- Highest share of postpaid phone gross
additions in company history
- Postpaid phone gross additions grew 10
percent year-over-year
- Postpaid phone net additions of 279,000
were the ninth consecutive quarter of net additions
- Prepaid net additions of 95,000
compared to net losses of 449,000 in the prior year
- Third consecutive quarter of net
additions and improved by 544,000 year-over-year
- Prepaid gross additions grew
year-over-year for the first time in two years
- Net loss of $48 million, operating
income of $601 million, and adjusted EBITDA* of $2.7 billion
- Seventh consecutive quarter of
operating income
- Highest fiscal second quarter adjusted
EBITDA* in 10 years
- Net cash provided by operating
activities of $2 billion and adjusted free cash flow* of $420
million
- More than $650 million of adjusted free
cash flow* in the first half of fiscal year 2017
- Positive adjusted free cash flow* in
seven of the last eight quarters
Sprint Corporation (NYSE: S) today reported operating
results for the second quarter of fiscal year 2017, including its
highest share of postpaid phone gross additions in company history
and its third consecutive quarter of net additions in both postpaid
phones and prepaid with 279,000 and 95,000 net additions,
respectively. The company also reported operating income of $601
million and its highest fiscal second quarter adjusted EBITDA* in
10 years at $2.7 billion.
Net cash provided by operating activities of $2 billion improved
by $251 million year-over-year, bringing the year-to-date total to
$3.2 billion, an improvement of $1 billion compared to a year ago.
Adjusted free cash flow* was $420 million in the quarter, bringing
the year-to-date total to more than $650 million. The company now
expects adjusted free cash flow* for fiscal year 2017 to be around
break-even.
“Sprint was able to deliver net additions in both its postpaid
phone and prepaid business for the third consecutive quarter,” said
Sprint CEO Marcelo Claure. “I’m even more proud that the team was
able to deliver this customer growth while continuing to attack the
cost structure, improve the network, and maintain positive adjusted
free cash flow*.”
Highest Retail Phone Net Additions in More Than Two
Years
Sprint’s execution in both its postpaid and prepaid business
resulted in the highest retail phone net additions in more than two
years. The company continued to add postpaid phone customers with
279,000 net additions in the quarter, its ninth consecutive quarter
of net additions. Postpaid phone gross additions grew 10 percent
year-over-year, including 30 percent year-over-year growth in
digital channels, and Sprint’s share of postpaid phone gross
additions was the highest in company history.
The recent turnaround of the prepaid business resulted in 95,000
net additions in the quarter, its third consecutive quarter of net
additions and a 544,000 improvement compared to the prior year.
Prepaid gross additions grew year-over-year for the first time in
two years, and prepaid churn improved year-over-year for the fifth
consecutive quarter.
Total company net additions were 378,000 in the quarter,
including postpaid net additions of 168,000, prepaid net additions
of 95,000, and wholesale and affiliate net additions of
115,000.
Cost Reduction Program Contributes to Improved
Profitability
Sprint continued to make progress on its multiyear plan to
transform the way it does business and improve its cost structure.
The company delivered nearly $400 million of combined
year-over-year reductions in cost of services and SG&A expenses
in the quarter, bringing the year-to-date total reduction to more
than $750 million, primarily driven by changes to the device
insurance program. Lower network and customer care expenses also
contributed to the year-to-date reduction.
Sprint continues to expect $1.3 billion to $1.5 billion of
year-over-year net reductions in cost of services and SG&A
expenses in fiscal year 2017. Although the gross reductions are
expected to be higher, the company plans to reinvest some of the
savings into future growth initiatives.
The cost reduction program has contributed to improved
profitability, as the company has now reported seven consecutive
quarters of operating income and $158 million of net income
year-to-date.
Operating income and net loss in the quarter were negatively
impacted by $34 million of hurricane-related charges and future
quarters may be impacted by additional charges.
The company also reported the following financial results:
(Millions,
except per share data) Fiscal 2Q17
Fiscal 2Q16 Change Net loss
($48) ($142) $94
Basic loss per share
($0.01) ($0.04) $0.03
Operating income
$601 $622 ($21)
Adjusted EBITDA* $2,729
$2,347 $382
Net cash provided by operating
activities $1,959 $1,708 $251
Adjusted
free cash flow* $420 $707 ($287)
Sprint Magic Box Contributes to Network Speed
Improvements
Sprint is unlocking the value of the largest spectrum holdings
in the U.S. by densifying and optimizing its network. The company
has already deployed tens of thousands of small cell solutions,
including the Sprint Magic Box, which recently won the 2017 Mobile
Breakthrough Award for Small Cell Technology Innovation of the
Year. As the world’s first all-wireless small cell, Sprint Magic
Box improves data coverage and increases download and upload speeds
on average by 200 percent.1
Sprint’s extended network toolbox is improving the experience
for customers across the country. Based on Ookla’s Speedtest
Intelligence data, Sprint is the most improved network with
national average download speeds up 33 percent year-over-year.2 And
in more than 25 of 99 top markets, the company’s average download
speeds increased anywhere from 40 percent to more than 100 percent,
including Chicago, Los Angeles, Seattle, and Houston.3
Fiscal Year 2017 Outlook
- The company continues to expect
adjusted EBITDA* of $10.8 billion to $11.2 billion.
- The company continues to expect
operating income of $2.1 billion to $2.5 billion.
- The company continues to expect cash
capital expenditures, excluding devices leased through indirect
channels, of $3.5 billion to $4 billion.
- The company expects adjusted free cash
flow* to be around break-even.
_________________________ 1 Signal and speeds based on optimal
conditions for most Sprint devices. 2 Average download speed
increase based on Ookla’s analysis of Speedtest Intelligence data
comparing Sept. 2016 to Sept. 2017 for all mobile results. 3
Average download speed increase based on Sprint’s analysis of Ookla
Speedtest Intelligence data comparing Sept. 2016 to Sept. 2017 for
all mobile results.
Additional Information
- Additional information about results,
including a message from management, is available on the Investor
Relations website at www.sprint.com/investors
Wireless Operating Statistics (Unaudited)
Quarter To Date Year To Date 9/30/17
6/30/17 9/30/16 9/30/17 9/30/16
Net additions
(losses) (in thousands) Postpaid 168 (39 )
344 129 524 Postpaid phone 279 88 347 367 520 Prepaid (f) 95 35
(449 ) 130 (755 ) Wholesale and affiliate (f) 115
65 704 180
1,432
Total wireless net
additions 378
61 599 439
1,201 End of period
connections (in thousands) Postpaid (d) 31,686 31,518 31,289
31,686 31,289 Postpaid phone (d) 26,432 26,153 25,669 26,432 25,669
Prepaid (d) (e) (f) (h) 8,765 8,719 10,187 8,765 10,187 Wholesale
and affiliate (d) (e) (f) 13,576
13,461 12,486 13,576
12,486
Total end of period connections
54,027 53,698
53,962 54,027
53,962 Churn
(g) Postpaid 1.72 % 1.65 % 1.52 % 1.69 % 1.54 % Postpaid
phone 1.59 % 1.50 % 1.37 % 1.55 % 1.38 % Prepaid (e) 4.83 % 4.57 %
5.59 % 4.70 % 5.49 %
Supplemental data - connected
devices End of period connections (in thousands) Retail
postpaid 2,158 2,091 1,874 2,158 1,874 Wholesale and affiliate
11,221 11,100
9,951 11,221 9,951
Total 13,379
13,191 11,825
13,379 11,825
ARPU (a) Postpaid $ 46.00 $ 47.30 $ 50.54 $ 46.65 $
51.04 Postpaid phone $ 52.34 $ 53.92 $ 58.03 $ 53.13 $ 58.61
Prepaid (e) $ 37.83 $ 38.24 $ 33.15 $ 38.04 $ 33.07
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
Quarter To Date Year To Date 9/30/17 6/30/17
9/30/16 9/30/17 9/30/16
ABPA*
Postpaid service revenue $ 4,363 $ 4,466 $ 4,720 $ 8,829 $
9,498 Add: Installment plan and non-operating lease billings 397
368 274 765 538 Add: Lease revenue - operating 966
899 811 1,865
1,566
Total for postpaid connections $
5,726 $ 5,733 $
5,805 $ 11,459 $ 11,602
Average postpaid accounts (in thousands) 11,277 11,312
11,363 11,295 11,346 Postpaid ABPA* (b) $ 169.25 $ 168.95 $ 170.29
$ 169.10 $ 170.43 Quarter To Date Year To Date 9/30/17
6/30/17 9/30/16 9/30/17 9/30/16
Postpaid
phone ABPU* Postpaid phone service revenue $ 4,132 $ 4,214 $
4,441 $ 8,346 $ 8,930 Add: Installment plan and non-operating lease
billings 358 332 248 690 491 Add: Lease revenue - operating
953 887 797 1,840
1,538
Total for postpaid phone connections
$ 5,443 $ 5,433 $
5,486 $ 10,876 $ 10,959
Postpaid average phone connections (in thousands) 26,312
26,052 25,514 26,182 25,394 Postpaid phone ABPU* (c) $ 68.95 $
69.51 $ 71.69 $ 69.23 $ 71.93 (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.
Postpaid phone ARPU represents revenues related to our postpaid
phone connections.
(b) Postpaid ABPA* is calculated by
dividing service revenue earned from connections plus billings from
installment plans and non-operating leases, as well as, operating
lease revenue by the sum of the monthly average number of accounts
during the period. Installment plan billings represent the
substantial majority of the total billings in the table above for
all periods presented.
(c) Postpaid phone ABPU* is calculated by
dividing postpaid phone service revenue earned from postpaid phone
connections plus billings from installment plans and non-operating
leases, as well as, operating lease revenue by the sum of the
monthly average number of postpaid phone connections during the
period. Installment plan billings represent the substantial
majority of the total billings in the table above for all periods
presented.
(d) As part of the Shentel transaction,
186,000 and 92,000 subscribers were transferred from postpaid and
prepaid, respectively, to affiliates, of which 18,000 prepaid
subscribers were subsequently excluded from our customer base as a
result of the Lifeline regulatory change as noted in (f) below. An
additional 270,000 of nTelos' subscribers are now part of our
affiliate relationship with Shentel and were reported in wholesale
and affiliate subscribers beginning with the quarter ended June 30,
2016. In addition, during the three-month period ended June 30,
2017, 17,000 and 4,000 subscribers were transferred from postpaid
and prepaid, respectively, to affiliates as a result of a the
transfer of additional subscribers to Shentel.
(e) During the three-month period ended
June 30, 2017, 2,000 Wi-Fi connections were adjusted from the
postpaid subscriber base.
(f) Sprint is no longer reporting Lifeline
subscribers due to recent regulatory changes resulting in tighter
program restrictions. We have excluded them from our customer base
for all periods presented, including our Assurance Wireless prepaid
brand and subscribers through our wholesale MVNO's.
(g) In the quarter ended June 30, 2017, the Company enhanced
subscriber reporting to better align certain early-life gross
activations and deactivations. This enhancement had no impact to
net additions, but did result in reporting lower gross additions
and lower deactivations in the quarter. Without this enhancement,
total postpaid churn in the quarter would have been 1.73 percent
versus 1.65 percent. (h) During the three-month period ended
September 30, 2017, the Prepaid Data Share platform It's On was
decommissioned as the Company continues to focus on higher value
contribution offerings resulting in the reduction of 49,000 to
prepaid end of period subscribers.
Wireless Device
Financing Summary (Unaudited) (Millions, except sales,
connections, and leased devices in property, plant and equipment)
Quarter To Date Year To Date 9/30/17
6/30/17 9/30/16 9/30/17 9/30/16
Postpaid activations (in thousands) 3,917 3,668 3,747 7,585
7,015 Postpaid activations financed 85 % 85 % 73 % 85 % 71 %
Postpaid activations - operating leases 68 % 55 % 39 % 62 % 41 %
Installment plans Installment sales financed $ 268 $
553 $ 745 $ 821 $ 1,152 Installment billings $ 373 $ 368 $ 274 $
741 $ 538 Installment receivables, net $ 1,583 $ 1,792 $ - $ 1,583
$ -
Leasing revenue and depreciation Lease revenue -
operating $ 966 $ 899 $ 811 $ 1,865 $ 1,566 Lease depreciation $
888 $ 854 $ 724 $ 1,742 $ 1,368
Leased device
additions Cash paid for capital expenditures - leased devices $
608 $ 497 $ 358 $ 1,105 $ 763 Transfers from inventory - leased
devices $ 1,060 $ 850 $ 645 $ 1,910 $ 1,186
Leased
devices Leased devices in property, plant and equipment, net $
4,709 $ 4,336 $ 3,759 $ 4,709 $ 3,759
Leased device
units Leased devices in property, plant and equipment (units in
thousands) 13,019 12,223 9,366 13,019 9,366
Leased device
and receivables financings net proceeds Proceeds $ 789 $ 765 $
- $ 1,554 $ 1,055 Repayments (1,148 )
(273 ) (184 ) (1,421 ) (424 )
Net (repayments) proceeds of financings related to devices and
receivables $ (359 )
$ 492 $ (184 )
$ 133 $ 631
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (Millions, except per share data) Quarter To
Date Year To Date 9/30/17 6/30/17
9/30/16 9/30/17 9/30/16
Net operating revenues
Service revenue $ 5,967 $ 6,071 $ 6,413 $ 12,038 $
12,929 Equipment revenue 1,960
2,086 1,834 4,046
3,330
Total net operating revenues
7,927 8,157
8,247 16,084
16,259 Net operating expenses Cost of
services (exclusive of depreciation and amortization below) 1,698
1,709 2,101 3,407 4,200 Cost of products (exclusive of depreciation
and amortization below) 1,404 1,545 1,693 2,949 3,112 Selling,
general and administrative 2,013 1,938 1,995 3,951 3,912
Depreciation - network and other 997 977 986 1,974 2,022
Depreciation - leased devices 888 854 724 1,742 1,368 Amortization
209 223 271 432 558 Other, net 117
(252 ) (145 ) (135 ) 104
Total net operating expenses 7,326
6,994 7,625 14,320
15,276
Operating income
601 1,163
622 1,764
983 Interest expense (595 ) (613 ) (630 ) (1,208 )
(1,245 ) Other income (expense), net 44
(52 ) (15 ) (8 ) (7 )
Income (loss) before income taxes 50 498
(23 ) 548 (269 ) Income tax
expense (98 ) (292 ) (119
) (390 ) (175 )
Net (loss) income
$ (48 ) $ 206
$ (142 ) $ 158
$ (444 ) Basic net
(loss) income per common share $ (0.01
) $ 0.05 $
(0.04 ) $ 0.04 $
(0.11 ) Diluted net (loss) income per common
share $ (0.01 ) $
0.05 $ (0.04 ) $
0.04 $ (0.11 ) Weighted
average common shares outstanding 3,998
3,993 3,979 3,996
3,977 Diluted weighted average common shares
outstanding 3,998 4,076
3,979 4,080 3,977
Effective tax rate 196.0
% 58.6 %
-517.4 % 71.2 %
-65.1 % NON-GAAP RECONCILIATION -
NET (LOSS) INCOME TO ADJUSTED EBITDA* (Unaudited) (Millions)
Quarter To Date Year To Date 9/30/17
6/30/17 9/30/16 9/30/17 9/30/16
Net (loss) income $ (48 )
$ 206 $ (142 )
$ 158 $ (444 )
Income tax expense 98 292
119 390 175
Income (loss) before income taxes 50 498
(23 ) 548 (269 ) Other (income)
expense, net (44 ) 52 15 8 7 Interest expense 595
613 630
1,208 1,245
Operating income
601 1,163
622 1,764
983 Depreciation - network and other 997 977
986 1,974 2,022 Depreciation - leased devices 888 854 724 1,742
1,368 Amortization 209 223
271 432 558
EBITDA* (1) 2,695
3,217 2,603
5,912 4,931 Gain
from asset dispositions, exchanges, and other, net (2) - (304 )
(354 ) (304 ) (354 ) Severance and exit costs (3) - - (5 ) - 11
Contract terminations (4) - (5 ) - (5 ) 113 Litigation and other
contingencies (5) - (55 ) 103 (55 ) 103 Hurricanes (6)
34 - -
34 -
Adjusted EBITDA*
(1) $ 2,729 $
2,853 $ 2,347 $
5,582 $ 4,804
Adjusted EBITDA margin* 45.7 % 47.0
% 36.6 % 46.4 % 37.2
% Selected items: Cash paid for capital
expenditures - network and other $ 682 $ 1,121 $ 470 $ 1,803 $ 943
Cash paid for capital expenditures - leased devices $ 608 $ 497 $
358 $ 1,105 $ 763
WIRELESS STATEMENTS OF
OPERATIONS (Unaudited) (Millions) Quarter To Date
Year To Date 9/30/17 6/30/17 9/30/16 9/30/17
9/30/16
Net operating revenues
Service revenue Postpaid $ 4,363 $ 4,466 $ 4,720 $ 8,829 $ 9,498
Prepaid (7) 990 999 1,037 1,989 2,111 Wholesale, affiliate and
other (7) 296 259
260 555 509 Total service
revenue 5,649 5,724 6,017 11,373 12,118 Equipment revenue
1,960 2,086 1,834
4,046 3,330
Total net
operating revenues 7,609
7,810 7,851
15,419 15,448 Net
operating expenses Cost of services (exclusive of depreciation
and amortization below) 1,422 1,412 1,793 2,834 3,577 Cost of
products (exclusive of depreciation and amortization below) 1,404
1,545 1,693 2,949 3,112 Selling, general and administrative 1,936
1,875 1,931 3,811 3,765 Depreciation - network and other 944 925
936 1,869 1,921 Depreciation - leased devices 888 854 724 1,742
1,368 Amortization 209 223 271 432 558 Other, net 117
(202 ) (151 ) (85 )
98 Total net operating expenses 6,920
6,632 7,197 13,552
14,399
Operating income $
689 $ 1,178 $
654 $ 1,867 $
1,049 WIRELESS NON-GAAP RECONCILIATION
(Unaudited) (Millions) Quarter To Date
Year To Date 9/30/17 6/30/17 9/30/16 9/30/17
9/30/16
Operating income $
689 $ 1,178 $ 654 $
1,867 $ 1,049 Gain from asset dispositions,
exchanges, and other, net (2) - (304 ) (354 ) (304 ) (354 )
Severance and exit costs (3) - (5 ) (11 ) (5 ) 5 Contract
terminations (4) - (5 ) - (5 ) 113 Litigation and other
contingencies (5) - - 103 - 103 Hurricanes (6) 34 - - 34 -
Depreciation - network and other 944 925 936 1,869 1,921
Depreciation - leased devices 888 854 724 1,742 1,368 Amortization
209 223 271
432 558
Adjusted
EBITDA* (1) $ 2,764
$ 2,866 $ 2,323
$ 5,630 $ 4,763
Adjusted EBITDA margin* 48.9 %
50.1 % 38.6 % 49.5 %
39.3 % Selected items: Cash paid
for capital expenditures - network and other $ 539 $ 938 $ 358 $
1,477 $ 734 Cash paid for capital expenditures - leased devices $
608 $ 497 $ 358 $ 1,105 $ 763
WIRELINE STATEMENTS
OF OPERATIONS (Unaudited) (Millions) Quarter To Date
Year To Date 9/30/17 6/30/17 9/30/16
9/30/17 9/30/16
Net operating revenues
Voice $ 109 $ 124 $ 172 $ 233 $ 353 Data 33 34 43 67 86
Internet 256 255 288 511 590 Other 11
20 18 31
37
Total net operating revenues
409 433
521 842
1,066 Net operating expenses Cost of
services (exclusive of depreciation and amortization below) 372 387
436 759 884 Selling, general and administrative 66 57 62 123 140
Depreciation and amortization 49 51 48 100 97 Other, net
- 5 7
5 7 Total net operating expenses
487 500 553
987 1,128
Operating
loss $ (78 ) $
(67 ) $ (32 ) $
(145 ) $ (62 )
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions) Quarter To Date Year To Date
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Operating loss $ (78 )
$ (67 ) $ (32 ) $
(145 ) $ (62 ) Severance and
exit costs (3) - 5 7 5 7 Depreciation and amortization
49 51 48
100 97
Adjusted EBITDA*
$ (29 ) $ (11
) $ 23 $ (40
) $ 42 Adjusted EBITDA
margin* -7.1 % -2.5 % 4.4
% -4.8 % 3.9 %
Selected items: Cash paid for capital expenditures - network
and other $ 40 $ 62 $ 31 $ 102 $ 51
CONDENSED
CONSOLIDATED CASH FLOW INFORMATION (Unaudited) (Millions)
Year to Date 9/30/17 9/30/16
Operating
activities Net income (loss) $ 158 $ (444 ) Depreciation
and amortization 4,148 3,948 Provision for losses on accounts
receivable 199 232 Share-based and long-term incentive compensation
expense 87 29 Deferred income tax expense 364 157 Gains from asset
dispositions and exchanges (479 ) (354 ) Call premiums paid on debt
redemptions (129 ) - Loss on early extinguishment of debt 65 -
Amortization of long-term debt premiums, net (90 ) (159 ) Loss on
disposal of property, plant and equipment 410 231 Contract
terminations (5 ) 96 Other changes in assets and liabilities:
Accounts and notes receivable (179 ) (126 ) Inventories and other
current assets (1,459 ) (892 ) Deferred purchase price from sale of
receivables - (400 ) Accounts payable and other current liabilities
(161 ) (195 ) Non-current assets and liabilities, net 183 (205 )
Other, net 127 332
Net
cash provided by operating activities
3,239 2,250
Investing activities Capital expenditures - network and
other (1,803 ) (943 ) Capital expenditures - leased devices (1,105
) (763 ) Expenditures relating to FCC licenses (19 ) (32 ) Change
in short-term investments, net 3,834 (1,650 ) Proceeds from sales
of assets and FCC licenses 218 66 Other, net (1 )
(36 )
Net cash provided by (used in) investing
activities 1,124
(3,358 ) Financing activities Proceeds
from debt and financings 1,860 3,278 Repayments of debt, financing
and capital lease obligations (4,261 ) (667 ) Debt financing costs
(9 ) (175 ) Other, net (21 ) 37
Net cash (used in) provided by financing activities
(2,431 ) 2,473
Net increase in cash and cash equivalents
1,932 1,365 Cash and cash equivalents,
beginning of period 2,870
2,641 Cash and cash equivalents, end of
period $ 4,802 $
4,006
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP)
(Unaudited) (Millions) Quarter To Date Year to Date 9/30/17
6/30/17 9/30/16 9/30/17 9/30/16
Net
cash provided by operating activities $ 1,959
$ 1,280 $ 1,708 $ 3,239
$ 2,250 Capital expenditures - network and
other (682 ) (1,121 ) (470 ) (1,803 ) (943 ) Capital expenditures -
leased devices (608 ) (497 ) (358 ) (1,105 ) (763 ) Expenditures
relating to FCC licenses, net (6 ) (13 ) (17 ) (19 ) (32 ) Proceeds
from sales of assets and FCC licenses 117 101 39 218 66 Other
investing activities, net (1 ) (3 )
(11 ) (4 ) (36 )
Free cash flow* $ 779
$ (253 ) $ 891
$ 526 $ 542
Net (repayments) proceeds of financings related to
devices and receivables (359 ) 492
(184 ) 133
631
Adjusted free cash flow* $
420 $ 239 $
707 $ 659
$ 1,173 CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (Millions)
9/30/17 3/31/17
ASSETS Current assets Cash and
cash equivalents $ 4,802 $ 2,870 Short-term investments 1,610 5,444
Accounts and notes receivable, net 4,118 4,138 Device and accessory
inventory 751 1,064 Prepaid expenses and other current assets
654 601 Total current
assets 11,935 14,117 Property, plant and equipment, net
18,901 19,209 Goodwill 6,578 6,579 FCC licenses and other 41,072
40,585 Definite-lived intangible assets, net 2,848 3,320 Other
assets 1,132 1,313
Total assets $ 82,466
$ 85,123 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities Accounts payable $
2,947 $ 3,281 Accrued expenses and other current liabilities 3,808
4,141 Current portion of long-term debt, financing and capital
lease obligations 4,142 5,036
Total current liabilities 10,897 12,458 Long-term
debt, financing and capital lease obligations 34,236 35,878
Deferred tax liabilities 14,780 14,416 Other liabilities
3,533 3,563
Total
liabilities 63,446
66,315 Stockholders' equity Common stock 40 40
Treasury shares, at cost (9 ) - Paid-in capital 27,807 27,756
Accumulated deficit (8,426 ) (8,584 ) Accumulated other
comprehensive loss (392 ) (404 ) Total
stockholders' equity 19,020
18,808
Total liabilities and stockholders' equity
$ 82,466 $ 85,123
NET DEBT* (NON-GAAP) (Unaudited)
(Millions) 9/30/17 3/31/17 Total debt $ 38,378 $ 40,914
Less: Cash and cash equivalents (4,802 ) (2,870 ) Less: Short-term
investments (1,610 ) (5,444 )
Net
debt* $ 31,966 $
32,600 SCHEDULE OF DEBT
(Unaudited) (Millions) 9/30/17
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 secured loan 12/17/2019 300 9% Guaranteed notes due 2018
11/15/2018 1,800 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% Secured debentures due 2022 04/15/2022 200
6% Senior notes due 2022 11/15/2022 2,280
Sprint Communications, Inc.
8,080 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 2040 (a)
12/01/2017 629
Clearwire Communications
LLC 629
Credit facilities Secured equipment credit facilities 2020 -
2021 552 Secured term loan 02/03/2024 3,980
Credit facilities
4,532 Accounts receivable facility
11/19/2018
2,393 Financing obligations 2017 -
2021
2,011 Capital leases and other
obligations 2017 - 2024
533
Total principal 38,382
Net premiums and debt financing costs
(4 ) Total debt
$ 38,378 (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) 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 six-month periods ended September
30, 2017, we leased devices through our Sprint direct channels
totaling approximately $1,060 million and $1,910 million,
respectively, which would have increased cost of products and
reduced EBITDA* if they had been purchased under our subsidized
program.
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.
(2) During the first quarter of fiscal year 2017, 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. Additionally, the company recorded a pre-tax non-cash gain
related to spectrum swaps with other carriers. 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.
(3) 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. (4) During the
first quarter of fiscal year 2017, we recorded a $5 million gain
due to reversal of a liability recorded in relation to the
termination of our relationship with General Wireless Operations,
Inc. (Radio Shack). During the first quarter of fiscal year 2016,
contract terminations primarily relate to the termination of our
pre-existing wholesale arrangement with NTELOS Holding Corp.
(5) During the first quarter of fiscal year 2017, we recorded a $55
million reduction in legal reserves related to favorable
developments in pending legal proceedings. During the second
quarter of fiscal year 2016, litigation and other contingencies
consist of unfavorable developments associated with legal matters
as well as federal and state matters such as sales, use or property
taxes. (6) During the second quarter of fiscal year 2017 we
recorded estimated hurricane-related charges of $34 million,
consisting of customer service credits, incremental roaming costs,
network repairs and replacements. (7) Sprint is no longer
reporting Lifeline subscribers due to recent regulatory changes
resulting in tighter program restrictions. We have excluded them
from our customer base for all periods presented, including our
Assurance Wireless prepaid brand and subscribers through our
wholesale Lifeline mobile virtual network operators (MVNO). The
table reflects the reclassification of the related Assurance
Wireless prepaid revenue from Prepaid service revenue to Wholesale,
affiliate and other revenue of $92 million and $183 million for the
three and six-month periods ended September 30, 2016, respectively.
Revenue associated with subscribers through our wholesale Lifeline
MVNO's continue to remain in Wholesale, affiliate and other revenue
following this change.
*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.
Postpaid ABPA is average billings per account and
calculated by dividing postpaid service revenue earned from
postpaid customers plus billings from installment plans and
non-operating leases, as well as, operating 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 postpaid
customer billings per account as it approximates the expected cash
collections, including billings from installment plans and
non-operating leases, as well as, operating lease revenue, per
postpaid account each month.
Postpaid Phone ABPU is average billings per postpaid
phone user and calculated by dividing service revenue earned from
postpaid phone customers plus billings from installment plans and
non-operating leases, as well as, operating 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
postpaid phone customer billings as it approximates the expected
cash collections, including billings from installment plans and
non-operating leases, as well as, operating 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 and equity method
investments. Adjusted Free Cash Flow is Free Cash
Flow plus the proceeds from device financings and sales of
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, 2017. 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 54 million connections as of
Sept. 30, 2017 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20171025005581/en/
SprintMedia:Dave TovarDavid.Tovar@sprint.comorInvestors:Jud
HenryInvestor.Relations@sprint.com
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