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Senior Editor

MCI: No revenue restatement on the way

Aug 19, 20033 mins
Financial Services IndustryNetworking

Responding to news reports saying more revenue restatements may be on the way for MCI, the telecommunications company said Tuesday a document it filed with the U.S. Securities and Exchange Commission (SEC) was misunderstood.

MCI, still legally known as WorldCom Inc., filed a financial document late Monday with the SEC after detailing its financial situation on Thursday as the company moves through bankruptcy proceedings. Some news reports seized on a couple of sentences near the end of the SEC filing, saying that more improperly reported revenue may be discovered.

But MCI spokeswoman Claire Hassett said the wording of the SEC filing was “boilerplate language” that MCI has used before to describe its financial situation in SEC filings. “We stand by our previously released (financial) guidance,” she said. “There’s no new news here, and we haven’t issued any new guidance.”

The SEC filing said that MCI’s new auditor had “identified a substantial number of material weaknesses in the Company’s internal controls.” Before WorldCom started using the name MCI again, the company filed for bankruptcy in July 2002 after revelations of a multibillion-dollar accounting fraud scandal, and news reports early Tuesday indicated that MCI was warning of additional revenue restatements.

The SEC filing went on to say: “Although the Company has begun work to address these deficiencies, a significant amount of work remains to be done. These material weaknesses, together with other as-yet unidentified issues affecting the Company’s internal controls, could have a material impact on the accuracy of the Company’s financial records and reports. In light of the foregoing events, all previous guidance regarding future financial performance issued by the Company is no longer in effect and should be ignored.”

That language, under a section of the SEC report titled, “Cautionary Statement Regarding Financial and Operating Data,” does not change the revenue numbers MCI previously reported to the SEC on July 7, Hassett said. The material weaknesses described in the new filing were also described to the SEC in a June 3 filing, according to MCI.

In the Thursday financial statement, MCI filed its June 2003 monthly operating report with the U.S. Bankruptcy Court for the Southern District of New York. During June, MCI recorded $2.1 billion in revenue, up from $2.0 billion in May. Operating income in June was $146 million, compared to $116 million in May, with net income in June of $84 million, compared to $46 million in May.

In June, MCI recorded capital expenditures of $43 million. MCI ended June with $4.6 billion in cash on hand, an increase of about $400 million from the beginning of the month.