<PAGE> 1
================================================================================
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): July 23, 1998
WORLDCOM, INC.
(Exact Name of Registrant as Specified in its Charter)
Georgia 0-11258 58-1521612
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) (Identification Number)
Incorporation)
515 East Amite Street
Jackson, Mississippi 39201-2702
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (601) 360-8600
================================================================================
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 23, 1998, WorldCom, Inc. issued its second quarter 1998
earnings release, certain portions of which are attached hereto as Exhibit 99.1
and is incorporated herein by reference.
ITEM 7(C) EXHIBITS.
The following exhibits are filed herewith in accordance with Item 601
of Regulation S-K:
Exhibit No. Description
---------- -----------
99.1 Certain portions of the Press release dated
July 23, 1998.
2
<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.
WORLDCOM, INC.
By: /s/ Scott D. Sullivan
--------------------------
Scott D. Sullivan
Chief Financial Officer
July 24, 1998
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
---------- ----------------------
<S> <C>
99.1 Certain portions of the Press release dated July 23, 1998.
</TABLE>
4
<PAGE> 1
EXHIBIT 99.1
[WORLDCOM LOGO]
PRESS RELEASE
FOR IMMEDIATE RELEASE
Contacts:
News Media: Terri Howell Investors: Gary Brandt
(601) 360-8750 (601) 360-8544
WORLDCOM REPORTS SECOND QUARTER 1998 RESULTS
EARNINGS PER SHARE OF $0.21
CORE REVENUE GROWTH ACCELERATES TO 38 PERCENT YEAR-OVER-YEAR
MERGER WITH MCI PASSES KEY REGULATORY HURDLES
JACKSON, MS (July 23, 1998) - WorldCom, Inc. (NASDAQ:WCOM) today reported second
quarter revenues of $2.61 billion, a 45 percent increase over second quarter
1997 revenues of $1.80 billion. Prior year results include the Brooks Fiber
merger, which was completed on January 29, 1998, and accounted for as a
pooling-of-interests transaction. Traffic for the second quarter increased 39
percent over the previous year. Internal growth was particularly strong across
all sectors of communications services. Accelerating internal growth, combined
with the benefits of the CNS/ANS transactions for the full quarter, contributed
to the impressive year-over-year reported core revenue gains of 52 percent. On a
pro forma basis, assuming the acquisitions of CNS and ANS occurred as of the
beginning of the year for both periods -- which is indicative of internal growth
- -- core communications services revenues increased 38 percent on industry
leading volume growth of 39 percent.
Reported net income for the second quarter 1998 was $228 million or $0.21 per
common share compared with net income before extraordinary items of $44 million
or $0.04 per common share in the second quarter of 1997.
Operating income for the second quarter 1998 was $494.8 million -- an increase
of 127 percent compared with $218.3 million on a reported basis for the second
quarter of 1997.
The improvement in operating income margins over the past year is due to a
significant improvement in year-over-year operating cash flow and the fixed
level of annual amortization. A more profitable mix of non-access bearing
revenues combined with the achievement of cost savings has driven the increase
in EBITDA margins.
<PAGE> 2
WORLDCOM SECOND QUARTER RESULTS/PAGE 2
YEAR-TO-DATE HIGHLIGHTS
For the six months ended June 30, 1998, WorldCom reported revenues of $4.96
billion, up 42 percent as compared with $3.49 billion for the first six months
of 1997. On a pro forma basis, assuming the acquisitions of CNS and ANS occurred
at the beginning of the year for both periods, year-to-date total revenue was
$5.04 billion, up 32 percent as compared with $3.83 billion. For core revenues
alone, the pro forma results increased 37 percent to $4.96 billion.
Reported year-to-date net income before non-recurring charges and extraordinary
items was $420 million, or $0.39 per common share compared with $69 million or
$0.06 per common share for the comparable six month period in 1997.
Operating income before non-recurring charges for the six months year-to-date
was $921 million -- an increase of 146 percent compared with $374 million on a
reported basis for the comparable period in 1997.
COMMUNICATIONS SERVICES - PRO FORMA COMPARISON
For internal growth comparison purposes, the following pro forma illustration
includes Brooks Fiber, CNS and ANS from the beginning of the earliest period
presented.
<TABLE>
<CAPTION>
SECOND QUARTER YEAR-TO-DATE
($ MILLIONS) PRO FORMA
REVENUES ACTUAL PRO FORMA ------------------
1998 1997 CHANGE 1998 1997 CHANGE
----- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic switched $1,207.8 $ 981.0 23% $2,369.7 $1,943.8 22%
Domestic private line 536.3 381.5 41% 1,032.7 741.0 39%
International 299.1 197.0 52% 558.8 360.8 55%
Internet 525.5 303.4 73% 999.2 574.7 74%
-------- -------- --- -------- -------- ---
CORE REVENUES $2,568.7 $1,862.9 38% $4,960.4 $3,620.3 37%
-------- -------- --- -------- -------- ---
Other 41.8 111.6 (63%) 81.6 211.1 (61%)
-------- -------- --- -------- -------- ---
TOTAL REVENUES $2,610.5 $1,974.5 32% $5,042.0 $3,831.4 32%
-------- -------- --- -------- -------- ---
Businesses sold:
Operator Services -- (25.9) -- -- (52.1) --
Broadcast Operations -- (13.8) -- -- (28.7) --
-------- -------- --- -------- -------- ---
RECASTED REVENUES $2,610.5 $1,934.8 35% $5,042.0 $3,750.6 34%
-------- -------- --- -------- -------- ---
</TABLE>
<PAGE> 3
WORLDCOM SECOND QUARTER RESULTS/PAGE 3
For the second quarter and year-to-date, all categories of core communications
services showed above 20 percent year-over-year growth, with total core revenue
growth of 38 percent and 37 percent for the quarter and year-to-date,
respectively. Domestic private line and data services, international and
Internet services now comprise more than half of total revenues and are the key
drivers of the company's industry leading revenue growth. Capital investment for
advanced transmission technologies and fiber optics in support of customer
demand for high speed data and Internet connections is focused on driving both
revenue and margin expansion.
CORE REVENUES - PRO FORMA ANALYSIS
Domestic switched services, or voice revenues, increased 23 percent for the
quarter and 22 percent for the year-to-date. Strong long distance volume gains
in all domestic sales channels, combined with an increasing mix of local
services, were the primary contributors to this increase. The strong volume
growth was offset partially by competitive international pricing and access
charge reform pass throughs.
Domestic private line, or data revenues, increased 41 percent for the quarter
and 39 percent for the year-to-date. The particularly strong revenue growth for
private line and frame relay services continues to be driven by tremendous
commercial end-user demand for high-speed data and by Internet-related growth on
both a local and long-haul basis. This growth is not only being fueled by
connectivity demands, but applications are becoming increasingly complex, and
bandwidth consumption is driving an acceleration in growth for higher capacity
circuits.
International revenues -- those revenues originating outside of the U.S. --
accelerated sequentially from the first quarter and were up 52 percent as
compared with a particularly strong second quarter in 1997. On a year-to-date
basis, International revenues were up 55 percent to $559 million. Earlier this
week, the pan-European network was commissioned for service and now provides
WorldCom the unprecedented capability to connect from end-to-end over 5,000
buildings in Europe with over 30,000 buildings in the U.S. -- all over its own
high-capacity circuits.
Internet revenues increased 73 percent for the quarter and 74 percent for the
year-to-date, all on a pro forma basis as if CNS and ANS had been combined since
the beginning of both years. Growth is being driven by both dial up and
dedicated connectivity to the Internet as more and more business customers
migrate their data networks and applications to Internet-based technologies.
OTHER REVENUES
Other revenues for the second quarter of 1998 were $42 million, down 63 percent
compared with the second quarter of 1997. Other revenues include MFS Network
Technologies of $32 million and systems and consulting sales of $10 million.
<PAGE> 4
WORLDCOM SECOND QUARTER RESULTS/PAGE 4
Operator services and broadcast operations were sold in the third quarter of
1997. On a recast basis, excluding the results of the operator services and
broadcast operations divisions in both periods, other revenues were down 42
percent for the second quarter due to the timing of transportation construction
contracts within the MFS Network Technologies group. MFS Network Technologies
was sold on July 2, 1998.
PRO FORMA COMPARATIVES
The following table reflects pro forma amounts as if the CNS/ANS transactions
occurred as of the beginning of the earliest period presented -- before merger
and extraordinary charges.
<TABLE>
<CAPTION>
SECOND QUARTER YEAR-TO-DATE
($ IN MILLIONS, PRO FORMA(1)
EXCEPT EPS AND % ACTUAL PRO FORMA(1) ---------
OF REVENUE) 1998 1997 CHANGE 1998 1997 CHANGE
----- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,610.5 $ 1,974.5 32% $ 5,042.0 $ 3,831.4 32%
EBITDA $ 826.7 $ 487.0 70% $ 1,560.8 $ 893.4 75%
% of Revenue 31.7% 24.7% 31.0% 23.3%
Operating Income $ 494.8 $ 203.3 143% $ 914.8 $ 338.5 170%
% of Revenue 19.0% 10.3% 18.1% 8.8 %
EPS $ 0.21 $ 0.02 -- $ 0.38 $ 0.02 --
</TABLE>
(1) 1997 results restated to reflect Brooks Fiber merger, which was accounted
for on a pooling-of-interests basis, and CNS/ANS results included from the
beginning of the year for both 1997 and 1998. Year-to-date figures have
been restated to include 3 months of CNS/ANS results for first quarter in
both years.
As a percent of revenues, EBITDA margin for the second quarter of 1998 was 32
percent and operating income 19 percent compared with 25 percent and 10 percent,
respectively, for the prior year period. The improvement in operating income is
due to the realization of merger synergies, an improving mix of higher margin
revenues, and the operating leverage related to the fixed quarterly level of
amortization expense.
MCI TRANSACTION
On November 10, 1997, WorldCom announced a definitive merger agreement with MCI
Communications Corporation (MCI). Under the terms of the agreement, stockholders
of MCI will receive 1.2439 shares of WorldCom common stock for each share of MCI
common stock held, based on WorldCom's 20-day average price being greater than
$41 per share. British Telecom (BT) will receive $51 in cash for each share of
MCI Class A common stock. Shareholders of WorldCom and stockholders of MCI
approved the merger at separate meetings held on March 11, 1998.
<PAGE> 5
WORLDCOM SECOND QUARTER RESULTS/PAGE 5
The European Commission (EC) and Department of Justice (DOJ) approved the merger
of WorldCom and MCI on July 8th and July 15th, respectively, based on MCI's
agreement to sell its Internet business to Cable and Wireless for $1.75 billion.
The FCC and remaining state approvals and closing are expected to occur in the
third quarter. In preparation for the MCI closing and to accommodate the $7
billion payment to BT, the company expects to complete a new bank facility in
early August. In addition, the company expects to access the bond market in the
first week of August.
Except for the historical information contained herein, this news release may be
deemed to include forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that involve risk and uncertainty, including
financial, regulatory environment and trend projections. Although the company
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its expectations will be achieved. The important factors that
could cause actual results to differ materially from those in the
forward-looking statements herein (the "Cautionary Statements") include, without
limitation, the company's degree of financial leverage, risks associated with
debt service requirements and interest rate fluctuations, risks associated with
acquisitions and the integration thereof, risks of international business,
dependence on availability of transmission facilities, regulation risks
including the impact of the Telecom Act, contingent liabilities, and the impact
of competitive services and pricing, as well as other risks referenced from time
to time in the company's filings with the SEC, including the
<PAGE> 6
WORLDCOM SECOND QUARTER RESULTS/PAGE 6
company's Form 10-K for the year ended December 31, 1997. All subsequent written
and oral forward-looking statements attributable to the company or persons
acting on its behalf are expressly qualified in their entirety by the Cautionary
Statements. The company does not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Any offering of WorldCom securities will only be made by means of a prospectus.
This news release shall not constitute an offer to sell or the solicitation of
any offer to buy nor shall there be any sale of such securities in any state in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state.
WorldCom, Inc. is a global telecommunications company with established
operations in over 50 countries encompassing the Americas, Europe and the
Asia-Pacific regions. WorldCom is a premier provider of facilities-based and
fully integrated local, long distance, international and Internet services.
WorldCom's global networks, including its state-of-the-art pan-European network
and transoceanic cable systems, provide end-to-end connectivity to over 35,000
buildings worldwide. WorldCom's World Wide Web address is: http://www.wcom.com.
On November 10, 1997, WorldCom announced a definitive merger agreement with MCI
Communications Corporation. The merger is expected to be completed this summer.
# # #
<PAGE> 7
WORLDCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited. In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------------------------------------------------
June 30, 1997
---------------------------------------------------
June 30, 1998 % Actual % Proforma %
------------- ------ ------------ ----- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Minutes 12,556,888 9,002,874 9,002,874
Revenues $ 2,610,477 100.0% $ 1,796,862 100.0% $ 1,974,460 100.0%
------------ ------ ------------ ----- ------------ -----
Operating expenses:
Line costs 1,260,020 48.3% 937,237 52.2% 1,031,594 52.2%
Selling, general and administrative 523,769 20.0% 401,290 22.3% 455,821 23.1%
Depreciation and amortization 331,848 12.7% 240,060 13.4% 283,715 14.4%
------------ ------ ------------ ----- ------------ -----
Total 2,115,637 81.0% 1,578,587 87.9% 1,771,130 89.7%
------------ ------ ------------ ----- ------------ -----
Operating income 494,840 19.0% 218,275 12.1% 203,330 10.3%
Other income (expense):
Interest expense (107,746) -4.1% (95,949) -5.3% (95,951) -4.8%
Miscellaneous 9,945 0.3% 7,313 0.4% 8,149 0.4%
------------ ------ ------------ ----- ------------ -----
Income before income taxes and extraordinary items 397,039 15.2% 129,639 7.2% 115,528 5.9%
Provision for income taxes 169,535 6.5% 85,158 4.7% 85,584 4.4%
------------ ------ ------------ ----- ------------ -----
Net income before extraordinary items 227,504 8.7% 44,481 2.5% 29,944 1.5%
Extraordinary item -- -- (2,857) -0.2% (2,857) -0.2%
Preferred dividend requirement 6,598 0.2% 6,611 0.4% 6,611 0.3%
------------ ------ ------------ ----- ------------ -----
Net income applicable to common shareholder $ 220,906 8.5% $ 35,013 1.9% $ 20,476 1.0%
============ ====== ============ ===== ============ =====
Earnings per common share:
Net income applicable to common shareholders before
extraordinary items:
Basic $ 0.21 $ 0.04 $ 0.02
============ ============ ============
Diluted $ 0.21 $ 0.04 $ 0.02
============ ============ ============
Extraordinary items $ -- $ (0.00) $ (0.00)
============ ============ ============
Net income applicable to common shareholders:
Basic $ 0.21 $ 0.04 $ 0.02
============ ============ ============
Diluted $ 0.21 $ 0.04 $ 0.02
============ ============ ============
</TABLE>
<PAGE> 8
WORLDCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited. In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Six Months Ended
----------------------------------------------------------------------------------------
June 30, 1998 June 30, 1997
-------------------------------------------- ------------------------------------------
Before After
Non-Recurring Non-Recurring
Charges % Charges % Actual % Proforma %
----------- ----- ---------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minutes 24,361,472 24,361,472 17,588,354 17,588,354
Revenues $ 4,960,444 100.0% $4,960,444 100.0% $3,493,656 100.0% $3,831,361 100.0%
----------- ----- ---------- ----- ---------- ----- ---------- -----
Operating expenses:
Line costs 2,406,969 48.5% 2,406,969 48.5% 1,858,714 53.2% 2,045,890 53.4%
Selling, general and administrative 1,001,900 20.2% 1,001,900 20.2% 789,489 22.6% 892,111 23.3%
Depreciation and amortization 630,428 12.7% 630,428 12.7% 471,699 13.5% 554,851 14.5%
Brooks Fiber merger costs - - 69,490 1.4% - - - -
Charge for in-process research and
development - - 429,000 8.7% - - - -
----------- ----- ---------- ----- ---------- ----- ---------- -----
Total 4,039,297 81.4% 4,537,787 91.5% 3,119,902 89.3% 3,492,852 91.2%
----------- ----- ---------- ----- ---------- ----- ---------- -----
Operating income 921,147 18.6% 422,657 8.5% 373,754 10.7% 338,509 8.8%
Other income (expense):
Interest expense (209,994) -4.2% (209,994) -4.2% (186,109) -5.3% (186,113) -4.8%
Miscellaneous 22,192 0.4% 22,192 0.4% 20,794 0.6% 22,443 0.6%
----------- ----- ---------- ----- ---------- ----- ---------- -----
Income before income taxes
and extraordinary items 733,345 14.8% 234,855 4.7% 208,439 6.0% 174,839 4.6%
Provision for income taxes 313,137 6.3% 287,735 5.8% 138,960 4.0% 138,117 3.6%
----------- ----- ---------- ----- ---------- ----- ---------- -----
Net income (loss) before
extraordinary items 420,208 8.5% (52,880) -1.1% 69,479 2.0% 36,722 1.0%
Extraordinary item (net of income taxes
of $77,568) - - (128,731) -2.5% (2,857) -0.1% (2,857) -0.1%
Preferred dividend requirement 13,200 0.3% 13,200 0.3% 13,221 0.4% 13,221 0.4%
----------- ----- ---------- ----- ---------- ----- ---------- -----
Net income (loss) applicable to common
shareholders $ 407,008 8.2% $ (194,811) -3.9% $ 53,401 1.5% $ 20,644 0.5%
=========== ===== ========== ===== ========== ===== ========== =====
Earnings (loss) per common share:
Net income (loss) applicable to
common shareholders before
extraordinary items:
Basic $ 0.40 $ (0.06) $ 0.06 $ 0.02
=========== ========== ========== ==========
Diluted $ 0.39 $ (0.06) $ 0.06 $ 0.02
=========== ========== ========== ==========
Extraordinary items $ - $ (0.13) $ (0.00) $ (0.00)
=========== ========== ========== ==========
Net income (loss) applicable to common
shareholders:
Basic $ 0.40 $ (0.19) $ 0.06 $ 0.02
=========== ========== ========== ==========
Diluted $ 0.39 $ (0.19) $ 0.06 $ 0.02
=========== =========== ========== ==========
</TABLE>
<PAGE> 9
WORLDCOM, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Basic:
Net income applicable to common shareholders
before extraordinary items $ 220,906 $ 37,870
Extraordinary item -- (2,857)
----------- -----------
Net income applicable to common shareholders $ 220,906 $ 35,013
=========== ===========
Weighted average shares outstanding 1,044,838 962,448
=========== ===========
Basic earnings per share:
Applicable to common shareholders before extraordinary items $ 0.21 $ 0.04
=========== ===========
Extraordinary item $ -- $ 0.00
=========== ===========
Applicable to common shareholders $ 0.21 $ 0.04
=========== ===========
Diluted:
Net income (loss) applicable to common shareholders
before extraordinary items $ 220,906 $ 37,870
Extraordinary item -- (2,857)
Add back:
Series A preferred dividend 6,364 6,364
Series B preferred dividend 234 247
----------- -----------
Net income (loss) applicable to common shareholders $ 227,504 $ 41,624
=========== ===========
Weighted average shares outstanding 1,044,838 962,448
Common stock equivalents 34,279 26,560
Common stock issuable upon conversion of:
Series A preferred stock 20,617 32,703
Series B preferred stock 1,183 1,246
----------- -----------
Diluted shares outstanding 1,100,917 1,022,957
=========== ===========
Diluted earnings (loss) per share:
Applicable to common shareholders before extraordinary items $ 0.21 $ 0.04
=========== ===========
Extraordinary item $ -- $ --
=========== ===========
Applicable to common shareholders $ 0.21 $ 0.04
=========== ===========
</TABLE>
<PAGE> 10
WORLDCOM, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Six Months Ended
---------------------------------------------
June 30, 1998
-----------------------------
Before After
Non-Recurring Non-Recurring
Charges Charges June 30, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Basic:
Net income (loss) applicable to common shareholders
before extraordinary items $ 407,008 $ (66,080) $ 56,258
Extraordinary item -- (128,731) (2,857)
---------- ---------- ----------
Net income (loss) applicable to common shareholders $ 407,008 $ (194,811) $ 53,401
========== ========== ==========
Weighted average shares outstanding 1,028,250 1,028,250 955,105
========== ========== ==========
Basic earnings (loss) per share:
Applicable to common shareholders before extraordinary items $ 0.40 $ (0.06) $ 0.06
========== ========== ==========
Extraordinary item $ -- $ (0.13) $ (0.00)
========== ========== ==========
Applicable to common shareholders $ 0.40 $ (0.19) $ 0.06
========== ========== ==========
Diluted:
Net income (loss) applicable to common shareholders
before extraordinary items $ 407,008 $ (66,080) $ 56,258
Extraordinary item -- (128,731) (2,857)
Add back:
Series A preferred dividend 12,729 -- --
Series B preferred dividend 471 -- 493
---------- ---------- ----------
Net income (loss) applicable to common shareholders $ 420,208 $ (194,811) $ 53,894
========== ========== ==========
Weighted average shares outstanding 1,028,250 1,028,250 955,105
Common stock equivalents 31,605 -- 28,364
Common stock issuable upon conversion of:
Series A preferred stock 26,660 -- --
Series B preferred stock 1,192 -- 1,242
---------- ---------- ----------
Diluted shares outstanding 1,087,707 1,028,250 984,711
========== ========== ==========
Diluted earnings (loss) per share:
Applicable to common shareholders before extraordinary items $ 0.39 $ (0.06) $ 0.06
========== ========== ==========
Extraordinary item $ -- $ (0.13) $ (0.00)
========== ========== ==========
Applicable to common shareholders $ 0.39 $ (0.19) $ 0.05
========== ========== ==========
</TABLE>
