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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 C. 1998 Year End Statements 53. In its March 30, 1999 filing with the SEC for the year ended December 31, 1998, WorldCom made the following representations about its operations, including revenues and income: MCI WORLDCOM. INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Millions, Except Per Share Data) For the Years Ended December 31, 1998 1997 1996 Revenues $17,678 $7,384 $4,449 Operating expenses: Line costs SG&A 8,416 4,312 3,764 1,626 2,397 867 Deprec. & amort. In-process R&D 2,200 976 320 and other charges Total 3,725 18,653 – 6,366 2,740 6,324 Operating income (loss) (975) 1,018 (1,875) Other income (expense): Interest expense (637) (395) (253) Miscellaneous 41 40 25 Income (loss) before income taxes, min. ints.& extraordinary items (1,571) 663 (2,103) Provision for income taxes 876 416 130 Income (loss) before min. ints. & extraordinary items (2,447) 247 (2,233) Minority interests (93) – – Income (loss) before extraordinary items (2,540) 247 (2,233) Extraordinary items (net of inc. taxes of $78, $0 and $16, resp.) (129) (3) (24) Net income (loss) (2,669) 244 (2,257) Dist. on subs. trust mand. redeemable pref. securities 18 – – Pref. dividend requirements 13 26 1 Net income (loss) appl. to common shareholders $ (2,700) $ 218 $(2,258) 26 27 28 15 COMPLAINT
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 54. On February 10, 1999, Andersen provided an unqualified opinion on the consolidated financial statements, including the Statements of Operations: To the shareholders of MCI WorldCom, Inc.: We have audited the accompanying consolidated balance sheets of MCI WORLDCOM, Inc. (a Georgia corporation) and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, shareholders’ investment and cash flows for each of the years in the three-year period ended December 31, 1998. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Brooks Fiber Properties, Inc., a company acquired during 1998 in a transaction accounted for as a pooling-of-interests, as discussed in Note 2, as of December 31, 1997 and 1996, and for each of the years in the two-year period ended December 31, 1997. Such statements are included in the consolidated financial statements of MCI WORLDCOM, Inc. and reflect total assets and total revenues of two percent and five percent, respectively, of the related consolidated totals in 1997 and one percent and four percent, respectively, of the related consolidated totals in 1996. These statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to amounts included for Brooks Fiber Properties, Inc. is based solely upon the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of MCI WORLDCOM, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. 16 COMPLAINT
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