JACKSON, Miss. (July 30, 1996) --
WorldCom, Inc. (Nasdaq/NM:WCOM) today reported record revenues of
$1.06 billion for the second quarter ended June 30, 1996, up 19% from
revenues of $894.7million for the second quarter of 1995. Net income,
before previously announced non-cash charges, increased 81% to a new
quarterly high of $99.6 million compared with $54.9 million for the
1995 second quarter. Fully diluted earnings per common share, before
the non-cash charges, increased 56% to $0.25 compared with $0.16 a
year ago.
Including the non-cash, after-tax charges of $344 million, or
$0.88 per share, and a non-cash extraordinary after-tax charge of $24
million, or $0.06 per share, the company reported a net loss of
$268.5 million, or $0.69 per share, for the second quarter of 1996.
The $344 million in non-cash, after-tax charges related to a
write-down in the carrying value of certain assets. On a pre-tax
basis, the write-down amounted to $402 million and included $139
million for network facilities and $263 million for non-core
businesses, primarily operator services goodwill. The $24 million
after-tax extraordinary charge related to early retirement of
long-term debt and a write-off of deferred charges. All of these
charges were entirely non-cash in nature and will result in an annual
future reduction in depreciation and amortization of approximately
$33 million after tax, or $.08 per share.
Second quarter highlights included the following year-over-year
growth statistics all internally generated:
- 24% increase in private line and frame relay revenues
- 22% increase in switched retail and wholesale core business
revenues - 21% increase in switched retail and wholesale traffic
- 20% increase in total telecom traffic, including the operator
service division
For the six months ended June 30, 1996, WorldCom, Inc. reported
revenues of $2.09 billion, up 19% from revenues of $1.76 billion for
the first six months of 1995. Net income, before non-cash charges,
increased 81% to $184.6 million compared with $101.9 million for the
1995 first half. Fully diluted earnings per common share, before the
non-cash charges, increased 53% to $0.46 compared with $0.30 a year
ago. Including the non-cash charges described above, the company
reported a net loss of $183 million, or $0.47 per share, for the
first six months of 1996.
On June 5, 1996, WorldCom, Inc. completed the redemption of its
Series 2 Preferred Stock through the conversion of 1,244,048 shares
of preferred stock into 5,266,160 shares of common stock. The fully
diluted common shares outstanding are unaffected by the conversion,
and the company will have no further cash dividend requirement.
On July 15, 1996, WorldCom, Inc. announced that it had exercised
its option to redeem on August 16, 1996, all of its outstanding
Convertible Subordinated Notes. The company expects that all holders
of the notes will elect to convert their notes to common stock prior
to the redemption. The fully diluted common shares outstanding are
unaffected by the conversion, and the company will have no further
cash interest requirement related to the notes.
During the second quarter, WorldCom, Inc. launched several new
promotions aimed at the retail market. Bottom Line Business ,
targeted to the small business community, offers a comprehensive
package of services which, in addition to domestic and international
long distance, can include calling card, cellular, conference
calling, enhanced fax, paging and Internet access. Designed for
businesses spending less than $250 per month on telecommunications,
the simplicity of Bottom Line Business makes it an excellent
product.
After a successful test in selected markets, an exciting new
international promotion was made available on a nationwide basis for
the consumer market. The Best of All Worlds promotion features simple
flat rate pricing to 47 countries without complicated discounts,
terms and conditions. In addition, special rates are available for
Canada, Cuba and Mexico calling.
The success of WorldCom, Inc.'s PhonePass prepaid calling card
continues to grow. During the second quarter, the Circle K Company
began offering PhonePass cards featuring the image of basketball
superstar and company spokesman Michael Jordan at 328 Circle K
convenience stores in California and Nevada. Showtime also began
utilizing PhonePass cards as new subscription incentives and
sweepstakes prizes, and Helene Curtis used PhonePass cards in
launching a large sales promotion.
The company's first national television advertising campaign,
featuring Michael Jordan, aired on NBC during the National Basketball
Association playoffs. The seven-week campaign was an overwhelming
success, reaching more than 122 million buying adults and increasing
brand awareness among decision makers.
WorldCom, Inc. signed two of the largest wholesale contracts in
its history during the second quarter, both multi-year service
agreements utilizing the company's specialized products for the
rapidly growing resale market. On June 17, WilTel, WorldCom,
Inc.'s wholesale services business unit, signed a $1 billion
contract with National Telephone & Communications, Inc. (NTC).
The contract superseded a $600 million contract signed by NTC in
1995, after it became apparent that NTC's growth substantially
exceeded projections in the first contract.
WorldCom, Inc. also signed in June a new four-year agreement with
Excel Communications, Inc., that calls for WilTel to become a major
provider of network switching services and dedicated access services.
Excel will make use of WilTel's Transcend wholesale product,
which unbundles the cost components of a long distance call to allow
resellers to offer the best values based on regional calling
patterns.
The capabilities of WorldCom, Inc.'s Internet business unit,
GridNet International, were employed to launch the nation's first
free Internet e-mail service for Juno. The service used by the highly
popular Juno is accessible by an end user dialing either a local or
toll-free number.
In early June, WorldCom, Inc. formed a new relationship with Mail
Boxes Etc., the world's largest franchisor of neighborhood retail
postal, business and communication service centers. In addition to
providing corporate telecommunications services for Mail Boxes Etc.,
WorldCom, Inc. will provide simple, economical long distance products
for resale through Mail Boxes Etc.'s 3,000 franchise locations.
The products are ideally suited for small office/home office
businesses as well as residential customers.
Internationally, WorldCom, Inc. is continuing an aggressive
expansion of its frame relay service to key market centers worldwide.
The company recently added four new switch sites in Amsterdam,
Montreal, Vancouver and Honolulu, and expanded its frame relay
service in Mexico. Eight more sites scheduled to be added later this
year include Brussels, Zurich, Stockholm, Milan, Madrid, Seoul,
Singapore and Taipei.
For domestic frame relay users, WorldCom, Inc. continued its
leadership role in the data markets when it introduced the first
dial-up to frame relay service targeted to the needs of business
travelers, telecommuters and other remote users requiring access to
company databases.
Making its first foray into the wireless marketplace, on July 24
WorldCom, Inc. completed the acquisition of Choice Cellular, a
profitable cellular reseller located in Phoenix. The sixth largest
cellular reseller in the country, Choice Cellular also resells paging
services. The ability to combine wireless services like those offered
by Choice Cellular with WorldCom, Inc.'s innovative long distance
services will enhance the company's position as a one-stop
provider of communications solutions. WorldCom, Inc. is continuing to
explore opportunities for alliances and acquisitions in the wireless
marketplace in order to extend the geographic reach of its wireless
product offerings.
On the regulatory front, WorldCom, Inc. scored a significant
victory on June 27 when the Illinois Commerce Commission granted the
company's petition asking that incumbent local exchange carriers
offer a network platform that WorldCom, Inc. and other companies can
use to provide competitive local services. This historic decision,
which should establish a precedent for federal regulators
implementing the Telecommunications Act of 1996, provides the
opportunity for meaningful local competition and thus more choices
for consumers.
WorldCom, Inc. is one of the largest long distance
telecommunications companies in the United States, offering domestic
and international voice, data and video products and services to
business customers, other carriers and the residential market. The
company operates a nationwide digital fiber optic network in the
United States and has worldwide network capacity. The common shares
of WorldCom, Inc. trade on The Nasdaq Stock Market's National
Market under the symbol WCOM.
