=============================================================================
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): November 1, 2000
-------------------------------------
WORLDCOM, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 0-11258 58-1521612
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
500 Clinton Center Drive, Clinton, Mississippi 39056
(Address of principal executive offices) (Zip Code)
(601) 460-5600
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
=============================================================================
<PAGE>
Item 5. Other Events.
-------------
On November 1, 2000, WorldCom, Inc. ("WorldCom") announced that it had
decided to create a tracking stock to track the performance of its core high-
growth data, Internet, hosting and international businesses and a tracking
stock to track its high cash flow consumer, small business, wholesale long-
distance voice operations and dial-up Internet access operations.
Item 7. Exhibits.
Exhibit No. Exhibit
----------- -------
99.1 Press Release, dated November 1, 2000, announcing the
tracking stock
-2-
<PAGE>
SIGNATURE
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
______________________________________
Name: Scott D. Sullivan
Title: Chief Financial Officer
Date: November 1, 2000
-3-
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
99.1 Press Release, dated November 1, 2000, announcing the
tracking stock
-4-
<PAGE>
Exhibit 99.1
WorldCom to Realign Businesses, Create Two
Tracking Stocks
Plan Will Provide Greater Focus for Shareholders and Business Units
Positions the Company for Growth
CLINTON, Miss., November 1, 2000 -WorldCom, Inc. (NASDAQ: WCOM) today
announced a realignment of its businesses with the distinct customer bases
they serve. While WorldCom, Inc. will remain the name of the Company it will
create two separately traded tracking stocks: WorldCom (NASDAQ: WCOM), which
will reflect the performance of the Company's core high-growth data,
Internet, hosting and international businesses, and MCI (NASDAQ: MCIT), which
will reflect the performance of its high-cash flow consumer, small business,
wholesale long-distance voice and dial-up Internet access operations.
Under the plan, which has been approved by its Board of Directors, the
Company will make a tax-free distribution to its shareholders of a 100
percent interest in MCI, which is expected to be completed during the first
half of 2001.
"Realigning WorldCom's structure in this way will enable the respective
businesses to achieve greater management and resource focus to execute
business strategies that work most effectively for each," said Bernard J.
Ebbers, WorldCom president and chief executive officer. "At the same time,
the new structure is designed to create greater shareholder value by
providing shareholders with two distinct, clear and compelling investment
opportunities, while ensuring a seamless transition for WorldCom customers
and employees."
-5-
<PAGE>
WorldCom stock will provide investors with a high-growth investment
opportunity that will track the primary growth drivers of the Company - data,
Internet and international services. Together, these growth businesses
represented $4.1 billion of revenue during the three-month period ended
September 30, 2000, providing all of the Company's $1.1 billion incremental
revenues during the period.
MCI stock will track the Company's high-cash flow consumer, small business
and wholesale long-distance voice businesses, as well as dial-up Internet
access services. MCI stock will pay a cash dividend.
"This plan is a triple-tiered win," said Ebbers. "For our shareholders, who
will gain more targeted investment opportunities. For our customers, who
will experience a more efficient operation attuned to their individual needs.
And for our employees, who will be enabled to execute targeted business
strategies that play to the strengths of each operation."
WORLDCOM
The WorldCom tracking stock will reflect the performance of the following
businesses:
- Data
- Internet
- Hosting
- International
- Wireless
- Business Long-Distance Voice
- Business Local Voice
WorldCom has the industry's most extensive, state-of-the-art global
facilities-based communications networks, providing unmatched reach and scale
in the marketplace. With its networks, focused sales efforts and prudent
capital investments, WorldCom has annualized revenues of $23 billion. Of
that, data, Internet and international operations represent a $16 billion
annualized high-growth revenue stream. In addition, WorldCom has high levels
of operating cash flow to fund its aggressive growth initiatives.
The international business consists of revenue streams generated outside of
the U.S., with annualized revenues exceeding $6 billion, operations in more
than 65 countries and local networks in more than 20 cities across Europe,
Latin America and Asia-Pacific. Additionally, business voice represents
annualized revenues of $7 billion from a full range of enterprises.
By leveraging its strengths, WorldCom intends to continue to expand its
market leadership in data, Internet and international services -the growth
-6-
<PAGE>
drivers of the industry today -while continuing to move quickly to capture
significant market share in global Internet Protocol-Virtual Private Networks
(IP-VPNs), hosting and other growth engines of tomorrow.
Taking advantage of its network and management strengths, WorldCom will
market a full complement of e-business-enabling communications services for
enterprises worldwide. WorldCom plans to expand its current global Internet
and high-speed data networks further into Europe and Asia-Pacific to provide
business customers in these rapidly growing regions the reliability,
performance and scale they need as their operations and communications needs
expand.
From its global leadership position in IP infrastructure, WorldCom will
continue its expansion into next generation "edge" services, such as IP-VPNs,
advanced hosting and content delivery. The IP-VPN market, which is currently
in its initial growth phase, is expected to grow to more than $7 billion by
2005. This digital technology simplifies operations by allowing data to
reach more locations through expansion of a data network's reach via the
Internet, without sacrificing the security and reliability of private
networks. Leveraging its industry-leading IP and data network platforms,
network services experience and corporate enterprise relationships, WorldCom
is well positioned to tap into these significant growth opportunities.
Managed hosting, an area projected in the U.S. alone to reach more than $19
billion by 2004, is an emerging business that provides data centers and
application operations, allowing customers to outsource their increasingly
essential web-based e-business operations. WorldCom will expand its presence
in the highly fragmented hosting market with the addition of a controlling
interest in Digex, a leading managed hosting provider, through its proposed
acquisition of Intermedia.
MCI
The MCI tracking stock will reflect the performance of the following
businesses:
- Mass Markets
- Wholesale Services
- Small Business
- Dial-up Internet Service
- Paging
- Prepaid Card
MCI stock will provide investors with dividend income and will track the
Company's high-cash flow consumer, small business, wholesale voice-based
long-distance and dial-up Internet businesses. With annual revenues of more
than $16 billion, MCI will focus on providing shareholders with an income-
-7-
<PAGE>
oriented investment opportunity linked to some of the Company's most
established enterprises. The MCI management team will be compensated based
on its ability to generate strong operating cash flow, reduce debt and return
excess cash flow to MCI shareholders.
As one of the largest providers of consumer long-distance services, MCI will
leverage its globally recognized brand, marketing channels and broad consumer
product offerings. MCI has one of the world's largest and most successful
telemarketing operations, encompassing 18 call centers.
MANAGEMENT STRUCTURE
Bernard J. Ebbers will remain the Company's president and chief executive
officer. Scott Sullivan will remain the Company's chief financial officer,
reporting to Mr. Ebbers. MCI's management structure, reporting up to Mr.
Ebbers, will be named in the coming weeks.
The WorldCom, Inc. Board of Directors will govern the activities of both
WorldCom and MCI.
TRANSACTION SPECIFICS
Upon shareholder approval of the tracking stocks, WorldCom, Inc. shareholders
will receive one share of MCI stock for every 25 shares of WorldCom, Inc.
common stock held immediately prior to the tracking stock distribution date.
MCI stock will initially pay a quarterly dividend of approximately $75
million ($300 million per year). MCI will initially be allocated notional
debt of $6 billion and the remaining WorldCom, Inc. debt (approximately $17
billion) will be allocated on a notional basis to the WorldCom tracking
stock.
The Company expects to file its registration/proxy statement with the
Securities and Exchange Commission before the end of 2000, to hold its
shareholder meeting to vote on the tracking stock plan in the first half of
2001 and to effect the distribution of the MCI stock shortly after
shareholder approval. No regulatory approvals are expected to be required.
NOTE TO MEDIA: WorldCom, Inc. will conduct a media call at 1:15 p.m. EST.
For those in the U.S. please call U.S. 1-888-566-5969, passcode 'WORLDCOM.'
International callers may join by dialing 1-712-271-3626, passcode
'WORLDCOM.'
-8-
<PAGE>
ABOUT WORLDCOM
WorldCom, Inc. (NASDAQ: WCOM) is a preeminent global communications company
for the digital generation, operating in more than 65 countries. Global
revenues in 1999 were $36 billion, with $15 billion from high-growth data,
Internet and international services. WorldCom provides the innovative
technologies and services that are the foundation for business in the 21st
century. For more information go to http://www.wcom.com
FORWARD-LOOKING STATEMENTS
The foregoing are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended, including
statements concerning future operating performance, share of new and existing
markets, and revenue and earnings growth rates. Such forward-looking
statements, which are not a guarantee of performance, are subject to a number
of uncertainties and other factors, that could cause actual results to differ
materially from such statements, including vigorous competition; the ability
to establish a significant market presence in new geographic service markets,
and the success and market acceptance of new products and services. For a
more detailed description of the factors that could cause such a difference,
please see WorldCom, Inc.'s filings with the Securities and Exchange
Commission. The Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
We urge investors and security holders to read WorldCom, Inc.'s Registration
Statement on Form S-4, including the prospectus and proxy statement, when
they become available, because they will contain important information. When
these and other documents relating to the transaction are filed with the U.S.
Securities and Exchange Commission, they may be obtained without charge from
the SEC's website at http://www.sec.gov. Holders of WorldCom, Inc. stock may
also obtain each of these documents (when they become available) for free by
directing your request to WorldCom, Inc., c/o Investor Relations Department,
500 Clinton Center Drive, Clinton, Mississippi 39056. This communication
shall not constitute an offer to sell or the solicitation of an offer to buy,
nor shall there be any sale of securities in any state in which the offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state. No offering of securities shall
be made except by means of a prospectus meeting the requirements of Section
10 of the Securities Act.
WorldCom, Inc. and certain other persons referred to below may be deemed to
be participants in the solicitation of proxies of shareholders to adopt the
proposals which will be set forth in the proxy statement contained in
WorldCom, Inc.'s Registration Statement on Form S-4. The participants in
-9-
<PAGE>
this solicitation may include the directors and executive officers of
WorldCom, Inc., who may have an interest in the transaction including as a
result of holding shares of common stock and/or options to acquire the same.
A detailed list of the names and interests of WorldCom, Inc.'s directors and
executive officers is contained in the Company's proxy statement for its 2000
annual meeting, which may be obtained without charge at the SEC's Internet
Website at http://www.sec.gov.
WorldCom and MCI
Frequently Asked Questions
Q.1 What is the purpose of WorldCom's announcement?
WorldCom, Inc. is realigning its world-class assets and brands to
better focus on the customer bases they serve. Today, the Company
serves two distinct groups of customers: corporate enterprises and
wholesale and consumer customers. The Company will maintain a
tracking stock, WorldCom (NASDAQ: WCOM), that reflects the
performance of services delivered to our core corporate enterprise
customers including the high-growth data, Internet, web hosting and
international businesses. The Company will also create another
tracking stock, MCI (NASDAQ: MCIT), that tracks the performance of
our high-cash flow consumer and wholesale long-distance voice
businesses. These steps will allow the Company to better focus our
resources on serving the distinct needs of our corporate enterprise
customers and our wholesale and consumer customers.
Q.2 What is a tracking stock?
Tracking stock is a separate class of a company's common stock
designed to provide a return to investors based upon the financial
performance of a distinct business unit of the company, sometimes
referred to as the targeted business. The ownership of the targeted
business does not change, and while each of the classes of stock
trade separately, all shareholders are common shareholders of the
company.
Q.3 Why is WorldCom doing this?
The realignment of our businesses will enable WorldCom and MCI to
more efficiently execute their business strategies by providing
greater management and resource focus to more adequately address the
unique fundamentals of each unit. Because we will report financial
results for WorldCom and MCI (in addition to the consolidated
WorldCom, Inc. results), it will help investors to understand the
-10-
<PAGE>
value of each business. This will provide investors a choice between
the high growth of WorldCom and/or the value opportunity and dividend
yield of MCI without having to invest in both at the same time.
Q.4 Do these actions constitute a change in strategy at WorldCom?
No. These actions provide greater clarity between the two businesses
but does not alter our strategy. Our strategy at WorldCom is to be a
global provider of communications services to corporate enterprises,
while our strategy at MCI is to provide high-quality voice
communication services to consumer and wholesale consumers.
Q.5 What differentiates WorldCom's plan and strategy?
Our actions mark a reaffirmation of our strategy to focus separately
on our high-growth data-driven corporate enterprise businesses, and
our mature consumer-oriented business. We are not splitting up
businesses that were intended to operate together, but simply
realigning assets and brands with their respective customer bases:
WorldCom as the "generation d" corporate enterprise brand, and MCI as
the nationally-recognized consumer brand. Finally, we expect to
complete this transaction very quickly (within the first half of
2001) without any operational disruptions.
Q.6 Why did WorldCom choose a tracking stock over a spin-off?
We want to maintain the integrity of the company and its ability to
serve customers with the products and services they want. By issuing
a tracking stock, the company will retain the advantages of doing
business as a single company as we do today because each group will
benefit from cost savings and synergies. These advantages include
lowering overall borrowing costs by maintaining the credit rating of
the combined company, retaining tax consolidation benefits, and
allowing the businesses attributed to each group to capitalize on
relationships with businesses attributed to the other group. These
benefits would not be available if the two businesses were separated
in a spin-off transaction.
Q.7 Are there other businesses that WorldCom, Inc. management would
consider for a tracking stock?
With these two tracking stocks, we have put together the businesses
with common assets and customers and we believe this structure will
maximize value for all parties. However, the Company's management
continually evaluates all options that have potential to create
additional value for its shareholders.
-11-
<PAGE>
Q.8 How will WorldCom and MCI compensate management?
Incentives of executives and other employees will be closely aligned
with the performance of their respective units, through stock options
and/or cash incentives of the tracking stocks of each group.
Q.9 On what basis was the dividend policy established?
The dividend for MCI was based on our desire to return a significant
portion of the cash generated from operations to shareholders on a
consistent basis. In addition, we believe the steady cash flows
generated will afford us the opportunity to retire a significant
amount of debt on a yearly basis. With respect to WorldCom, we do
not plan to institute a dividend given the significant growth and
investment opportunities associated with these businesses.
Q.10 How will this affect WorldCom, Inc.'s credit ratings?
We are not increasing the amount of borrowings by the Company on a
consolidated basis. Therefore, we do not expect that this
transaction would have any impact on our credit ratings.
Q.11 Will WorldCom have an inter-group interest in MCI?
No. The Company intends to distribute 100 percent of MCI tracking
stock to shareholders of WorldCom, Inc. as of the effective date. At
the same time, the Company will reclassify WorldCom common stock as
WorldCom tracking stock. After this distribution, WorldCom, Inc.
will continue to own 100 percent of the assets of the WorldCom and
MCI businesses.
Q.12 How does the Company intend to ensure that cash flow from one group
will not be reinvested in the other group? Are there financial
obligations from WorldCom to MCI or vice versa?
The board will adopt a policy that earnings and cash flow generated
from the business of WorldCom or MCI will be used only for
reinvestment in the business of the entity generating such earnings,
for the repayment of debt, for the payment of dividends or the
repurchase of shares of tracking stock related to that group.
However, funds of one entity may be loaned to the other and will
accrue interest at established, market based rates. In addition,
holders of both classes of tracking stock will remain common
shareholders of WorldCom, Inc. and be subject to all of the risks
associated with an investment in WorldCom, Inc. and all of its
businesses, assets and liabilities.
-12-
<PAGE>
Q.13 How will this change affect all of WorldCom's stakeholders including
customers, employees, equipment vendors and suppliers?
The realignment and creation of tracking stocks will provide
investors with a choice between the high growth of WorldCom, Inc. and
the value opportunity and dividend yield of MCI. We believe that the
choice, enhanced management focus and transparency resulting from
these actions will result in increased value for shareholders.
Q.14 How is this action intended to benefit investors?
The separation will highlight the WorldCom stock that is targeted
toward growth investors: high revenue, EBITDA, and EPS growth as well
as our commitment to maintain high capital spending to continue the
growth of these businesses. MCI stock will highlight high cash flow
and dividend yield providing an investment vehicle for income-
oriented investors.
Q.15 How will the two groups cooperate in this new structure?
No significant changes will occur as a result of these actions. The
primary inter-group relationship will be the selling of wholesale
voice minutes by MCI to WorldCom and the provisioning of various
general and corporate services. The wholesale marketing of minutes
is a mature, transparent market. Prices will be set at then
prevailing market rates. MCI will purchase transport, either
through long-term leases or purchases, from WorldCom, Inc., which
will control the communications network.
Q.16 How do these actions help the Company address the increasingly
competitive landscape for wholesale and consumer voice communication
services?
The wholesale and consumer voice businesses are mature, profitable
businesses where revenue growth is difficult to achieve. These
actions will provide management of MCI incentives to position these
mature businesses more competitively in the long-term.
Q.17 Does this action reflect a diminished commitment to, or lack of
confidence in, the consumer long distance market by WorldCom, Inc.?
No. The consumer long distance business is important to WorldCom,
Inc. and is a key element of the MCI tracking stock. In fact, this
announcement reinforces our commitment to the consumer long distance
market by realigning our assets to better serve our customers in this
market.
-13-
<PAGE>
Q.18 Will the tracking stock structures alter capital budget allocations
to WorldCom and MCI in the future?
WorldCom, Inc. will allocate capital appropriately to ensure that
WorldCom has sufficient resources to fund its growth and MCI has
sufficient resources to sustain its cash flow.
Q.19 How does this new stock structure affect another company's ability to
acquire WorldCom, Inc., WorldCom or MCI? Would you consider selling
either entity if approached?
This structure is not intended to make it any easier or harder for
another company to acquire WorldCom, Inc. However, there are certain
limitations on the ability of another company to control a tracked
group without acquiring both tracking stocks. We are currently not
considering further actions but will continue to evaluate all options
that can potentially create shareholder value.
Q.20 How will these actions affect the Intermedia merger agreement?
The Intermedia transaction is expected to close prior to the
shareholder vote to approve the tracking stocks. Upon closing of the
Intermedia transaction, the Intermedia shareholders will become
shareholders of WorldCom, Inc. Intermedia shareholders will receive
the same combination of tracking stocks as current shareholders of
WorldCom, Inc. Neither the Intermedia nor the Digex Board of
Directors will need to reconsider its approval of the Intermedia
merger with WorldCom, Inc. in light of this action.
Q.21 What voting rights will WorldCom and MCI shareholders have after the
stock distribution?
Voting rights of WorldCom and MCI shareholders will be prorated based
on the relative market values of WorldCom and MCI, with no
predetermined maximum limit on the percent of vote either group may
represent.
Q.22 Will the Company conduct separate annual meetings for WorldCom and
MCI shareholders?
No. The Company will conduct shareholder meetings that encompass all
holders of WorldCom, Inc. common stock. WorldCom and MCI
shareholders will vote together as a single class on all matters
brought to a vote of shareholders, including the election of
directors.
-14-
<PAGE>
Q.23 How will WorldCom, Inc. report earnings for the consolidated company
and each of the tracking stocks?
Because the Company is unchanged as a legal entity it will continue
to issue consolidated financial statements which consolidate WorldCom
and MCI. In addition, the Company separately will report the
financial results of WorldCom and the results of MCI.
Q.24 Will MCI have a separate board of directors?
No. MCI is not a separate corporation and the legal structure of
WorldCom, Inc. is not changing. The WorldCom, Inc. Board of
Directors will manage the activities of both WorldCom and MCI.
Management of WorldCom and MCI will report to WorldCom, Inc.'s
president and chief executive officer.
Q.25 How will a single board of directors resolve issues in which the
interests of the holders of WorldCom and MCI may conflict?
The board will have the same fiduciary duties to holders of WorldCom
and MCI stock that it currently has to holders of the existing
WorldCom, Inc. common stock. That duty is to act in its good faith
business judgment of the best interests of the company as a whole.
Q.26 Does WorldCom have the ability to convert one class of common stock
into the other class of common stock?
Yes. The board may convert each outstanding share of MCI tracking
stock into shares of WorldCom tracking stock at a premium of 110
percent of the relative trading value of MCI for the 20 days prior to
the announcement of such conversion. No premium will be paid on a
conversion which occurs after three years of issuance of the MCI
stock.
Q.27 What would the shareholders of WorldCom or MCI stock receive if all
or substantially all of their respective assets were sold?
The shareholders would receive either: (1) a distribution equal to
the fair value of the net proceeds of the sale, either by special
dividend or by redemption of shares, or (2) a number of shares of the
remaining entity's common stock having been calculated in accordance
with a predetermined conversion premium.
The foregoing are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended, including
-15-
<PAGE>
statements concerning future operating performance, share of new and existing
markets, and revenue and earnings growth rates. Such forward-looking
statements, which are not a guarantee of performance, are subject to a number
of uncertainties and other factors, that could cause actual results to differ
materially from such statements, including vigorous competition; the ability
to establish a significant market presence in new geographic service markets,
and the success and market acceptance of new products and services. For a
more detailed description of the factors that could cause such a difference,
please see WorldCom, Inc.'s filings with the Securities and Exchange
Commission. The Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
We urge investors and security holders to read WorldCom Inc.'s Registration
Statement on Form S-4, including the prospectus and proxy statement, when
they become available, because they will contain important information. When
these and other documents relating to the transaction are filed with the U.S.
Securities and Exchange Commission, they may be obtained without charge from
the SEC's website at http://www.sec.gov. Holders of WorldCom, Inc. stock may
also obtain each of these documents (when they become available) for free by
directing your request to WorldCom, Inc., c/o Investor Relations Department,
500 Clinton Center Drive, Clinton, Mississippi 39056. This communication
shall not constitute an offer to sell or the solicitation of an offer to buy,
nor shall there be any sale of securities in any state in which the offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state. No offering of securities shall
be made except by means of a prospectus meeting the requirements of Section
10 of the Securities Act.
WorldCom, Inc. and certain other persons referred to below may be deemed to
be participants in the solicitation of proxies of shareholders to adopt the
proposals which will be set forth in the proxy statement contained in
WorldCom Inc.'s Registration Statement on Form S-4. The participants in this
solicitation may include the directors and executive officers of WorldCom,
Inc., who may have an interest in the transaction including as a result of
holding shares of common stock and/or options to acquire the same. A detailed
list of the names and interests of WorldCom Inc.'s directors and executive
officers is contained in the Company's proxy statement for its 2000 annual
meeting, which may be obtained without charge at the SEC's Internet Website
at http://www.sec.gov.
-16-
