SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 16, 2002
--------------
McLEODUSA INCORPORATED
--------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-20763 42-1407240
------------------------------- ------------------------ --------------------
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
McLeodUSA Technology Park
6400 C Street S.W., P.O. Box 3177
Cedar Rapids, IA 52406-3177
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code: (319) 790-7800
--------------
-----------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On April 16, 2002, McLeodUSA Holdings, Inc.('Holdings"), a
wholly-owned subsidiary of McLeodUSA Incorporated ("McLeodUSA"), completed
the sale of all of the outstanding common stock of McLeodUSA Media Group,
Inc., an Iowa corporation ("Pubco"), to Yellow Book/McLeod Holdings, Inc.,
a Delaware corporation ("Yellow Book") and a subsidiary of Yell Group
Limited ("Yell"). Yellow Book was successor to Yell under the Stock
Purchase Agreement, by and among Holdings, Yell and McLeodUSA, dated as of
January 19, 2002, as amended (the "Pubco Agreement"). A copy of such
agreement and the first amendment thereto are attached hereto as Exhibit
2.1 and Exhibit 2.2, respecitively. The gross proceeds from the sale were
$600 million in cash.
In connection with the transaction, McLeodUSA entered into a
multi-year Publishing, Branding and Operating Agreement with Yellow Book,
which, among other things, provides for the continued publishing of
telephone directories under the McLeodUSA brand.
Pursuant to the First Amended Plan of Reorganization of McLeodUSA
Incorporated ("the Plan"), which was confirmed by the United States
Bankruptcy Court for Delaware on April 5, 2002 and which became effective
on April 16, 2002, the proceeds of the sale of Pubco constituted part of
the cash payment distributed to holders of McLeodUSA's senior notes under
the Plan. The Plan is described in the Disclosure Statement with Respect to
Amended Plan of Reorganization of McLeodUSA Incorporated filed as Exhibit
99.1 to Current Report on Form 8-K filed with the Securities and Exchange
Commission on March 5, 2002. The confirmed Plan of Reorganization is filed
as Exhibit 2.2 to Current Report on Form 8-K filed with the SEC on April
22, 2002.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
DESCRIPTION
(b) Pro Forma Financial Information
The Pubco Agreement provided for the sale of Pubco to Yell for
$600 million in cash. On April 16, 2002, the transaction was completed.
Pursuant to the Plan, which was confirmed by the United States Bankruptcy
Court for Delaware on April 5, 2002 and became effective on April 16, 2002,
the proceeds from the sale of Pubco constituted part of the cash payment
distributed to holders of McLeodUSA's senior notes under the Plan. The
attached pro forma information is intended to reflect the effect of the
Pubco Agreement and does not include the full effect of the Plan. The pro
forma condensed consolidated statements of operations for the year ended
December 31, 2001 present the operating results of McLeodUSA, excluding the
operations of Pubco and its subsidiaries as if the operations had been sold
on January 1, 2001. The pro forma condensed consolidated balance sheet has
been prepared assuming the sale took place on December 31, 2001.
As of April 17, 2002, McLeodUSA will implement fresh start
reporting under the provisions of Statement of Position 90-7, Financial
Reporting by Entities in Reorganization under the Bankruptcy Code ("SOP
90-7"). Under SOP 90-7, McLeodUSA's reorganization fair value will be
allocated to its assets and liabilities, its accumulated deficit will be
eliminated, and its new equity will be issued according to the Plan.
McLeodUSA is still evaluating the impact but anticipates that the adoption
of SOP 90-7 and fresh start reporting will have a material effect on its
financial statements. As a result, the financial statements published for
periods following the effectiveness of the Plan will not be comparable to
those published before the Plan is effective, including those contained
herein.
The unaudited pro forma condensed consolidated statements of
operations, balance sheets and notes thereto should be read in conjunction
with the consolidated financial statements included in McLeodUSA's Annual
Report on Form 10-K/A for the year ended December 31, 2001 as filed with
the Securities and Exchange Commission on April 19, 2002.
The unaudited pro forma information is not necessarily indicative
of the consolidated results of operations or the consolidated financial
position that would have resulted had the Pubco sale occurred on the dates
described above, nor is it necessarily indicative of the results of
operations of future periods or future consolidated financial position.
McLeodUSA Incorporated and Subsidiaries
Proforma Condensed Consolidated Statement of Operations
(In millions except per share information)
Pro Forma
Historical Twelve Months
Twelve Months Ended
Ended Pro Forma December 31,
December 31, 2001 Adjustments (1) 2001
-------------------- --------------------------------------
Revenue 1,810.8 298.4 1,512.4
-------------------- --------------------------------------
Operating expenses:
Cost of service 1,056.9 107.2 949.7
Selling, general and administrative 664.7 133.9 530.8
Depreciation and amortization 617.8 35.8 582.0
Restructuring, asset impairment and other
charges 2,942.1 - 2,942.1
-------------------- --------------------------------------
Total operating expenses 5,281.5 276.9 5,004.6
-------------------- --------------------------------------
Operating (loss) income (3,470.7) 21.5 (3,492.2)
-------------------- --------------------------------------
Nonoperating income (expense):
Interest income 10.3 0.1 10.2
Interest expense (253.2) - (253.2)
Other income (expense) 113.8 (0.2) 114.0
-------------------- --------------------------------------
Total nonoperating expense (129.1) (0.1) (129.0)
-------------------- --------------------------------------
(Loss) income before income taxes (3,599.8) 21.4 (3,621.2)
-------------------- --------------------------------------
Income taxes - - -
-------------------- --------------------------------------
Net (loss) income (3,599.8) 21.4 (3,621.2)
Gain on exchange of preferred stock 851.2 - 851.2
referred stock dividends (45.9) - (45.9)
-------------------- -------------------------------------
Net loss applicable to common shares (2,794.5) 21.4 (2,815.9)
==================== ======================================
(Loss) income per common share (4.51) 0.03 (4.54)
==================== ======================================
Weighted average common shares outstanding 620.3 620.3
==================== ====================
McLeodUSA Incorporated and Subsidiaries
Proforma Condensed Consolidated Balance Sheets
(In millions except per share information)
Historical Pro Forma Pro Forma
December 31, 2001 Adjustments(2) December 31, 2001
-------------------------------------- ----------------------
Assets
Current assets:
Cash, cash equivalents, & short-term investments 151.9 592.1 744.0
Trade receivables, net 273.2 (94.0) 179.2
Inventory 14.0 - 14.0
Deferred expenses 54.0 (53.1) 0.9
Prepaid expense and other 32.3 (4.0) 28.3
-------------------------------------- ----------------------
Total Current Assets
525.4 441.0 966.4
Long-term Assets
Property and equipment, net 2,682.6 (36.3) 2,646.3
Goodwill and other intangibles, net 1,440.4 (316.1) 1,124.3
Other investments 28.3 - 28.3
Other long term assets 78.4 - 78.4
-------------------------------------- ----------------------
4,229.7 (352.4) 3,877.3
-------------------------------------- ----------------------
Total Assets 4,755.1 88.6 4,843.7
====================================== ======================
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt 17.3 (1.2) 16.1
Long-term debt classified as current 2,978.9 - 2,978.9
Accounts payable - trade 105.0 (14.5) 90.5
Deferred revenue 18.1 - 18.1
Customer deposits 33.5 (30.1) 3.4
Other current liabilities 417.8 (5.8) 412.0
-------------------------------------- ----------------------
Total Current Liabilities
3,570.6 (51.6) 3,519.0
Long Term Liabilities:
Long term debt 967.9 (1.6) 966.3
Deferred revenue, less current 16.4 - 16.4
Other long term liabilities 17.1 - 17.1
-------------------------------------- ----------------------
1,001.4 (1.6) 999.8
-------------------------------------- ----------------------
Total shareholders' equity 183.1 141.8 324.9
-------------------------------------- ----------------------
Total Liabilities and Shareholders' Equity 4,755.1 88.6 4,843.7
====================================== ======================
Notes to Unaudited Pro Forma Consolidated Financial Statements
Note 1.
Represents the historical results of operations of Pubco for the
year ended December 31, 2001.
Note 2.
Represents the historical amounts of Pubco at December 31, 2001
except for cash. The cash pro forma adjustment gives effect to $600 million
in cash proceeds from the sale net of closing costs of approximately $4.4
million. Pubco's $3.5 million cash balance at December 31, 2001 is also
reflected as a reduction from the gross proceeds.
(c) Exhibits.
2.1 Stock Purchase Agreement, by and among McLeodUSA
Holdings, Inc., Yell Group Limited, and McLeodUSA
Incorporated, dated as of January 19, 2002.
2.2 First Amendment to Stock Purchase Agreement, by and among
McLeodUSA Holdings, Inc., Yell Group Limited, Yellow
Book/McLeod Holdings, Inc.and McLeodUSA Incorporated,
dated as of April 16, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: May 1, 2002 McLEODUSA INCORPORATED
By: /s/ RANDALL RINGS
---------------------------
Randall Rings
Group Vice President-Law
EXHIBIT INDEX
2.1 Stock Purchase Agreement, by and among McLeodUSA
Holdings, Inc., Yell Group Limited, and McLeodUSA
Incorporated, dated as of January 19, 2002.
2.2 First Amendment to Stock Purchase Agreement, by and among
McLeodUSA Holdings, Inc., Yell Group Limited, Yellow
Book/McLeod Holdings, Inc.and McLeodUSA Incorporated,
dated as of April 16, 2002.