Marketgems Earnings Trader- Trading Strong or Weak Earnings Growth

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WFII: Wasatch has a big position in this one; http://www.nasdaq.com/asp/Holdings.asp?Selected=WFII&symbol=WFII`&FormType=Institutional&...
got an upgrade today; earnings (released on May 8th) were lackluster, but they have a big contract with Cingular Wireless.
Wednesday May 8, 4:05 pm Eastern Time
Wireless Facilities Reports Results for First Quarter 2002
SAN DIEGO, May 8 /PRNewswire-FirstCall/ -- Wireless Facilities, Inc., (WFI), (Nasdaq: WFII - news), a global leader in the design, deployment and management of wireless telecommunications networks, today released financial results for the first quarter ended March 31, 2002.

The results for first quarter 2002 reflect the continued weakness in the telecommunications market, specifically the level of wireless telecom infrastructure spending during the quarter. During this period, the Company experienced a continuation of customer slowdowns and project scope reductions and postponements related to wireless network deployment, which were highlighted in its recent Annual Report on Form 10-K filed with the SEC on March 19, 2002.

As announced on April 30, 2002, the Company's revenue for the first quarter totaled $40.1 million, a decrease of 11 percent compared to the $45.0 million reported in the fourth quarter of 2001, and a decrease of 24 percent compared to the $52.7 million reported in the first quarter of 2001.

The Company also announced a substantial net loss in the quarter due to the continued weakness in the wireless telecommunications market. During the first quarter, the Company implemented a change in its business model resulting in significant cost cutting actions and expense reductions, including a downsizing in work force, asset impairment charges associated with certain goodwill, finite life intangibles and other long-lived assets, and charges for unused lease space. These charges reflect management decisions to more efficiently scale its ongoing costs to achieve targeted levels of profitability.

On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," at which time the Company ceased amortization of goodwill and intangible assets with indefinite lives. During the first quarter, the Company recorded a $19.9 million impairment charge related to certain goodwill and other intangible assets resulting from triggering events during the quarter. As of March 31, 2002, the Company has not completed its transitional impairment test of goodwill and other intangible assets pursuant to the adoption of SFAS 142. The Company expects to complete this analysis by the end of second quarter 2002, in accordance with the guidelines set forth in the standard. SFAS 142 requires disclosure of what reported net income or loss and related per-share amounts would have been in periods prior to the adoption of SFAS 142 exclusive of amortization expense related to goodwill and other intangible assets that are no longer amortized. As such, the Company is presenting "As Adjusted" financial results for its prior period consolidated statements of operations.

Reported net loss for the first quarter 2002 was $71.7 million ($1.52 per basic and diluted share) compared to a reported and "As Adjusted" net loss of $10.4 million ($0.22 per basic and diluted share) and $8.7 million ($0.18 per basic and diluted share), respectively, in fourth quarter 2001, and compared to a reported and "As Adjusted" net loss of $8.5 million ($0.19 per basic and diluted share) and $7.7 million ($0.18 per basic and diluted share), respectively, in first quarter 2001.

During the first quarter, the Company recorded a net provision for taxes of $10.1 million related to providing an additional valuation allowance for deferred tax assets.

Cash from operations for the quarter was $1.3 million. Total cash and cash equivalents at the end of the first quarter increased $1.2 million to $62.3 million.

On May 1, 2002, the Company announced that it had been awarded a three-year contract from Bechtel Corporation in conjunction with Cingular Wireless' nationwide network overlay project of GSM/GPRS technologies. Cingular Wireless is the nation's second largest wireless service provider. The revenue to WFI over the three year project life is expected to be a minimum of $135 million and could exceed $200 million.

"Cingular's contract award to the WFI/Bechtel partnership represents the largest award in our Company's history and highlights the market share gains we are making in an otherwise difficult telecom environment," said Thomas Munro, President of WFI. "This marketplace continues to be characterized by cautious capital spending, with new opportunities awarded to providers who have the size, financial strength, depth of services and quality necessary to complete large-scale engagements. Our management team is very focused on aligning our total cost structure with market opportunities in order to improve profitability and cash flow. We will also continue to strengthen our relationships with carriers, equipment manufacturers and partners."

Guidance

The Company expects to have positive earnings before interest, tax, depreciation and amortization expenses (EBITDA) in the second quarter 2002, based on a five percent sequential increase in revenue.

About Wireless Facilities

A global leader in telecommunications outsourcing, Wireless Facilities, Inc. designs, deploys and manages wireless networks for some of the largest cellular and PCS carriers and equipment suppliers worldwide. Specializing in network architecture and dimensioning of mobile and high speed wireless data systems, including third generation (3G) networks, WFI provides a complete range of network services -- from business and market planning to RF engineering, fixed network engineering, IP and data engineering, site acquisition and development, installation, optimization and maintenance. Headquartered in San Diego, WFI has performed work in over 100 countries since the Company was founded in late 1994. The Company has offices in Dallas, Chicago, Seattle, Reston, Montvale, London, Gothenburg, Mexico City, Sao Paulo, and Bejing. News and information are available at www.wfinet.com .

Notice Regarding Forward-Looking Statements

This news release contains certain forward-looking statements that involve risks and uncertainties. The Company operates in a very dynamic market environment, and expectations or assumptions that appear reasonable as of the date hereof may not be reasonable at any point in the future. Words such as "anticipates," "expects," "projects," "intends," "plans," "believes," "may," "will," and similar expressions are intended to identify forward-looking statements and specifically include references to the Company's expected revenue from the Cingular Wireless contract and the Company's belief that new business wins improve Company visibility to the extent the Company can accurately forecast sequential quarterly increases in revenue and EBITDA earnings for the second quarter of fiscal 2002, within a wireless environment generally characterized by low visibility. Such statements are only predictions, and the Company's actual results may differ materially from those anticipated. Factors that may cause the Company's results to differ include, but are not limited to, changes in the scope or timing of the project for Cingular Wireless; continued and additional slowdowns in telecommunications infrastructure spending in the United States and globally, which could delay network deployment and reduce demand for the Company's services; the timing, rescheduling or cancellation of significant customer contracts and agreements, or the loss of key customers; the adoption rate of new wireless data services; potential losses arising from business transactions and the Company's restructuring as part of its new business model, including potential write-offs of accounts receivable, goodwill and intangibles associated with the Company's acquisitions and changes in the Company's business model; changes in the Company's effective income tax rate and severance related expenses, including write-downs and charges associated therewith; the rate of adoption of telecom outsourcing by network carriers and equipment suppliers; competition in the marketplace which could reduce revenues and profit margins; and lower customer satisfaction levels for services performed by the Company. Although the Company believes that the expectations reflected in any forward- looking statements made herein are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. The Company undertakes no obligation to update any forward-looking statements made to conform to actual results or to changes to expectations. These risk factors and others are more fully discussed under "Risk Factors" and elsewhere in the Company's registration statement on Form S-1 and the Company's Annual Report on Form 10-K filed on March 19, 2002 with the Securities and Exchange Commission.

For further information, please contact: Investors/Media, Mark Francois, Director, Investor Relations of Wireless Facilities, Inc., [phone], [e-mail]


WIRELESS FACILITIES, INC.
Unaudited Condensed Consolidated Statements of Operations
(In millions, except per share amounts)

Three months ended
As Adjusted (1)
December 31, December 31, March 31,
2001 2001 2002

Revenues $45.0 $45.0 $40.1
Cost of revenues 32.4 32.4 29.2
Gross profit 12.6 12.6 10.9

Selling, general and
administrative expenses 16.7 16.7 47.1
Depreciation and amortization 5.1 2.6 2.7
Impairment charges -- -- 21.1
Operating loss (9.2) (6.7) (60.0)
Other income (expense), net 1.3 1.3 (1.6)
Loss before taxes and
minority interest in
income of subsidiary (7.9) (5.4) (61.6)
Provision for income taxes 2.4 3.2 10.1
Minority interest in income
of subsidiary 0.1 0.1 --
Net loss $(10.4) $(8.7) $(71.7)

Net loss per common share -
Basic and diluted $(0.22) $(0.18) $(1.52)

Weighted-average common
shares outstanding -
Basic and diluted 47.1 47.1 47.3

Net loss adjusted for
amortization of goodwill
and other intangible
assets and related
impairment charges:

Net loss $(10.4) $(8.7) $(71.7)
Impairment charges related
to goodwill and other
intangible assets (2) -- -- 19.9
Amortization of goodwill
and other intangible assets 3.3 0.8 0.8
Adjusted net loss $(7.1) $(7.9) $(51.0)

Adjusted net loss
per common share -
Basic and diluted $(0.15) $(0.17) $(1.08)

(1) "As adjusted" December 31, 2001, is presented for purposes of
comparability and reflects an adjustment to exclude amortization of
goodwill and other intangible assets with indefinite lives during the
period and the related estimated tax effect. In accordance with
SFAS 142, "Goodwill and Other Intangible Assets," amortization of
goodwill and intangible assets with indefinite lives ceased effective
January 1, 2002.
(2) The impairment charge in Q1 2002 of $19.9 million for certain goodwill
and other intangible assets did not result from the SFAS 142
transitional impairment test, but was a result of a triggering event.
As such, the charge is not recorded as a "Change in Accounting
Principle" under the guidelines of SFAS 142.


WIRELESS FACILITIES, INC.
Unaudited Condensed Consolidated Statements of Operations
(In millions, except per share amounts)

Three months ended
As Adjusted (1)
March 31, March 31, March 31,
2001 2001 2002

Revenues $52.7 $52.7 $40.1
Cost of revenues 39.1 39.1 29.2
Gross profit 13.6 13.6 10.9

Selling, general and
administrative expenses 30.3 30.3 47.1
Depreciation and amortization 5.4 3.0 2.7
Impairment charges -- -- 21.1
Operating loss (22.1) (19.7) (60.0)
Other expense, net (2.2) (2.2) (1.6)
Loss before income taxes (24.3) (21.9) (61.6)
Provision (benefit)
for income taxes (15.8) (14.2) 10.1
Net loss $(8.5) $(7.7) $(71.7)

Net loss per common share -
Basic and diluted $(0.19) $(0.18) $(1.52)

Weighted-average common
shares outstanding -
Basic and diluted 43.7 43.7 47.3

Net loss adjusted for
amortization of goodwill and
other intangible assets and
related impairment charges:

Net loss $(8.5) $(7.7) $(71.7)
Impairment charges related
to goodwill and other
intangible assets (2) -- -- 19.9
Amortization of goodwill and
other intangible assets 3.6 1.2 0.8
Adjusted net loss $(4.9) $(6.5) $(51.0)

Adjusted net loss
per common share -
Basic and diluted $(0.11) $(0.15) $(1.08)

(1) "As adjusted" March 31, 2001, is presented for purposes of
comparability and reflects an adjustment to exclude amortization of
goodwill and other intangible assets with indefinite lives during the
period and the related estimated tax effect. In accordance with
SFAS 142, "Goodwill and Other Intangible Assets," amortization of
goodwill and other intangible assets with indefinite lives ceased
effective January 1, 2002.
(2) The impairment charge in Q1 2002 of $19.9 million for certain goodwill
and other intangible assets did not result from the SFAS 142
transitional impairment test, but was a result of a triggering event.
As such, the charge is not recorded as a "Change in Accounting
Principle" under the guidelines of SFAS 142.



WIRELESS FACILITIES, INC.
Condensed Consolidated Balance Sheets
(In millions)

December 31, March 31,
2001 2002
(Audited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (1) $61.1 $62.3
Billed accounts receivable, net 42.7 27.6
Unbilled accounts receivable, net 46.1 40.6
Contract management receivables, net 5.9 4.8
Income taxes receivable 3.2 3.7
Other current assets, net 15.3 7.2
Total current assets 174.3 146.2
Property and equipment, net 19.0 15.9
Goodwill, net 54.4 41.6
Other intangibles, net 8.6 0.2
Investments in unconsolidated affiliates 8.4 8.3
Deferred tax assets, net 10.0 --
Other assets 1.2 0.8
Total assets $275.9 $213.0

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Billings in excess of costs and profits $1.6 $2.3
Other current liabilities 68.4 64.9
Total current liabilities 70.0 67.2
Other long-term liabilities, net 7.9 16.8
Total liabilities 77.9 84.0
Minority interest 0.2 0.2

Stockholders' equity 197.8 128.8

Total liabilities and stockholders' equity $275.9 $213.0

(1) In May 2002, the Company renegotiated and amended its line of credit
agreement. As a result, $25 million of the Company's cash will be
restricted to its use under the provisions of the new agreement.

SOURCE: Wireless Facilities, Inc.,