EXHIBIT 99.4
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[LOGO OF MCLEODUSA 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
bnemitz@mcleodusa.com
Phone: (319) 298-7800
FAX: (319) 298-7767
FOR IMMEDIATE RELEASE
McLeodUSA Reports Continued Growth and Margin Improvement for First Quarter 1998
Cedar Rapids, Iowa, April 29, 1998 -- McLeodUSA Incorporated
(NASDAQ/NMS:MCLD), a provider of integrated telecommunications services in
Midwest and Rocky Mountain states, today reported first quarter results for
1998. Revenues were $134.3 million for the quarter ended March 31, 1998, an
increase of 276 percent compared to revenues of $35.7 million for the first
quarter of 1997. Net loss for the quarter was $30.3 million or $(0.49) per share
compared to a net loss of $13.4 million or $(0.26) per share for the first
quarter of 1997. EBITDA for the quarter was a positive $0.5 million compared
with EBITDA loss of $9.4 million a year ago.
Steve Gray, President and COO, commented, "I'm pleased with our
performance, both operationally and financially. Our quarterly EBITDA
achievement exceeded market expectations due to lower expenses and higher margin
revenues associated with our continuing shift in emphasis toward business
sales."
Of the $134.3 million in total revenues for the quarter, telecommunications
revenues accounted for 75 percent, and directory advertising revenues were 21
percent. Due to anticipated seasonal variations, revenues from directory
publishing were down from the most recent quarter, but up 97 percent from the
same quarter a year ago.
"Consistent with our financial performance, our operating statistics
continue to improve," said Gray. "The ongoing process of shifting our sales
emphasis to business has streamlined our order implementation and customer
service, and has improved margins. In cities where our business market share is
stronger and our network is operational, we were able to move our sales
efforts upmarket, allowing the sale of higher margin access, private line and
data services to business customers for both intra- and inter-city services."
McLeodUSA reported an increase in CLEC local lines in service from 193,000
lines at the end of 1997 to 223,200 lines as of March 31, an increase of 16
percent for the quarter and 189 percent over the first quarter total in 1997.
Total local lines in service increased 307 percent year over year. Market
penetration in states other than Iowa and Illinois continued strong during the
quarter, with the Company's expansion states contributing 54 percent of new
business lines sold.
During 1998, McLeodUSA is focusing on continuing its market share growth as
it builds facilities to prepare for the 1999 and 2000 migration of customers
onto the Company's network. Consistent with this strategy, Gray stated, "We will
aggressively add network along the intra-city business corridors in 100 selected
cities to reach more business customers and prospects via direct build. As a
result, we have increased our planned 1998 network build to 2,000 route miles."
McLeodUSA added the first of three switches planned for 1998 to its
network, bringing the total number of switches to seven. The new switch will
carry local and long distance traffic for McLeodUSA customers. In addition, the
Company reported that construction of its 36 city rings is progressing on
schedule. Gray commented, "Every indication is that building network directly to
customers in our core business markets is the right approach. By attacking this
portion of our strategy, we can continue to improve our margins, be less
dependent on the Bell companies, and offer our customers improved responsiveness
and a broader array of advanced telecommunications services."
To help fund this incremental facilities construction, the Company
completed a private offering of senior notes in March yielding $293 million in
proceeds. "These additional funds will help finance the third part of our core
strategy: migrating customers onto our network," stated Clark McLeod, Chairman
and CEO.
Summarizing the quarter, McLeod stated, "It is exciting to see our
execution strategy entering its third and most important phase: the migration of
our customer share to our network. Continued growth and preparation for the
migration process is our clear focus for 1998."
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; future expansion will add 4 additional states. McLeodUSA is a
facilities-oriented telecommunications provider with 7 switches, and nearly
314,000 local lines, 4,700 employees, and 5,100 route miles of fiber optics
network. In the next 12 months, the Company's publishing subsidiaries will
distribute nearly 15 million copies of competitive directories in 21 states,
reaching a population of nearly 27 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 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.
###
McLeodUSA Incorporated and Subsidiaries
Consolidated Statement of Operations
(In thousands except for per share data)
(UNAUDITED)
Three Months Ended
------------------
March 31,
---------
1998 1997
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Revenues:
Telecommunications:
Local and long distance $61,658 $14,848
Local exchange services (ICTC) 15,943 ---
Private line and data 9,385 2,413
Network maintenance and equipment 7,481 1,985
Other telecommunications 6,884 ---
------- -------
Total telecommunications revenue 101,351 19,246
Directory 27,964 14,214
Telemarketing 5,016 2,287
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Total revenues 134,331 35,747
Operating expenses:
Cost of service 75,045 20,238
Selling, general and administrative 58,768 24,947
Depreciation and amortization 19,431 4,122
Other 1,900 1,608
------- -------
Total operating expenses 155,144 50,915
------- -------
Operating loss (20,813) (15,168)
Non-operating income (expense):
Interest income 4,613 4,253
Interest (expense) (14,754) (2,447)
Other 687 7
------- -------
Total non-operating income (expense) (9,454) 1,813
------- -------
Loss before income taxes (30,267) (13,355)
Income Taxes --- ---
------- -------
Net loss $(30,267) $(13,355)
======= =======
Loss per common share $(0.49) $(0.26)
======= =======
Weighted average common shares outstanding 62,227 52,327
======= =======
EBITDA $518 $(9,438)
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McLeodUSA Incorporated and Subsidiaries
Consolidated Statement of Operations
(In thousands except for per share data)
(UNAUDITED)
Three Months Ended
------------------
6/30/97 9/30/97 12/31/97 3/31/98
------- ------- -------- ---------
Revenues:
Telecommunications:
Local and long distance $18,551 $26,783 $52,607 $61,658
Local exchange services (ICTC) ---- ---- 16,117 15,943
Private line and data 2,256 2,848 9,657 9,385
Network maintenance and equipment 3,434 6,396 9,150 7,481
Other telecommunications ---- ---- 7,141 6,884
-------- -------- -------- ---------
Total telecommunications revenue 24,241 36,027 94,672 101,351
Directory 20,273 11,073 35,495 27,964
Telemarketing 2,009 2,225 6,124 5,016
-------- -------- -------- ---------
Total revenues 46,523 49,325 136,291 134,331
Operating expenses:
Cost of service 26,520 30,987 73,445 75,045
Selling, general and administrative 29,441 31,975 61,795 58,768
Depreciation and amortization 5,231 6,355 17,567 19,431
Other 999 82 1,943 1,900
-------- -------- -------- ---------
Total operating expenses 62,191 69,399 154,750 155,144
-------- -------- -------- ---------
Operating loss (15,668) (20,074) (18,459) (20,813)
Non-operating income (expense):
Interest income 6,199 7,618 4,590 4,613
Interest (expense) (7,039) (11,270) (13,871) (14,754)
Other 12 21 1,386 687
-------- -------- -------- ---------
Total non-operating income (expense) (828) (3,631) (7,895) (9,454)
-------- -------- -------- ---------
Loss before income taxes (16,496) (23,705) (26,354) (30,267)
Income Taxes ---- ---- ---- ----
-------- -------- -------- ---------
Net loss $(16,496) $(23,705) $(26,354) $(30,267)
======== ======== ======== =========
Loss per common share $(0.31) $(0.45) $(0.43) $(0.49)
======== ======== ======== =========
Weighted average common shares outstanding 52,583 53,335 61,567 62,227
======== ======== ======== =========
EBITDA $(9,438) $(13,637) $1,051 $518
======== ======== ======== =========
McLeodUSA Selected Statistical Data:
3/31/97 12/31/97 3/31/98
------- -------- -------
Sales cities 45 60 63
Central offices/switches 227 366 376
Cities served 138 227 259
Route miles 2,576 4,908 5,086
Total local lines in service 77,200 282,600 313,900
Business 67,400 149,300 174,000
Residential 9,800 133,300 139,900
Total local customers 22,600 157,000 166,400
Business 13,200 29,200 32,300
Residential 9,400 127,800 134,100
CLEC Local lines in service 77,200 193,000 223,200
Business 67,400 124,900 149,200
Residential 9,800 68,100 74,000
CLEC Local line customers 22,600 86,000 94,700
Business 13,200 22,200 25,200
Residential 9,400 63,800 69,500
CLEC Lines per business customer 5.1 5.6 5.9
CLEC Lines sold during quarter 22,600 41,200 37,500
Business 10,600 26,700 21,600
Residential 12,000 14,500 15,900
New CLEC Lines in service during quarter 11,800 38,800 30,200
Business 5,900 20,800 24,300
Residential 5,900 18,000 5,900
ILEC Local lines in service NA 89,600 90,700
Business NA 24,400 24,800
Residential NA 65,200 65,900
ILEC Local line customers NA 71,000 71,700
Business NA 7,000 7,100
Residential NA 64,000 64,600