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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 16, 2000
Date of Report (Date of earliest event reported)
Commission File Number 333-61293
SPLITROCK SERVICES, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C>
Delaware 76-0529757
(State or other jurisdiction of incorporation (IRS Employer Identification Number)
or organization)
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9012 New Trails Drive
The Woodlands, Texas 77381
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 465-1200
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Item 5. Other Events
On February 16, 2000, Splitrock Services, Inc., a Delaware corporation
issued a press release announcing its results for the year ended December 31,
1999. The press release is attached hereto as an exhibit and hereby
incorporated by reference.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits:
Exhibit No. Description
99.1 Press release, dated February 16, 2000, announcing Splitrock
Services, Inc.'s results for the year ended December 31, 1999
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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.
SPLITROCK SERVICES, INC.
Dated: February 18, 2000
By: /s/ Patrick J. McGettigan, Jr.
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Patrick J. McGettigan, Jr.
Senior Vice President, Secretary and
General Counsel
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EXHIBIT 99.1
[LETTERHEAD OF SPLITROCK SERVICES INC.]
For Immediate Release
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February 16, 2000
Contact: Investor Relations
Splitrock Services Inc.
(281) 465-1200
[email protected]
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Splitrock Reports 33 Percent Revenue Increase
From Third to Fourth Quarter 1999
Extension of Prodigy Contract, Rapid Growth from Other Customers
The Woodlands, Texas -- February 16, 2000 -- Splitrock Services Inc. (NASDAQ:
SPLT), a facilities-based network services provider to ISPs, telecommunications
companies and business enterprise customers, today reported revenues of $31.6
million for the quarter ended December 31, 1999, an increase of 33.4 percent
from $23.7 million in the third quarter of 1999, and a 97.3 percent increase
from $16.0 million in the fourth quarter of 1998.
Total network costs were $33.8 million in the fourth quarter of 1999, versus
$27.7 million in the fourth quarter of 1998 and $29.5 million in the third
quarter of 1999. Legacy network costs -- a component of total network costs
associated with operating and decommissioning the legacy network -- were $3.4
million in the fourth quarter of 1999, a decrease of 78.5 percent from $15.7
million in the fourth quarter of 1998 and a decline of 49.2 percent from the
third quarter of 1999. Legacy network costs are expected to be eliminated during
the first quarter of 2000, since Splitrock's extensive nationwide network
buildout is substantially complete.
EBITDA for the fourth quarter of 1999 was a negative $11.2 million, an
improvement of $0.7 million or 5.8 percent when compared to the third quarter of
1999. The EBITDA for the fourth quarter of 1998 was a negative $13.9 million.
The net loss for the fourth quarter of 1999 was $25.9 million, compared with
$25.7 million in the same quarter of 1998 and $26.0 million in the third quarter
of 1999.
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"Splitrock's strong revenue growth in the fourth quarter results from continued
growth in revenues from our largest customer, Prodigy Communications
Corporation, and an acceleration in growth from our other wholesale ISP
customers. Total revenue from other customers accounted for 22.5% of revenues in
the fourth quarter," said Bill Wilson, president and chief executive officer of
Splitrock. "We were also pleased by the improved network efficiency and
increased capacity added in the fourth quarter," added Wilson, noting that
delays from suppliers in scheduled circuit turnups contributed to the lower-
than-expected network costs in the quarter.
In addition, Splitrock announced an amendment to its contract with Prodigy that
would convert its subscriber basis of pricing to a fixed hourly rate effective
January 1, 2000 and would extend the initial term of the contract by an
additional six months to December 31, 2001. Splitrock estimates that the effect
of the price change to its most recent month's billing to Prodigy is a 2.9
percent revenue reduction. Revenue from Prodigy grew by 27.4 percent from the
third quarter but declined as a percent of total revenue from 81.1 percent in
the third quarter to 77.5 percent in the fourth.
"As the anchor customer on Splitrock's network, Prodigy represents a key part of
our revenue mix," said Bill Wilson. "We are pleased to announce these changes
that will provide Splitrock an attractive revenue source for the long term while
rewarding Prodigy for driving increased usage on our network."
On January 6, 2000 Splitrock announced its proposed merger with McLeodUSA
Incorporated. The merger is expected to be completed in the second quarter of
2000.
About Splitrock
Headquartered near Houston, Texas, Splitrock has a nationwide broadband access
platform that places ATM switches in hundreds of points of presence (POPs)
providing ubiquitous coverage of US businesses and households. Splitrock's
"carry anything, anywhere" business strategy is implemented on this "ATM-to-the-
Edge(TM)" access platform which integrates data, video and voice traffic on one
platform. Because of the unified nature of the network platform, Splitrock
offers the same level and quality of service in markets like Cheyenne, WY as it
does in major markets like Boston, MA. Splitrock's products and services
include dial and dedicated Internet access and dial and dedicated VPN to
corporate end users, ISPs, and other telecommunications carriers. For more
information, visit the company's web site at www.splitrock.net.
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This press release contains forward-looking statements that involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by the forward-looking
statements are: substantial capital requirements; intense competition; changes
in technology; changes in regulatory policy; and general economic conditions.
Additional information concerning these and other important factors can be found
in the periodic reports and registration statements filed by Splitrock with the
Securities and Exchange Commission.
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Consolidated Statements of Income and Selected Financial Data
(in thousands, except share and per share data)
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Three Months Three Months Year Year
Ended Ended Ended Ended
December 31, 1998 December 31, 1999 December 31, 1998 December 31, 1999
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Statement of Operations Data:
Revenues $ 16,019 $ 31,612 $ 63,611 $ 89,556
Operating Costs and Expenses:
Splitrock network costs 11,977 30,416 32,912 87,398
Legacy networks costs 15,692 3,381 58,292 31,904
Selling, general & administrative 2,221 8,978 6,390 21,386
Depreciation and amortization 6,139 8,046 13,850 27,322
Total Operating Expenses 36,029 50,821 111,444 168,010
Loss from operations $ (20,010) $ (19,209) $ (47,833) $ (78,454)
Interest income 2,546 1,378 5,393 7,714
Interest expense (8,254) (8,110) (15,390) (32,581)
Loss before income taxes $ (25,718) $ (25,941) $ (57,830) $ (103,321)
Provision for income tax
Net loss $ (25,718) $ (25,941) $ (57,830) $ (103,321)
Net loss per share - basic and diluted $ (0.55) $ (0.46) $ (1.30) $ (2.03)
Weighted average shares - basic and
diluted 46,621,968 56,902,623 44,388,948 50,866,855
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As of As of
Balance Sheet Data: December 31, 1998 December 31, 1999
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Cash and cash equivalents $ 28,330 $ 92,593
Unrestricted investments 120,475 5,441
Restricted investments 58,477 33,786
Property and equipment, net 73,899 120,863
Total assets 296,141 301,286
Long-term debt and capital lease obligations (including current portion) 275,581 298,410
Stockholders' deficit (30,291) (45,184)
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Three Months Three Months Year Year
Ended Ended Ended Ended
December 31, 1998 December 31, 1999 December 31, 1998 December 31, 1999
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Other Financial Data:
Capital expenditures (including purchases
under capital lease) $ 28,141 $ 39,371 $ 50,053 $ 72,054
EBITDA (13,871) (11,163) (33,983) (51,132)
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