Leap Wireless has delayed the release of its annual report due to accounting changes and announced a bonus plan for employees, according to a pair of Securities and Exchange Commission filings.
Leap said it is unable to file its 10-K for 2004 with the SEC because it is reviewing its lease-related accounting practices following changes from the SEC to cell-site leasing accounting practices. Several tower companies and wireless carriers pushed back their fourth-quarter 2004 financial results due to the changes.
“… The review process has been taking a considerable amount of time because the company has more than 2,500 cell-site leases, many of which were amended during the course of the company’s bankruptcy proceedings,” said Leap in the filing.
Leap said it plans to finalize its financial statements for 2004 and to file its annual report by April 15.
Leap added the financial report delay constitutes a breach of the terms of its senior secured credit agreement, relating to a $500 million term loan and a $110 million revolving credit facility. Leap said if it is unable to finalize its financial statements by April 15, it will constitute a default under the credit agreement, and Leap would seek a waiver of the event of default.
Leap said it expects that its combined operating results for the seven months ended July 31, 2004, and the five months ended Dec. 31, 2004, will generally compare with its operating results for the fiscal year ended Dec. 31, 2003. Revenue in 2004 will be greater than revenue in 2003, reflecting in part an increase in net customers, an increase in average revenue per customer, higher average net revenue per handset sold and higher handset sales volumes. Leap added that total operating expenses in 2004 will be lower than in 2003, reflecting primarily a decrease in depreciation and amortization expense in 2004 and about $195 million of asset impairment and related charges in 2003 compared with less than $1 million of asset impairment and related charges in 2004.
In addition, Leap said it expects interest expense in 2004 will be lower than interest expense in 2003. Leap said it recorded a net gain from reorganization items in excess of $900 million for the seven months ended July 31, 2004, which the company expects will result in substantial net income for the year ended Dec. 31, 2004, compared with a net loss for 2003.
Leap also announced its 2005 Bonus Plan, which its board of directors approved Feb. 24. The company informed employees of the plan March 25.
“The objective of the 2005 Bonus Plan is to attract, motivate and retain employees who can, through their collective efforts, help the company achieve its 2005 business goals,” Leap said.
The 2005 Bonus Plan provides for the payment of cash bonuses to employees working a specified minimum number of hours per week, other than employees who participate in the company’s separate 2005 Sales Bonus Plan. The 2005 Bonus Plan provides for the payment of bonuses on a semi-annual basis to executive officers at the senior vice president level or higher and on a quarterly basis to other eligible employees of Cricket. Bonuses paid to employees at levels above the manager level are based 75 percent on the Company’s achievement of certain performance metrics and 25 percent on the individual employee performance.
