Sprint Delivers Best Financial Results In Company History With Highest Ever Net Income And Operating Income In Fiscal Year 2017
Sprint Delivers Best Financial Results In Company History With Highest Ever Net Income And Operating Income In Fiscal Year 2017
OVERLAND PARK, Kan., May 2, 2018 /PRNewswire/ --
-- Fiscal year 2017 postpaid phone net additions of 606,000
-- Third consecutive year of postpaid phone net additions
-- Highest postpaid phone gross additions in six years
-- Fiscal fourth quarter postpaid phone net additions of 55,000 marked
the eleventh consecutive quarter of net additions
-- Fiscal year 2017 prepaid net additions of 363,000 compared to net losses
of 1 million in the prior year
-- Prepaid net additions for the first time in three years
-- Prepaid churn of 4.58 percent was the lowest in three years
-- Fiscal fourth quarter prepaid net additions of 170,000
-- Fiscal year 2017 net income of $7.4 billion, operating income of $2.7
billion and Adjusted EBITDA* of $11.1 billion
-- Net income for the first time in 11 years, even when excluding $7.1
billion of one-time favorable impact from tax reform
-- Highest operating income in company history and highest Adjusted
EBITDA* in 11 years
-- Fiscal fourth quarter net income of $69 million, operating income of
$236 million, and Adjusted EBITDA* of $2.8 billion
-- Fiscal year 2017 net cash provided by operating activities of $10.1
billion and adjusted free cash flow* of $945 million
-- Second consecutive year of positive adjusted free cash flow*
-- Completed thousands of tri-band upgrades on macro sites, added thousands
of outdoor small cells and deployed more than 200,000 Sprint Magic Boxes
Sprint Corporation (NYSE: S) today reported operating results for the fiscal 2017 fourth quarter and full year, including its highest annual retail phone net additions in five years and the best profitability in company history with its highest annual operating income at $2.7 billion and annual net income for the first time in 11 years, even when excluding the one-time favorable impact from tax reform. The company also reported its highest adjusted EBITDA* in 11 years at $11.1 billion and its second consecutive year of positive adjusted free cash flow* at $945 million.
"In the fourth year of our turnaround, Sprint delivered the best financial results in company history as a result of growing our customer base and continuously improving our cost structure, while significantly improving our LTE network and initiating deployment for the first truly mobile 5G network in the U.S," said Sprint CEO Marcelo Claure. "By executing our turnaround, we have positioned Sprint for strategic opportunities which led to our proposed merger with T-Mobile, which will create an entirely new level of innovation and disruption in the industry."
Sprint Adds Nearly 1 Million Retail Phone Customers in Fiscal Year 2017
Sprint's focus on both its postpaid and prepaid businesses resulted in nearly 1 million retail phone net additions in fiscal year 2017, an improvement of more than 1 million compared to the prior year.
-- Postpaid phone net additions of 606,000 marked the third consecutive
year of net additions, as postpaid phone gross additions reached their
highest level in six years. For the fourth quarter, postpaid phone net
additions of 55,000 marked the eleventh consecutive quarter of net
additions, including net additions in the business space for the sixth
consecutive quarter. The current quarter and full year results included
44,000 net migrations from prepaid to non-Sprint branded postpaid.
-- Prepaid net additions of 363,000 compared to net losses of 1 million in
the prior year, an improvement of nearly 1.4 million driven by a
resurgence in the Boost brand. Prepaid churn of 4.58 percent, the lowest
in three years, improved by 80 basis points year-over-year. For the
fourth quarter, prepaid net additions were 170,000, including the
highest share of gross additions in two years and year-over-year
improvement in churn for the seventh consecutive quarter.
Cost Reduction Program Contributes to Improved Cash Flows
Sprint continued to make progress on its multi-year plan to improve its cost structure. Excluding approximately $100 million of hurricane-related and other non-recurring charges in fiscal year 2017, the company reported approximately $1.1 billion of combined year-over-year reductions in cost of services and selling, general and administrative expenses, making it the fourth consecutive year of more than $1 billion of year-over-year reductions and bringing the total reduction over the last four years to approximately $6 billion. The year-over-year reductions were primarily driven by changes to the device insurance program, as well as lower network expenses.
Fiscal year 2017 net cash provided by operating activities of $10.1 billion improved by $13.4 billion year-over-year, primarily due to a modification of our accounts receivable facility in February 2017. Adjusted free cash flow* of $945 million improved by $338 million year-over-year, mostly due to operational improvements in the business.
Net income of $7.4 billion in fiscal year 2017 included a one-time $7.1 billion non-cash benefit from tax reform, resulting from a re-measurement of our deferred tax assets and liabilities under provisions contained in the new tax law.
The company also reported the following financial results:
(Millions,
except per
share data) Fiscal Fiscal Change Fiscal Fiscal Change
4Q17 4Q16 2017 2016
--- ---- ---- ---- ----
Net income
(loss) $69 ($283) $352 $7,389 ($1,206) $8,595
---------- --- ----- ---- ------ ------- ------
Basic income
(loss) per
share $0.02 ($0.07) $0.09 $1.85 ($0.30) $2.15
------------ ----- ------ ----- ----- ------ -----
Operating
income $236 $470 ($234) $2,727 $1,764 $963
--------- ---- ---- ----- ------ ------ ----
Adjusted
EBITDA* $2,768 $2,680 $88 $11,069 $9,934 $1,135
-------- ------ ------ --- ------- ------ ------
Net cash
provided by
(used in)
operating
activities $2,653 ($523) $3,176 $10,062 ($3,290) $13,352
------------ ------ ----- ------ ------- ------- -------
Adjusted
free cash
flow* ($240) $80 ($320) $945 $607 $338
---------- ----- --- ----- ---- ---- ----
Network Quality Improves as Progress Toward First Mobile 5G Network Continues
Sprint is building a super-reliable, high-capacity mobile network that will deliver a great LTE experience and enable industry-leading 5G capabilities. The company's Next-Gen Network plan involves:
-- Upgrading existing towers to leverage all three of the company's
spectrum bands
-- Building new macro cell sites
-- Adding more small cells including mini-macros, strand mounts with cable
operators and Sprint Magic Boxes
-- Deploying 5G technologies such as Massive MIMO
With more than 160 MHz of 2.5 GHz spectrum in the top 100 markets, Sprint is one of the only operators in the world with enough capacity to operate LTE and 5G simultaneously using Massive MIMO and huge channels of 100-200 MHz of licensed spectrum on the same radios. Sprint expects to launch the first mobile 5G network in the U.S. in the first half of 2019.
Sprint completed thousands of tri-band upgrades on macro sites, added thousands of outdoor small cells and deployed more than 200,000 Sprint Magic Boxes in fiscal year 2017. These deployments helped drive continued improvement in network quality, as seen in Ookla's Speedtest Intelligence data.
-- Sprint saw a 36 percent year-over-year increase in its national average
download speed, the largest increase of the top four national
carriers.(1)
-- Sprint is #1 for fastest average download speed in 100 cities, more than
twice as many cities as last year and more than AT&T for the third
consecutive quarter.(2)
Fiscal Year 2018 Outlook
-- The company expects adjusted EBITDA* of $11.3 billion to $11.8 billion.
Including the impact of the new revenue recognition accounting standard,
adjusted EBITDA* is expected to increase to a range of $11.6 billion to
$12.1 billion.
-- The company expects cash capital expenditures excluding leased devices
to be $5 billion to $6 billion.
Conference Call and Webcast
-- Date/Time: 4:30 p.m. (ET) Wednesday, May 2, 2018
-- Call-in Information
-- U.S./Canada: 866-360-1063 (ID: 4588039)
-- International: 443-961-0242 (ID: 4588039)
-- Webcast available at www.sprint.com/investors
-- Additional information about results is available on our Investor
Relations website
(1) Based on Ookla's analysis of Speedtest Intelligence data comparing March 2017 to March 2018 for all mobile results.
(2) Based on Ookla's analysis of Speedtest Intelligence data from 1/1/18 to 3/31/18 for all mobile results when comparing cities where the top four national carriers rank
Wireless Operating Statistics (Unaudited)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Net additions (losses) (in thousands)
Postpaid(a) 39 256 (118) 424 811
Postpaid phone (a) 55 184 42 606 930
Prepaid(b) 170 63 195 363 (1,020)
Wholesale and
affiliate(b) (165) 66 291 81 2,342
------------- ---- --- --- --- -----
Total wireless net
additions 44 385 368 868 2,133
------------------ --- --- --- --- -----
End of period connections (in thousands)
Postpaid(a) (c) (d) 32,119 31,942 31,576 32,119 31,576
Postpaid phone(a) (c) 26,813 26,616 26,079 26,813 26,079
Prepaid(a) (b) (c) (e)
(f) (g) 8,989 8,997 8,688 8,989 8,688
Wholesale and
affiliate (b) (c) (f) 13,517 13,642 13,375 13,517 13,375
----------------------
Total end of period
connections 54,625 54,581 53,639 54,625 53,639
------------------- ------ ------ ------ ------ ------
Churn
Postpaid 1.78% 1.80% 1.75% 1.74% 1.62%
Postpaid phone 1.68% 1.71% 1.58% 1.62% 1.48%
Prepaid (f) 4.30% 4.63% 4.69% 4.58% 5.38%
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid 2,335 2,259 2,001 2,335 2,001
Wholesale and
affiliate 11,162 11,272 10,880 11,162 10,880
------------- ------ ------ ------
Total 13,497 13,531 12,881 13,497 12,881
----- ------ ------ ------ ------ ------
ARPU(h)
Postpaid $44.40 $45.13 $47.34 $45.70 $49.77
Postpaid phone $50.44 $51.26 $54.10 $51.98 $57.09
Prepaid(f) $37.15 $37.46 $38.48 $37.67 $34.46
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
ABPA*
Postpaid service
revenue $4,270 $4,297 $4,493 $17,396 $18,677
Add: Installment plan
and non-operating
lease billings 368 379 343 1,512 1,172
Add: Equipment rentals 1,136 1,047 842 4,048 3,295
---------------------- ----- ----- ---
Total for postpaid
connections $5,774 $5,723 $5,678 $22,956 $23,144
------------------ ------ ------ ------ ------- -------
Average postpaid
accounts (in
thousands) 11,259 11,193 11,405 11,260 11,378
Postpaid ABPA*(i) $171.38 $170.39 $165.92 $169.99 $169.51
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Postpaid phone ABPU*
Postpaid phone service
revenue $4,048 $4,069 $4,228 $16,463 $17,578
Add: Installment plan
and non-operating
lease billings 324 335 309 1,349 1,061
Add: Equipment rentals 1,126 1,037 829 4,003 3,240
----------------------
Total for postpaid
phone connections $5,498 $5,441 $5,366 $21,815 $21,879
------------------ ------ ------ ------ ------- -------
Postpaid average phone
connections (in
thousands) 26,754 26,461 26,053 26,394 25,659
Postpaid phone ABPU*
(j) $68.51 $68.54 $68.66 $68.88 $71.06
(a)During the three-month period ended
March 31, 2018, a non-Sprint branded
postpaid offering was introduced
allowing prepaid customers to purchase a
device under our installment billing
program. As a result of the extension of
credit, approximately 167,000 prepaid
subscribers were migrated from the
prepaid subscriber base into the
postpaid subscriber base. In addition,
net subscriber additions under the non-
Sprint branded postpaid offering were
44,000 during the three-month period
ended March 31, 2018.
(b)Sprint is no longer reporting Lifeline
subscribers due to 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 MVNOs.
(c) 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 (b) above.
An additional 270,000 of nTelos'
subscribers are now part of our
affiliate relationship with Shentel and
are being 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 and, during the three-month
period ended March 31, 2018, 29,000 and
11,000 subscribers were transferred from
postpaid and prepaid, respectively, to
affiliates as a result of the transfer
of additional subscribers to Shentel.
(d) During the three-month period ended
June 30, 2017, 2,000 Wi-Fi connections
were adjusted from the postpaid
subscriber base.
(e)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 a 49,000
reduction to prepaid end of period
subscribers.
(f)During the three-month period ended
December 31, 2016, the Company aligned
all prepaid brands, excluding Assurance
Wireless but including prepaid affiliate
subscribers, under one churn and
retention program. As a result of this
change, end of period prepaid and
affiliate subscribers as of December 31,
2016 were reduced by 1,234,000 and
21,000, respectively.
(g)During the three-month period ended
December 31, 2017, prepaid end of period
subscribers increased by 169,000 in
conjunction with the PRWireless HoldCo,
LLC joint venture.
(h) 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.
(i) Postpaid ABPA* is calculated by
dividing postpaid service revenue earned
from postpaid customers plus billings
from installment plans and non-
operating leases, as well as equipment
rentals, by the sum of the monthly
average number of postpaid accounts
during the period. Installment plan
billings represent the substantial
majority of the total billings in the
table above for all periods presented.
(j) Postpaid phone ABPU* is calculated
by dividing service revenue earned from
postpaid phone customers plus billings
from installment plans and non-
operating leases, as well as equipment
rentals, 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.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant and equipment)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Postpaid activations (in
thousands) 3,737 4,874 3,471 16,196 15,298
Postpaid activations
financed 84% 84% 82% 85% 76%
Postpaid activations -
operating leases 70% 72% 42% 67% 42%
Installment plans
Installment sales
financed $214 $276 $696 $1,311 $2,884
Installment billings $342 $353 $343 $1,436 $1,172
Installment receivables,
net $1,149 $1,383 $1,764 $1,149 $1,764
Equipment rentals and
depreciation -equipment
rentals
Equipment rentals $1,136 $1,047 $842 $4,048 $3,295
Depreciation -equipment
rentals $1,060 $990 $911 $3,792 $3,116
Leased device additions
Cash paid for capital
expenditures -leased
devices $1,928 $2,468 $1,080 $7,461 $4,976
Leased devices
Leased devices in
property, plant and
equipment, net $6,012 $5,683 $4,162 $6,012 $4,162
Leased device units
Leased devices in
property, plant and
equipment (units in
thousands) 14,543 14,002 11,888 14,543 11,888
Leased device and
receivables financings
net proceeds
Proceeds $ - $1,125 $100 $2,679 $1,155
Repayments (555) (598) (414) (2,574) (1,069)
---------- ---- ---- ---- ------ ------
Net (repayments) proceeds
of financings related to
devices and receivables $(555) $527 $(314) $105 $86
------------------------- ----- ---- ----- ---- ---
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Net operating revenues
Service revenue $5,866 $5,930 $6,116 $23,834 $25,368
Equipment sales 1,081 1,262 1,581 4,524 4,684
Equipment rentals 1,136 1,047 842 4,048 3,295
----------------- ----- ----- --- ----- -----
Total net operating
revenues 8,083 8,239 8,539 32,406 33,347
------------------- ----- ----- ----- ------ ------
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization below) 1,661 1,733 1,736 6,801 7,861
Cost of equipment
sales 1,487 1,673 1,980 6,109 6,583
Cost of equipment
rentals (exclusive
of depreciation
below) 146 123 141 493 975
Selling, general and
administrative 2,028 2,108 2,002 8,087 7,994
Depreciation -
network and other 1,015 987 960 3,976 3,982
Depreciation -
equipment rentals 1,060 990 911 3,792 3,116
Amortization 184 196 239 812 1,052
Other, net 266 (298) 100 (391) 20
---------- --- ---- --- ---- ---
Total net operating
expenses 7,847 7,512 8,069 29,679 31,583
------------------- ----- ----- ----- ------ ------
Operating income 236 727 470 2,727 1,764
---------------- --- --- --- ----- -----
Interest expense (576) (581) (631) (2,365) (2,495)
Other (expense)
income, net (9) (42) 27 (59) (40)
--------------- --- --- --- --- ---
(Loss) income before
income taxes (349) 104 (134) 303 (771)
Income tax benefit
(expense) 412 7,052 (149) 7,074 (435)
------------------ --- ----- ---- ----- ----
Net income (loss) 63 7,156 (283) 7,377 (1,206)
---------------- --- ----- ---- ----- ------
Less: Net loss
attributable to
noncontrolling
interests 6 6 - 12 -
---------------- --- --- --- --- ---
Net income (loss)
attributable to
Sprint Corporation $69 $7,162 $(283) $7,389 $(1,206)
------------------- --- ------ ----- ------ -------
Basic net income
(loss) per common
share $0.02 $1.79 $(0.07) $1.85 $(0.30)
------------------ ----- ----- ------ ----- ------
Diluted net income
(loss) per common
share $0.02 $1.76 $(0.07) $1.81 $(0.30)
------------------ ----- ----- ------ ----- ------
Weighted average
common shares
outstanding 4,004 4,001 3,988 3,999 3,981
---------------- ----- ----- ----- ----- -----
Diluted weighted
average common
shares outstanding 4,055 4,061 3,988 4,078 3,981
------------------- ----- ----- ----- ----- -----
Effective tax rate 118.1% -6,780.8% -111.2% -2,334.7% -56.4%
------------------ ----- -------- ------ -------- -----
NON-GAAP RECONCILIATION - NET INCOME (LOSS) TO ADJUSTED EBITDA* (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Net income (loss) $63 $7,156 $(283) $7,377 $(1,206)
---------------- --- ------ ----- ------ -------
Income tax (benefit)
expense (412) (7,052) 149 (7,074) 435
-------------------- ---- ------ --- ------ ---
(Loss) income before
income taxes (349) 104 (134) 303 (771)
Other expense
(income), net 9 42 (27) 59 40
Interest expense 576 581 631 2,365 2,495
---------------- --- --- --- ----- -----
Operating income 236 727 470 2,727 1,764
---------------- --- --- --- ----- -----
Depreciation -
network and other 1,015 987 960 3,976 3,982
Depreciation -
equipment rentals 1,060 990 911 3,792 3,116
Amortization 184 196 239 812 1,052
------------ --- --- --- --- -----
EBITDA*(1) 2,495 2,900 2,580 11,307 9,914
--------- ----- ----- ----- ------ -----
Loss (gain) from
asset dispositions,
exchanges, and
other, net(2) 189 - - (115) (326)
Severance and exit
costs (3) 67 13 36 80 66
Contract
terminations (4) - - 27 (5) 140
Litigation and other
contingencies(5) 10 (260) 37 (305) 140
Hurricanes (6) 7 66 - 107 -
------------- --- --- --- --- ---
Adjusted EBITDA*(1) $2,768 $2,719 $2,680 $11,069 $9,934
------------------ ------ ------ ------ ------- ------
Adjusted EBITDA
margin* 47.2% 45.9% 43.8% 46.4% 39.2%
Selected items:
Cash paid for
capital
expenditures -
network and other $780 $696 $529 $3,319 $1,950
Cash paid for
capital
expenditures -
leased devices $1,928 $2,468 $1,080 $7,461 $4,976
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Net operating revenues
Service revenue
Postpaid $4,270 $4,297 $4,493 $17,396 $18,677
Prepaid (7) 989 993 982 3,971 4,078
Wholesale, affiliate
and other(7) 314 329 269 1,198 1,053
-------------------- --- --- --- ----- -----
Total service revenue 5,573 5,619 5,744 22,565 23,808
Equipment sales 1,081 1,262 1,581 4,524 4,684
Equipment rentals 1,136 1,047 842 4,048 3,295
Total net operating
revenues 7,790 7,928 8,167 31,137 31,787
------------------- ----- ----- ----- ------ ------
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization below) 1,401 1,466 1,448 5,701 6,674
Cost of equipment
sales 1,487 1,673 1,980 6,109 6,583
Cost of equipment
rentals (exclusive of
depreciation below) 146 123 141 493 975
Selling, general and
administrative 1,947 2,024 1,944 7,782 7,741
Depreciation -network
and other 968 931 911 3,768 3,779
Depreciation -
equipment rentals 1,060 990 911 3,792 3,116
Amortization 184 196 239 812 1,052
Other, net 258 16 91 (35) (1)
----------
Total net operating
expenses 7,451 7,419 7,665 28,422 29,919
------------------- ----- ----- ----- ------ ------
Operating income $339 $509 $502 $2,715 $1,868
---------------- ---- ---- ---- ------ ------
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Operating income $339 $509 $502 $2,715 $1,868
Loss (gain) from asset
dispositions,
exchanges, and other,
net(2) 189 - - (115) (326)
Severance and exit
costs (3) 59 4 27 58 45
Contract terminations
(4) - - 27 (5) 140
Litigation and other
contingencies (5) 10 63 37 73 140
Hurricanes (6) 7 66 - 107 -
Depreciation -network
and other 968 931 911 3,768 3,779
Depreciation -
equipment rentals 1,060 990 911 3,792 3,116
Amortization 184 196 239 812 1,052
Adjusted EBITDA*(1) $2,816 $2,759 $2,654 $11,205 $9,814
------------------ ------ ------ ------ ------- ------
Adjusted EBITDA
margin* 50.5% 49.1% 46.2% 49.7% 41.2%
Selected items:
Cash paid for capital
expenditures -
network and other $681 $565 $468 $2,760 $1,591
Cash paid for capital
expenditures -leased
devices $1,928 $2,468 $1,080 $7,461 $4,976
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Net operating
revenues 344 393 480 1,579 2,043
------------- --- --- --- ----- -----
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization below) 316 352 402 1,427 1,686
Selling, general and
administrative 76 71 49 270 238
Depreciation and
amortization 50 55 47 205 195
Other, net 9 (314) 8 (300) 21
----------
Total net operating
expenses 451 164 506 1,602 2,140
------------------- --- --- --- ----- -----
Operating (loss)
income $(107) $229 $(26) $(23) $(97)
---------------- ----- ---- ---- ---- ----
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Operating (loss)
income $(107) $229 $(26) $(23) $(97)
Loss from asset
dispositions,
exchanges, and
other, net(2) 1 - - 1 -
Severance and exit
costs (3) 8 9 8 22 21
Litigation and other
contingencies (5) - (323) - (323) -
Depreciation and
amortization 50 55 47 205 195
----------------
Adjusted EBITDA* $(48) $(30) $29 $(118) $119
--------------- ---- ---- --- ----- ----
Adjusted EBITDA
margin* -14.0% -7.6% 6.0% -7.5% 5.8%
Selected items:
Cash paid for
capital
expenditures -
network and other $34 $30 $19 $166 $94
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
Year To Date
------------
3/31/18 3/31/17
------- -------
Operating activities
Net income (loss) $7,377 $(1,206)
Depreciation and amortization 8,580 8,150
Provision for losses on accounts receivable 362 555
Share-based and long-term incentive compensation expense 182 93
Deferred income tax (benefit) expense (7,119) 433
Gains from asset dispositions and exchanges (479) (354)
Loss on early extinguishment of debt 65 -
Amortization of long-term debt premiums, net (158) (302)
Loss on disposal of property, plant and equipment 868 509
Contract terminations (5) 111
Deferred purchase price from sale of receivables (1,140) (10,498)
Other changes in assets and liabilities:
Accounts and notes receivable 83 (1,017)
Inventories and other current assets 705 457
Accounts payable and other current liabilities 57 (365)
Non-current assets and liabilities, net 271 (308)
Other, net 413 452
---
Net cash provided by (used in) operating activities 10,062 (3,290)
--------------------------------------------------- ------ ------
Investing activities
Capital expenditures - network and other (3,319) (1,950)
Capital expenditures - leased devices (7,461) (4,976)
Expenditures relating to FCC licenses (115) (83)
Change in short-term investments, net 3,090 (5,444)
Proceeds from sales of assets and FCC licenses 527 219
Proceeds from deferred purchase price from sale of receivables 1,140 10,498
Other, net 3 41
Net cash used in investing activities (6,135) (1,695)
------------------------------------- ------ ------
Financing activities
Proceeds from debt and financings 8,529 10,966
Repayments of debt, financing and capital lease obligations (8,518) (5,417)
Debt financing costs (93) (358)
Call premiums paid on debt redemptions (131) -
Other, net 3 95
Net cash (used in) provided by financing activities (210) 5,286
--------------------------------------------------- ---- -----
Net increase in cash, cash equivalents and restricted cash 3,717 301
Cash, cash equivalents and restricted cash, beginning of period 2,942 2,641
------------------------------------------------------------- ----- -----
Cash, cash equivalents and restricted cash, end of period $6,659 $2,942
--------------------------------------------------------- ------ ------
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
3/31/18 12/31/17 3/31/17 3/31/18 3/31/17
------- -------- ------- ------- -------
Net cash provided by (used in) operating
activities $2,653 $2,683 $(523) $10,062 $(3,290)
Capital expenditures - network and other (780) (696) (529) (3,319) (1,950)
Capital expenditures - leased devices (1,928) (2,468) (1,080) (7,461) (4,976)
Expenditures relating to FCC licenses, net (23) (73) (37) (115) (83)
Proceeds from sales of assets and FCC licenses 160 149 93 527 219
Proceeds from deferred purchase price from
sale of receivables 231 269 2,476 1,140 10,498
Other investing activities, net 2 6 (6) 6 103
---
Free cash flow* $315 $(130) $394 $840 $521
-------------- ---- ----- ---- ---- ----
Net (repayments) proceeds of financings
related to devices and receivables (555) 527 (314) 105 86
Adjusted free cash flow* $(240) $397 $80 $945 $607
----------------------- ----- ---- --- ---- ----
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
3/31/18 3/31/17
------- -------
ASSETS
Current assets
Cash and cash equivalents $6,610 $2,870
Short-term investments 2,354 5,444
Accounts and notes receivable, net 3,711 4,138
Device and accessory inventory 1,003 1,064
Prepaid expenses and other current assets 575 601
----------------------------------------- --- ---
Total current assets 14,253 14,117
Property, plant and equipment, net 19,925 19,209
Goodwill 6,586 6,579
FCC licenses and other 41,309 40,585
Definite-lived intangible assets, net 2,465 3,320
Other assets 921 1,313
------------ --- -----
Total assets $85,459 $85,123
------------ ------- -------
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $3,409 $3,281
Accrued expenses and other current liabilities 3,962 4,141
Current portion of long-term debt, financing and capital lease obligations 3,429 5,036
-------------------------------------------------------------------------- ----- -----
Total current liabilities 10,800 12,458
Long-term debt, financing and capital lease obligations 37,463 35,878
Deferred tax liabilities 7,294 14,416
Other liabilities 3,483 3,563
Total liabilities 59,040 66,315
----------------- ------ ------
Stockholders' equity
Common stock 40 40
Paid-in capital 27,884 27,756
Accumulated deficit (1,332) (8,584)
Accumulated other comprehensive loss (236) (404)
Total stockholders' equity 26,356 18,808
-------------------------- ------ ------
Noncontrolling interests 63 -
Total equity 26,419 18,808
------------ ------ ------
Total liabilities and equity $85,459 $85,123
---------------------------- ------- -------
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
3/31/18 3/31/17
------- -------
Total debt $40,892 $40,914
Less: Cash and cash equivalents (6,610) (2,870)
Less: Short-term investments (2,354) (5,444)
Net debt* $31,928 $32,600
-------- ------- -------
SCHEDULE OF DEBT (Unaudited)
(Millions)
3/31/18
-------
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
7.625% Senior notes due 2026 03/01/2026 1,500
Sprint Corporation 12,000
------------------ ------
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 3,063
4.738% Senior secured notes
due 2025 03/20/2025 2,100
5.152% Senior secured notes
due 2028 03/20/2028 1,837
Sprint Spectrum Co LLC,
Sprint Spectrum Co II LLC,
and Sprint Spectrum Co III
LLC 7,000
--------------------------- -----
Sprint Communications, Inc.
Export Development Canada
secured loan 12/17/2019 300
9% Guaranteed notes due 2018 11/15/2018 1,753
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. 8,033
--------------------------- -----
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
-------------------------- -----
Credit facilities
PRWireless secured term loan 06/28/2020 182
Secured equipment credit
facilities 2020 - 2021 527
Secured term loan 02/03/2024 3,960
----------------- ----------
Credit facilities 4,669
----------------- -----
Accounts receivable facility 11/18/2019 2,411
Financing obligations 08/31/2021 150
Capital leases and other
obligations 2018 - 2026 536
Total principal 41,003
--------------- ------
Net premiums and debt
financing costs (111)
Total debt $40,892
---------- -------
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 equipment sales
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 revenue
from equipment sales at the point
of sale and the cost of the device
is recognized as cost of equipment
sales. During the three and twelve-
month periods ended March 31, 2018,
we leased devices through our
Sprint direct channels totaling
approximately $1,213 million and
$4,884 million, respectively, which
would have increased cost of
equipment sales 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 fourth and first quarters
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 third
quarter of fiscal year 2016, 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.
(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
fourth quarter of fiscal year 2016,
we terminated our relationship with
Radio Shack and incurred net
contract termination charges of
approximately $27 million primarily
related to cash termination
payments and write-downs of
leasehold improvements at
associated retail stores that were
shut down as of March 31, 2017.
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 fourth, third and first
quarters of fiscal year 2017,
litigation and other contingencies
consist of reductions associated
with legal settlements or favorable
developments in pending legal
proceedings as well as non-
recurring charges of $51 million
related to a regulatory fee matter.
During the fourth and second
quarters 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 fourth, third and second
quarters of fiscal year 2017 we
recorded estimated hurricane-
related charges of $7 million, $66
million and $34 million,
respectively, 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 $85
million and $360 million for the
three and twelve-month periods
ended March 31, 2017, 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 equipment rentals, 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 equipment rentals, 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 equipment rentals 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 equipment rentals, 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 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 and short-term investments. 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, and, when filed, its Annual Report on Form 10-K for the fiscal year ended March 31, 2018. 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 54.6 million connections as of March 31, 2018 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. Today, Sprint's legacy of innovation and service continues with an increased investment to dramatically improve coverage, reliability, and speed across its nationwide network and commitment to launching the first 5G mobile network in the U.S. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.
CONTACT: Media contact: Dave Tovar, David.Tovar@sprint.com, or Investor contact: Jud Henry, Investor.Relations@sprint.com
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SOURCE Sprint
