Cash earnings per share up 44 percent to $0.56; Earnings per share up 53 percent from second quarter 1999 to $0.46
CLINTON, Miss., (July 27, 2000) .WorldCom, Inc. (NASDAQ:WCOM) today
reported solid profitability gains in the second quarter ended June 30,
2000, driven by revenue increases in data, Internet and international
services, combined with declining access and technology costs.
This quarter WorldCom recognized one-time after tax charges of $55
million associated with the termination of its merger agreement with
Sprint. For comparative purposes, the discussion of results excludes
this non-recurring charge.
Financial Highlights
- Communications services revenues, net of voice access costs,
increased 18 percent year-over-year. Including access costs paid to
local exchange carriers, communications services revenues grew $1.2
billion or 14 percent year-over-year to $10.2 billion. Excluding
WorldCom.s interest in the Brazilian communications company,
Embratel, communications services revenues were $9.4 billion, a
year-over-year increase of 13.3 percent or $1.1 billion. - EBITDA increased by $824 million or 29 percent from the year-ago
period to $3.7 billion. - Operating income increased by $724 million or 41 percent from the
second quarter of 1999 to $2.5 billion. - Cash earnings (earnings before goodwill amortization) per share
increased 44 percent year-over-year to $0.56 per common share. - Net income increased 54 percent to $1.3 billion, or $0.46 per
common share.
Quarter Highlights
- Data, Internet and international revenues grew $1.1 billion or 30
percent from the year-ago quarter to $4.9 billion and now account for
48 percent of WorldCom.s total revenues.
- Domestic data revenues grew $447 million or 25 percent to $2.2
billion. Domestic commercial data revenues, excluding wholesale, grew
$442 million, or 30 percent, from the second quarter of 1999 to $1.9
billion. As companies increasingly conduct more mission critical
distributed applications, demand for higher bandwidth services from
new and existing customers drove revenue growth. Reflecting this
demand, local Voice Grade Equivalents (VGEs), which measure the
capacity of local private line data circuits, increased 98 percent in
the second quarter.
- Internet revenues increased 40 percent from the year-ago quarter,
fueled by robust demand for higher bandwidth dedicated access and
value-added services as corporate customers increasingly embrace the
Internet to improve business functions. Customers spent nearly 1.6
billion hours connected to WorldCom.s dial-up Internet service during
the quarter, an increase of 62 percent from the same period last
year.
- International revenues, those originating outside the U.S.,
increased by $339 million or 31 percent to $1.4 billion for the
quarter driven by strong sales in Europe, as well as increasing
revenues in the Asia-Pacific and Latin America regions. Excluding
WorldCom.s interest in Embratel, international revenues increased by
$188 million or 45 percent to $608 million. During the quarter, the
Company connected an additional 2,000 overseas buildings to its
network, boosting its international total to more than 13,000
buildings, all over high capacity circuits.
Merger-Related Charges
The $55 million of after tax one-time charges associated with the
termination of the Sprint merger agreement included regulatory, legal,
accounting and investment banking fees and other costs. After
merger-related charges, reported net income was $1.3 billion, or $0.44
per share.
DEVELOPMENTS DURING THE QUARTER
As part of WorldCom.s "generation d" initiative, WorldCom
and Cisco Systems, Inc. created a new network service that brings
together all the necessary elements supporting e-business applications
within or between companies. This Business Class IP service will offer
private any-to-any connectivity and will ultimately support Web,
application, and content hosting.
WorldCom announced rollout plans for 13 new International Data
Centers (IDCs) across Europe over the next 12 months. These new IDCs
will provide highly secure, state-of-the-art, carrier-grade facilities
connected directly to WorldCom.s broadband and Internet networks in
major European metropolitan centers, complementing "generation
d."
WorldCom and AOL launched a unique multi-year consumer Internet
alliance under which WorldCom will market AOL service to WorldCom.s
millions of residential local and long distance customers.
OUTLOOK
Commenting on the outlook for WorldCom, Bernard J. Ebbers, president
and CEO of WorldCom said, "We are disappointed that our proposed
merger with Sprint was blocked. But WorldCom is moving forward,
exploring opportunities to restructure our business to increase growth
and profitability. We will continue to expand the reach of our
industry-leading global network as we sharpen our focus on
higher-margin, value-added services in the commercial data, Internet
and international markets. Furthermore, our continued capital
investments in these high-growth areas of our business bolster our
confidence in our ability to grow revenues and profitability in an
extremely competitive business environment."
Ebbers continued, "We are exploring opportunities to separate
portions of our switched voice operations into separate companies or
tracking stocks. This would allow more efficient management of the
voice business while enhancing WorldCom.s effectiveness in targeting
commercial customers. Revenues from commercial customers grew 20
percent year-over-year this quarter, while wholesale and consumer
revenues grew 1 percent."
COMPARATIVES
Second Quarter | Year-to-Date | |||||||
($ in millions) | 2000 | 1999 | Change | 2000 | 1999 | Change | ||
Revenues | ||||||||
Voice | $ 2,752 | $ 2,645 | 4% | $ 5,474 | $5,314 | 3% | ||
Data | 1,897 | 1,455 | 30% | 3,688 | 2,837 | 30% | ||
Internet | 1,172 | 836 | 40% | 2,276 | 1,594 | 43% | ||
International | 1,446 | 1,107 | 31% | 2,811 | 2,150 | 31% | ||
Commercial services | $ 7,267 | $ 6,043 | 20% | $ 14,249 | $ 11,895 | 20% | ||
Wholesale and consumer revenues | 2,926 | 2,902 | 1% | 5,922 | 5,769 | 3% | ||
Communications services revenues | $ 10,193 | 8,945 | 14% | $ 20,171 | $ 17,664 | 14% | ||
Gross margins | $ 6,041 | $ 5,109 | 18% | $ 11,927 | $ 10,094 | 18% | ||
% of revenues | 59.3% | 56.4% | 59.1% | 55.5% | ||||
EBITDA | $ 3,692 | $ 2,868 | 29% | $7,279 | $5,479 | 33% | ||
% of revenues | 36.2% | 31.6% | 36.1% | 30.1% | ||||
Operating income | $ 2,506 | $ 1,782 | 41% | $ 4,946 | $ 3,292 | 50% | ||
% of revenues | 24.6% | 19.7% | 24.5% | 18.1% | ||||
Net income applicable to common shareholders | $ 1,330 | $ 865 | 54% | $ 2,614 | $ 1,577 | 66% | ||
% of revenues | 13.0% | 9.5% | 13.0% | 8.7% |
Note:
Excludes Sprint merger-related charges in the second quarter of 2000
and revenues reported in 1999 from SHL, which was sold in April of
1999. SHL revenues were $120 million and $523 million in the second
quarter and first half of 1999, respectively.
FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, this news
release may be deemed to include forward-looking statements 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, uncertainties associated
with the success of acquisitions and the integration thereof, the
effects of vigorous competition in the markets in which the Company
operates, the impact of technological change on the Company's
business, new entrants and alternative technologies and dependence on
availability of transmission facilities, risks of international
business, regulatory risks including the impact of the
Telecommunications Act of 1996, contingent liabilities, the impact of
competitive services and pricing, risks associated with Euro conversion
efforts, risks associated with debt service requirements and interest
rate fluctuations, the Company.s degree of financial leverage as well
as other risks referenced from time to time in the Company.s filings
with the Securities and Exchange Commission. 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.
WorldCom (NASDAQ: WCOM) is a global leader in
"all-distance" communications services with operations in
more than 65 countries. Revenues in 1999 were $37 billion, with more
than $15 billion from high-growth data, Internet and international
services. WorldCom provides facilities-based and fully integrated
services to facilitate e-business and e-commerce in the digital
generation. For more information go to http://www.wcom.com.
WorldCom will conduct a conference call to discuss its financial
results today, Thursday, July 27 at 9:00 AM (Central Time). The call
will be available to all investors on the Internet at
http://www.wcom.com/investor_relations/.
