Exhibit 99.1
[MCLEODUSA LOGO]
PRESS RELEASE
McLeod, Inc.
221 Third Avenue, SE, Suite 500
Cedar Rapids, IA 52401
Press and Investor Contact: Bryce E. Nemitz
Phone: (319) 364-0000
FAX: (319) 298-7767
FOR IMMEDIATE RELEASE
MCLEODUSA REPORTS FIRST QUARTER RESULTS
STRONG LINE SALES--UP OVER 300 PERCENT
Cedar Rapids, IA, April 30, 1997--McLeod, Inc. (NASDAQ/NMS:MCLD), doing
business as McLeodUSA, a provider of integrated telecommunications services,
today reported first quarter results for 1997. Revenues were $35.7 million for
the first quarter ended March 31, 1997, an increase of 186 percent compared to
revenues of $12.5 million for the first quarter of 1996. Net loss for the
quarter was $13.4 million or $(0.26) per share compared to a net loss of $4.3
million or $(0.12) per share for the first quarter of 1996. EBITDA loss for the
quarter was $9.4 million compared with EBITDA loss of $3.1 million a year ago.
"We are pleased with our 1997 first quarter growth compared to first
quarter of 1996. However, we are even more pleased with our sales growth within
the quarter," said Steve Gray, president and chief operating officer. He
continued, "Our local line sales results have doubled. Sales for the quarter
exceeded 22,000 lines, and because of this increase in sales, our backlog of
lines to be installed in the U S West market grew from approximately 3,000 to
13,500. After McLeodUSA filed a report with the Iowa Utilities Board in March,
U S West immediately committed to increase their order volume. Further, U S
West agreed to process orders within the normal five-day interval, and if they
fail to do so, they will make certain financial considerations. Since that
agreement, U S West has steadily decreased the McLeodUSA backlog and is
currently meeting our sales pace."
Gray adds, "Contributing significantly to our sales figures for the quarter
was our telemarketing initiative for PrimeLine(R) service, our residential
product. We have now fully assimilated last summer's acquisition of Ruffalo,
Cody, and refocused the efforts of a good portion of that sales force to sell
our product. Although we have reduced revenues by $2 million from third party
contracts, this sales force is now creating a recurring revenue stream. We were
able to add 8 new PrimeLine markets and sold more than 11,000 residential lines
in the first quarter of 1997."
McLeodUSA now provides services from 227 U S West and Ameritech central
offices serving 138 cities. Gray adds, "Our expansion into 90 additional
central offices and the strengthening of our sales force in existing markets is
key to market share growth. We added 6 new sales offices in 4 states during
first quarter, including Illinois, Minnesota, North Dakota and Wisconsin. We
now have nearly 400 people devoted to direct and telephone sales activities, and
operate sales offices in 45 cities."
"Our white and yellow page publishing subsidiary made significant progress
in the quarter, growing its revenue total by 16% over the same quarter last
year. Because of the cyclical nature of the publishing business, first quarter
revenues were down by $700,000 from the previous quarter. McLeodUSA Publishing,
now with a 350-person sales force, acquired 32 telephone directories in North
Dakota and Indiana; distributed 1.2 million directories, of which nearly 700,000
carry the McLeodUSA name; and began publishing directories carrying an 8-page
service guide highlighting the Company's products," reported Gray.
Commenting on the quarterly revenue total of $35.7 million, Gray explains,
"Our revenues nearly tripled over the same quarter a year ago. Our
telecommunications business contributed $19.2 million, $14.2 million came from
advertising sales in telephone directories, and $2.3 million from telemarketing
sales."
The $9.1 million increase in net loss can be primarily attributed to the
Company's aggressive expansion plan. Included in this plan is the expansion of
Bell central office operations, the opening of new sales offices, and costs
related to the acquisitions completed in 1996. The development of the Company's
business and the construction and expansion of its network require significant
expenditures, a substantial portion of which is incurred before the realization
of revenues.
"First quarter also marked a financing milestone for the Company," stated
Clark McLeod, chairman and chief executive officer. "We completed a private
debt offering of $500 million, raising our financing total to nearly $1 billion
in less than one year. The debt offering of 10 1/2% senior discounted notes due
March 1, 2007, resulted in gross proceeds to the Company of $300 million. The
significant achievement is not the dollar total, but the fact that we now have
the funds in place to execute our current plan."
"We accomplished a number of regulatory successes this quarter as well,"
adds Gray. "We received approval to provide local service in Colorado, and
facilities-based service in Wisconsin. In North Dakota, the district court
upheld the Public Service Commission's decision to prohibit Centrex withdrawal
by U S West."
Gray summarized the quarterly results saying, "Our market share growth by
every measure is strong. The addition of central offices nearly tripled. Our
expansion into additional sales cities is progressing well. And, we completed
an additional 224 route miles of fiber optic network bringing our total to 2,576
route miles. Perhaps the most encouraging observation is the synergistic
merging of our 1996 acquisitions. As mentioned, the telemarketing efforts in
support
of our PrimeLine sales are going very well, and the benefits of having
our name, logo, color scheme and product information merchandised by our
telephone directories is going better than we expected when we accomplished
these acquisitions last summer."
McLeod, Inc., founded in June of 1991, is a provider of integrated
telecommunications services to businesses and residential customers. The
Company's telecommunications customers are located primarily in Iowa, Illinois,
Minnesota and Wisconsin. In 1997, we will print and distribute over 8 million
telephone directories in 18 midwestern and Rocky Mountain states.
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
McLeod, Inc.'s actual results and experiences 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, 1996, which is filed with the
Securities and Exchange Commission.
PrimeLine(R) is a registered trademark of McLeod, Inc.
# # #
MCLEOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except for per share data)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
-------- -------
Revenue $ 35,747 $12,488
Operating expenses:
Cost of service 21,200 9,250
Selling, general and administrative 23,985 6,345
Depreciation and amortization 4,122 969
Other 1,608 --
-------- -------
TOTAL OPERATING EXPENSES 50,915 16,564
-------- -------
OPERATING LOSS (15,168) (4,076)
Non-operating income (expense):
Interest income 4,253 1
Interest (expense) (2,447) (265)
Other 7 --
-------- -------
TOTAL NON-OPERATING INCOME (EXPENSE) 1,813 (264)
-------- -------
LOSS BEFORE INCOME TAXES (13,355) (4,340)
Income Taxes -- --
-------- -------
NET LOSS $(13,355) $(4,340)
======== =======
Loss per common and common equivalent share $ (0.26) $ (0.12)
======== =======
Weighted average common and
common equivalent shares outstanding 52,327 37,055
======== =======
EBITDA $ (9,438) $(3,107)
======== =======
MCLEOD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except for per share data)
(UNAUDITED)
Three Months Ended
------------------------------------------
6/30/96 9/30/96 12/31/96 3/31/97
-------- -------- --------- --------
Revenue $ 13,918 $ 19,091 $ 35,826 $ 35,747
Operating expenses:
Cost of service 9,474 12,969 20,931 21,200
Selling, general and administrative 7,631 11,650 20,418 23,985
Depreciation and amortization 1,604 2,161 3,751 4,122
Other -- -- 2,380 1,608
-------- -------- --------- --------
TOTAL OPERATING EXPENSES 18,709 26,780 47,480 50,915
-------- -------- --------- --------
OPERATING LOSS (4,791) (7,689) (11,654) (15,168)
Non-operating income (expense):
Interest income 503 2,899 2,630 4,253
Interest (expense) (255) (23) (122) (2,447)
Other -- 278 218 7
-------- -------- --------- --------
TOTAL NON-OPERATING INCOME (EXPENSE) 248 3,154 2,726 1,813
-------- -------- --------- --------
LOSS BEFORE INCOME TAXES (4,543) (4,535) (8,928) (13,355)
Income Taxes -- -- -- --
-------- -------- --------- --------
NET LOSS $ (4,543) $ (4,535) $ (8,928) $(13,355)
======== ======== ========= ========
Loss per common and common equivalent share $ (0.11) $ (0.10) $ (0.18) $ (0.26)
======== ======== ========= ========
Weighted average common and
common equivalent shares outstanding 39,968 46,233 48,707 52,327
======== ======== ========= ========
EBITDA $ (3,187) $ (5,528) $ (5,523) $ (9,438)
======== ======== ========= ========
SELECTED STATISTICAL DATA:
1Q97 vs. 1Q97 vs.
1Q96 4Q96
3/31/97 3/31/96 % Change 12/31/96 % Change
------- ------- -------- -------- --------
Sales cities 45 30 50% 39 15%
Central Offices in operation 227 72 215% 137 66%
Cities served 138 46 200% 102 35%
Route miles 2,576 434 494% 2,352 10%
Local lines 77,228 41,268 87% 65,367 18%
Business 67,388 41,268 63% 61,505 10%
Residential 9,840 -- -- 3,862 155%
Local line customers 22,610 9,156 147% 16,562 37%
Business 13,155 9,156 44% 12,064 9%
Residential 9,455 -- -- 4,498 110%
Lines per business customer 5.1 4.5 13% 5.1 --
Lines sold 22,642 5,440 316% 10,283 120%
Business 10,666 5,440 120% 6,863 75%
Residential 11,976 -- -- 3,420 212%
Employees 2,362 462 411% 2,077 14%