<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -------------
Commission file number: 0-11258
____________________
WorldCom, Inc.
(F/K/A LDDS COMMUNICATIONS, INC.)
(Exact name of registrant as specified in its charter)
____________________
Georgia 58-1521612
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 East Amite Street, Jackson, Mississippi 39201-2702
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code : (601) 360-8600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
----- -----
The number of outstanding shares of the registrant's Common Stock, par
value $.01 per share, was 193,127,590 on October 31, 1995.
================================================================================
<PAGE> 2
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994 . . . . . . . . . . . . 3
Consolidated Statements of Operations
for the three and nine month periods ended September 30, 1995
and September 30, 1994 . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the nine months ended September 30, 1995 and
September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 13
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote
of Securities Holders . . . . . . . . . . . . . . . . . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WORLDCOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,877 $ 19,259
Short-term investments - 1,000
Accounts receivable, net of allowance for bad debts of
$48,458 in 1995 and $52,949 in 1994 509,792 470,175
Deferred tax asset 92,652 62,687
Other current assets 38,950 36,305
------------------- ------------------
Total current assets 652,271 589,426
------------------- ------------------
Property and equipment:
Transmission equipment 1,341,721 472,737
Communications equipment 380,518 307,262
Furniture, fixtures and other 284,398 164,266
------------------- ------------------
2,006,637 944,265
Less - accumulated depreciation (438,040) (317,598)
------------------- ------------------
1,568,597 626,667
------------------- ------------------
Excess of cost over net tangible assets acquired, net of
accumulated amortization 4,186,679 2,070,709
Line installation costs, net of accumulated amortization 33,211 28,768
Deferred income taxes 14,120 14,120
Other assets 97,032 100,502
------------------- ------------------
$ 6,551,910 $ 3,430,192
=================== ==================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Short-term debt and current maturities of long-term debt $ 2,061 $ 5,996
Accounts payable 133,524 138,101
Accrued line costs 361,285 258,053
Accrued restructuring costs 5,862 25,837
Shareholder litigation reserve - 75,000
Income taxes payable 78,466 11,940
Other current liabilities 291,442 195,728
------------------- ------------------
Total current liabilities 872,640 710,655
------------------- ------------------
Long-term liabilities, less current portion:
Long-term debt 3,392,357 788,005
Deferred income taxes payable 77,258 -
Other liabilities 125,169 104,362
------------------- ------------------
Total long-term liabilities 3,594,784 892,367
------------------- ------------------
Commitments and contingencies
Shareholders' investment:
Series 1 preferred stock, par value $.01 per share; authorized,
issued and outstanding: none in 1995 and 10,896,785 shares in 1994 - 109
Series 2 preferred stock, par value $.01 per share; authorized, issued and
outstanding: 1,244,048 shares in 1995 and 2,000,000 shares in 1994 12 20
Preferred stock: par value $.01 per share; authorized: 37,103,215 shares
in 1995 and 1994; none issued - -
Common stock, par value $.01 per share; authorized: 500,000,000 shares;
issued and outstanding: 193,052,907 shares in 1995 and 159,643,312 in 1994 1,931 1,596
Additional paid-in capital 1,874,318 1,772,882
Retained earnings 208,225 52,563
------------------- ------------------
Total shareholders' investment 2,084,486 1,827,170
------------------- ------------------
$ 6,551,910 $ 3,430,192
=================== ==================
</TABLE>
The accompanying notes are an integral part of these Statements
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<PAGE> 4
WORLDCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------ -------------------------------------------
1995 1994 1995 1994
-------------- -------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Revenues $ 933,560 $ 568,558 $ 2,693,314 $ 1,647,771
-------------- -------------- ------------------- ------------------
Operating expenses:
Line costs 508,318 365,513 1,480,696 1,042,584
Selling, general and administrative 167,644 100,337 490,213 290,955
Depreciation and amortization 79,787 42,646 231,301 121,109
Provision to reduce carrying value of
certain assets - 35,000 - 35,000
-------------- -------------- ------------------- ------------------
Total 755,749 543,496 2,202,210 1,489,648
-------------- -------------- ------------------- ------------------
Operating income 177,811 25,062 491,104 158,123
Other income (expense):
Interest expense (62,526) (12,778) (189,392) (34,298)
Shareholder litigation settlement - (76,000) - (76,000)
Miscellaneous 3,752 1,223 7,125 4,431
-------------- -------------- ------------------- ------------------
Income (loss) before income taxes 119,037 (62,493) 308,837 52,256
Provision for income taxes 46,424 49,263 120,446 104,109
-------------- -------------- ------------------- ------------------
Net income (loss) 72,613 (111,756) 188,391 (51,853)
-------------- -------------- ------------------- ------------------
Preferred dividend requirement 3,811 6,938 17,686 20,828
One-time dividend payment to Series 1
preferred shareholder 15,000 - 15,000 -
-------------- -------------- ------------------- ------------------
Net income (loss) applicable to common
shareholders $ 53,802 $ (118,694) $ 155,705 $ (72,681)
============== ============== =================== ==================
Earnings (loss) per common share :
Primary 0.29 (0.75) 0.89 (0.46)
============== ============== =================== ==================
Fully diluted 0.29 (0.75) 0.89 (0.46)
============== ============== =================== ==================
Earnings (loss) per common share before
one-time dividend payment to Series 1
preferred shareholder:
Primary 0.37 (0.75) 0.97 (0.46)
============== ============== =================== ==================
Fully diluted 0.37 (0.75) 0.96 (0.46)
============== ============== =================== ==================
Weighted average shares outstanding:
Primary 195,014 158,282 192,517 157,296
Fully diluted 202,961 158,282 200,526 157,296
</TABLE>
The accompanying notes are an integral part of these Statements.
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WORLDCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------------------------------
1995 1994
------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 188,391 $ (51,853)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 137,567 72,136
Amortization 93,734 48,973
Provision for losses on accounts receivable 29,129 26,100
Provision for shareholder litigation - 76,000
Provision to reduce the carrying value of certain assets - 35,000
Provision for deferred income taxes 47,293 58,871
Change in assets and liabilities, net of effect of
business combinations:
Accounts receivable (38,930) (146,970)
Other current assets (359) 4,647
Accounts payable and other current liabilities (10,033) (82,181)
Shareholder litigation reserve (75,000) -
Other (6,349) 3,830
------------------- ------------------
Net cash provided by operating activities 365,443 44,553
------------------- ------------------
Cash flows from investing activities:
Capital expenditures (287,441) (110,775)
Sale of short-term investments, net 1,000 9,636
Acquisitions and related costs (2,713,765) (77,127)
Increase in intangible assets (6,350) (23,049)
Proceeds from disposition of other assets 14,463 -
Increase in other assets (4,641) (6,558)
Increase (decrease) in other liabilities (21,468) 25,821
Payment for line installation costs (14,848) (3,651)
Proceeds from disposition of property and equipment 13,690 -
------------------- ------------------
Net cash used in investing activities (3,019,360) (185,703)
------------------- ------------------
Cash flows from financing activities:
Borrowings 2,717,650 120,000
Principal payments on debt (128,232) (18,657)
Common stock issuance 88,803 33,883
Dividends paid on preferred stock (32,686) (20,828)
------------------- ------------------
Net cash provided by financing activities 2,645,535 114,398
------------------- ------------------
Net decrease in cash and cash equivalents (8,382) (26,752)
Cash and cash equivalents at beginning of period 19,259 60,780
------------------- ------------------
Cash and cash equivalents at end of period $ 10,877 $ 34,028
=================== ==================
</TABLE>
The accompanying notes are an integral part of these Statements
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<PAGE> 6
WORLDCOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) NAME CHANGE
At the annual meeting of shareholders held May 25, 1995, shareholders of LDDS
Communications, Inc. voted to change the name of the company to WorldCom, Inc.
("WorldCom" or the "Company") effective immediately. The change was made to
appropriately express the Company's image, direction and capabilities as a
major participant in the worldwide telecommunications market.
(B) GENERAL
The financial statements included herein are unaudited and have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting and Securities and Exchange Commission ("SEC") regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the financial statements reflect all adjustments (of a
normal and recurring nature) which are necessary to present fairly the
financial position, results of operations and cash flows for the interim
periods. These financial statements should be read in conjunction with the
Annual Report of the Company on Form 10-K for the year ended December 31, 1994.
The results for the nine month period ended September 30, 1995, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995.
(C) BUSINESS COMBINATIONS
On January 5, 1995, the Company completed the acquisition of Williams
Telecommunications Group, Inc. ("WilTel"), a subsidiary of The Williams
Companies, Inc. ("Williams"), for approximately $2.5 billion in cash (the
"WilTel Acquisition"). Through this purchase, the Company acquired a
nationwide common carrier network of approximately 11,000 miles of fiber optic
cable and digital microwave facilities. The WilTel Acquisition was effected
pursuant to a Stock Purchase Agreement dated as of August 22, 1994, by and
among the Company, Williams and WTG Holdings, Inc. The WilTel Acquisition is
being accounted for as a purchase for financial reporting purposes. The funds
paid to Williams were obtained by the Company under a new credit facility
entered into on December 21, 1994.
The following unaudited pro forma combined results of operations for the
Company assume that the WilTel Acquisition was completed on January 1, 1994 (in
thousands, except per share data):
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1994
------------------
<S> <C>
Revenues $2,249,563
Net loss applicable to common shareholders (126,929)
Loss per common share (0.81)
</TABLE>
These pro forma amounts represent the historical operating results of WilTel
combined with those of the Company with appropriate adjustments which give
effect to interest expense and amortization. These pro forma amounts are not
necessarily indicative of operating results which would have occurred if the
WilTel Acquisition had been operated by current management during the periods
presented because these amounts do not reflect full network optimization and
the synergistic effect on operating, selling, general and administrative
expenses.
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(D) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid by the Company during the nine months ended September 30, 1995
and 1994 amounted to $165.4 million and $34.0 million, respectively. Income
taxes paid during the nine months ended September 30, 1995 and 1994 were $7.4
million and $9.5 million, respectively. In conjunction with business
combinations during the nine months ended September 30, 1995 and 1994 (see Note
C), assumed assets and liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------------
1995 1994
---------- -----------
<S> <C> <C>
Fair value of assets acquired $ 829,806 $ -
Excess of cost over net tangible assets acquired 2,199,415 283,840
Liabilities assumed (302,606) (189,329)
Common stock issued (12,850) (17,384)
----------- ------------
$ 2,713,765 $ 77,127
=========== ============
</TABLE>
Acquisition and related costs for the nine months ended September 30, 1994
reflect additional costs related to the acquisitions in 1993.
(E) PREFERRED STOCK
On August 23, 1995, Metromedia Company ("Metromedia") converted its Series 1
$2.25 Cumulative Senior Perpetual Convertible Preferred Stock (the "Series 1
Preferred Stock") of WorldCom into 21,876,976 shares of WorldCom common stock
and exercised warrants to acquire 3,106,976 shares of WorldCom common stock and
immediately sold its position of 30,849,548 shares of WorldCom common stock in
a public offering. In connection with the preferred stock conversion, WorldCom
made a one-time non-recurring payment of $15.0 million to Metromedia,
representing a discount to the minimum nominal dividends that would have been
payable on the Series 1 Preferred Stock prior to the September 15, 1996
optional call date of approximately $26.6 million (which amount includes an
annual dividend requirement of $24.5 million plus accrued dividends to such
call date). Metromedia offered the shares immediately through an underwriting
by Donaldson, Lufkin & Jenrette Securities Corporation, as representative for
the several underwriters. The Company did not receive any proceeds from the
sale of the shares, but did receive approximately $33.7 million in proceeds
from the exercise of the warrants, which were used to repay certain existing
bank debt. John W. Kluge, Chairman of WorldCom, and the two other directors
elected by Metromedia, Silvia Kessel and Stuart Subotnick, currently remain as
directors of WorldCom.
(F) CONTINGENCIES
IDB RELATED INVESTIGATIONS. On June 9, 1994, the SEC issued a formal order of
investigation concerning certain matters, including IDB Communications Group,
Inc.'s ("IDB") financial position, books and records and internal controls and
trading in IDB securities on the basis of non-public information. The SEC has
issued subpoenas to WorldCom, IDB and others, including certain former officers
of IDB, in connection with its investigation. The NASD and other self-
regulatory bodies have also made inquiries of IDB concerning similar matters.
The U.S. Attorney's Office for the Central District of California has issued
grand jury subpoenas to IDB seeking documents relating to IDB's first quarter
results, the Deloitte & Touche LLP resignation, trading in IDB securities and
other matters, including information concerning certain entities in which
certain former officers of IDB are personal investors and transactions between
such entities and IDB. IDB has been informed that a criminal investigation has
commenced. The U.S. Attorney's Office has issued a grand jury subpoena to
WorldCom arising out of the same investigation seeking certain documents
relating to IDB.
AT&T PATENTS. AT&T has written the Company claiming that certain of the
Company's long distance services (including certain 800 services, operator
services and calling card services) make unauthorized use of AT&T patents.
Similar claims have
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been asserted against other long distance carriers. AT&T has stated that it
will enforce its patent rights and requested that the Company and other
carriers enter into patent license agreements. The Company has had discussions
with AT&T and is currently evaluating AT&T's claims. The Company is not yet in
a position to predict whether this matter will lead to litigation. In a
related development, MCI has brought suit against AT&T alleging that certain of
these same patents are invalid under the patent laws or unenforceable due to
representations made by AT&T to the District Court at the time of the 1982 AT&T
divestiture decree. AT&T has counterclaimed against MCI alleging patent
infringement. The Company could be adversely affected if, as a result of
litigation or otherwise, it was required to pay substantial patent royalties to
AT&T. However, the ultimate outcome of this issue, or the amount of any such
patent royalties which might be required, cannot be determined at this time.
OTHER. The United States Senate and the House of Representatives have passed
separate bills that would permit the Bell System Operating Companies ("BOCs")
to provide domestic and international long distance services upon, among other
things, a finding that the state regulatory environment and the petitioning
BOCs had satisfied certain criteria for opening the BOCs network to
competition. Differences between both bills are anticipated to be considered
by a House- Senate Conference Committee shortly. The House and the Senate will
vote upon a bill reported by the Conference Committee, if any. After passage
by both houses of Congress, a bill will be forwarded to the President for
enactment or veto. The outcome of pending legislation cannot be predicted.
The Company is involved in other legal and regulatory proceedings generally
incidental to its business. In some instances, rulings by regulatory
authorities in some states may result in increased operating costs to the
Company.
While the results of these various legal and regulatory matters contain an
element of uncertainty, the Company believes that the probable outcome of any
of the legal or regulatory matters, or all of them combined, should not have a
material adverse effect on the Company's consolidated results of operations or
financial position.
(G) RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed charges
and preferred stock dividends for each of the five years ended December 31,
1994 and for the nine months ended September 1994 and 1995, which ratios are
based on the historical consolidated financial statements of WorldCom. The
table also sets forth the pro forma combined data for the year ended December
31, 1994, which data gives effect to the WilTel Acquisition and the financing
thereof as if it occurred on January 1, 1994. The WilTel Acquisition was
accounted for as a purchase transaction. The pro forma combined data are
presented for comparative purposes only and are not intended to be indicative
of actual results had the transactions occurred as of the date indicated above
nor do they purport to be indicative of results which may be attained in the
future.
<TABLE>
<CAPTION>
Pro Forma
Historical Combined Historical
--------------------------------------------------- ---------------- ----------
Nine Months Ended
Year Ended December 31, Year Ended December 31, September 30,
1990 1991 1992 1993 1994 1994 1994 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of
earnings to
combined fixed
charges and
preferred stock
dividends 2.45:1 2.53:1 1.40:1 4.14:1 0.13:1 0.45:1 1.51:1 2.12:1
Deficiency of
earnings to
combined fixed
charges and
preferred stock
dividends (in
thousands) - - - - $(78,008) $(153,203) - -
</TABLE>
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For the purpose of computing the ratio of earnings to combined fixed charges
and preferred stock dividends, earnings consist of income (loss) from
continuing operations and fixed charges and preferred stock dividends, and
fixed charges consist of interest (including capitalized interest, but
excluding amortization amounts previously capitalized) on all indebtedness,
amortization of debt discount and expense and that portion of rental expense
which the Company believes to be representative of interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis relates to the financial condition and
results of operations of the Company for the three and nine months ended
September 30, 1995 and 1994 after giving effect to the Company's merger with
IDB on December 30, 1994 (the "IDB Merger"), which was accounted for as a
pooling-of-interests.
GENERAL
The Company's continued emphasis on acquisitions has taken the Company from a
small regional long distance carrier to one of the largest long distance
telecommunications companies in the industry, serving customers domestically
and internationally. The Company's operations have grown significantly in each
year of its operations as a result of internal growth, the selective
acquisition of smaller long distance companies with limited geographic service
areas and market shares, the consolidation of certain third tier long distance
carriers with larger market shares and international expansion.
The Company's long distance revenues are derived principally from the number of
minutes of use billed by the Company. Minutes billed are those conversation
minutes during which a call is actually connected at the Company's switch
(except for minutes during which the customer receives a busy signal or the
call is unanswered at its destination). The Company's profitability is
dependent upon, among other things, its ability to achieve line costs that are
less than its revenues. The principal components of line costs are access
charges and transport charges. Access charges are expenses incurred by all
interexchange carriers ("IXCs") for accessing the local networks of the local
exchange carriers ("LECs") in order to originate and terminate calls and
payments made to foreign telephone administrations to complete calls made from
the U.S. by the Company's customers. Transport charges are the expenses
incurred in transmitting calls between or within local access and transport
areas.
The most significant portion of the Company's line costs is access charges
which are highly regulated. The FCC regulates international communications
services and interstate telephone service and certain states, through the
appropriate regulatory agency, regulate intrastate telephone service.
Accordingly, the Company cannot predict what effect continued regulation and
increased competition between LECs and other IXCs will have on future access
charges. However, the Company believes that it will be able to continue to
reduce transport costs through effective utilization of its network, favorable
contracts with carriers and network efficiencies made possible as a result of
expansion of the Company's customer base by acquisitions and internal growth.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the Company's
statement of operations as a percentage of its operating revenues.
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<TABLE>
<CAPTION>
For the Quarter Ended For the Nine Months
September 30, Ended September 30,
---------------------- ---------------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Operating expenses:
Line costs 54.4% 64.3% 55.0% 63.3%
Selling, general and administrative 18.0% 17.6% 18.2% 17.7%
Depreciation and amortization 8.5% 7.5% 8.6% 7.3%
Provision to reduce carrying value of certain assets - 6.2% - 2.1%
----- ----- ----- -----
Operating income 19.1% 4.4% 18.2% 9.6%
Other income (expense):
Interest expense -6.7% -2.2% -7.0% -2.1%
Shareholder litigation settlement - -13.4% - -4.6%
Miscellaneous 0.4% 0.2% 0.3% 0.3%
----- ----- ----- -----
Income (loss) before income taxes 12.8% -11.0% 11.5% 3.2%
Provision for income taxes 5.0% 8.7% 4.5% 6.3%
----- ----- ----- -----
Net income (loss) 7.8% -19.7% 7.0% -3.1%
----- ----- ----- -----
Preferred dividend requirement 0.4% 1.2% 0.7% 1.3%
One-time dividend payment to Series 1 preferred shareholder 1.6% - 0.5% -
----- ----- ----- -----
Net income (loss) applicable to common shareholders 5.8% -20.9% 5.8% -4.4%
===== ===== ===== =====
</TABLE>
Revenues for the three months ended September 30, 1995 increased 64% to $933.6
million on 5.0 billion revenue minutes as compared to $568.6 million on 2.82
billion revenue minutes for the three months ended September 30, 1994. For the
nine months ended September 30, 1995, revenues increased 63% to $2.69 billion
on 14.27 billion revenue minutes versus $1.65 billion on 8.06 billion revenue
minutes for the comparable 1994 period.
On a pro forma basis, as though the acquisition of WilTel occurred at the
beginning of 1994, revenues and traffic for the third quarter of 1995 increased
18% and 29%, respectively, compared with pro forma revenues of $792.2 million
on 3.89 billion revenue minutes for the third quarter of 1994. For the first
nine months of 1995, revenues and traffic rose 20% and 32%, respectively, from
pro forma revenues of $2.25 billion on 10.83 billion revenue minutes. Revenue
growth for the three and nine months ended September 30, 1995 was driven by
strong performance from the Company's retail and wholesale markets offset by
declines in operator services revenue.
The Company's third quarter switched retail revenue, which excludes wholesale
and operator services traffic, increased 22% over 1994 pro forma results, while
traffic growth from this core business equaled 25%. For the first nine months
of 1995, revenues and traffic for switched retail revenue increased 20% and
21%, respectively, over the comparable 1994 period.
Third quarter 1995 results for wholesale switched revenue likewise increased,
with revenues also up 22% over 1994 pro forma results and volume increasing 39%
over the same period. For the first nine months of 1995, wholesale revenues
increased 30% and traffic increased 55%, over the comparable 1994 period.
Private line revenues for the three months and nine months ended September 30,
1995, also reflected positive growth, with increases of 21% for both periods
over the 1994 pro forma results.
Line costs as a percentage of revenues decreased to 54.4% during the third
quarter of 1995 as compared to 64.3% for the same period in the prior year. On
a year-to-date basis, line costs as a percentage of revenues decreased to 55.0%
in 1995 from 63.3% in 1994. These decreases are attributable to changes in the
product mix, rate reductions resulting from favorable contract negotiations and
synergies and economies of scale resulting from network efficiencies achieved
from the assimilation of the IDB Merger and the WilTel Acquisition into the
Company's operations. Additionally, through the WilTel Acquisition, the
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Company has been able to achieve further network efficiencies associated with
owning the WilTel nationwide fiber optic cable network rather than leasing
similar capacity from other providers at a higher cost.
Selling, general and administrative expenses for the third quarter of 1995
increased to $167.6 million or 18.0% of revenues as compared to $100.3 million
or 17.6% of revenues for the third quarter of 1994. On a year-to-date basis,
these expenses increased to $490.2 million or 18.2% of revenues from $291.0
million or 17.7% of revenues for the nine months ended September 30, 1994. The
increase in selling, general and administrative expenses results from the
Company's expanding operations, primarily through the WilTel Acquisition and
internal growth.
Depreciation and amortization expense for the third quarter of 1995 increased
to $79.8 million or 8.5% of revenues from $42.6 million or 7.5% of revenues for
the third quarter of 1994. On a year-to-date basis, this expense increased to
$231.3 million or 8.6% of revenues versus $121.1 million or 7.3% of revenues
for the comparable 1994 period. This increase reflects depreciation and
amortization of the additional property and equipment and goodwill from the
WilTel Acquisition.
In the third quarter of 1994, the Company determined that adjustments to
certain IDB Broadcast assets were appropriate to properly reflect estimated net
realizable values. Accordingly, the Company recorded an adjustment of $35.0
million, to reduce the carrying value of these broadcast assets (primarily
intangible assets and property and equipment) to the Company's best estimate of
the net realizable value. Although the Company continues to offer IDB
Broadcast services, such services are not a part of the Company's core business
operations. Accordingly, in the first quarter of 1995, the Company sold its
simulcasting operations and entered into an agreement to outsource the
management of the remaining IDB Broadcast operations.
Interest expense in the third quarter of 1995 was $62.5 million or 6.7% of
revenues, as compared to $12.8 million or 2.2% of revenues in the third quarter
of 1994. For the nine months ended September 30, 1995, interest expense
increased to $189.4 million or 7.0% of revenues, as compared to $34.3 million
or 2.1% of revenues for the first nine months of 1994. The increase in
interest expense was due primarily to an increase in the average debt
outstanding by the Company to finance the WilTel Acquisition.
In the third quarter of 1994, the Company recorded a $76.0 million charge which
represented an estimated IDB shareholder litigation settlement of $75.0 million
and $1.0 million in related legal costs. The shareholder litigation settlement
was paid in April 1995.
In the third quarter of 1995, Metromedia converted its Series 1 Preferred Stock
into 21,876,976 shares of WorldCom common stock and exercised warrants to
acquire 3,106,976 shares of WorldCom common stock and immediately sold its
position of 30,849,548 shares of WorldCom common stock in a public offering.
In connection with the preferred stock conversion, WorldCom made a one-time
non-recurring payment of $15.0 million to Metromedia, representing a discount
to the minimum nominal dividends that would have been payable on the Series 1
Preferred Stock prior to the September 15, 1996 optional call date of
approximately $26.6 million (which amount includes an annual dividend
requirement of $24.5 million plus accrued dividends to such call date).
Net income applicable to common shareholders was $53.8 million for the third
quarter of 1995 versus a $118.7 million loss in the comparable 1994 period.
Operating results for the third quarter of 1995 include the one-time
non-recurring payment of $15.0 million to Metromedia. Excluding this payment,
earnings for the third quarter of 1995 would have been $68.8 million or $0.37
per common share. Operating results in the third quarter of 1994 were
significantly affected by the IDB shareholder litigation settlement of $76.0
million, the reduction in carrying value of certain assets of $35.0 million, an
$18.3 million valuation reserve provided against certain IDB deferred tax
assets, an $8.5 million allowance to adjust the provision for doubtful
accounts, a $4.5 million accrual for accounting and legal expenses incurred in
connection with the resignation of IDB's prior auditors, and $11.0 million
related to various investment write-downs and other balance sheet accruals. On
a year-to-date basis, net income applicable to common shareholders increased to
$155.7 million or $.89 per share versus a net loss of $72.7 million or $.46 per
share for the comparable 1994 period.
Page 11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
On January 5, 1995, in conjunction with the WilTel Acquisition, the Company
utilized its $3.41 billion long-term credit facilities and repaid all debt
under the Company's previous credit facilities and the $123.0 million in senior
notes. Total additional borrowings for the nine months ended September 30,
1995 were $2.7 billion. At September 30, 1995, the Company had access to an
additional $220.6 million under its long-term credit facilities. For the nine
months ended September 30, 1995, the weighted average interest rate under the
credit facilities was 7.4%.
In February 1995, in the event of rising interest rates, the Company entered
into financial hedging agreements with various financial institutions, in
connection with the credit facilities. The hedging agreements establish capped
fixed rates of interest ranging from 8.25% to 8.3125% on an aggregate notional
value of $1.7 billion. If interest rates do not reach this cap, the Company's
interest rate remains variable. These contracts range in duration from one to
two years with $845.4 million maturing in each of the years ending 1996 and
1997.
The Company believes that the combined operations of WorldCom, IDB and WilTel
will generate sufficient cash flow to service the Company's debt under the new
credit facilities; however, economic downturns, increased interest rates and
other adverse developments, including factors beyond the Company's control,
could impair its ability to service its indebtedness. In addition, the cash
flow required to service WorldCom's debt will reduce its liquidity, which in
turn may reduce its ability to fund internal growth, additional acquisitions
and capital improvements.
The Company anticipates it will need to refinance a portion of the $1.25
billion term principal debt under the credit facilities prior to December 1996,
thereby requiring the Company to seek financing alternatives such as public or
private debt or equity offerings, or refinancing with the existing or new
lenders. The Company is committed to a priority plan of accelerating operating
cash flow to reduce debt. The Company anticipates that the remaining debt
balances will be refinanced with a combination of commercial bank debt and
public market debt. Successful execution of this priority plan would provide
continued compliance with required operating ratio covenants and would
eliminate any type of equity financing other than equity issued in connection
with acquisitions. No assurance can be given that the Company will achieve its
priority plan or that any refinancing will be available on terms acceptable to
WorldCom.
The Company has historically utilized cash flow from operations to finance
capital expenditures and a mixture of cash flow, debt and stock to finance
acquisitions. The Company will continue to analyze potential acquisitions
utilizing primarily equity financing until the additional leverage from the
WilTel Acquisition is reduced.
For the nine months ended September 30, 1995, the Company's cash flow from
operations was $365.4 million, increasing from $44.6 million in the comparable
period for 1994. The increase in cash flow from operations was primarily
attributable to cash flow from acquired operations, internal growth and the
sale of the Company's receivables as noted below.
Cash used in investing activities in the nine months ended September 30, 1995
totaled $3.02 billion and included $2.71 billion for acquisitions and related
costs and $287.4 million for capital expenditures. Primary capital
expenditures include purchases of switching, transmission, communication and
other equipment. Capital expenditures for 1995 are anticipated to total
approximately $340.0 million to $350.0 million.
Included in cash flows from financing activities are payments of $17.7 million
for preferred dividend requirements and $15.0 million for the one-time
non-recurring payment to Metromedia. All of the Series 1 Preferred Stock was
converted by Metromedia in August 1995 and accordingly, no further dividends
will be required on the Series 1 Preferred Stock. A portion of the Company's
Series 2 Preferred Stock was also converted during the third quarter of 1995.
The future annual dividend requirement for the Company's remaining Series 2
Preferred Stock is $2.0 million, payable on a quarterly basis. The Company
believes that no event will occur during the remainder of 1995 to interfere
with its ability to satisfy these dividend requirements.
During 1995, the Company amended WilTel's existing $80.0 million receivables
purchase agreement to include certain additional receivables and received
additional proceeds of $200.0 million. The Company used these proceeds to
reduce the outstanding debt under the Company's credit facilities and provide
additional working capital. As of September 30, 1995, the
Page 12
<PAGE> 13
purchaser owned an undivided interest in a $558.8 million pool of receivables
which includes the $280.0 million sold. The aggregate purchase limit under
this agreement was $280.0 million at September 30, 1995.
In April 1995, an additional $75.0 million was borrowed against the Company's
long-term credit facilities to pay the IDB shareholder litigation settlement
liability, which had been recognized by the Company during the third quarter of
1994.
During 1995, Metromedia exercised its right to purchase a total of 6.2 million
shares of the Company's common stock under purchase warrants. Aggregate
proceeds of $64.4 million from these exercises were used to reduce the
outstanding debt under the Company's credit facilities.
Absent significant capital requirements for other acquisitions, the Company
believes that cash flow from operations and funds available under the credit
facilities will be adequate to meet the Company's capital needs for the
remainder of 1995.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This Statement establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. This Statement is
effective for financial statements for fiscal years beginning after December
15, 1995. WorldCom has not determined what effect this statement will have on
the Company's consolidated results of operations or financial position.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans and is effective for
fiscal years beginning after December 15, 1995. The Company expects to
continue to apply the accounting provisions of APB Opinion 25 in determining
its net income. However, additional disclosures will be made to disclose the
estimated value of compensation expense under the method established by SFAS
No. 123.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material changes in the litigation reported in the
Company's Annual Report on Form 10-K for the year ended December 31,
1994, filed on March 30, 1995 except as may be reflected in the
discussion under Note F of the Notes to Consolidated Financial
Statements in Part I, Item 1, above.
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Page 13
<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits
See Exhibit Index
B. Reports on Form 8-K
(i) Current Report on Form 8-K dated September 8, 1995 (filed
September 8, 1995), reporting under Item 5, Other Events,
the ratio of earnings to combined fixed charges and
preferred stock dividends for each of the five years ended
December 31, 1994 and for the six months ended June 30, 1994
and 1995.
(ii) Current Report on Form 8-K dated August 23, 1995 (filed
August 29, 1995), reporting under Item 5, Other Events,
information relative to Metromedia converting its Series 1
Preferred Stock into 21,876,976 shares of WorldCom common
stock and exercise of warrants to acquire 3,106,976 shares
of WorldCom common stock and subsequent sale of its position
of 30,849,548 shares of WorldCom common stock in a public
offering.
(iii) Current Report on Form 8-K dated August 14, 1995 (filed
August 14, 1995), reporting under Item 5, Other Events, the
following information: (a) the Company's announcement that
it was notified by Metromedia of its intent to convert its
Series 1 Preferred Stock and to sell its position of
WorldCom in a public offering and (b) brief summaries of
certain provisions relating to the capital stock of the
Company.
Page 14
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 10-Q to be signed on its
behalf by Scott D. Sullivan, thereunto duly authorized to sign on behalf of the
registrant and as the principal financial officer thereof.
WORLDCOM, INC.
By: /s/ Scott D. Sullivan
----------------------------------
Scott D. Sullivan
Chief Financial Officer
Dated: November 14, 1995
Page 15
<PAGE> 16
EXHIBIT INDEX
Exhibit
No. Description
- ------ -----------
3(i) Amended and Restated Articles of Incorporation of the Company
(including preferred stock designations) as of September 15,
1993 (incorporated herein by reference to Exhibit 3(i) to
Amendment No. 1 to the Company's Registration Statement on Form
S-3 (File No. 33-67340)), as amended by Articles of Amendment
dated May 26, 1994 (incorporated herein by reference to Exhibit
3.1 to the Quarterly Report on Form 10-Q filed by the Company
(File No. 1-10415) for the quarter ended June 30, 1994), as
amended by Articles of Amendment dated May 25, 1995 (incorporated
herein by reference to Exhibit 3(ii) to the Quarterly Report on
Form 10-Q filed by the Company for the quarter ended June 30,
1995).
3(ii) Bylaws of the Company (incorporated herein by reference to
Exhibit 3(ii) to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (File No. 33-67340))
11.1 Computation of Per Share Earnings
12.1 Statement regarding computation of ratio of earnings to combined
fixed charges and preferred stock dividends
27.1 Financial Data Schedule
Page 16
<PAGE> 1
Exhibit 11.1
WORLDCOM, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------------------------------------------
1995 1994 1995 1994
------------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares outstanding 176,644 158,282 166,725 157,296
Common stock equivalents 4,492 - 5,515 -
Common stock issuable upon conversion of:
Series 1 preferred stock 12,603 - 18,786 -
Series 2 preferred stock 1,275 - 1,491 -
------------- ----------- ------------ ----------------
195,014 158,282 192,517 157,296
============= =========== ============ ================
Income (loss) applicable to common shareholders $ 53,802 $ (118,694) $ 155,705 $ (72,681)
Dividend paid on Series 1 preferred stock conversions 3,062 - 15,312 -
Dividend paid on Series 2 preferred stock conversions 243 - 858 -
------------- ----------- ------------ ----------------
Primary income (loss) applicable to common shareholders
after one-time dividend $ 57,107 $ (118,694) $ 171,875 $ (72,681)
One-time dividend payment on Series 1 preferred stock
conversion 15,000 - 15,000 -
------------- ----------- ------------ ----------------
Primary income (loss) applicable to common shareholders
before one-time dividend $ 72,107 $ (118,694) $ 186,875 $ (72,681)
============= =========== ============ ================
Primary earnings (loss) per share:
After one-time dividend payment to Series 1 preferred
shareholder $ 0.29 $ (0.75) $ 0.89 $ (0.46)
============= =========== ============ ================
Before one-time dividend payment to Series 1 preferred
shareholder $ 0.37 $ (0.75) $ 0.97 $ (0.46)
============= =========== ============ ================
Fully diluted:
Weighted average shares outstanding 176,644 158,282 166,725 157,296
Common stock equivalents 4,671 - 5,756 -
Common stock issuable upon conversion of:
5% convertible notes 5,135 - 5,135 -
Series 1 preferred stock 12,603 - 18,786 -
Series 2 preferred stock 3,908 - 4,124 -
------------- ----------- ------------ ----------------
202,961 158,282 200,526 157,296
============= =========== ============ ================
Income (loss) applicable to common shareholders $ 53,802 $ (118,694) $ 155,705 $ (72,681)
Add back:
Interest on 5% convertible notes, net of taxes 1,491 - 4,472 -
Series 1 preferred dividend requirement 3,062 - 15,312 -
Series 2 preferred dividend requirement 749 - 2,374 -
------------- ----------- ------------ ----------------
Fully diluted income (loss) applicable to common
shareholders after one-time dividend $ 59,104 $ (118,694) $ 177,863 $ (72,681)
Dividend paid on Series 1 preferred stock conversion 15,000 - 15,000 -
------------- ----------- ------------ ----------------
Fully diluted income (loss) applicable to common
shareholders before one-time dividend $ 74,104 $ (118,694) $ 192,863 $ (72,681)
============= =========== ============ ================
Fully diluted earnings (loss) per share:
After one-time dividend payment to Series 1 preferred
shareholder $ 0.29 $ (0.75) $ 0.89 $ (0.46)
============= =========== ============ ================
Before one-time dividend payment to Series 1 preferred
shareholder $ 0.37 $ (0.75) $ 0.96 $ (0.46)
============= =========== ============ ================
</TABLE>
<PAGE> 1
Exhibit 12.1
WorldCom,Inc.
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1990 1991 1992 1993 1994
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings:
Pretax Income (loss) from continuing operations 61,645 65,646 20,401 198,237 (76,108)
Fixed charges, net of capitalized interest 38,109 38,116 38,720 58,999 87,455
------------------------------------------------
Earnings 99,754 103,762 59,121 257,236 11,347
================================================
Fixed charges:
Interest expense 32,635 31,595 30,311 35,557 47,303
Interest capitalized 2,647 2,900 3,504 3,100 1,900
Amortization of financing costs 984 1,018 1,464 1,792 2,086
Interest factor of rent expense 4,490 5,503 4,833 9,967 10,300
Preferred dividend requirements - - 2,112 11,683 27,766
------------------------------------------------
Fixed charges 40,756 41,016 42,224 62,099 89,355
================================================
Deficiency of earnings to fixed charges - - - - (78,008)
================================================
Ratio of earnings to combined fixed
charges and preferred stock dividends 2.45:1 2.53:1 1.40:1 4.14:1 0.13:1
================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
Pro Forma September 30,
Fiscal Year -----------------
1994 1994 1995
--------- -----------------
<S> <C> <C> <C>
Earnings:
Pretax Income (loss) from continuing operations (151,303) 31,428 276,151
Fixed charges, net of capitalized interest 276,506 59,900 239,461
-------- -----------------
Earnings 125,203 91,328 515,612
======== =================
Fixed charges:
Interest expense 222,568 34,298 189,392
Interest capitalized 1,900 455 3,221
Amortization of financing costs 9,586 1,037 5,574
Interest factor of rent expense 16,586 3,737 11,809
Preferred dividend requirements 27,766 20,828 32,686
-------- -----------------
Fixed charges 278,406 60,355 242,682
======== =================
Deficiency of earnings to fixed charges (153,203) - -
======== =================
Ratio of earnings to combined fixed
charges and preferred stock dividends 0.45:1 1.51:1 2.12:1
======== =================
</TABLE>
See notes to computation of ratio of earnings to combined fixed charges and
preferred stock dividends.
<PAGE> 2
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(1) On January 5, 1995, the Company completed the acquisition of Williams
Telecommunications Group, Inc. for approximately $2.5 billion in cash
(the "WilTel Acquisition"). The WilTel Acquisition is being accounted
for as a purchase.
(2) As a result of the mergers with IDB Communications Group, Inc. (the
"IDB Merger") and Advanced Telecommunications Corporation (the "ATC
Merger"), the Company initiated plans to reorganize and restructure
its management and operational organization and facilities to
eliminate duplicate personnel, physical facilities and service
capacity, to abandon certain products and marketing activities, and to
further take advantage of the synergy available to the combined
entities. Also, during the fourth quarter of 1993, plans were
approved to reduce IDB Communications Group, Inc.'s cost structure and
to improve productivity. Accordingly, in 1994, 1993 and 1992, the
Company charged to operations the estimated costs of such
reorganization and restructuring activities, including employee
severance, physical facility abandonment and duplicate service
capacity. These costs totaled $43.7 million in 1994, $5.9 million in
1993 and $79.8 million in 1992.
Also, during 1994 and 1992, the Company incurred direct merger costs
of $15.0 million and $7.3 million, respectively, related to the IDB
Merger (in 1994) and the ATC Merger (in 1992). These costs include
professional fees, proxy solicitation costs, travel and related
expenses and certain other direct costs attributable to these mergers.
(3) In connection with certain debt refinancing, the Company recognized in
1993 and 1992 extraordinary items of approximately $7.9 million and
$5.8 million, respectively, net of income taxes, consisting of
unamortized debt discount, unamortized issuance cost and prepayment
fees.
(4) In the third quarter of 1995, Metromedia Company ("Metromedia")
converted its Series 1 Preferred Stock into 21,876,976 shares of
WorldCom common stock and exercised warrants to acquire 3,106,976
shares of WorldCom common stock and immediately sold its position of
30,849,548 shares of WorldCom common stock in a public offering. In
connection with the preferred stock conversion, WorldCom made a
one-time non-recurring payment of $15.0 million to Metromedia,
representing a discount to the minimum nominal dividends that would
have been payable on the Series 1 Preferred Stock prior to the
September 15, 1996 optional call date of approximately $26.6 million
(which amount includes an annual dividend requirement of $24.5
million plus accrued dividends to such call date).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WORLDCOM, INC. (F/K/A LDDS COMMUNICATIONS, INC.) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,877
<SECURITIES> 0
<RECEIVABLES> 558,250
<ALLOWANCES> 48,458
<INVENTORY> 0
<CURRENT-ASSETS> 652,271
<PP&E> 2,006,637
<DEPRECIATION> 438,040
<TOTAL-ASSETS> 6,551,910
<CURRENT-LIABILITIES> 872,640
<BONDS> 3,392,357
<COMMON> 1,931
0
12
<OTHER-SE> 2,082,543
<TOTAL-LIABILITY-AND-EQUITY> 6,551,910
<SALES> 2,693,314
<TOTAL-REVENUES> 2,693,314
<CGS> 1,480,696
<TOTAL-COSTS> 2,202,210
<OTHER-EXPENSES> (7,125)
<LOSS-PROVISION> 29,129
<INTEREST-EXPENSE> 189,392
<INCOME-PRETAX> 308,837
<INCOME-TAX> 120,446
<INCOME-CONTINUING> 188,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,705
<EPS-PRIMARY> .97
<EPS-DILUTED> .96
</TABLE>
