AW and all: WorldCom Expects MCI-Linked Charge
Of $6 Billion to $7 Billion in SEC Filing
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Excerpts:
WorldCom Inc. said it plans to take a charge of about $6 billion to $7 billion in connection with its takeover of MCI Communications Corp.
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By writing off a substantial amount of the purchase price immediately, acquiring companies can avoid hits to future earnings from goodwill. Goodwill, the premium of the purchase price over the acquired company's book value, is supposed to be deducted from the acquirer's profit over a period of years.
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WorldCom also said in its filing that it expects to record a charge for restructuring but didn't give an estimate. If WorldCom were to finalize the in-process research and development charge at a lower amount, it could have the effect of raising the amount of goodwill to be deducted from earnings in future quarters.
For 1997, WorldCom reported net income of $383.7 million on $7.35 billion in revenue, according to the company's SEC filings. MCI reported 1997 net of $149 million on revenue of $19.65 billion, according to MCI's SEC filings. WorldCom made its filing after the close of regular trading Thursday. In Nasdaq Stock Market composite trading, WorldCom rose $2.1875 to $52.625. MCI climbed $2.3125 to $63.9375.
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WorldCom's bond sale, which was boosted to a record $6.1 billion, was a hit with investors, emphasizing the interest in large, liquid bond issues. |
