Sprint Reports Inflection In Wireless Service Revenue With Fiscal Year 2018 First Quarter Results
OVERLAND PARK, Kan., Aug 1, 2018 /PRNewswire/ --
-- Wireless service revenue grew sequentially for the first time in more
than four years, excluding the impact of the new revenue recognition
standard
-- Postpaid ARPU grew sequentially for the first time in nearly five
years
-- Net income of $176 million, operating income of $815 million, and
adjusted EBITDA* of $3.3 billion
-- Third consecutive quarter of net income
-- 10(th) consecutive quarter of operating income
-- Highest adjusted EBITDA* in more than 11 years
-- Net cash provided by operating activities of $2.4 billion and adjusted
free cash flow* of $8 million
-- Positive adjusted free cash flow* in five of the last six quarters
-- Retail phone net additions for the sixth consecutive quarter
-- Postpaid phone net additions of 87,000 were the 12(th) consecutive
quarter of postpaid phone net additions
-- Seven consecutive quarters of postpaid phone net additions in the
business market
-- Prepaid net additions for the sixth consecutive quarter, including
the lowest prepaid churn in more than three years
Sprint Corporation (NYSE: S) today reported an inflection in wireless service revenue and the sixth consecutive quarter of retail phone net additions as part of results for the first quarter of fiscal year 2018.
"Sprint continued to deliver solid results this quarter while embarking on our transformative merger with T-Mobile," said Sprint CEO Michel Combes, "By balancing growth and profitability, we were able to grow wireless service revenue sequentially, continue to add retail phone customers, generate net income for the third consecutive quarter, and improve the network."
Wireless Service Revenue Returns to Sequential Growth
Sprint reported sequential growth in wireless service revenue for the first time in more than four years, when excluding the impact of the new revenue recognition standard, as postpaid and prepaid ARPU grew sequentially. The company continues to expect year-over-year growth in wireless service revenue to occur by the end of fiscal year 2018, excluding the impact of the new revenue recognition standard.
Several other revenue metrics showed improvement in the quarter, excluding the impact of the new revenue recognition standard.
-- Postpaid ARPU grew sequentially for the first time in nearly five years.
-- Postpaid service revenue grew sequentially for first time in more than
four years.
-- Prepaid service revenue grew both sequentially and year-over-year.
Continued Focus on Profitability
Sprint reported its third consecutive quarter of net income, its 10(th) consecutive quarter of operating income, and its highest adjusted EBITDA* in more than 11 years, all excluding the positive impact of the new revenue recognition standard. The new revenue recognition standard had a positive impact of $152 million on reported net income and $192 million on reported operating income and adjusted EBITDA* in the quarter.
Operating income of $815 million would have been relatively flat year-over-year when adjusting for the new revenue recognition standard and $135 million of merger and other non-recurring costs this quarter and a net benefit of $364 million from non-recurring items in the year ago period. Similarly, net income of $176 million would also have been relatively flat year-over-year when adjusting for the aforementioned items on a tax-adjusted basis.
(Millions, except
per share data) Fiscal 1Q18 Fiscal 1Q17 Change
----------------- ----------- ----------- ------
Net income $176 $206 ($30)
---------- ---- ---- ----
Basic income per
share $0.04 $0.05 ($0.01)
---------------- ----- ----- ------
Operating income $815 $1,163 ($348)
---------------- ---- ------ -----
Adjusted EBITDA* $3,280 $2,853 $427
--------------- ------ ------ ----
Net cash provided
by operating
activities $2,430 $1,924 $506
----------------- ------ ------ ----
Adjusted free
cash flow* $8 $368 ($360)
------------- --- ---- -----
Sprint Continues to Add Retail Phone Customers and Launches New Unlimited Plans
Sprint's focus on both its postpaid and prepaid businesses resulted in the sixth consecutive quarter of retail phone net additions.
-- Postpaid phone net additions of 87,000 marked the 12(th) consecutive
quarter of net additions, including net additions in the business market
for the seventh consecutive quarter.
-- Prepaid net additions of 3,000 were the sixth consecutive quarter of net
additions, as continued strength in Boost Mobile was partially offset by
losses in other brands. Prepaid churn was the lowest in more than three
years and Boost Mobile gross additions grew year-over-year for the
fourth consecutive quarter.
Sprint recently introduced several new plans that offer more choice and features for an incredible value. The new Unlimited Plus, Unlimited Basic, Unlimited Military, and Unlimited 55+ plans are available to new and existing customers and are just the beginning of "Unlimited for All," the company's initiative to tailor plans so customers can get the best choice for them.
Driving Growth in Digital
Sprint also plans to offer the best digital customer experience, including leveraging artificial intelligence to improve customer care interactions, utilizing deep dive analytics to identify customer issues, and boosting the mix of sales in digital channels. Postpaid phone gross additions in digital channels grew more than 50 percent year-over-year in the quarter and the mix of gross additions in digital channels was also up year-over-year.
Network Built for Unlimited Keeps Getting Better
With more than 200 MHz of sub-6 GHz spectrum, Sprint has the Network Built for Unlimited and made continued progress on executing its Next-Gen Network plan in the quarter.
-- Completed thousands of tri-band upgrades and now has 2.5 GHz spectrum
deployed on nearly two-thirds of its macro sites.
-- Added thousands of new outdoor small cells and currently has more than
15,000 deployed including both mini-macros and strand mounts.
-- Distributed more than 65,000 Sprint Magic Boxes, bringing the total to
more than 260,000 nationwide.
These deployments are contributing to Sprint providing customers with a better network experience. In fact, Sprint is the most improved network according to Ookla as shown in Speedtest Intelligence data(1), and PCMag's 2018 Fastest Mobile Networks. In both, the company's year-over-year increase in national average download speeds outpaced the competitors, including an 87 percent lift reported in PCMag's annual tests.
Sprint's deployment of Massive MIMO radios, a key technology for 5G, is underway and the company continues to expect to launch the first mobile 5G network in the U.S. in the first half of 2019.
Fiscal Year 2018 Outlook
-- The company is increasing adjusted EBITDA* expectations on a reported
basis to a range of $12.0 billion to $12.5 billion, as impacts of the
new revenue recognition standard were higher than preliminary estimates.
The previous expectation was $11.6 billion to $12.1 billion.
-- Excluding the impact of the new revenue recognition standard, the
company continues to expect adjusted EBITDA* to be $11.3 billion to
$11.8 billion.
-- The company continues to expect cash capital expenditures excluding
leased devices to be $5 billion to $6 billion.
Conference Call and Webcast
-- Date/Time: 8:30 a.m. (ET) Wednesday, August 1, 2018
-- Call-in Information
-- U.S./Canada: 866-360-1063 (ID: 9665377)
-- International: 443-961-0242 (ID: 9665377)
-- Webcast available at www.sprint.com/investors
-- Additional information about results is available on our Investor
Relations website
____________________________________
(1) http://www.speedtest.net/reports/united-states/
Wireless Operating Statistics (Unaudited)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Net additions (losses) (in thousands)
Postpaid(a) 123 39 (39)
Postpaid phone (a) 87 55 88
Prepaid(b) 3 170 35
Wholesale and
affiliate(b) (69) (165) 65
------------- --- ---- ---
Total wireless net
additions 57 44 61
------------------ --- --- ---
End of period connections (in thousands)
Postpaid(a) (c) (d) 32,187 32,119 31,518
Postpaid phone(a) (c) 26,847 26,813 26,153
Prepaid(a) (b) (c) 9,033 8,989 8,719
Wholesale and
affiliate (b) (c) (e) 13,347 13,517 13,461
---------------------- ------ ------ ------
Total end of period
connections 54,567 54,625 53,698
------------------- ------ ------ ------
Churn
Postpaid 1.63% 1.78% 1.65%
Postpaid phone 1.55% 1.68% 1.50%
Prepaid 4.17% 4.30% 4.57%
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid 2,429 2,335 2,091
Wholesale and
affiliate 10,963 11,162 11,100
------------- ------ ------ ------
Total 13,392 13,497 13,191
----- ------ ------ ------
ARPU(f)
Postpaid $43.55 $44.40 $47.30
Postpaid phone $49.57 $50.44 $53.92
Prepaid $36.27 $37.15 $38.24
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
ABPA*
Postpaid service
revenue $4,188 $4,270 $4,466
Add: Installment plan
and non-operating
lease billings 352 368 368
Add: Equipment rentals 1,212 1,136 899
---------------------- ----- ----- ---
Total for postpaid
connections $5,752 $5,774 $5,733
------------------ ------ ------ ------
Average postpaid
accounts (in
thousands) 11,176 11,259 11,312
Postpaid ABPA*(g) $171.57 $171.38 $168.95
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Postpaid phone ABPU*
Postpaid phone service
revenue $3,977 $4,048 $4,214
Add: Installment plan
and non-operating
lease billings 307 324 332
Add: Equipment rentals 1,204 1,126 887
---------------------- ----- ----- ---
Total for postpaid
phone connections $5,488 $5,498 $5,433
------------------ ------ ------ ------
Postpaid average phone
connections (in
thousands) 26,745 26,754 26,052
Postpaid phone ABPU*
(h) $68.41 $68.51 $69.51
Error occurred while generating ASCII Content for table
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant and equipment)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Postpaid activations (in
thousands) 3,473 3,737 3,668
Postpaid activations
financed 83% 84% 85%
Postpaid activations -
operating leases 70% 70% 55%
Installment plans
Installment sales financed $213 $214 $553
Installment billings $325 $342 $368
Installment receivables,
net $983 $1,149 $1,792
Equipment rentals and
depreciation -equipment
rentals
Equipment rentals $1,212 $1,136 $899
Depreciation -equipment
rentals $1,136 $1,060 $854
Leased device additions
Cash paid for capital
expenditures -leased
devices $1,817 $1,928 $1,359
Leased devices
Leased devices in property,
plant and equipment, net $6,213 $6,012 $4,336
Leased device units
Leased devices in property,
plant and equipment (units
in thousands) 15,169 14,543 12,223
Leased device and
receivables financings net
proceeds
Proceeds $1,356 $ - $765
Repayments (1,070) (555) (273)
---------- ------ ---- ----
Net proceeds (repayments)
of financings related to
devices and receivables $286 $(555) $492
------------------------- ---- ----- ----
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Net operating revenues
Service revenue $5,740 $5,866 $6,071
Equipment sales 1,173 1,081 1,187
Equipment rentals 1,212 1,136 899
----------------- ----- ----- ---
Total net operating revenues 8,125 8,083 8,157
---------------------------- ----- ----- -----
Net operating expenses
Cost of services (exclusive of depreciation and
amortization below) 1,677 1,661 1,709
Cost of equipment sales 1,270 1,487 1,545
Cost of equipment rentals (exclusive of depreciation
below) 124 146 112
Selling, general and administrative 1,867 2,028 1,938
Depreciation - network and other 1,023 1,015 977
Depreciation - equipment rentals 1,136 1,060 854
Amortization 171 184 223
Other, net 42 266 (364)
---------- --- --- ----
Total net operating expenses 7,310 7,847 6,994
---------------------------- ----- ----- -----
Operating income 815 236 1,163
---------------- --- --- -----
Interest expense (637) (576) (613)
Other income (expense), net 42 (9) (52)
--------------------------- --- --- ---
Income (loss) before income taxes 220 (349) 498
Income tax (expense) benefit (47) 412 (292)
---------------------------- --- --- ----
Net income 173 63 206
---------- --- --- ---
Less: Net loss attributable to noncontrolling interests 3 6 -
------------------------------------------------------- --- --- ---
Net income attributable to Sprint Corporation $176 $69 $206
--------------------------------------------- ---- --- ----
Basic net income per common share $0.04 $0.02 $0.05
--------------------------------- ----- ----- -----
Diluted net income per common share $0.04 $0.02 $0.05
----------------------------------- ----- ----- -----
Weighted average common shares outstanding 4,010 4,004 3,993
------------------------------------------ ----- ----- -----
Diluted weighted average common shares outstanding 4,061 4,055 4,076
-------------------------------------------------- ----- ----- -----
Effective tax rate 21.4% 118.1% 58.6%
------------------ ---- ----- ----
NON-GAAP RECONCILIATION - NET INCOME TO ADJUSTED EBITDA* (Unaudited)
(Millions)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Net income $173 $63 $206
---------- ---- --- ----
Income tax expense (benefit) 47 (412) 292
--------------------------- --- ---- ---
Income (loss) before income taxes 220 (349) 498
Other (income) expense, net (42) 9 52
Interest expense 637 576 613
---------------- --- --- ---
Operating income 815 236 1,163
---------------- --- --- -----
Depreciation - network and other 1,023 1,015 977
Depreciation - equipment rentals 1,136 1,060 854
Amortization 171 184 223
------------
EBITDA*(1) 3,145 2,495 3,217
--------- ----- ----- -----
Loss (gain) from asset dispositions, exchanges, and
other, net(2) - 189 (304)
Severance and exit costs (3) 8 67 -
Contract terminations (4) 34 - (5)
Merger costs (5) 93 - -
Litigation and other contingencies(6) - 10 (55)
Hurricanes (7) - 7 -
------------- --- --- ---
Adjusted EBITDA*(1) $3,280 $2,768 $2,853
------------------ ------ ------ ------
Adjusted EBITDA margin* 57.1% 47.2% 47.0%
Selected items:
Cash paid for capital expenditures - network and other $1,132 $780 $1,151
Cash paid for capital expenditures - leased devices $1,817 $1,928 $1,359
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Net operating revenues
Service revenue
Postpaid $4,188 $4,270 $4,466
Prepaid 982 989 999
Wholesale,
affiliate and
other 290 314 259
-------------- --- --- ---
Total service
revenue 5,460 5,573 5,724
Equipment sales 1,173 1,081 1,187
Equipment rentals 1,212 1,136 899
Total net
operating
revenues 7,845 7,790 7,810
---------- ----- ----- -----
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization
below) 1,429 1,401 1,412
Cost of equipment
sales 1,270 1,487 1,545
Cost of equipment
rentals
(exclusive of
depreciation
below) 124 146 112
Selling, general
and
administrative 1,704 1,947 1,875
Depreciation -
network and other 972 968 925
Depreciation -
equipment rentals 1,136 1,060 854
Amortization 171 184 223
Other, net 37 258 (314)
----------
Total net
operating
expenses 6,843 7,451 6,632
---------- ----- ----- -----
Operating income $1,002 $339 $1,178
---------------- ------ ---- ------
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Operating income $1,002 $339 $1,178
Loss (gain) from
asset
dispositions,
exchanges, and
other, net(2) - 189 (304)
Severance and exit
costs (3) 3 59 (5)
Contract
terminations (4) 34 - (5)
Litigation and
other
contingencies (6) - 10 -
Hurricanes (7) - 7 -
Depreciation -
network and other 972 968 925
Depreciation -
equipment rentals 1,136 1,060 854
Amortization 171 184 223
Adjusted
EBITDA*(1) $3,318 $2,816 $2,866
----------- ------ ------ ------
Adjusted EBITDA
margin* 60.8% 50.5% 50.1%
Selected items:
Cash paid for
capital
expenditures -
network and other $1,019 $681 $965
Cash paid for
capital
expenditures -
leased devices $1,817 $1,928 $1,359
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Net operating revenues $338 $344 $433
---------------------- ---- ---- ----
Net operating expenses
Cost of services (exclusive
of depreciation and
amortization below) 311 316 387
Selling, general and
administrative 69 76 57
Depreciation and
amortization 49 50 51
Other, net 5 9 5
----------
Total net operating
expenses 434 451 500
------------------- --- --- ---
Operating loss $(96) $(107) $(67)
-------------- ---- ----- ----
WIRELINE NON-GAAP
RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Operating loss $(96) $(107) $(67)
Loss from asset
dispositions, exchanges,
and other, net(2) - 1 -
Severance and exit costs
(3) 5 8 5
Depreciation and
amortization 49 50 51
----------------
Adjusted EBITDA* $(42) $(48) $(11)
--------------- ---- ---- ----
Adjusted EBITDA margin* -12.4% -14.0% -2.5%
Selected items:
Cash paid for capital
expenditures -network and
other $51 $34 $62
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Operating
activities
Net income $173 $63 $206
Depreciation and
amortization 2,330 2,259 2,054
Provision for
losses on
accounts
receivable 57 50 102
Share-based and
long-term
incentive
compensation
expense 40 45 41
Deferred income
tax expense
(benefit) 39 (412) 282
Gains from asset
dispositions
and exchanges - - (479)
Loss on early
extinguishment
of debt - - 66
Amortization of
long-term debt
premiums, net (33) (33) (51)
Loss on disposal
of property,
plant and
equipment 124 335 293
Deferred
purchase price
from sale of
receivables (170) (231) (375)
Other changes in
assets and
liabilities:
Accounts and
notes
receivable 273 157 (53)
Inventories and
other current
assets 421 175 181
Accounts payable
and other
current
liabilities (766) 121 (474)
Non-current
assets and
liabilities,
net (197) 11 73
Other, net 139 113 58
Net cash
provided by
operating
activities 2,430 2,653 1,924
------------ ----- ----- -----
Investing
activities
Capital
expenditures -
network and
other (1,132) (780) (1,151)
Capital
expenditures -
leased devices (1,817) (1,928) (1,359)
Expenditures
relating to FCC
licenses (59) (23) (13)
Change in short-
term
investments,
net (1,654) (2,181) 1,095
Proceeds from
sales of assets
and FCC
licenses 133 160 101
Proceeds from
deferred
purchase price
from sale of
receivables 170 231 375
Other, net (10) 2 (1)
Net cash used in
investing
activities (4,369) (4,519) (953)
---------------- ------ ------ ----
Financing
activities
Proceeds from
debt and
financings 1,370 5,456 902
Repayments of
debt, financing
and capital
lease
obligations (1,415) (1,359) (2,121)
Debt financing
costs (248) (74) -
Call premiums
paid on debt
redemptions - (2) (129)
Other, net (2) 9 (15)
Net cash (used
in) provided by
financing
activities (295) 4,030 (1,363)
---------------- ---- ----- ------
Net (decrease)
increase in
cash, cash
equivalents and
restricted cash (2,234) 2,164 (392)
Cash, cash
equivalents and
restricted
cash, beginning
of period 6,659 4,495 2,942
---------------- ----- ----- -----
Cash, cash
equivalents and
restricted
cash, end of
period $4,425 $6,659 $2,550
---------------- ------ ------ ------
RECONCILIATION
TO CONSOLIDATED
FREE CASH FLOW*
(NON-GAAP)
(Unaudited)
(Millions)
Quarter To Date
---------------
6/30/18 3/31/18 6/30/17
------- ------- -------
Net cash
provided by
operating
activities $2,430 $2,653 $1,924
Capital
expenditures -
network and
other (1,132) (780) (1,151)
Capital
expenditures -
leased devices (1,817) (1,928) (1,359)
Expenditures
relating to FCC
licenses, net (59) (23) (13)
Proceeds from
sales of assets
and FCC
licenses 133 160 101
Proceeds from
deferred
purchase price
from sale of
receivables 170 231 375
Other investing
activities, net (3) 2 (1)
---
Free cash flow* $(278) $315 $(124)
-------------- ----- ---- -----
Net proceeds
(repayments) of
financings
related to
devices and
receivables 286 (555) 492
Adjusted free
cash flow* $8 $(240) $368
------------- --- ----- ----
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
6/30/18 3/31/18
------- -------
ASSETS
Current assets
Cash and cash equivalents $4,378 $6,610
Short-term investments 4,008 2,354
Accounts and notes receivable, net 3,492 3,711
Device and accessory inventory 622 1,003
Prepaid expenses and other current assets 895 575
----------------------------------------- --- ---
Total current assets 13,395 14,253
Property, plant and equipment, net 20,538 19,925
Costs to acquire a customer contract 1,294 -
Goodwill 6,586 6,586
FCC licenses and other 41,368 41,309
Definite-lived intangible assets, net 2,245 2,465
Other assets 1,023 921
------------ ----- ---
Total assets $86,449 $85,459
------------ ------- -------
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $3,143 $3,409
Accrued expenses and other current liabilities 3,658 3,962
Current portion of long-term debt, financing
and capital lease obligations 4,846 3,429
-------------------------------------------- ----- -----
Total current liabilities 11,647 10,800
Long-term debt, financing and capital lease
obligations 35,771 37,463
Deferred tax liabilities 7,704 7,294
Other liabilities 3,382 3,483
Total liabilities 58,504 59,040
----------------- ------ ------
Stockholders' equity
Common stock 40 40
Treasury shares, at cost (4) -
Paid-in capital 27,938 27,884
Retained earnings (accumulated deficit) 236 (1,255)
Accumulated other comprehensive loss (317) (313)
Total stockholders' equity 27,893 26,356
-------------------------- ------ ------
Noncontrolling interests 52 63
Total equity 27,945 26,419
------------ ------ ------
Total liabilities and equity $86,449 $85,459
---------------------------- ------- -------
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
6/30/18 3/31/18
------- -------
Total debt $40,617 $40,892
Less: Cash and cash equivalents (4,378) (6,610)
Less: Short-term investments (4,008) (2,354)
Net debt* $32,231 $31,928
-------- ------- -------
SCHEDULE OF DEBT (Unaudited)
(Millions)
6/30/18
-------
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 2,843
4.738% Senior secured notes
due 2025 03/20/2025 2,100
5.152% Senior secured notes
due 2028 03/20/2028 1,838
Sprint Spectrum Co LLC,
Sprint Spectrum Co II LLC,
and Sprint Spectrum Co III
LLC 6,781
--------------------------- -----
Sprint Communications, Inc.
Export Development Canada
secured loan 12/12/2019 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% 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 462
Secured term loan 02/03/2024 3,950
----------------- ----------
Credit facilities 4,594
----------------- -----
Accounts receivable facility 2020 2,697
Financing obligations 2021 139
Capital leases and other
obligations 2018 - 2026 507
Total principal 40,955
--------------- ------
Net premiums and debt
financing costs (338)
Total debt $40,617
---------- -------
RECONCILIATION OF ADJUSTMENTS FROM THE ADOPTION OF TOPIC 606 RELATIVE TO TOPIC 605 ON CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Millions, except per share data)
Three Months Ended June 30, 2018
--------------------------------
As reported Balances Change
without adoption
of Topic 606
------------
Net operating
revenues
Service revenue $5,740 $5,883 $(143)
Equipment sales 1,173 892 281
Equipment rentals 1,212 1,228 (16)
----------------- ----- ----- ---
Total net operating
revenues 8,125 8,003 122
------------------- ----- ----- ---
Net operating
expenses
Cost of services
(exclusive of
depreciation and
amortization below) 1,677 1,688 (11)
Cost of equipment
sales 1,270 1,248 22
Cost of equipment
rentals (exclusive
of depreciation
below) 124 124 -
Selling, general and
administrative 1,867 1,948 (81)
Depreciation -
network and other 1,023 1,023 -
Depreciation -
equipment rentals 1,136 1,136 -
Amortization 171 171 -
Other, net 42 42 -
---------- --- --- ---
Total net operating
expenses 7,310 7,380 (70)
------------------- ----- ----- ---
Operating income 815 623 192
---------------- --- --- ---
Total other expense (595) (595) -
------------------- ---- ---- ---
Income before income
taxes 220 28 192
Income tax expense (47) (7) (40)
------------------ --- --- ---
Net income 173 21 152
---------- --- --- ---
Less: Net loss
attributable to
noncontrolling
interests 3 3 -
---------------- --- --- ---
Net income
attributable to
Sprint Corporation $176 $24 $152
------------------- ---- --- ----
Basic net income per
common share $0.04 $0.01 $0.03
-------------------- ----- ----- -----
Diluted net income
per common share $0.04 $0.01 $0.03
------------------ ----- ----- -----
Weighted average
common shares
outstanding 4,010 4,010 -
---------------- ----- ----- ---
Diluted weighted
average common
shares outstanding 4,061 4,061 -
------------------- ----- ----- ---
RECONCILIATION OF ADJUSTMENTS FROM THE ADOPTION OF TOPIC 606 RELATIVE TO TOPIC 605 ON CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
June 30, 2018
-------------
As reported Balances Change
without adoption
of Topic 606
------------
ASSETS
Current assets
Accounts and notes receivable,
net $3,492 $3,404 $88
Device and accessory inventory 622 644 (22)
Prepaid expenses and other
current assets 895 557 338
Costs to acquire a customer
contract 1,294 - 1,294
Other assets 1,023 919 104
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accrued expenses and other
current liabilities $3,658 $3,690 $(32)
Deferred tax liabilities 7,704 7,298 406
Other liabilities 3,382 3,413 (31)
Stockholders' equity
Retained earnings (accumulated
deficit) 236 (1,223) 1,459
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-month
period ended June 30, 2018, we
leased devices through our Sprint
direct channels totaling
approximately $1,163 million,
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 in
our indirect channels 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.
(3) During the first quarter of fiscal
year 2018 and fourth quarter of
fiscal year 2017, 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 2018, contract termination
costs are primarily due to the
purchase of certain leased
spectrum assets, which upon
termination of the spectrum leases
resulted in the accelerated
recognition of the unamortized
favorable lease balances. 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).
(5) During the first quarter of fiscal
year 2018, we recorded $93 million
of merger costs due to the
proposed Business Combination
Agreement with T-Mobile.
(6) During the fourth 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. In addition,
the first quarter of fiscal year
2017 includes non-recurring
charges of $51 million related to
a regulatory fee matter.
(7) During the fourth quarter of fiscal
year 2017 we recorded estimated
hurricane-related charges of $7
million, consisting of incremental
roaming costs, network repairs and
replacements.
*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, 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 June 30, 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.
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SOURCE Sprint
