NextWave Wireless Inc.

CIK:0001374993|SEC Filings

Business Divestiture and Discontinued Operations

9 Months Ended

Sep. 29, 2012

Business Divestiture and Discontinued Operations [Abstract]

Business Divestiture and Discontinued Operations

5.	Business Divestiture and Discontinued Operations

Business Divestiture

During the nine months ended October 1, 2011, we completed the sale of our remaining subsidiaries in Latin America to a third party for $3.0 million and recognized a gain on the divestiture of $1.7 million, all of which is reported in discontinued operations in the condensed consolidated statement of operations, and of which $1.3 million was accumulated in the foreign currency translation adjustment component of equity for these consolidated subsidiaries and transferred to earnings upon substantial liquidation.

Discontinued Operations

In an effort to reduce our future working capital requirements and in order to comply with the terms of our Notes our Board of Directors approved the implementation of a global restructuring initiative in 2008, pursuant to which we have divested, either through sale, dissolution or closure, our multimedia, network infrastructure and semiconductor businesses.

Our continuing operations are comprised of our portfolio of licensed wireless spectrum assets. We continue to pursue sales of our wireless spectrum license assets, the net proceeds of which will be used to reduce our outstanding indebtedness.

The results of operations of our Global Services Support strategic business unit and our WiMAX Telecom, Inquam and South American businesses, have been reported as discontinued operations in the consolidated financial statements for all periods presented, prior to sale or dissolution of the respective business.

The carrying amounts of the assets and liabilities of our discontinued operations are as follows:


(in thousands)	September 29, 2012		December 31, 2011
Cash and cash equivalents	$	661	$	5
Property and equipment held for sale		3,500		3,500
Other assets		1		6

Current assets of discontinued operations	$	4,162	$	3,511

Current liabilities of discontinued operations	$	725	$	172

The financial results of our discontinued operations are as follows:


	Three Months Ended						Nine Months Ended
(in thousands)	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011
Revenues	$	—		$	—		$	—		$	6
Total operating expense credits⁽¹⁾		(117	)		(65	)		(268	)		(613	)
Net gains (losses) on business divestitures⁽²⁾		—			(1	)		19,862			2,119
Income before income taxes		16			66			20,029			2,740
Net income from discontinued operations		10			42			18,563			1,740

(1)	Total operating expense credits for the three months ended September 29, 2012 includes $0.1 million in sublease revenue. Total operating expense credits for the nine months ended September 29, 2012 includes $0.3 million in sublease revenue

Total operating expense credits for the three months ended October 1, 2011 includes $0.1 million in sublease revenue. Total operating expense credits for the nine months ended October 1, 2011 include a $0.3 million favorable settlement with a service vendor, $0.2 million in net gains on the sale of equipment and $0.2 million in sublease revenue.

(2)

Net gains on business divestitures for the nine months ended September 29, 2012 includes $2.3 million in cash consideration received plus $17.6 million accumulated in the foreign currency translation adjustment component of equity that was transferred to earnings upon substantial liquidation of our foreign entities.

Net gains on business divestitures for the nine months ended October 1, 2011 includes $3.4 million in cash consideration received, partially offset by $1.3 million accumulated in the foreign currency translation adjustment component of equity that was transferred to earnings upon substantial liquidation of our foreign entities.

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 29, 2012	Oct. 01, 2011
OPERATING ACTIVITIES
Net loss	$ (131,875)	$ (195,848)
Net income from discontinued operations	18,563	1,740
Net loss from continuing operations	(150,438)	(197,588)
Adjustments to reconcile loss from continuing operations to net cash used in operating activities of continuing operations:
Amortization of intangible assets	5,574	5,709
Depreciation	592	656
Non-cash share-based compensation	295	625
Paid-in-kind interest	124,080	98,448
Amortization of deferred financing costs and discounts	5,342	86,552
Gains on sales of wireless spectrum licenses	(101)	(255)
Gains from changes in estimated fair values of embedded derivatives		(1,261)
Deferred income tax benefit	(607)	(1,082)
Other non-cash adjustments	3	(1,044)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	572	551
Other assets	290	(389)
Accounts payable and accrued liabilities	1,872	(2,610)
Net cash used in operating activities of continuing operations	(12,526)	(11,688)
INVESTING ACTIVITIES
Proceeds from the maturity of investment securities	20,210
Purchase of held-to-maturity investment securities	(10,191)	(15,000)
Proceeds from the sale of wireless spectrum licenses, net of selling costs	278	255
Net cash provided by (used in) investing activities of continuing operations	10,297	(14,745)
FINANCING ACTIVITIES
Payments on long-term obligations	(4,080)	(10,137)
Payments to restricted cash account used to redeem long-term obligations	(647)
Net cash used in financing activities of continuing operations	(4,727)	(10,137)
Cash provided (used) by discontinued operations:
Net cash provided (used) by operating activities of discontinued operations	193	(906)
Net cash provided by investing activities of discontinued operations	2,213	3,654
Net cash provided by discontinued operations	2,406	2,748
Effect of foreign currency exchange rate changes on cash	(18)	3
Net decrease in cash and cash equivalents	(4,568)	(33,819)
Cash and cash equivalents, beginning of period	11,092	42,598
Cash and cash equivalents, end of period	6,524	8,779
Less cash and cash equivalents of discontinued operations, end of period	(661)	(40)
Cash and cash equivalents of continuing operations, end of period	$ 5,863	$ 8,739

Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 29, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 5,863	$ 11,087
Restricted cash	1,696	1,047
Marketable securities		10,000
Prepaid expenses and other current assets	248	827
Current assets of discontinued operations	4,162	3,511
Total current assets	11,969	26,472
Wireless spectrum licenses, net	431,397	435,522
Property and equipment, net	721	1,313
Other assets	50	362
Total assets	444,137	463,669
Current liabilities:
Accounts payable	250	5
Accrued expenses	3,959	2,328
Current portion of long-term obligations	1,148,434	142,019
Other current liabilities	9	10
Current liabilities of discontinued operations	725	172
Total current liabilities	1,153,377	144,534
Deferred income tax liabilities	83,937	83,334
Long-term obligations, net of current portion	15,489	896,568
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.001 par value; 25,000 shares authorized; 355 shares designated as Series A Senior Convertible Preferred Stock; no other shares issued or outstanding
Common stock, $0.007 par value; 57,143 shares authorized; 24,938 shares issued and outstanding at September 29, 2012 and December 31, 2011	175	175
Additional paid-in-capital	888,800	888,505
Accumulated other comprehensive income	5,486	21,805
Accumulated deficit	(1,703,127)	(1,571,252)
Total stockholders' deficit	(808,666)	(660,767)
Total liabilities and stockholders' deficit	$ 444,137	$ 463,669