SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 28, 2005 (April 28, 2005)
Nextel Communications, Inc.
| Delaware | 0-19656 | 36-3939651 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 2001 Edmund Halley Drive, Reston, Virginia | 20191 | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (703) 433-4000
| N/A | ||
| (Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (seeGeneral Instruction A.2.):
| þ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02. Results of Operations and Financial Condition.
The following information is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On April 28, 2005, the Company issued a press release announcing certain financial and operating results for the three month period ended March 31, 2005. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated into Item 2.02 of this Form 8-K by reference.
ITEM 8.01 Other Events.
On April 28, 2005, Nextel announced certain financial and operating results for the three month period ended March 31, 2005, including the following financial and operating data:
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
Consolidated Statements of Operations(1)
(in millions, except per share amounts)
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
Operating revenues | ||||||||
| Service revenues | $ | 3,256 | $ | 2,776 | ||||
| Handset and accessory revenues | 352 | 327 | ||||||
| 3,608 | 3,103 | |||||||
Operating expenses | ||||||||
| Cost of service (exclusive of depreciation included below) | 552 | 436 | ||||||
| Cost of handset and accessory revenues | 532 | 489 | ||||||
| Selling and marketing | 595 | 495 | ||||||
| General and administrative | 605 | 476 | ||||||
| Depreciation and amortization | 507 | 443 | ||||||
Operating income | 817 | 764 | ||||||
| Interest expense | (128 | ) | (154 | ) | ||||
| Interest income | 13 | 8 | ||||||
| Loss on retirement of debt | (37 | ) | (17 | ) | ||||
| Realized gain on sale of investment | — | 26 | ||||||
| Equity in earnings of unconsolidated affiliates and other | 19 | 1 | ||||||
Income before income tax provision | 684 | 628 | ||||||
Income tax provision(2) | (89 | ) | (33 | ) | ||||
Net income | 595 | 595 | ||||||
| Mandatorily redeemable preferred stock dividends and accretion | (6 | ) | (2 | ) | ||||
Income available to common stockholders | $ | 589 | $ | 593 | ||||
Earnings per common share | ||||||||
| Basic | $ | 0.53 | $ | 0.54 | ||||
| Diluted | $ | 0.52 | $ | 0.52 | ||||
Weighted average number of common shares outstanding | ||||||||
| Basic | 1,121 | 1,106 | ||||||
| Diluted | 1,139 | 1,172 | ||||||
Selected Balance Sheet Data (1)
(in millions)
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
Cash, cash equivalents and short-term investments | $ | 2,461 | $ | 1,814 | ||||
Accounts and notes receivable,net of allowance for doubtful accounts of $61 and $64 | 1,444 | 1,452 | ||||||
Property, plant and equipment, net | 9,886 | 9,613 | ||||||
Intangible assets, net | 7,240 | 7,223 | ||||||
Total assets | 23,894 | 22,744 | ||||||
Long-term debt,including current portion | 8,574 | 8,549 | ||||||
Total liabilities | 13,620 | 13,228 | ||||||
Zero coupon mandatorily redeemable preferred stock | 110 | 108 | ||||||
Stockholders’ equity | 10,164 | 9,408 | ||||||
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
Consolidated Statements of Operations(1)
(in millions, except per share amounts)
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
Operating revenues | ||||||||
| Service revenues | $ | 3,256 | $ | 2,776 | ||||
| Handset and accessory revenues | 352 | 327 | ||||||
| 3,608 | 3,103 | |||||||
Operating expenses | ||||||||
| Cost of service (exclusive of depreciation included below) | 552 | 436 | ||||||
| Cost of handset and accessory revenues | 532 | 489 | ||||||
| Selling and marketing | 595 | 495 | ||||||
| General and administrative | 605 | 476 | ||||||
| Depreciation and amortization | 507 | 443 | ||||||
Operating income | 817 | 764 | ||||||
| Interest expense | (128 | ) | (154 | ) | ||||
| Interest income | 13 | 8 | ||||||
| Loss on retirement of debt | (37 | ) | (17 | ) | ||||
| Realized gain on sale of investment | — | 26 | ||||||
| Equity in earnings of unconsolidated affiliates and other | 19 | 1 | ||||||
Income before income tax provision | 684 | 628 | ||||||
Income tax provision(2) | (89 | ) | (33 | ) | ||||
Net income | 595 | 595 | ||||||
| Mandatorily redeemable preferred stock dividends and accretion | (6 | ) | (2 | ) | ||||
Income available to common stockholders | $ | 589 | $ | 593 | ||||
Earnings per common share | ||||||||
| Basic | $ | 0.53 | $ | 0.54 | ||||
| Diluted | $ | 0.52 | $ | 0.52 | ||||
Weighted average number of common shares outstanding | ||||||||
| Basic | 1,121 | 1,106 | ||||||
| Diluted | 1,139 | 1,172 | ||||||
Selected Balance Sheet Data (1)
(in millions)
| March 31, | December 31, | |||||||
| 2005 | 2004 | |||||||
Cash, cash equivalents and short-term investments | $ | 2,461 | $ | 1,814 | ||||
Accounts and notes receivable,net of allowance for doubtful accounts of $61 and $64 | 1,444 | 1,452 | ||||||
Property, plant and equipment, net | 9,886 | 9,613 | ||||||
Intangible assets, net | 7,240 | 7,223 | ||||||
Total assets | 23,894 | 22,744 | ||||||
Long-term debt,including current portion | 8,574 | 8,549 | ||||||
Total liabilities | 13,620 | 13,228 | ||||||
Zero coupon mandatorily redeemable preferred stock | 110 | 108 | ||||||
Stockholders’ equity | 10,164 | 9,408 | ||||||
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
Other Data
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
Nextel branded service | ||||||||
Handsets in service, end of period(in thousands) | 15,543 | 13,356 | ||||||
Net handset additions(in thousands)(3) | 496 | 474 | ||||||
Average monthly minutes of use per handset | 820 | 750 | ||||||
Customer churn rate (4) | 1.5 | % | 1.7 | % | ||||
Boost Mobile branded prepaid service | ||||||||
Handsets in service, end of period(in thousands) | 1,474 | 537 | ||||||
Net handset additions(in thousands)(3) | 314 | 132 | ||||||
Customer churn rate (4) | 5.0 | % | NM | |||||
System minutes of use(in millions) | 39,354 | 30,387 | ||||||
Bad debt expense included in general and administrative(in millions) | $ | 35 | $ | 34 | ||||
Bad debt expense as a percentage of operating revenues | 1.0 | % | 1.1 | % | ||||
NM- Not meaningful
Capital Expenditures
(in millions)
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
| Cash paid for capital expenditures, excluding capitalized interest and rebanding costs | $ | 557 | $ | 681 | ||||
| Changes in capital expenditures accrued or unpaid | 136 | (144 | ) | |||||
| Capital expenditures, excluding capitalized interest and rebanding costs | 693 | 537 | ||||||
| Rebanding-related costs subject to Transition Administrator approval ($21 million accrued or unpaid) | 81 | — | ||||||
| Capitalized interest | 2 | 3 | ||||||
| $ | 776 | $ | 540 | |||||
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
Condensed Consolidated Statements of Cash Flows(1)
(in millions)
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2005 | 2004 | |||||||
Cash flows from operating activities | ||||||||
| Net income | $ | 595 | $ | 595 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 507 | 443 | ||||||
| Change in accrued interest on short-term investments | — | (3 | ) | |||||
| Net tax benefit from the release of valuation allowance | (178 | ) | — | |||||
| Other | 281 | 209 | ||||||
| Net cash provided by operating activities | 1,205 | 1,244 | ||||||
Cash flows from investing activities | ||||||||
| Cash paid for capital expenditures, including capitalized interest and rebanding costs | (619 | ) | (684 | ) | ||||
| Payments for licenses, acquisitions, investments and other, net of cash acquired | (24 | ) | (56 | ) | ||||
| Proceeds from sale of investments | — | 77 | ||||||
| Net changes in short-term investments | 69 | 142 | ||||||
| Net cash used in investing activities | (574 | ) | (521 | ) | ||||
Cash flows from financing activities | ||||||||
| Repayments under long-term credit facility | (2,178 | ) | (48 | ) | ||||
| Borrowings under long-term credit facility | 2,200 | — | ||||||
| Purchase and retirement of debt securities | — | (191 | ) | |||||
| Proceeds from issuance of debt securities | — | 494 | ||||||
| Proceeds from issuance of stock | 68 | 68 | ||||||
| Repayments under capital lease obligation | — | (9 | ) | |||||
| Payment for capital lease buy-out | — | (156 | ) | |||||
| Debt issue costs and other | (5 | ) | — | |||||
| Net cash provided by financing activities | 85 | 158 | ||||||
Net increase in cash and cash equivalents | 716 | 881 | ||||||
Cash and cash equivalents, beginning of period | 1,479 | 806 | ||||||
Cash and cash equivalents, end of period | $ | 2,195 | $ | 1,687 | ||||
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
Long-Term Debt and Mandatorily Redeemable Preferred Stock Data
(dollars in millions)
| Retirements and | Debt for debt | |||||||||||||||
| December 31, | repayments of | exchange | March 31, | |||||||||||||
| 2004 | principal | and other | 2005 | |||||||||||||
5.25% convertible senior notes due 2010 | $ | 607 | $ | — | $ | — | $ | 607 | ||||||||
9.5% senior serial redeemable notes due 2011, | ||||||||||||||||
| including a deferred premium of $7 and $3 | 214 | — | (126 | ) (a) | 88 | |||||||||||
6.875% senior serial redeemable notes due 2013, | ||||||||||||||||
| including a deferred premium of $5 and $7 and | ||||||||||||||||
| net of unamortized discount of $58 and $61 | 1,364 | — | 55 | (a) | 1,419 | |||||||||||
5.95% senior serial redeemable notes due 2014, | ||||||||||||||||
| including a deferred premium of $12 and $14 and | ||||||||||||||||
| net of unamortized discount of $59 and $64 | 1,046 | — | 74 | (a) | 1,120 | |||||||||||
7.375% senior serial redeemable notes due 2015, | ||||||||||||||||
| net of unamortized discount of $3 and $3 | 2,134 | — | — | 2,134 | ||||||||||||
Bank credit facility | 3,178 | (2,178 | ) | 2,200 | 3,200 | |||||||||||
Other | 6 | — | — | 6 | ||||||||||||
Total long-term debt, including current portion | $ | 8,549 | $ | (2,178 | ) | $ | 2,203 | $ | 8,574 | |||||||
Zero coupon convertible preferred stock mandatorily redeemable 2013(b) | $ | 108 | $ | — | $ | 2 | $ | 110 | ||||||||
| (a) | During the first quarter 2005, we issued $77 million in principal amount of new 5.95% senior notes issued at a $7 million discount to their principal amount and $56 million in principal amount of new 6.875% senior notes issued at a $4 million discount to their principal amount in exchange for $122 million in principal amount of our 9.5% senior notes. As a result, the $4 million of the deferred premium associated with the 9.5% senior notes is now associated with the 5.95% and 6.875% senior notes and will be recognized as an adjustment to interest expense over the remaining life of the 5.95% and 6.875% senior notes. | |||
| (b) | During the first quarter 2005, we made an offer to exchange our zero coupon convertible preferred stock for an equal number of our newly issued series B zero coupon convertible preferred stock, the terms of which are substantially identical after giving effect to the proposed amendments, including the right to receive a special dividend of $30.00 per share payable upon conversion. Substantially all of the outstanding preferred stock was properly tendered and will be exchanged in the second quarter 2005. | |||
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
Notes to Financial Data
| 1) | On February 7, 2005, we accepted the Federal Communications Commission’s plan to eliminate interference with the public safety operators in the 800 MHz band (the “ Report and Order”). By accepting the terms of the Report and Order, we agreed to exchange certain of our FCC licenses for other FCC licenses, and to assume certain obligations to reconfigure the 800 MHz spectrum band through a 36-month phased transition approach. Due to the complexity of this transaction, we consulted with the staff of the Office of the Chief Accountant (“OCA”) of the Securities and Exchange Commission regarding the appropriate accounting treatment for this transaction, and our discussions with the OCA and our independent registered public accounting firm on the topic are ongoing. The final determination of the accounting treatment for this transaction will affect both our current and future results of operations and our assets, liabilities and stockholders’ equity. Accordingly, the attached financial statements including the statement of operations and statement of cash flows for the quarter ended March 31, 2005 and the balance sheet as of March 31, 2005 do not reflect the accounting treatment for the transaction contemplated by the Report and Order, except for the tax treatment as discussed in note 2 below. We expect to conclude these discussions and reflect the final accounting treatment for the transaction in our Quarterly Report on Form 10-Q to be filed for the quarter ended March 31, 2005. | |||
| 2) | For the three months ended March 31, 2005, our income tax provision was $89 million consisting of an income tax provision of $267 million and a net benefit of $178 million. The net benefit is derived from the release of the portion of the tax valuation allowance attributable to the tax impact of recognized capital gains on completed transactions and capital gains that are more likely than not to be recognized on anticipated transactions. The benefit was partially offset by an increase in our tax reserves. | |||
| 3) | Net handset additions represents gross handsets activated during the period less handsets disconnected from commercial service, in the case of Nextel branded service, or handsets with a zero balance for more than 60 days, in the case of Boost Mobile branded prepaid service. | |||
| 4) | The customer churn rate is an indicator of customer retention and represents the monthly percentage of handsets that cease to be in service. Customer churn is calculated by dividing the number of handsets disconnected from commercial service during the period in the case of Nextel branded service, or handsets with a zero balance for more than 60 days, in the case of Boost Mobile branded prepaid service, by the average number of handsets in commercial service during the period. | |||
ITEM 9.01. Financial Statements and Exhibits.
| (c) | Exhibits: |
Number | Exhibit | |
| 99.1 | Press release dated April 28, 2005. |
2
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.
NEXTEL COMMUNICATIONS, INC.
By: /s/ Gary D. Begeman
Name: Gary D. Begeman
Title: Vice President and Deputy General Counsel
Dated: April 28, 2005
3
INDEX TO EXHIBITS
| Number | Exhibit | |
| 99.1 | Press release dated April 28, 2005. |
4
