SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 25, 2001
Leap Wireless International, Inc.
(Exact name of registrant as specified in its charter)
| Delaware (State or Other Jurisdiction of Incorporation) |
0-29752 (Commission File Number) |
33-0811062 (I.R.S. Employer Identification No.) |
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| 10307 Pacific Center Court, San Diego, California (Address of Principal Executive Offices) |
92121 (Zip Code) |
Registrant’s telephone number, including area code: (858) 882-6000
| Item 5. Other Events. | ||||||||
| SIGNATURE | ||||||||
This Current Report on Form 8-K is filed by Leap Wireless International, Inc., a Delaware corporation (“Leap” or the “Company”), in connection with the matters described herein.
Item 5. Other Events.
On July 25, 2001, Leap announced its financial and certain other operational results for the quarter ended June 30, 2001 as set forth below.
The Company reported that as of June 30, 2001, customers of the Company’s Cricket service grew to over 472,000, compared to the just over 339,000 customers reported as of March 31, 2001.
Cricket operational highlights from the second quarter of 2001 included:
| • | Leap launched an additional six market areas — Spokane, Washington; Fort Smith, Arkansas; Columbus and Macon, Georgia; Hickory, North Carolina; and Pittsburgh, Pennsylvania — bringing the total potential customers covered by Cricket service in markets across the United States to approximately 12.3 million (1998 POPs) at the end of the quarter. Subsequent to the end of the quarter, Leap also launched Cricket service in Fayetteville, Arkansas. | ||
| • | Average revenue per user per month (ARPU) across all of Leap’s operational markets rose to approximately $36, up from the approximately $35 reported for the first quarter of 2001. | ||
| • | Overall cost per gross customer addition (CPGA) was approximately $245. |
Key financial performance measures for the second quarter ended June 30, 2001 were as follows:
| • | Total operating revenues for Leap’s U.S. operations for the second quarter were $47.8 million, an increase of $11 million over the $36.8 million reported for the first quarter of 2001. Service revenue rose to $39.5 million, an increase of 54 percent over that reported for the first quarter of 2001. | ||
| • | Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) was negative $56.6 million, compared to the negative $48.1 million reported for the first quarter of 2001. | ||
| • | Leap’s consolidated net loss for the quarter was $128.5 million or $3.91 per share, compared to a net loss of $114.4 million or $3.88 per share in the prior quarter. Of the $3.91 net loss per share reported in the second quarter, $0.52 was the result of Leap’s share of losses for Pegaso Telecomunicaciones S.A., de C.V. (“PEGASO”), the Mexican wireless company that Leap co-founded, recognized under the equity method of accounting. | ||
| • | Leap’s total cash and cash equivalents, investments, and deposits on pending wireless license acquisitions as of June 30, 2001 were $593.4 million. | ||
| • | The book value of wireless licenses at the end of the second quarter rose to $681.5 million, an increase of $408.1 million over what was reported at the end of the first quarter of 2001 and reflecting the completion of several spectrum acquisitions. |
| • | Leap’s property and equipment, net of depreciation, rose to $686.5 million in the second quarter, an increase of $178.5 million over that reported at March 31, 2001. |
Other Highlights:
| • | New Services — In May 2001, Leap introduced its Telephone Entertainment Network, a company initiative focused on turning wireless communications into an entertainment and information medium. During the quarter, Leap launched Slice, the first channel to debut on the Telephone Entertainment Network, in Chattanooga and Nashville, Tenn., and further expanded this service in July 2001 to include Albuquerque, N.M. Marketed as Your Personal Telephone Entertainment Channel, Slice is designed to deliver short, crisp “voice clips” directly to the customer’s wireless phone. With Slice service, customers hear entertaining, short clips of local news and events, sports, weather, traffic and more before their calls connect. Leap intersperses short advertisements and promotions that can save customers money with these fun, fresh “slices” of information. With a simple press of a button, customers can get more information by voice or text on selected voice clips. | ||
| • | Spectrum — During the second quarter of 2001, Leap completed the acquisition of 40 new wireless licenses totaling approximately 14.2 million potential customers (1998 POPs), bringing the total potential customers covered by the licenses that Leap owns to approximately 49.8 million. In total, Leap now owns or has rights to acquire 72.7 million potential customers (1998 POPs) in 36 states. This number includes licenses covering 22.4 million potential customers (1998 POPs) on which Leap was the high bidder in FCC Auction #35 that ended in January 2001. It is unclear when or whether the FCC will transfer these licenses to Leap because of a June 22, 2001 U.S. Court of Appeals opinion stating that the FCC violated the United States Bankruptcy Code in canceling NextWave’s licenses (which were then auctioned in Auction #35). The 22 licenses that Leap won in Auction #35 were all NextWave licenses that the FCC reclaimed. | ||
| • | International Operations — PEGASO grew its customer base to approximately 729,000 at the end of the second quarter. As of March 31, 2001, PEGASO had launched service in 13 markets with networks covering nearly 30 million potential customers across Mexico. Leap has chosen to invest an additional $29 million into the Mexican wireless carrier to support the future growth and working capital needs of Pegaso. Other shareholders of Pegaso have also agreed to contribute additional amounts such that Leap’s percentage ownership in Pegaso remains unchanged. |
LEAP WIRELESS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
| June 30, | December 31, | |||||||||
| 2001 | 2000 | |||||||||
| (Unaudited) | ||||||||||
Assets |
||||||||||
Cash and cash equivalents |
$ | 381,522 | $ | 338,878 | ||||||
Restricted cash equivalents |
— | 13,575 | ||||||||
Short-term investments |
118,791 | 199,106 | ||||||||
Inventories |
28,487 | 9,032 | ||||||||
Notes receivable, net |
33,284 | 138,907 | ||||||||
Other current assets |
9,577 | 12,746 | ||||||||
Total current assets |
571,661 | 712,244 | ||||||||
Property and equipment, net |
686,451 | 430,193 | ||||||||
Investment in unconsolidated wireless operating company |
788 | 34,691 | ||||||||
Wireless licenses, net |
681,487 | 265,635 | ||||||||
Goodwill and other intangible assets, net |
47,431 | 30,297 | ||||||||
Restricted investments |
53,323 | 51,896 | ||||||||
Deposits for wireless licenses |
87,699 | 91,772 | ||||||||
Other assets |
156,144 | 30,679 | ||||||||
Total assets |
$ | 2,284,984 | $ | 1,647,407 | ||||||
Liabilities and Stockholders’ Equity |
||||||||||
Accounts payable and accrued liabilities |
$ | 57,219 | $ | 58,735 | ||||||
Other current liabilities |
132,018 | 65,690 | ||||||||
Total current liabilities |
189,237 | 124,425 | ||||||||
Long-term debt |
1,408,371 | 897,878 | ||||||||
Other long-term liabilities |
107,012 | 41,846 | ||||||||
Total liabilities |
1,704,620 | 1,064,149 | ||||||||
Stockholders’ equity: |
||||||||||
Preferred stock |
— | — | ||||||||
Common stock |
3 | 3 | ||||||||
Additional paid-in capital |
1,131,657 | 893,401 | ||||||||
Unearned stock-based compensation |
(7,776 | ) | (10,019 | ) | ||||||
Accumulated deficit |
(545,813 | ) | (302,898 | ) | ||||||
Accumulated other comprehensive income |
2,293 | 2,771 | ||||||||
Total stockholders’ equity |
580,364 | 583,258 | ||||||||
Total liabilities and stockholders’ equity |
$ | 2,284,984 | $ | 1,647,407 | ||||||
LEAP WIRELESS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In Thousands, Except Per Share Data)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | ||||||||||||||||||||
| 2001 | 2000 | 2001 | 2000 | |||||||||||||||||
Revenues: |
||||||||||||||||||||
Service revenues |
$ | 39,554 | $ | 16,828 | $ | 65,209 | $ | 26,246 | ||||||||||||
Equipment revenues |
8,292 | 1,696 | 19,390 | 2,269 | ||||||||||||||||
Total revenues |
47,846 | 18,524 | 84,599 | 28,515 | ||||||||||||||||
Operating expenses: |
||||||||||||||||||||
Cost of service |
(17,480 | ) | (5,981 | ) | (29,706 | ) | (8,764 | ) | ||||||||||||
Cost of equipment |
(32,497 | ) | (12,720 | ) | (63,435 | ) | (25,968 | ) | ||||||||||||
Selling and marketing |
(21,786 | ) | (4,941 | ) | (38,801 | ) | (11,617 | ) | ||||||||||||
General and administrative |
(32,715 | ) | (26,957 | ) | (57,401 | ) | (42,384 | ) | ||||||||||||
Depreciation and amortization |
(20,511 | ) | (8,436 | ) | (35,298 | ) | (13,678 | ) | ||||||||||||
Total operating expenses |
(124,989 | ) | (59,035 | ) | (224,641 | ) | (102,411 | ) | ||||||||||||
Operating loss |
(77,143 | ) | (40,511 | ) | (140,042 | ) | (73,896 | ) | ||||||||||||
Equity in net loss of investments in
and loan receivable from
unconsolidated wireless
operating companies |
(17,116 | ) | (17,169 | ) | (43,298 | ) | (46,752 | ) | ||||||||||||
Interest income |
7,874 | 12,313 | 18,773 | 17,004 | ||||||||||||||||
Interest expense |
(41,840 | ) | (36,311 | ) | (79,451 | ) | (52,471 | ) | ||||||||||||
Foreign currency transaction gains
(losses) |
(40 | ) | 10,322 | (1,275 | ) | 11,721 | ||||||||||||||
Gain on sale of subsidiary |
— | 313,432 | — | 313,432 | ||||||||||||||||
Gain on issuance of stock by
unconsolidated wireless operating
company |
— | 25,734 | — | 25,734 | ||||||||||||||||
Other income, net |
— | 1,313 | 3,576 | 1,948 | ||||||||||||||||
Income (loss) before income
taxes and extraordinary items |
(128,265 | ) | 269,123 | (241,717 | ) | 196,720 | ||||||||||||||
Income taxes |
(265 | ) | (34,548 | ) | (1,198 | ) | (34,548 | ) | ||||||||||||
Income (loss) before extraordinary
items |
(128,530 | ) | 234,575 | (242,915 | ) | 162,172 | ||||||||||||||
Extraordinary losses on early
extinguishment of debt |
— | (315 | ) | — | (4,737 | ) | ||||||||||||||
Net income (loss) |
$ | (128,530 | ) | $ | 234,260 | $ | (242,915 | ) | $ | 157,435 | ||||||||||
Basic net income (loss) per common
share: |
||||||||||||||||||||
Income (loss) before extraordinary
items |
$ | (3.91 | ) | $ | 9.18 | $ | (7.79 | ) | $ | 6.77 | ||||||||||
Extraordinary loss |
— | (0.01 | ) | — | (0.20 | ) | ||||||||||||||
Net income (loss) |
$ | (3.91 | ) | $ | 9.17 | $ | (7.79 | ) | $ | 6.57 | ||||||||||
Diluted net income (loss) per common
share: |
||||||||||||||||||||
Income (loss) before extraordinary
items |
$ | (3.91 | ) | $ | 7.21 | $ | (7.79 | ) | $ | 5.19 | ||||||||||
Extraordinary loss |
-— | (0.01 | ) | — | (0.15 | ) | ||||||||||||||
Net income (loss) |
$ | (3.91 | ) | $ | 7.20 | $ | (7.79 | ) | $ | 5.04 | ||||||||||
Shares used in per share calculations: |
||||||||||||||||||||
Basic |
32,882 | 25,536 | 31,181 | 23,967 | ||||||||||||||||
Diluted |
32,882 | 32,519 | 31,181 | 31,227 | ||||||||||||||||
LEAP WIRELESS INTERNATIONAL, INC.
SELECTED SEGMENT DATA
(UNAUDITED)
(In Thousands)
| As of and for the | As of and for the | |||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | ||||||||||||||||
| 2001 | 2000 | 2001 | 2000 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
United States: |
||||||||||||||||
Revenues |
$ | 47,846 | $ | 5,642 | $ | 84,599 | $ | 9,841 | ||||||||
EBITDA |
(45,779 | ) | (11,038 | ) | (86,796 | ) | (19,875 | ) | ||||||||
Operating loss |
(66,004 | ) | (14,131 | ) | (121,362 | ) | (28,637 | ) | ||||||||
Capital expenditures |
(191,884 | ) | (48,203 | ) | (277,921 | ) | (84,089 | ) | ||||||||
Purchase of wireless licenses |
(403,631 | ) | — | (410,345 | ) | (73,154 | ) | |||||||||
Total assets |
1,783,273 | 673,713 | 1,783,273 | 673,713 | ||||||||||||
Mexico(1): |
||||||||||||||||
Revenues |
37,324 | 19,035 | 58,198 | 23,687 | ||||||||||||
EBITDA |
(39,234 | ) | (53,188 | ) | (140,315 | ) | (101,670 | ) | ||||||||
Operating loss |
(56,279 | ) | (62,776 | ) | (170,149 | ) | (116,285 | ) | ||||||||
Capital expenditures |
(64,701 | ) | (21,361 | ) | (163,834 | ) | (87,428 | ) | ||||||||
Total assets |
933,631 | 622,083 | 933,631 | 622,083 | ||||||||||||
| (1) | The results of the Mexico segment are for the three and six months ended March 31, 2001 and 2000, a three-month reporting lag. The results of the Mexico segment for the three months ended March 31, 2001 are pro forma, and exclude cumulative adjustments reducing revenues by $17.4 million and reducing cost of revenues by $4.2 million related to Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: July 25, 2001 | LEAP WIRELESS INTERNATIONAL, INC. | |||
| By: | /s/ THOMAS D. WILLARDSON | |||
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| Thomas D. Willardson Senior Vice President, Finance and Treasurer |
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