department of Justice and the European Commission, subject to the divestiture of MCI's Internet services business. See Item 5(2) below. In addition, the MCI/WorldCom Merger is also subject to approvals from the Federal Communications Commission ("FCC") and certain state government bodies. WorldCom anticipates that the MCI/WorldCom Merger will close in the third quarter of 1998. In May 1998, GTE Corporation and three of its subsidiaries filed suit in the U.S. District Court for the District of Columbia against WorldCom and MCI seeking to enjoin the MCI/WorldCom Merger on the grounds that it violates U.S. antitrust laws. WorldCom believes that the complaint is without merit, although there can be no assurance as to the ultimate result of the suit. 2 3 Termination of the MCI/WorldCom Merger Agreement by MCI or WorldCom under certain conditions will require MCI to pay WorldCom $750 million as a termination fee and to reimburse WorldCom the $450 million alternative transaction fee paid by WorldCom to British Telecommunications plc ("BT"). Further, termination of the MCI/WorldCom Merger Agreement by MCI or WorldCom under certain conditions, would require WorldCom to pay MCI $1.635 billion as a termination fee. Pursuant to an agreement (the "BT Agreement") among MCI, WorldCom and BT, the prior merger agreement between BT and MCI (the "BT/MCI Merger Agreement") was terminated, and WorldCom agreed to pay BT an alternative transaction fee of $450 million and expenses of $15 million payable to BT in accordance with the BT/MCI Merger Agreement. These fees were paid on November 12, 1997. WorldCom also agreed to pay to BT an additional payment of $250 million in the event that WorldCom is required to make the $1.635 billion payment to MCI in accordance with the MCI/WorldCom Merger Agreement. The foregoing description of the MCI/WorldCom Merger Agreement and the BT Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to such agreements, copies of which are incorporated by reference as exhibits to the WorldCom Annual Report on Form 10-K for the year ended December 31, 1997, which is incorporated by reference herein. Additional information regarding such agreements and the transactions contemplated thereby (as of January 22, 1998) is also contained in portions of WorldCom's Proxy Statement/Prospectus dated January 22, 1998 under the captions "The MCI/WorldCom Merger - Interests of Certain Persons in the Transaction," "Other Terms of the MCI/WorldCom Merger Agreement," "The BT Agreement" and "Certain Regulatory Filings and Approvals" included in WorldCom's Registration Statement on Form S-4, as amended (No. 333-36901), which portions are hereby incorporated by reference herein. (2) On July 15, 1998, MCI announced that it had entered into a letter agreement (the "Letter Agreement") with Cable and Wireless plc ("Cable & Wireless") to sell its Internet backbone facilities and wholesale and retail Internet business (the "iMCI Business") for $1.75 billion in cash. The sale of the iMCI Business includes all associated traffic, revenue and backbone facilities. Cable & Wireless will acquire the following Internet assets: MCI's U.S. nationwide Internet backbone, MCI's dedicated access customers, MCI's Internet service provider customers, MCI's dial-up business and MCI's web hosting and managed firewall services. In connection with the transaction, MCI has agreed to provide Cable & Wireless underlying transport service for Cable & Wireless's Internet backbone for up to five years. MCI and Cable & Wireless have also agreed to non-competition agreements for transitioning accounts of 24 and 18 months for wholesale and dedicated access retail customers, respectively. In addition, approximately 1,000 MCI employees - in engineering, sales, customer service, marketing, operations and administrative support - may be transferred to Cable & Wireless. The sale of the iMCI Business to Cable & Wireless is contingent upon receipt of U.S. Department of Justice and European Commission approval of the sale and the final regulatory approval of the MCI/WorldCom Merger. The Letter Agreement will terminate if such governmental approvals are not received by December 31, 1998. MCI's agreement with Cable & Wireless has no immediate impact on MCI's Internet customers. They will continue to receive Internet service from MCI until the close of the MCI/WorldCom Merger when the agreement with Cable & Wireless becomes effective. At that time, they will become Cable & Wireless Internet customers. Subject to the terms of the Letter Agreement, MCI/WorldCom will offer a full suite of Internet services upon completion of the MCI/WorldCom Merger. (3) WorldCom currently is in the process of arranging a $12.0 billion bank credit facility (the "New Credit Facility"), consisting of the amendment and restatement of its existing $5.0 billion facility and the arrangement of a new $7.0 billion 364-day revolving credit facility. The $5.0 billion facility will consist of a $3.75 billion Facility A Revolving Credit Agreement ("Facility A") and a $1.25 billion Facility B Term Loan Agreement ("Facility B"). Facility A and Facility B will mature on June 30, 2002, and the $7.0 billion revolving credit facility ("Facility C") will mature 364 days from the closing of the Facilities, with options to extend Facility C for two additional 364-day periods (subject to 51% approval by the lenders) and to convert up to $4.0 billion of outstanding borrowings thereunder into a one-year term loan. The Company expects the New Credit Facility to contain pricing, covenants and events of default that are generally no less favorable than those contained in its existing credit facilities. The New Credit Facility is expected to be finalized in early August 1998. As of this date, WorldCom has secured commitments, subject to satisfactory documentation and certain other conditions, in excess of the aggregate amount of the New Credit Facility. There can be no assurance that the New Credit Facility will be completed or that committed amounts will be made available to the Company. (4) On July 30, 1998, MCI issued its second quarter 1998 earnings release, certain portions of which are attached hereto as Exhibit 99.1 and are incorporated herein by reference. Information regarding WorldCom's results for the three months ended June 30, 1998 is contained in WorldCom's Current Report on Form 8-K dated July 23, 1998 (filed July 24, 1998). ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits. The following exhibits are filed herewith in accordance with Item 601 of Regulation S-K: 3 4 (c) Exhibit Index Exhibit No. Description ----------- ----------- 99.1 Certain portions of MCI's Press release dated July 30, 1998. 99.2 Portions of WorldCom's Proxy Statement/Prospectus dated January 22, 1998 under the captions "The MCI/WorldCom Merger - Interests of Certain Persons in the Transaction," "Other Terms of the MCI/WorldCom Merger Agreement," "The BT Agreement" and "Certain Regulatory Filings and Approvals" contained in WorldCom's Registration Statement on Form S-4, as amended (No. 333-36901), which portions are hereby incorporated by reference herein. 4 5 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 hereunto duly authorized. WORLDCOM, INC. By: /s/ SCOTT D. SULLIVAN ----------------------------- Scott D. Sullivan Chief Financial Officer August 4, 1998 5 6 EXHIBIT INDEX
Exhibit No. Description of Exhibit ----------- ---------------------- 99.1 Certain portions of MCI's press release dated July 30, 1998. 99.2 Portions of WorldCom's Proxy Statement/Prospectus dated January 22, 1998 under the captions "The MCI/WorldCom Merger - Interests of Certain Persons in the Transaction," "Other Terms of the MCI/WorldCom Merger Agreement," "The BT Agreement" and "Certain Regulatory Filings and Approvals" contained in WorldCom's Registration Statement on Form S-4, as amended (No. 333-36901), which portions are hereby incorporated by reference herein.
EX-99.1 2 PRESS RELEASE 1 EXHIBIT 99.1 [MCI COMMUNICATIONS CORPORATION LETTERHEAD] Mike Kraft, Vice President MCI Investor Relations 202-887-2801 Frank J. Walter MCI News Bureau 1-800-644-NEWS 202-887-3000 MCI SECOND QUARTER REVENUE GROWS NEARLY 11 PERCENT TO $5.4 BILLION REVENUE GROWTH BEST SINCE 1996 Washington, D.C.--July 30, 1998--MCI (NASDAQ: MCIC) today reported second quarter revenue of $5.4 billion, an increase of $527 million or nearly 11 percent. Net income for the quarter was $195 million, or $0.26 per diluted share. Included in the second quarter results was additional depreciation expense of $58 million pre-tax or ($.05) per diluted share after-tax related to an asset disposal plan adopted in fourth quarter 1997. Also, this quarter MCI recorded gains totaling $43 million pre-tax or $.04 per diluted share after-tax from the sales of holdings in non-core businesses. Excluding these special items, net income for the quarter was $204 million or $0.27 per diluted share. -more- 2 2-2-2 SUMMARY OF SECOND QUARTER, YEAR-TO-DATE REVENUE (U.S. $ IN MILLIONS)
SECOND QUARTER YEAR-TO-DATE 1998 1997 % Increase 1998 1997 % Increase ---------- ---------- ---------- ---------- ---------- -------------- Voice and Messaging $ 3,934 $ 3,654 7.7 $ 7,829 $ 7,367 6.3 Data and Internet 1,001 809 23.7 1,944 1,561 24.5 Information Technology 464 417 11.3* 949 824 15.2 Eliminations and Other (29) (37) (21.6) (64) (26) not meaningful ---------- ---------- ---------- ---------- ---------- -------------- TOTAL REVENUE $ 5,370 $ 4,843 10.9 $ 10,658 $ 9,726 9.6
*Excluding revenue from discontinued service lines, pro-forma revenue in the second quarter was $444 million, up 21 percent year-over-year. COMMUNICATION SERVICES MCI reported second quarter communications services revenue of $4.9 billion, an increase of approximately 11 percent from the second quarter 1997. The company's communications services revenue include U.S. and international voice and messaging services (long distance inbound and outbound calling, local services, call center and wireless) and data and Internet services. In the voice and messaging area, MCI's revenue grew to $3.9 billion or nearly 8 percent, led by conferencing and local. MCI continues to expand its presence in the U.S. local market with local revenue increasing 70 percent over second quarter 1997. The company offers local services in 31 major markets where it has built local network facilities. Following the completion of the merger, MCI WorldCom's national sales force will market local services in more than 100 markets. In the mass market, MCI continues to see improvements in revenue growth and customer retention. The company now has more than 7 million customers on its flagship MCI One service. Despite competitive pressures, customer churn has been stable as a result of the company's integrated product offering. In fact, more than 90 percent of MCI's consumer customers use more than one service. -more- 3 3-3-3 In the data and Internet area, MCI's revenue for the quarter increased nearly 24 percent to $1 billion. The company's portfolio of virtual data services accounted for the largest gains with frame relay sales increasing by more than 70 percent and ATM sales increasing more than 100 percent. The performance, flexibility and cost benefits of virtual data services in supporting intranet and other enterprise network applications has fueled greater demand for these services among mid-size and smaller businesses. MCI continues to expand its presence in the managed services market, with revenue in this area growing seven-fold over the past year. Just last week, MCI announced a $350 million long-term agreement with CSX Corp. to manage its national network supporting its transportation operations. Other managed services clients include the U.S. Postal Service, the FAA and NASDAQ . In the Internet area, MCI's revenue for the quarter grew to $89 million, an increase of 59 percent year-over-year. As announced on July 15, MCI will sell its public Internet business to Cable and Wireless for $1.75 billion, simultaneous with the completion of MCI's merger with WorldCom. INFORMATION TECHNOLOGY MCI Systemhouse, the company's information technology unit, grew revenue to $464 million, or 11 percent on a reported basis over second quarter 1997. Excluding revenue from discontinued service lines, pro-forma revenue in the second quarter was $444 million, up 21 percent year-over-year. The company's systems integration practice has expanded by 50 percent this year and posted double-digit growth in outsourcing services. MCI Systemhouse continues to grow successfully in the U.S. market. U.S. revenues now account for 40 percent of MCI Systemhouse's total and are growing 30 percent annually. The company offers large accounts a full suite of integrated network enterprise solutions for such applications as e-commerce, customer care platforms, and network management services. -more- 4 4-4-4 GLOBAL MARKETS MCI's joint venture with BT, Concert Communications Services, posted distributor revenue of $232 million or a 27 percent increase over last year's second quarter. MCI's share of Concert losses was $2 million. Following MCI's merger with WorldCom, BT will purchase MCI's stake in the venture while MCI will retain non-exclusive U.S. distribution rights to sell Concert services to its customers. MCI will continue to offer an array of global communication services, including the high-speed data services now available from WorldCom in Europe. Avantel, MCI's Mexican joint venture company, has close to 10 percent of the addressable long distance market. The company continues to expand its base in the business market, winning a number of key new corporate and government contracts and growing its share of higher-margin services such as data and Internet services. Avantel continues to work closely with Mexican regulatory bodies to reduce interconnection charges and discriminatory practices that are hindering true competition in the Mexican telecommunications market MERGER WITH WORLDCOM In July, MCI and WorldCom received approval for their merger from the European Commission and the U.S. Department of Justice, following MCI's agreement to sell its public Internet business. The merger is awaiting final regulatory approval from the U.S. Federal Communications Commission and three U.S. states. The companies expect to close the merger and launch MCI WorldCom in the third quarter. MCI, headquartered in Washington, D.C., is a leading provider of local-to-global communication services to business, government and residential users. The company's fast-growing portfolio of advanced data and IT services account for a quarter of MCI's approximately $20 billion in annual revenue. MCI operates one of the world's largest and most advanced digital networks, connecting local markets in the U.S. to hundreds of locations worldwide. The information in this release may contain certain forward-looking statements that are subject to risks and uncertainties. Certain factors could affect the future results of the company, including material adverse changes in the economic conditions in MCI's markets; future regulatory actions and conditions; the ability of the company to obtain local facilities at competitive rates; and industry-wide competition and price levels. Reference is made to, and the forward-looking statements made herein are qualified by, the statement relating to forward-looking statements contained in the company's most recent reports to the Securities and Exchange Commission. ### 5 MCI Communications Corporation Financial Highlights Second Quarter 1998 CONSOLIDATED REVENUE Second quarter revenue totaled $5.4 billion - an increase of $527 million, or 10.9% from second quarter 1997. Consolidated revenue grew 1.6% from first quarter 1998. Voice & Messaging revenue was $3.9 billion in the second quarter, up 7.7% year-over-year and an increase of 1.0% sequentially. Voice & Messaging is comprised of traditional switched services, including domestic and international inbound and outbound, as well as local and wireless. Data & Internet revenue totaled $1.0 billion, a 23.7% increase year-over-year. Data & Internet revenue grew 6.2% sequentially. Data & Internet revenue is comprised of all domestic and international private line, virtual data and Internet services. MCI's Internet revenue in the quarter was $89 million, an increase of 59% from second quarter 1997. Information Technology revenue totaled $464 million, an 11.3% percent increase from the year-ago quarter and a 4.3% percent decline from first quarter. Excluding the impact of revenue from discontinued service lines, second quarter 1998 revenue totaled $444 million, an increase of 21.0% versus second quarter 1997 and a decrease of 0.2% from first quarter 1998. IT revenue is comprised solely of MCI Systemhouse. REVENUE & TRAFFIC GROWTH Year-over-year, total communications services revenue grew 10.6% compared to volume growth of 12.3%, resulting in a revenue-to-traffic gap of (1.7%). Total communications services revenue includes Voice, Messaging, Data and Internet revenue. The gap narrowed from (5.4%) in first quarter 1998 as a result of changing revenue mix. Sequential growth in total communications services revenue of 2.0% combined with sequential volume growth of (0.6%) to produce a revenue-to-traffic gap for the quarter of 2.6%. Financial Highlights - 1 6 COST OF SERVICES Cost of services includes telecommunications interconnection costs (local, long distance, and international) and the costs of providing IT services. Cost of services totaled $2.8 billion, or 52.9% of revenue, compared to 54.5% of revenue in the first quarter of 1998 and 52.6% of revenue in the second quarter of 1997. The sequential improvement in cost of services, as a percent of revenue, is primarily attributable to lower long distance telecommunications expense as a percent of communications services revenue. The improvement came from changing revenue mix and the benefits of declining international settlement rates. The year-over-year increase in cost of services, as a percent of revenue, reflects the net impact of several factors. Contributing to the increase in cost of services as a percent of revenue were a higher mix of local and IT revenue, payphone compensation, and lower revenue rate per minute for certain voice services. Partially offsetting these factors were declines in domestic and international telecommunications costs. SALES, OPERATIONS AND GENERAL Sales, Operations and General expense for the quarter was $1.6 billion, or 28.9% of revenue. SO&G increased $289 million year-over-year and $50 million sequentially. The year-over-year increase in SO&G is related to human resources costs in the communications services and IT businesses, as well as incremental merger-related expenses. DEPRECIATION Second quarter depreciation expense totaled $621 million. The $621 million included $58 million (pre-tax) - or approximately 5 cents per diluted share (after-tax) - in additional depreciation expense associated with the asset disposal plan MCI adopted in the fourth quarter of 1997. Depreciation expense totaled $479 million in second quarter 1997 and $553 million in first quarter 1998 (excluding $137 million in additional depreciation expense associated with the asset disposal plan). Underlying year-over-year and sequential growth in depreciation expense was driven by investments to add capacity, reliability, and performance to the data and traditional communications networks. Capital expenditures for the quarter were approximately $800 million. Financial Highlights - 2 7 OPERATING INCOME Second quarter operating income was $356 million or 6.6% of revenue. Excluding the impact of the additional depreciation expense, operating income was $414 million, or 7.7% of revenue. INTEREST EXPENSE Second quarter interest expense, including distributions on Trust preferred securities, was $69 million versus $67 million in first quarter 1998. OTHER INCOME/(EXPENSE) Second quarter other income was $38 million, which included the impact of approximately $43 million (pre-tax) - or approximately 4 cents per diluted share (after-tax) - of gains from sales of holdings in non-core businesses. Equity in losses of affiliates totaled ($23) million in the second quarter of 1998, compared to ($24) million in second quarter 1997. NET INCOME AND EARNINGS PER SHARE Reported net income in the second quarter totaled $195 million versus net income of $101 million in first quarter 1998 and net income of $280 million in second quarter 1997. Net income, excluding the additional depreciation expense and recognized gains, was $204 million in the second quarter of 1998. Reported earnings per diluted share were $0.26 in the second quarter versus a $0.14 in the first quarter of 1998 and $0.40 in second quarter 1997. Earnings per diluted share, excluding the additional depreciation expense and recognized gains, were $0.27 in the second quarter. MCI's diluted share count in the second quarter of 1998 was 745 million. ### Financial Highlights - 3 8 FINANCIAL TABLES
Tables Table - ------------------------------------------------------------------------------------------- Consolidated Income Statements, Second Quarter 1998 1 Consolidated Income Statements, Year to Date Second Quarter 1998 2 Consolidated Balance Sheets 3 Supplemental Consolidated Revenue Breakout, Second Quarter 1998 4 Supplemental Consolidated Revenue Breakout, Year to Date Second Quarter 1998 & 1997 5
9 TABLE 1 MCI COMMUNICATIONS CORPORATION CONSOLIDATED INCOME STATEMENTS SECOND QUARTER 1998 AS REPORTED (In millions, except per share amounts) (unaudited)
2ND QTR 2ND QTR % 1ST QTR % 1998 1997 CHANGE 1998 CHANGE ========================================================= REVENUE $ 5,370 $ 4,843 10.9 $ 5,288 1.6 ------- ------- ----- ------- ----- OPERATING EXPENSES Cost of Services 2,839 2,547 11.5 2,883 (1.5) Sales, operations and general 1,554 1,265 22.8 1,504 3.3 Depreciation 621 479 29.6 690 (10.0) ------- ------- ----- ------- ----- TOTAL OPERATING EXPENSES 5,014 4,291 16.8 5,077 (1.2) ------- ------- ----- ------- ----- INCOME FROM OPERATIONS 356 552 (35.5) 211 68.7 Interest (expense) (54) (58) 6.9 (52) (3.8) Interest income 12 4 NM 4 NM Equity in income (losses) of affiliated companies (23) (24) 4.2 (24) 4.2 Other income (expense), net 38 (4) NM 39 (2.6) ------- ------- ----- ------- ----- INCOME BEFORE INCOME TAXES AND TRUST DISTRIBUTIONS 329 470 (30.0) 178 84.8 Income tax provision (benefit) 119 175 (32.0) 62 91.9 Distributions on Trust preferred securities 15 15 -- 15 -- ------- ------- ----- ------- ----- NET INCOME $ 195 $ 280 (30.4) $ 101 93.1 ======= ======= ===== ======= ===== BASIC EARNINGS PER COMMON SHARE $ 0.27 $ 0.41 (34.1) $ 0.14 92.9 DILUTED EARNINGS PER COMMON SHARE $ 0.26 $ 0.40 (35.0) $ 0.14 85.7 Weighted average number of shares 729 689 5.8 715 2.0 Weighted average number of shares - assuming dilution 745 708 5.2 732 1.8 NM - not meaningful
Table 1 10 TABLE 2 MCI COMMUNICATIONS CORPORATION CONSOLIDATED INCOME STATEMENTS YEAR TO DATE SECOND QUARTER 1998 AS REPORTED (In millions, except per share amounts) (unaudited)
% 1998 1997 CHANGE ================================== REVENUE $ 10,658 $ 9,726 9.6 -------- -------- ------ OPERATING EXPENSES Cost of services 5,722 5,072 12.8 Sales, operations and general 3,058 2,584 18.3 Depreciation 1,311 932 40.7 -------- -------- ------ TOTAL OPERATING EXPENSES 10,091 8,588 17.5 -------- -------- ------ INCOME FROM OPERATIONS 567 1,138 (50.2) Interest (expense) (106) (116) 8.6 Interest income 16 10 60.0 Equity in income (losses) of affiliated companies (47) (61) 23.0 Other income (expense), net 77 (7) NM -------- -------- ------ INCOME BEFORE INCOME TAXES AND TRUST DISTRIBUTIONS 507 964 (47.4) Income tax provision 181 359 (49.6) Distributions on Trust preferred securities 30 30 -- -------- -------- ------ NET INCOME $ 296 $ 575 (48.5) ======== ======== ====== BASIC EARNINGS PER COMMON SHARE $ 0.41 $ 0.84 (51.2) DILUTED EARNINGS PER COMMON SHARE $ 0.40 $ 0.82 (51.2) Weighted average number of shares 722 688 4.9 Weighted average number of shares - assuming dilution 737 705 4.5 NM - not meaningful
Table 2 11 TABLE 3 MCI COMMUNICATIONS CORPORATION CONSOLIDATED BALANCE SHEETS JUNE 30, 1998 (In millions) (unaudited)
2ND QTR 1ST QTR % 2ND QTR % 1998 1998 Change 1997 Change ========================================================== ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,126 $ 208 NM $ 55 NM Marketable securities -- -- -- 95 (100.0) Receivables, net 3,325 3,872 (14.1) 3,670 (9.4) Other current assets 983 1,048 (6.2) 845 16.3 ------- ------- ------- ------- ------- TOTAL CURRENT ASSETS 5,434 5,128 6.0 4,665 16.5 ------- ------- ------- ------- ------- PROPERTY AND EQUIPMENT, net of accumulated depreciation of $8,304, $7,675 and $7,084 14,140 13,944 1.4 13,286 6.4 OTHER ASSETS Noncurrent marketable securities -- -- -- 33 (100.0) Other assets and deferred charges 1,054 1,021 3.2 884 19.2 Investment in affiliates 636 643 (1.1) 662 (3.9) Investment in News Corp 1,350 1,350 -- 1,350 -- Investment in DBS 1,064 1,052 1.1 980 8.6 Goodwill, net 2,308 2,327 (0.8) 2,391 (3.5) ------- ------- ------- ------- ------- TOTAL OTHER ASSETS 6,412 6,393 0.3 6,300 1.8 ------- ------- ------- ------- ------- TOTAL ASSETS $25,986 $25,465 2.0 $24,251 7.2 ======= ======= ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accrued telecommunications expense $ 2,564 $ 2,496 2.7 $ 2,134 20.1 Accounts payable and other accrued liabilities 3,637 3,634 0.1 2,782 30.7 Long-term debt due within one year 742 1,107 (33.0) 1,930 (61.6) ------- ------- ------- ------- ------- TOTAL CURRENT LIABILITIES 6,943 7,237 (4.1) 6,846 1.4 ------- ------- ------- ------- ------- NONCURRENT LIABILITIES Long-term debt 3,938 3,615 8.9 3,259 20.8 Deferred taxes and other 2,167 2,101 3.1 2,046 5.9 ------- ------- ------- ------- ------- TOTAL NONCURRENT LIABILITIES 6,105 5,716 6.8 5,305 15.1 MANDATORILY REDEEMABLE PREFERRED SECURITIES TRUST 750 750 -- 750 -- STOCKHOLDERS' EQUITY Class A Common Stock 14 14 -- 14 -- Common Stock 60 60 -- 60 -- Additional paid in capital 6,489 6,350 2.2 6,363 2.0 Retained Earnings 5,623 5,446 3.3 5,789 (2.9) Accumulated other comprehensive income 2 -- NM 10 (80.0) Treasury stock, at cost -- (108) 100.0 (886) 100.0 ------- ------- ------- ------- ------- TOTAL STOCKHOLDERS' EQUITY 12,188 11,762 3.6 11,350 7.4 ------- ------- ------- ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,986 $25,465 2.0 $24,251 7.2 ======= ======= ======= ======= ======= NM - not meaningful
Table 3 12 TABLE 4 MCI COMMUNICATIONS CORPORATION SUPPLEMENTAL CONSOLIDATED REVENUE BREAKOUT 2ND QUARTER 1998 (In millions) (unaudited)
2ND QTR 2ND QTR % 1ST QTR % 1998 1997 CHANGE 1998 CHANGE ========================================================= VOICE & MESSAGING $ 3,934 $ 3,654 7.7 $ 3,895 1.0 DATA & INTERNET 1,001 809 23.7 943 6.2 INFORMATION TECHNOLOGY 464 417 11.3 485 (4.3) ELIMINATIONS/OTHER (29) (37) (21.6) (35) (17.1) ------- ------- ------- ------- ------- REVENUE $ 5,370 $ 4,843 10.9 $ 5,288 1.6 ======= ======= ======= ======= =======
Table 4 13 TABLE 5 MCI COMMUNICATIONS CORPORATION SUPPLEMENTAL CONSOLIDATED REVENUE BREAKOUT YEAR TO DATE SECOND QUARTER 1998 & 1997 (In millions) (unaudited)
% 1998 1997 CHANGE ================================== VOICE & MESSAGING $ 7,829 $ 7,367 6.3 DATA & INTERNET 1,944 1,561 24.5 INFORMATION TECHNOLOGY 949 824 15.2 ELIMINATIONS/OTHER (64) (26) NM -------- -------- ------ REVENUE $ 10,658 $ 9,726 9.6 ======== ======== ======
NM - not meaningful Table 5 -----END PRIVACY-ENHANCED MESSAGE-----