WorldCom 'Explains' to SEC

CLINTON, Miss. WorldCom, Inc. (Nasdaq: WCOME, MCITE) today announced that, as requested, it has delivered to the Securities and Exchange Commission (SEC) a detailed explanation of events that led to its notifying the agency of its intent to restate its financial results for 2001 and the first quarter of 2002. In the filing, the company explained that as a result of an internal audit of the company's capital expenditure accounting, it determined that certain transfers from line cost expenses to capital accounts during this period were not made in accordance with generally accepted accounting principles (GAAP).“Today’s filing is consistent with our pledge to be forthright and open, and to cooperate fully with both internal and external investigations,” said John Sidgmore, who became WorldCom president and CEO two months ago. “We will continue to be proactive in reviewing our operations and reporting our findings. This company is absolutely committed to operating in accordance with the highest ethical standards.”Separately, WorldCom said that, as expected, it has received a notice of termination of its $1.5 billion accounts receivable securitization program. The company now cannot sell any new accounts receivable into the program, and collections on accounts receivable in the program will be used to pay down the approximately $1.2 billion outstanding under the program. The company believes that the receivables in the program are sufficient to repay the amounts outstanding.Also, as expected, WorldCom’s lenders under its $2.65 billion and $1.6 billion senior unsecured credit facilities have notified the company that events of default had occurred and that they have reserved their rights and remedies under the facilities. These events permit lenders holding 51 percent of the loans under the $2.65 billion facility to vote to accelerate the date for repayment of the loans, which would then become immediately due and payable if the lenders chose to do so. “These notifications were anticipated,” said Sidgmore. “We are engaged in discussions with lenders regarding replacement facilities and remain optimistic that our good working relationships will ultimately reach a positive resolution.” The company also said it received notice from Nasdaq stating that the company has failed to comply with certain filing and fee requirements for continued listing set forth in Marketplace Rules 4310(c)(13) and 4310(c)(14) and that its securities are, therefore, subject to delisting from The Nasdaq National Market. The notice said that the company’s securities will be delisted at the opening of business on July 5, 2002 but that the delisting will be stayed if the company requests a hearing, in accordance with Nasdaq rules.WorldCom’s Audit Committee is reviewing the company’s financial records for 2001, 2000, and 1999 and has requested KPMG’s assistance in this review, including of certain material reversals of reserve accounts during 2000 and 1999. If, after review, the company believes additional actions are required, it will make an announcement promptly. Separately, WorldCom today announced its present intention to pay the MCI group dividend for the second quarter of 2002, as scheduled on July 15.WorldCom Inc.