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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): APRIL 27, 1999
MCLEODUSA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-20763 42-1407240
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NUMBER)
OF INCORPORATION)
MCLEODUSA TECHNOLOGY PARK 52406-3177
6400 C STREET, S.W., P.O. BOX 3177, CEDAR RAPIDS, IA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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
FIRST QUARTER RESULTS FOR 1999
On April 27, 1999, the Company issued a press release announcing its
first quarter results for 1999. Revenues were $181.1 million for the quarter
ended March 31, 1999, an increase of 35 percent compared to revenues of $134.3
million for the third quarter of 1998. Net loss for the quarter was $47.5
million or $(0.72) per share compared to a net loss of $30.3 million or $(0.49)
per share for the first quarter of 1998. EBITDA (earnings before interest,
taxes, depreciation and amortization) for the quarter was a positive $8.8
million compared with EBITDA of $0.5 million a year ago. 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 April 27, 1999.
* * * * *
Certain statements contained in this Current Report on Form 8-K are
forward-looking statements that involve risks and uncertainties, including, but
not limited to revision of expansion plans, 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 Company's business, changes in the competitive climate
in which the Company operates and the emergence of future opportunities, all of
which could cause actual results and experiences of McLeodUSA Incorporated to
differ materially from anticipated results and expectations expressed in the
forward-looking statements contained herein. These and other applicable risks
are summarized under the caption "Business- Risk Factors" and elsewhere in the
Company's Annual Report on Form 10-K for its fiscal year ended December 31,
1998, which is filed with the Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
99.1 Press Release, dated April 27, 1999, announcing the Company's first
quarter results for 1999.
2
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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: May 4, 1999
By: /s/ RANDALL RINGS
-----------------------------
RANDALL RINGS
VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
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EXHIBIT INDEX
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99.1 Press Release, dated April 27, 1999,
announcing the Company's first quarter
results for 1999.
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EXHIBIT 99.1
[MCLEODUSA LOGO APPEARS HERE]
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, PO Box 3177
Cedar Rapids, IA 52406-3177
Press and Investor Contact: Bryce E. Nemitz
[email protected]
Phone: (319) 790-7800
FAX: (319) 298-7767
FOR IMMEDIATE RELEASE
McLeodUSA Reports Stellar Results
for First Quarter 1999
Total local lines in service increase 24% during quarter
Cedar Rapids, Iowa, April 27, 1999 -- McLeodUSA Incorporated
(NASDAQ/NMS:MCLD), a leading Integrated Communications Provider (ICP) in Midwest
and Rocky Mountain states, today reported first quarter results for 1999.
Revenues were $181.1 million for the quarter ended March 31, 1999, an increase
of 35 percent, compared to revenues of $134.3 million for the first quarter of
1998. Earnings per share for the quarter was $(0.72) compared to $(0.49) for the
first quarter of 1998. McLeodUSA reported positive EBITDA for the sixth
consecutive quarter. First quarter EBITDA was a strong $8.8 million compared
with EBITDA of $0.5 million a year ago.
"It was another outstanding quarter for McLeodUSA both operationally
and financially," stated Steve Gray, President and COO. "Significant highlights
included: 1) our addition of Ovation Communications and Dakota
Telecommunications Group; 2) our acquisition of 40 phone directories from 4
publishers; and 3) increasing our number of competitive lines sold during the
quarter to a record high of 61,700 lines."
Of $181.1 million in total revenues for the quarter,
telecommunications revenues accounted for 71 percent, and directory
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advertising revenues were 27 percent. Private line and data revenues were 13
percent of total telecommunications revenues, up from 9 percent one year ago.
On April 14, McLeodUSA announced a data strategy for offering digital
local line service and high-speed data connections using advanced technologies.
New services will include a variety of DSL (Digital Subscriber Line)
technologies, ATM (Asynchronous Transfer Mode), and Frame Relay as well as
local, metropolitan and wide-area network connectivity. As these services are
brought on-line, local line signals will be clearer and data transmissions will
be ten to twenty times faster than with existing dial-up services.
In the same April press release, the Company announced the opening of
four states -- Idaho, Montana, Nebraska, and Utah -- completing its original
market footprint; and the addition of Kansas, bringing its target marketplace
geography to 16 states. Overlaying the data product package with the expanded
market area, McLeodUSA now estimates its ten-year revenue potential to be $65
billion.
McLeodUSA reported an increase in competitive local lines in service
from 306,200 lines at the end of 1998 to 395,500 lines as of March 31, an
increase of 29 percent for the quarter and 77 percent over the first quarter
total in 1998. Total local lines in service increased 58 percent for the same
period.
The Company now has 15 switches, up from 9 at year end. Switches were
activated in Milwaukee, Wisconsin, and Chicago and Springfield, Illinois during
the quarter. Gray: "The addition of 6 switches and more than 500 route miles of
fiber optic network during the quarter supports two key elements of our
strategy: building network and migrating customers onto our facilities."
Summarizing the quarter, Clark McLeod, Chairman and CEO stated, "The
addition of DTG and Ovation, and the acquisition of 40 new directory titles
during the quarter could have been a distraction for many companies. Instead, we
welcomed the new team members from DTG and Ovation, integrated the companies,
met or exceeded all our financial goals for the quarter, and began the new year
with record sales and installs."
McLeodUSA is a provider of integrated communications services to
business and residential customers in 11 Midwest and Rocky Mountain states; 5
additional expansion states will be added. McLeodUSA is a facilities-oriented
communications provider with 15 switches, 7,654 route miles of fiber optics
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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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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March 31,
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1999 1998
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<S> <C> <C>
Revenues:
Telecommunications:
Local and long distance $ 79,261 $ 61,658
Local exchange services 18,248 15,943
Private line and data 16,922 9,385
Network maintenance and equipment 8,120 7,481
Other telecommunications 5,814 6,884
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Total telecommunications revenue 128,365 101,351
Directory: 49,018 27,964
Telemarketing: 3,726 5,016
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Total revenues: 181,109 134,331
Operating expenses:
Cost of service 92,459 75,045
Selling, general and administrative 79,811 58,768
Depreciation and amortization 35,110 19,431
Other -- 1,900
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Total operating expenses 207,380 155,144
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Operating loss (26,271) (20,813)
Non-Operating income (expense):
Interest income 8,260 4,613
Interest (expense) (29,464) (14,754)
Other (1) 687
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Total non-operating income (expense) (21,205) (9,454)
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Loss before income taxes (47,476) (30,267)
Income taxes -- --
-------- --------
Net loss $(47,476) $(30,267)
======== ========
Loss per common share $ (0.72) $ (0.49)
======== ========
Weighted average common shares outstanding 66,121 62,227
======== ========
EBITDA $ 8,839 $ 518
======== ========
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MCLEODUSA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except for per share data)
(UNAUDITED)
<TABLE>
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Three Months Ended
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6/30/98 9/30/98 12/31/98 3/31/99
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<S> <C> <C> <C> <C>
Revenues:
Telecommunications:
Local and long distance $ 63,658 $ 68,835 $ 73,284 $ 79,261
Local exchange services 16,610 16,791 18,441 18,248
Private line and data 10,584 11,158 12,765 16,922
Network maintenance and equipment 7,604 8,964 8,836 8,120
Other telecommunications 6,892 7,099 6,919 5,814
-------- -------- --------- --------
Total telecommunications revenue 105,348 112,847 120,245 128,365
Directory 45,514 30,613 40,785 49,018
Telemarketing 4,833 5,156 4,474 3,726
-------- -------- --------- --------
Total revenues $155,695 $148,616 $ 165,504 $181,109
Operating expenses:
Cost of service 83,068 81,082 84,013 92,459
Selling, general and administrative 66,981 63,830 71,352 79,811
Depreciation and amortization 21,046 23,186 25,444 35,110
Other 1,900 1,775 -- --
-------- -------- --------- --------
Total operating expenses 172,995 169,873 180,809 207,380
-------- -------- --------- --------
Operating loss (17,300) (21,257) (15,305) (26,271)
Non-operating income (expense):
Interest income 7,821 6,640 6,926 8,260
Interest (expense) (20,410) (19,429) (23,641) (29,464)
Other 98 1,004 208 (1)
-------- -------- --------- --------
Total non-operating income (expense) (12,491) (11,785) (16,507) (21,205)
-------- -------- --------- --------
Loss before income taxes (29,791) (33,042) (31,812) (47,476)
Income taxes -- -- -- --
-------- -------- --------- --------
Net loss $(29,791) $(33,042) $ (31,812) $(47,476)
======== ======== ========= ========
Loss per common share $ (0.48) $ (0.52) $ (0.50) $ (0.72)
======== ======== ========= ========
Weighted average common shares outstanding 62,644 62,955 63,389 66,121
======== ======== ========= ========
EBITDA $ 5,646 $ 3,704 $ 10,139 $ 8,839
======== ======== ========= ========
</TABLE>
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McLeodUSA Selected Statistical Data:
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3/31/98 12/31/98 3/31/99
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Sales cities 63 68 74
Central offices / switches 376 415 488
Cities served 259 269 408
Route miles 5,086 7,120 7,654
Total local lines in service 313,900 397,600 494,700
Business 174,000 252,700 323,500
Residential 139,900 144,900 171,200
Total local customers 166,400 186,200 220,900
Business 32,300 49,600 61,700
Residential 134,100 136,600 159,200
CLEC Local lines in service 223,200 306,200 395,500 (a)
Business 149,200 227,100 294,400
Residential 74,000 79,100 101,100
CLEC Local line customers 94,700 114,600 143,600
Business 25,200 42,300 52,600
Residential 69,500 72,300 91,000
CLEC Lines per business customer 5.9 5.4 5.6
CLEC Lines sold during quarter 37,500 43,300 61,700 (b)
Business 21,600 34,700 46,300
Residential 15,900 8,600 15,400
New CLEC Lines in service during quarter 30,200 31,100 89,300 (a)
Business 24,300 29,400 67,300
On-switch 41,600
Residential 5,900 1,700 22,000
On-switch 15,900
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<S> <C> <C> <C>
ILEC Local lines in service 90,700 91,400 99,200 (c)
Business 24,800 25,600 29,100
Residential 65,900 65,800 70,100
71,700 71,600 77,300
ILEC Local line customers
Business 7,100 7,300 9,100
Residential 64,600 64,300 68,200
</TABLE>
(a) Includes 55,300 acquired CLEC lines
(b) Proforma for acquisitions
(c) Includes 6,700 acquired ILEC lines
