EXHIBIT 99.1
[LOGO OF MCLEODUSA APPEARS HERE]
[LETTERHEAD OF MCLEODUSA APPEARS HERE]
MCLEODUSA REPORTS FOURTH QUARTER AND 1997 RESULTS
1997: A Year of Expansion and Growth
Cedar Rapids, Iowa, January 28, 1998 -- McLeodUSA Incorporated
(NASDAQ/NMS:MCLD) today reported results for fourth quarter and fiscal year
1997. Revenues were a record $267.9 million for the year ended December 31,
1997, compared to $81.3 million for 1996, an increase of 230 percent. Net loss
for the year was $79.9 million compared to a net loss of $22.3 million for 1996.
EBITDA (earnings before interest, taxes, depreciation and amortization) loss for
the year was $31.5 million, compared with EBITDA loss of $17.3 million for 1996.
Commenting on 1997 results, Clark McLeod, chairman and CEO stated, "It was
a challenging year with substantial rewards. We completed the Consolidated
Communications merger while maintaining significant internal growth. Our 1996 to
1997 statistics highlight our progress:
. local lines in service grew from 65,000 to 283,000,
. fiber route miles increased from 2,400 to nearly 5,000,
. directory distribution grew from 10 million to 15 million, and
. revenues increased from $81 million to $268 million."
(more)
The Company reported fourth quarter revenues of $136.3 million, compared to
revenues of $35.8 million for the same quarter of 1996, an increase of 281
percent. Net loss for the quarter was $26.4 million compared to a net loss of
$8.9 million for the fourth quarter of 1996. EBITDA was a positive $1.1 million
in fourth quarter, compared to negative $13.6 million in third quarter 1997, and
negative $5.5 million for fourth quarter 1996.
A comparison of sequential quarters shows an additional 38,800 CLEC local
lines in service over third quarter, an increase in new CLEC lines sold of
41,200; and 22,100 new CLEC local line customers.
Commenting on fourth quarter results, Steve Gray, president and chief
operating officer, stated: "This is our first full quarter of results combining
the CCI organization with McLeodUSA. Two elements of a cyclical nature also
occurred during the quarter. First, our directory business experienced its
strongest quarter of the year contributing $35.5 million in revenue. Second,
installs of new service increased from third quarter to fourth quarter even with
nearly 15 percent fewer business days. Fourth quarter results also reflect the
shift in our sales emphasis to business, which will trend to just over two-
thirds business, one-third residential in 1998. This shift is expected to help
our gross margin and simplify order implementation and customer service."
McLeod summarized: "Our focus in 1998 will be to:
1. Continue our successful branding strategy through ubiquitous coverage
of our target geography with McLeodUSA phone directories.
2. Aggressively capture business line share in the states we have
targeted for 1998.
3. Emphasize marketing our residential services in our core states.
4. Add 1,400 miles of fiber and focus on 36 new city rings.
5. Prepare for the migration of local service customers to our network
in 1999 and 2000."
Concluding, Mr. McLeod stated, "The expansion and growth we achieved in
1997 positioned us for 1998, establishing most of the key anchor points of our
geographic footprint and bringing together the team who will continue to execute
our plan."
###
McLeodUSA, 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, Wisconsin, North Dakota and South Dakota. In September 1997 McLeodUSA
completed a merger with Consolidated Communications Inc. of Mattoon, IL,
creating the first Super Regional Competitive Local Exchange Carrier. The
combined firm is a 14-state facilities-oriented telecommunications provider with
6 switches, and more than 282,000 local lines, 4,500 employees, and 4,900 route
miles of fiber optics
network. In the next 12 months, the Company's publishing subsidiaries will
distribute over 14.8 million copies of competitive directories in 21 states,
reaching a population of 26 million.
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 numbers
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, 1996, which is filed
with the Securities and Exchange Commission.
McLeodUSA Incorporated and Subsidiaries
Consolidated Statement of Operations
(In thousands except for per share data)
(UNAUDITED)
Three Months Ended Twelve Months Ended
------------------- -------------------
December 31, December 31,
------------ ------------
1997 1996 1997 1996
---------------- ----------------
Revenues:
Telecommunications:
Local and long distance $49,841 $12,465 $110,023 $41,399
Local exchange services (ICTC) 16,117 ---- 16,117 ----
Private line and data 9,657 2,157 17,174 10,272
Network maintenance and equipment 9,150 1,509 20,965 5,936
Other telecommunications 9,907 ---- 9,907 ----
-------- -------- -------- --------
Total telecommunications revenue 94,672 16,131 174,186 57,607
Directory 35,495 15,152 81,055 15,152
Telemarketing 6,124 4,543 12,645 8,564
-------- -------- -------- --------
Total revenues 136,291 35,826 267,886 81,323
Operating expenses:
Cost or service 74,750 20,931 155,430 52,624
Selling, general and administrative 60,490 20,418 143,918 46,044
Depreciation and amortization 17,567 3,751 33,275 8,485
Other 1,943 2,380 4,632 2,380
-------- -------- -------- --------
Total operating expenses 154,750 47,480 337,255 109,533
-------- -------- -------- --------
Operating loss (18,459) (11,654) (69,369) (28,210)
Non-operating income (expense):
Interest income 4,590 2,630 22,660 6,034
Interest (expense) (13,871) (122) (34,627) (665)
Other 1,386 218 1,426 495
-------- -------- -------- --------
Total non-operating income (expense) (7,895) 2,726 (10,541) 5,864
-------- -------- -------- --------
Loss before income taxes (26,354) (8,928) (79,910) (22,346)
Income taxes ---- ---- ---- ----
-------- -------- -------- --------
Net loss $(26,354) $(8,928) $(79,910) $(22,346)
======== ======== ======== ========
Loss per common and common equivalent share $(0.43) $(0.18) $(1.45) $(0.52)
======== ======== ======== ========
Weighted average common and
common equivalent shares outstanding 61,567 48,707 54,974 43,019
======== ======== ======== ========
EBITDA $1,051 $(5,523) $(31,462) $(17,345)
======== ======== ======== ========
McLeodUSA Incorporated and Subsidiaries
Consolidated Statement of Operations
(In thousands except for per share data)
(UNAUDITED)
Three Months Ended
------------------
3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- --------
Revenues:
Telecommunications:
Local and long distance $14,848 $18,551 $26,783 $49,841
Local exchange services (ICTC) ---- ---- ---- 16,117
Private line and data 2,413 2,256 2,848 9,657
Network maintenance and equipment 1,985 3,434 6,396 9,150
Other telecommunications ---- ---- ---- 9,907
-------- -------- -------- ---------
Total telecommunications revenue 19,246 24,241 36,027 94,672
Directory 14,214 20,273 11,073 35,495
Telemarketing 2,287 2,009 2,225 6,124
-------- -------- -------- ---------
Total revenues 35,747 46,523 49,325 136,291
Operating expenses:
Cost of service 21,200 27,563 31,917 74,750
Selling, general and administrative 23,985 28,398 31,045 60,490
Depreciation and amortization 4,122 5,231 6,355 17,567
Other 1,608 999 82 1,943
-------- -------- -------- ---------
Total operating expenses 50,915 62,191 69,399 154,750
-------- -------- -------- ---------
Operating loss (15,168) (15,668) (20,074) (18,459)
Non-operating income (expense):
Interest income 4,253 6,199 7,618 4,590
Interest (expense) (2,447) (7,039) (11,270) (13,871)
Other 7 12 21 1,386
-------- -------- -------- ---------
Total non-operating income (expense) 1,813 (828) (3,631) (7,895)
-------- -------- -------- ---------
Loss before income taxes (13,355) (16,496) (23,705) (26,354)
Income Taxes ---- ---- ---- ----
-------- -------- -------- ---------
Net loss $(13,355) $(16,496) $(23,705) $(26,354)
======== ======== ======== =========
Loss per common and
common equivalent share $(0.26) $(0.31) $(0.45) $(0.43)
======== ======== ======== =========
Weighted average common and
common equivalent shares outstanding 52,327 52,583 53,335 61,567
======== ======== ======== =========
EBITDA $(9,438) $(9,438) $(13,637) $1,051
======== ======== ======== =========
McLeodUSA Selected Statistical Data:
4Q97 vs. 4Q97 vs.
4Q96 3Q97
12/31/97 12/31/96 % Change 9/30/97 % Change
-------- -------- -------- -------- --------
Sales cities 60 39 54% 60 0%
Central offices 366 186 97% 350 5%
Cities served 227 92 147% 212 7%
Route miles 4,908 2,352 109% 4,617 6%
Total local lines in service 282,600 65,400 332% 244,000 16%
Business 149,300 61,500 143% 128,200 16%
Residential 133,300 3,900 3,318% 115,800 15%
Total local customers 157,000 16,600 846% 135,400 16%
Business 29,200 12,100 141% 25,200 16%
Residential 127,800 4,500 2,740% 110,200 16%
CLEC Local lines in service 193,000 65,400 195% 154,200 25%
Business 124,900 61,500 103% 104,100 20%
Residential 68,100 3,900 1,646% 50,100 36%
CLEC Local line customers 86,000 16,600 418% 63,900 35%
Business 22,200 12,100 83% 18,300 21%
Residential 63,800 4,500 1,318% 45,600 40%
CLEC Lines per business customer 5.6 5.1 10% 5.7 (2)%
CLEC Lines sold during quarter 41,200 10,300 300% 48,400 (15)%
Business 26,700 6,900 287% 19,800 35%
Residential 14,500 3,400 326% 28,600 (49)%
New CLEC Lines in service
during quarter* 38,800 9,400 313% 35,300 10%
Business 20,800 6,900 201% 16,300 28%
Residential 18,000 2,500 620% 19,000 (5)%
ILEC Local lines in service 89,600 NA NA 89,800 0%
Business 24,400 NA NA 24,100 1%
Residential 65,200 NA NA 65,700 (1)%
ILEC Local line customers 71,000 NA NA 71,500 (1)%
Business 7,000 NA NA 6,900 1%
Residential 64,000 NA NA 64,600 (1)%
* Third and Fourth Quarters exclude lines acquired from CCI