WIRELESS FACILITIES INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

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

Commission file number 0-27231


WIRELESS FACILITIES, INC.
(Exact name of Registrant as specified in its charter)

Delaware		13-3818604
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4810 Eastgate Mall San Diego, CA 92121 (858) 228-2000
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

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 o

As of August 9, 2002 there were 48,076,445 shares of the Registrant’s $0.001 par value Common Stock outstanding.

WIRELESS FACILITIES, INC.

FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2002
INDEX

			Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

		Consolidated Balance Sheets as of December 31, 2001 and June 30, 2002 (unaudited)	3

		Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2002 (unaudited)	4

		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2002 (unaudited)	5

		Notes to Consolidated Financial Statements (unaudited)	6

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		26

Item 2.	Changes in Securities		26

Item 4.	Submission of Matters to a Vote of Security Holders		27

Item 6.	Exhibits and Reports on Form 8-K		27

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WIRELESS FACILITIES, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value and share amounts)

				December 31, 2001			June 30, 2002

				(Audited)			(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	61.1		$	76.1
	Accounts receivable (net of allowance for doubtful accounts of $15.9 and $24.9 as of December 31, 2001 and June 30, 2002, respectively)				88.5			70.7
	Accounts receivable - related party				0.3			0.3
	Contract management receivables (net of allowance for doubtful accounts of $2.4 and $2.7 as of December 31, 2001 and June 30, 2002, respectively)				5.9			2.8
	Income taxes receivable				3.2			3.1
	Prepaid expenses				4.5			1.3
	Employee loans and advances				1.5			0.6
	Other current assets, net				9.3			4.5

			Total current assets		174.3			159.4

Property and equipment, net					19.0			15.5
Goodwill, net					54.4			41.6
Other intangibles, net					8.6			—
Deferred tax assets, net					10.0			—
Investments in unconsolidated affiliates					8.4			8.3
Employee loans and advances					0.7			—
Other assets					0.5			0.2

			Total assets	$	275.9		$	225.0

Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	9.0		$	7.7
	Accounts payable - related party				2.2			1.4
	Accrued expenses				15.3			14.9
	Contract management payables				4.2			2.0
	Billings in excess of costs and profits				1.6			6.1
	Line of credit payable				33.0			—
	Note payable				0.2			—
	Capital lease obligations				4.5			3.0

			Total current liabilities		70.0			35.1

Note payable - net of current portion					0.4			—
Capital lease obligations - net of current portion					4.0			1.5
Deferred tax liabilities, net					—			1.6
Accrued unused office space					1.3			10.8
Other liabilities					2.2			0.7

			Total liabilities		77.9			49.7

Minority interest in subsidiary					0.2			0.2
Stockholders’ equity:
	Preferred stock, 5,000,000 shares authorized
		Series A Convertible Preferred Stock, $.001 par value, 63,637 shares issued and outstanding at December 31, 2001 and June 30, 2002 (liquidation preference $35.0)			—			—
		Series B Convertible Preferred Stock, $.001 par value, 0 and 90,000 shares outstanding at December 31, 2001 and June 30, 2002, respectively (liquidation preference $45.0)			—			—
	Common stock, $.001 par value, 195,000,000 shares authorized; 47,184,000 and 48,028,396 shares issued and outstanding at December 31, 2001 and June 30, 2002, respectively				—			—
	Additional paid-in capital				215.1			263.9
	Accumulated deficit				(17.1	)		(86.6	)
	Accumulated other comprehensive loss				(0.2	)		(2.2	)

			Total stockholders’ equity		197.8			175.1

			Total liabilities and stockholders’ equity	$	275.9		$	225.0

See accompanying notes to unaudited consolidated financial statements.

WIRELESS FACILITIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)

					Three months ended June 30,						Six months ended June 30,

					2001			2002			2001			2002

Revenues					$	54.7		$	46.8		$	107.4		$	86.9
Cost of revenues						32.5			35.0			71.6			64.2

				Gross profit		22.2			11.8			35.8			22.7
Selling, general and administrative expenses						40.3			9.0			70.6			56.1
Depreciation and amortization						5.5			1.6			10.9			4.3
Asset impairment charges						12.9			—			12.9			21.1

				Operating income (loss)		(36.5	)		1.2			(58.6	)		(58.8	)

Other income (expense):
	Interest income					0.2			0.3			0.4			0.6
	Interest expense					(1.0	)		(0.7	)		(2.1	)		(1.9	)
	Foreign currency gain (loss)					(1.8	)		1.3			(2.1	)		0.9
	Other					0.2			0.1			(0.8	)		(0.2	)

			Other income (expense), net			(2.4	)		1.0			(4.6	)		(0.6	)

		Income (loss) before income taxes				(38.9	)		2.2			(63.2	)		(59.4	)
Provision (benefit) for income taxes						(0.6	)		—			(16.4	)		10.1

Net income (loss)					$	(38.3	)	$	2.2		$	(46.8	)	$	(69.5	)

Net income (loss) per common share:
	Basic				$	(0.87	)	$	0.05		$	(1.05	)	$	(1.46	)
	Diluted				$	(0.87	)	$	0.04		$	(1.05	)	$	(1.46	)
Weighted average common shares outstanding:
	Basic					44.1			47.7			44.7			47.7
	Diluted					44.1			59.4			44.7			47.7

See accompanying notes to unaudited consolidated financial statements.

WIRELESS FACILITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)

							Six months ended June 30,

							2001			2002

Net cash provided by (used in) operating activities							$	(7.3	)	$	10.1

Investing activities - capital expenditures								(2.7	)		(2.1	)

Financing activities:
					Proceeds from issuance of Series B Convertible Preferred Stock, net of issuance costs			—			44.9
					Proceeds from issuance of common stock			4.9			1.1
				Repayment of notes payable				(1.6	)		(0.6	)
				Net repayment under line of credit				(1.9	)		(33.0	)
			Repayment of capital lease obligations					(2.9	)		(4.0	)

						Net cash provided by (used in) financing activities		(1.5	)		8.4

Effect of exchange rate on cash and cash equivalents								1.2			(1.4	)

Net increase (decrease) in cash and cash equivalents								(10.3	)		15.0
Cash and cash equivalents at beginning of period								18.5			61.1

Cash and cash equivalents at end of period							$	8.2		$	76.1

Supplemental disclosure of cash flow information:
		Cash paid during the period for interest					$	2.1		$	1.7
		Net cash received during the period for income taxes					$	4.2		$	0.8

Supplemental disclosures of non-cash transactions:
		Common stock issued for earn out provision in acquisition					$	8.7		$	—
		Common stock issued for employee stock purchase plan					$	1.7		$	2.8
	Note receivable issued for sale of equipment						$	1.0		$	—
	Property and equipment acquired under capital leases						$	2.8

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