Exhibit 99.3
Statement Under Oath of Principal Executive Officer and Principal
Financial Officer Regarding Facts and Circumstances Relating to
Exchange Act Filings
I, G. Kenneth Burckhardt, state and attest that:
(1) Except as set forth in item 4 below, to the best of my knowledge, based
upon a review of the covered reports of McLeodUSA Incorporated, and, except
as corrected or supplemented in a subsequent covered report:
o no covered report contained an untrue statement of a material fact
as of the end of the period covered by such report (or in the case
of a report on Form 8-K or definitive proxy materials, as of the
date on which it was filed); and
o no covered report omitted to state a material fact necessary to
make the statements in the covered report, in light of the
circumstances under which they were made, not misleading as of the
end of the period covered by such report (or in the case of a
report on Form 8-K or definitive proxy materials, as of the date
on which it was filed).
(2) I have reviewed the contents of this statement with the Company's audit
committee.
(3) In this statement under oath, each of the following, if filed on or
before the date of this statement, is a "covered report":
o the Annual Report on Form 10-K for the fiscal year ended December
31, 2001 of McLeodUSA Incorporated;
o all reports on Form 10-Q, all reports on Form 8-K and all
definitive proxy materials of McLeodUSA filed with the Commission
subsequent to the filing of the Form 10-K identified above; and
o any amendments to any of the foregoing.
(4) I am not making the statements set forth in item 1 above with respect
to the Annual Report on Form 10-K for the fiscal year ended December 31,
2001 of McLeodUSA Incorporated or any amendment thereto due to the facts
and circumstances set forth below in this item 4. With respect to all other
covered reports, I am not making the statements set forth in item 1 above
with respect to any financial information for the years ended December 31,
2001 and December 31, 2000 or any portions thereof contained in such
covered reports due to the facts and circumstances set forth below in this
item 4.
In January 31, 2002, McLeodUSA Incorporated filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). McLeodUSA's Plan of Reorganization, as amended, was
confirmed by the Bankruptcy Court on April 5, 2002 and became effective on
April 16, 2002.
In connection with its reorganization, McLeodUSA completed the
sale of certain businesses, including its directory publishing business
("Pubco"), and recently entered into agreements to sell Illinois
Consolidated Telephone Company ("ICTC") and other non-core businesses. In
the Quarterly Report on Form 10-Q, based on the requirements of SFAS 144
"Accounting for the Impairment of Long Lived Assets," McLeodUSA is
reflecting these businesses and other businesses held for sale as
discontinued operations. In accordance with accounting principles generally
accepted in the United States of America, ("GAAP"), McLeodUSA is required
to present its financial statements for the years ended December 31, 2000
and 2001, and each quarter, reflecting these businesses as discontinued
operations. The Company's former auditors, Arthur Andersen LLP ("Arthur
Andersen"), audited the Company's financial statements for the years ended
December 31, 2000 and 2001. Since Arthur Andersen is no longer able to
perform audits of publicly traded companies, in order to comply with GAAP
requirements related to the financial presentation for discontinued
operations, the Securities and Exchange Commission ("SEC") will, in effect,
require McLeodUSA's new auditor, Deloitte & Touche LLP ("Deloitte &
Touche"), to re-audit the Company's financial statements for the years
ending December 31, 2000 and 2001 to provide McLeodUSA with an audit
opinion on such financial statements.
While McLeodUSA believes its financial statements for these years,
as audited by Arthur Andersen, complied with GAAP in all material respects
when such statements were filed with the SEC, its Chief Executive Officer
and Chief Financial Officer are unable to make certifications required by
the SEC with respect to any financial information for the years ended
December 31, 2001 and 2000, or any portion thereof, because the Company
anticipates that the results of the Deloitte & Touche audit will differ
from the prior audit by Arthur Andersen. Deloitte & Touche has informed
McLeodUSA that they have a different interpretation than Arthur Andersen
with respect to accounting standards applicable to revenue recognition on
certain Indefeasible Rights of Use ("IRU") transactions completed by
McLeodUSA during 2001. Deloitte & Touche's interpretation would result in a
change in classification of such IRU transactions from sales-type leases to
operating leases. Deloitte & Touche has also advised McLeodUSA that the
AICPA-SEC Regulations Committee has very recently expressed a position on
accounting treatment for IRU exchanges that will be applied retroactively
and which differs from previously accepted accounting practices. This
pronouncement would apply to one IRU contract for which the Company
recorded revenue in 2001. As a result, the Deloitte & Touche re-audit
process as it relates to these identified IRU transactions would likely
result in a reduction in 2001 total revenue and gross margin of
approximately $60 million and $20 million, respectively. These adjustments
for the six months ended June 30, 2001 would be a reduction of
approximately $33 million in revenue and $10 million in gross margin. Such
adjustment would also result in an annual increase in revenue and gross
margin of approximately $3 million in 2002 and going forward through the
term of these multi-year agreements. Other adjustments, if any, which could
be required as a result of the Deloitte & Touche re-audit, are unknown at
this time.
In light of the Company's reorganization, sale of businesses, and
implementation of "fresh-start" accounting on April 16, 2002, McLeodUSA
believes that the expense and effort associated with a re-audit may not be
in the best interest of the Company or its shareholders as it would result
in financial statements that are not comparable to the reorganized
Company's on-going operations. Therefore, the Company is considering
seeking a waiver of this requirement from the SEC. If required, the
Deloitte & Touche re-audits for 2000 and 2001 would be expected to be
completed by the end of the first quarter of 2003.
/s/ G. Kenneth Burckhardt Subscribed and sworn to
- ------------------------- before me this 14th day of
G. Kenneth Burckhardt August 2002.
August 14, 2002
/s/ Rosalie M. Wolf
--------------------------
Notary Public
My Commission Expires:
7/28/2003