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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
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
JULY 15, 1999
McLEODUSA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 0-20763 42-1407240
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION
OF INCORPORATION) NUMBER)
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MCLEODUSA TECHNOLOGY PARK
6400 C STREET, S.W., P.O. BOX 3177,
CEDAR RAPIDS, IA 52406-3177
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(319) 364-0000
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
Election of Anne K. Bingaman to Board of Directors
On July 15, 1999, McLeodUSA Incorporated (the "Company"), issued a press
release announcing the election of Anne K. Bingaman to its Board of Directors.
Ms. Bingaman joins the class of directors whose term expires in 2001. Enclosed
as Exhibit 99.1 to this Current Report on Form 8-K, and incorporated by
reference herein, is the text of the press release issued by the Company on
July 15, 1999.
Second Quarter Results for 1999
On July 26, 1999, the Company issued a press release announcing its
second quarter results for 1999. Revenues were $222.7 million for the quarter
ended June 30, 1999, an increase of 23 percent compared to revenues of $181.1
million for the first quarter of 1999. Net loss for the quarter was $61.4
million or $(0.41) per share compared to a net loss of $29.8 million or $(0.24)
per share for the second quarter of 1998. EBITDA (earnings before interest,
taxes, depreciation and amortization) for the quarter was a positive $11.1
million compared with EBITDA of $5.6 million for the quarter a year ago.
Enclosed as Exhibit 99.2 to this Current Report on Form 8-K, and incorporated by
reference herein, is the text of the press release issued by the Company on
July 26, 1999.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
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99.1 Press Release, dated July 15, 1999, announcing the appointment of Anne K. Bingaman
to the Company's Board of Directors
99.2 Press Release, dated July 26, 1999, announcing the Company's second quarter
results for 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.
McLeodUSA Incorporated
Date: August 2, 1999 By: /s/ Randall Rings
-----------------------------
Randall Rings
Vice President, Secretary and
General Counsel
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EXHIBIT INDEX
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PAGE NUMBER
IN SEQUENTIAL
EXHIBIT NUMBERING
NUMBER EXHIBIT SYSTEM
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99.1 Press Release, dated July 15, 1999,
announcing the appointment of Anne K. Bingaman to the
Company's Board of Directors
99.2 Press Release, dated July 26, 1999, announcing
the Company's second quarter results for 1999
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact:
- -------
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW PO Box 3177
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz
Phone: 319-790-7800 Fax: 319-298-7767
[email protected]
Web Site: www.mcleodusa.com
-----------------
McLeodUSA Elects Anne K. Bingaman
---------------------------------
CEDAR RAPIDS, Iowa -- July 15, 1999 -- McLeodUSA Incorporated (NASDAQ/NMS:MCLD),
a leading Integrated Communications Provider (ICP) in Midwest and Rocky Mountain
states, announced today the election of Anne K. Bingaman to its Board of
Directors for a term expiring in 2001.
Anne K. Bingaman, 56, is currently an independent consultant in Washington,
D.C., where she focuses on antitrust issues related to the telecommunications
industry.
Ms. Bingaman served as Senior Corporate Vice-President and founding
President of the Local Services Division of LCI International Telecom, Inc. in
McLean, Virginia from January 1997 until LCI was acquired by Qwest in July 1998.
At LCI, Ms. Bingaman completed the roll-out of local telecommunications services
to LCI business customers in 28 major U.S. markets in 8 months, serving
thousands of new business customers with bundled local and long distance
service. As President of the Local Services Division at LCI, Ms. Bingaman was
responsible for Marketing, Network Planning, Customer Fulfillment/Local
Operations and Business Analysis. As LCI's Senior Vice President responsible for
Regulatory Affairs, Ms. Bingaman filed numerous petitions with the FCC, and
testified before the Senate Commerce Committee as well as various state Public
Utility Commissions to promote local service competition under the
Telecommunications Act of 1996.
Before assuming her position at LCI International, Ms. Bingaman was
nominated by the President and confirmed by the Senate to the post of Assistant
Attorney General in charge of the Antitrust Division at the U.S. Department of
Justice where she served from June 1993 to October 1996. In this role, Ms.
Bingaman focused on telecommunications, international antitrust and intellectual
property. Prior to her appointment as Assistant Attorney General, Ms. Bingaman
was a partner at a number of law firms, as well as an Associate Professor of
Law. Her B.A. and LL.B. degrees are from Stanford. "It is our pleasure to
welcome Anne to our Board," stated Clark McLeod, Chairman and CEO of McLeodUSA.
"Her rich experience in telecommunications, her valiant efforts to create a
regulatory environment conducive to competition, and her spirit and drive will
be welcome additions to our Board." Ms. Bingaman joins recently elected Board
members Roy A. Wilkins and Peter H.O. Claudy on the McLeodUSA Board. Other Board
members include Thomas M. Collins, Robert J. Currey, Lee Liu, Paul D. Rhines,
and the following McLeodUSA executives: Clark E. McLeod, Richard A. Lumpkin,
Stephen C. Gray, and Blake O. Fisher, Jr.
McLeodUSA is a provider of integrated communications services to business
and residential customers in Midwest and Rocky Mountain states; additional
expansion states will be added. McLeodUSA is a facilities-oriented
communications provider with 15 switches, 7,654 route miles of fiber optics
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network, 495,000 local lines, and 6,100 employees. In the next 12 months, our
publishing subsidiaries plan to distribute nearly 21 million copies of
competitive directories in 22 states, expected to reach nearly 36 million
people.
* * *
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EXHIBIT 99.2
FOR IMMEDIATE RELEASE
Contact:
- -------
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW PO Box 3177
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz
Phone: 319-790-7800 Fax: 319-298-7767
[email protected]
Web Site: www.mcleodusa.com
-----------------
McLeodUSA Exceeds Expectations
------------------------------
Competitive local lines sold up 145 percent;
Quarterly local lines in service up 98 percent over 1998
CEDAR RAPIDS, Iowa, July 26, 1999 -- McLeodUSA Incorporated (Nasdaq/NMS:MCLD),
one of the nation's fastest growing Integrated Communications Providers (ICP),
today announced results for second quarter 1999.
Total revenue reached a new high of $222.7 million for the quarter
ended June 30, 1999, an increase of 23 percent over the previous sequential
quarter, and up 43 percent from revenue reported in the second quarter of 1998.
Competitive telecommunications revenue, which includes all telecommunications
revenue except local exchange services, rose 29 percent over the most recent
quarter to $142.4 million, up 60 percent over the second quarter of 1998.
Private line and data revenues increased to more than $19 million, up 97 percent
over the same quarter in 1998. Directory revenues accounted for 25 percent of
total revenues for the quarter.
McLeodUSA also announced continued growth in total local lines in
service to 554,700 as of June 30, 1999, adding over 60,000 competitive local
lines during the quarter. Competitive lines in service represents a 49 percent
increase during the first six months of 1999 over the previous six-month period,
and an 80 percent increase over the first half of 1998.
Quarterly EBITDA (earnings before interest, taxes, depreciation and
amortization) was a record $11.1 million compared with EBITDA of $5.6 million in
second quarter 1998. "The first half of 1999 has been spectacular for
McLeodUSA," said McLeodUSA President and COO Steve Gray. "Operational and
financial performance continues to exceed our own expectations, underscoring the
strength of our management team. Our ability to attract new customers to
McLeodUSA remains solid and growing."
On April 14, McLeodUSA unveiled its data strategy, designed to enhance
its product package and provide high-speed digital access and data services. The
announced upgrades will range from basic dial tone transmitted digitally, to
high-speed data connections for Intranet and Internet applications. On the same
day, the Company announced the addition of five states to its target
marketplace: Kansas, Idaho, Montana, Nebraska and Utah.
On June 1, McLeodUSA announced an agreement to acquire Access
Communications Inc. and SJ Investments, Inc. of Salt Lake City, Utah, operating
as Access Long Distance. As a result of this transaction, McLeodUSA will gain
more than 300 employees, 30,000 customers, and four additional states: Arizona,
New Mexico, Oregon and Washington. The geographic expansion to these states
increases the
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Company's addressable market by 23 percent, spanning 20 states. The Company
estimates its ten-year market potential in these 20 states to be as much as $94
billion.
A two-for-one stock split in the form of a stock dividend was
announced on June 30. Stockholders of record on July 12 will receive one
additional share of McLeodUSA Class A common stock for each share held.
Distribution of the additional Class A shares will begin on July 27.
On July 15, McLeodUSA elected Anne K. Bingaman to its Board of
Directors. Ms. Bingaman served as Senior Corporate Vice-President and founding
President of the Local Services Division of LCI International Telecom in 1997
and 1998, completing the roll-out of local services to LCI business customers in
28 major markets. Prior to her tenure at LCI, Ms. Bingaman served as Assistant
Attorney General in charge of the Antitrust Division at the U.S. Department of
Justice. Ms. Bingaman joins recently elected Board members Roy A. Wilkins and
Peter H. O. Claudy to the McLeodUSA Board. "These additions to our Board add
both depth and breadth in terms of telecommunications experience," said Chairman
and CEO Clark McLeod. "Anne, Roy and Peter add significantly to the 250 years of
combined telecommunications experience of our senior management team."
McLeodUSA Publishing Company announced the acquisition of six
directories from J-Mar Publishing of Indian River, Michigan, on July 16. These
white and yellow page directories reach an estimated population of 406,000 in
northern Michigan. With the addition of these directories, the McLeodUSA book
will be delivered to approximately 57 percent of Michigan's total population.
More recently, McLeodUSA was named to the Federal Communications
Commission's National Reliability and Interoperability Council. NRIC is an
advisory panel that directly influences FCC policies and decisions regarding
network compatibility issues in the industry. To date, McLeodUSA is the only
competitive local exchange carrier to serve on the Council.
On July 22, the Company announced a proposed underwritten offering of
400,000 shares of its Series A Cumulative Convertible Preferred Stock and up to
$400 million of its Senior Notes due 2009. McLeodUSA management will begin
presentations to potential investors in these securities on Monday, July 26.
McLeodUSA is a provider of integrated communications services to
business and residential customers in 11 Midwest and Rocky Mountain states; nine
additional expansion states will be added. McLeodUSA is a facilities-oriented
communications provider with 16 switches, 8,500 route miles of fiber optics
network, 554,700 local lines, and 7,100 employees. In the next 12 months, our
publishing subsidiaries plan to distribute over 21 million copies of competitive
directories in 22 states, expected to reach over 36 million people.
Some of the statements contained in this press release discuss future
expectations, contain projections of results of operations or financial
condition or state other forward-looking information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The "forward-looking" information is based on various factors and
was derived using numerous assumptions. In some cases, you can identify these
so-called forward-looking statements by words like "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements only reflect the predictions of
McLeodUSA. Actual events or results may differ substantially. Important factors
that could cause actual results of McLeodUSA to be materially different from the
forward-looking statements include availability of financing and regulatory
approvals, the number of potential customers in a target market, the existence
of strategic alliances or relationships, technological, regulatory or other
developments in the industry, changes in the competitive climate in which
McLeodUSA operates and the emergence of future opportunities. These and other
applicable risks are summarized under the caption "Risk Factors" in the
McLeodUSA Annual Report on Form 10-K for the fiscal year ended December 31,
1998, which is filed with the Securities and Exchange Commission.
# # #
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MCLEODUSA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except for per share data)
(UNAUDITED)
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Three Months Ended
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June 30,
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1999 1998
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Revenues:
Telecommunications:
Local and long distance $106,370 $64,456
Local exchange services 19,787 16,610
Private line and data 19,315 9,786
Network maintenance and equipment 8,355 7,604
Other telecommunications 8,346 6,892
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Total telecommunications revenue 162,173 105,348
Directory 55,670 45,514
Telemarketing 4,819 4,833
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Total revenues 222,662 155,695
Operating expenses
Cost of service 113,048 83,068
Selling, general and administrative 98,528 66,981
Depreciation and amortization 43,598 21,046
Other -- 1,900
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Total operating expenses 255,174 172,995
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Operating loss (32,512) (17,300)
Non-Operating income (expense)
Interest income 6,754 7,821
Interest (expense) (36,216) (20,410)
Other 563 98
-------- --------
Total non-operating income (expense) (28,899) (12,491)
-------- --------
Loss before income taxes (61,411) (29,791)
Income taxes -- --
-------- --------
Net loss $(61,411) $(29,791)
======== ========
Loss per common share(1) $(0.41) $(0.24)
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Weighted average common shares outstanding(1) 149,802 125,288
======== ========
EBITDA $11,086 $5,646
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(1) As adjusted for the two-for-one stock split announced June 30, 1999 to be
effected in the form of a dividend.
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MCLEODUSA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except for per share data)
(UNAUDITED)
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Three Months Ended
------------------------------------------------------
9/30/98 12/31/98 3/31/99 6/30/99
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Revenues:
Telecommunications:
Local and long distance $ 69,875 $ 74,518 $ 81,072 $106,370
Local exchange services 16,791 18,441 17,632 19,787
Private line and data 10,118 11,531 15,111 19,315
Network maintenance and equipment 8,964 8,836 8,120 8,355
Other telecommunications 7,099 6,919 5,814 8,346
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Total telecommunications revenue 112,847 120,245 127,749 162,173
Directory 30,613 40,785 49,634 55,670
Telemarketing 5,156 4,474 3,726 4,819
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Total revenues 148,616 165,504 181,109 222,662
Operating expenses:
Cost of service 81,082 84,013 92,459 113,048
Selling, general and administrative 63,830 71,352 79,811 98,528
Depreciation and amortization 23,186 25,444 35,110 43,598
Other 1,775 -- -- --
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Total operating expenses 169,873 180,809 207,380 255,174
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Operating loss (21,257) (15,305) (26,271) (32,512)
Non-operating income (expense):
Interest income 6,640 6,926 8,260 6,754
Interest (expense) (19,429) (23,641) (29,464) (36,216)
Other 1,004 208 (1) 563
-------- --------- -------- --------
Total non-operating income (expense) (11,785) (16,507) (21,205) (28,899)
-------- --------- -------- --------
Loss before income taxes (33,042) (31,812) (47,476) (61,411)
Income taxes -- -- -- --
-------- --------- -------- --------
Net loss $(33,042) $ (31,812) $(47,476) $(61,411)
======== ========= ======== ========
Loss per common share(1) $(0.26) $(0.25) $(0.36) $(0.41)
======== ========= ======== ========
Weighted average common shares outstanding(1) 125,910 126,778 132,242 149,802
======== ========= ======== ========
EBITDA $ 3,704 $ 10,139 $ 8,839 $ 11,086
======== ========= ======== ========
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(1) As adjusted for the two-for-one stock split announced June 30, 1999 to be
effected in the form of a dividend.
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McLeodUSA Selected Statistical Data:
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6/30/98 3/31/99 6/30/99
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Sales cities 64 74 76
Central offices leased 321 342 357
Switches owned 7 15 16
Cities served 266 408 473
Route miles 5,573 7,654 8,521
TOTAL
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Local lines in service 344,300 494,700 554,700
Business 201,300 323,500 370,200
On-switch / net 29,600 75,200 89,200
Residential 143,000 171,200 184,500
On-switch / net 69,100 90,500 96,200
Local customers 174,600 220,900 242,900
Business 37,600 61,700 70,400
Residential 137,000 159,200 172,500
COMPETITIVE
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Local lines in service 253,600 395,500 455,600
Business 176,200 294,400 341,000
On-switch / net 4,500 46,100 60,000
Residential 77,400 101,100 114,600
On-switch / net 3,500 20,400 26,300
Local line customers 103,200 143,600 165,900
Business 30,400 52,600 61,300
Residential 72,800 91,000 104,600
Local Lines per business customer 5.8 5.6 5.6
Local Lines sold during quarter 32,700 61,700(a) 80,200
Business 26,400 46,300 58,800
Residential 6,300 15,400 21,400
New Local Lines in service during quarter 30,400 89,300(b) 60,100
Business 27,000 67,300 46,600
Residential 3,400 22,000 13,500
ILEC
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Local lines in service 90,700 99,200(c) 99,100
Business 25,100 29,100 29,200
Residential 65,600 70,100 69,900
Local line customers 71,400 77,300 77,000
Business 7,200 9,100 9,100
Residential 64,200 68,200 67,900
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(a) Pro Forma for acquisitions
(b) Includes 55,300 acquired CLEC lines
(c) Includes 6,700 acquired ILEC lines
