8-K

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): August 5, 2004

______________________

MCI, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	001-10415	20-0533283
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
22001 Loudoun County Parkway, Ashburn, Virginia		20147
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code  (703) 886-5600

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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(a)	Financial Statements.
	Not applicable.
(b)	Pro Forma Financial Information.
	Not applicable.
(c)	Exhibits.
	Exhibit No.	Description of Exhibit
	99.1	Press release dated August 5, 2004 and related financial schedules

Item 12. Results of Operations and Financial Condition.

On August 5, 2004, MCI, Inc. (“MCI”) issued a press release announcing its operating results for the three-month period ended June 30, 2004. A copy of the press release, together with the related financial schedules, is attached hereto as Exhibit 99.1, the text of which are incorporated under Item 12 of this Form 8-K by reference herein.

Limitation on Incorporation by Reference

     In accordance with General Instruction B.2 of Form 8-K, the information in this Item 12 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MCI, INC.
(Registrant)
By:	/s/ Eric R. Slusser
	Name:  Eric R. Slusser
	Title:     Senior Vice President and Controller

Dated: August 5, 2004

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EXHIBIT INDEX

Exhibit No.		Description
	99.1	Press release dated August 5, 2004 and related financial schedules

EX-99.1

Exhibit 99.1

Contacts:	Media	Investors
	Brad Burns	Susan Watson
	Peter Lucht	(703) 886-5282
	(800) 644-NEWS

MCI Announces Second Quarter 2004 Results

Operating income increases $306 million sequentially

SG&A reduced 18 percent sequentially

Cash on hand totals $5.4 billion

Board declares $2.2 billion of excess cash and initiates return of capital through a
quarterly dividend of $0.40 per share

Ashburn, Va., August 5, 2004 – MCI, Inc. (NASDAQ: MCIP) today reported its operating results for the three-month period ended June 30, 2004 (second quarter).

Revenues in the second quarter were $5.2 billion, a decline of 4 percent sequentially and 15 percent from the same period last year.

MCI’s sales, general and administrative (SG&A) expenses were $1.3 billion in the second quarter, an improvement of 18 percent sequentially and 17 percent versus second quarter 2003. The Company realized operating income of $41 million versus a $265 million loss in first quarter 2004 and operating income of $324 million in second quarter 2003. Reported operating income also included depreciation and amortization of $569 million in second quarter 2004.

MCI’s net loss for the period was $71 million or ($0.22) per share versus a net loss of $388 million or ($1.19) per share in first quarter 2004 and net income of $8 million in second quarter 2003.

“We did what we said we would do. By executing against our business plan, we produced second quarter results that reflect solid, measurable progress and significant financial improvements,” said Michael D. Capellas, MCI president and chief executive officer. “To remain competitive we will continue to drive operational improvements, deliver unparalleled customer service and introduce new IP-based products and services to the marketplace.”

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The results of Embratel, a Brazilian affiliate, were classified as discontinued operations in the second quarter and, therefore, are excluded from continuing operations. MCI reached an agreement in March to sell its 19 percent stake in Embratel for $400 million to Telmex, $50 million of which was received prior to June 30, 2004. The sale was completed on July 23, 2004 and the Company received the remaining balance of $350 million.

With these results the Company has initiated segment reporting by its three business segments. These are:

• Enterprise Markets, which incorporates its largest global corporate and government customers, MCI Solutions and Conferencing;
• U.S. Sales and Service, which incorporates national accounts, and small and medium businesses that comprise its Commercial business, as well as its Mass Markets business; and
• International and Wholesale, two separate businesses utilizing its voice telecommunications, data services, Internet and managed network services.

Liquidity

On March 31, 2004, MCI’s cash and cash equivalents totaled $5.9 billion, excluding Embratel. During the second quarter the Company paid approximately $1 billion of bankruptcy claims. On June 30, 2004, cash and cash equivalents totaled $5.4 billion excluding Embratel, which has been classified as an asset held for sale.

Total debt of $6 billion included approximately $295 million of capitalized leases. MCI issued $5.7 billion of Senior Notes on April 20, 2004, which have not yet been rated by credit rating agencies. The Company has initiated discussions with the rating agencies and presently expects the process to be completed by the end of 2004.

On May 19, 2004, MCI announced that its Board of Directors had initiated a study of the Company’s liquidity requirements with a view toward identifying any excess cash as defined in Section 5.07 of the Plan of Reorganization. Today the Board declared excess cash of $2.2 billion and initiated a return of capital in the form of a quarterly cash dividend of $0.40 per share. The first dividend will be paid September 15, 2004 to shareholders of record on September 1, 2004.

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Conference Call

Management will host a conference call to discuss today’s results at 5 PM (EDT). Investors are invited to access a live audio feed at the company’s website, www.mci.com. An audio archive of the call will be available at the website for 30 days.

About MCI

MCI, Inc. (NASDAQ: MCIP) is a leading global communications provider, delivering innovative, cost-effective, advanced communications connectivity to businesses, governments and consumers. With the industry's most expansive global IP backbone, based on the number of company-owned points of presence, and wholly-owned data networks, MCI develops the converged communications products and services that are the foundation for commerce and communications in today's market. For more information, go to www.mci.com.

Forward-Looking Statements

This press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. Factors that may cause actual results to differ materially from management's expectations include economic uncertainty; the effects of vigorous competition, including price compression; the impact of technological change on our business, alternative technologies, and dependence on availability of transmission facilities; risks of international business; regulatory risks in the United States and internationally; contingent liabilities; uncertainties regarding the collectability of receivables; risks associated with debt service requirements and our financial leverage; uncertainties associated with the success of acquisitions; and the ongoing war on terrorism. More detailed information about those factors is contained in the Company’s filings with the Securities and Exchange Commission, including its 10-K under “Risk Factors.”

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MCI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six-Month Periods Ended June 30, 2004 and 2003
(In Millions, Except Per Share Data)

		Successor			Predecessor			Successor			Predecessor
		Company			Company			Company			Company
	Three-Month Period Ended June 30,						Six-Month Period Ended June 30,
		2004			2003			2004			2003
Revenues	$	5,236		$	6,174		$	10,669		$	12,779
Operating expenses:
Access costs		2,678			3,009			5,585			6,083
Costs of services and products		627			698			1,291			1,442
Selling, general and administrative		1,321			1,589			2,935			3,202
Depreciation and amortization		569			545			1,089			1,118
Loss (gain) on property dispositions		—			9			(7	)		6
Total operating expenses		5,195			5,850			10,893			11,851
Operating income (loss)		41			324			(224	)		928
Other (expense) income, net:
Interest expense (contractual interest of $598 and $1,224 for the three and
six-month periods ended June 30, 2003, respectively)		(95	)		(17	)		(195	)		(61	)
Miscellaneous income (expense), net		17			(61	)		24			(58	)
Reorganization items, net		—			(155	)		—			(361	)
(Loss) income from continuing operations before income taxes, minority interests
and cumulative effect of a change in accounting principle		(37	)		91			(395	)		448
Income tax expense		29			85			53			172
Minority interests, net of tax		—			1			—			(6	)
(Loss) income from continuing operations before cumulative effect of a change in
accounting principle		(66	)		5			(448	)		282
Net (loss) income from discontinued operations		(5	)		3			(11	)		(7	)
(Loss) income before cumulative effect of a change in accounting principle		(71	)		8			(459	)		275
Cumulative effect of a change in accounting principle		—			—			—			(215	)
Net (loss) income	$	(71	)	$	8			(459	)	$	60
Basic and diluted loss per share:
Continuing operations	$	(0.21	)				$	(1.39	)
Discontinued operations		(0.01	)					(0.03	)
Loss per share	$	(0.22	)				$	(1.42	)
Basic and diluted shares used in calculation		318.9						322.6

MCI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three-Month Periods Ended June 30, 2004 and March 31, 2004
(In Millions, Except Per Share Data)

	Successor Company
	Three-Month Period Ended
		June 30, 2004			March 31, 2004
Revenues	$	5,236		$	5,433
Operating expenses:
Access costs		2,678			2,907
Costs of services and products		627			664
Selling, general and administrative		1,321			1,614
Depreciation and amortization		569			520
Loss (gain) on property dispositions		—			(7	)
Total operating expenses		5,195			5,698
Operating income (loss)		41			(265	)
Other (expense) income, net:
Interest expense		(95	)		(100	)
Miscellaneous income, net		17			7
Loss from continuing operations before income taxes		(37	)		(358	)
Income tax expense		29			24
Loss from continuing operations		(66	)		(382	)
Net loss from discontinued operations		(5	)		(6	)
Net loss	$	(71	)	$	(388	)
Basic and diluted loss per share:
Continuing operations	$	(0.21	)	$	(1.17	)
Discontinued operations		(0.01	)		(0.02	)
Loss per share	$	(0.22	)	$	(1.19	)
Basic and diluted shares used in calculation		318.9			326.3

MCI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2004 and December 31, 2003
(In Millions, Except Share Data)

	Successor Company
	As of June 30, 2004			As of December 31, 2003
ASSETS
Current assets
Cash and cash equivalents	$	5,409		$	6,178
Accounts receivable, net of allowance for doubtful accounts of $ 945 as of
June 30, 2004 and $1,762 as of December 31, 2003		3,052			4,348
Deferred taxes		962			990
Other current assets		835			836
Assets held for sale		3,765			176
Total current assets		14,023			12,528
Property, plant and equipment, net		9,081			11,538
Intangible assets, net		1,797			2,085
Deferred taxes		1			608
Other assets		338			711
	$	25,240		$	27,470
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,056		$	1,722
Accrued access costs		1,960			2,349
Current portion of long-term debt		38			330
Accrued interest		97			25
Other current liabilities		2,981			4,361
Liabilities of assets held for sale		3,390			23
Total current liabilities		9,522			8,810
Long-term debt, excluding current portion		5,922			7,117
Deferred taxes		1,190			1,207
Other liabilities		609			714
Commitments and contingencies
Minority interests		—			1,150
Shareholders’ equity:
MCI common stock, par value $0.01 per share; authorized: 3,000,000,000;
issued and outstanding 317,009,511 as of June 30, 2004 and 314,856,250 as
of December 31, 2003		3			3
Additional paid-in capital		8,628			8,639
Deferred stock-based compensation		(149	)		(170	)
Accumulated deficit		(459	)		—
Accumulated other comprehensive loss		(26	)		—
Total shareholders’ equity		7,997			8,472
	$	25,240		$	27,470

MCI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six-Month Periods Ended June 30, 2004 and 2003
(In Millions)

		Successor Company			Predecessor Company
		Six-Month Period Ended June 30,
		2004			2003
OPERATING ACTIVITIES
Net (loss) income	$	(459	)	$	60
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization		1,089			1,118
Cumulative effect of a change in accounting principle		—			215
Minority interests, net of tax		—			(6	)
Bad debt provision		362			481
(Gain) loss on sale of property, plant and equipment		(7	)		6
Deferred tax provision		10			(65	)
Non-cash reorganization charges		—			240
Amortization of debt discount		114			—
Stock-based compensation expense		11			—
Loss (income) from equity investments		23			(8	)
Other		(32	)		180
Changes in assets and liabilities:
Accounts receivable		361			(255	)
Other current assets		35			(13	)
Non current assets		(51	)		142
Accounts payable and accrued access costs		(514	)		(355	)
Other current liabilities		(773	)		496
Other liabilities		(13	)		(75	)
Net cash provided by operating activities		156			2,161
INVESTING ACTIVITIES
Additions to property, plant and equipment		(416	)		(199	)
Deposit on the sale of Embratel		50			—
Proceeds from sale of property, plant and equipment		13			31
Proceeds from the sale of assets held for sale		179			—
Net cash used in investing activities		(174	)		(168	)
FINANCING ACTIVITIES
Principal repayments on debt		(24	)		(16	)
Cash restricted for line of credit		(120	)		—
Net cash used in financing activities		(144	)		(16	)
Net change in cash and cash equivalents		(162	)		1,977
Net change in cash and cash equivalents from discontinued operations		(607	)		(29	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		6,178			2,820
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	5,409		$	4,768

MCI, INC. AND SUBSIDIARIES
SEGMENT RESULTS
For the Three-Month Periods Ended June 30, 2004 and 2003 and March 31, 2004
(In Millions)

	Three-Month Period Ended June 30, 2004 (Successor Company)
		Enterprise Markets		U.S. Sales & Service		International &Wholesale Markets			Total
Revenues:
Voice	$	461	$	1,716	$	1,014		$	3,191
Data		579		420		370			1,369
Internet		167		183		326			676
Total revenues		1,207		2,319		1,710			5,236
Costs of sales and services		716		1,241		1,348			3,305
Selling, general and administrative expenses		262		767		292			1,321
Depreciation and amortization expenses		144		229		196			569
Operating income (loss)	$	85	$	82	$	(126	)	$	41

	Three-Month Period Ended March 31, 2003 (Predecessor Company)
		Enterprise Markets		U.S. Sales & Service		International &Wholesale Markets		Total
Revenues:
Voice	$	477	$	2,113	$	1,114	$	3,704
Data		657		524		486		1,677
Internet		217		183		403		803
Total revenues		1,351		2,820		2,003		6,174
Costs of sales and services		806		1,464		1,437		3,707
Selling, general and administrative expenses		274		981		334		1,589
Depreciation and amortization expenses		155		196		194		545
Loss on property dispositions		3		4		2		9
Operating income	$	113	$	175	$	36	$	324

	Three-Month Period Ended March 31, 2004 (Successor Company)
		Enterprise Markets			U.S. Sales & Service			International &Wholesale Markets			Total
Revenues:
Voice	$	460		$	1,793		$	1,114		$	3,367
Data		566			424			374			1,364
Internet		178			183			341			702
Total revenues		1,204			2,400			1,829			5,433
Costs of sales and services		781			1,346			1,444			3,571
Selling, general and administrative expenses		314			907			393			1,614
Depreciation and amortization expenses		133			204			183			520
Gain on property dispositions		(2	)		(3	)		(2	)		(7	)
Operating loss	$	(22	)	$	(54	)	$	(189	)	$	(265	)

MCI, INC. AND SUBSIDIARIES
SEGMENT RESULTS
For the Six-Month Periods Ended June 30, 2004 and 2003 (In Millions)

	Six-Month Period Ended June 30, 2004 (Predecessor Company)
		Enterprise Markets			U.S. Sales & Service			International &Wholesale Markets			Total
Revenues:
Voice	$	921		$	3,509		$	2,128		$	6,558
Data		1,145			844			744			2,733
Internet		345			366			667			1,378
Total revenues		2,411			4,719			3,539			10,669
Costs of sales and services		1,497			2,587			2,792			6,876
Selling, general and administrative expenses		576			1,674			685			2,935
Depreciation and amortization expenses		277			433			379			1,089
Gain on property dispositions		(2	)		(3	)		(2	)		(7	)
Operating income (loss)	$	63		$	28		$	(315	)	$	(224	)

	Six-Month Period Ended June 30, 2003 (Predecessor Company)
		Enterprise Markets		U.S. Sales & Service		International &Wholesale Markets		Total
Revenues:
Voice	$	996	$	4,447	$	2,181	$	7,624
Data		1,337		1,086		1,024		3,447
Internet		462		398		848		1,708
Total revenues		2,795		5,931		4,053		12,779
Costs of sales and services		1,633		2,980		2,912		7,525
Selling, general and administrative expenses		537		1,959		706		3,202
Depreciation and amortization expenses		313		408		397		1,118
Loss on property dispositions		3		2		1		6
Operating income	$	309	$	582	$	37	$	928