<PAGE>

================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q

(Mark One)
  [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

       For the Quarterly Period Ended March 31, 2000

                                       or

  [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

       For the transition period ______________ to ________________

       Commission file number 0-20763

                             McLEODUSA INCORPORATED
             (Exact name of registrant as specified in its charter)



                Delaware                                   42-1407240
        (State of Incorporation)               (IRS Employer Identification No.)


        McLeodUSA Technology Park
            6400 C Street SW
             P.O. Box 3177
          Cedar Rapids, Iowa                              52406-3177
(Address of principal executive office)                   (Zip Code)


                                  319-364-0000
                        (Registrant's telephone number,
                              including area code)

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.       Yes  [X]        No [ ]

  The number of shares outstanding of each class of the issuer's common stock as
of May 9, 2000:

     Common Stock Class A:  ($.01 par value)....  578,213,511 shares

     Common Stock Class B:  ($.01 par value)....                None

================================================================================
<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                                    Page
                                                                                                                    ----
PART I.  Financial Information
------------------------------
<S>                                                                                                                  <C>
Item 1.  Financial Statements...................................................................................      3

         Consolidated Balance Sheets, March 31, 2000 (unaudited) and December 31, 1999..........................      3

         Unaudited Consolidated Statements of Operations and Comprehensive Income
            for the three months ended March 31, 2000 and 1999..................................................      4

         Unaudited Consolidated Statements of Cash Flows for the three months ended
            March 31, 2000 and 1999.............................................................................      5

         Notes to Consolidated Financial Statements (unaudited).................................................      6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations..................     11

PART II. Other Information
--------------------------

Item 2.  Changes in Securities and Use of Proceeds..............................................................     18

Item 4.  Submission of Matters to a Vote of Security Holders....................................................     18

Item 6.  Exhibits and Reports on Form 8-K.......................................................................     19

Signatures......................................................................................................     22
</TABLE>

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
                    McLEODUSA INCORPORATED AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                          (In millions, except shares)
<TABLE>
<CAPTION>                                                                                    March 31,              December 31,
                                                                                               2000                     1999
                                                                                             ---------              ------------
<S>                                                                                       <C>                       <C>
ASSETS                                                                                      (Unaudited)
Current Assets
 Cash and cash equivalents..............................................................     $  536.8                 $  326.9
 Investment in available-for-sale securities............................................        493.0                    934.1
 Trade receivables, net.................................................................        231.8                    183.8
 Inventory..............................................................................         29.9                     27.5
 Deferred expenses......................................................................         37.1                     39.2
 Prepaid expenses and other.............................................................         68.3                     58.0
                                                                                             --------                 --------
  TOTAL CURRENT ASSETS..................................................................      1,396.9                  1,569.5
                                                                                             --------                 --------
Property and Equipment
 Land and building......................................................................        104.4                     85.1
 Telecommunications networks............................................................        797.3                    635.9
 Furniture, fixtures and equipment......................................................        325.1                    267.2
 Networks in progress...................................................................        644.3                    453.2
 Building in progress...................................................................          2.1                      1.2
                                                                                             --------                 --------
                                                                                              1,873.2                  1,442.6
 Less accumulated depreciation..........................................................        243.2                    172.6
                                                                                             --------                 --------
                                                                                              1,630.0                  1,270.0
                                                                                             --------                 --------
Investments, Intangible and Other Assets
 Other investments......................................................................         37.3                     35.9
 Goodwill, net..........................................................................      3,031.9                    957.1
 Other intangibles, net.................................................................        332.1                    290.2
 Other..................................................................................        101.9                     80.4
                                                                                             --------                 --------
                                                                                              3,503.2                  1,363.6
                                                                                             --------                 --------
                                                                                             $6,530.1                 $4,203.1
                                                                                             ========                 ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
 Current maturities of long-term debt...................................................     $   29.7                 $   14.4
 Contracts and notes payable............................................................          0.1                      0.1
 Accounts payable.......................................................................        132.0                    109.6
 Accrued payroll and payroll related expenses...........................................         26.7                     26.2
 Other accrued liabilities..............................................................        155.8                     92.2
 Deferred revenue, current portion......................................................         38.8                     24.1
 Customer deposits......................................................................         32.0                     30.1
                                                                                             --------                 --------
  TOTAL CURRENT LIABILITIES.............................................................        415.1                    296.7
Long-term Debt, less current maturities.................................................      2,059.9                  1,763.8
Deferred Revenue, less current portion..................................................         15.5                     15.8
Other long-term liabilities.............................................................         19.0                     18.3
                                                                                             --------                 --------
                                                                                              2,509.5                  2,094.6
                                                                                             --------                 --------
Redeemable convertible preferred stock
 Preferred, Series B, redeemable, convertible, $.01 par value, authorized, issued and
  outstanding 2000 275,000 shares; 1999 275,000 shares..................................        687.5                    687.5

 Preferred, Series C, redeemable, convertible, $.01 par value, authorized, issued and
  outstanding 2000 125,000 shares; 1999 125,000 shares..................................        312.5                    312.5
                                                                                             --------                 --------
                                                                                              1,000.0                  1,000.0
                                                                                             --------                 --------
Stockholders' Equity
 Capital Stock:
   Preferred, Series A, $.01 par value: authorized, issued  and outstanding 2000
    1,150,000 shares; 1999 1,150,000 shares.............................................          ---                      ---

  Common, Class A, $.01 par value; authorized 1,000,000,000 shares;
   issued and outstanding 2000 575,494,911 shares; 1999  472,761,036
   shares...............................................................................          5.8                      4.8
  Common, Class B, convertible, $.01 par value; authorized 22,000,000
   shares; issued and outstanding 2000 and 1999 none....................................          ---                      ---
 Additional paid-in capital.............................................................      3,487.4                  1,523.5
 Accumulated deficit....................................................................       (567.3)                  (494.5)
 Accumulated other comprehensive income.................................................         94.7                     74.7
                                                                                             --------                 --------
                                                                                              3,020.6                  1,108.5
                                                                                             --------                 --------
                                                                                             $6,530.1                 $4,203.1
                                                                                             ========                 ========
</TABLE>

 .  Class A common stock and accumulated deficit are presented after giving
   effect for the three-for-one stock split effected in the form of a stock
   dividend as described in Note 4.

       The accompanying notes are an integral part of these consolidated
                             financial statements

                                       3
<PAGE>

                    McLEODUSA INCORPORATED AND SUBSIDIARIES


   UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                     (In millions, except per share data)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                               March 31,
                                                          --------------------
                                                              2000       1999
                                                            ------     ------
<S>                                                       <C>        <C>
Revenues:
 Telecommunications:
  Local and long distance.................................  $154.2     $ 81.1
  Local exchange services.................................    21.6       17.7
  Private line and data...................................    26.2       15.3
  Network maintenance and equipment.......................     9.2        8.1
  Other telecommunications................................     7.7        5.8
                                                            ------     ------
   Total telecommunications revenue.......................   218.9      128.0
 Directory................................................    64.8       49.4
 Telemarketing............................................     4.6        3.7
                                                            ------     ------
  TOTAL REVENUES..........................................   288.3      181.1
Operating expenses:
 Cost of service..........................................   148.1       92.5
 Selling, general and administrative......................   122.2       79.8
 Depreciation and amortization............................    60.6       35.1
                                                            ------     ------
  TOTAL OPERATING EXPENSES................................   330.9      207.4
                                                            ------     ------
  OPERATING LOSS..........................................   (42.6)     (26.3)
Nonoperating income (expense):
 Interest income..........................................    15.3        8.3
 Interest (expense).......................................   (31.0)     (29.5)
 Other income.............................................     (.2)        --
                                                            ------     ------
  TOTAL NONOPERATING INCOME (EXPENSE).....................   (15.9)     (21.2)
                                                            ------     ------
  LOSS BEFORE INCOME TAXES................................   (58.5)     (47.5)
Income taxes..............................................     ---        ---
                                                            ------     ------
  NET LOSS................................................  $(58.5)    $(47.5)
Preferred stock dividend..................................   (13.6)       ---
                                                            ------     ------
  NET LOSS APPLICABLE TO COMMON SHARES....................  $(72.1)    $(47.5)
                                                            ======     ======
Loss per common share.....................................  $(0.15)    $(0.12)
                                                            ======     ======
Weighted average common shares outstanding................   479.7      396.7
                                                            ======     ======

Other comprehensive income (loss), net of tax:
 Unrealized gains on securities:
  Unrealized holding gains (losses) arising during the
   period.................................................    20.0        8.2
  Less:  reclassification adjustment for gains included in
   net income.............................................     ---       (0.1)
                                                            ------     ------
  TOTAL OTHER COMPREHENSIVE INCOME (LOSS).................    20.0       (8.1)
                                                            ------     ------
  COMPREHENSIVE LOSS......................................  $(52.1)    $(39.4)
                                                            ======     ======
</TABLE>

* Loss per common share and weighted average common shares outstanding are
presented after giving effect for the three-for-one stock split effected in the
form of a dividend as described in Note 4.

      The accompanying notes are an integral part of these consolidated
                             financial statements

                                       4
<PAGE>

                    McLEODUSA INCORPORATED AND SUBSIDIARIES


                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In millions)

<TABLE>
<CAPTION>
                                                                                                        Three Months Ended
                                                                                                             March 31,
                                                                                                  ------------------------------
<S>                                                                                             <C>                   <C>
                                                                                                     2000                   1999
                                                                                                  -------                -------
Cash Flows from Operating Activities
 Net loss...............................................................................          $ (72.1)               $ (47.5)
 Adjustments to reconcile net loss to net cash provided by (used in) operating
  activities:
  Depreciation..........................................................................             35.1                   18.0
  Amortization..........................................................................             25.5                   17.1
  Accretion of interest on senior discount notes........................................             10.1                    9.3
  Changes in assets and liabilities, net of effects of acquisitions:
      (Increase) in trade receivables...................................................            (35.6)                 (17.0)
      (Increase) in inventory...........................................................             (2.4)                  (5.0)
      Decrease in deferred expenses.....................................................              2.2                    ---
      Decrease in prepaid expenses and other............................................             31.0                    5.6
      (Decrease) in deferred line installation costs....................................             (9.0)                  (2.5)
      (Decrease) in accounts payable and accrued expenses...............................            (26.0)                 (29.5)
      Increase in deferred revenue......................................................             14.3                    0.7
      Increase in customer deposits.....................................................              1.9                    2.6
                                                                                                  -------                -------
        NET CASH (USED IN) OPERATING ACTIVITIES.........................................            (25.0)                 (48.2)
                                                                                                  -------                -------
Cash Flows from Investing Activities
 Purchases of property and equipment....................................................           (239.4)                 (84.9)
 Available-for-sale securities:
  Purchases.............................................................................           (280.6)                (262.0)
  Sales.................................................................................              ---                   72.8
  Maturities............................................................................            759.4                   55.3
 Business Acquisitions..................................................................            (10.9)                (128.1)
 Other..................................................................................             (2.5)                  (2.5)
                                                                                                  -------                -------
        NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                         226.0                 (349.4)
                                                                                                  -------                -------
Cash Flows from Financing Activities
 Payments on contracts and notes payable................................................              ---                  (12.8)
 Net proceeds from preferred stock - Series B and C.....................................             (0.3)                  ----
 Net proceeds from long-term debt.......................................................              ---                  487.7
 Payments on long-term debt.............................................................             (8.4)                (118.5)
 Net proceeds from issuance of common stock.............................................             17.6                    1.5
                                                                                                  -------                -------
         NET CASH PROVIDED BY FINANCING ACTIVITIES......................................              8.9                  357.9
                                                                                                  -------                -------
         NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...........................            209.9                  (39.7)
Cash and cash equivalents:
 Beginning..............................................................................            326.9                  455.1
                                                                                                  -------                -------
 Ending.................................................................................          $ 536.8                $ 415.4
                                                                                                  =======                =======
Supplemental Disclosure of Cash Flow Information:
 Cash payment for interest..............................................................            $43.9                 $23.6
                                                                                                    =====                 =====
Supplemental Schedule of Noncash Investing and Financing Activities
 Capital leases incurred for the acquisition of property and equipment..................            $ 5.2                 $ 2.0
                                                                                                    =====                 =====
</TABLE>


       The accompanying notes are an integral part of these consolidated
                             financial statements

                                       5
<PAGE>

                    McLEODUSA INCORPORATED AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (Information as of and for the Three Months Ended
                     March 31, 2000 and 1999 is Unaudited)

Note 1:    Basis of Presentation

      Interim Financial Information (unaudited): The financial statements and
related notes as of March 31, 2000, and for the three month periods ended March
31, 2000 and 1999, are unaudited, but in the opinion of management include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our financial position and results of operations.  The
operating results for the interim periods are not indicative of the operating
results to be expected for a full year or for other interim periods.  Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to instructions, rules and regulations prescribed
by the Securities and Exchange Commission ("SEC").  Although we believe that the
disclosures provided are adequate to make the information presented not
misleading, we recommend that you read these consolidated condensed financial
statements in conjunction with the audited consolidated financial statements and
the related footnotes included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999, filed with the SEC on March 30, 2000.

      Reclassifications: Certain items in the unaudited statement of operations
for the three month period ended March 31, 1999 have been reclassified to be
consistent with the presentation in the March 31, 2000 unaudited financial
statements.

Note 2:    Supplemental Asset Data

      Cash and cash equivalents: For purposes of reporting cash flows, we
consider all highly liquid debt instruments purchased with a maturity of three
months or less and all certificates of deposit, regardless of maturity, to be
cash equivalents.

 Trade Receivables: The composition of trade receivables, net is as follows:

<TABLE>
<CAPTION>
                                                                      March 31,          December 31,
                                                                         2000                1999
                                                                        ------              ------
                                                                                 (In millions)
<S>                                                                    <C>                   <C>
Trade Receivables:
 Billed......................................................            $207.1             $165.7
 Unbilled....................................................              72.1               59.5
                                                                         ------             ------
                                                                          279.2              225.2
Allowance for doubtful accounts and discounts................             (47.4)             (41.4)
                                                                         ------             ------
                                                                         $231.8             $183.8
                                                                         ======             ======
</TABLE>

      Inventory: Inventory is carried principally at the lower of average cost
or market and consists primarily of new and reusable parts required to maintain
fiber optic networks and parts and equipment used in the maintenance and
installation of telephone systems.

      Goodwill: Goodwill resulting from our acquisitions is being amortized over
a range of 15 to 30 years using the straight-line method and is periodically
reviewed for impairment based upon an assessment of future operations to ensure
that it is appropriately valued. Accumulated amortization on goodwill totaled
$65.7 million and $52.1 million, at March 31, 2000 and December 31, 1999,
respectively.

                                       6
<PAGE>

      Other intangibles: Other intangibles consist of customer lists and
noncompete agreements related to our acquisitions, deferred line installation
costs incurred in the establishment of local access lines for customers and
franchise rights to provide cable services to customers in three Illinois
counties and in a Michigan city. The customer lists and noncompete agreements
are being amortized using the straight-line method over periods ranging from 3
to 15 years. The deferred line installation costs are being amortized using the
straight-line method over 36 to 60 months, which approximates the average lives
of residential and business customer contracts. The franchise rights are being
amortized using the straight-line method over periods ranging from 10 to 15
years. Accumulated amortization on the other intangibles totaled $72.8 million
and $60.7 million at March 31, 2000 and December 31, 1999, respectively.

Note 3:  Acquisitions

      Talking Directories, Inc. (Talking Directories) and Info America Phone
Books, Inc. (Info America): On February 10, 1999, we acquired Talking
Directories in exchange for 15.3 million shares of its Class A common stock, par
value $.01 per share ("Class A common stock") after giving effect to the three-
for-one stock split described in Note 4.  In a related and concurrent
transaction, on February 10, 1999, we acquired Info America in exchange for 7.2
million shares of its Class A common stock.  We also paid outstanding
obligations of Talking Directories and Info America of approximately $27
million.

      Dakota Telecommunications Group, Inc. (DTG): On March 5, 1999, we acquired
DTG in exchange for approximately $5.7 million shares of its Class A common
stock, after giving effect to the three-for-one stock split described in Note 4,
and the assumption of approximately $31 million in DTG debt.

      Ovation Communications, Inc. (Ovation): On March 31, 1999, we acquired
Ovation in exchange for approximately 33.6 million shares of its Class A common
stock, after giving effect to the three-for-one stock split described in Note 4,
and the payment of approximately $121.3 million in cash to the stockholders of
Ovation.  The total purchase price was approximately $310.2 million based on the
average closing price of our Class A common stock five days before and after the
date of the acquisition agreement. Approximately $105.6 million in Ovation debt
remained outstanding.

      Splitrock Services, Inc. ("Splitrock"): On March 30, 2000, we acquired
Splitrock pursuant to the Amended Plan of Merger dated February 11, 2000.  The
acquisition of Splitrock was effected through two separate but related
transactions: (1) a holding company reorganization, in which Splitrock Services,
Inc. became a wholly owned subsidiary of its former subsidiary, Splitrock
Holdings; and (2) a merger of Southside Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of McLeodUSA, with and into Splitrock
Holdings in which Splitrock Holdings was the surviving corporation and became a
wholly owned subsidiary of McLeodUSA.

     Pursuant to these transactions, each common stockholder of Splitrock
ultimately received 0.5347 of a share of Class A common stock of McLeodUSA in
exchange for each share of Splitrock common stock owned. We issued
approximately 93.2 million shares of Class A common stock, after giving effect
for the three-for-one stock split described in Note 4.  The total purchase price
was approximately $2.3 billion based on the average closing price of our Class A
common stock five days before and after January 6, 2000, the initial date of the
Merger Agreement. Approximately $261 million in Splitrock debt remains
outstanding. The purchase price includes approximately $29.4 million of direct
acquisition costs.

                                       7
<PAGE>

      The following table summarizes the purchase price allocations we incurred
for business acquisitions incurred in the three months ended March 31, 2000 and
1999 (in millions):

Transaction Year:                                 2000           1999
---------------------                           --------        -------
Cash purchase price                             $   10.8        $ 128.1
Acquisition costs                                   41.7             --
Promissory notes                                    38.4             --
Stock issued                                     1,832.4          347.1
Option agreements                                  103.3             --
                                                --------        -------
                                                $2,026.6        $ 475.2
                                                ========        =======

Working capital acquired, net                   $   15.8        $ (22.4)
Fair value of other assets acquired                184.1          127.0
Intangibles                                      2,117.4          525.2
Liabilities assumed                               (290.7)        (154.6)
                                                --------        -------
                                                $2,026.6        $ 475.2
                                                ========        =======

      These acquisitions have been accounted for as purchases and the results of
operations are included in the consolidated financial statements since the dates
of acquisition. All 2000 purchase price allocations are preliminary and subject
to revisions.

      The unaudited consolidated results of operations for the three months
ended March 31, 2000 on a pro forma basis as though the above entities had been
acquired as of the beginning of the period is as follows (in millions, except
per share data):

                                                               2000
                                                             -------
      Revenue.......................................         $ 323.3
      Net loss applicable to common shares..........          (136.5)
      Loss per common share.........................           (0.24)

     The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisitions been consummated as of the above dates, nor are
such operating results necessarily indicative of future operating results.

Note 4:  Common Stock Split

      On February 29, 2000, we announced a three-for-one stock split in the form
of a stock dividend on our Class A common stock. The record date for the stock
split was April 4, 2000 and the distribution of the additional shares took place
on April 24, 2000. All share data in the consolidated financial statements and
notes to the financial statements have been adjusted to reflect the stock split.

Note 5: Information by Business Segment

      We operate predominantly in the business of providing local, long distance
and related communications services to end users, selling advertising space in
telephone directories and supplying end to end data communications. The three
business segments have separate management teams and infrastructures that offer
different products and services. The principal elements of these segments are to
(1) provide integrated communications services, provide outstanding customer
service, expand fiber optic network, expand intra-city fiber network build, (2)
publish and distribute directories to local area subscribers, and (3) provide
end to end data communications. The acquisition of Splitrock on March 30, 2000
introduced our third business segment: end-to-end data communications services
on the Splitrock network. Since the data segment was part of McLeodUSA for only
one day in the first quarter ended March 31, 2000, operating statement
information for this segment has not been included in the segment information
table below.

      We evaluate the performance of our operating segments based on earnings
before interest, taxes, depreciation and amortization, excluding general
corporate expenses ("EBITDA"). The accounting policies of the reportable
segments are the same as those described in Note 1 of our Annual Report on

                                       8
<PAGE>

Form 10-K for the fiscal year ended December 31, 1999. Intersegment transfers
are accounted for on an arm's length pricing basis.

      Identifiable assets (excluding intersegment receivables) are our assets
that are identified in each business segment. Corporate assets primarily include
cash and cash equivalents, investments in available-for-sale securities,
administrative headquarters and goodwill recorded primarily as a result of the
acquisition of Consolidated Communications, Inc. in 1997, the acquisitions of
DTG and Ovation in 1999 and the acquisition of Splitrock in 2000.

      In the three months ended March 31, 2000 and 1999, no single customer or
group under common control represented 10% or more of our sales.

Segment information for the three months ended March 31, 2000 and 1999 was as
follows (in millions):

<TABLE>
<CAPTION>
                                    Telecommunications    Media           Data        Corporate        Total
                                   -------------------    -----           ----        ---------        -----
<S>                               <C>                   <C>            <C>         <C>              <C>
Three months ended
March 31, 2000
Revenues                           $     222.8          $    65.5       $    --     $         --    $     288.3
                                  ===============================================================================

EBITDA                             $      10.3          $    13.0       $    --     $       (5.3)   $      18.0
Depreciation and amortization            (37.0)              (7.4)           --            (16.2)         (60.6)
Interest Revenue                           0.4                0.1            --             14.8           15.3
Interest Expense                          (1.0)                --            --            (30.0)         (31.0)
Taxes and Other                           (2.3)                --            --              2.1           (0.2)
                                  -------------------------------------------------------------------------------
Net Income (Loss)                  $     (29.6)         $     5.7       $    --     $      (34.6)   $     (58.5)
                                  ===============================================================================

As of March 31, 2000
Total assets                       $   2,065.2          $   469.9        $264.9     $    3,730.1    $   6,530.1

Three months ended
March 31, 2000
Capital expenditures               $     243.0          $     1.0       $    --     $      266.1    $     510.1
</TABLE>

<TABLE>
<CAPTION>
                                    Telecommunications    Media           Data        Corporate        Total
                                   -------------------    -----           ----        ---------        -----
<S>                               <C>                   <C>            <C>         <C>              <C>

March 31, 1999
Revenues                           $     131.3          $    49.8       $    --     $         --    $     181.1
                                  ===============================================================================

EBITDA                             $       5.8          $     9.2       $    --     $       (6.2)   $       8.8
Depreciation and amortization            (19.5)              (9.6)           --             (6.0)         (35.1)
Interest Revenue                           0.3                 --            --              8.0            8.3
Interest Expense                          (1.4)                --            --            (28.1)         (29.5)
Taxes and Other                            0.3                 --            --             (0.3)            --
                                  -------------------------------------------------------------------------------
Net Income (Loss)                  $     (14.5)         $    (0.4)      $    --     $      (32.6)   $     (47.5)
                                  ===============================================================================

As of March 31, 1999
Total assets                       $   1,034.6          $   389.9       $    --     $    1,411.9    $   2,836.4

Three months ended
March 31, 1999
Capital expenditures               $     210.3          $   131.1       $    --     $      197.5    $     538.9

</TABLE>
Note 6: Subsequent Events

     On April 12, 2000 we announced that we received a commitment for $1 billion
of Senior Secured Credit Facilities (together the "Facilities") with a syndicate
of financial institutions.  The facilities are currently contemplated to consist
of (1) a seven year Senior Secured Revolving Facility with an aggregate
principal amount of $500 million (the "Revolving Facility), (2) a seven year
Senior Secured Multi-Draw Term Loan Facility with an aggregate principal amount
of $300 million ("Tranche A Term Facility"), and (3) an eight year single draw
Senior Secured Term Loan with an aggregate principal amount of $200 million
("Tranche B Term Facility").  The Tranche A Term Facility is expected to provide
for multiple ($50 million minimum) draws for the first 24 months of the
agreement at which time any undrawn commitments expire.

     The Facilities are to be secured by 1) a first priority pledge of all the
capital stock owned by us and by each subsidiary, and 2) a perfected first
priority security interest in substantially all our tangible

                                       9
<PAGE>

and intangible assets and, to the extent of $100 million, by each subsidiary. In
addition, telecommunications assets acquired with proceeds from the facilities
will serve as collateral.

     Interest on the Facilities is payable quarterly and variable at LIBOR plus
1% to LIBOR plus 3.25% based on the Company's debt rating.  At our current debt
rating, interest rates contemplated are LIBOR plus 2.25% on the Revolving
Facility and Tranche A Term Facility, and LIBOR plus 3.00% on the Tranche B Term
Facility.  A commitment fee of 0.5% to 1.0% will be charged on the undrawn
portion of the commitment relating to the Revolving Facility and the Tranche A
Term Facility. We will be expected to maintain certain financial covenants
requiring minimum access lines, debt to capital and debt to EBITDA ratios.

     In connection with the Splitrock acquisition, approximately $261 million in
Splitrock debt remains outstanding.  The merger constituted a change of control
as defined in the Indenture for the Splitrock Senior Notes payable.  Therefore,
Splitrock was required under the Indenture to make an offer within 30 days of
the change of control to repurchase all of the Splitrock Senior Notes properly
tendered at a price equal to 101% of the principal amount plus accrued and
unpaid interest to the date of repurchase.  On April 12, 2000, Splitrock mailed
the appropriate notice to the holders of the Senior Notes.  The note holders had
until May 12, 2000 to exercise their rights under this notice.  Security holders
with a principal amount of $100,000 exercised their option rights under this
notice and have until May 16, 2000 to revoke any such election.

                                       10
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

     Statements included in this discussion relating, but not limited, to future
revenues, operating expenses, capital requirements, growth rates, cash flows,
operational performance, sources and uses of funds, acquisitions, technological
changes and development of a PCS system, are forward-looking statements that
involve certain risks and uncertainties.  Factors that may cause the actual
results, performance, achievements or investments expressed or implied by such
forward-looking statements to differ materially from any future results,
performance, achievements or investments expressed or implied by such forward-
looking statements include, among other things, the availability of financing
and regulatory approvals, the number of potential customers in a target market,
the existence of strategic alliances and relationships, technological,
regulatory or other developments in the Company's business, the ability of the
Company and its third party vendors to maintain Year 2000 readiness in computer
systems, changes in the competitive climate in which the Company operates and
the emergence of future opportunities and other factors more fully described
under the caption "Business--Risk Factors" in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, filed with the Securities
and Exchange Commission on March 30, 2000 and which section is incorporated
herein by reference.

     Unless otherwise indicated, all dollar amounts in the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations that exceed $1 million have been rounded to one decimal place and all
dollar amounts less than $1 million have been rounded to the nearest thousand.
All share data in the consolidated financial statements and notes to the
financial statements have been adjusted to reflect the April 24, 2000 three-for-
one stock split of our Class A common stock.

Overview

     We derive most of our revenue from:

     .  our core business of providing local, long distance and related
        communications services to end users, typically in a bundled package
     .  the sale of advertising space in telephone directories

     .  traditional local telephone company services through the operations of
        Illinois Consolidated Telephone Company ("ICTC") in east central
        Illinois and Dakota Telecommunications Group, Inc. in southeast South
        Dakota

     .  communications facilities and services dedicated for a particular
        customer's use

     We also derive revenue from:

     .  communications network maintenance services
     .  telephone equipment sales, leasing, service and installation
     .  video services
     .  telemarketing services
     .  computer networking services
     .  other communications services, including cellular, operator, payphone,
        and paging services

     The table set forth below summarizes our percentage of revenues from these
sources:

                                       11
<PAGE>

                                                         Quarter Ended March 31,
                                                        ------------------------
                                                        2000               1999
                                                        ----               ----
Local and long distance communications services.....      53%                45%
Telephone directory advertising.....................      22                 27
Traditional local telephone company services........       8                 10
Special access, private line and data services......       9                  8
Network maintenance and equipment services..........       3                  5
Telemarketing services..............................       2                  3
Other communications services.......................       3                  2
                                                        ----               ----
                                                         100%               100%
                                                        ====               ====

     We began offering local and long distance services to business customers in
January 1994.  In June 1996, we began marketing and providing to residential
customers in Cedar Rapids, Iowa and Iowa City, Iowa an integrated package of
communications services that includes local and long distance service, voice
mail, Internet access and travel card services.  Since June 1996, we have
expanded the states in which we offer service to business customers to include
Iowa, Illinois, Indiana, Michigan, Minnesota, Nebraska, Wisconsin, North Dakota,
South Dakota, Colorado, Missouri, Utah, Washington, Ohio and Wyoming.  We also
expanded our residential service to additional cities in Iowa and Illinois and
began offering the service to customers in North Dakota, South Dakota,
Wisconsin, Wyoming, Colorado, and Michigan.  We plan to continue our efforts to
market and provide local, long distance and other communications services to
business customers and market our service to residential customers.

     Our principal operating expenses consist of cost of service; selling,
general and administrative expenses ("SG&A"); and depreciation and amortization.
Cost of service primarily includes local services purchased from the MegaBells,
costs to terminate the long distance calls of our customers through long
distance carriers, costs of printing and distributing telephone directories and
costs associated with maintaining the Iowa Communications Network.  The Iowa
Communications Network is a fiber optic communications network that links many
schools, libraries and other public buildings in the state of Iowa.  SG&A
consist of sales and marketing, customer service and administrative expenses,
including the costs associated with operating our communications network.
Depreciation and amortization include depreciation of our telecommunications
network and equipment; amortization of goodwill and other intangibles related to
our acquisitions, amortization expense related to the excess of estimated fair
market value in aggregate of options over the aggregate exercise price of such
options granted to some of our officers, other employees and directors; and
amortization of one-time installation costs associated with transferring
customers' local line service from the regional Bell operating companies to our
local telecommunications service.

     As we expand into new markets, both cost of service and SG&A will increase.
We expect to incur cost of service and SG&A expenses before achieving
significant revenues in new markets.  Fixed costs related to leasing of central
office facilities needed to provide telephone services must be incurred prior to
generating revenue in new markets, while significant levels of marketing
activity may be necessary in the new markets in order for us to build a customer
base large enough to generate sufficient revenue to offset such fixed costs and
marketing expenses.

     We have experienced operating losses since our inception as a result of
efforts to build our customer base, develop and construct our communications
network infrastructure, build our internal staffing, develop our systems and
expand into new markets.  We expect to continue to focus on increasing our
customer base and geographic coverage and bringing our customer base onto our
communications network.  Accordingly, we expect that our cost of service, SG&A
and capital expenditures will continue to increase significantly, all of which
may have a negative impact on operating results.

     In addition, our projected increases in capital expenditures will continue
to generate negative cash flows from construction activities during the next
several years while we install and expand our fiber optic communications network
and develop wireless services.  We may also be forced to change our pricing
policies to respond to a changing competitive environment, and we cannot assure
you that we will be able to maintain our operating margin.  We cannot assure you
that growth in our revenue or customer base will continue or that we will be
able to achieve or sustain profitability or positive cash flows.

                                       12
<PAGE>

     We have generated net operating losses since our inception and,
accordingly, have incurred no income tax expense.  We have reduced the net
deferred tax assets generated by these losses by a valuation allowance which
offsets the net deferred tax asset due to the uncertainty of realizing the
benefit of the tax loss carry forwards.  We will reduce the valuation allowance
when, based on the weight of available evidence, it is more likely than not that
some portion or all of the deferred tax assets will be realized.

Three Months Ended March 31, 2000 Compared with Three Months Ended March 31,
1999

     Total revenue increased from $181.1 million for the three months ended
March 31, 1999 to $288.3 million for the three months ended March 31, 2000,
representing an increase of $107.2 million or 59%.  The increase was due to the
acquisitions completed in 1999 as well as the increase in local and long
distance customers.  Revenue from the sale of local and long distance
telecommunications services accounted for $73.1 million of the increase,
including $44.2 million contributed by Dakota Telecommunications Group, Inc.
("DTG"), Ovation Communications, Inc. ("Ovation"), and Access Communications
Holding, Inc. and S.J. Investments Holdings, Inc. (together, "Access") which we
acquired on March 5, 1999, March 31, 1999 and August 13, 1999, respectively.
Local exchange services generated $3.9 million in additional revenues over the
same period in 1999, including $2.5 million contributed by DTG.  Private line
and data revenues accounted for $10.9 million of increased revenues over 1999,
including $9.2 million contributed by DTG, Ovation and Access.  Network
maintenance and equipment revenue increased $1.1 million over 1999, including
$0.5 million contributed by DTG.  Other telecommunications revenue increased
$1.9 million when compared to the same period in 1999, which was primarily
attributable to the DTG, Ovation and Access acquisitions.  Directory revenues
increased $15.4 million from the first quarter of 1999 to the first quarter of
2000 due mainly to revenues from new directories acquired in 1999.
Telemarketing revenues in the first quarter of 2000 increased $0.9 million when
compared to the same period in 1999.

     Cost of service increased from $92.5 million for the three months ended
March 31, 1999, to $148.1 million for the three months ended March 31, 2000,
representing an increase of $55.6 million or 60%.  This increase in cost of
service was due primarily to the growth in our local and long distance
telecommunications and to the acquisitions of DTG, Ovation and Access which
contributed an aggregate of $25.7 million to the increase.  Cost of service as a
percentage of revenue remained consistent at 51% for the three months ended
March 31, 1999 and for the three months ended March 31, 2000.

     SG&A increased from $79.8 million for the three months ended March 31, 1999
to $122.2 million for the three months ended March 31, 2000, an increase of
$42.4 million or 53%.  Our acquisitions of Talking Directories Inc. and Info
America Phone Books, Inc. (together, "Talking Directories"), DTG, Ovation and
Access contributed to the increase.  Also contributing to this increase were
increased costs related primarily to expansion of selling, customer support and
administrative activities to support our growth.

     Depreciation and amortization expenses increased from $35.1 million for the
three months ended March 31, 1999 to $60.6 million for the three months ended
March 31, 2000, representing an increase of $25.5 million or 73%.  This increase
related to the acquisitions of Talking Directories, DTG, Ovation and Access and
to the growth of our network.

     Interest income increased from $8.3 million for the three month period
ended March 31, 1999, to $15.3 million for the same period in 2000.  This
increase resulted from a higher average investment balance during 2000.

     Gross interest expense increased from $33.7 million for the first quarter
of 1999 to $41.2 million for the first quarter of 2000.  This increase was
primarily a result of an increase in the accretion of interest on our 10  1/2%
senior discount notes of $1.0 million and an increase of interest of $5.9
million primarily as the result of the issuance of our 8 1/8% senior notes in
February 1999.  Interest expense of approximately $10.2 and $4.2 million was
capitalized as part of our construction of fiber optic network during the first
quarter of 2000 and 1999, respectively.

     Net loss applicable to common shares increased from $47.5 million for the
three months ended March 31, 1999 to $72.1 million for the three months ended
March 31, 2000, an increase of $24.6 million. This increase resulted primarily
from the following four factors: (1) the expansion of our local and long

                                       13
<PAGE>

distance services, which requires significant expenditures, a substantial
portion of which is incurred before the realization of revenues; (2) the
increased depreciation expense related to the construction and expansion of our
communications networks and amortization of intangibles related to acquisitions;
(3) net interest expense on indebtedness to fund market expansion, network
development and acquisitions, and (4) dividends on preferred stock issued.

Liquidity and Capital Resources

     Our total assets increased from $4.2 billion at December 31, 1999 to $6.5
billion at March 31, 2000.  The increase is primarily due to the acquisition
related intangibles of approximately $2.1 billion resulting from the acquisition
of Splitrock.  At March 31, 2000, our current assets of $1,396.9 million
exceeded our current liabilities of $415.1 million, providing working capital of
$981.8 million, which represents a decrease in working capital of $291.0 million
compared to December 31, 1999.  At December 31, 1999, our current assets of
$1,569.5 million exceeded current liabilities of $296.7 million, providing
working capital of $1,272.8 million.

     The net cash used in operating activities totaled $25.0 million for the
three months ended March 31, 2000 and $48.2 million for the three months ended
March 31, 1999.  During the three months ended March 31, 2000, cash used in
operating activities was used primarily to fund our net loss of $72.1 million
for such period.   Primarily as a result of the expansion of our local and long
distance communications services, we also required cash to fund:

     .    growth in trade receivables of $35.6 million
     .    growth in inventory of $2.4 million
     .    decreases in deferred line installation costs of $9.0 million
     .    decreases in accounts payable and accrued expenses of $26.0 million

These amounts were partially offset by:

     .    decreases in prepaid and other expenses of $31.0 million
     .    decreases in deferred expenses of $2.2 million
     .    increases in deferred revenue of $14.3 million
     .    increases in customer deposits of $1.9 million
     .    cumulative non-cash expenses of $70.7 million

During the three months ended March 31, 1999, cash for operating activities was
used primarily to fund our net loss of $47.5 million for such period. We also
required cash to fund the growth in trade receivables, inventory and deferred
line installation costs of $17.0 million, $5.0 million and $2.5 million,
respectively, and to decrease accounts payable and accrued expenses of $29.5
million.  These uses of cash for operating activities during the three months
ended March 31, 1999, were offset by a decrease in prepaid expenses of $5.6
million and increases in deferred revenue and customer deposits of $0.7 million
and $2.6 million, respectively, and cumulative non-cash expenses of $44.4
million.

     Our investing activities provided cash of $226.0 million during the three
months ended March 31, 2000 and used cash of $349.4 million during the three
months ended March 31, 1999.  The equipment required for the expansion of our
local and long distance telecommunications services, our development and
construction of fiber optic telecommunications network and other capital
expenditures resulted in purchases of equipment and fiber optic cable and other
property and equipment totaling $239.4 million and $84.9 million during the
three months ended March 31, 2000 and 1999, respectively. We also used cash of
$280.6 million and $262.0 million to acquire available-for-sale securities
during the first three months of 2000 and 1999, respectively, offset by proceeds
from sales and maturities of available-for-sale securities of $759.4 million and
$128.1 million, respectively, during those periods.

     During the three months ended March 31, 2000 and March 31, 1999, we used
aggregate cash of $10.9 million and $128.1 million, respectively, to acquire
various directories and other telecommunication businesses.

                                       14
<PAGE>

     Net cash received from financing activities was $8.9 million during the
three months ended March 31, 2000.  Net cash received from financing activities
during the three months ended March 31, 1999 was $357.9 million and was
primarily obtained from our offering of our 8 1/8% senior notes in February
1999.

     On February 22, 1999, we completed an offering of $500.0 million aggregate
principal amount of our 8 1/8% senior notes in which we received net proceeds of
approximately $485.8 million.  Interest on the 8 1/8% senior notes is payable in
cash semi-annually in arrears on February 15 and August 15.

     Our 10  1/2% senior discount notes, 9  1/4% senior notes, 8 3/8% senior
notes, 9  1/2% senior notes and 8 1/8% senior notes are senior unsecured
obligations of McLeodUSA Incorporated, the parent company, ranking pari passu in
right of payment with all other existing and future senior unsecured obligations
of McLeodUSA and senior to all existing and future subordinated debt of
McLeodUSA.  The 10 1/2% senior discount notes, 9  1/4% senior notes, 8 3/8%
senior notes, 9  1/2% senior notes and 8 1/8% senior notes are effectively
subordinated to all existing and future secured indebtedness of McLeodUSA and
our subsidiaries to the extent of the value of the assets securing such
indebtedness.  The 10  1/2% senior discount notes, 9  1/4% senior notes, 8 3/8%
senior notes, 9  1/2% senior notes and 8 1/8% senior notes also are effectively
subordinated to all existing and future third-party indebtedness and other
liabilities of our subsidiaries.

     The indentures governing our 10  1/2% senior discount notes, 9  1/4% senior
notes, 8 3/8% senior notes, 9  1/2% senior notes and 8 1/8% senior notes impose
operating and financial restrictions on our subsidiaries and us.  These
restrictions affect, and in many cases significantly limit or prohibit, among
other things, our subsidiaries' ability to:

     .    incur additional indebtedness
     .    pay dividends or make distributions in respect of our or our
          subsidiaries' capital stock
     .    redeem capital stock
     .    make other restricted payments
     .    enter into sale and leaseback transactions
     .    create liens upon assets
     .    enter into transactions with affiliates or related persons
     .    sell assets
     .    consolidate, merge or sell all or substantially all of our assets

  Approximately $261.0 million of public debt at Splitrock remains outstanding
after our acquisition of Splitrock.  The Splitrock indenture provides for
redemption of their Senior Notes at any time, in whole or in part, on or after
July 15, 2003 at a premium through July 15, 2005.  The Splitrock Senior Note
indenture also restricts Splitrock's ability to incur additional indebtedness,
to create liens or other encumbrances, to make certain payments, investments,
loans and guarantees and to sell or otherwise dispose of a substantial portion
of assets to, or merge or consolidate with, an unaffiliated entity.

     We cannot assure you that such covenants in our various indentures will not
adversely affect our ability to finance our future operations or capital needs
or to engage in other business activities that may be in our interests.

     As of March 31, 2000 based on our business plan, capital requirements and
growth projections as of that date, we estimated that we would require
approximately $2.0 billion through 2002.  Our estimated aggregate capital
requirements include the projected costs of:

     .  building our fiber optic communications network, including intra-city
        fiber optic communications networks

     .  adding voice and ATM switches

     .  expanding operations in existing and new markets

     .  developing wireless services

     .  funding general corporate expenses

     .  completing recent acquisitions

                                       15
<PAGE>

     .  constructing, acquiring, developing or improving telecommunications
        assets

     The estimated costs and incremental capital needs associated with the
acquisition of Splitrock are included in our estimated aggregate capital
requirements.

     We expect to use the following to address our capital needs:

     .  approximately $1,029.8 million of cash and investments on hand at March
        31, 2000

     .  additional issuance of debt or equity securities, including the
        commitment for approximately $1.0 billion in Senior Secured Credit
        Facilities as discussed in Note 6 of Part I, Item 1

     .  projected operating cash flow

     Our estimate of future capital requirements is a forward-looking statement
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.  The actual amount and timing of our future
capital requirements may differ substantially from our estimate due to factors
such as:

     .  strategic acquisition costs and effects of acquisitions on our business
        plan, capital requirements and growth projections

     .  unforeseen delays

     .  cost overruns

     .  engineering design changes

     .  changes in demand for our services

     .  regulatory, technological or competitive developments

     .  new opportunities

     We also expect to evaluate potential acquisitions, joint ventures and
strategic alliances on an ongoing basis.  We may require additional financing if
we pursue any of these opportunities.  Accordingly, we may need additional
capital to continue to expand our markets, operations, facilities, network and
services.

     We may meet any additional capital needs by issuing additional debt or
equity securities or borrowing funds from one or more lenders.  We cannot assure
you that we will have timely access to additional financing sources on
acceptable terms.

     Failure to generate or raise sufficient funds may require us to delay or
abandon some of our expansion plans or expenditures, which could have a material
adverse effect on our business, results of operations or financial condition.
See "Business--Risk Factors--Failure to Raise Necessary Capital Could Restrict
Our Ability to Develop Our Network and Services and Engage in Strategic
Acquisitions" in our Annual Report on Form 10-K.

Market Risk

     At March 31, 2000, we recorded the marketable equity securities that we
hold at a fair value of $108.3 million.  These securities have exposure to price
risk.  A hypothetical ten percent adverse change in quoted market prices would
amount to a decrease in the recorded value of investments of approximately $10.8
million.  We believe our exposure to market price fluctuations on all other
investments is nominal due to the short-term nature of our investment portfolio.

     We have no material future earnings or cash flow exposures from changes in
interest rates on our long-term debt obligations, as substantially all of our
long-term debt obligations are fixed rate obligations.

Year 2000 Date Conversion

     The Year 2000 conversion issue, which involved the millennial date change
from 1999 to 2000, threatened to impact computer programs and hardware timers
using two digits (rather than four) to define the applicable year.  Prior to the
end of 1999, we completed our review of our system readiness for the

                                       16
<PAGE>

processing of date-sensitive information by our computerized information
systems. Upon the occurrence of the millennial date change, none of our computer
systems appeared to suffer material adverse effects from the Year 2000
conversion.

     We incurred costs arising from our Year 2000 readiness process in the
amount of $6.3 million.  Our review and related Year 2000 readiness activities
did not cause us to defer or forego, to any material degree, any other critical
Information Technology project.

     You should be aware that there is the possibility of latent defects or
issues related to the Year 2000 conversion issue that could result in future
miscalculations or system failures.  If we, our major vendors, our material
service providers or our customers fail to identify and address any latent Year
2000 issues in a timely manner, such failure could have a material adverse
effect on our business, results of operations and financial condition.  We
depend on local exchange carriers, primarily the MegaBells, to provide most of
our local and some of our long distance services.  To the extent US West and
SBC/Ameritech fail to address latent Year 2000 issues which might interfere with
their ability to fulfill their obligations to us, such interference could have a
material adverse effect on our future operations.  If other telecommunications
carriers are unable to resolve such issues, it is likely that we will be
affected to a similar degree as others in the telecommunications industry.


Effects of New Accounting Standards

Accounting for Derivative Instruments and Hedging Activities

     Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities", as amended, is effective for
fiscal years beginning after June 15, 2000.  SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and hedging activities by
requiring that entities recognize all derivatives as either assets or
liabilities at fair market value on the balance sheet.  The Company does not
expect the impact of the adoption of SFAS No. 133 to be material to its results
of operations as it does not currently hold any derivative instruments or engage
in hedging activities.

Revenue Recognition

     The effective date for Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition" has been delayed and is effective beginning in the second quarter
of 2000.  SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements.  Management believes that this
statement will not have a material effect on results of operations and financial
position of the Company.

Inflation

     We do not believe that inflation has had a significant impact on our
consolidated operations.

                                       17
<PAGE>

                                    PART II

                               OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

     During the period from January 1, 2000 through March 31, 2000, we issued
and sold the following equity securities not registered under the Securities Act
of 1933, as amended:

        (1) On January 5, 2000, we issued 239,475 shares of Class A common stock
in connection with our acquisition of certain assets of Noverr Publishing, Inc.
("Noverr"). We had previously agreed on May 29, 1999 to purchase four
directories and certain assets of Noverr for a total purchase price of $22.3
million, which consisted of 239,475 shares of Class A common stock, after giving
effect for the three-for-one stock split described in Note 4 to the financial
statements, $19.4 million in cash and note payable and an option to purchase
300,000 shares of Class A common stock, after giving effect for the three-for-
one stock split described in Note 4 to the financial statements.

        (2) On March 21, 2000, we issued 46,272 shares of Class A common stock
in connection with our acquisition of certain assets of Millennium Group
Telemanagement, LLC ("Millennium"). We had previously agreed on June 8, 1999, to
purchase certain assets of Millennium and assume certain liabilities of
Millennium for a total purchase price of $7.0 million. The purchase price
consisted of $3.5 million in cash and the issuance or commitment to issue
385,590 shares of Class A common stock, after giving effect for the three-for-
one stock split described in Note 4 to the financial statements, of which
208,218 shares were issued June 8, 1999 and 131,100 were issued on September 28,
1999.

        (3) On February 25, 2000, we acquired certain assets of University
System Technology in exchange for 103,125 shares of our Class A common stock,
after giving effect for the three-for-one stock split described in Note 4 to the
financial statements.

The issuance of securities described above were made in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act or
Regulation D promulgated thereunder for transactions by an issuer not involving
any public offering.  The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for distribution in connection with such transactions.
All recipients had adequate access to information about us through their
relationship with us or through information about us made available to them.

Item 4.  Submission of Matters to a Vote of Security Holders

     We held a special meeting of stockholders on March 30, 2000.  Both
proposals presented for stockholder consideration were approved at the meeting.
The following is a tabulation of the voting on each proposal presented at the
meeting:

Proposal 1 - Amend the Certificate of Incorporation to Increase the Number of
Authorized Shares of Class A Common Stock to 1,000,000,000

     Votes for           406,937,682
     Votes Against       3,930,129
     Votes Withheld      108,867
     Broker Non-Votes    0

Proposal 2 - Approve the Issuance of Shares pursuant to Amended and Restated
Agreement and Plan of Merger with Splitrock Services, Inc.

     Votes for           410,746,626
     Votes Against       109,269
     Votes Withheld      120,786
     Broker Non-Votes    0

     The votes indicated give effect to the three-for-one stock split described
in Note 4 to the financial statements.

                                       18
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

Exhibit
-------
Number  Exhibit Description
------  -------------------

3.1   Amended and Restated Certificate of Incorporation of McLeod, Inc. Filed as
      an exhibit to the McLeodUSA Registration Statement on Form S-1, file no.
      333-3112, and incorporated herein by reference.
3.3   Certificate of Amendment of Amended and Restated Certificate of
      Incorporation of McLeod, Inc. Filed as an exhibit to the McLeodUSA
      Registration Statement on Form S-4, file no. 333-27647, and incorporated
      herein by reference.
3.4   Certificate of Change of Registered Agent and Registered Office of
      McLeodUSA Incorporated. Filed as an exhibit to the McLeodUSA Annual Report
      on Form 10-K, file no. 0-20763, filed with the SEC on March 6, 1998 and
      incorporated herein by reference.
3.5   Certificate of Designations of the 6.75% Series A preferred stock.  Filed
      as an exhibit to the McLeodUSA Current Report on Form 8-K, file no. 0-
      20763, filed with the SEC on August 9, 1999 and incorporated herein by
      reference.
3.6   Certificate of Designations of the Series B preferred stock.  Filed as an
      exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
      95941, and incorporated herein by reference.
3.7   Certificate of Designations of the Series C preferred stock.  Filed as an
      exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
      95941, and incorporated herein by reference.
3.8   Amendment dated March 30, 2000 to Amended and Restated Certificate of
      Incorporation of McLeodUSA Incorporated.
4.26  Stockholders' Agreement dated as of March 30, 2000 by and among McLeodUSA,
      Kwok Li and Linsang Partners, LLC.
4.27  Third Amended and Restated November 1998 Stockholders' Agreement dated as
      of March 10, 2000 by and among certain Alliant Entities, Clark and Mary
      McLeod, Richard Lumpkin and certain CCI Shareholders.
4.28  Third Amended and Restated January 1999 Stockholders' Agreement dated as
      of March 10, 2000 by and among certain Alliant Entities, Clark and Mary
      McLeod, Richard Lumpkin, certain CCI Shareholders and the M/C
      Stockholders.
4.29  Indenture dated as of July 24, 1998 between Harris Trust Company of New
      York (formerly Bank of Montreal Trust Company) and Splitrock Services,
      Inc. relating to 11 3/4% Senior Notes due 2008. Filed as an exhibit to
      Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
      incorporated herein by reference.
4.30  Specimen 11  3/4% Senior Note due 2008. Filed as an exhibit to Splitrock's
      Registration Statement on Form S-4, file no. 333-61293, and incorporated
      herein by reference.
4.31  First Supplemental Indenture dated as of November 24, 1999 between Harris
      Trust Company of New York and Splitrock relating to 11 3/4% Senior Notes
      due 2008. Filed as an exhibit to Splitrock's Post-effective Amendment on
      Form S-3 to its Registration Statement on Form S-1, file no. 333-63001,
      and incorporated herein by reference.
4.32  Second Supplemental Indenture dated as of December 22, 1999 between Harris
      Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating
      to 11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
      effective Amendment on Form S-3 to its Registration Statement on Form S-1,
      file no. 333-63001, and incorporated herein by reference.
4.33  Third Supplemental Indenture dated as of February 11, 2000 between Harris
      Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating
      to 11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
      effective Amendment on Form S-3 to its Registration Statement on Form S-1,
      file no. 333-63001, and incorporated herein by reference.
4.34  Warrant Agreement dated as of July 29, 1998 by and between Harris Trust
      Company of New York (formerly Bank of Montreal Trust Company) and
      Splitrock Services, Inc. Filed as an exhibit to Splitrock's Registration
      Statement on Form S-4, file no. 333-61293, and incorporated herein by
      reference.
4.35  Form of Splitrock Warrant.  Filed as an exhibit to Splitrock's
      Registration Statement on Form S-4, file no. 333-61293, and incorporated
      herein by reference.
4.36  First Supplemental Warrant Agreement by and between Splitrock Services,
      Inc. and Harris Trust Company of New York, dated as of February 24, 2000.
      Filed as an exhibit to Splitrock's Post-effective Amendment on Form S-3 to
      its Registration Statement on Form S-1, file no. 333-63001, and
      incorporated herein by reference.

                                       19
<PAGE>

4.37  Second Supplemental Warrant Agreement by and between Splitrock Services,
      Inc., Splitrock Holdings, Inc. and Harris Trust Company of New York, dated
      as of March 30, 2000.

4.38  Third Supplemental Warrant Agreement by and between Splitrock Services,
      Inc., Splitrock Holdings, Inc., McLeodUSA Incorporated and Harris Trust
      Company of New York, dated as of March 30, 2000.

10.58 Splitrock Full Service Agreement dated as of June 24, 1997 by and between
      Splitrock and Prodigy Services Corporation. Filed as an exhibit to
      Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
      incorporated herein by reference. *

10.59 Amendment to Full Service Agreement between Splitrock and Prodigy dated
      May 18, 1999. Filed as an exhibit to Splitrock's Registration Statement on
      Form S-1, file no. 333-97707, and incorporated herein by reference. *

10.60 Amended and Restated Full Service Agreement between Splitrock and Prodigy
      dated as of February 16, 2000. Filed as an exhibit to Splitrock's
      Quarterly Report on Form 10-Q, file no. 000-26827, filed with the SEC on
      May 15, 2000 and incorporated herein by reference. *

10.61 Cost Sharing National IRU Agreement effective April 26, 1999 by and
      between Level 3 Communications, LLC and Splitrock.  Filed as an exhibit to
      Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
      incorporated herein by reference. *

10.62 First Amendment to Cost Sharing National IRU Agreement by and between
      Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
      Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
      incorporated herein by reference. *

10.63 Second Amendment to Cost Sharing National IRU Agreement by and between
      Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
      Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
      the SEC on May 15, 2000 and incorporated herein by reference. *

10.64 Third Amendment to Cost Sharing National IRU Agreement by and between
      Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
      Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
      the SEC on May 15, 2000 and incorporated herein by reference. *

11.1  Statement regarding computation of loss per common share.
27.1  Financial Data Schedule.

----------
*  Confidential treatment has been requested.  The copy filed as an exhibit
omits the information subject to the confidential treatment requested.

     (b)  Reports on Form 8-K

     On January 19, 2000, we filed a Current Report on Form 8-K to announce that
on January 6, 2000 we entered into an agreement and Plan of Merger with
Splitrock Services, Inc., a Delaware corporation.

     On January 21, 2000, we filed a Current Report on Form 8-K to make various
slides regarding the proposed acquisition of Splitrock Services, Inc. available.

     On February 3, 2000, we filed a Current Report on Form 8-K to report
results for the fourth quarter and fiscal year 1999.

     On February 11, 2000, we filed a Current Report on Form 8-K to report that
our chairman and CEO and his wife sold shares of McLeodUSA stock.

     On March 14, 2000, we filed a Current Report on Form 8-K to announce that
the Board of Directors had declared a three-for-one stock split of our Class A
common stock to be effected in the form of a stock dividend.

                                       20
<PAGE>

                                   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 thereunto duly authorized.

                                     McLEODUSA INCORPORATED
                                     (registrant)



Date:  May 15, 2000                  By:         /s/ Stephen C. Gray
                                                 -------------------
                                                   Stephen C. Gray
                                        President and Chief Operating Officer


Date:  May 15, 2000                  By:         /s/ J. Lyle Patrick
                                                 -------------------
                                                    J. Lyle Patrick
                                               Chief Financial Officer

                                       21
<PAGE>

                                INDEX TO EXHIBITS

                                                                    Sequentially
                                                                    ------------
Exhibit                                                                Numbered
---------                                                           ------------
Number     Exhibit Description                                           Page
------     -------------------                                      ------------

3.1  Amended and Restated Certificate of Incorporation of McLeod, Inc. Filed as
     an exhibit to the McLeodUSA Registration Statement on Form S-1, file no.
     333-3112, and incorporated herein by reference.
3.3  Certificate of Amendment of Amended and Restated Certificate of
     Incorporation of McLeod, Inc. Filed as an exhibit to the McLeodUSA
     Registration Statement on Form S-4, file no. 333-27647, and incorporated
     herein by reference.
3.4  Certificate of Change of Registered Agent and Registered Office of
     McLeodUSA Incorporated. Filed as an exhibit to the McLeodUSA Annual Report
     on Form 10-K, file no. 0-20763, filed with the SEC on March 6, 1998 and
     incorporated herein by reference.
3.5  Certificate of Designations of the 6.75% Series A preferred stock. Filed as
     an exhibit to the McLeodUSA Current Report on Form 8-K, file no. 0-20763,
     filed with the SEC on August 9, 1999 and incorporated herein by reference.
3.6  Certificate of Designations of the Series B preferred stock. Filed as an
     exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
     95941, and incorporated herein by reference.
3.7  Certificate of Designations of the Series C preferred stock. Filed as an
     exhibit to the McLeodUSA Registration Statement on Form S-4, file no. 333-
     95941, and incorporated herein by reference.
3.8  Amendment dated March 30, 2000 to Amended and Restated Certificate of
     Incorporation of McLeodUSA Incorporated.
4.26 Stockholders' Agreement dated as of March 30, 2000 by and among McLeodUSA,
     Kwok Li and Linsang Partners, LLC.
4.27 Third Amended and Restated November 1998 Stockholders' Agreement dated as
     of March 10, 2000 by and among certain Alliant Entities, Clark and Mary
     McLeod, Richard Lumpkin and certain CCI Shareholders.
4.28 Third Amended and Restated January 1999 Stockholders' Agreement dated as of
     March 10, 2000 by and among certain Alliant Entities, Clark and Mary
     McLeod, Richard Lumpkin, certain CCI Shareholders and the M/C Stockholders.
4.29 Indenture dated as of July 24, 1998 between Harris Trust Company of New
     York (formerly Bank of Montreal Trust Company) and Splitrock Services, Inc.
     relating to 11 3/4% Senior Notes due 2008. Filed as an exhibit to
     Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
     incorporated herein by reference.
4.30 Specimen 11 3/4% Senior Note due 2008. Filed as an exhibit to Splitrock's
     Registration Statement on Form S-4, file no. 333-61293, and incorporated
     herein by reference.
4.31 First Supplemental Indenture dated as of November 24, 1999 between Harris
     Trust Company of New York and Splitrock relating to 11 3/4% Senior Notes
     due 2008. Filed as an exhibit to Splitrock's Post-effective Amendment on
     Form S-3 to its Registration Statement on Form S-1, file no. 333-63001, and
     incorporated herein by reference.
4.32 Second Supplemental Indenture dated as of December 22, 1999 between Harris
     Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating to
     11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
     effective Amendment on Form S-3 to its Registration Statement on Form S-1,
     file no. 333-63001, and incorporated herein by reference.
4.33 Third Supplemental Indenture dated as of February 11, 2000 between Harris
     Trust Company of New York, Splitrock and Splitrock Leasing, LLC relating to
     11 3/4% Senior Notes due 2008. Filed as an exhibit to Splitrock's Post-
     effective Amendment on Form S-3 to its Registration Statement on Form S-1,
     file no. 333-63001, and incorporated herein by reference.
4.34 Warrant Agreement dated as of July 29, 1998 by and between Harris Trust
     Company of New York (formerly Bank of Montreal Trust Company) and Splitrock
     Services, Inc. Filed as an exhibit to Splitrock's Registration Statement on
     Form S-4, file no. 333-61293, and incorporated herein by reference.
4.35 Form of Splitrock Warrant. Filed as an exhibit to Splitrock's Registration
     Statement on Form S-4, file no. 333-61293, and incorporated herein by
     reference.
4.36 First Supplemental Warrant Agreement by and between Splitrock Services,
     Inc. and Harris Trust Company of New York, dated as of February 24, 2000.
     Filed as an exhibit to Splitrock's Post-effective Amendment on Form S-3 to
     its Registration Statement on Form S-1, file no. 333-63001, and
     incorporated herein by reference.

                                       22
<PAGE>

4.37 Second Supplemental Warrant Agreement by and between Splitrock Services,
     Inc., Splitrock Holdings, Inc. and Harris Trust Company of New York, dated
     as of March 30, 2000.
4.38 Third Supplemental Warrant Agreement by and between Splitrock Services,
     Inc., Splitrock Holdings, Inc., McLeodUSA Incorporated and Harris Trust
     Company of New York, dated as of March 30, 2000.
10.58 Splitrock Full Service Agreement dated as of June 24, 1997 by and between
      Splitrock and Prodigy Services Corporation. Filed as an exhibit to
      Splitrock's Registration Statement on Form S-4, file no. 333-61293, and
      incorporated herein by reference. *
10.59 Amendment to Full Service Agreement between Splitrock and Prodigy dated
      May 18, 1999. Filed as an exhibit to Splitrock's Registration Statement on
      Form S-1, file no. 333-97707, and incorporated herein by reference. *
10.60 Amended and Restated Full Service Agreement between Splitrock and Prodigy
      dated as of February 16, 2000. Filed as an exhibit to Splitrock's
      Quarterly Report on Form 10-Q, file no. 000-26827, filed with the SEC on
      May 15, 2000 and incorporated herein by reference. *
10.61 Cost Sharing National IRU Agreement effective April 26, 1999 by and
      between Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
      Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
      incorporated herein by reference. *
10.62 First Amendment to Cost Sharing National IRU Agreement by and between
      Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
      Splitrock's Registration Statement on Form S-1, file no. 333-97707, and
      incorporated herein by reference. *
10.63 Second Amendment to Cost Sharing National IRU Agreement by and between
      Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
      Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
      the SEC on May 15, 2000 and incorporated herein by reference. *
10.64 Third Amendment to Cost Sharing National IRU Agreement by and between
      Level 3 Communications, LLC and Splitrock. Filed as an exhibit to
      Splitrock's Quarterly Report on Form 10-Q, file no. 000-26827, filed with
      the SEC on May 15, 2000 and incorporated herein by reference. *
11.1  Statement regarding computation of loss per common share.
27.1  Financial Data Schedule.

--------------

*  Confidential treatment has been requested.  The copy filed as an exhibit
omits the information subject to the confidential treatment requested.

                                       23