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) February 2, 1998
(January 29, 1998)
MCI COMMUNICATIONS CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-6457 52-0886267
-------------- ---------------- -------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1801 Pennsylvania Avenue, N.W., Washington, D.C. 20006
------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (202) 872-1600.
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PAGE 2
Item 7. Exhibits.
Exhibit No. Description
- ----------- -----------------------
99(a) 1997 Earnings Release of MCI Communications
Corporation dated January 29, 1998.
99(b) Supplemental financial information provided as
attachments to the 1997 Earnings Release.
Forward-looking Statements May Prove Inaccurate
MCI has made certain forward-looking statements in this Current Report on Form
8-K that are subject to risks and uncertainties. Forward-looking statements
include information concerning the possible future results of operations of the
company, its long-distance telecommunication services business, its investments
in ventures and developing markets ("VDM") businesses, the possible future
results of operations of the company and MCI WorldCom, Inc. ("MCI/WorldCom")
after the merger (the "Merger") of MCI with and into TC Investments Corp., a
wholly-owned subsidiary of WorldCom, Inc., and statements of information
preceded by, followed by or that include the words "estimates", "expects", or
similar expressions. For those statements, the company claims the protection of
safe-harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The reader is cautioned that important factors
such as the following could affect the future results of the company, its long
distance telecommunication services and VDM businesses and the company and
MCI/WorldCom after the Merger and could cause those results to differ materially
from those expressed in the forward-looking statements: material adverse changes
in the economic conditions in the markets served by the company and
MCI/WorldCom; a significant delay in the expected closing of the Merger; future
regulatory actions and conditions in MCI's and MCI/WorldCom's operating areas,
including the ability of the company to obtain local facilities at competitive
rates; the ability of the company to pass on to its customers certain surcharges
imposed by the Federal Communications Commission; and competition from others in
the U.S. and international long-distance markets, including the entry of the
RBOC's and other companies into the long-distance markets in the U.S.
<PAGE>
PAGE 3
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.
MCI COMMUNICATIONS CORPORATION
/s/ Edward G. Freitag
------------------------------
Edward G. Freitag
Assistant Secretary
Date: February 2, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------------------
99(a) 1997 Earnings Release of MCI Communications
Corporation dated January 29, 1998.
99(b) Supplemental financial information provided as
attachments to the 1997 Earnings Release.
Exhibit 99(a)
MCI QUARTERLY REVENUE TOPS $5 BILLION FOR FIRST TIME
1997 Results Reflect Strong Growth in Data, Internet and IT
services
Washington, D.C.-January 29, 1998-MCI (NASDAQ: MCIC) today reported fourth
quarter results with revenue up 7.5 percent to $5.1 billion and traffic growing
9.7 percent from the prior year. For the year, MCI's revenue reached $19.7
billion, a 6.3 percent increase. MCI's growth was led by strong gains in data
and Internet sales, which accounted for more than 50 percent of the company's
annual revenue growth.
During the fourth quarter, MCI took additional steps to improve returns in its
business and enhance customer and employee retention resulting in a reduction to
pre-tax earnings of $752 million or $0.66 per share after-tax for the quarter.
The actions consist of $235 million for employee and customer retention
programs, $252 million for restructuring initiatives in parts of its long
distance, local and IT businesses, and $265 million for technology upgrades
primarily to improve the performance of its data centers. As a result of the
actions taken this quarter, MCI reported a net loss of $391 million or $0.56 per
share for the quarter. For the year, MCI reported net income of $2 million,
reflecting the impact of $1.3 billion in pre-tax actions and increased operating
expenses and provisions taken during the second half of 1997.
"MCI showed solid improvement in the fourth quarter with revenue and traffic
gains that position the company well going into 1998," said Gerald H. Taylor,
MCI CEO. "With data, Internet and IT services now accounting for a quarter of
the company's revenue and growing more than 20 percent a year, MCI has
effectively transformed itself into a new-era communications company."
"When the MCI WorldCom merger is complete, the new company will be ideally
positioned to offer its customers an expanded array of end-to-end communication
services through its own network reaching more than 100 local markets and all
key international locations."
Long Distance/Data Business
In long distance, MCI had record revenue for the quarter of $4.5 billion, up 5.5
percent from the prior year. Fourth quarter results reflect continued strength
in MCI's Business Markets unit, the company's largest unit, and improvements in
Mass Markets. For the year, long distance revenue was $17.6 billion, an increase
of five percent versus 1996.
<PAGE>
MCI continues to produce very strong results in the data and Internet services
market. For the quarter, MCI's data and Internet revenue grew 30 percent. The
company's virtual data services revenue, led by sales of MCI's HyperStream Frame
Relay Service, jumped more than 100 percent and Internet services revenue grew
65 percent. MCI's data and Internet revenues now exceed $3 billion and grew more
than 25 percent annually. In the Internet area, MCI added more than 4,000 access
ports to accommodate future growth and rolled-out 56 kilobit service, a
higher-speed dial-up service, in 300 U.S. markets. In 1998, MCI has allocated
approximately 50 percent of its capital expenditures to expand the data/Internet
solutions it provides customers through additional investment in network
software, hardware and integration capabilities. Traditional voice capacity will
account for less than 20 percent of the company's capital expenditures this
year.
In addition, MCI continues to see strong growth in its managed services business
and in conferencing services. This year, MCI won its largest contract ever, a $3
billion contract to manage a U.S. Postal Service network linking 34,000
locations; and a $600 million NASDAQ contract to expand and operate its global
trading network, the world's largest intranet. MCI operates state-of- the-art
network management centers, staffed with highly trained IT managers, to provide
many of its largest customers around-the- clock local and global network
management services. In conferencing services, networkMCI conferencing grew
revenue by approximately 30 percent for the quarter and 50 percent for the year.
MCI offers business customers a full range of audio, video and data conferencing
services, many of which are integrated with Internet capabilities.
In Mass Markets, MCI's focus on attracting and retaining higher-spending
customers helped drive improvements in revenue and profit. The company continues
to have significant success with its marketing and service integration programs
aimed at building customer loyalty. Today, MCI has more than 20 joint partner
marketing agreements, including agreements with the largest U.S. airlines such
as Delta, United, US Airways and American Airlines as well as with Blockbuster,
Microsoft's MSN, Yahoo and WebTV. In addition, the September launch of MCI Five
Cent Sundays has increased call volume, sales productivity and customer
retention levels in MCI's customer base. MCI One, the company's flagship
consumer brand for integrated long distance, personal 800, Internet and other
services, added one million customers during the quarter and now has more than
five million customers.
In addition, for the quarter MCI demonstrated continued success with its
transactional branded services, 1-800-COLLECT and 10-321. Both services
experienced double-digit revenue growth during the quarter and have become
well-known brands among consumers nationwide.
<PAGE>
Ventures and Developing Markets
Fourth quarter revenue for ventures and developing markets grew nearly 35
percent to $708 million year-to-year. For the year, revenue increased over 28
percent to $2.5 billion, led by gains in local and IT services.
LOCAL-MCI local services revenue increased to $106 million, up 116 percent from
fourth quarter 1996 and 15 percent from third quarter 1997. MCI completed
construction of local networks in six new markets-Washington, D.C., Dallas,
Houston, San Antonio, Cincinnati and Fort Lauderdale-during the quarter and now
markets facility-based services in 31 major U.S. business markets. For the year,
MCI signed up a number of key local accounts including: PeopleSoft, Chrysler,
Multiple Zone and Future Electronics, among others. MCI is one of the few
communication companies that can offer business customers in major cities
throughout the U.S. a complete integrated set of local-to-global services,
including high-speed data services offered on its own global network.
"MCI's integrated service portfolio is making it easier and more affordable for
many mid size and large businesses to purchase local-to-global communication
services for their intranet and data processing applications," said Taylor. "We
are bringing facilities-based competition to customers throughout the U.S.
despite the obstructionist tactics of the incumbent monopolies."
In the public policy arena, there were a number of key developments connected to
the Telecommunications Act of 1996. The FCC rejected Bell South's application to
offer in-region long distance in South Carolina on the grounds that the local
market was not sufficiently open for competition. A federal district court judge
in Texas ruled parts of the Telecommunications Act of 1996 unconstitutional. The
FCC, MCI and other companies have filed suit to overturn this ruling. On Monday,
the Supreme Court agreed to review last summer's decision by the 8th Circuit
Appeals Court overturning key elements of the FCC's interconnection order.
INFORMATION TECHNOLOGY-MCI's IT business, which consists primarily of MCI
Systemhouse, reported fourth quarter revenue of $520 million, a year-to-year
gain of 33 percent. For the year, revenue reached $1.8 billion, an increase of
30 percent. In the last 100 days of 1997, MCI Systemhouse signed new corporate
contracts worth more than $1 billion in revenue, including agreements with Moore
USA, American Heart Association and the California State Automobile Association.
GLOBAL SERVICES-MCI investments in Concert Communications Services, its global
services joint venture with BT, and Avantel, the joint venture it operates with
Grupo Financiero Banamex-Accival in Mexico, continue to augment the company's
existing global service portfolio and network presence. For the
<PAGE>
quarter, Concert distributor revenue grew to over $200 million, an increase of
24 percent. The Concert joint venture is on-target to reach profitability in
1998. In Mexico, MCI's Avantel joint venture finished its first full year in
business and made significant gains in the addressable Mexican long distance
market. Avantel's high-quality data, Internet and corporate voice services have
helped the company win many large corporate and federal government accounts.
WIRELESS-Total quarterly wireless revenue was $76 million versus $80 million a
year ago. MCI's wireless strategy is to resell existing wireless services under
its MCI One and networkMCI One brands in the consumer and business markets. The
company now has 441,000 customers, up 2.7 percent from a year ago. In the paging
market, MCI has 176,000 customers. MCI continues to have success offering
wireless services as a value-added component of an integrated communications
package. Wireless results reflect the company's decision to reduce efforts to
market wireless as a stand-alone service.
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, Internet and IT services now
accounts for nearly a quarter of MCI's $19.7 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 more than 280 countries and locations
worldwide. MCI has agreed to merge with WorldCom, one of the world's
fastest-growing communications companies. The merger, which is expected to be
completed by mid-1998, will create MCI WorldCom, a company uniquely positioned
in the U.S. local and long distance markets as well as the global data and
Internet markets.
<TABLE>
<CAPTION>
Exhibit 99(b)
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT A - ENTERPRISE REPORTING
(NASDAQ: MCIC)
4TH QUARTER 1997
AS REPORTED
(In millions, except per share amounts)
(unaudited)
4TH QTR 3RD QTR % 4TH QTR %
1997 1997 CHANGE 1996 CHANGE
------ ------ ------ ------ ------
CORE BUSINESS
- -------------
<S> <C> <C> <C> <C> <C>
REVENUE $4,539 $4,343 4.5 $4,302 5.5
OPERATING EXPENSES
Cost of services 2,489 2,710 (8.2) 2,135 16.6
Sales, operations and general 1,393 1,079 29.1 1,136 22.6
Depreciation 741 479 54.7 409 81.2
------ ------ ------ ------ ------
TOTAL OPERATING EXPENSES 4,623 4,268 8.3 3,680 25.6
------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (84) 75 (212.0) 622 (113.5)
Non-Operating income (expense), net 31 (27) 214.8 (239) 113.0
------ ------ ------ ------ ------
NET INCOME (LOSS) $(53) $48 (210.4) $383 (113.8)
====== ====== ====== ====== ======
EBITDA $657 $554 18.6 $1,031 (36.3)
VENTURES AND DEVELOPING MARKETS
- -------------------------------
REVENUE $708 $608 16.4 $526 34.6
OPERATING EXPENSES
Cost of services 506 419 20.8 361 40.2
Sales, operations and general 545 372 46.5 179 204.5
Depreciation 71 64 10.9 32 121.9
------ ------ ------ ------ ------
TOTAL OPERATING EXPENSES 1,122 855 31.2 572 96.2
------ ------ ------ ------ ------
LOSS FROM OPERATIONS (414) (247) (67.6) (46) NM
Non-operating income (expense), net 122 71 71.8 1 NM
Equity in income (losses)
of affiliated companies (37) (46) 19.6 (28) (32.1)
------ ------ ------ ------ ------
NET LOSS $(329) $(222) (48.2) $(73) NM
====== ====== ====== ====== ======
EBITDA $(343) $(183) (87.4) $(14) NM
NM - not meaningful
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT B - ENTERPRISE REPORTING SELECTED DATA
(NASDAQ: MCIC)
4TH QUARTER 1997
AS REPORTED
(In millions)
(unaudited)
4Q 97 4Q 97 4Q 97 4Q 96 4Q 96 4Q 96
Revenue EBITDA Net Income Revenue EBITDA Net Income
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
CORE $4,539 $657 $(53) $4,302 $1,031 $383
VDM
Information Tech 520 (127) (117) 390 27 (14)
Wireless 76 (23) (29) 80 (14) (17)
Local 106 (197) (146) 49 (27) (26)
Multimedia and
International 6 4 (37) 7 1 (5)
Other - - - - (1) (11)
------- ------- ------- ------- ------- -------
TOTAL VDM 708 (343) (329) 526 (14) (73)
Eliminations (139) (15) (9) (75) (7) (7)
------- ------- ------- ------- ------- -------
Total MCI $5,108 $299 $(391) $4,753 $1,010 $303
======= ======= ======= ======= ======= =======
4Q 97 4Q 97 4Q 97 3Q 97 3Q 97 3Q 97
Revenue EBITDA Net Income Revenue EBITDA Net Income
------- ------- ---------- ------- ------- ----------
CORE $4,539 $657 $(53) $4,343 $554 $48
VDM
Information Tech 520 (127) (117) 430 (21) (57)
Wireless 76 (23) (29) 80 (7) (13)
Local 106 (197) (146) 92 (157) (118)
Multimedia and
International 6 4 (37) 6 3 (24)
Other - - - - (1) (10)
------- ------- ------- ------- ------- -------
TOTAL VDM 708 (343) (329) 608 (183) (222)
Eliminations (139) (15) (9) (132) (14) (8)
------- ------- ------- ------- ------- -------
Total MCI $5,108 $299 $(391) $4,819 $357 $(182)
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT C - ENTERPRISE REPORTING
(NASDAQ: MCIC)
YEAR ENDED DECEMBER 31, 1997
AS REPORTED
(In millions, except per share amounts)
(unaudited)
%
1997 1996 CHANGE
------ ------ ------
<S> <C> <C> <C>
CORE BUSINESS
- -------------
REVENUE $17,619 $16,784 5.0
OPERATING EXPENSES
Cost of services 9,648 8,401 14.8
Sales, operations and general 4,601 4,394 4.7
Depreciation 2,065 1,536 34.4
------ ------ ------
TOTAL OPERATING EXPENSES 16,314 14,331 13.8
------ ------ ------
INCOME FROM OPERATIONS 1,305 2,453 (46.8)
Non-Operating income (expense), net (503) (939) 46.4
------ ------ ------
NET INCOME $802 $1,514 (47.0)
====== ====== ======
EBITDA $3,370 $3,989 (15.5)
VENTURES AND DEVELOPING MARKETS
- -------------------------------
REVENUE $2,508 $1,953 28.4
OPERATING EXPENSES
Cost of services 1,725 1,312 31.5
Sales, operations and general 1,381 639 116.1
Depreciation 222 128 73.4
------ ------ ------
TOTAL OPERATING EXPENSES 3,328 2,079 60.1
------ ------ ------
LOSS FROM OPERATIONS (820) (126) NM
Non-operating income (expense), net 194 (16) NM
Equity in income (losses)
of affiliated companies (144) (156) 7.7
------ ------ ------
NET LOSS $(770) $(298) (158.4)
====== ====== ======
EBITDA $(598) $2 NM
NM - not meaningful
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT D - ENTERPRISE REPORTING SELECTED DATA
(NASDAQ: MCIC)
YEAR ENDED DECEMBER 31, 1997
AS REPORTED
(In millions)
(unaudited)
1997 1997 1997 1996 1996 1996
Revenue EBITDA Net Income Revenue EBITDA Net Income
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
CORE $17,619 $3,370 $802 $16,784 $3,989 $1,514
VDM
Information Tech 1,827 (89) (216) 1,401 114 (59)
Wireless 314 (36) (61) 347 (28) (43)
Local 343 (485) (375) 178 (62) (70)
Multimedia and
International 24 14 (93) 27 (20) (82)
Other - (2) (25) - (2) (44)
------- ------- ------- ------- ------- -------
TOTAL VDM 2,508 (598) (770) 1,953 2 (298)
Eliminations (474) (46) (30) (243) (14) (14)
------- ------- ------- ------- ------- -------
Total MCI $19,653 $2,726 $2 $18,494 $3,977 $1,202
======= ======= ======= ======= ======= =======
</TABLE>
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<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT E - ENTERPRISE REPORTING - PRO FORMA DATA
(EXCLUDES EFFECTS OF ACTIONS AND INCREASES IN CERTAIN OPERATING EXPENSES AND PROVISIONS)
(NASDAQ: MCIC)
4TH QUARTER 1997
(In millions, except per share amounts)
(unaudited)
4TH QTR 3RD QTR % 4TH QTR %
1997 1997 CHANGE 1996 CHANGE
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CORE BUSINESS
- -------------
REVENUE $4,544 $4,410 3.0 $4,302 5.6
OPERATING EXPENSES
Cost of services 2,472 2,378 4.0 2,135 15.8
Sales, operations and general 1,103 1,023 7.8 1,136 (2.9)
Depreciation 495 472 4.9 409 21.0
------ ------ ------ ------ ------
TOTAL OPERATING EXPENSES 4,070 3,873 5.1 3,680 10.6
------ ------ ------ ------ ------
INCOME FROM OPERATIONS 474 537 (11.7) 622 (23.8)
Non-Operating income (expense), net (184) (203) 9.4 (239) 23.0
------ ------ ------ ------ ------
NET INCOME $290 $334 (13.2) $383 (24.3)
====== ====== ====== ====== ======
EBITDA $969 $1,009 (4.0) $1,031 (6.0)
VENTURES AND DEVELOPING MARKETS
- -------------------------------
REVENUE $708 $608 16.4 $526 34.6
OPERATING EXPENSES
Cost of services 487 411 18.5 361 34.9
Sales, operations and general 404 338 19.5 179 125.7
Depreciation 53 53 - 32 65.6
------ ------ ------ ------ ------
TOTAL OPERATING EXPENSES 944 802 17.7 572 65.0
------ ------ ------ ------ ------
LOSS FROM OPERATIONS (236) (194) (21.6) (46) NM
Non-operating income (expense), net 47 49 (4.1) 1 NM
Equity in income (losses)
of affiliated companies (21) (46) 54.3 (28) 25.0
------ ------ ------ ------ ------
NET LOSS $(210) $(191) (9.9) $(73) (187.7)
====== ====== ====== ====== ======
EBITDA $(183) $(141) (29.8) $(14) NM
NM - not meaningful
THE ABOVE PRO FORMA INFORMATION IS PRESENTED TO ASSIST IN UNDERSTANDING MCI'S
RESULTS OF OPERATIONS EXCLUDING THE EFFECTS OF ACTIONS AND INCREASES IN CERTAIN
OPERATING EXPENSES AND PROVISIONS INCLUDED IN THE QUARTERS ENDED DECEMBER 31,
1997 AND SEPTEMBER 30, 1997. THIS INFORMATION SHOULD BE CONSIDERED SUPPLEMENTAL
TO THE REPORTED RESULTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT F - ENTERPRISE REPORTING PRO FORMA SELECTED DATA
(EXCLUDES EFFECTS OF ACTIONS AND INCREASES IN CERTAIN OPERATING EXPENSES AND PROVISIONS)
(NASDAQ: MCIC)
4TH QUARTER 1997
(In millions)
(unaudited)
4Q 97 4Q 97 4Q 97 4Q 96 4Q 96 4Q 96
Revenue EBITDA Net Income Revenue EBITDA Net Income
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
CORE $4,544 $969 $290 $4,302 $1,031 $383
VDM
Information Tech 520 23 (23) 390 27 (14)
Wireless 76 (13) (15) 80 (14) (17)
Local 106 (197) (146) 49 (27) (26)
Multimedia and
International 6 4 (26) 7 1 (5)
Other (1) (11)
- - - -
------- ------- ------- ------- ------- -------
TOTAL VDM 708 (183) (210) 526 (14) (73)
Eliminations (139) (15) (9) (75)
(7) (7)
------- ------- ------- ------- ------- -------
Total MCI $5,113 $771 $71 $4,753 $1,010 $303
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
4Q 97 4Q 97 4Q 97 3Q 97 3Q 97 3Q 97
Revenue EBITDA Net Income Revenue EBITDA Net Income
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
CORE $4,544 $969 $290 $4,410 $1,009 $334
VDM
Information Tech 520 23 (23) 430 21 (26)
Wireless 76 (13) (15) 80 (7) (13)
Local 106 (197) (146) 92 (157) (118)
Multimedia and
International 6 4 (26) 6 3 (24)
Other (1) (10)
- - -
-
------- ------- ------- ------- ------- -------
TOTAL VDM 708 (183) (210) 608 (141) (191)
Eliminations (139) (15) (9) (132) (14) (8)
------- ------- ------- ------- ------- -------
Total MCI $5,113 $771 $71 $4,886 $854 $135
======= ======= ======= ======= ======= =======
THE ABOVE PRO FORMA INFORMATION IS PRESENTED TO ASSIST IN UNDERSTANDING MCI'S
RESULTS OF OPERATIONS EXCLUDING THE EFFECTS OF ACTIONS AND INCREASES IN CERTAIN
OPERATING EXPENSES AND PROVISIONS INCLUDED IN THE QUARTERS ENDED DECEMBER 31,
1997 AND SEPTEMBER 30, 1997. THIS INFORMATION SHOULD BE CONSIDERED SUPPLEMENTAL
TO THE REPORTED RESULTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT G - ENTERPRISE REPORTING - PRO FORMA DATA
(EXCLUDES EFFECTS OF ACTIONS AND INCREASES IN CERTAIN OPERATING EXPENSES AND PROVISIONS)
(NASDAQ: MCIC)
YEAR ENDED DECEMBER 31, 1997
(In millions, except per share amounts)
(unaudited)
%
1997 1996 CHANGE
------ ------ ------
<S> <C> <C> <C>
CORE BUSINESS
- -------------
REVENUE $17,691 $16,784 5.4
OPERATING EXPENSES
Cost of services 9,299 8,401 10.7
Sales, operations and general 4,255 4,394 (3.2)
Depreciation 1,812 1,536 18.0
------ ------ ------
TOTAL OPERATING EXPENSES 15,366 14,331 7.2
------ ------ ------
INCOME FROM OPERATIONS 2,325 2,453 (5.2)
Non-Operating income (expense), net (894) (939) 4.8
------ ------ ------
NET INCOME $1,431 $1,514 (5.5)
====== ====== ======
EBITDA $4,137 $3,989 3.7
VENTURES AND DEVELOPING MARKETS
- -------------------------------
REVENUE $2,508 $1,953 28.4
OPERATING EXPENSES
Cost of services 1,698 1,312 29.4
Sales, operations and general 1,206 639 88.7
Depreciation 193 128 50.8
------ ------ ------
TOTAL OPERATING EXPENSES 3,097 2,079 49.0
------ ------ ------
LOSS FROM OPERATIONS (589) (126) NM
Non-operating income (expense), net 97 (16) NM
Equity in income (losses)
of affiliated companies (128) (156) 17.9
------ ------ ------
NET LOSS $(620) $(298) (108.1)
====== ====== ======
EBITDA $(396) $2 NM
NM - not meaningful
THE ABOVE PRO FORMA INFORMATION IS PRESENTED TO ASSIST IN UNDERSTANDING MCI'S
RESULTS OF OPERATIONS EXCLUDING THE EFFECTS OF ACTIONS AND INCREASES IN CERTAIN
OPERATING EXPENSES AND PROVISIONS INCLUDED IN THE YEAR ENDED DECEMBER 31, 1997.
THIS INFORMATION SHOULD BE CONSIDERED SUPPLEMENTAL TO THE REPORTED RESULTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
ATTACHMENT H - ENTERPRISE REPORTING PRO FORMA SELECTED DATA
(EXCLUDES EFFECTS OF ACTIONS AND INCREASES IN CERTAIN OPERATING EXPENSES AND PROVISIONS)
(NASDAQ: MCIC)
YEAR ENDED DECEMBER 31, 1997
(In millions)
(unaudited)
1997 1997 1997 1996 1996 1996
Revenue EBITDA Net Income Revenue EBITDA Net Income
------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
CORE $17,691 $4,137 $1,431 $16,784 $3,989 $1,514
VDM
Information Tech 1,827 103 (91) 1,401 114 (59)
Wireless 314 (26) (47) 347 (28) (43)
Local 343 (485) (375) 178 (62) (70)
Multimedia and
International 24 14 (82) 27 (20) (82)
Other - (2) (25) - (2) (44)
------- ------- ------- ------- ------- -------
TOTAL VDM 2,508 (396) (620) 1,953 2 (298)
Eliminations (474) (46) (30) (243) (14) (14)
------- ------- ------- ------- ------- -------
Total MCI $19,725 $3,695 $781 $18,494 $3,977 $1,202
======= ======= ======= ======= ======= =======
THE ABOVE PRO FORMA INFORMATION IS PRESENTED TO ASSIST IN UNDERSTANDING MCI'S
RESULTS OF OPERATIONS EXCLUDING THE EFFECTS OF ACTIONS AND INCREASES IN CERTAIN
OPERATING EXPENSES AND PROVISIONS INCLUDED IN THE YEAR ENDED DECEMBER 31, 1997.
THIS INFORMATION SHOULD BE CONSIDERED SUPPLEMENTAL TO THE REPORTED RESULTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
(NASDAQ: MCIC)
FOURTH QUARTER 1997
AS REPORTED
(In millions, except per share amounts)
(unaudited)
4TH QTR 4TH QTR % 3RD QTR %
1997 1996 CHANGE 1997 CHANGE
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
REVENUE 5,108 4,753 7.5 4,819 6.0
------ ------ ------ ------ ------
OPERATING EXPENSES
Cost of Services 2,881 2,433 18.4 3,018 (4.5)
Sales, operations and general 1,928 1,310 47.2 1,444 33.5
Depreciation 812 441 84.1 543 49.5
------ ------ ------ ------ ------
TOTAL OPERATING EXPENSES 5,621 4,184 34.3 5,005 12.3
------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS (513) 569 (190.2) (186) (175.8)
Interest (expense) (61) (43) (41.9) (58) (5.2)
Interest income 4 7 (42.9) 4 -
Equity in income (losses) of
affiliated companies (37) (28) (32.1) (46) 19.6
Other income (expense), net (14) (4) NM 6 NM
------ ------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES
AND TRUST DISTRIBUTIONS (621) 501 NM (280) (121.8)
Income tax provision (benefit) (245) 183 NM (113) (116.8)
Distributions on Trust
preferred securities 15 15 - 15 -
------ ------ ------ ------ ------
NET INCOME (LOSS) (391) 303 NM (182) (114.8)
====== ====== ====== ====== ======
BASIC EARNINGS (LOSS) PER COMMON SHARE (0.56) 0.44 NM (0.26) (115.4)
DILUTED EARNINGS (LOSS) PER COMMON SHARE (0.56) 0.44 NM (0.26) (115.4)
Weighted average number of shares 703 685 2.6 695 1.2
Weighted average number of shares
- assuming dilution 703 694 1.3 695 1.2
NM - not meaningful
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
(NASDAQ: MCIC)
YEAR ENDED DECEMBER 31, 1997
AS REPORTED
(In millions, except per share amounts)
(unaudited)
%
1997 1996 CHANGE
------ ------ ------
<S> <C> <C> <C>
REVENUE 19,653 18,494 6.3
------ ------ ------
OPERATING EXPENSES
Cost of services 10,971 9,489 15.6
Sales, operations and general 5,956 5,028 18.5
Depreciation 2,287 1,664 37.4
------ ------ ------
TOTAL OPERATING EXPENSES 19,214 16,181 18.7
------ ------ ------
INCOME FROM OPERATIONS 439 2,313 (81.0)
Interest (expense) (235) (196) (19.9)
Interest income 18 34 (47.1)
Equity in income (losses) of
affiliated companies (144) (156) 7.7
Other expense, net (15) (5) (200.0)
------ ------ ------
INCOME BEFORE INCOME TAXES
AND TRUST DISTRIBUTIONS 63 1,990 (96.8)
Income tax provision 1 753 (99.9)
Distributions on Trust
preferred securities 60 35 71.4
------ ------ ------
NET INCOME 2 1,202 (99.8)
====== ====== ======
BASIC EARNINGS PER COMMON SHARE 0.00 1.75 (100.0)
DILUTED EARNINGS PER COMMON SHARE 0.00 1.73 (100.0)
Weighted average number of shares 693 687 0.9
Weighted average number of shares
- assuming dilution 707 695 1.7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MCI COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(NASDAQ:MCIC)
December 31, 1997
(In millions)
(unaudited)
4TH QTR 3RD QTR % 4TH QTR %
1997 1997 Change 1996 Change
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $261 $139 87.8 $187 39.6
Marketable securities 0 10 (100.0) 161 (100.0)
Receivables, net 3,576 3,561 0.4 3,480 2.8
Other current assets 1,423 893 59.4 888 60.2
------- ------- ------- ------- -------
TOTAL CURRENT ASSETS 5,260 4,603 14.3 4,716 11.5
------- ------- ------- ------- -------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of
$7,467, $7,475 and $6,535 13,663 13,783 (0.9) 12,174 12.2
OTHER ASSETS
Noncurrent marketable securities 0 10 (100.0) 58 (100.0)
Other assets and deferred charges 991 971 2.1 678 46.2
Investment in affiliates 653 605 7.9 690 (5.4)
Investment in News Corp 1,350 1,350 - 1,350 0.0
Investment in DBS 1,043 1,029 1.4 893 16.8
Goodwill, net 2,345 2,366 (0.9) 2,419 (3.1)
------- ------- ------- ------- -------
TOTAL OTHER ASSETS 6,382 6,331 0.8 6,088 4.8
------- ------- ------- ------- -------
TOTAL ASSETS $25,305 $24,717 2.4 $22,978 10.1
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued telecommunications expense $2,416 $2,312 4.5 $2,045 18.1
Accounts payable and
other accrued liabilities 3,600 2,963 21.5 2,798 28.7
Long-term debt due within one year 2,111 2,052 2.9 203 NM
------- ------- ------- ------- -------
TOTAL CURRENT LIABILITIES 8,127 7,327 10.9 5,046 61.1
------- ------- ------- ------- -------
NONCURRENT LIABILITIES
Long-term debt 3,276 3,282 (0.2) 4,798 (31.7)
Deferred taxes and other 1,988 2,037 (2.4) 1,723 15.4
------- ------- ------- ------- -------
TOTAL NONCURRENT LIABILITIES 5,264 5,319 (1.0) 6,521 (19.3)
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 6,362 6,394 (0.5) 6,410 (0.7)
Retained Earnings 5,198 5,607 (7.3) 5,231 (0.6)
Treasury stock, at cost (470) (754) 37.7 (1,054) 55.4
------- ------- ------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 11,164 11,321 (1.4) 10,661 4.7
------- ------- ------- ------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $25,305 $24,717 2.4 $22,978 10.1
======= ======= ======= ======= =======
NM- not meaningful
</TABLE>
