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+DJ WorldCom Confirms Intention To Restate
06/25/2002
Dow Jones News Services
(Copyright © 2002 Dow Jones & Company, Inc.)
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07:50 PM
*DJ WorldCom Confirms Intention To Restate 2001, 1Q Of 2002
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07:50 PM
*DJ WorldCom Confirms Some Accounting Not In Accordance With GAAP
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07:51 PM
*DJ WorldCom: Line Cost Expenses Transfers Not In Accordance With GAAP
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07:52 PM
*DJ WorldCom: $3.055B Transfers In 2001; $797M In 2002 1Q
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07:53 PM
*DJ WorldCom: Without Transfers, 2001 EBITDA Cut To $6.339B
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07:54 PM
*DJ WorldCom: Without Transfers, 2002 1Q EBITDA Cut To $1.368B
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07:55 PM
*DJ WorldCom: Without Transfers, Co Had Loss For 2001, 1Q Of 2002
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07:55 PM
*DJ WorldCom Notifies SEC Of These Events
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07:56 PM
*DJ WorldCom: Sr Mgmt 'Shocked' By These Discoveries
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07:58 PM
*DJ WorldCom Notifies Lead Bank Lenders Of These Events
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07:58 PM
*DJ WorldCom Sees Restatement Not Affecting Cash Position
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07:59 PM
*DJ WorldCom: No Debt Maturing During Next Two Quarters.
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07:59 PM
*DJ WorldCom Hires McLucas Of Law Firm Wilmer, Cutler & Pickering
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08:00 PM
*DJ WorldCom, After Internal Audit, Asked KPMG To Audit Statements
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08:01 PM
*DJ WorldCom Also Notified Former Auditor Andersen >WCOM
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08:02 PM
*DJ WorldCom: Andersen Had Audited 2001 Financial Statements
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08:03 PM
*DJ WorldCom: Andersen Had Reviewed Statements For 1Q Of 2002
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08:04 PM
*DJ WorldCom: Andersen Said Not To Rely On 2001 Audit Report
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08:05 PM
*DJ WorldCom Accepts Resignation Of Controller David Myers
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08:06 PM
*DJ WorldCom: Committed To 'Highest Ethical Standards'
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08:09 PM
*DJ WorldCom: Co. Remains 'Viable' >WCOM
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08:09 PM
*DJ WorldCom Group Shares Closed Tue At 83c, Down 8.8%
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08:12 PM
*DJ WorldCom Group Shrs Fell Sharply After Hours, Last At 20c
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08:13 PM
DJ WorldCom Restatement -2: Acctg Not In Line With GAAP>WCOM
CLINTON, Miss. (Dow Jones)--WorldCom Inc. (WCOM) confirmed 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.
In a press release Tuesday, the communications provider said certain transfers from line cost expenses to capital accounts during this period weren't made in accordance with generally accepted accounting principles.
The amount of these transfers was $3.06 billion for 2001 and $797 million for first quarter 2002. Without these transfers, the company's reported earnings before interest, taxes, depreciation and amortization would be reduced to $6.34 billion for 2001 and $1.37 billion for first quarter 2002, and the company would have reported a loss for 2001 and for the first quarter of 2002.
Earlier Tuesday, CNBC reported that Worldcom overstated EBITDA by $3.6 billion and fired Chief Financial Officer Scott Sullivan.
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08:29 PM
DJ WorldCom Restatement -3: Co. Reviewing Its Fincl Guidance
The discovery of these improperly booked expenses is expected to result in a restatement to WorldCom's earnings that could be one of the largest in corporate history.
WorldCom said it 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.
WorldCom said that after its internal audit indicated that some transfers from line cost expenses to capital accounts weren't made in accordance with GAAP, 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 the first quarter of 2002.
On Monday, 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.
WorldCom's stock closed Tuesday at 83 cents, down 99% from its high of $64.50 in June 1999.
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08:39 PM
DJ WorldCom Restatement -4: Co Sees No Effect On Customers
The expected restatement of operating results for 2001 and 2002 is not expected to have an impact on the WorldCom's cash position and won't affect WorldCom's customers or services, the company said. WorldCom said it has no debt maturing during the next two quarters.
"Our senior management team is shocked by these discoveries," said John Sidgmore, who was appointed WorldCom chief executive on April 29. "We are committed to operating WorldCom in accordance with the highest ethical standards."
WorldCom confirmed it fired Chief Financial Officer Scott Sullivan, who served in that position since 1994. The company also accepted the resignation of David Myers as senior vice president and controller.
The Wall Street Journal reported Tuesday that WorldCom, which has been in difficult negotiations with its banks for a $5 billion line of credit, may be forced to draw down $5.4 billion in existing credit lines, one of which expires June 30.
Drawing down the line that expires June 30 would be likely to force the company to file for bankruptcy protection because the money would be due Monday, according to Glenn Reynolds, an analyst at CreditSights, the Journal reported.
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08:44 PM
DJ WorldCom Restatement -5: Co Hires Former SEC Official
The Wall Street Journal reported that last week, one of WorldCom's internal auditors discovered that starting in early 2001, huge amounts of expenses related to building out the company's telecom system were being capitalized instead of being treated as regular costs. This resulted in a significant boosting of the company's EBITDA, which WorldCom used as a critical gauge of its growth, the Journal reported.
WorldCom said Tuesday it notified the Securities and Exchange Commission and its lead bank lenders of these events. The audit committee of the board hired William R. McLucas, of the law firm of Wilmer, Cutler & Pickering, and former Chief of the Enforcement Division of the SEC, to conduct an independent investigation of the matter.
In after-hours trading, the company's shares fell to 20 cents, according to the Island ECN order book.
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09:07 PM
DJ WorldCom Restatement -6: To Cut Work Force On Fri. >WCOM
WorldCom said it will continue its efforts to restructure the company and continue discussions with its bank lenders.
Beginning Friday, it will cut its work force by 17,000, which is expected to save $900 million annually. The job cuts are primarily composed of discontinued operations, operations and technology functions, attrition and contractor terminations.
WorldCom plans to cut capital expenditures significantly in 2002 and expects 2003 capital expenditures to be $2.1 billion annually.
In addition, the company plans to sell non-core businesses, including exiting the wireless resale business, which will save $700 million annually. The company is exploring the sale of other wireless assets and certain South American assets. WorldCom said these sales will reduce losses associated with these operations.
WorldCom plans to create $2 billion a year in cash savings in addition to any cash generated from its business operations.
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09:24 PM
DJ WorldCom Restatement -7:MCI Tracker Stk To Be Eliminated
As part of its restructuring, WorldCom said it will pay Series D, E and F preferred stock dividends in common stock rather than cash. It also plans to defer dividends on MCI quarterly income preferred securities.
As reported last month, the company will discontinue its MCI tracker stock on July 12 in order to save about $375 million annually. The stock paid a dividend of 60 cents a share each quarter.
Finally, the company said it is creating the new position of chief service and quality officer to focus on customer services during this restructuring.
-Stephen Lee; Dow Jones Newswires; 201-938-5400
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09:36 PM
DJ WorldCom Restatement -8:Andersen Warned About '01 Results
In a separate press release, Andersen said its work for WorldCom complied with SEC and and professional standards at all times. The accounting firm said important information about line costs was withheld from Andersen auditors by Sullivan, WorldCom's former chief financial officer.
Andersen said Sullivan didn't disclose the line cost transfers nor consult with Andersen about the accounting treatment. Upon recently learning of the transfers, Andersen said it conferred with WorldCom's audit committee and new management, and advised the company that WorldCom's financial statements for 2001 should not be relied upon.
In May, WorldCom replaced Andersen with KPMG. Andersen served the company since 1989. Earlier this month, a jury found that Andersen tried to block an SEC inquiry by destroying documents connected to the firm's audits of Enron Corp. (ENRNQ).
(END) DOW JONES NEWS 06-25-02
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