MCI today reported its operating results for the three-month period ended 30 June 2004 (second quarter). Revenues in the second quarter were $5.2 billion, a decline of 4% sequentially and 15% from the same period last year.
MCI`s sales, general and administrative (SG&A) expenses were $1.3 billion in the second quarter, an improvement of 18% sequentially and 17% versus second quarter 2003. The company realised operating income of $41 million versus a $265 million loss in first quarter 2004 and operating income of $324 million in second quarter 2003. Reported operating income also included depreciation and amortisation of $569 million in second quarter 2004.
MCI`s net loss for the period was $71 million or ($0.22) per share versus a net loss of $388 million or ($1.19) per share in first quarter 2004 and net income of $8 million in second quarter 2003.
"We did what we said we would do. By executing against our business plan, we produced second quarter results that reflect solid, measurable progress and significant financial improvements," said Michael D Capellas, MCI president and chief executive officer. "To remain competitive we will continue to drive operational improvements, deliver unparalleled customer service and introduce new IP-based products and services to the marketplace."
The results of Embratel, a Brazilian affiliate, were classified as discontinued operations in the second quarter and, therefore, are excluded from continuing operations. MCI reached an agreement in March to sell its 19% stake in Embratel for $400 million to Telmex, $50 million of which was received prior to 30 June 2004. The sale was completed on 23 July 2004 and the company received the remaining balance of $350 million.
With these results the company has initiated segment reporting by its three business segments. These are:
* Enterprise Markets, which incorporates its largest global corporate and government customers, MCI Solutions and Conferencing;
* US Sales and Service, which incorporates national accounts, and small and medium businesses that comprise its Commercial business, as well as its Mass Markets business; and
* International and Wholesale, two separate businesses utilising its voice telecommunications, data services, Internet and managed network services.
Liquidity
On 31 March 2004, MCI`s cash and cash equivalents totalled $5.9 billion, excluding Embratel. During the second quarter the company paid approximately $1 billion of bankruptcy claims. On 30 June 2004, cash and cash equivalents totalled $5.4 billion excluding Embratel, which has been classified as an asset held for sale.
Total debt of $6 billion included approximately $295 million of capitalised leases. MCI issued $5.7 billion of Senior Notes on 20 April 2004, which have not yet been rated by credit rating agencies. The company has initiated discussions with the rating agencies and presently expects the process to be completed by the end of 2004.
On 19 May 2004, MCI announced that its board of directors had initiated a study of the company`s liquidity requirements with a view toward identifying any excess cash as defined in Section 5.07 of the Plan of Reorganisation. Today the board declared excess cash of $2.2 billion and initiated a return of capital in the form of a quarterly cash dividend of $0.40 per share. The first dividend will be paid 15 September 2004 to shareholders of record on 1 September 2004.
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MCI, Inc (NASDAQ: MCIP) is a leading global communications provider, delivering innovative, cost-effective, advanced communications connectivity to businesses, governments and consumers. With the industry`s most expansive global IP backbone, based on the number of company-owned points of presence, and wholly-owned data networks, MCI develops the converged communications products and services that are the foundation for commerce and communications in today`s market. For more information, go to www.mci.com.
UUNET SA
UUNET SA, an MCI company, is the leading southern Africa pan-African provider of Internet-based network solutions and is one of the largest global carriers of Internet traffic. The company provides Internet connectivity and corporate network solutions to major corporations as well as access services to Internet service providers. All UUNET SA products and solutions are delivered within the required regulatory conditions. For more information, please visit the UUNET SA Web site at www.uunet.co.za.
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