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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): JUNE 2, 2000
LEAP WIRELESS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-29752 33-0811062
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION)
10307 PACIFIC CENTER COURT, SAN DIEGO, CALIFORNIA 92121
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (858) 882-6000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As of June 2, 2000, Leap Wireless International, Inc., a Delaware
corporation (the "Company"), its wholly-owned subsidiary Inversiones Leap
Wireless Chile S.A. ("Inversiones"), and a nominee shareholder designated by
Inversiones ("Nominee") completed the sale of all of the issued and outstanding
capital stock of the Chilean mobile wireless operating company majority-owned by
Inversiones, Smartcom, S.A., a sociedad anonima organized under the laws of
Chile ("Smartcom"), to Endesa S.A., a Spanish utility company ("Endesa"). The
sale was effected pursuant to a Share Purchase Agreement dated as of June 2,
2000 among the Company, Inversiones and Endesa (the "Share Purchase Agreement").
Pursuant to the Share Purchase Agreement, Inversiones sold 8,399,999 of
the Series A preferred stock of Smartcom and 8,400,000 shares of the Series B
common stock of Smartcom to Endesa, and the Nominee sold 1 share of the Series A
preferred stock of Smartcom to a nominee shareholder designated by Endesa.
(Under Chilean law, a sociedad anonima must have a minimum of two shareholders.)
Inversiones and the Nominee sold the Smartcom capital stock to Endesa in
exchange for gross consideration of approximately $381.5 million. The purchase
price consisted of (a) approximately $156.8 million in cash; (b) repayment of
Smartcom indebtedness to the Company and Inversiones in the approximate amounts
of $17.5 million and $35.8 million, respectively; (c) release of cash collateral
posted in the United States by the Company to collateralize a reimbursement
obligation with respect to a standby letter of credit issued in favor of ABN
AMRO Bank (Chile) to secure Smartcom indebtedness of approximately $28.2
million; and (d) three promissory notes issued by Endesa to Inversiones in the
aggregate amount of $143.2 million, one of which is subject to a one year right
of set-off to secure the indemnification obligations of Leap and Inversiones
under the Share Purchase Agreement, and one of which is subject to adjustment
based upon an audit of the estimated closing balance sheet to be completed
within 60 days following the closing of the Share Purchase Agreement. Each of
the promissory notes matures on June 2, 2001 and bears interest at the rate of
3-month LIBOR, compounded semi-annually. In addition, the sale of the capital
stock of Smartcom resulted in the removal of approximately $191.4 million in
Smartcom liabilities from the respective consolidated balance sheets of the
Company and Inversiones.
In connection with the closing of the Share Purchase Agreement, the
Company, Inversiones, Smartcom and QUALCOMM Incorporated ("Qualcomm")entered
into a Waiver, Release and Termination of Obligations as of June 2, 2000 (the
"Release"), whereunder Qualcomm released the Company and Inversiones from their
respective obligations under a series of agreements by and among the Company,
Inversiones, the Nominee, Smartcom and Qualcomm related to Smartcom's purchase
of equipment, software and services from Qualcomm. The Company also committed to
cause Inversiones to repay certain loans to Citibank, N.A. and Banco Santiago
within 10 days following the closing of the Share Purchase Agreement.
The terms of the sale of the capital stock of Smartcom, including the
purchase price, were established through arms-length negotiations between the
Company and Endesa. The primary assets of Smartcom at the time of the sale
consisted of a mobile PCS license for providing public digital mobile 1900 MHz
telecommunications services in Chile utilizing the
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Code Division Multiple Access format ("CDMA") and the related improvements
comprising a wireless telecommunications network in Chile.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
LEAP WIRELESS INTERNATIONAL, INC.
Pro Forma Financial Statements:
Unaudited Pro Forma Consolidated Balance Sheet at February 29,
2000
Unaudited Pro Forma Consolidated Statement of Operations for
the six months ended February 29, 2000
Unaudited Pro Forma Consolidated Statement of Operations for
the year ended August 31, 1999
Notes to the Pro Forma Financial Information (unaudited)
(c) Exhibits.
2.1 Share Purchase Agreement, dated as of June 2, 2000 among
Endesa, S.A., Leap Wireless International, Inc. and
Inversiones Leap Wireless Chile, S.A.
10.1 Waiver, Release and Termination of Obligations by and
between Smartcom, S.A., Inversiones Leap Wireless Chile,
S.A., QUALCOMM Incorporated and Leap Wireless
International, Inc.
99.1 Press Release, dated June 6, 2000.
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LEAP WIRELESS INTERNATIONAL, INC.
PRO FORMA FINANCIAL INFORMATION
The Pro Forma Financial Information is based on the historical
consolidated financial statements of Leap Wireless International, Inc. and its
subsidiaries ("Leap" or the "Company") at February 29, 2000, for the six months
ended February 29, 2000 and for the year ended August 31, 1999, adjusted to give
effect to the Company's sale on June 2, 2000 of all of the outstanding shares in
Smartcom, S.A. ("Smartcom") as if it had already occurred. The Unaudited Pro
Forma Consolidated Balance Sheet at February 29, 2000 gives effect to the sale
of all of the outstanding shares in Smartcom as if it had occurred as of
February 29, 2000. The Unaudited Pro Forma Consolidated Statements of Operations
for the six months ended February 29, 2000 and the year ended August 31, 1999
give effect to the sale of all of the outstanding shares in Smartcom as if it
had occurred as of September 1, 1998, however, do not include the pro forma gain
on sale of approximately $349.0 million and related pro forma income tax expense
of approximately $33.8 million. The sale and related adjustments are described
in the accompanying notes. The Pro Forma Financial Information is based upon
available information and certain assumptions that management believes are
reasonable. In our opinion, all adjustments have been made that are necessary to
present fairly the pro forma data. The final recorded amounts could differ
although such differences are not expected to be material.
The Pro Forma Financial Information is provided for illustrative
purposes only and does not purport to represent what the Company's results of
operations or financial condition actually would have been had this sale in fact
occurred on such dates or to project the Company's results of operations or
financial condition for any future period or date. The Pro Forma Financial
Information and accompanying notes should be read in conjunction with the
historical financial statements of the Company.
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LEAP WIRELESS INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
FEBRUARY 29, 2000
----------------------------------------------------------
LEAP
LEAP PRO FORMA CONSOLIDATED
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- ------------
ASSETS
Cash and cash equivalents ................... $ 599,935 $ 209,248 (1)(2)(3) 809,183
Restricted cash equivalents and
short-term investments .................... 58,667 (28,942)(3) 29,725
Accounts receivable, net .................... 6,354 (4,731)(1) 1,623
Inventories ................................. 5,379 (5,379)(1) --
Recoverable taxes ........................... 8,034 (8,034)(1) --
Notes receivable ............................ -- 143,173 (4) 143,173
Other current assets ........................ 6,181 (5,480)(1) 701
----------- ----------- -----------
Total current assets .................. 684,550 299,855 984,405
----------- ----------- -----------
Property and equipment, net ................. 136,777 (133,537)(1) 3,240
Investments in and loans receivable from
unconsolidated wireless operating
companies.................................. 71,676 -- 71,676
Intangible assets, net ...................... 94,626 (52,260)(1) 42,366
Restricted investments ...................... 49,811 -- 49,811
Deferred financing costs and other assets.... 16,223 (544)(1) 15,679
----------- ----------- -----------
Total assets .......................... $ 1,053,663 $ 113,514 $ 1,167,177
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable and accrued liabilities..... $ 21,361 $ (11,621)(1) $ 9,740
Loans payable to banks ...................... 32,007 (32,007)(1)(2) --
Other current liabilities ................... 1,618 -- 1,618
----------- ----------- -----------
Total current liabilities ............. 54,986 (43,628) 11,358
----------- ----------- -----------
Long-term debt .............................. 552,876 (191,820) 361,056
Other long-term liabilities ................. 10,120 33,833 (5) 43,953
----------- ----------- -----------
Total liabilities ..................... 617,982 (201,615) 416,367
----------- ----------- -----------
Stockholders' equity:
Preferred stock ........................... -- -- --
Common stock .............................. 3 -- 3
Additional paid-in capital ................ 787,887 -- 787,887
Accumulated deficit ....................... (346,134) 315,129 (6) (31,005)
Accumulated other comprehensive loss....... (6,075) -- (6,075)
----------- ----------- -----------
Total stockholders' equity ............ 435,681 315,129 750,810
----------- ----------- -----------
Total liabilities and
stockholders' equity................. $ 1,053,663 $ 113,514 $ 1,167,177
=========== =========== ===========
See Notes to the Pro Forma Financial Information.
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LEAP WIRELESS INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED FEBRUARY 29, 2000
--------------------------------------------------------
LEAP
LEAP PRO FORMA CONSOLIDATED
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ------------
Operating revenues .................................... $ 14,283 $ (14,211)(7) $ 72
--------- --------- ---------
Operating expenses:
Cost of operating revenues ............................ (22,462) 21,898(7) (564)
Selling, general and administrative ................... (33,041) 19,370(7) (13,671)
Depreciation and amortization ......................... (10,248) 9,880(7) (368)
--------- --------- ---------
Total operating expenses ..................... (65,751) 51,148 (14,603)
--------- --------- ---------
Operating loss ..................................... (51,468) 36,937 (14,531)
Equity in net loss of unconsolidated
wireless operating companies......................... (50,059) -- (50,059)
Interest income ....................................... 1,577 (152)(7) 1,425
Interest expense ...................................... (21,120) 7,140(7)(8) (13,980)
Foreign currency transaction .......................... (1,396) 1,396(7) --
losses
Minority interest ..................................... 518 -- 518
Other income (expense), net ........................... (2,868) 568(7) (2,300)
--------- --------- ---------
Income (loss) before extraordinary item ............ $(124,816) $ 45,889 $ (78,927)
========= ========= =========
Basic and diluted loss per
common share before extraordinary item .............. $ (6.31) $ (3.99)
========= =========
Shares used to calculate
basic and diluted loss per common share before
extraordinary item .................................. 19,788 19,788
========= =========
See Notes to the Pro Forma Financial Information.
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LEAP WIRELESS INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED AUGUST 31, 1999
---------------------------------------------------
LEAP
LEAP PRO FORMA CONSOLIDATED
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ------------
Operating revenues ......................... $ 3,907 $ (3,774)(7) $ 133
--------- --------- ---------
Operating expenses:
Cost of operating revenues ................. (3,810) 3,810(7) --
Selling, general and administrative ........ (28,745) 4,548(7) (24,197)
Depreciation and amortization .............. (5,824) 5,261(7) (563)
--------- --------- ---------
Total operating expenses .......... (38,379) 13,619 (24,760)
--------- --------- ---------
Operating loss .......................... (34,472) 9,845 (24,627)
Equity in net loss of unconsolidated
wireless operating companies ............. (100,300) 13,129(9) (87,171)
Write-down of investments in
unconsolidated wireless operating
companies ................................ (27,242) -- (27,242)
Interest income ............................ 2,505 (259)(7) 2,246
Interest expense ........................... (10,356) 5,810(7)(8) (4,546)
Foreign currency transaction losses ........ (7,211) 7,211(7) --
Gain on sale of wholly owned subsidiary .... 9,097 -- 9,097
Gain on issuance of stock by
unconsolidated wireless operating
company .................................. 3,609 -- 3,609
Other income (expense), net ................ (243) 140(7) (103)
--------- --------- ---------
Net income (loss) ........................ $(164,613) $ 35,876 $(128,737)
========= ========= =========
Basic and diluted net loss per
common share ............................. $ (9.19) $ (7.19)
========= =========
Shares used to calculate basic and
diluted net loss per common share ........ 17,910 17,910
========= =========
See Notes to the Pro Forma Financial Information.
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LEAP WIRELESS INTERNATIONAL, INC.
NOTES TO THE PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
NOTE 1. DESCRIPTION OF TRANSACTION
On June 2, 2000, the Company, its wholly-owned subsidiary Inversiones
Leap Wireless Chile, S.A. ("Inversiones"), and a nominee shareholder designated
by Inversiones completed the sale of all of the outstanding shares of Smartcom
to Endesa, S.A., a Spanish utility company ("Endesa") for $156.8 million in cash
and notes totaling $143.2 million subject to certain post-closing adjustments,
plus repayment of intercompany debt owed to Leap and Inversiones by Smartcom
totaling $53.3 million and the release of cash collateral posted by Leap
securing Smartcom indebtedness of approximately $28.2 million. Smartcom, a
Chilean corporation that holds a license to offer wireless telephone services,
has deployed and is operating a nationwide wireless telephone system in Chile.
In April 1999, Inversiones acquired all of the shares of Smartcom that
it did not already own. Prior to the acquisition, Inversiones owned 50% of the
shares of Smartcom. The Company had previously accounted for its interest in
Smartcom under the equity method.
NOTE 2. PRO FORMA ADJUSTMENTS
(1) Reflects assets and liabilities of Smartcom sold to Endesa.
(2) Reflects cash proceeds received by the Company of $184.9 million
(including repayment of intercompany debt owed to Leap and Inversiones
by Smartcom totaling $46.0 million at February 29, 2000), net of
repayment of loans payable to banks in Chile totaling $17.9 million at
February 29, 2000.
(3) To reclass $28.9 million of restricted cash at February 29, 2000 which
was held on account to secure a loan to Smartcom.
(4) Reflects promissory notes issued by Endesa for principal amounts in
total equal to the remainder of purchase price not paid in cash at
closing. The promissory notes plus accrued interest at the rate of
3-month LIBOR, compounded semi-annually, are payable to the Company on
the first anniversary of closing.
(5) Reflects estimated Chilean income taxes payable by Inversiones, due in
April 2001.
(6) Reflects gain on sale net of estimated Chilean income taxes payable by
Inversiones.
(7) To eliminate the results of operations of Smartcom.
(8) Reflects adjustment to interest expense of $2.8 million and $2.9
million for the six months ended February 29, 2000 and the year ended
August 31, 1999, respectively, for a) loans payable by Inversiones to
banks in Chile that were repaid at closing and b) borrowings under the
Company's credit agreement with Qualcomm Incorporated that related to
Smartcom funding by Leap.
(9) Elimination of the Company's share of the net loss of Smartcom
previously recognized under the equity method of accounting.
* * * *
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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: June 19, 2000 Leap Wireless International, Inc.
By: /S/ JAMES E. HOFFMANN
--------------------------------------
James E. Hoffmann
Senior Vice President, General Counsel
and Secretary
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Exhibit Index
Exhibit Number Description
- -------------- -----------
2.1 Share Purchase Agreement, dated as of June 2, 2000 among
Endesa, S.A., Leap Wireless International, Inc. and
Inversiones Leap Wireless Chile, S.A.
10.1 Waiver, Release and Termination of Obligations by and
between Smartcom, S.A., Inversiones Leap Wireless Chile,
S.A., QUALCOMM Incorporated and Leap Wireless International,
Inc.
99.1 Press Release, dated June 6, 2000.