March 12 (Bloomberg) -- WorldCom Inc., scheduled to exit the biggest U.S. bankruptcy next month, had net losses of $73.7 billion from 2000 through 2002 after correcting accounting errors and writing down the value of assets.

Completing the restatements, ordered by the U.S. Securities and Exchange Commission, was the last major hurdle Chief Executive Michael Capellas needed to clear before leading the No. 2 U.S. long-distance phone company out of bankruptcy. At least $10.6 billion of the adjustments were related to improper accounting, Ashburn, Virginia-based WorldCom said in a statement.

``The numbers are stunning. It's amazing what those guys did way back when,'' said Thomas Mullen, a WorldCom bondholder and general partner at hedge fund TWM Capital LP.

WorldCom's losses from 2000 to 2002 are the second largest reported by a U.S. company for that period. Only Time Warner Inc.'s were worse, at just under $108 billion. WorldCom originally reported net income of $5.47 billion for 2000 and 2001. It had never issued annual results for 2002.

The discovery of $3.85 billion in accounting errors led to WorldCom's bankruptcy filing in July 2002. The mistakes later ballooned into the biggest accounting fraud in U.S. history, leading to the indictment of former Chief Executive Bernard Ebbers on fraud charges. Capellas became CEO in December 2002.

WorldCom's restatement for 2000 and 2001 includes $59.8 billion to write down goodwill and other assets. It corrects $5.8 billion in faulty accounting related to purchases and $4.8 billion in improperly recorded network-access costs, the company said. Ebbers built WorldCom through about 75 acquisitions over 20 years.

Losing Its Shield

The restated net losses total $48.9 billion in 2000, $15.6 billion in 2001 and $9.2 billion in 2002. The changes resulted in a net reduction of $74.4 billion in previously reported pretax income for 2000 and 2001. Consolidated revenue from 2000 to 2002 was restated to $109.2 billion.

WorldCom will lose its bankruptcy shield as heightened competition in the industry, which has driven down the price of phone-and-data service, shows no signs of abating. WorldCom has predicted that sales this year will fall as much as 12 percent to about $21.5 billion.

WorldCom said it's still working to produce a 2003 annual report.

``The 2003 10-K will be more relevant because we are going to start to see the company's cash flow statements,'' said Romeo Reyes, analyst at Jefferies & Co. who has a ``hold'' rating on WorldCom shares and doesn't own them.

WorldCom stock rose 10 cents to $20 at 12:41 p.m. New York time. The stock, which represents shares in the restructured company, trades on electronic exchanges.

Bankruptcy, Fraud Charges

WorldCom on Oct. 31 received approval from a federal bankruptcy court to exit creditor protection with liabilities slashed to $6 billion from $41 billion. Competitors such as AT&T Corp. and Verizon Communications Inc. have said the company's ability to shed most of its debt amounts to a reward for bad behavior. With debt costs slashed, WorldCom could be in a position to drive prices down further, some analysts have said.

WorldCom last month received approval to delay its Feb. 28 emergence deadline by 60 days because the restatements, which cost about $250 million, were taking longer than expected.

Ebbers, 62, is the co-founder of WorldCom. He stepped down in April 2002 and was indicted March 2 on federal charges that he helped mastermind WorldCom's fraud. He has pleaded not guilty. His deputy, former Chief Financial Officer Scott Sullivan, has pleaded guilty to the charges and agreed to cooperate with Ebbers's prosecutors.

Arthur Andersen

The company's auditor during the period of fraudulent accounting was Arthur Andersen LLP, which stopped auditing public companies in the wake of a conviction for obstructing a government investigation into the collapse of Enron Corp. KPMG LLP became WorldCom's auditor in May 2002.

Sullivan and Ebbers, who bought assets including a yacht- building business with money he borrowed using inflated WorldCom stock, had their accounting department record fees for using other phone company networks as capital expenditures, masking operating costs and losses, the Justice Department said in its indictment. The two men also instructed subordinates to improperly recognize revenue, it said.

WorldCom has agreed to pay $750 million after it exits bankruptcy to settle a suit filed by the SEC when the accounting irregularities were first disclosed in June 2002.

Industry Woes

Global Crossing Ltd., another long-distance network operator which emerged from bankruptcy in December, said Thursday that its main business would have a loss of as much as $130 million before interest, tax, depreciation, amortization and stock compensation this year, compared with a loss on that basis of $18 million last year, as sales fall.

The Hamilton, Bermuda-based company has yet to show signs it is benefiting from a reorganization that erased $12 billion of debt.

To contact the reporter on this story: Dana Cimilluca in New York at dcimilluca@bloomberg.net; Don Stancavish in Princeton at (1) dstancavish@bloomberg.net.

Last Updated: March 12, 2004 12:53 EST