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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): JANUARY 27, 1999
MCLEODUSA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 0-20763 42-1407240
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NUMBER)
OF INCORPORATION)
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MCLEODUSA TECHNOLOGY PARK 52406-3177
6400 C STREET, S.W., P.O. BOX 3177, CEDAR RAPIDS, IA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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
FOURTH QUARTER AND FISCAL YEAR RESULTS FOR 1998
On January 27, 1999, the Company issued a press release announcing results for
fourth quarter and fiscal year 1998. Revenues were $604.1 million for the year
ended December 31, 1998, compared to $267.9 million for 1997, an increase of 125
percent. Competitive telecommunications revenues grew 145 percent for the year.
Earnings per share for the year was $(1.99) compared to $(1.45) for 1997. EBITDA
(earnings before interest, taxes, depreciation and amortization) for the year
was a positive $20.0 million, compared with EBITDA loss of $31.5 million for
1997.
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
January 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 "Risk Factors" and elsewhere in the Company's
Registration Statement on Form S-4, which was filed with the Securities and
Exchange Commission on December 14, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
99.1 Press Release, dated January 27, 1999, announcing the Company's results
for the fourth quarter and fiscal year 1998.
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: February 3, 1999
By: /s/ Randall Rings
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RANDALL RINGS
VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
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EXHIBIT INDEX
PAGE NUMBER
IN SEQUENTIAL
EXHIBIT NUMBER EXHIBIT NUMBERING SYSTEM
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99.1 Press Release, dated January 27, 1999,
announcing the Company's results
for the fourth quarter and fiscal year 1998.
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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) 298-7800
FAX: (319) 298-7767
FOR IMMEDIATE RELEASE
McLeodUSA Reports Record Results
for Fourth Quarter and 1998
Annual revenues increase by $336 million, up 125% from 1997
Cedar Rapids, Iowa, January 27, 1999 -- McLeodUSA Incorporated (NASDAQ/NMS:MCLD)
today reported results for fourth quarter and fiscal year 1998. Revenues were a
record $604.1 million for the year ended December 31, 1998, compared to $267.9
million for 1997, an increase of 125 percent. Competitive telecommunications
revenues grew 145 percent for the year. Earnings per share for the year was
$(1.99) compared to $(1.45) for 1997. EBITDA (earnings before interest, taxes,
depreciation and amortization) for the year was a positive $20.0 million,
compared with EBITDA loss of $31.5 million for 1997.
Commenting on 1998 results, Clark McLeod, chairman and CEO stated, "1998 was a
solid year for McLeodUSA. We continued to execute on our long-standing three
part strategy and have consistently exceeded Wall Street expectations."
Steve Gray, president and COO added, "Our 1997 to 1998 statistics highlight
our progress:
. local lines in service grew 41 percent from 283,000 to 398,000,
. fiber route miles increased 45 percent from 4,900 to 7,120,
. directory distribution grew from 10 million to 14 million,
. revenues increased 125 percent from $268 million to $604 million, and
. EBITDA increased from a negative $31.5 million to a positive
$20.0 million - a $51 million gain."
The Company reported fourth quarter revenues of $165.5 million, compared to
revenues of $136.3 million for the same quarter of 1997. Competitive
telecommunications revenues grew 45 percent over the prior year fourth quarter
total. Earnings per share for the quarter was $(0.50) compared to $(0.43) for
the same quarter one year ago. EBITDA was a positive $10.1 million in fourth
quarter, compared to $3.7 million in third quarter 1998, and $1.1 million for
fourth quarter 1997.
Commenting on fourth quarter results, Gray stated, "Our fourth quarter
performance capped a year packed with both operational and strategic
accomplishments."
McLeod added: "Our focus in 1999 and beyond will be to:
1. Continue our successful branding strategy through ubiquitous coverage of
our target geography with McLeodUSA phone directories.
2. Aggressively capture the addressable business line market in our expanded
region which has nearly doubled as a result of our recent merger
announcements.
3. Continue the migration of local service customers on-switch in 1999 and
2000."
Concluding, Mr. McLeod stated, "Our 1998 accomplishments have heightened our
expectations for 1999. We expect to at least 2x performance in many of our key
areas: net new lines in service, intra-city network miles, and central office
activations. We are aggressively pursuing our goal to be the most dominant,
ubiquitous Super Regional CLEC in the country."
McLeodUSA, founded in June of 1991, is a provider of integrated
telecommunications services to business and residential customers. The Company's
telecommunications customers are located in ten Midwest and Rocky Mountain
states. McLeodUSA is a facilities-oriented telecommunications provider with 9
switches, 398,000 local lines, 5,300 employees, and over 7,100 route miles of
fiber optic network. In the next 12 months, the Company's publishing
subsidiaries will distribute over 19 million copies of competitive directories
in 21 states, reaching 33 million people or 12 percent of the nation's
population.
The statements contained in this release 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, 1997, 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 Twelve Months Ended
----------------------- ---------------------------
December 31, December 31,
------------ ------------
1998 1997 1998* 1997
----------------------- ---------------------------
Revenues:
Telecommunications:
<S> <C> <C> <C> <C>
Local and long distance $ 73,284 $ 49,841 $ 267,435 $ 110,023
Local exchange services (ICTC) 18,441 16,117 67,785 16,117
Private line and data 12,765 9,657 43,892 17,174
Network maintenance and equipment 8,836 9,150 32,885 20,965
Other telecommunications 6,919 9,907 27,794 9,907
TOTAL TELECOMMUNICATIONS REVENUE 120,245 94,672 439,791 174,186
Directory 40,785 35,495 144,876 81,055
Telemarketing 4,474 6,124 19,479 12,645
TOTAL REVENUES $ 165,504 $136,291 $ 604,146 $ 267,886
Operating expenses:
Cost of service 84,013 73,445 323,208 151,190
Selling, general and administrative 71,352 61,795 260,931 148,158
Depreciation and amortization 25,444 17,567 89,107 33,275
Other ---- 1,943 5,575 4,632
TOTAL OPERATING EXPENSES 180,809 154,750 678,821 337,255
OPERATING LOSS (15,305) (18,459) (74,675) (69,369)
Non-operating income (expense):
Interest income 6,926 4,590 26,000 22,660
Interest (expense) (23,641) (13,871) (78,234) (34,627)
Other 208 1,386 1,997 1,426
TOTAL NON-OPERATING INCOME (EXPENSE) (16,507) (7,895) (50,237) (10,541)
LOSS BEFORE INCOME TAXES (31,812) (26,354) (124,912) (79,910)
Income Taxes ---- ---- ---- ----
NET LOSS $ (31,812) $(26,354) $(124,912) $ (79,910)
Loss per common and common equivalent share $(0.50) $(0.43) $(1.99) $(1.45)
Weighted average common shares outstanding 63,389 61,567 62,807 54,974
EBITDA $ 10,139 $ 1,051 $ 20,007 $ (31,462)
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* CCI merger completed September 1997
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McLeodUSA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
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Three Months Ended
3/31/98 6/30/98 9/30/98 12/31/98
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Revenues:
Telecommunications:
Local and long distance $ 61,658 $ 63,658 $ 68,835 $ 73,284
Local exchange services (ICTC) 15,943 16,610 16,791 18,441
Private line and data 9,385 10,584 11,158 12,765
Network maintenance and equipment 7,481 7,604 8,964 8,836
Other telecommunications 6,884 6,892 7,099 6,919
TOTAL TELECOMMUNICATIONS REVENUE 101,351 105,348 112,847 120,245
Directory 27,964 45,514 30,613 40,785
Telemarketing 5,016 4,833 5,156 4,474
TOTAL REVENUES $134,331 $155,695 $148,616 $ 165,504
Operating expenses:
Cost of service 75,045 83,068 81,082 84,013
Selling, general and administrative 58,768 66,981 63,830 71,352
Depreciation and amortization 19,431 21,046 23,186 25,444
Other 1,900 1,900 1,775 ----
TOTAL OPERATING EXPENSES 155,144 172,995 169,873 180,809
OPERATING LOSS (20,813) (17,300) (21,257) (15,305)
Non-operating income (expense):
Interest income 4,613 7,821 6,640 6,926
Interest (expense) (14,754) (20,410) (19,429) (23,641)
Other 687 98 1,004 208
TOTAL NON-OPERATING INCOME (EXPENSE) (9,454) (12,491) (11,785) (16,507)
LOSS BEFORE INCOME TAXES (30,267) (29,791) (33,042) (31,812)
Income Taxes ---- ---- ---- ----
NET LOSS $(30,267) $(29,791) $(33,042) $ (31,812)
Loss per common share $(0.49) $(0.48) $(0.52) $(0.50)
Weighted average common shares outstanding 62,227 62,644 62,955 63,389
EBITDA $ 518 $ 5,646 $ 3,704 $ 10,139
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McLeodUSA Selected Statistical Data:
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12/31/98 12/31/97 4Q98 9/30/98 4Q98
vs. vs.
4Q97 3Q98
% Change % Change
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Sales cities 68 60 13% 66 3%
Central offices / switches 415 366 13% 382 9%
Cities served 269 227 19% 267 1%
Route miles 7,120 4,908 45% 6,329 13%
Total local lines in service 397,600 282,600 41% 366,800 8%
Business 252,700 149,300 69% 223,200 13%
Residential 144,900 133,300 9% 143,600 1%
Total local customers 186,200 157,000 19% 179,400 4%
Business 49,600 29,200 70% 42,500 17%
Residential 136,600 127,800 7% 136,900 0%
CLEC Local lines in service 306,200 193,000 59% 275,100 11%
Business 227,100 124,900 82% 197,700 15%
Residential 79,100 68,100 16% 77,400 2%
CLEC Local line customers 114,600 86,000 33% 107,300 7%
Business 42,300 22,200 91% 35,200 20%
Residential 72,300 63,800 13% 72,100 0%
CLEC Lines per business customer 5.4 5.6 ---- 5.6 ----
CLEC Lines sold during quarter 43,300 41,200 5% 42,600 2%
Business 34,700 26,700 30% 33,600 3%
Residential 8,600 14,500 (41)% 9,000 (4)%
New CLEC Lines in service during quarter 31,100 38,800 (20)% 21,500 45%
Business 29,400 20,800 41% 21,500 37%
Residential 1,700 18,000 (91)% ---- 100%
ILEC Local Lines in service 91,400 89,600 2% 91,700 0%
Business 25,600 24,400 5% 25,500 0%
Residential 65,800 65,200 1% 66,200 (1%)
ILEC Local Line customers 71,600 71,000 1% 72,100 (1%)
Business 7,300 7,000 4% 7,300 0%
Residential 64,300 64,000 1% 64,800 (1)%
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