Sprint Reports Fiscal Year 2018 Fourth Quarter And Full Year Results
OVERLAND PARK, Kan., May 7, 2019 /PRNewswire/ --
-- Fiscal year 2018 wireless service revenue stabilized year-over-year,
excluding the impact of the new revenue recognition standard
-- Fiscal fourth quarter wireless service revenue grew 1 percent
year-over-year
-- Fiscal year 2018 net loss of $1.9 billion and operating income of $398
million both include a preliminary non-cash charge of $2 billion;
Adjusted EBITDA* of $12.8 billion
-- Fiscal fourth quarter net loss of $2.2 billion, operating loss of
$1.7 billion, and adjusted EBITDA* of $3.1 billion
-- Fiscal year 2018 postpaid net additions of 710,000 improved by 286,000
year-over-year
-- Data device net additions of 872,000 were partially offset by phone
net losses of 162,000
-- Fiscal fourth quarter postpaid net additions of 169,000 driven by
data device net additions of 358,000 and phone net losses of 189,000
-- Continued progress on Next-Gen Network deployment
-- Mobile 5G network to launch in select cities in the coming weeks
-- Strong momentum on digitalization initiatives
-- Postpaid gross additions in digital channels increased approximately
60 percent year-over-year in both the fourth quarter and for the
full year
Sprint Corporation (NYSE: S) today reported results for the fiscal year 2018 fourth quarter and full year, including a stabilization of wireless service revenue and continued growth in postpaid net additions. The company reported a net loss of $1.9 billion and operating income of $398 million, both of which included a preliminary non-cash charge of $2 billion, along with adjusted EBITDA* of $12.8 billion in fiscal year 2018.
"Sprint delivered on its plan for fiscal 2018, as we met all of our financial guidance for the year," said Sprint CEO Michel Combes. "While we've made progress, there are certainly continued challenges to address, which will continue to put pressure on our service revenue and retail customer growth."
Wireless Service Revenue Stabilized and Cost Reduction Targets Achieved
Sprint has focused on growing revenue per customer with additional devices and value-added services. This strategy produced 710,000 postpaid net additions for the year, an improvement of 286,000 year-over-year that was driven by growth in data devices, which offset losses in postpaid phone customers. This growth, along with a slowing decline in postpaid ARPU, contributed to the stabilization of wireless service revenue at $22.5 billion for the year, excluding the impact of the new revenue recognition standard.
Sprint achieved both its gross and net cost reduction targets in fiscal year 2018. Excluding the impact of the new revenue recognition standard and approximately $350 million of merger-related costs, the company delivered approximately $1.2 billion of combined year-over-year gross reductions in cost of services and selling, general and administrative (SG&A) expenses during fiscal year 2018 and approximately $330 million of net reductions after reinvestments in network and other operational initiatives. While the company continues to look for opportunities to improve operational and cost efficiencies in fiscal 2019, these improvements are expected to be fully offset by incremental costs associated with network and customer experience initiatives.
Net loss of $1.9 billion for the year compared to net income of $7.4 billion in the prior year, as fiscal year 2018 included a preliminary non-cash goodwill impairment charge of $2 billion and fiscal year 2017 results included a $7.1 billion non-cash benefit from tax reform.
The new revenue recognition standard had a positive impact on reported net income of $146 million and $678 million in the fiscal year 2018 fourth quarter and full year, respectively. The new standard also had a positive impact on reported operating income and adjusted EBITDA* of $185 million and $858 million in the fiscal year 2018 fourth quarter and full year, respectively.
(Millions,
except per
share data)
Fiscal 4Q18
Fiscal 4Q17 Change Fiscal 2018 Fiscal 2017 Change
---
Net (loss)
income
attributable
to Sprint ($2,174) $69 ($2,243) ($1,943) $7,389 ($9,332)
---
Basic (loss)
income per
share ($0.53) $0.02 ($0.55) ($0.48) $1.85 ($2.33)
---
Operating
(loss) income ($1,674) $236 ($1,910) $398 $2,727 ($2,329)
---
Adjusted
EBITDA* $3,136 $2,768 $368 $12,773 $11,069 $1,704
---
Net cash
provided by
operating
activities $2,847 $2,653 $194 $10,429 $10,062 $367
---
Adjusted free
cash flow* ($539) ($240) ($299) ($914) $945 ($1,859)
---
Network Deployment Continues with Mobile 5G Launch Coming Soon
Sprint made continued progress in the quarter on executing its Next-Gen Network plan.
-- Sprint now has 2.5 GHz spectrum deployed on approximately 80 percent of
its macro sites.
-- Sprint currently has approximately 30,000 outdoor small cells deployed
including both mini macros and strand mounts.
-- Sprint has deployed approximately 1,500 Massive MIMO radios, which
increase the speed and capacity of the LTE network and, with a software
upgrade, will provide mobile 5G service in select cities in the coming
weeks.
Standards-based 5G is currently on-air in select locations, with commercial service expected to launch in the coming weeks. Chicago, Atlanta, Dallas and Kansas City are expected to be among the first cities to offer commercial 5G service; with Houston, Los Angeles, New York City, Phoenix and Washington D.C. slated to launch by the end of June. The total initial 5G coverage footprint across all nine cities is expected to be more than 1,000 square miles. The company has also announced standards-based 5G devices from LG, HTC, and Samsung that will be available soon.
Building a Digital Disruptor
Sprint continued to leverage digital capabilities to transform the way it engages with customers.
-- Postpaid gross additions in digital channels increased approximately 60
percent year-over-year in both the fiscal fourth quarter and for the
full fiscal year. Additionally, the company exited the year with nearly
20 percent of postpaid upgrades occurring in a digital channel.
-- Approximately 30 percent of all Sprint customer care chats are now
performed by virtual agents using artificial intelligence.
-- Web conversions improved while online media spend and cost per click
were down year-over-year.
Conference Call and Webcast
-- Date/Time: 4:30 p.m. (ET) Tuesday, May 7, 2019
-- Call-in Information
-- U.S./Canada: 866-360-1063 ID: 4660559
-- International: 443-961-0242 ID: 4660559
-- Webcast available at www.sprint.com/investors
-- Additional information about results is available on our Investor
Relations website
Wireless Operating Statistics (Unaudited)
Quarter To Date
Year To Date
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Net additions (losses) (in thousands)
Postpaid(a) 169 309 39 710 424
Postpaid phone(a) (189) (26) 55 (162) 606
Prepaid (30) (173) 170 (214) 363
Wholesale and
affiliate (147) (88) (165) (419) 81
---
Total wireless net
(losses) additions (8) 48 44 77 868
---
End of period connections (in thousands)
Postpaid(a) (b) (d)
(e) 32,774 32,605 32,119 32,774 32,119
Postpaid phone(a) (b)
(d) 26,598 26,787 26,813 26,598 26,813
Prepaid(a) (b) (c) (d)
(f) (g) 8,816 8,846 8,989 8,816 8,989
Wholesale and
affiliate (c) (d) (h) 12,897 13,044 13,517 12,897 13,517
---
Total end of period
connections 54,487 54,495 54,625 54,487 54,625
---
Churn
Postpaid 1.81% 1.85% 1.78% 1.77% 1.74%
Postpaid phone 1.82% 1.84% 1.68% 1.74% 1.62%
Prepaid 4.37% 4.83% 4.30% 4.53% 4.58%
Supplemental data -connected devices
End of period connections (in thousands)
Retail postpaid 3,121 2,821 2,335 3,121 2,335
Wholesale and
affiliate 10,384 10,563 11,162 10,384 11,162
---
Total 13,505 13,384 13,497 13,505 13,497
---
ARPU(i)
Postpaid $43.25 $43.64 $44.40 $43.60 $45.70
Postpaid phone $50.18 $50.01 $50.44 $49.98 $51.98
Prepaid $33.67 $34.53 $37.15 $34.98 $37.67
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
ABPA*
Postpaid service
revenue $4,231 $4,236 $4,270 $16,910 $17,396
Add: Installment plan
and non-operating
lease billings 273 306 368 1,257 1,512
Add: Equipment rentals 1,359 1,313 1,136 5,137 4,048
---
Total for postpaid
connections $5,863 $5,855 $5,774 $23,304 $22,956
--- ---
Average postpaid
accounts (in
thousands) 11,184 11,196 11,259 11,191 11,260
Postpaid ABPA*(j) $174.75 $174.32 $171.38 $173.54 $169.99
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Postpaid phone ABPU*
Postpaid phone service
revenue $4,012 $4,014 $4,048 $16,041 $16,463
Add: Installment plan
and non-operating
lease billings 213 253 324 1,052 1,349
Add: Equipment rentals 1,354 1,307 1,126 5,112 4,003
---
Total for postpaid
phone connections $5,579 $5,574 $5,498 $22,205 $21,815
--- ---
Postpaid average phone
connections (in
thousands) 26,652 26,751 26,754 26,746 26,394
Postpaid phone ABPU*
(k) $69.79 $69.45 $68.51 $69.19 $68.88
(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)During the three-month period ended June 30, 2018, we ceased selling devices in our installment billing program under one of our brands and as a result, 45,000 subscribers were migrated back to prepaid.
(c)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 Lifeline MVNOs.
(d) As a result of our affiliate agreement with Shentel, certain subscribers have been transferred from postpaid and prepaid to affiliates. During the three-month period ended June 30, 2018, 10,000 and 4,000 subscribers were
transferred from postpaid and prepaid, respectively, to affiliates. During the three-month period ended March 31, 2018, 29,000 and 11,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates.
During the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates.
(e) During the three-month period ended June 30, 2017, 2,000 Wi-Fi connections were adjusted from the postpaid subscriber base.
(f) 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.
(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) On April 1, 2018, approximately 115,000 wholesale subscribers were removed from the subscriber base with no impact to revenue. During the three-month period ended December 31, 2018, an additional 100,000 wholesale
subscribers were removed from the subscriber base with no impact to revenue.
(i) 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.
(j) 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.
(k) 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
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Postpaid activations
(in thousands) 3,730 4,462 3,737 15,437 16,196
Postpaid activations
financed 79% 81% 84% 81% 85%
Postpaid activations -
operating leases 58% 63% 70% 62% 67%
Installment plans
Installment sales
financed $368 $357 $214 $1,193 $1,311
Installment billings $219 $251 $342 $1,087 $1,436
Installment
receivables, net $926 $894 $1,149 $926 $1,149
Equipment rentals and depreciation -equipment rentals
Equipment rentals $1,359 $1,313 $1,136 $5,137 $4,048
Depreciation -
equipment rentals $1,084 $1,137 $1,060 $4,538 $3,792
Leased device additions
Cash paid for capital
expenditures -leased
devices $1,702 $2,215 $1,928 $7,441 $7,461
Leased devices
Leased devices in
property, plant and
equipment, net $6,612 $6,683 $6,012 $6,612 $6,012
Leased device units
Leased devices in
property, plant and
equipment (units in
thousands) 15,889 15,897 14,543 15,889 14,543
Leased device and receivables financings net proceeds
Proceeds $1,783 $2,200
$ - $6,866 $2,679
Repayments (2,500) (1,900) (555) (6,670) (2,574)
Net (repayments)
proceeds of
financings related to
devices and
receivables $(717) $300 $(555) $196 $105
--- ---
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Net operating revenues
Service revenue $5,656 $5,699 $5,866 $22,857 $23,834
Equipment sales 1,426 1,589 1,081 5,606 4,524
Equipment rentals 1,359 1,313 1,136 5,137 4,048
---
Total net operating
revenues 8,441 8,601 8,083 33,600 32,406
---
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization below) 1,645 1,648 1,661 6,664 6,801
Cost of equipment
sales 1,561 1,734 1,487 6,082 6,109
Cost of equipment
rentals (exclusive
of depreciation
below) 186 182 146 643 493
Selling, general and
administrative 2,043 2,003 2,028 7,774 8,087
Depreciation -
network and other 1,113 1,088 1,015 4,245 3,976
Depreciation -
equipment rentals 1,084 1,137 1,060 4,538 3,792
Amortization 133 145 184 608 812
Goodwill impairment
(1) 2,000 2,000 -
Other, net 350 185 266 648 (391)
---
Total net operating
expenses 10,115 8,122 7,847 33,202 29,679
---
Operating (loss)
income (1,674) 479 236 398 2,727
---
Interest expense (629) (664) (576) (2,563) (2,365)
Other income
(expense), net 34 32 (9) 187 (59)
---
(Loss) income before
income taxes (2,269) (153) (349) (1,978) 303
Income tax benefit 91 8 412 35 7,074
---
Net (loss) income (2,178) (145) 63 (1,943) 7,377
Less: Net loss
attributable to
noncontrolling
interests 4 4 6 12
---
Net (loss) income
attributable to
Sprint Corporation $(2,174) $(141) $69 $(1,943) $7,389
--- ---
Basic net (loss)
income per common
share attributable
to Sprint
Corporation $(0.53) $(0.03) $0.02 $(0.48) $1.85
--- ---
Diluted net (loss)
income per common
share attributable
to Sprint
Corporation $(0.53) $(0.03) $0.02 $(0.48) $1.81
--- ---
Basic weighted
average common
shares outstanding 4,080 4,078 4,004 4,057 3,999
---
Diluted weighted
average common
shares outstanding 4,080 4,078 4,055 4,057 4,078
---
Effective tax rate 4.0% 5.2% 118.1% 1.8% -2,334.7%
---
NON-GAAP RECONCILIATION - NET (LOSS) INCOME TO ADJUSTED EBITDA* (Unaudited)
(Millions)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Net (loss) income $(2,178) $(145) $63 $(1,943) $7,377
--- ---
Income tax benefit (91) (8) (412) (35) (7,074)
---
(Loss) income before
income taxes (2,269) (153) (349) (1,978) 303
Other (income)
expense, net (34) (32) 9 (187) 59
Interest expense 629 664 576 2,563 2,365
---
Operating (loss)
income (1,674) 479 236 398 2,727
---
Depreciation -
network and other 1,113 1,088 1,015 4,245 3,976
Depreciation -
equipment rentals 1,084 1,137 1,060 4,538 3,792
Amortization 133 145 184 608 812
---
EBITDA*(2) 656 2,849 2,495 9,789 11,307
---
Loss (gain) from
asset dispositions,
exchanges, and
other, net(3) 304 105 189 477 (115)
Severance and exit
costs (4) 22 30 67 85 80
Contract
terminations costs
(benefits) (5) - 34 (5)
Merger costs (6) 130 67 346 -
Litigation expenses
and other
contingencies(7) 24 50 10 74 (305)
Goodwill impairment
(1) 2,000 2,000 -
Hurricanes (8) - 7 (32) 107
--- ---
Adjusted EBITDA*(2) $3,136 $3,101 $2,768 $12,773 $11,069
--- ---
Adjusted EBITDA
margin* 55.4% 54.4% 47.2% 55.9% 46.4%
Selected items:
Cash paid for
capital
expenditures -
network and other $1,149 $1,416 $780 $4,963 $3,319
Cash paid for
capital
expenditures -
leased devices $1,702 $2,215 $1,928 $7,441 $7,461
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Net operating revenues
Service revenue
Postpaid $4,231 $4,236 $4,270 $16,910 $17,396
Prepaid 886 924 989 3,746 3,971
Wholesale, affiliate
and other 292 289 314 1,160 1,198
---
Total service revenue 5,409 5,449 5,573 21,816 22,565
Equipment sales 1,426 1,589 1,081 5,606 4,524
Equipment rentals 1,359 1,313 1,136 5,137 4,048
Total net operating
revenues 8,194 8,351 7,790 32,559 31,137
---
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization below) 1,462 1,439 1,401 5,796 5,701
Cost of equipment
sales 1,561 1,734 1,487 6,082 6,109
Cost of equipment
rentals (exclusive of
depreciation below) 186 182 146 643 493
Selling, general and
administrative 1,854 1,885 1,947 7,192 7,782
Depreciation -network
and other 1,064 1,035 968 4,039 3,768
Depreciation -
equipment rentals 1,084 1,137 1,060 4,538 3,792
Amortization 133 145 184 608 812
Other, net 349 185 258 629 (35)
---
Total net operating
expenses 7,693 7,742 7,451 29,527 28,422
---
Operating income $501 $609 $339 $3,032 $2,715
--- ---
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Operating income $501 $609 $339 $3,032 $2,715
Loss (gain) from asset
dispositions,
exchanges, and other,
net(3) 304 105 189 477 (115)
Severance and exit
costs (4) 21 30 59 66 58
Contract terminations
costs (benefits) (5) - 34 (5)
Litigation expenses
and other
contingencies (7) 24 50 10 74 73
Hurricanes (8) - 7 (32) 107
Depreciation -network
and other 1,064 1,035 968 4,039 3,768
Depreciation -
equipment rentals 1,084 1,137 1,060 4,538 3,792
Amortization 133 145 184 608 812
Adjusted EBITDA*(2) $3,131 $3,111 $2,816 $12,836 $11,205
--- ---
Adjusted EBITDA
margin* 57.9% 57.1% 50.5% 58.8% 49.7%
Selected items:
Cash paid for capital
expenditures -
network and other $973 $1,242 $681 $4,335 $2,760
Cash paid for capital
expenditures -leased
devices $1,702 $2,215 $1,928 $7,441 $7,461
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Net operating
revenues $314 $316 $344 $1,296 $1,579
--- ---
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization below) 255 280 316 1,141 1,427
Selling, general and
administrative 50 52 76 224 270
Depreciation and
amortization 46 51 50 197 205
Other, net 1 9 19 (300)
---
Total net operating
expenses 352 383 451 1,581 1,602
---
Operating loss $(38) $(67) $(107) $(285) $(23)
--- ---
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Operating loss $(38) $(67) $(107) $(285) $(23)
Loss from asset
dispositions,
exchanges, and
other, net(3) - 1 1
Severance and exit
costs (4) 1 8 19 22
Litigation expenses
and other
contingencies (7) - (323)
Depreciation and
amortization 46 51 50 197 205
---
Adjusted EBITDA* $9 $(16) $(48) $(69) $(118)
--- ---
Adjusted EBITDA
margin* 2.9% -5.1% -14.0% -5.3% -7.5%
Selected items:
Cash paid for
capital
expenditures -
network and other $72 $64 $34 $242 $166
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
Year To Date
3/31/19
3/31/18
Operating activities
Net (loss) income $(1,943) $7,377
Goodwill impairment (1) 2,000
Depreciation and amortization 9,391 8,580
Provision for losses on accounts receivable 394 362
Share-based and long-term incentive compensation expense 132 182
Deferred income tax benefit (85) (7,119)
Gains from asset dispositions and exchanges (479)
Loss on early extinguishment of debt 65
Amortization of long-term debt premiums, net (112) (158)
Loss on disposal of property, plant and equipment 1,135 868
Litigation and other contingencies 74 (13)
Deferred purchase price from sale of receivables (223) (1,140)
Other changes in assets and liabilities:
Accounts and notes receivable (150) 83
Inventories and other current assets 279 745
Accounts payable and other current liabilities (142) 17
Non-current assets and liabilities, net (728) 271
Other, net 407 421
Net cash provided by operating activities 10,429 10,062
---
Investing activities
Capital expenditures - network and other (4,963) (3,319)
Capital expenditures - leased devices (7,441) (7,461)
Expenditures relating to FCC licenses (163) (115)
Change in short-term investments, net 2,032 3,090
Proceeds from sales of assets and FCC licenses 591 527
Proceeds from deferred purchase price from sale of
receivables 223 1,140
Proceeds from corporate owned life insurance policies 110 2
Other, net 69 1
Net cash used in investing activities (9,542) (6,135)
---
Financing activities
Proceeds from debt and financings 9,307 8,529
Repayments of debt, financing and capital lease
obligations (9,764) (8,518)
Debt financing costs (321) (93)
Call premiums paid on debt redemptions (131)
Proceeds from issuance of common stock, net 291 21
Other, net 4 (18)
Net cash used in financing activities (483) (210)
---
Net increase in cash, cash equivalents and restricted cash 404 3,717
Cash, cash equivalents and restricted cash, beginning of
period 6,659 2,942
---
Cash, cash equivalents and restricted cash, end of period $7,063 $6,659
---
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
Quarter To Date
Year To Date
---
3/31/19
12/31/18
3/31/18
3/31/19
3/31/18
---
Net cash provided by
operating activities $2,847 $2,225 $2,653 $10,429 $10,062
Capital expenditures -
network and other (1,149) (1,416) (780) (4,963) (3,319)
Capital expenditures -
leased devices (1,702) (2,215) (1,928) (7,441) (7,461)
Expenditures relating
to FCC licenses, net (18) (75) (23) (163) (115)
Proceeds from sales of
assets and FCC
licenses 175 144 160 591 527
Proceeds from deferred
purchase price from
sale of receivables - 231 223 1,140
Other investing
activities, net 25 129 2 214 6
Free cash flow* $178 $(1,208) $315 $(1,110) $840
--- ---
Net (repayments)
proceeds of
financings related to
devices and
receivables (717) 300 (555) 196 105
Adjusted free cash
flow* $(539) $(908) $(240) $(914) $945
--- ---
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
3/31/19
3/31/18
ASSETS
Current assets
Cash and cash equivalents $6,982 $6,610
Short-term investments 67 2,354
Accounts and notes receivable, net 3,554 3,711
Device and accessory inventory 999 1,003
Prepaid expenses and other current
assets 1,289 575
---
Total current assets 12,891 14,253
Property, plant and equipment, net 21,201 19,925
Costs to acquire a customer contract 1,559
Goodwill 4,598 6,586
FCC licenses and other 41,465 41,309
Definite-lived intangible assets,
net 1,769 2,465
Other assets 1,118 921
---
Total assets $84,601 $85,459
---
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $3,961 $3,409
Accrued expenses and other current
liabilities 3,597 3,962
Current portion of long-term debt,
financing and capital lease
obligations 4,557 3,429
---
Total current liabilities 12,115 10,800
Long-term debt, financing and
capital lease obligations 35,366 37,463
Deferred tax liabilities 7,556 7,294
Other liabilities 3,437 3,483
Total liabilities 58,474 59,040
---
Stockholders' equity
Common stock 41 40
Paid-in capital 28,306 27,884
Accumulated deficit (1,883) (1,255)
Accumulated other comprehensive loss (392) (313)
Total stockholders' equity 26,072 26,356
---
Noncontrolling interests 55 63
Total equity 26,127 26,419
---
Total liabilities and equity $84,601 $85,459
---
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
3/31/19
3/31/18
Total debt $39,923 $40,892
Less: Cash and cash equivalents (6,982) (6,610)
Less: Short-term investments (67) (2,354)
Net debt* $32,874 $31,928
---
SCHEDULE OF DEBT (Unaudited)
(Millions)
3/31/19
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 2,187
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 6,125
---
Sprint Communications, Inc.
Export Development Canada secured loan
12/17/2019 300
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
6% Senior notes due 2022
11/15/2022 2,280
Sprint Communications, Inc. 6,080
---
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
---
Credit facilities
PRWireless secured term loan
06/28/2020 198
Secured equipment credit facilities
2020 - 2022 661
Secured term loan
02/03/2024 3,920
Secured term loan B1
02/03/2024 1,995
---
Credit facilities 6,774
---
Accounts receivable facility 2020 2,607
Financing obligations 2021 109
Capital leases and other obligations
2019 - 2026 429
Total principal 40,328
---
Net premiums and debt financing costs (405)
Total debt $39,923
---
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 March 31, 2019
Year Ended March 31, 2019
---
As reported
Balances
Change
As reported
Balances
Change
without adoption without adoption
of Topic 606 of Topic 606
---
Net operating revenues
Service revenue $5,656 $5,869 $(213) $22,857 $23,585 $(728)
Equipment sales 1,426 1,057 369 5,606 4,280 1,326
Equipment rentals 1,359 1,373 (14) 5,137 5,200 (63)
---
Total net operating
revenues 8,441 8,299 142 33,600 33,065 535
---
Net operating expenses
Cost of services
(exclusive of
depreciation and
amortization below) 1,645 1,669 (24) 6,664 6,742 (78)
Cost of equipment
sales 1,561 1,506 55 6,082 5,937 145
Cost of equipment
rentals (exclusive
of depreciation
below) 186 186 643 643 -
Selling, general and
administrative 2,043 2,117 (74) 7,774 8,164 (390)
Depreciation -
network and other 1,113 1,113 4,245 4,245 -
Depreciation -
equipment rentals 1,084 1,084 4,538 4,538 -
Amortization 133 133 608 608 -
Goodwill impairment
(1) 2,000 2,000 2,000 2,000 -
Other, net 350 350 648 648 -
---
Total net operating
expenses 10,115 10,158 (43) 33,202 33,525 (323)
---
Operating (loss)
income (1,674) (1,859) 185 398 (460) 858
---
Total other expenses (595) (595) (2,376) (2,376) -
---
Loss before income
taxes (2,269) (2,454) 185 (1,978) (2,836) 858
Income tax benefit 91 130 (39) 35 215 (180)
---
Net loss (2,178) (2,324) 146 (1,943) (2,621) 678
---
Less: Net loss
attributable to
noncontrolling
interests 4 4 -
---
Net loss
attributable to
Sprint Corporation $(2,174) $(2,320) $146 $(1,943) $(2,621) $678
--- ---
Basic net loss per
common share
attributable to
Sprint Corporation $(0.53) $(0.57) $0.04 $(0.48) $(0.65) $0.17
--- ---
Diluted net loss per
common share
attributable to
Sprint Corporation $(0.53) $(0.57) $0.04 $(0.48) $(0.65) $0.17
--- ---
Basic weighted
average common
shares outstanding 4,080 4,080 4,057 4,057 -
---
Diluted weighted
average common
shares outstanding 4,080 4,080 4,057 4,057 -
---
RECONCILIATION OF ADJUSTMENTS FROM THE ADOPTION OF TOPIC 606 RELATIVE TO TOPIC 605 ON CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
March 31, 2019
As reported
Balances
Change
without adoption
of Topic 606
---
ASSETS
Current assets
Accounts and notes receivable,
net $3,554 $3,443 $111
Device and accessory inventory 999 1,020 (21)
Prepaid expenses and other
current assets 1,289 651 638
Costs to acquire a customer
contract 1,559 1,559
Other assets 1,118 916 202
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses and other
current liabilities $3,597 $3,610 $(13)
Deferred tax liabilities 7,556 7,010 546
Other liabilities 3,437 3,466 (29)
Stockholders' equity
Accumulated deficit (1,883) (3,868) 1,985
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1) As a result of our annual goodwill
impairment assessment, we recorded a
preliminary non-cash goodwill
impairment charge of $2 billion during
the fourth quarter of fiscal year
2018. The substantial portion of this
impairment charge is not taxable as
goodwill is generally not separately
deductible for tax purposes.
(2) 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
subsidy model, we recognize revenue
from the sale of devices as 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, 2019, we leased devices
through our Sprint direct channels
totaling approximately $1,114 million
and $4,931 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 in our indirect
channels from the time value of money
element related to the imputed
interest on the installment
receivable.
(3) During the fourth, third and second
quarters of fiscal year 2018 and 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, during the first quarter
of fiscal year 2017 the company
recorded a pre-tax non-cash gain
related to spectrum swaps with other
carriers.
(4) For all quarters of fiscal year 2018
and the fourth and third quarters 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.
(5) 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).
(6) During the fourth, third, second and
first quarters of fiscal year 2018, we
recorded merger costs of $130 million,
$67 million, $56 million and $93
million, respectively, due to the
proposed Business Combination
Agreement with T-Mobile.
(7) During the fourth quarter of fiscal
year 2018, litigation expenses and
other contingencies consist of
unfavorable developments associated
with legal matters. During the third
quarter of fiscal year 2018,
litigation expenses and other
contingencies consist of tax matters
settled with the State of New York.
During the fourth, third and first
quarters of fiscal year 2017,
litigation expenses and other
contingencies consist of reductions
associated with legal settlements or
favorable developments in pending
legal proceedings. In addition, the
third quarter of fiscal year 2017
included non-recurring charges of $51
million related to a regulatory fee
matter.
(8) During the second quarter of fiscal
year 2018 we recognized hurricane-
related reimbursements of $32 million.
During the fourth, third and second
quarters of fiscal year 2017 we
recorded hurricane-related costs of
$7 million, $66 million and $34
million, respectively, consisting of
customer service credits, 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, subscriber 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 such as 5G; efficiencies and cost savings of new technologies and services; customer and network usage; subscriber additions and churn rates; service, speed, capacity, coverage and quality; availability of devices; availability of various financings; and 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, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 and, when filed, our Annual Report on Form 10-K for the fiscal year ended March 31, 2019. 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 54.5 million connections as of March 31, 2019 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
