WorldCom Inc. announced yesterday that it has taken a record one-time write-off of $79.8 billion to reflect the declining value of companies it acquired and the lowered value of hard assets such as its vast fiber-optic network.
Included in the write-off was a $45 billion charge to wipe out goodwill -- the prices WorldCom paid above the book value for the 75 companies it gobbled up in an acquisition frenzy in the 1990s.
WorldCom, the parent company of long-distance giant MCI and Internet backbone UUNet, also announced that it is writing down the value of other intangible assets and its network from more than $44 billion to $10 billion. WorldCom said the accounting changes resulted from its recently completed preliminary review of intangible assets and property and equipment accounts.
After months of scrubbing its books, WorldCom may be close to establishing a realistic value for its assets, which is a necessary step to reorganize in bankruptcy court, said Drake Johnstone, an analyst with Davenport & Co. "The book value after the write-down is pretty much where the bonds are trading, so that is pretty close to fair value," he said.
The company will have to issue audited financial restatements for 2000 through 2002 before emerging from bankruptcy, possibly later this year.
WorldCom filed for bankruptcy protection last July in an accounting scandal. The company has said that it may have improperly accounted for as much as $9 billion from 2000 to 2002.
Johnstone noted that the company has said it improperly claimed routine operating expenses as capital expenditures, which may have artificially boosted the stated value of its tangible assets. WorldCom's decision to write down the value of its network and other tangible assets from $39.2 billion to $10 billion may reflect that change, he said.
The company also announced yesterday that its monthly revenue for December was $2.2 billion, which is consistent with previous months. It reported $43 million in operating income from continuing operations and a net loss of $47 million before reorganization costs, such as legal fees.
WorldCom also revealed in a filing with the U.S. Bankruptcy Court in New York that it had about $2.5 billion in cash on hand at the end of December, up $200 million from the previous month.