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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): March 30, 2000
McLEODUSA INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 0-20763 42-1407240
(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification Number)
McLeodUSA Technology Park
6400 C Street S.W., P.O. Box 3177
Cedar Rapids, IA 52406-3177
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (319) 364-0000
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INFORMATION TO BE INCLUDED IN THE REPORT
Pursuant to Items 7(a)(4) and 7(b)(2) of Form 8-K under the Securities
Exchange Act of 1934, McLeodUSA Incorporated ("McLeodUSA") hereby amends Item 7
of its Current Report on Form 8-K, filed with the Securities and Exchange
Commission (the "Commission") on April 14, 2000 (the "Form 8-K"), to add
financial information for McLeodUSA reflecting the acquisition of Splitrock
Services, Inc. ("Splitrock"). McLeodUSA acquired Splitrock on March 30, 2000
pursuant to an Amended and Restated Agreement and Plan of Reorganization dated
as of February 11, 2000.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The financial statements and exhibits listed below are incorporated by
reference to financial statements in registration statements or
reports which were previously filed with the Securities and Exchange Commission
as indicated.
Description
-----------
The Balance Sheet of McLeodUSA as of March 31, 2000 (incorporated herein by
reference to Form 10-Q, File No. 000-20763, filed with the Securities and
Exchange Commission on May 15, 2000 ("Form 10-Q").
The Balance Sheets of Splitrock as of December 31, 1999 and 1998
(incorporated herein by reference to Splitrock's Form 10-K, File No. 000-
26827, filed with the Securities and Exchange Commission on March 17, 2000
("Splitrock's 10-K")) and as of March 31, 2000 (incorporated by reference
to Splitrock's Form 10-Q, File No. 000-26827, filed with the Securities and
Exchange Commission on May 15, 2000 ("Splitrock's 10-Q")).
Statements of Operations of Splitrock for the period from March 5, 1997
(date of inception) through December 31, 1997 and for the years ended
December 31, 1998 and 1999 (incorporated herein by reference to Splitrock's
10-K) and for the three months ended March 31, 2000 (incorporated herein by
reference to Splitrock's 10-Q).
Statements of Changes in Stockholder's Equity of Splitrock for the period
from March 5, 1997 (date of inception) through December 31, 1997 and for
the years ended December 31, 1998 and 1999 (incorporated herein by
reference to Splitrock's 10-K).
Statements of Cash Flows of Splitrock for the period from March 5, 1997
(date of inception) through December 31, 1997 and for the years ended
December 31, 1998 and 1999 (incorporated herein by reference to Splitrock's
10-K) and for the three months ended March 31, 2000 (incorporated herein by
reference to Splitrock's 10-Q).
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Notes to Financial Statements of Splitrock dated December 31, 1999
(incorporated herein by reference to Splitrock's 10-K) and March 31, 2000
(incorporated herein by reference to Splitrock's 10-Q).
Report of Independent Auditors dated February 15, 2000 (incorporated herein
by reference to Splitrock's 10-K).
(b) Pro Forma Financial Information
<TABLE>
<S> <C>
Introduction to Pro Forma Financial Information..........................................F-1
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
Twelve Months Ended December 31, 1999..........................................F-3
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2000..............................................F-4
</TABLE>
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McLeodUSA Incorporated and Subsidiaries
---------------------------------------
Introduction to Pro Forma Financial Information
-----------------------------------------------
The following unaudited pro forma financial information has been prepared to
give effect to:
. the issuance by McLeodUSA of its 8 1/8% senior notes in February 1999
. the acquisition by McLeodUSA of Ovation Communications, Inc. in March
1999
. the issuance by McLeodUSA of its 6.75% Series A preferred stock in August
1999
. the issuance by McLeodUSA of its Series B preferred stock and Series C
preferred stock in September 1999
. the acquisition by McLeodUSA of Splitrock in March 2000.
For purposes of this pro forma presentation, the issuance of the Series A,
Series B and Series C preferred stock are collectively referred to as the
"Preferred Stock Issuances."
The acquisition of Splitrock was completed on March 30, 2000. The
Consolidated Balance Sheet of McLeodUSA included in its Form 10-Q for the three
months ended March 31, 2000 includes the balance sheet of Splitrock and is
incorporated herein by reference to such Form 10-Q.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
include the operations of Ovation Communications, Inc. and the operations of
Splitrock as if the acquisition of Ovation and the acquisition of Splitrock were
consummated on January 1, 1999 and the related weighted average share amounts
have been adjusted to give effect to the shares issued in the transactions as if
they had been issued on January 1, 1999. It also assumes that interest related
to the 8 1/8% senior notes, dividends related to the Preferred Stock Issuances
and the additional depreciation and amortization due to the increased value of
tangible and intangible assets acquired through the acquisition of Ovation and
the acquisition of Splitrock, using the purchase method of accounting, began
January 1, 1999. The unaudited pro forma financial information is derived from
and should be read in conjunction with the Consolidated Financial Statements of
McLeodUSA and the related notes thereto included in the McLeodUSA Annual Report
on Form 10-K for the fiscal year ended December 31, 1999.
The pro forma adjustments are based upon available information and assumptions
that management believes to be reasonable. Depreciation and amortization were
adjusted to include amortization of intangibles acquired in the acquisitions.
The acquired intangibles will be amortized over periods ranging from three to 20
years. The adjustments for the Splitrock acquisition reflect the preliminary
allocation of the net purchase price of Splitrock to the net assets of Splitrock
that were acquired, including intangible assets, and record the issuance of
93,201,882 shares of McLeodUSA Class A common stock valued at $19.63 per share,
after giving effect
F-1
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for the three-for-one stock split in the form of a stock dividend on April 24,
2000. The value of $19.63 per share represents the average closing price of
McLeodUSA Class A common stock on The Nasdaq Stock Market for the 10 trading
days beginning five days prior to the date the merger agreement was announced,
January 7, 2000, and ending four days after such announcement, after giving
effect for the three-for-one stock split in the form of a stock dividend. The
purchase price of approximately $2.3 billion is equal to (1) the product of (A)
the total number of shares of Splitrock common stock attributable to outstanding
Splitrock common stock, warrants and options as of March 30, 2000, multiplied by
(B) the conversion ratio, multiplied by (C) the value of a share of McLeodUSA
Class A common stock (calculated as described above), plus (2) the fair value of
Splitrock's debt and other direct acquisition costs, minus (3) the aggregate
option and warrant proceeds to be received.
For purposes of allocating the net purchase price among the various assets
acquired, McLeodUSA has marked Splitrock's debt to market based on the closing
trading price as of March 30, 2000 and has preliminarily considered the carrying
value of the other acquired assets and liabilities to approximate their fair
value, with all of the excess of the net purchase price being attributed to
intangible assets, primarily goodwill. McLeodUSA intends to more fully evaluate
the acquired assets and, as a result, the allocation of the net purchase price
among the acquired tangible and intangible assets may change.
The unaudited pro forma financial information is provided for informational
purposes only and is not necessarily indicative of the operating results that
would have occurred had the acquisition been consummated at the beginning of
1999, nor is it necessarily indicative of future operating results or financial
position.
(table begins on the next page)
F-2
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McLeodUSA Incorporated and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Operations
(In thousands, except per share information)
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1999
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Adjustments Pro Forma Adjustments Pro Forma for Adjustments
for the Notes for the Notes for Ovation Ovation for Preferred
McLeodUSA Offerings Offerings Ovation Acquisition Acquisition Stock Issuances
----------- -------------- -------------- --------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations Statement Data:
Revenue...................... $ 908,792 $ -- $ 908,792 $19,696 $ -- $ 928,488 $ --
---------- ------------- ---------- ------- ------- ---------- ---------------
Operating expenses:
Cost of service............ 457,085 -- 457,085 7,338 -- 464,423 --
Selling, general and
administrative............ 392,687 -- 392,687 10,880 -- 403,567 --
Depreciation and
amortization.............. 190,695 -- 190,695 2,829 4,044 197,568 --
Other...................... -- -- -- -- -- -- --
---------- ------------- ---------- ------- ------- ---------- ---------------
Total operating
expenses................. 1,040,467 -- 1,040,467 21,047 4,044 1,065,558 --
---------- ------------- ---------- ------- ------- ---------- ---------------
Operating income
(loss).................... (131,675) -- (131,675) (1,351) (4,044) (137,070)
Interest income
(expense), net............ (94,244) (5,962) (100,206) (2,383) -- (102,589) --
Other non-operating
income
(expense)................. 5,637 -- 5,637 -- -- 5,637 --
Income taxes............... -- -- -- -- -- -- --
---------- ------------- ---------- ------- ------- ---------- ---------------
Net income (loss).......... (220,282) (5,962) (226,244) (3,734) (4,044) (234,022) --
Preferred stock
dividends................. (17,727) -- (17,727) -- -- (17,727) (36,648)
---------- ------------- ---------- ------- ------- ---------- ---------------
Earnings applicable
to common stock........... $ (238,009) $ (5,962) $ (243,971) $(3,734) $(4,044) $ (251,749) $ (36,648)
========== ============= ========== ======= ======= ========== ===============
Loss per common
equivalent share.......... $(0.54) $ (0.55) $ (0.56)
========== ========== ==========
Weighted average
common and common
equivalent shares
outstanding............... 443,130 443,130 8,396 451,526
========== ========== ======= ==========
Other Financial Data:
EBITDA(1).................... $ 59,020 $ -- $ 59,020 $ 1,478 $ -- $ 60,498 $ --
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1999
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Pro Forma for Pro Forma
Preferred for
Stock Adjustments Splitrock
Issuances Splitrock for Splitrock Acquisition
-------------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
Operations Statement Data:
Revenue...................... $ 928,488 $ 89,556 $ -- $ 1,018,044
----------- ----------- ----------- -----------
Operating expenses:
Cost of service............ 464,423 119,302 -- 583,725
Selling, general and
administrative............ 403,567 21,386 -- 424,953
Depreciation and
amortization.............. 197,568 27,322 108,387 333,277
Other...................... -- -- -- --
----------- ----------- ----------- -----------
Total operating
expenses................. 1,065,558 168,010 108,387 1,341,955
----------- ----------- ----------- -----------
Operating income
(loss).................... (137,070) (78,454) (108,387) (323,911)
Interest income
(expense), net............ (102,589) (24,867) -- (127,456)
Other non-operating
income
(expense)................. 5,637 -- -- 5,637
Income taxes............... -- -- -- --
----------- ----------- ----------- -----------
Net income (loss).......... (234,022) (103,321) (108,387) (445,730)
Preferred stock
dividends................. (54,375) -- -- (54,375)
----------- ----------- ----------- -----------
Earnings applicable
to common stock........... $ (288,397) $ (103,321) $ (108,387) $ (500,105)
=========== =========== =========== ===========
Loss per common
equivalent share.......... $ (0.64)
=========== $ (0.92)
Weighted average
common and common
equivalent shares
outstanding............... 451,526 93,202 544,728
=========== =========== ===========
Other Financial Data:
EBITDA(1).................... $ 60,498 $ (51,132) $ -- $ 9,366
</TABLE>
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(1) EBITDA consists of operating loss before depreciation, amortization and
other nonrecurring operating expenses. McLeodUSA has included EBITDA data
because it is a measure commonly used in the industry. EBITDA is not a
measure of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flows as a measure of liquidity.
F-3
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McLeodUSA Incorporated and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Operations
(In thousands, except per share information)
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
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Pro Forma
for
Adjustments Splitrock
McLeodUSA Splitrock for Splitrock Acquisition
---------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
Operations Statement Data:
Revenue........................................................... $288,299 $ 35,037 $ -- $ 323,336
-------- -------- -------- ---------
Operating expenses:
Cost of service................................................... 148,059 42,580 -- 190,639
Selling, general and administration............................... 122,218 10,012 -- 132,230
Depreciation and amortization..................................... 60,632 12,470 27,097 100,199
Other............................................................. -- 872 -- 872
-------- -------- -------- ---------
Total operating expenses.......................................... 330,909 65,934 27,097 423,940
-------- -------- -------- ---------
Operating income (loss)........................................... (42,610) (30,897) (27,097) (100,604)
Interest income (expense), net.................................... (15,649) (6,302) -- (21,951)
Other non-operating income (expense).............................. (199) -- -- (199)
Income taxes...................................................... -- -- -- --
-------- -------- -------- ---------
Net income (loss)................................................. (58,458) (37,199) (27,097) (122,754)
Preferred stock dividends......................................... (13,602) -- -- (13,602)
-------- -------- -------- ---------
Earnings applicable to common stock............................... $(72,060) $(37,199) $(27,097) $(136,356)
======== ======== ======== =========
Loss per common equivalent share................................ $ (0.15) $ (0.24)
======== =========
Weighted average common and common equivalent
shares outstanding................................................ 479,723 92,167 571,890
======== ======== =========
Other Financial Data:
EBITDA(1)......................................................... $ 18,022 $(17,555) $ -- $ 467
</TABLE>
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(1) EBITDA consists of operating loss before depreciation, amortization and
other nonrecurring operating expenses. McLeodUSA has included EBITDA data
because it is a measure commonly used in the industry. EBITDA is not a
measure of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flows as a measure of liquidity.
F-4
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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.
Date: June 13, 2000 McLEODUSA INCORPORATED
By: /s/ Randall Rings
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Randall Rings
Vice President, Secretary and
General Counsel
