- Operating Income of $318 million and
Adjusted EBITDA* of $1.7 billion
- 1.2 million Sprint platform net
additions compared to net losses of 383,000 in the prior year
quarter
- Postpaid net additions of 211,000
compared to net losses of 231,000 in the prior year quarter
- Postpaid phone losses of 201,000
improved sequentially for the fourth consecutive quarter and
improved by nearly 500,000 year-over-year
- Prepaid net additions of 546,000 led
the industry for second consecutive quarter and compared to net
losses of 364,000 in the prior year quarter
- Wholesale net additions of 492,000
increased from 212,000 in the prior year quarter
- Postpaid net port positive for the
quarter - first time in nearly three years
- Sprint platform postpaid churn of 1.84
percent improved 46 basis points sequentially from 2.30 percent
last quarter
- Expanded company-owned distribution by
opening 1,435 co-branded Sprint-RadioShack stores
- Launched industry-first Sprint Direct 2
You service
- 4G LTE coverage now reaches nearly 280
million people equaling 87 percent of U.S. population
Sprint Corporation (NYSE:S) today reported operating
results for the fourth fiscal quarter of 2014, including 1.2
million Sprint platform net additions, the highest number in nearly
three years. The company recorded significantly better postpaid
churn of 1.84 percent, and for the fourth consecutive quarter,
reduced postpaid phone losses. In addition, the company
reported operating income of $318 million and Adjusted EBITDA* of
$1.7 billion.
“I am proud of the team for successfully executing the first
phase of our strategy to stop the decline in customers. We are now
one quarter into the second phase, focusing on attracting more
quality customers, retaining our customers through a better
customer experience and continuously improving the network,” said
Sprint CEO Marcelo Claure. “As a result, Sprint platform net
additions were the highest in nearly three years, postpaid churn
dropped by 46 basis points sequentially, and the network received
more awards in major markets, all of which will position the
company for profitable growth.”
1.2 Million Sprint Platform Net Additions
- Sprint platform net additions of 1.2
million compared to 967,000 in the prior quarter and net losses of
383,000 in the prior year quarter. The year-over-year improvement
was mostly driven by growth in the prepaid business and fewer
postpaid phone customer losses.
- Postpaid net additions of 211,000
compared to 30,000 in the prior quarter and net losses of 231,000
in the prior year quarter. The 442,000 year-over-year improvement
was due to both higher prime credit quality gross additions and
lower churn.
- Net port positive for the first time in
nearly three years.
- Postpaid phone losses of 201,000
compared to losses of 205,000 in the prior quarter and 693,000 in
the prior year quarter. The 492,000 year-over-year improvement was
driven by lower churn and higher prime credit quality gross
additions.
- Postpaid tablet net additions of
349,000 compared to 189,000 in the prior quarter and 516,000 in the
prior year quarter.
- Prepaid net additions of 546,000 led
the industry for the second consecutive quarter and compared to
410,000 in the prior quarter and net losses of 364,000 in the prior
year quarter. The 910,000 year-over-year improvement was mostly due
to growth in the Boost Mobile brand.
- Wholesale net additions of 492,000
compared to 527,000 in the prior quarter and 212,000 in the prior
year quarter. The year-over-year growth was mostly driven by
connected devices.
Solid Progress on Customer Retention Efforts
Sprint has focused on reducing postpaid churn by increasing
credit standards, embracing customer demand to upgrade to the
latest devices and continuing to improve the network experience.
The company has also placed greater emphasis on Net Promoter Score
(NPS), a measure of customer loyalty, by establishing a chief
experience officer dedicated to improving this metric and by
linking NPS improvement to every employee’s compensation. These
actions, among others, have resulted in improvement in several
customer retention metrics during the quarter.
- Sprint platform postpaid churn of 1.84
percent improved 46 basis points from 2.30 percent last quarter,
the best sequential improvement in nearly seven years.
- Best sequential improvement in Sprint
platform postpaid voluntary churn in nearly 11 years.
- NPS improved from a negative score in
mid-2014 to the highest level in nearly two years in March.
Enhancing the Customer Experience
Last month Sprint introduced several new innovative programs and
features to further enhance the customer experience.
- Sprint Direct 2 You is an
industry-first program that is expected to transform the mobile
phone buying experience by taking the retail store experience to
the customer. With this personalized white glove service, a
Sprint-trained expert will take a mobile device to a customer's
location, set it up and transfer all of their content from their
old device.
- Free International Value Roaming when
added to a domestic service plan gives customers the ability to
travel to major areas in Latin America, Europe and Japan and roam
with up to 2G speeds at no additional charge. Additionally, they
can send unlimited text messages for no extra charge and call
anywhere in the world from these areas for 20 cents per minute.
More international locations are expected to be added to the
service over time.
- Free Wi-Fi Calling for iPhone®
dramatically expands coverage and connectivity options for
customers with service on iPhone 6, iPhone 6 Plus, iPhone 5c and
iPhone 5s. Including the rich portfolio of Wi-Fi calling Android
devices, Sprint now has 27 total devices capable of experiencing
the benefits of Wi-Fi calling.
Continuing to Attract Quality Customers
Sprint is not only focused on attracting more customers but also
better quality customers. With innovative offerings such as the Cut
Your Bill in Half event and the industry’s only device leasing
program, the company has seen improvement in customer acquisition
on the Sprint platform.
- Postpaid gross additions grew 11
percent year-over-year.
- Postpaid phone gross additions with
prime credit quality grew 65 percent year-over-year.
- Prepaid gross additions were highest on
record, growing 41 percent year-over-year.
Expanding Distribution
Sprint recently doubled its company-owned retail footprint by
opening 1,435 Sprint-RadioShack co-branded stores and expects to
have the “store-within-a-store” retail model fully operationalized
over the next couple of quarters, providing a rapid and
cost-effective expansion of the company’s distribution. The company
will also continue to seek innovative ways, such as Sprint Direct 2
You, to further expand Sprint-branded distribution and achieve a
more competitive position within the industry.
Quarterly Financial Results
- Net operating revenues of $8.3 billion
were down seven percent year-over-year, as lower wireless service
revenues mostly driven by customer shifts to rate plans associated
with device financing options were partially offset by higher
equipment revenue.
- Consolidated Adjusted EBITDA* of $1.7
billion declined five percent from the prior year period, as lower
service revenues were partially offset by lower net subsidy
expenses related to the introduction of device financing options,
including leasing for which no cost of products expense is recorded
at the point of sale, and lower cost of services expense due to the
completion of the 3G and voice network replacement.
- Operating income of $318 million was
down from $420 million in the year-ago quarter, primarily due to
higher depreciation expense.
- Net loss of $224 million, or $.06 per
share, compared to a net loss of $151 million, or $.04 per share,
in the year-ago period, as lower operating income was partially
offset by lower income tax expense.
- Total liquidity was $7.5 billion at the
end of the quarter, including $4.2 billion of cash, cash
equivalents and short-term investments and $3.3 billion of undrawn
borrowing capacity under the revolving bank credit facility and
service receivables facility. The company also currently has $1.4
billion of availability under vendor financing agreements that can
be utilized toward the purchase of 2.5 GHz network equipment.
Additionally, in April Sprint amended the service receivables
facility and increased its size from $1.3 billion to $3.3 billion
by including equipment receivables.
Network Performance #GettingBetterEveryDay
Sprint is focused on leveraging its spectrum portfolio to
provide a network that delivers the consistent reliability,
capacity and speed that customers demand. During the quarter,
Sprint continued to build out 4G LTE on the 800 MHz and 2.5 GHz
spectrum and total LTE coverage now reaches nearly 280 million
people.
Independent mobile analytics firm RootMetrics® acknowledged the
company’s significant network improvements in their second half
2014 Mobile Network Performance Review Report. Since that time,
Sprint has been awarded a total of 104 first place (outright or
shared) RootScore Awards for overall, reliability, speed, data,
call, or text network performance in the 77 markets measured to
date in the first half of 2015, including these notable
achievements.
City Category 2H14 Ranking
1H15 Ranking Pittsburgh, PA Reliability &
Call Performance 3rd, Shared 2nd Shared 1st San
Antonio, TX Reliability & Call Performance Shared
2nd, Shared 1st Shared 1st St. Louis, MO Reliability
& Call Performance Shared 3rd, Shared 1st Shared
1st Jacksonville, FL Reliability & Call Performance
Shared 3rd, Shared 1st Shared 1st Miami, FL
Call Performance 3rd Shared 1st Las Vegas, NV
Overall Performance 4th Shared 1st Denver, CO
Speed Shared 3rd Shared 1st Salt Lake City, UT
Speed Shared 3rd Shared 1st Dayton, OH Speed
4th
1st
Atlanta, GA Text Performance 3rd Shared 1st
Disclaimer: Rankings based on RootMetrics 2nd Half 2014 Mobile
Network Performance Review Report, published February 10, 2015 and
77 RootMetrics (January 1 – April 7, 2015) RootScore Reports for
mobile performance as tested on best available plans and devices on
four mobile networks across all available network types. The
RootMetrics award is not an endorsement of Sprint. Your results may
vary. See www.rootmetrics.com for details.
“In our first half 2015 RootMetrics studies, a selection of top
population metro areas have seen improvements in Sprint’s network
performance, including reliability, call and speed,” said Bill
Moore, CEO of independent mobile analytics firm RootMetrics. “This
is great news for Sprint customers in these areas who are
benefiting from the investment Sprint has made in these
markets.”
Outlook
- The company expects fiscal 2015
Adjusted EBITDA* to be between $6.5 and $6.9 billion.
- The company expects fiscal 2015 accrued
capital expenditures to be approximately $5 billion, excluding the
impact of leased devices sold through indirect channels.
Conference Call and Webcast
- Date/Time: 8:30 a.m. ET Tuesday, May 5,
2015
- Call-in Information
- U.S./Canada: 866-360-1063 (ID:
21947319)
- International: 706-679-4164 (ID:
21947319)
- Webcast available via the Internet at
www.sprint.com/investors
- Additional information about results,
including the “Quarterly Investor Update,” is available on our
Investor Relations website
Financial results in the enclosed tables include a predecessor
period related to the results of operations of Sprint
Communications, Inc. (formerly Sprint Nextel) prior to the closing
of the SoftBank transaction on July 10, 2013, and the applicable
successor periods. In order to present financial results in a way
that offers investors a more meaningful comparison of the
year-to-date results, we have combined the 2013 results of
operations for the predecessor and successor periods. For
additional information, please reference the section titled
Financial Measures. Trended financial performance metrics on a
combined basis can also be found at our Investor Relations website
at www.sprint.com/investors.
Wireless Operating Statistics
(Unaudited) Quarter To Date Year To Date 3/31/15
12/31/14 3/31/14 3/31/15 3/31/14
Net Additions (Losses) (in thousands) Sprint
platform: Postpaid (2) 211 30 (231 ) (212 ) (339 ) Prepaid (3) 546
410 (364 ) 449 (444 ) Wholesale and affiliate 492
527 212 2,349 467
Total Sprint platform 1,249 967 (383 ) 2,586 (316 ) Nextel
platform: Postpaid (2) - - - - (1,060 ) Prepaid (3) -
- - - (255 ) Total Nextel
platform - - - - (1,315 ) Transactions: Postpaid (2) (41 ) (49 )
(102 ) (218 ) (583 ) Prepaid (3) (18 ) (39 ) (51 ) (189 ) (230 )
Wholesale 22 13 69 75
107 Total transactions (37 ) (75 ) (84 ) (332
) (706 ) Total retail postpaid net additions (losses) 170
(19 ) (333 ) (430 ) (1,982 ) Total retail prepaid net additions
(losses) 528 371 (415 ) 260 (929 ) Total wholesale and affiliate
net additions 514 540 281
2,424 574
Total Wireless Net Additions
(Losses) 1,212 892
(467 ) 2,254
(2,337 ) End of Period Connections (in
thousands) Sprint platform: Postpaid (2) 29,706 29,495 29,918
29,706 29,918 Prepaid (3) 15,706 15,160 15,257 15,706 15,257
Wholesale and affiliate 10,725 10,233
8,376 10,725 8,376 Total Sprint
platform 56,137 54,888 53,551 56,137 53,551 Nextel platform:
Postpaid (2) - - - - - Prepaid (3) - -
- - - Total Nextel platform - -
- - - Transactions: (a) Postpaid (2) 368 409 586 368 586 Prepaid
(3) 361 379 550 361 550 Wholesale 275 253
200 275 200 Total
transactions 1,004 1,041 1,336 1,004 1,336 Total retail
postpaid end of period connections 30,074 29,904 30,504 30,074
30,504 Total retail prepaid end of period connections 16,067 15,539
15,807 16,067 15,807 Total wholesale and affiliate end of period
connections 11,000 10,486 8,576
11,000 8,576
Total End of Period
Connections 57,141 55,929
54,887 57,141
54,887 Supplemental Data - Connected
Devices End of Period Connections (in thousands) Retail
postpaid 1,320 1,180 968 1,320 968 Wholesale and affiliate
5,832 5,175 3,882 5,832
3,882
Total 7,152
6,355 4,850 7,152
4,850 Churn Sprint
platform: Postpaid 1.84 % 2.30 % 2.11 % 2.09 % 2.00 % Prepaid 3.84
% 3.94 % 4.33 % 3.99 % 4.04 % Nextel platform: Postpaid - - - -
33.90 % Prepaid - - - - 32.13 % Transactions: (a) Postpaid 3.87 %
4.09 % 5.48 % 4.21 % 7.05 % Prepaid 3.77 % 4.95 % 5.11 % 5.28 %
7.58 % Total retail postpaid churn 1.87 % 2.33 % 2.18 % 2.13
% 2.26 % Total retail prepaid churn 3.84 % 3.97 % 4.35 % 4.03 %
4.21 %
Nextel Platform Connection Recaptures
Connections (in thousands) (4): Postpaid - - - - 364 Prepaid - - -
- 101 Rate (5): Postpaid - - - - 34 % Prepaid - - - - 39 %
(a) We acquired approximately 352,000 postpaid connections and
59,000 prepaid connections through the acquisition of assets from
U.S. Cellular when the transaction closed on May 17, 2013. We
acquired approximately 788,000 postpaid connections, 721,000
prepaid connections, 93,000 wholesale connections and transferred
29,000 Sprint wholesale connections that were originally recognized
through our Clearwire MVNO arrangement to Transactions postpaid
connections as a result of the Clearwire acquisition when the
transaction closed on July 9, 2013.
Wireless Operating
Statistics (Unaudited) (continued) Successor
Predecessor
Combined (1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14 3/31/14
3/31/15 3/31/14 7/10/13 3/31/14
ARPU (b) Sprint platform:
Postpaid
$ 56.94 $ 58.90 $ 63.52 $ 59.63 $ 63.95 $ 64.25 $ 64.03 Prepaid $
27.50 $ 27.12 $ 26.45 $ 27.30 $ 26.16 $ 26.96 $ 26.38 Nextel
platform: Postpaid $ - $ - $ - $ - $ - $ 36.66 $ 36.66 Prepaid $ -
$ - $ - $ - $ - $ 34.48 $ 34.48 Transactions: (a) Postpaid $ 40.28
$ 39.85 $ 37.26 $ 39.69 $ 36.99 $ 56.98 $ 39.21 Prepaid $ 46.68 $
45.80 $ 43.80 $ 45.72 $ 41.65 $ 18.26 $ 42.24 Total retail
postpaid ARPU $ 56.72 $ 58.63 $ 62.98 $ 59.32 $ 63.29 $ 63.68 $
63.42 Total retail prepaid ARPU $ 27.95 $ 27.61 $ 27.07 $ 27.81 $
26.79 $ 27.01 $ 26.87
NON-GAAP RECONCILIATION -
AVERAGE BILLINGS PER USER (ABPU)* (Unaudited) (Millions, except
ABPU*)
Successor Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
3/31/15 12/31/14 3/31/14
3/31/15
ABPU* (c) Sprint platform service
revenue $ 5,049 $ 5,202 $ 5,719 $ 21,181 Add: Installment plan
billings and lease revenue 423 288
55 1,041 Total for Sprint platform postpaid
connections $ 5,472 $ 5,490 $ 5,774 $ 22,222 Sprint platform
ABPU* $ 61.71 $ 62.16 $ 64.13 $ 62.55
(a) We acquired approximately 352,000 postpaid connections and
59,000 prepaid connections through the acquisition of assets from
U.S. Cellular when the transaction closed on May 17, 2013. We
acquired approximately 788,000 postpaid connections, 721,000
prepaid connections, 93,000 wholesale connections and transferred
29,000 Sprint wholesale connections that were originally recognized
through our Clearwire MVNO arrangement to Transactions postpaid
connections as a result of the Clearwire acquisition when the
transaction closed on July 9, 2013.
(b) ARPU is calculated by dividing service revenue by the sum of
the 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. Combined ARPU for the year-to-date March
31, 2014 period aggregates service revenue for the 101 days ended
July 10, 2013 predecessor period and the year-to-date March 31,
2014 successor period divided by the sum of the average connections
during the year-to-date period.
(c) Sprint platform postpaid ABPU* is calculated by dividing
service revenue earned from customers plus installment plan
billings and lease revenue by the sum of the average number of
connections during the period.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) (Millions, except per Share Data)
Successor
Predecessor
Combined (1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14
3/31/14 3/31/15 3/31/14
7/10/13 3/31/14
Net Operating
Revenues Service revenue $ 7,138 $ 7,272 $ 7,876 $ 29,542 $
22,970 $ 8,915 $ 31,885 Equipment revenue 1,144
1,701 999
4,990 2,796 894
3,690
Total Net Operating Revenues
8,282 8,973
8,875 34,532
25,766 9,809
35,575 Net Operating Expenses Cost of
services 2,381 2,330 2,622 9,660 7,796 3,033 10,829 Cost of
products 1,827 2,952 2,038 9,309 6,641 2,579 9,220 Selling, general
and administrative 2,331 2,647 2,371 9,563 7,198 2,731 9,929
Depreciation and amortization 1,454 1,320 1,297 5,349 4,231 1,753
5,984 Impairments (6) - 2,133 75 2,133 75 - 75 Other, net
(29 ) 131 52
413 361 627
988 Total net operating expenses 7,964
11,513 8,455
36,427 26,302
10,723 37,025
Operating Income (Loss)
318 (2,540
) 420
(1,895 ) (536 )
(914 ) (1,450 ) Interest expense
(523 ) (506 ) (516 )
(2,051 ) (1,434 ) (703 )
(2,137 ) Equity in earnings of unconsolidated investments and
other, net 8 10
1 27 68
2,665 2,733
(Loss) Income before
Income Taxes (197 )
(3,036 ) (95 )
(3,919 ) (1,902 )
1,048 (854 ) Income tax
(expense) benefit (27 ) 657
(56 ) 574 (100 )
(1,563 ) (1,663 )
Net Loss $
(224 ) $ (2,379 )
$ (151 ) $ (3,345
) $ (2,002 ) $
(515 ) $ (2,517 )
Basic Net Loss Per Common Share
$ (0.06 ) $ (0.60
) $ (0.04 ) $
(0.85 ) $ (0.54 )
$ (0.17 ) NM Diluted
Net Loss Per Common Share $ (0.06 )
$ (0.60 ) $ (0.04
) $ (0.85 ) $
(0.54 ) $ (0.17 )
NM Basic Weighted Average Common Shares outstanding
3,962 3,957
3,949 3,953 3,693
3,038 NM Diluted Weighted Average
Common Shares outstanding 3,962
3,957 3,949 3,953
3,693 3,038 NM
Effective Tax Rate -13.7
% 21.6 %
-58.9 % 14.6 %
-5.3 % 149.1 %
NM NON-GAAP RECONCILIATION - NET
LOSS TO ADJUSTED EBITDA* (Unaudited) (Millions)
Successor
Predecessor
Combined (1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14
3/31/14 3/31/15 3/31/14
7/10/13 3/31/14
Net
Loss $ (224 ) $
(2,379 ) $ (151 )
$ (3,345 ) $ (2,002
) $ (515 ) $ (2,517
) Income tax expense (benefit) 27
(657 ) 56 (574 )
100 1,563 1,663
(Loss) Income before Income Taxes (197 )
(3,036 ) (95 ) (3,919 )
(1,902 ) 1,048 (854 ) Equity in
earnings of unconsolidated investments and other, net (8 ) (10 ) (1
) (27 ) (68 ) (2,665 ) (2,733 ) Interest expense 523
506 516
2,051 1,434 703
2,137
Operating Income (Loss)
318 (2,540 )
420 (1,895 )
(536 ) (914 )
(1,450 ) Depreciation and amortization
1,454 1,320 1,297
5,349 4,231
1,753 5,984
EBITDA*
1,772 (1,220 )
1,717 3,454
3,695 839
4,534 Severance and exit costs (7) (29 ) 22 52 304
361 627 988 Impairments (6) - 2,133 75 2,133 75 - 75 Litigation (8)
- 91 - 91 - - - Business combinations (9) - - - - 100 53 153
Partial pension settlement (10) - 59 - 59 - - - Release of assumed
liability - U.S. Cellular asset acquisition (11) - (41 ) - (41 ) -
- - Hurricane Sandy (12) - -
- -
(7 ) - (7 )
Adjusted EBITDA*
$ 1,743 $ 1,044
$ 1,844 $ 6,000
$ 4,224 $ 1,519
$ 5,743 Adjusted EBITDA
Margin* 24.4 % 14.4 % 23.4
% 20.3 % 18.4 % 17.0
% 18.0 % Selected items:
Increase in deferred tax asset valuation allowance $ 114 $ 500 $ 82
$ 911 $ 790 $ 1,145 $ 1,935 Accrued capital expenditures $ 1,422 $
1,827 $ 1,057 $ 6,182 $ 4,624 $ 2,072 $ 6,696 Cash paid for capital
expenditures $ 2,047 $ 1,568 $ 1,488 $ 6,004 $ 5,335 $ 1,759 $
7,094
WIRELESS
STATEMENTS OF OPERATIONS (Unaudited) (Millions)
Successor
Predecessor
Combined (1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14
3/31/14 3/31/15 3/31/14
7/10/13 3/31/14
Net Operating
Revenues Service revenue Sprint platform: Postpaid (2) $ 5,049
$ 5,202 $ 5,719 $ 21,181 $ 16,702 $ 6,469 $ 23,171 Prepaid (3)
1,272 1,215 1,232 4,905 3,497 1,408 4,905 Wholesale, affiliate and
other 189 191
145 724 393
146 539 Total Sprint platform
6,510 6,608 7,096
26,810 20,592
8,023 28,615 Nextel platform: Postpaid
(2) - - - - - 74 74 Prepaid (3) -
- - -
- 17 17 Total
Nextel platform - -
- - -
91 91 Transactions: Postpaid (2)
47 52 70 222 240 26 266 Prepaid (3) 52 54 75 236 236 2 238
Wholesale 19 18
14 69 32
- 32 Total transactions
118 124 159
527 508 28
536 Equipment revenue 1,144
1,701 999
4,990 2,796 894
3,690
Total net operating revenues
7,772 8,433
8,254 32,327
23,896 9,036
32,932 Net Operating Expenses Cost of
services 2,006 1,902 2,106 7,945 6,441 2,532 8,973 Cost of products
1,827 2,952 2,038 9,309 6,641 2,579 9,220 Selling, general and
administrative 2,242 2,545 2,273 9,179 6,817 2,550 9,367
Depreciation and amortization 1,406 1,259 1,224 5,109 4,032 1,636
5,668 Impairments (6) - 1,900 72 1,900 72 - 72 Other, net
(29 ) 107 51
349 331 627
958 Total net operating expenses 7,452
10,665 7,764
33,791 24,334
9,924 34,258
Operating Income (Loss)
$ 320 $ (2,232
) $ 490 $
(1,464 ) $ (438 )
$ (888 ) $ (1,326 )
Supplemental Revenue Data Total retail service
revenue $ 6,420 $ 6,523 $ 7,096 $ 26,544 $ 20,675 $ 7,996 $ 28,671
Total service revenue $ 6,628 $ 6,732 $ 7,255 $ 27,337 $ 21,100 $
8,142 $ 29,242
WIRELESS NON-GAAP
RECONCILIATION (Unaudited) (Millions)
Successor
Predecessor
Combined (1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14
3/31/14 3/31/15 3/31/14
7/10/13 3/31/14
Operating Income (Loss) $ 320 $
(2,232 ) $ 490 $ (1,464
) $ (438 ) $ (888
) $ (1,326 ) Severance and exit costs
(7) (29 ) 21 51 263 331 627 958 Impairments (6) - 1,900 72 1,900 72
- 72 Litigation (8) - 84 - 84 - - - Business combinations (9) - - -
- 25 - 25 Partial pension settlement (10) - 43 - 43 - - - Release
of assumed liability - U.S. Cellular asset acquisition (11) - (41 )
- (41 ) - - - Hurricane Sandy (12) - - - - (7 ) - (7 ) Depreciation
and amortization 1,406 1,259
1,224 5,109
4,032 1,636 5,668
Adjusted EBITDA* $ 1,697
$ 1,034 $ 1,837
$ 5,894 $ 4,015
$ 1,375 $ 5,390
Adjusted EBITDA Margin* 25.6 %
15.4 % 25.3 % 21.6 %
19.0 % 16.9 % 18.4 %
Selected items: Accrued capital expenditures $
1,343 $ 1,616 $ 930 $ 5,589 $ 4,173 $ 1,884 $ 6,057 Cash paid for
capital expenditures $ 1,957 $ 1,376 $ 1,343 $ 5,442 $ 4,878 $
1,570 $ 6,448
WIRELINE
STATEMENTS OF OPERATIONS (Unaudited) (Millions)
Successor
Predecessor
Combined (1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14
3/31/14 3/31/15 3/31/14
7/10/13 3/31/14
Net Operating
Revenues Voice $ 264 $ 289 $ 352 $ 1,174 $ 1,071 $ 419 $ 1,490
Data 52 52 62 213 200 94 294 Internet 335 333 345 1,353 1,092 479
1,571 Other 17 18
11 74 43
16 59
Total net operating
revenues 668
692 770
2,814 2,406
1,008 3,414 Net
Operating Expenses Costs of services 538 581 668 2,338 1,903
741 2,644 Selling, general and administrative 90 100 90 363 269 123
392 Depreciation and amortization 46 59 69 232 192 115 307
Impairments (6) - 233 3 233 3 - 3 Other, net (2 )
24 2 61
32 - 32
Total net operating expenses 672
997 832 3,227
2,399 979 3,378
Operating (Loss) Income $ (4 )
$ (305 ) $ (62
) $ (413 ) $
7 $ 29 $ 36
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Successor
Predecessor
Combined (1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14
3/31/14 3/31/15 3/31/14
7/10/13 3/31/14
Operating (Loss) Income $ (4 ) $
(305 ) $ (62 ) $
(413 ) $ 7 $ 29 $
36 Severance and exit costs (7) (2 ) 2 2 39 32 - 32
Impairments (6) - 233 3 233 3 - 3 Litigation (8) - 6 - 6 - - -
Partial pension settlement (10) - 16 - 16 - - - Depreciation and
amortization 46 59
69 232 192
115 307
Adjusted EBITDA*
$ 40 $ 11
$ 12 $ 113
$ 234 $ 144 $
378 Adjusted EBITDA Margin* 6.0
% 1.6 % 1.6 % 4.0
% 9.7 % 14.3 % 11.1
% Selected items: Accrued capital
expenditures $ 68 $ 70 $ 72 $ 278 $ 227 $ 104 $ 331 Cash paid for
capital expenditures $ 70 $ 81 $ 79 $ 275 $ 232 $ 110 $ 342
CONDENSED CONSOLIDATED CASH FLOW
INFORMATION (Unaudited) (Millions)
Successor Predecessor Combined (1) Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 3/31/14 7/10/13 3/31/14
Operating Activities Net
loss $ (3,345 ) $ (2,002 ) $ (515 ) $ (2,517 ) Impairments (6)
2,133 75 - 75 Depreciation and amortization 5,349 4,231 1,753 5,984
Provision for losses on accounts receivable 892 414 111 525
Share-based and long-term incentive compensation expense 86 133 20
153 Deferred income tax (benefit) expense (609 ) 79 1,562 1,641
Gain on previously-held equity interests - - (2,926 ) (2,926 )
Equity in losses of unconsolidated investments, net - - 280 280
Amortization and accretion of long-term debt premiums and
discounts, net (303 ) (234 ) (5 ) (239 ) Other working capital
changes, net (1,736 ) (1,470 ) 1,004 (466 ) Other, net
(17 )
(763 ) 447 (316 )
Net cash provided
by operating activities
2,450 463
1,731 2,194
Investing Activities Capital expenditures (6,004 ) (5,335 )
(1,759 ) (7,094 ) Expenditures relating to FCC licenses (163 ) (298
) (70 ) (368 ) Reimbursements relating to FCC licenses 95 - - -
Change in short-term investments, net 1,054 (119 ) 869 750
Acquisitions, net of cash acquired - (14,112 ) (4,039 ) (18,151 )
Investment in Clearwire (including debt securities) - - (228 ) (228
) Proceeds from sales of assets and FCC licenses 315 8 4 12 Other,
net (11 )
(8 ) (4 ) (12 )
Net cash used in
investing activities
(4,714 ) (19,864
) (5,227 ) (25,091
) Financing Activities Proceeds from debt and
financings 1,930 9,500 - 9,500 Debt financing costs (87 ) (148 ) (1
) (149 ) Repayments of debt, financing and capital lease
obligations (574 ) (3,537 ) (303 ) (3,840 ) Proceeds from issuance
of common stock and warrants, net 35 18,567 53 18,620 Other, net
-
(14 ) - (14 )
Net cash
provided by (used in) financing activities
1,304
24,368 (251 )
24,117 Net (Decrease) Increase in Cash and
Cash Equivalents (960 ) 4,967
(3,747 ) 1,220 Cash and Cash
Equivalents, beginning of period
4,970
3 6,275 3,750
Cash and Cash Equivalents, end of period
$ 4,010 $ 4,970 $ 2,528
$ 4,970 RECONCILIATION TO
CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
Successor Predecessor Combined
(1) Quarter
To
Date
Quarter
To
Date
Quarter
To
Date
Year
To
Date
Year
To
Date
101 Days
Ended
Year
To
Date
3/31/15 12/31/14
3/31/14 3/31/15 3/31/14
7/10/13 3/31/14
Net
Cash Provided by (Used in) Operating Activities $
976 $ (233 ) $ 522
$ 2,450 $ 463 $ 1,731
$ 2,194 Capital expenditures (2,047 ) (1,568 )
(1,488 ) (6,004 ) (5,335 ) (1,759 ) (7,094 ) Expenditures relating
to FCC licenses, net (42 ) (42 ) (152 ) (68 ) (298 ) (70 ) (368 )
Proceeds from sales of assets and FCC licenses 201 13 1 315 8 4 12
Other investing activities, net (2 ) (3
) (2 ) (11 ) (8 )
(4 ) (12 )
Free Cash Flow* (914
) (1,833 )
(1,119 ) (3,318 )
(5,170 ) (98 )
(5,268 ) Debt financing costs (50 ) (37 ) (1 )
(87 ) (148 ) (1 ) (149 ) Increase (decrease) in debt and other, net
1,446 273 (159 ) 1,356 5,963 (303 ) 5,660 Acquisitions, net of cash
acquired - - - - (14,112 ) (4,039 ) (18,151 ) (Payments for)
proceeds from issuance of common stock and warrants, net of
payments for shares surrendered for taxes (15 ) 4 - 35 18,567 53
18,620 Investment in Clearwire (including debt securities) - - - -
- (228 ) (228 ) Other financing activities, net -
- -
- (14 ) - (14 )
Net
Increase (Decrease) in Cash, Cash Equivalents and
Short-Term Investments
$ 467 $ (1,593
) $ (1,279 ) $
(2,014 ) $ 5,086 $
(4,616 ) $ 470
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
Successor 3/31/15
3/31/14
Assets Current assets Cash and cash
equivalents $ 4,010 $ 4,970 Short-term investments 166 1,220
Accounts and notes receivable, net 2,290 3,607 Device and accessory
inventory 1,359 982 Deferred tax assets 62 128 Prepaid expenses and
other current assets 1,890 672
Total current assets 9,777 11,579 Investments and
other assets 1,077 892 Property, plant and equipment, net 19,721
16,299 Goodwill 6,575 6,383 FCC licenses and other 39,987 41,978
Definite-lived intangible assets, net 5,893
7,558
Total assets $
83,030 $ 84,689
Liabilities and Stockholders' Equity Current liabilities
Accounts payable $ 4,347 $ 3,163 Accrued expenses and other current
liabilities 5,293 5,544 Current portion of long-term debt,
financing and capital lease obligations 1,300
991 Total current liabilities 10,940 9,698
Long-term debt, financing and capital lease obligations
32,531 31,787 Deferred tax liabilities 13,898 14,207 Other
liabilities 3,951 3,685
Total liabilities 61,320
59,377 Stockholders' equity Common
shares 40 39 Paid-in capital 27,468 27,354 Treasury shares, at cost
(7 ) - Accumulated deficit (5,383 ) (2,038 ) Accumulated other
comprehensive loss (408 ) (43 ) Total
stockholders' equity 21,710
25,312
Total liabilities and stockholders' equity
$ 83,030 $ 84,689
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
Successor 3/31/15
3/31/14 Total Debt $ 33,831 $ 32,778 Less: Cash and
cash equivalents (4,010 ) (4,970 ) Less: Short-term investments
(166 ) (1,220 )
Net Debt*
$ 29,655 $ 26,588
SCHEDULE OF DEBT
(Unaudited) (Millions) 3/31/15
ISSUER
COUPON MATURITY PRINCIPAL
Sprint Corporation 7.25% Notes due 2021 7.250% 09/15/2021 $
2,250 7.875% Notes due 2023 7.875% 09/15/2023 4,250 7.125% Notes
due 2024 7.125% 06/15/2024 2,500 7.625% Notes due 2025
7.625% 02/15/2025 1,500
Sprint
Corporation
10,500 Sprint Communications, Inc. Export
Development Canada Facility (Tranche 2) 4.080% 12/15/2015 500
Export Development Canada Facility (Tranche 3) 3.495% 12/17/2019
300 6% Senior Notes due 2016 6.000% 12/01/2016 2,000 9.125% Senior
Notes due 2017 9.125% 03/01/2017 1,000 8.375% Senior Notes due 2017
8.375% 08/15/2017 1,300 9% Guaranteed Notes due 2018 9.000%
11/15/2018 3,000 7% Guaranteed Notes due 2020 7.000% 03/01/2020
1,000 7% Senior Notes due 2020 7.000% 08/15/2020 1,500 11.5% Senior
Notes due 2021 11.500% 11/15/2021 1,000 9.25% Debentures due 2022
9.250% 04/15/2022 200 6% Senior Notes due 2022 6.000%
11/15/2022 2,280
Sprint Communications,
Inc.
14,080 Sprint Capital Corporation 6.9% Senior
Notes due 2019 6.900% 05/01/2019 1,729 6.875% Senior Notes due 2028
6.875% 11/15/2028 2,475 8.75% Senior Notes due 2032
8.750% 03/15/2032 2,000
Sprint Capital
Corporation
6,204 Clearwire Communications LLC 14.75%
First-Priority Senior Secured Notes due 2016 14.750% 12/01/2016 300
8.25% Exchangeable Notes due 2040 8.250%
12/01/2040 629
Clearwire Communications LLC
929
Secured Equipment Credit Facilities 1.853% - 2.204% 2017 -
2022
610 Tower financing obligation 6.092%
09/30/2021
275 Capital lease obligations and other
2015 - 2023
127
TOTAL PRINCIPAL
32,725 Net premiums
1,106 TOTAL DEBT
$ 33,831
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1) Financial results include a Predecessor period from
January 1, 2012, through the closing of the SoftBank transaction on
July 10, 2013, and a Successor period from October 5, 2012 through
March 31, 2014. In order to present financial results in a way that
offers investors a more meaningful calendar period-to-period
comparison, we have combined results of operations and cash flows
for the Predecessor and Successor periods for the twelve-month
period ended March 31, 2014. (See Financial Measures for further
information). (2) Postpaid connections on the Sprint platform are
defined as retail postpaid devices with an active line of service
on the CDMA network, including connections utilizing WiMax and LTE
technology. Postpaid connections previously on the Nextel platform
are defined as retail postpaid connections on the iDEN network,
which was shut-down on June 30, 2013. Postpaid connections from
transactions are defined as retail postpaid connections acquired
from U.S. Cellular in May 2013 and Clearwire in July 2013 who had
not deactivated or been recaptured on the Sprint platform. Included
in Sprint platform net additions are tablets and connected devices,
which generally generate a significantly lower ARPU than other
postpaid connections. (3) Prepaid connections on the Sprint
platform are defined as retail prepaid connections and
session-based tablet users who utilize the CDMA network and WiMax
and LTE technology via our multi-brand offerings. Prepaid
connections previously on the Nextel platform are defined as retail
prepaid connections who utilized the iDEN network, which was
shut-down on June 30, 2013. Prepaid connections from transactions
are defined as retail prepaid connections acquired from U.S.
Cellular in May 2013 and Clearwire in July 2013 who had not
deactivated or been recaptured on the Sprint platform. (4) Nextel
Connection Recaptures are defined as the number of connections that
deactivated service from the postpaid or prepaid Nextel platform,
as applicable, during each period but remained with the Company as
connections on the postpaid or prepaid Sprint platform,
respectively. Connections that deactivated service from the Nextel
platform and activated service on the Sprint platform are included
in the Sprint platform net additions for the applicable period. (5)
The Postpaid and Prepaid Nextel Recapture Rates are defined as the
portion of total connections that left the postpaid or prepaid
Nextel platform, as applicable, during the period and were retained
on the postpaid or prepaid Sprint platform, respectively. (6) For
the third quarter of fiscal year 2014, impairment losses were
recorded after determining that the carrying value exceeded
estimated fair value of both the Sprint trade name and Wireline
asset group, which consists primarily of property, plant and
equipment. (7) Severance and exit costs are primarily associated
with work force reductions and exit costs associated with the
Nextel platform and access terminations and those related to
exiting certain operations of Clearwire. (8) For the third quarter
of fiscal year 2014, litigation primarily includes legal reserves
and fees incurred in relation to various pending legal suits and
proceedings. (9) For the second and first quarters of fiscal year
2013, included in selling, general and administrative expenses are
fees paid to unrelated parties necessary for the transactions with
SoftBank and our acquisition of Clearwire. (10) The partial pension
settlement resulted from amounts paid to eligible terminated
participants who voluntarily elected to receive lump sum
distributions as a result of an approved plan amendment to the
Sprint Retirement Pension Plan by the Board of Directors in June
2014. (11) As a result of the U.S. Cellular asset acquisition, we
recorded a liability related to network shut-down costs 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 approximately
$41 million. (12) Hurricane Sandy amounts for the quarter-to-date
December 31, 2013 period represent insurance recoveries.
*FINANCIAL MEASURES
On July 9, 2013, Sprint Communications, Inc. (formerly Sprint
Nextel Corporation) completed its acquisition of Clearwire. On July
10, 2013 we consummated the SoftBank Merger with Starburst II,
which immediately changed its name to Sprint Corporation (now
referred to as the Company or Sprint). As a result of these
transactions, the assets and liabilities of Sprint Communications,
Inc. and Clearwire were adjusted to fair value on the respective
closing dates. The Company's financial statement presentations
herein distinguish between a predecessor period relating to Sprint
Communications, Inc. for periods prior to the SoftBank Merger
(Predecessor) and a successor period (Successor). The Successor
information represents Sprint Corporation, which includes the
activity and accounts of Sprint Communications, Inc. as of and for
the three and twelve-month periods ended March 31, 2015 and the
twelve-month period ended March 31, 2014. The accounts and activity
for the successor periods from October 5, 2012 (date of inception)
to December 31, 2012 and from January 1, 2013 to July 10, 2013
consist of the activity of Starburst II prior to the close of the
SoftBank Merger. The Predecessor information contained herein
represents the historical basis of presentation for Sprint
Communications, Inc. for all periods prior to the SoftBank Merger
date on July 10, 2013. As a result of the valuation of assets
acquired and liabilities assumed at fair value at the time of the
SoftBank Merger and Clearwire Acquisition, the financial statements
for the successor period are presented on a measurement basis
different than the predecessor period, which was Sprint
Communication Inc.’s historical cost, and are, therefore, not
comparable.
In order to present financial results in a way that offers
investors a more meaningful calendar period-to-period comparison,
we have combined the current and prior year results of operations
for the predecessor with successor results of operations on an
unaudited combined basis. The combined information for the
twelve-month period ended March 31, 2014 does not purport to
represent what our consolidated results of operations would have
been if the acquisition had occurred as of April 1, 2013.
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. Other than the use of
non-GAAP combined results as described above, 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.
ABPU is average billings per user and calculated by
dividing service revenue earned from customers plus installment
plan billings and lease revenue by the sum of the average number of
connections during the period. We believe that ABPU provides useful
information to investors, analysts and our management to evaluate
average Sprint platform postpaid customer billings as it
approximates the expected cash collections, including installment
plan billings and lease revenue, per 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 amounts included as investments in Clearwire and Sprint
Communications, Inc. during the period, if applicable. We believe
that Free Cash Flow provides useful information to investors,
analysts and our management about the cash generated by our core
operations 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,” “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, 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; 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 Transition Report on Form 10-K for the period
ended March 31, 2014, and, when filed, our Form 10-K for the fiscal
year ended March 31, 2015. 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 more than 57
million connections as of March 31, 2015 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 four years.
You can learn more and visit Sprint at www.sprint.com or
www.facebook.com/sprint and www.twitter.com/sprint.
Sprint CorporationMedia:Scott Sloat,
240-855-0164scott.sloat@sprint.comorInvestor:Jud Henry,
800-259-3755investor.relations@sprint.com
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