Earnings reports

WorldCom's Ebbers Stands Firm

Global communications provider WorldCom Inc. (Nasdaq: WCOM) saw its stock skyrocket this morning after the company refuted rumors that have been circulating that it is on the verge of bankruptcy. Reporting its fourth quarter and annual results, WorldCom announced that it has nearly $10 billion in available liquidity, including $1.4 billion in cash and cash equivalents.

In response to the announcement, WorldCom stock rose more that 15 percent in the first hour of trading today, jumping $1.05 to $7.74.

"To question WorldCom’s viability is utter nonsense,” Bernard J. Ebbers, WorldCom president and CEO, said on this morning’s conference call. “We continue to lead the industry with revenue growth... None of the rumors that have hatched in the last two weeks will change any of that.”

On the call, Ebbers also dismissed speculations that he might be planning to sell his stake in the company to repay personal loans, despite his current debt to the company of $198.7 million. "I have assets in addition to the company stock that are more than sufficient to cover my debt," he said. “I will continue to do what’s best for the shareholders."

A rumor that WorldCom’s two tracking stocks might be recombined was also denied. Ebbers said the company doesn’t feel such a combination would benefit either company. WorldCom stock tracks the data, corporate telephone, and international businesses, while MCI (Nasdaq: MCIT) stock follows residential long-distance telephone operations and dial-up Internet business. He said the MCI Group's dividend could realistically be maintained at 70 cents a share.

“I think there were just a lot of really bad rumors out there,” says Crédit Lyonnais Securities Inc. analyst Rick Grubbs. “This is no Enron. It went from the biggest story in the world to no story.”

WorldCom reported $5.3 billion in revenues for its fourth quarter of 2001, ended on December 31, up 7 percent from fourth-quarter revenues a year ago of $4.9 billion. Of that, data and Internet revenues grew 13 percent to just under $3 billion, and voice revenues declined 8 percent from the year-ago period to $1.6 billion. WorldCom’s cash earnings, before goodwill amortization, were $595 million, or 20 cents per share, while the company’s net income was $384 million, or 13 cents per share for the quarter.

“Their revenue numbers were just a little lower than anticipated,” Grubbs says. “We were looking for 15 cents. They said 13 cents.”

Although WorldCom did manage to break even on free cash flow, excluding a $200 million prepayment to one of the company’s largest network equipment suppliers, and reduce its debt by nearly $1 billion over the quarter, the company still reports a remaining debt of $24.7 billion.

Ebbers, however, said he wasn’t worried about the debt. “Our debt load is very manageable. We’re up to the task.”

For the year, WorldCom reported revenues of $21.3 billion, up 11 percent from the $19.2 billion in revenues for 2000. The company also announced that it had cash earnings of $3 billion, or $1.01 per share, for the year, and that its cash income was $2.1 billion, or 70 cents per share.

For 2002, WorldCom forecasts mid-single-digit percentage revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) growth, and is expecting earnings to be between 75 and 80 cents per share. Capital expenditure for the year is expected to drop to between $5 billion and $5.5 billion.

“We are expecting the economy not to get any worse,” Scott Hamilton, vice president of investor relations at WorldCom, asserted on the call, "But we’re not expecting it to get any better. We are certainly trying to be realistic in our numbers.”

— Eugénie Larson, Reporter, Light Reading

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