Leap Wireless International Inc., the San Diego-based flat-rate wireless service provider in 39 mid-sized cities, reported its first quarterly profit since emerging from Chapter 11 bankruptcy last August.
For the quarter ended March 31, the company that does business under the brand name Cricket, reported a net profit of $12.6 million on revenues of $228.4 million.
The results contrast to the prior year’s first quarter of 2004 when it reported a net loss of $28 million on $206.8 million in revenues.
Leap, a spinoff firm of Qualcomm Inc., filed for bankruptcy protection in early 2003 after it defaulted on payments to corporate bonds it issued in prior years to raise capital for infrastructure costs. At the time it filed for Chapter 11 restructuring, it listed outstanding debt of more than $2.4 billion. The process wiped out the investment of all stockholders.
Leap Chief Executive Officer Doug Hutcheson said the recent results “clearly demonstrate that we are building on the financial performance we delivered in 2004.”
Leap said it gained nearly 46,000 net customers during the first quarter to bring the total customer base to more than 1.6 million. However, it revised its annual projection of net new customers for this year to come in somewhere between 125,000 and 200,000, down from an earlier forecast between 150,000 to 200,000.
The company also projected annual revenues this year between $890 million and $950 million, making it among the largest publicly traded firms based in San Diego. While Leap Wireless has more than 1,400 employees, only about 230 work at its corporate headquarters in Sorrento Mesa.
The flat rate, unlimited calling model sold as Cricket is offered in mostly mid-sized cities such as Buffalo, N.Y., and Chattanooga, Tenn., and is not available in San Diego. Leap said it is expanding this year into Fresno (it already serves Visalia and Merced/Modesto) and plans to spend between $20 million to $25 million to build out its network there.
The company said average revenue per user per month rose to $39.03, up $1.58 from the first quarter of 2004.
Leap, which is traded on the over-the-counter bulletin board under LEAP.OB, closed at $27.78 on June 14, the day the first quarter news was released. It was up 13 cents from the prior day’s close.
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The Move To Nasdaq:
Southwest Community Bancorp, an Encinitas-based commercial banking company with more than $600 million in total assets and eight branches, began trading its stock on the Nasdaq small-cap market exchange on June 14 under the ticker SWCB.
Southwest CEO Frank Mercardante said the bank had been considering changing from its former home on the over-the-counter bulletin board for some time and filed the application earlier this year.
“We’re pleased that we were able to meet the stringent listing requirements including corporate governance policies, stock price, market capitalization and shareholder equity,” Mercardante said. “Over time, the listing should serve to increase awareness for Southwest Community in the investment community, increase liquidity, strengthen our investor base, expand the opportunity fro research coverage and specifically enhance our exposure among institutional investors for which a Nasdaq listing is a preference or a regulatory requirement.”
Another locally based bank, Temecula Valley Bancorp, also recently applied for listing on the Nasdaq exchange earlier this month.
In other news involving Southwest Community, the company agreed to sell the assets of its data processing unit called Financial Data Solutions to Open Solutions Inc., a publicly traded Connecticut firm for about $9 million in cash.
After transaction costs and taxes, Southwest said it should realize a gain of $1.8 million.
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Late Again:
Petco Animal Supplies said it would not be able to file its first quarter 10-Q report on time because it is still conducting an internal review of its full fiscal year, and for the fourth quarter that ended Jan. 29.
Petco’s latest filing follows several earlier reports in which the national pet retailer revealed it was conducting a review of earlier financial results in light of accounting error it discovered involving its distribution operations.
In mid-April, Petco requested an extension to file its annual 10K report, and said then it should be able to file that final report “within the next few weeks.”
In May 23 filing Petco said it still had not filed the required 10K but planned to have it filed “within the next couple of weeks.”
CFO Rodney Carter said earlier this month the annual report should be completed and filed by the end of this month.
Meanwhile, the Nasdaq appended an “E” after the ticker, PETC, signaling an extraordinary event, and notified the firm the stock could be delisted. The company has requested a hearing by the Nasdaq listing qualifications panel, a move that will cause a postponement of the stock’s delisting.
Petco closed at $31.91, up 60 cents on June 13. It has ranged from $27.20 to $39.91 over the past 52 weeks.
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New Auditor:
Wireless Facilities, Inc., the San Diego-based provider of telecom outsourcing services to wireless carriers, said its audit committee dismissed its outside auditor, KPMG, and hired Grant Thornton LLP as its new accounting firm.
The company said the main reason for giving KPMG the boot was receiving more than $1 million in unexpected invoices from the firm. This was on top of $1.9 million in auditing fees already paid to KPMG. WFI said up until getting the latest bill, it had not received any notice from KPMG that there was going to any material additional costs on the auditing.
WFI made it clear in a filing with the SEC on June 13 that KPMG’s financial reports on the company for the years 2003 and 2004 did not contain an adverse opinion, “nor were qualified or modified as to uncertainty, audit scope, or accounting principle.”
To ensure a smooth audit transition to Grant Thornton, WFI negotiated a final settlement with KPMG for about $1 million, and a promise that KPMG would provide the new accounting firm with access to all the historic audit reports to enable Grant Thornton to work on the company’s 2005 audit. WFI said it would take a pre-tax charge of about $1 million in its second quarter related to the unexpected higher audit fees.
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Record Sales:
RF Industries, the San Diego-based distributor of coaxial connectors and radio components, reported net income of $163,000 on record sales of $3.6 million for the second quarter ended April 30.
That compared to net income of $351,000 on revenues of $2.8 million for the same period of 2004. Six-month results were net profits of $370,000 on revenues of $6.4 million compared to $585,000 in net profits on sales of $5.3 million.
Chief Executive Officer Howard Hill attributed the reduced profits this year on increased materials and labor expenses. He also noted the company spent $340,000 through the end of April on compliance with the federal Sarbanes-Oxley Act of 2002. The accounting reform law requires additional reports from all public firms on the firms’ internal control systems.
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On The Rise:
Mad Catz Interactive Inc., the San Diego-based maker of video game accessories, reported net income of $900,000 on revenues of $21.8 million for its fourth quarter ended March 31, compared to net profits of $500,000 on revenues of $21.1 million for the like period in 2004.
For the full year, Mad Catz reported net income of $4.6 million on revenues of $112.1 million, compared to net income of $1.1 million on 102.1 million in revenues for the prior fiscal year.
Chief Executive Officer Darren Richardson said his firm’s exceptional financial results were highlighted by a 331 percent growth in annual net profits.
The company is succeeding in differentiating from other video game accessory providers, and has arranged licensing agreements with the National Football League, the National Basketball Association, Major League Baseball, Batman and Fantastic 4 properties, and iPod.
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Ticker Takes:
PriceSmart Inc., the operator of 26 warehouse club stores primarily in the Caribbean, said net sales increased nearly 16 percent in May to $56 million. WebSideStory received an award for the most innovative growth strategy by the Association of Corporate Growth.
Send any news of San Diego based public companies to Mike Allen at mallen@sdbj.com. He can be reached at (858) 277-6359.
