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ooops, did i say 4 billion, sorry i meant 7.....

Discussion in 'Channel Zero' started by mental invalid, Aug 9, 2002.

  1. mental invalid

    mental invalid Dirty Dozen Crew

    Joined: May 11, 2001 Messages: 13,050 Likes Received: 8
    i mean i thought i sucked ass at balancing my check book, this is just straight hysterics....

    from Forbes:


    WorldCom: I'll See That $4B And Raise It $3B
    Dan Ackman, 08.09.02, 8:53 AM ET

    NEW YORK - I know I put that $3 billion somewhere, but what the heck happened to it?

    This is the question surrounding WorldCom (nasdaq: WCOEQ - news - people ) accounts as the company said Thursday it found another $3.3 billion in improperly reported earnings, adding to the $3.85 billion it reported in June.



    WorldCom's June report--which led to the firing of two top executives, a declaration of bankruptcy two weeks ago and later criminal charges against the two executives--involved the reporting of ordinary expenses as capital expenditures. This time the company isn't saying exactly--or even generally--what it did: In an "internal review of its financial statements [the company has discovered an additional $3.3 billion in improperly reported earnings before interest, taxes, depreciation and amortization (EBITDA) for 1999, 2000, 2001 and first-quarter 2002," reads the press release.

    The company also warned that it is continuing its audit and that "nvestors and creditors should be aware that additional amounts of improperly reported EBITDA and pretax income may be discovered and announced."

    Whatever.

    At this point investors and creditors probably don't care all that much about EBITDA. For them, all is already lost. They will almost certainly get nothing out of the company's attempts to reorganize. Creditors may get something--though not much--and the question for them is how much cash the company can generate and what saleable assets it still has. These are the questions investors ignored in the EBITDA-mad telecom boom that becomes a little more busted each day.

    WorldCom Thursday added some bad news on the asset front by saying

    it expects to record further writeoffs of assets, such as all existing goodwill and other intangible assets, currently recorded as $50.6 billion. This figure reflects the writedown of assets acquired during its long merger binge leading up to its failed attempt to acquire Sprint (nyse: FON - news - people ) in 2000.

    The quarterly accounting should be more interesting to federal prosecutors who have already filed charges against Scott Sullivan and David Myers. The criminal complaint against WorldCom's former CFO and controller include allegations only relating to the $3.85 billion in accounting irregularities already reported and say nothing about this new revelation. The charges essentially restate what the company itself admitted to earlier. WorldCom's illustrious former CEO Bernard Ebbers remains conspicuously free from charges.

    While the Clinton, Miss.-based long-distance and internet traffic carrier did not say Thursday what led the need to re-account for the $3.3 billion, various reports indicate that the company used a variety of techniques to bolster operating income, including reversing reserves for bad debts into operating income.

    This technique involved adding back to income money that had been set aside previously as a reserve to pay future contingent liabilities. Companies typically establish reserves and report them as a one-time charge against earnings. These reserves don't actually reduce a company's cash--and many investors happily ignored them and focused instead on revenue and expenses expected to recur year after year.

    Many companies added or subtracted from these reserves to add to stated operating profits to insure that the bottom line would meet analysts' expectations in a given quarter. Companies might also add to reserve funds in a way that would reduce reported earnings.

    While this practice is believed to have been commonplace in the 1990s, in a sense it was all Monopoly money--fictional debt (the reserves) being turned into fictional income. If reserves are reduced and added back to income, it has no effect on cash. But the action would affect reported earnings, which is what investors were looking at.

    Perhaps this is part of the reason why few investors or reporters and apparently none of the Wall Street analysts supposedly following the company noticed anything odd while WorldCom was blithely shifting its accounts over a three-year period. For the analysts, the massive fees to Wall Street from WorldCom's debt issuance and mergers and acquisitions may have helped dull their vision.

    Consider WorldCom's 2000 annual report, which the company now says is unreliable. It reports that WorldCom's long-term debt increased dramatically to $11.7 billion from $7.1 billion a year earlier. The total debt was offset, however, by a $1.6 billion reduction in "other liabilities." In that same year, WorldCom reported a $239 million increase in earnings--all of which may have come from reducing its reserve funds.

    This is largely speculation of course. At this point no one knows what WorldCom's books should have looked like between 1999 and 2002. "The company intends to continue to expeditiously announce unaudited changes to previously reported financial statements if it discovers additional issues, " it said yesterday.

    For investors though, those expeditious announcements will be years too late.
     
  2. Pistol

    Pistol Dirty Dozen Crew

    Joined: Jul 12, 2001 Messages: 19,358 Likes Received: 298
    firsties.
    you know it's bad when major league baseball is following the trend and cooking the books too.
     
  3. NATO

    NATO Guest

    bastard. second:dazed:
     
  4. sneak

    sneak Guest

    fuck it

    third
     
  5. ElectricitySucks

    ElectricitySucks Veteran Member

    Joined: Jul 13, 2001 Messages: 6,395 Likes Received: 24
  6. beardo

    beardo Guest

    you guys are so gay with that first shit


    i just find this worldcom (and all those other bankruptcies) histerical
     
  7. mental invalid

    mental invalid Dirty Dozen Crew

    Joined: May 11, 2001 Messages: 13,050 Likes Received: 8
    seriously, what is that shit making a comeback, like he-man and alf?
     
  8. jah

    jah Elite Member

    Joined: Dec 30, 2001 Messages: 2,705 Likes Received: 2
    oops....
     
  9. Canadiano

    Canadiano Guest

    he-man and alf are making comebacks? I've seen that alf commercial for that phone company, but where is he-man?


    and what was battlecat's name when he's just a scaredy cat?
     
  10. serpent of the light

    serpent of the light Member

    Joined: Sep 22, 2001 Messages: 650 Likes Received: 0
    remember alf! he's back...

    nah, not gonna finish said quote. i'm fucking tired.
     
  11. HESHIANDET

    HESHIANDET Guest

    dude 50 billion is such an immeasurable amount of money. its retarded to think that it even existed in the first place. if these people would kep their mouths shut and the govt. out of their business i might be able to retire someday. they should let a real criminal run the books for christs sake.
     
  12. postaholic

    postaholic Guest

    dam, depression here we come...

    :eek: :eek: :eek: :eek:
     
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