EXHIBIT 99.1
MCLEODUSA REPORTS CONTINUED GROWTH IN REVENUES
AND EBITDA FOR SECOND QUARTER 1998
CEDAR RAPIDS, IOWA, JULY 29, 1998 -- McLeodUSA Incorporated (NASDAQ/NMS:MCLD), a
provider of integrated telecommunications services in Midwest and Rocky Mountain
states, today reported second quarter results for 1998. Revenues were $155.7
million for the quarter ended June 30, 1998, an increase of 235 percent compared
to revenues of $46.5 million for the second quarter of 1997. Net loss for the
quarter was $29.8 million or $(0.47) per share compared to a net loss of $16.5
million or $(0.31) per share for the second quarter of 1997. EBITDA (earnings
before interest, taxes, depreciation and amortization) for the quarter was a
positive $5.65 million compared with EBITDA loss of $9.44 million a year ago.
Steve Gray, President and COO, commented, "I continue to be pleased with our
performance, both operationally and financially. Our quarterly achievements more
than met market expectations, due to lower expenses and higher margin revenues
associated with our continuing emphasis on business sales, and the continuing
migration of services onto our network."
Of the $155.7 million in total revenues for the quarter, telecommunications
revenues accounted for 68 percent and directory advertising revenues, 29
percent. Directory revenues were up $17.6 million or 63 percent from the most
recent quarter, and 125 percent higher than the same quarter a year ago, due in
part, to anticipated seasonal variations.
McLeodUSA reported an increase in CLEC local lines in service from 223,200 lines
at the end of first quarter to 253,600 lines as of June 30, an increase of 14
percent for the quarter and 145 percent over the second quarter total in 1997.
Total local lines in service increased 233 percent year over year.
Gray: "Our telecommunications revenues were up as a result of our continued
success in capturing business line share from the incumbent providers." Total
business lines sold increased 22 percent over the most recent quarter and 37
percent over second quarter a year ago. "In support of our business sales
effort, we are increasing our sales force by over 20 percent, and continue to
grow our data and private line sales," Gray added.
During 1998, McLeodUSA continues to focus on 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 are on track
to add 2,000 additional miles of fiber optic network in 1998 as a result of our
own intra- and inter-city construction efforts and through fiber exchange
agreements and acquisition." Of the Company's 5,573 route miles constructed,
approximately 3,200 are in operation.
An example of network acquisition occurred earlier this week when the Company
announced a definitive agreement to acquire QST Communications Inc. of Peoria,
IL, a competitive access provider serving commercial and industrial customers in
central Illinois. Commenting on this acquisition Gray stated, "Upon closing, we
will gain a fiber optic city ring in Peoria of 112 route miles and a nearly
completed fiber optic link to Springfield, IL of another 65 miles. This
agreement creates another long-term relationship with a utility company and
speeds our ability to direct connect to business customers in Peoria, where we
had already planned to construct network as part of our AT&T agreement and our
MainStreet initiative."
MainStreet is the McLeodUSA project name for constructing network along business
corridors in cities where the Company has established market share. Since the
project's inception at the beginning of second quarter, the MainStreet team
routed 1,800 miles in 44 cities by quarter end in preparation for network
engineering and construction.
Summarizing the quarter, Clark McLeod, Chairman and CEO, stated, "The third
phase of our execution strategy, migrating customers onto our network, is now
becoming reality for McLeodUSA. We will continue to build customer share with
particular emphasis on business lines, and will continue to construct and
acquire network as we begin the early stages of our three year migration phase."
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, 344,000 local
lines, 5,000 employees, and nearly 5,600 route miles of fiber optic network. In
the next 12 months, the Company's publishing subsidiaries will distribute nearly
16 million copies of competitive directories in 20 states, reaching 27 million
people or 10 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.
McLeodUSA Incorporated and Subsidiaries
Consolidated Statement of Operations
(In thousands except for per share data)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
1998* 1997 1998* 1997
Revenues:
Telecommunications:
Local and long distance $ 63,658 $ 18,551 $125,316 $ 33,399
Local exchange services (ICTC) 16,610 ---- 32,553 ----
Private line and data 10,584 2,256 19,969 4,669
Network maintenance and equipment 7,604 3,434 15,085 5,419
Other telecommunications 6,892 ---- 13,776 ----
Total telecommunications revenue 105,348 24,241 206,699 43,487
Directory 45,514 20,273 73,478 34,487
Telemarketing 4,833 2,009 9,849 4,296
Total revenues $155,695 $ 46,523 $290,026 $ 82,270
Operating expenses:
Cost of service 83,068 26,520 158,113 46,758
Selling, general and administrative 66,981 29,441 125,749 54,388
Depreciation and amortization 21,046 5,231 40,477 9,353
Other 1,900 999 3,800 2,607
Total operating expenses 172,995 62,191 328,139 113,106
Operating loss (17,300) (15,668) (38,113) (30,836)
Non-operating income (expense):
Interest income 7,821 6,199 12,434 10,452
Interest (expense) (20,410) (7,039) (35,164) (9,486)
Other 98 12 785 19
Total non-operating income (expense) (12,491) (828) (21,945) 985
Loss before income taxes (29,791) (16,496) (60,058) (29,851)
Income Taxes ---- ---- ---- ----
Net loss $(29,791) $(16,496) $(60,058) $(29,851)
Loss per common share $(0.47) $(0.31) $(0.96) $(0.57)
Weighted average common shares outstanding 62,644 52,583 62,436 52,456
EBITDA $ 5,646 $ (9,438) $ 6,164 $(18,876)
*CCI merger completed September 1997
McLeodUSA Incorporated and Subsidiaries
Consolidated Statement of Operations
(In thousands except for per share data)
(Unaudited)
Three Months Ended
9/30/97 12/31/97 3/31/98* 6/30/98*
Revenues:
Telecommunications:
Local and long distance $ 26,783 $ 52,607 $ 61,658 $ 63,658
Local exchange services (ICTC) ---- 16,117 15,943 16,610
Private line and data 2,848 9,657 9,385 10,584
Network maintenance and equipment 6,396 9,150 7,481 7,604
Other telecommunications ---- 7,141 6,884 6,892
Total telecommunications revenue 36,027 94,672 101,351 105,348
Directory 11,073 35,495 27,964 45,514
Telemarketing 2,225 6,124 5,016 4,833
Total revenues $ 49,325 $ 136,291 $134,331 $155,695
Operating expenses:
Cost of service 30,987 73,445 75,045 83,068
Selling, general and administrative 31,975 61,795 58,768 66,981
Depreciation and amortization 6,355 17,567 19,431 21,046
Other 82 1,943 1,900 1,900
Total operating expenses 69,399 154,750 155,144 172,995
Operating loss (20,074) (18,459) (20,813) (17,300)
Non-operating income (expense):
Interest income 7,618 4,590 4,613 7,821
Interest (expense) (11,270) (13,871) (14,754) (20,410)
Other 21 1,386 687 98
Total non-operating income (expense) (3,631) (7,895) (9,454) (12,491)
Loss before income taxes (23,705) (26,354) (30,267) (29,791)
Income Taxes ---- ---- ---- ----
Net loss $(23,705) $ (26,354) $(30,267) $(29,791)
Loss per common share $(0.45) $(0.43) $(0.49) $(0.47)
Weighted average common shares outstanding 53,335 61,567 62,227 62,644
EBITDA $(13,637) $ 1,051 $ 518 $ 5,646
McLeodUSA Selected Statistical Data:
12/31/97 3/31/98 6/30/98
Sales cities 60 63 64
Central offices / switches 366 376 380
Cities served 227 259 266
Route miles 4,908 5,086 5,573
Total local lines in service 282,600 313,900 344,300
Business 149,300 174,000 201,300
Residential 133,300 139,900 143,000
Total local customers 157,000 166,400 174,600
Business 29,200 32,300 37,600
Residential 127,800 134,100 137,000
CLEC Local lines in service 193,000 223,200 253,600
Business 124,900 149,200 176,200
Residential 68,100 74,000 77,400
CLEC Local line customers 86,000 94,700 103,200
Business 22,200 25,200 30,400
Residential 63,800 69,500 72,800
CLEC Lines per business customer 5.6 5.9 5.8
CLEC Lines sold during quarter 41,200 37,500 32,700
Business 26,700 21,600 26,400
Residential 14,500 15,900 6,300
New CLEC Lines in service during quarter 38,800 30,200 30,400
Business 20,800 24,300 27,000
Residential 18,000 5,900 3,400
ILEC Local lines in service 89,600 90,700 90,700
Business 24,400 24,800 25,100
Residential 65,200 65,900 65,600
ILEC Local line customers 71,000 71,700 71,400
Business 7,000 7,100 7,200
Residential 64,000 64,600 64,200