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Fwd: WorldCom Investor News: WorldCom Announces Intention to Restate 2001 and First Quarter 2002 Financial Statements
- From: blitz
- Date: Wed Jun 26 01:12:48 2002
From their own press report:
WorldCom Announces Intention to Restate 2001 and First Quarter 2002
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
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
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.
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 Commi!