McLeodUSA pares down net loss in wake of bankruptcy

McLeodUSA released positive first-quarter results today after several tumultuous months of bankruptcy, restructuring, liquidation and personnel changes.

McLeodUSA reported revenues of $388.9 million, down 10% from the year before, a shortfall new CEO Chris Davis attributed to the sale of several of its non-core businesses and a net loss per share of 30 cents, compared with 31 cents in the first quarter of 2001. The carrier also reported it has agreed to sell its ILEC operations in the upper Midwest to Prairie Wave Communications for $88 million. Furthermore, the company gave positive guidance, saying McLeodUSA is projecting revenues of $1.3 billion and cash flow of $135 million for the year, excluding restructuring charges.

Though McLeodUSA spent 75 days mired in Chapter 11 bankruptcy earlier this year, Davis reported the carrier lost only two of its top 100 customers – one of which was in the process of returning to McLeodUSA – and added 13,000 net lines in the first quarter. Davis said the competitive carrier would continue with its restructuring plan and asset sales and install a new sales plan to drive revenues in its core 25-state local exchange business.

“McLeodUSA is a work in progress,” Davis said at the company’s earnings call today. “We’ve come through this organization in a very efficient and short amount of time.”

McLeodUSA announced it would go into prepackaged bankruptcy late last year, taking a deal from investor Teddy Forstmann that gave the New York Financier control over the company and eliminated most of the company’s long-term debt. In order to raise cash, the carrier sold off its wholesale dial-up ISP business to Level 3 Communication, its customer premise equipment business to Inter-Tel Technologies in January. It sold Caprock Communications to a holding company led by Genesis Park and the Riverside Company, and its massive directory publishing business to the Yell Group. Still on the block is Illinois Central Telephone, its incumbent exchange business in the central Midwest. After the sale, McLeodUSA plans to reduce the carrier’s total debt to just $715 million in bank borrowings.

Last month, McLeodUSA further shook things up. Company founder and chairman Clark McLeod retired, paving the way for Davis – who then held the joint chief operating and financial officers posts – to become CEO and chairman. Davis in turn installed a raft of new executives from former Forstmann Little property Gulfstream Aerospace – the company she and Forstmann brought back from financial ruin 10 years ago.