WorldCom Announces Intention to Restate Statements
Press Releases
WorldCom Announces Intention to Restate 2001 and First Quarter 2002 Financial Statements
CLINTON, Miss., June 25, 2002 – WorldCom, Inc. (Nasdaq: WCOM, MCIT) today announced it intends to restate its financial statements for 2001 and the first quarter of 2002. As a result of an internal audit of the company’s capital expenditure accounting, it was determined that certain transfers from line cost expenses to capital accounts during this period were not made in accordance with generally accepted accounting principles (GAAP). The amount of these transfers was $3.055 billion for 2001 and $797 million for first quarter 2002. Without these transfers, the company’s reported EBITDA would be reduced to $6.339 billion for 2001 and $1.368 billion for first quarter 2002, and the company would have reported a net loss for 2001 and for the first quarter of 2002.
The company promptly notified its
recently engaged external auditors, KPMG LLP, and has asked
KPMG to undertake a comprehensive audit of the company’s
financial statements for 2001 and 2002. The company also
notified Andersen LLP, which had audited the company’s
financial statements for 2001 and reviewed such statements
for first quarter 2002, promptly upon discovering these
transfers. On June 24, 2002, Andersen advised WorldCom that
in light of the inappropriate transfers of line costs,
Andersen’s audit report on the company’s financial
statements for 2001 and Andersen’s review of the company’s
financial statements for the first quarter of 2002 could not
be relied upon.
The company will issue unaudited
financial statements for 2001 and for the first quarter of
2002 as soon as practicable. When an audit is completed, the
company will provide new audited financial statements for
all required periods. Also, WorldCom is reviewing its
financial guidance.
The company has terminated Scott
Sullivan as chief financial officer and secretary. The
company has accepted the resignation of David Myers as
senior vice president and controller.
WorldCom has
notified the Securities and Exchange Commission (SEC) of
these events. The Audit Committee of the Board of Directors
has retained William R. McLucas, of the law firm of Wilmer,
Cutler & Pickering, former Chief of the Enforcement Division
of the SEC, to conduct an independent investigation of the
matter. This evening, WorldCom also notified its lead bank
lenders of these events.
The expected restatement of
operating results for 2001 and 2002 is not expected to have
an impact on the Company’s cash position and will not affect
WorldCom’s customers or services. WorldCom has no debt
maturing during the next two quarters.
“Our senior
management team is shocked by these discoveries,” said John
Sidgmore, appointed WorldCom CEO on April 29, 2002. “We are
committed to operating WorldCom in accordance with the
highest ethical standards.”
“I want to assure our customers and employees that the company remains viable and committed to a long-term future. Our services are in no way affected by this matter, and our dedication to meeting customer needs remains unwavering,” added Sidgmore. “I have made a commitment to driving fundamental change at WorldCom, and this matter will not deter the new management team from fulfilling our plans.”
Actions to Improve Liquidity
and Operational Performance
As Sidgmore previously
announced, WorldCom will continue its efforts to restructure
the company to better position itself for future growth.
These efforts include:
Cutting capital expenditures
significantly in 2002. We intend 2003 capital expenditures
will be $2.1 billion on an annual basis.
Downsizing
our workforce by 17,000, beginning this Friday, which is
expected to save $900 million on an annual basis. This
downsizing is primarily composed of discontinued operations,
operations & technology functions, attrition and contractor
terminations.
Selling a series of non-core businesses,
including exiting the wireless resale business, which alone
will save $700 million annually. The company is also
exploring the sale of other wireless assets and certain
South American assets. These sales will reduce losses
associated with these operations and allow the company to
focus on its core businesses.
Paying Series D, E and F preferred stock dividends in common stock rather than cash, deferring dividends on MCI QUIPS, and discontinuing the MCI tracker dividend, saving approximately $375 million annually.
Continuing discussions with our bank lenders.
Creating a new position of Chief Service and
Quality Officer to keep an eye focused on our customer
services during this restructuring.
“We intend to
create $2 billion a year in cash savings in addition to any
cash generated from our business operations,” said Sidgmore.
“By focusing on these steps, I am convinced WorldCom will
emerge a stronger, more competitive player.”
About
WorldCom, Inc.
WorldCom, Inc. (NASDAQ: WCOM, MCIT) is a
pre-eminent global communications provider for the digital
generation, operating in more than 65 countries. With one of
the most expansive, wholly-owned IP networks in the world,
WorldCom provides innovative data and Internet services for
businesses to communicate in today's market. In April 2002,
WorldCom launched The Neighborhood built by MCI - the
industry's first truly any-distance, all-inclusive local and
long-distance offering to consumers for one fixed monthly
price. Effective as of the close of regular trading on July
12, 2002, WorldCom will eliminate its tracking stock
structure and have one class of common stock with the NASDAQ
ticker symbol WCOM. For more information, go to
http://www.worldcom.com.
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 economic uncertainty; the effects of vigorous
competition; the impact of technological change on our
business, alternative technologies, and dependence on
availability of transmission facilities; risks of
international business; regulatory risks in the United
States and internationally; contingent liabilities;
uncertainties regarding the collectibility of receivables;
risks associated with debt service requirements and; our
financial leverage; uncertainties associated with the
success of acquisitions; and the ongoing war on terrorism.
More detailed information about those factors is contained
in WorldCom's filings with the Securities and Exchange
Commission.
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