- Net operating revenues of $8.5 billion
grew more than 5 percent year-over-year
- Second consecutive quarter of
year-over-year growth
- Postpaid phone net additions of 368,000
were the highest in four years
- Beat both Verizon and AT&T for the
fourth consecutive quarter
- Ninth consecutive quarter of
year-over-year improvement
- Postpaid net port positive for the
third quarter in a row
- Net loss of $479 million, Operating
income of $311 million and Adjusted EBITDA* of $2.5 billion
- Operating income and Adjusted EBITDA*
both improved by more than $500 million year-over-year
- More than $1.6 billion of year-to-date
reductions in cost of service and selling, general, and
administrative expenses
- Diversified funding sources, lowered
cost of capital, and enhanced cash and liquidity position
- Issued $3.5 billion of spectrum-backed
notes at 3.36 percent – about half of Sprint’s current effective
interest rate
- Moody’s Investor Service upgraded the
company’s debt rating
- Network performing at best-ever levels
with most metro RootMetrics® RootScore® awards in the company’s
history in the second half of calendar 2016
Sprint Corporation (NYSE:S) today reported operating
results for the third quarter of fiscal year 2016, including more
than 5 percent year-over-year growth in net operating revenues and
the highest postpaid phone net additions in four years. The company
also reported operating income of $311 million and Adjusted EBITDA*
of $2.5 billion, both improvements of more than $500 million
year-over-year.
“Sprint is turning the corner,” said Sprint CEO Marcelo Claure.
“Even with all the aggressive promotional offers from our
competitors, we were still able to add more postpaid phone
customers than both Verizon and AT&T while continuing to grow
revenues, take costs out of the business, and improve the
network.”
Highest Postpaid Phone Net Additions in Four Years During
Very Competitive Quarter
Sprint’s focus on delivering the best value proposition in
wireless resulted in 368,000 postpaid phone net additions in the
quarter, its ninth consecutive quarter of year-over-year
improvement. Even in a highly competitive quarter with multiple
promotional offers from its competitors, Sprint was able to add
more postpaid phone customers than both Verizon and AT&T and
report its highest postpaid phone net additions in four years. The
company also remained postpaid net port positive for the third
quarter in a row and had its highest postpaid phone gross additions
in four years.
The company also reported the following results:
- Total net additions were 577,000 in the
quarter, including postpaid net additions of 405,000, prepaid net
losses of 501,000, and wholesale and affiliate net additions of
673,000.
- Total postpaid churn was 1.67 percent
and postpaid phone churn was 1.57 percent in the quarter.
Top Line Growing as Cost Reductions Continue
Sprint made continued progress on growing revenues and improving
the cost structure of the business. Total net operating revenues of
$8.5 billion grew by $442 million year-over-year, or more than 5
percent, and cost of service and selling, general and
administrative expenses declined by nearly $500 million
year-over-year, bringing the year-to-date cost reduction to more
than $1.6 billion.
As part of its ongoing cost reduction program, the company
modified the terms of its vendor agreements associated with the
service and repair program on Jan. 1, 2017, which are expected to
be accretive to Adjusted EBITDA* by approximately $25 million to
$50 million per quarter. Under the terms of the new agreements, the
company will now only record the net margin and therefore expects
the reduction to wireless service revenues of approximately $200
million per quarter to be more than offset by a greater reduction
in cost of service expenses.
The company remains on track to achieve its goal of a
sustainable reduction of $2 billion or more of run-rate operating
expenses exiting fiscal year 2016 and has plans for further
reductions in fiscal year 2017 and beyond.
The company also reported the following financial results:
- Net loss of $479 million, or $0.12 per
share, in the quarter compared to a net loss of $836 million, or
$0.21 per share, in the year-ago period, an improvement of $357
million, or $0.09 per share.
- Operating income of $311 million in the
quarter compared to an operating loss of $197 million in the
year-ago period, an improvement of $508 million.
- Adjusted EBITDA* of $2.5 billion in the
quarter compared to $1.9 billion in the year-ago period, an
increase of approximately $552 million or 29 percent.
- Net cash provided by operating
activities was $650 million in the quarter compared to $806 million
in the year-ago period.
- Adjusted free cash flow* was negative
$646 million in the quarter compared to positive $339 million in
the year-ago period. The prior year quarter included $1.1 billion
of proceeds from the first sale-leaseback transaction with Mobile
Leasing Solutions, LLC (MLS), while this quarter included a cash
outflow of approximately $370 million related to the repurchase of
the devices sold in the first MLS transaction.
Improved Operating Performance and Liquidity Position
Bolsters Credit Rating
During the quarter the company issued $3.5 billion of
spectrum-backed senior secured notes at 3.36 percent, which is
about half of Sprint’s current effective interest rate, as part of
a $7 billion program aimed at diversifying the company’s funding
sources, lowering its cost of capital, and reducing future cash
interest expenses. The company also retired $2.3 billion of debt
maturities with significantly higher coupon payments and
repurchased the devices sold in the first MLS transaction, thus
eliminating the associated future lease obligation.
Total liquidity was $9.1 billion at the end of the quarter,
including $6.1 billion of cash, cash equivalents and short-term
investments. Additionally, the company also has $1.2 billion of
availability under vendor financing agreements that can be used
toward the purchase of 2.5GHz network equipment.
Based on the company’s sustained operational performance and
improved liquidity, Moody’s Investor Service recently upgraded
Sprint’s corporate family rating from B3 to B2.
In addition, the company is in the process of refinancing its
$3.3 billion unsecured revolving credit facility and expects to
complete that process in the coming weeks.
Network Improvements Expected to Continue with High
Performance User Equipment (HPUE)
Sprint continues to unlock the value of the largest spectrum
holdings in the U.S. by densifying and optimizing its network to
provide customers the best experience. Third party sources continue
to validate the company’s network performance improvements.
- Independent mobile analytics firm
RootMetrics® awarded Sprint a company record 246 first-place
(outright or shared) Metropolitan area RootScore® awards for
reliability, speed, data, call, text, or overall network
performance in the second half of 2016, including more call
RootScore awards than Verizon, AT&T, or T-Mobile for the first
time ever. Additionally, Sprint has received nearly 50 percent more
total awards compared to its award tally in the prior testing
period.1
- Sprint’s overall network reliability
continues to beat T-Mobile and performs within 1 percent of Verizon
and AT&T, based on an analysis of Nielsen data.2
The Sprint LTE Plus network, which includes advanced
technologies such as antenna beamforming and two-channel carrier
aggregation, is now available in more than 250 markets, with
three-channel carrier aggregation deployed in more than 100 of
those markets.
Sprint also recently announced a breakthrough innovation called
HPUE, a new technology that can extend the coverage of its 2.5GHz
spectrum by up to 30 percent to nearly match its mid-band 1.9GHz
spectrum performance on capable devices, including indoors where
the majority of wireless traffic is generated. HPUE-capable devices
are expected to be available in the coming months.
Fiscal Year 2016 Outlook
- The company now expects Adjusted
EBITDA* of $9.7 billion to $10 billion, at the high end of its
previous expectation of $9.5 billion to $10 billion.
- The company now expects operating
income of $1.4 billion to $1.7 billion, at the high end of its
previous expectation of $1.2 billion to $1.7 billion.
- The company now expects cash capital
expenditures, excluding devices leased through indirect channels,
of $2 billion to $2.3 billion. The company’s previous expectation
was less than $3 billion.
- The company continues to expect
Adjusted free cash flow* around break-even.
Conference Call and Webcast
- Date/Time: 8:30 a.m. (ET) Tuesday, Jan.
31, 2017
- Call-in Information
- U.S./Canada: 866-360-1063 (ID:
47845527)
- International: 443-961-0242 (ID:
47845527)
- Webcast available at
www.sprint.com/investors
- Additional information about results is
available on our Investor Relations website
1 Rankings based on RootMetrics 125 Metro RootScore Reports (1H
and 2H 2016) for mobile performance as tested on best available
plans and devices on 4 mobile networks across all available network
types. Your experience may vary. The RootMetrics awards are not an
endorsement of Sprint. Visit www.rootmetrics.com.
2 Average network reliability (voice & data) based on
Sprint’s analysis of latest Nielsen drive test data in the top 106
metro markets.
Wireless Operating Statistics (Unaudited)
Quarter To
Date Year To Date 12/31/16 9/30/16
12/31/15 12/31/16 12/31/15
Sprint platform
(1): Net additions (losses) (in thousands)
Postpaid 405 344 501 929 1,189 Prepaid (501 ) (427 ) (491 ) (1,259
) (1,045 ) Wholesale and affiliate 673
823 481
2,024 2,078
Total
Sprint platform wireless net additions
577 740
491 1,694
2,222 End of period
connections (in thousands) Postpaid (d) 31,694 31,289 30,895
31,694 30,895 Prepaid (d) (e) 11,812 13,547 14,661 11,812 14,661
Wholesale and affiliate (d) (e) 16,009
15,357 12,803
16,009 12,803
Total Sprint platform end of period connections
59,515
60,193 58,359
59,515 58,359
Churn Postpaid 1.67 % 1.52 % 1.62 % 1.58 %
1.57 % Prepaid (e) 5.80 % 5.63 % 5.82 % 5.66 % 5.31 %
Supplemental data - connected devices End of period
connections (in thousands) Retail postpaid 1,960 1,874 1,676
1,960 1,676 Wholesale and affiliate 10,594
9,951 7,930
10,594 7,930
Total 12,554
11,825
9,606 12,554
9,606 Sprint platform
ARPU (1) (a) Postpaid $ 49.70 $ 50.54 $ 52.48 $ 50.59
$ 53.97 Prepaid (e) $ 27.61 $ 27.31 $ 27.44 $ 27.41 $ 27.64
Sprint platform postpaid phone (1) Postpaid
phone net additions 368 347 366 888 416 Postpaid phone end of
period connections (d) 26,037 25,669 25,294 26,037 25,294 Postpaid
phone churn 1.57 % 1.37 % 1.53 % 1.44 % 1.50 %
NON-GAAP
RECONCILIATION - ABPA*, POSTPAID PHONE ARPU AND ABPU*
(Unaudited) (Millions, except accounts,
connections, ABPA*, ARPU, and ABPU*)
Quarter To Date Year To Date 12/31/16
9/30/16 12/31/15 12/31/16
12/31/15
Sprint platform ABPA* (1) Postpaid
service revenue $ 4,686 $ 4,720 $ 4,813 $ 14,184 $ 14,670 Add:
Installment plan billings 291 274 300 829 903 Add: Lease revenue
887 811
531 2,453 1,176
Total for
Sprint platform postpaid connections $
5,864 $ 5,805
$ 5,644 $ 17,466 $
16,749 Sprint platform postpaid accounts (in
thousands) 11,413 11,363 11,261 11,368 11,211 Sprint platform
postpaid ABPA* (b) $ 171.28 $ 170.29 $ 167.11 $ 170.71 $ 166.00
Quarter To Date Year To Date 12/31/16 9/30/16
12/31/15 12/31/16 12/31/15
Sprint
platform postpaid phone ARPU and ABPU* (1)
Postpaid phone service revenue $ 4,420 $ 4,441 $ 4,529 $ 13,350 $
13,819 Add: Installment plan billings 261 248 280 752 848 Add:
Lease revenue 873 797
522 2,411 1,150
Total for Sprint platform postpaid phone connections
$ 5,554 $ 5,486
$ 5,331 $ 16,513
$ 15,817 Sprint platform postpaid
average phone connections (in thousands) 25,795 25,514 25,040
25,528 24,927 Sprint platform postpaid phone ARPU (a) $ 57.12 $
58.03 $ 60.30 $ 58.11 $ 61.60 Sprint platform postpaid phone ABPU*
(c) $ 71.77 $ 71.69 $ 70.99 $ 71.87 $ 70.51 (a) ARPU is calculated
by dividing service revenue by the sum of the monthly average
number of connections in the applicable service category. Changes
in average monthly service revenue reflect connections for either
the postpaid or prepaid service category who change rate plans, the
level of voice and data usage, the amount of service credits which
are offered to connections, plus the net effect of average monthly
revenue generated by new connections and deactivating connections.
Sprint platform postpaid phone ARPU represents revenues related to
our postpaid phone connections. (b) Sprint platform postpaid ABPA*
is calculated by dividing service revenue earned from connections
plus installment plan billings and lease revenue by the sum of the
monthly average number of accounts during the period. (c) Sprint
platform postpaid phone ABPU* is calculated by dividing postpaid
phone service revenue earned from postpaid phone connections plus
installment plan billings and lease revenue by the sum of the
monthly average number of postpaid phone connections during the
period. (d) As part of the transaction involving Shenandoah
Telecommunications Company (Shentel), 186,000 and 92,000
subscribers were transferred in May 2016 from postpaid and prepaid,
respectively, to affiliates. An additional 270,000 nTelos'
subscribers are now part of our affiliate relationship with Shentel
and are being reported in wholesale and affiliate subscribers
during the quarter ended June 30, 2016. (e) As a result of aligning
all prepaid brands, including prepaid affiliate subscribers, under
one churn and retention program as of December 31, 2016, end of
period prepaid and affiliate subscribers were reduced by 1,234,000
and 21,000, respectively.
Wireless Device Financing
Summary (Unaudited)
(Millions, except sales,
connections, and sales and connections mix) Quarter To Date Year To
Date 12/31/16 9/30/16 12/31/15 12/31/16
12/31/15
Postpaid sales (in thousands)
4,812 3,747 4,799 11,827 12,956
Postpaid sales mix
Subsidy/other 20 % 27 % 35 % 25 % 35 % Installment plans 37 % 34 %
10 % 33 % 12 % Leasing 43 % 39 % 55 % 42 % 53 %
Installment plans Installment sales financed $ 1,036 $ 745 $
251 $ 2,188 $ 748 Installment billings 291 274 300 829 903
Leasing Lease revenue $ 887 $ 811 $ 531 $ 2,453 $ 1,176
Lease depreciation 837 724 535 2,205 1,231
Leased device
additions: Cash paid for capital expenditures - leased devices
$ 767 $ 358 $ 607 $ 1,530 $ 1,724 Transfers from inventory - leased
devices 1,095 645 1,073 2,281 2,623 Leased devices in
property, plant and equipment, net $ 4,454 $ 3,759 $ 3,321 $ 4,454
$ 3,321
Leased device net proceeds Proceeds from MLS
sale $ - $ - $ 1,136 $ 1,055 $ 1,136 Repayments to MLS (176 ) (161
) - (502 ) - Proceeds from lease securitization - - - - -
Repayments of lease securitization (55
) (23 ) -
(153 ) -
Net (repayments) proceeds
of device financings and sales of future lease receivables
$ (231 )
$ (184 ) $ 1,136
$ 400 $
1,136 CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date Year To Date 12/31/16
9/30/16 12/31/15 12/31/16 12/31/15
Net operating revenues Service revenue $ 6,323 $ 6,413 $
6,683 $ 19,252 $ 20,600 Equipment revenue
2,226 1,834
1,424 5,556 3,509
Total net operating revenues
8,549 8,247
8,107 24,808
24,109 Net operating
expenses Cost of services (exclusive of depreciation and
amortization below) 1,925 2,101 2,348 6,125 7,194 Cost of products
(exclusive of depreciation and amortization below) 1,985 1,693
1,589 5,097 4,244 Selling, general and administrative 2,080 1,995
2,129 5,992 6,540 Depreciation - network and other 1,000 986 1,014
3,022 2,971 Depreciation - leased devices 837 724 535 2,205 1,231
Amortization 255 271 316 813 994 Other, net
156 (145 )
373 260 633 Total
net operating expenses 8,238
7,625 8,304
23,514 23,807
Operating income (loss)
311 622
(197 ) 1,294
302 Interest expense (619 ) (630
) (546 ) (1,864 ) (1,630 ) Other (expense) income, net
(60 ) (15 )
4 (67 ) 13
Loss
before income taxes (368 ) (23 )
(739 ) (637 ) (1,315 )
Income tax expense (111 )
(119 ) (97 ) (286 )
(126 )
Net loss $
(479 ) $ (142 )
$ (836 ) $ (923
) $ (1,441 )
Basic and diluted net loss per common share
$ (0.12 ) $
(0.04 ) $ (0.21 )
$ (0.23 ) $ (0.36
) Weighted average common shares outstanding
3,983 3,979
3,970 3,979
3,969
Effective tax rate
-30.2 % -517.4
% -13.1 %
-44.9 % -9.6 %
NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED EBITDA*
(Unaudited)
(Millions) Quarter To Date Year
To Date 12/31/16 9/30/16 12/31/15
12/31/16 12/31/15
Net loss
$ (479 ) $
(142 ) $ (836 )
$ (923 ) $ (1,441
) Income tax expense 111
119 97
286 126
Loss before
income taxes (368 ) (23 )
(739 ) (637 ) (1,315 )
Other expense (income), net 60 15 (4 ) 67 (13 ) Interest expense
619 630
546 1,864
1,630
Operating income (loss)
311
622 (197 )
1,294 302
Depreciation - network and other 1,000 986 1,014 3,022 2,971
Depreciation - leased devices 837 724 535 2,205 1,231 Amortization
255 271
316 813
994
EBITDA* (3)
2,403 2,603
1,668 7,334
5,498 Loss (gain) from
asset dispositions and exchanges, net (4) 28 (354 ) - (326 ) 85
Severance and exit costs (5) 19 (5 ) 209 30 247 Contract
terminations (6) - - - 113 - Litigation and other contingencies (7)
- 103 21 103 178 Reduction in liability - U.S. Cellular asset
acquisition (8) -
- - -
(20 )
Adjusted EBITDA* (3)
$ 2,450
$ 2,347 $ 1,898
$ 7,254 $
5,988 Adjusted EBITDA margin*
38.7 % 36.6 % 28.4 %
37.7 % 29.1 % Selected
items: Cash paid for capital expenditures - network and other $
478 $ 470 $ 994 $ 1,421 $ 3,958 Cash paid for capital expenditures
- leased devices $ 767 $ 358 $ 607 $ 1,530 $ 1,724
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions) Quarter To Date Year To Date 12/31/16
9/30/16 12/31/15 12/31/16 12/31/15
Net operating revenues Service revenue Sprint platform (1):
Postpaid $ 4,686 $ 4,720 $ 4,813 $ 14,184 $ 14,670 Prepaid 1,077
1,129 1,224 3,371 3,783 Wholesale, affiliate and other
183 168
182 509 548 Total
Sprint platform 5,946 6,017 6,219 18,064 19,001 Total
transactions (2) -
- 27 -
216 Total service revenue 5,946 6,017 6,246 18,064 19,217
Equipment revenue 2,226
1,834 1,424
5,556 3,509
Total net operating
revenues 8,172
7,851 7,670
23,620 22,726
Net operating expenses Cost of services (exclusive of
depreciation and amortization below) 1,649 1,793 2,031 5,226 6,147
Cost of products (exclusive of depreciation and amortization below)
1,985 1,693 1,589 5,097 4,244 Selling, general and administrative
2,032 1,931 2,041 5,797 6,273 Depreciation - network and other 947
936 961 2,868 2,821 Depreciation - leased devices 837 724 535 2,205
1,231 Amortization 255 271 316 813 994 Other, net
150 (151 )
353 248 611 Total net operating
expenses 7,855
7,197 7,826 22,254
22,321
Operating income (loss)
$ 317 $ 654
$ (156 ) $ 1,366
$ 405 WIRELESS NON-GAAP
RECONCILIATION (Unaudited)
(Millions) Quarter To
Date Year To Date 12/31/16 9/30/16
12/31/15 12/31/16 12/31/15
Operating income
(loss) $ 317 $ 654 $
(156 ) $ 1,366 $ 405 Loss
(gain) from asset dispositions and exchanges, net (4) 28 (354 ) -
(326 ) 85 Severance and exit costs (5) 13 (11 ) 189 18 225 Contract
terminations (6) - - - 113 - Litigation and other contingencies (7)
- 103 21 103 178 Reduction in liability - U.S. Cellular asset
acquisition (8) - - - - (20 ) Depreciation - network and other 947
936 961 2,868 2,821 Depreciation - leased devices 837 724 535 2,205
1,231 Amortization 255
271 316 813
994
Adjusted EBITDA*
(3) $ 2,397
$ 2,323 $
1,866 $ 7,160
$ 5,919 Adjusted EBITDA margin*
40.3 % 38.6 % 29.9 %
39.6 % 30.8 % Selected
items: Cash paid for capital expenditures - network and other $
389 $ 358 $ 869 $ 1,123 $ 3,512 Cash paid for capital expenditures
- leased devices $ 767 $ 358 $ 607 $ 1,530 $ 1,724
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions) Quarter To Date Year To Date 12/31/16
9/30/16 12/31/15 12/31/16 12/31/15
Net operating revenues Voice $ 153 $ 172 $ 201 $ 506 $ 646
Data 41 43 42 127 134 Internet 281 288 317 871 968 Other
22 18
21 59
72
Total net operating revenues
497 521
581 1,563
1,820 Net
operating expenses Costs of services (exclusive of depreciation
and amortization below) 400 436 466 1,284 1,495 Selling, general
and administrative 49 62 82 189 254 Depreciation and amortization
51 48 50 148 144 Other, net 6
7 20
13 22 Total net operating
expenses 506
553 618 1,634
1,915
Operating loss
$ (9 )
$ (32 ) $ (37
) $ (71 ) $
(95 ) WIRELINE NON-GAAP RECONCILIATION
(Unaudited)
(Millions) Quarter To Date Year To Date
12/31/16 9/30/16 12/31/15 12/31/16
12/31/15
Operating loss $
(9 ) $ (32 ) $ (37
) $ (71 ) $ (95 )
Severance and exit costs (5) 6 7 20 13 22 Depreciation and
amortization 51
48 50 148
144
Adjusted EBITDA*
$ 48 $
23 $ 33 $
90 $ 71
Adjusted EBITDA margin* 9.7 % 4.4
% 5.7 % 5.8 % 3.9
% Selected items: Cash paid for capital
expenditures - network and other $ 24 $ 31 $ 74 $ 75 $ 205
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)**
(Millions) Year to Date 12/31/16
12/31/15
Operating activities Net loss $ (923
) $ (1,441 ) Depreciation and amortization 6,040 5,196 Provision
for losses on accounts receivable 406 385 Share-based and long-term
incentive compensation expense 57 58 Deferred income tax expense
276 120 Gains from asset dispositions and exchanges (354 ) -
Amortization of long-term debt premiums, net (234 ) (236 ) Loss on
disposal of property, plant and equipment 368 228 Contract
terminations 96 - Other changes in assets and liabilities: Accounts
and notes receivable (542 ) (1,482 ) Inventories and other current
assets (2,254 ) (2,165 ) Deferred purchase price from sale of
receivables (220 ) 2,048 Accounts payable and other current
liabilities (97 ) (816 ) Non-current assets and liabilities, net
(313 ) 112 Other, net 594
596
Net cash provided by operating
activities 2,900
2,603 Investing
activities Capital expenditures - network and other (1,421 )
(3,958 ) Capital expenditures - leased devices (1,530 ) (1,724 )
Expenditures relating to FCC licenses (46 ) (75 ) Change in
short-term investments, net (2,349 ) 125 Proceeds from sales of
assets and FCC licenses 126 36 Proceeds from sale-leaseback
transaction - 1,136 Other, net
26 (25 )
Net cash used in investing
activities (5,194
) (4,485 )
Financing activities Proceeds from debt and financings 6,830
755 Repayments of debt, financing and capital lease obligations
(3,266 ) (727 ) Debt financing costs (272 ) (1 ) Other, net
68 20
Net cash provided by financing activities
3,360
47 Net increase (decrease) in cash
and cash equivalents 1,066 (1,835 )
Cash and cash equivalents, beginning of period
2,641
4,010 Cash and cash equivalents, end of period
$ 3,707
$ 2,175 RECONCILIATION TO
CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
Quarter To Date Year to Date 12/31/16 9/30/16
12/31/15 12/31/16 12/31/15
Net cash provided by operating activities $
650 $ 1,708 $ 806 $
2,900 $ 2,603 Capital expenditures -
network and other (478 ) (470 ) (994 ) (1,421 ) (3,958 ) Capital
expenditures - leased devices (767 ) (358 ) (607 ) (1,530 ) (1,724
) Expenditures relating to FCC licenses, net (14 ) (17 ) (30 ) (46
) (75 ) Proceeds from sales of assets and FCC licenses 60 39 32 126
36 Other investing activities, net 134
(11 ) (4 )
98 (25 )
Free cash flow*
(9) $ (415 )
$ 891 $
(797 ) $ 127
$ (3,143 ) Net (repayments)
proceeds of device financings and sales of future lease receivables
(231 ) (184 )
1,136 400
1,136
Adjusted free cash flow*
$ (646 ) $
707 $ 339
$ 527 $ (2,007
) **Certain prior period amounts have been
reclassified to conform to the current period presentation.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions) 12/31/16
3/31/16
ASSETS Current assets Cash and cash equivalents $
3,707 $ 2,641 Short-term investments 2,349 - Accounts and notes
receivable, net 1,236 1,099 Device and accessory inventory 1,296
1,173 Prepaid expenses and other current assets
1,984 1,920 Total
current assets 10,572 6,833 Property, plant and equipment,
net 19,333 20,297 Goodwill 6,579 6,575 FCC licenses and other
40,556 40,073 Definite-lived intangible assets, net 3,582 4,469
Other assets 673
728
Total assets $
81,295 $ 78,975
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable $ 2,894 $ 2,899 Accrued expenses and
other current liabilities 4,189 4,374 Current portion of long-term
debt, financing and capital lease obligations
6,554 4,690 Total current
liabilities 13,637 11,963 Long-term debt, financing and
capital lease obligations 30,759 29,268 Deferred tax liabilities
14,238 13,959 Other liabilities 3,665
4,002
Total liabilities
62,299
59,192 Stockholders' equity Common
stock 40 40 Treasury shares, at cost - (3 ) Paid-in capital 27,694
27,563 Accumulated deficit (8,301 ) (7,378 ) Accumulated other
comprehensive loss (437 )
(439 ) Total stockholders' equity
18,996 19,783
Total
liabilities and stockholders' equity
$ 81,295 $ 78,975
NET DEBT* (NON-GAAP) (Unaudited)
(Millions) 12/31/16 3/31/16 Total debt $ 37,313 $
33,958 Less: Cash and cash equivalents (3,707 ) (2,641 ) Less:
Short-term investments (2,349 )
-
Net debt*
$ 31,257 $ 31,317
SCHEDULE OF DEBT (Unaudited)
(Millions) 12/31/16
ISSUER
MATURITY PRINCIPAL Sprint
Corporation 7.25% Senior notes due 2021 09/15/2021 $ 2,250
7.875% Senior notes due 2023 09/15/2023 4,250 7.125% Senior notes
due 2024 06/15/2024 2,500 7.625% Senior notes due 2025
02/15/2025 1,500
Sprint
Corporation
10,500 Sprint Spectrum Co LLC, Sprint Spectrum Co
II LLC and Sprint Spectrum Co III LLC 3.36% Senior secured
notes due 2021 09/20/2021
3,500
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and
Sprint Spectrum Co III LLC
3,500 Sprint Communications,
Inc. Export Development Canada Facility (Tranche 4) 12/15/2017
250 Export Development Canada Facility (Tranche 3) 12/17/2019 300
9.125% Senior notes due 2017 03/01/2017 1,000 8.375% Senior notes
due 2017 08/15/2017 1,300 9% Guaranteed notes due 2018 11/15/2018
3,000 7% Guaranteed notes due 2020 03/01/2020 1,000 7% Senior notes
due 2020 08/15/2020 1,500 11.5% Senior notes due 2021 11/15/2021
1,000 9.25% Debentures due 2022 04/15/2022 200 6% Senior notes due
2022 11/15/2022 2,280
Sprint Communications, Inc.
11,830 Sprint Capital
Corporation 6.9% Senior notes due 2019 05/01/2019 1,729 6.875%
Senior notes due 2028 11/15/2028 2,475 8.75% Senior notes due 2032
03/15/2032 2,000
Sprint Capital Corporation
6,204 Clearwire
Communications LLC 8.25% Exchangeable notes due 2017 (a)
12/01/2017 629
Clearwire
Communications LLC
629 Secured equipment credit facilities
2017 - 2021
586 Financing obligations 2017 -
2021
3,401 Capital leases and other
obligations 2017 - 2024
480 Total principal
37,130 Net premiums
and debt financing costs
183 Total debt
$ 37,313 (a) $629 million
Clearwire 8.25% Exchangeable Notes due 2040 have both a par call
and put in December 2017.
NOTES TO THE FINANCIAL
INFORMATION (Unaudited) (1) Sprint platform refers to
the Sprint network that supports the wireless service we provide
through our multiple brands. (2) Postpaid and prepaid connections
from transactions are defined as retail postpaid and prepaid
connections acquired from Clearwire in July 2013 who had not
deactivated or been recaptured on the Sprint platform. (3) As more
of our customers elect to lease a device rather than purchasing one
under our subsidized program, there is a significant positive
impact to EBITDA* and Adjusted EBITDA* from direct channel sales
primarily due to the fact the cost of the device is not recorded as
cost of products but rather is depreciated over the customer lease
term. Under our device leasing program for the direct channel,
devices are transferred from inventory to property and equipment
and the cost of the leased device is recognized as depreciation
expense over the customer lease term to an estimated residual
value. The customer payments are recognized as revenue over the
term of the lease. Under our subsidized program, the cash received
from the customer for the device is recognized as equipment revenue
at the point of sale and the cost of the device is recognized as
cost of products. During the three and nine-month periods ended
December 31, 2016, we leased devices through our Sprint direct
channels totaling approximately $1,095 million and $2,281 million,
respectively, which would have increased cost of products and
reduced EBITDA* if they had been purchased under our subsidized
program. Also, during the three and nine-month periods ended
December 31, 2016, the equipment revenue derived from customers
electing to finance their devices through device leasing or
installment billing programs in our direct channel was 66% and 67%,
respectively.
The impact to EBITDA* and Adjusted EBITDA*
resulting from the sale of devices under our installment billing
program is generally neutral except for the impact from the time
value of money element related to the imputed interest on the
installment receivable.
(4) During the third quarter of fiscal year 2016 and the second
quarter of fiscal year 2015, the company recorded losses on
dispositions of assets primarily related to cell site construction
and network development costs that are no longer relevant as a
result of changes in the company's network plans. During the second
quarter of fiscal year 2016 the company recorded a pre-tax non-cash
gain of $354 million related to spectrum swaps with other carriers.
(5) Severance and exit costs consist of lease exit costs primarily
associated with tower and cell sites, access exit costs related to
payments that will continue to be made under the company's backhaul
access contracts for which the company will no longer be receiving
any economic benefit, and severance costs associated with reduction
in its work force. (6) Contract terminations primarily relate to
the termination of our pre-existing wholesale arrangement with
Ntelos Holding Corp. (7) Litigation and other contingencies consist
of unfavorable developments associated with legal as well as
federal and state matters such as sales, use or property taxes. (8)
As a result of the U.S. Cellular asset acquisition, we recorded a
liability related to network shut-down costs, which primarily
consisted of lease exit costs, for which we agreed to reimburse
U.S. Cellular. During the third quarter of fiscal year 2014, we
identified favorable trends in actual costs and, as a result,
reduced the liability resulting in a gain of $41 million. During
the first quarter of fiscal year 2015, we revised our estimate and,
as a result, reduced the liability resulting in approximately $20
million of income. (9) Free cash flow* for the three and nine-month
periods ended December 31, 2016, included net cash outflows of
approximately $370 million related to the termination of our MLS
Tranche 1 arrangement, which included the repurchase of the
devices.
*FINANCIAL MEASURES
Sprint provides financial measures determined in accordance with
GAAP and adjusted GAAP (non-GAAP). The non-GAAP financial measures
reflect industry conventions, or standard measures of liquidity,
profitability or performance commonly used by the investment
community for comparability purposes. These measurements should be
considered in addition to, but not as a substitute for, financial
information prepared in accordance with GAAP. We have defined below
each of the non-GAAP measures we use, but these measures may not be
synonymous to similar measurement terms used by other
companies.
Sprint provides reconciliations of these non-GAAP measures in
its financial reporting. Because Sprint does not predict special
items that might occur in the future, and our forecasts are
developed at a level of detail different than that used to prepare
GAAP-based financial measures, Sprint does not provide
reconciliations to GAAP of its forward-looking financial
measures.
The measures used in this release include the following:
EBITDA is operating income/(loss) before depreciation and
amortization. Adjusted EBITDA is EBITDA excluding
severance, exit costs, and other special items. Adjusted EBITDA
Margin represents Adjusted EBITDA divided by non-equipment net
operating revenues for Wireless and Adjusted EBITDA divided by net
operating revenues for Wireline. We believe that Adjusted EBITDA
and Adjusted EBITDA Margin provide useful information to investors
because they are an indicator of the strength and performance of
our ongoing business operations. While depreciation and
amortization are considered operating costs under GAAP, these
expenses primarily represent non-cash current period costs
associated with the use of long-lived tangible and definite-lived
intangible assets. Adjusted EBITDA and Adjusted EBITDA Margin are
calculations commonly used as a basis for investors, analysts and
credit rating agencies to evaluate and compare the periodic and
future operating performance and value of companies within the
telecommunications industry.
Sprint Platform Postpaid ABPA is average billings per
account and calculated by dividing postpaid service revenue earned
from postpaid customers plus installment plan billings and lease
revenue by the sum of the monthly average number of postpaid
accounts during the period. We believe that ABPA provides useful
information to investors, analysts and our management to evaluate
average Sprint platform postpaid customer billings per account as
it approximates the expected cash collections, including
installment plan billings and lease revenue, per postpaid account
each month.
Sprint Platform Postpaid Phone ABPU is average billings
per postpaid phone user and calculated by dividing service revenue
earned from postpaid phone customers plus installment plan billings
and lease revenue by the sum of the monthly average number of
postpaid phone connections during the period. We believe that ABPU
provides useful information to investors, analysts and our
management to evaluate average Sprint platform postpaid phone
customer billings as it approximates the expected cash collections,
including installment plan billings and lease revenue, per postpaid
phone user each month.
Free Cash Flow is the cash provided by operating
activities less the cash used in investing activities other than
short-term investments, including changes in restricted cash, if
any, and excluding the sale-leaseback of devices. Adjusted
Free Cash Flow is Free Cash Flow plus the proceeds
from device financings and sales of future lease receivables, net
of repayments. We believe that Free Cash Flow and Adjusted Free
Cash Flow provide useful information to investors, analysts and our
management about the cash generated by our core operations and net
proceeds obtained to fund certain leased devices, respectively,
after interest and dividends, if any, and our ability to fund
scheduled debt maturities and other financing activities, including
discretionary refinancing and retirement of debt and purchase or
sale of investments.
Net Debt is consolidated debt, including current
maturities, less cash and cash equivalents, short-term investments
and, if any, restricted cash. We believe that Net Debt provides
useful information to investors, analysts and credit rating
agencies about the capacity of the company to reduce the debt load
and improve its capital structure.
SAFE HARBOR
This release includes “forward-looking statements” within the
meaning of the securities laws. The words “may,” “could,” “should,”
“estimate,” “project,” “forecast,” “intend,” “expect,”
“anticipate,” “believe,” “target,” “plan”, “outlook,” “providing
guidance,” and similar expressions are intended to identify
information that is not historical in nature. All statements that
address operating performance, events or developments that we
expect or anticipate will occur in the future — including
statements relating to our network, cost reductions, connections
growth, and liquidity; and statements expressing general views
about future operating results — are forward-looking statements.
Forward-looking statements are estimates and projections reflecting
management’s judgment based on currently available information and
involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by the
forward-looking statements. With respect to these forward-looking
statements, management has made assumptions regarding, among other
things, the development and deployment of new technologies and
services; efficiencies and cost savings of new technologies and
services; customer and network usage; connection growth and
retention; service, speed, coverage and quality; availability of
devices; availability of various financings, including any leasing
transactions; the timing of various events and the economic
environment. Sprint believes these forward-looking statements are
reasonable; however, you should not place undue reliance on
forward-looking statements, which are based on current expectations
and speak only as of the date when made. Sprint undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law. In addition,
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from our company's historical experience and our present
expectations or projections. Factors that might cause such
differences include, but are not limited to, those discussed in
Sprint Corporation’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2016. You should understand that it is not possible
to predict or identify all such factors. Consequently, you should
not consider any such list to be a complete set of all potential
risks or uncertainties.
About Sprint:
Sprint (NYSE:S) is a communications services company
that creates more and better ways to connect its customers to
the things they care about most. Sprint served 59.5 million
connections as of Dec. 31, 2016 and is widely recognized for
developing, engineering and deploying innovative technologies,
including the first wireless 4G service from a national carrier in
the United States; leading no-contract brands including Virgin
Mobile USA, Boost Mobile, and Assurance Wireless; instant national
and international push-to-talk capabilities; and a global Tier 1
Internet backbone. Sprint has been named to the Dow Jones
Sustainability Index (DJSI) North America for the past five years.
You can learn more and visit Sprint at www.sprint.com or
www.facebook.com/sprint and www.twitter.com/sprint.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170131005461/en/
SprintMedia:Dave Tovar,
913-315-1451David.Tovar@sprint.comorInvestors:Jud Henry,
800-259-3755Investor.Relations@sprint.com
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