MCI Friday restated its 2000 and 2001 financial results, reducing its combined pretax profits by $74.4 billion but bringing the telephone company closer to putting the largest accounting fraud in U.S. history behind it.
The company, which also filed its 2002 results, said it is still working on its 2003 financial statements and now expects to emerge from bankruptcy protection in April.
MCI, whose legal name is WorldCom, filed for bankruptcy in 2002 after the accounting scandal in which losses were masked by improperly recorded expenses.
Last week, MCI’s former chief executive, Bernard Ebbers, was indicted on charges he orchestrated the $11 billion accounting scandal. He pleaded not guilty to charges of fraud, conspiracy and making false statements, and his trial is scheduled for November.
While the restated figures take a step toward putting the accounting fraud behind it, many analysts were more interested in the 2003 results, which will give a more relevant picture of MCI’s post-bankruptcy health and possibly set the stage for the embattled company to be acquired.
“This is all history that’s irrelevant,” said Guzman & Co. analyst Patrick Comack of the results released in the filing with the U.S. Securities and Exchange Commission. “We need a properly audited 2003 balance sheet to value this company.”
Comack said MCI also is still operating in the same tough environment that includes declining prices due to brutal competition from the Baby Bells, customers switching to wireless service and hesitant spending on telecom gear by business customers.
“This filing culminates the largest and most complex financial restatement ever undertaken,” MCI Chief Financial Officer Bob Blakely said in a statement. “It is one of the last remaining milestones on our path to emerge from Chapter 11 protection.”
He stressed that the restatements have no impact on its current operations or liquidity. MCI had about $6 billion in cash and cash equivalents at the end of last year.
The restatement included revenues, expenses and earnings and the write-downs of assets and adjustments to liabilities, the company said. MCI, based in Ashburn, Virginia, is the No. 2 U.S. long-distance phone company behind AT&T Corp.
MCI said that consolidated revenue, including its Brazilian affiliate Embratel, was $37.7 billion in 2001 and $39.3 billion in 2000. It had a net loss of $15.6 billion in 2001 and $48.9 billion in 2000, including the restatement adjustments, it said in a regulatory filing.
MCI has been trying to unload Embratel for two years and bids for it were due on Friday. Analysts see Mexican phone giant Telefonos de Mexico as the front runner.
The largest category of restatement adjustments, totaling $59.8 billion, is impairment charges resulting from write-offs of goodwill and write-downs in the carrying value of other intangible assets and property, plant and equipment.
Other significant adjustments are related to MCI’s review of significant acquisitions as far back as 1993. Restatement adjustments to correct errors in the application of purchase accounting for the acquisitions total $5.8 billion.
The remaining adjustments total $8.8 billion. Included in this amount are $4.8 billion of charges to pretax income related to improperly booked access costs.
KPMG audited the financial numbers and Deloitte & Touche participated in the process, MCI said.
