MCI Announces Second Quarter 2005 Results

MCI results for the second quarter ended June 30, 2005.

The Company returned to profitability in the second quarter, generating net income of $64 million or $0.20 and $0.19 per basic and diluted share, respectively, compared to a net loss of $2 million or $.01 per basic and diluted share in the first quarter. In the second quarter of 2004, MCI reported a net loss of $71 million or $0.22 per basic and diluted share.

Revenues for the second quarter were $4.7 billion, down 2 percent sequentially and 10 percent year-over-year. Operating expenses fell to $4.6 billion, down 11 percent year-over-year and 1 percent sequentially; reflecting the benefits of last year’s restructuring efforts, a reduction in severance expense, lower bad debt expense and ongoing efficiencies in selling, general and administrative expenses, as well as lower depreciation and amortization expense.

Operating income was $61 million in the second quarter, compared to operating income of $115 million in the first quarter of 2005 and $37 million in the year-earlier second quarter. The Company recognized depreciation and amortization expense of $325 million in the second quarter of 2005, $328 million in the first quarter of 2005 and $569 million in the second quarter of 2004.

“In the second quarter, we continued to launch next generation products and services, improve customer service and realize results from our cost reduction initiatives,” said Michael D. Capellas, MCI president and chief executive officer. “In the second half of the year, we will remain focused on executing in the marketplace and moving toward a timely completion of our merger with Verizon.”

For the first half of 2005, revenues were $9.5 billion, down 11 percent year-over-year. Operating income was $176 million, compared to an operating loss of $233 million in 2004. Operating income in the first half of 2005 included $653 million of depreciation and amortization expense, compared to $1.1 billion in 2004. Net income for the first six months of 2005 was $62 million or $0.19 per basic and diluted share, compared to a net loss of $459 million in the first half of 2004. Year-to-date, merger-related expenses totaled $29 million, severance expense was $40 million and reorganization costs were $16 million, for a total of $85 million.

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