Sprint Reports Fiscal Year 2019 Third Quarter Results
OVERLAND PARK, Kan., Jan. 27, 2020 /PRNewswire/ --
-- Wireless service revenue of $5.2 billion
-- Postpaid wireless service revenue of $4.2 billion was stable
sequentially and year-over-year
-- Postpaid average revenue per account (ARPA) of $124.80 and postpaid
phone average revenue per user (ARPU) of $50.37 were stable
sequentially and year-over-year
-- Net loss of $120 million, operating income of $66 million, and adjusted
EBITDA* of $2.5 billion
-- Postpaid net additions of 494,000
-- 10(th) consecutive quarter of net additions
-- Data device net additions of 609,000 were partially offset by phone
net losses of 115,000
-- Average postpaid accounts of 11.3 million grew sequentially and
year-over-year for the third consecutive quarter
-- Digital capabilities driving higher sales, better customer experience,
and cost efficiencies
-- Postpaid gross additions in digital channels increased 80 percent
year-over-year
-- More than 25 percent of all targeted customer care web chats are
performed by virtual agents using artificial intelligence
-- Continued execution of Next-Gen Network plan
-- Second fastest network and most improved operator based on national
average download speeds
-- True Mobile 5G coverage expanded to 20 million people
Sprint Corporation (NYSE: S) today reported results for the fiscal year 2019 third quarter, including stability in postpaid wireless service revenue and continued growth in postpaid net additions. The company also reported a net loss of $120 million, operating income of $66 million, and adjusted EBITDA* of $2.5 billion.
"I continue to be impressed by the commitment of Sprint employees to deliver results during this period of uncertainty," said Sprint CEO Michel Combes. "As we await a decision in the state attorneys general lawsuit, I continue to believe the merger with T-Mobile is the best way to deliver the benefits of competition to American consumers."
Stable Wireless Service Revenue and Cost Optimization
Postpaid wireless service revenue of $4.2 billion remained stable sequentially and year-over-year as Sprint continued to focus on promoting its feature-rich Unlimited Plus and Unlimited Premium rate plans, selling additional data devices, and being more selective in its acquisition of postpaid phone customers. Postpaid net additions of 494,000 and average postpaid accounts of 11.3 million improved sequentially and year-over-year, while postpaid ARPA of $124.80 remained stable.
Total wireless service revenue of $5.2 billion was negatively impacted by the continued amortization of prepaid contract balances as a result of adopting the new revenue standard last year, while the year-ago period included Lifeline revenue related to federal and state government subsidies claimed as a result of an inadvertent coding error. Adjusting for these impacts, total wireless service revenue was stable year-over-year and sequentially.
The company continued its focus on cost optimization during the quarter by driving year-over-year gross reductions in cost of services and selling, general and administrative expenses, with most of the reductions coming from network optimization. These reductions have been offset by incremental costs associated with network coverage and capacity improvements, along with other customer experience initiatives.
Digital Capabilities Driving Higher Sales, Better Customer Experience, and Cost Efficiencies
Sprint continued to enhance its digital capabilities and transform the way it engages with customers.
-- Postpaid gross additions in digital channels increased 80 percent
year-over-year.
-- Postpaid upgrades in digital channels increased more than 40 percent
year-over-year.
-- More than 25 percent of all targeted customer care web chats are
performed by virtual agents using artificial intelligence.
-- Web conversions improved and orders from digital media more than doubled
year-over-year.
These digital initiatives have contributed to more efficient acquisition of new customers, along with lower customer care costs.
Network Improves and True Mobile 5G Coverage Expands to 20 Million People
Sprint made continued progress on executing its focused Next-Gen Network plan.
-- Sprint has 2.5 GHz spectrum substantially deployed on its existing macro
sites.
-- The company has continued the rollout of Massive MIMO, a breakthrough
technology that improves network capacity, enhances LTE performance, and
allows for simultaneous use of spectrum for LTE and 5G. The company has
thousands of Massive MIMO sites on-air across the country.
-- Sprint has approximately 37,000 outdoor small cells deployed including
both mini macros and strand mounts.
These deployments have driven performance improvements and increased capacity in Sprint's network, as seen in Ookla Speedtest Intelligence data which shows Sprint having the second fastest network[1] and being the most improved operator in calendar 2019 with a 45 percent year-over-year increase in its national average download speeds.[2] Additionally, the company is focused on improving the end-to-end network quality for its customers.
Sprint expanded its True Mobile 5G network coverage to approximately 20 million people within nine metropolitan areas - Atlanta, Chicago, Dallas-Fort Worth, Houston, Kansas City, Los Angeles, New York City, Phoenix and Washington, D.C. In these areas, customers with 5G devices are experiencing dramatically faster speeds with Sprint's average 5G download speed of 215 Mbps more than 5X faster than Sprint LTE.[3]
Additional Information
-- Additional information about results, including a message from
management, is available on the Investor Relations website at
www.sprint.com/investors.
(1) Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds from Q4 2019 for All Mobile Results. Ookla® trademarks used under license and reprinted with permission.
(2) Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds from December 2018 to December 2019 for All Mobile Results. Ookla® trademarks used under license and reprinted with permission.
(3) Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds for December 2019 of 4G (LTE) and 5G Beta (NR) results. Ookla® trademarks used under license and reprinted with permission.
Wireless Operating Statistics (Unaudited)
Year To Date
Quarter To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
Net additions (losses) (in thousands)
Postpaid(a) 494 273 309 901 541
Postpaid phone (115) (91) (26) (334) 27
Prepaid(a) (174) (207) (173) (550) (184)
Wholesale and affiliate (71) (462) (88) (673) (272)
---
Total wireless net additions (losses) 249 (396) 48 (322) 85
---
End of period connections (in thousands)
Postpaid(a) (b)(c)(d) 33,842 33,348 32,605 33,842 32,605
Postpaid phone(b) (c) 26,264 26,379 26,787 26,264 26,787
Prepaid(a) (b) (c) 8,266 8,440 8,846 8,266 8,846
Wholesale and affiliate (c) (d) (e) 12,057 12,128 13,044 12,057 13,044
---
Total end of period connections 54,165 53,916 54,495 54,165 54,495
---
Churn
Postpaid 1.98% 1.87% 1.85% 1.87% 1.75%
Postpaid phone 2.06% 1.91% 1.84% 1.91% 1.71%
Prepaid 4.92% 4.94% 4.83% 4.70% 4.58%
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid 4,050 3,718 2,821 4,050 2,821
Wholesale and affiliate 9,419 9,585 10,563 9,419 10,563
---
Total 13,469 13,303 13,384 13,469 13,384
---
ARPU(f)
Postpaid $42.02 $42.30 $43.64 $42.29 $43.73
Postpaid phone $50.37 $50.10 $50.01 $50.11 $49.91
Prepaid $29.63 $30.97 $34.53 $30.93 $35.40
ARPA(g)
Average postpaid accounts (in thousands) 11,295 11,265 11,196 11,256 11,193
Postpaid ARPA $124.80 $124.81 $126.14 $124.83 $125.87
(a)During the three and nine-month
periods ended December 31, 2019, net
subscriber additions under the non-
Sprint branded postpaid plan
offering were 108,000 and 331,000,
respectively, and are included in
total retail postpaid subscribers
above. As of December 31, 2019, end
of period subscribers under the non-
Sprint branded postpaid plan
offering were 885,000 and are
included in total retail postpaid
subscribers above.
(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 from postpaid.
(c) 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.
(d) During the three-month period
ended June 30, 2019, one of our
postpaid customers purchased a
wholesale MVNO and as a result,
167,000 subscribers were transferred
from the wholesale to postpaid
subscriber base.
(e) 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.
(f) 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.
(g) ARPA is calculated by dividing
postpaid service revenue by the sum
of the monthly average number of
retail postpaid accounts.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant and equipment)
Quarter To Date
Year To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
Postpaid activations (in thousands) 4,773 3,983 4,462 12,231 11,707
Postpaid activations financed 80% 78% 81% 79% 82%
Postpaid activations - operating leases 61% 59% 63% 60% 64%
Installment plans
Installment sales financed $541 $433 $357 $1,391 $825
Installment billings $230 $214 $251 $653 $868
Installment receivables, net $1,250 $1,110 $894 $1,250 $894
Equipment rentals and depreciation - equipment rentals
Equipment rentals $1,292 $1,330 $1,313 $3,981 $3,778
Depreciation - equipment rentals $1,011 $1,056 $1,137 $3,096 $3,454
Leased device additions
Cash paid for capital expenditures - leased devices $2,147 $1,786 $2,215 $5,449 $5,739
Leased devices
Leased devices in property, plant and equipment, net $6,748 $6,378 $6,683 $6,748 $6,683
Leased device units
Leased devices in property, plant and equipment (units in thousands) 15,714 15,566 15,897 15,714 15,897
Leased device and receivables financings net proceeds
Proceeds $1,350 $2,080 $2,200 $4,550 $5,083
Repayments (747) (2,210) (1,900) (3,847) (4,170)
---
Net proceeds (repayments) of financings related to devices and receivables $603 $(130) $300 $703 $913
---
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date
Year To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
---
Net operating revenues
Service revenue $5,416 $5,273 $5,699 $16,252 $17,201
Equipment sales 1,372 1,192 1,589 3,784 4,180
Equipment rentals 1,292 1,330 1,313 3,981 3,778
---
Total net operating revenues 8,080 7,795 8,601 24,017 25,159
---
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,718 1,775 1,648 5,203 5,019
Cost of equipment sales 1,646 1,359 1,734 4,346 4,521
Cost of equipment rentals (exclusive of depreciation below) 201 240 182 666 457
Selling, general and administrative 2,045 1,936 2,003 5,888 5,731
Depreciation - network and other 1,071 1,065 1,088 3,256 3,132
Depreciation - equipment rentals 1,011 1,056 1,137 3,096 3,454
Amortization 474 106 145 698 475
Other, net (152) 21 185 106 298
---
Total net operating expenses 8,014 7,558 8,122 23,259 23,087
---
Operating income 66 237 479 758 2,072
---
Interest expense (589) (594) (664) (1,802) (1,934)
Other (expense) income, net (6) 14 32 36 153
---
(Loss) income before income taxes (529) (343) (153) (1,008) 291
Income tax benefit (expense) 408 64 8 494 (56)
---
Net (loss) income (121) (279) (145) (514) 235
---
Less: Net loss (income) attributable to noncontrolling interests 1 5 4 9 (4)
---
Net (loss) income attributable to Sprint Corporation $(120) $(274) $(141) $(505) $231
--- ---
Basic net (loss) income per common share attributable to Sprint Corporation $(0.03) $(0.07) $(0.03) $(0.12) $0.06
--- ---
Diluted net (loss) income per common share attributable to Sprint Corporation $(0.03) $(0.07) $(0.03) $(0.12) $0.06
--- ---
Basic weighted average common shares outstanding 4,109 4,098 4,078 4,098 4,050
---
Diluted weighted average common shares outstanding 4,109 4,098 4,078 4,098 4,110
---
Effective tax rate 77.1% 18.7% 5.2% 49.0% 19.2%
---
NON-GAAP RECONCILIATION - NET (LOSS) INCOME TO ADJUSTED EBITDA* (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
---
Net (loss) income $(121) $(279) $(145) $(514) $235
--- ---
Income tax (benefit) expense (408) (64) (8) (494) 56
---
(Loss) income before income taxes (529) (343) (153) (1,008) 291
Other expense (income), net 6 (14) (32) (36) (153)
Interest expense 589 594 664 1,802 1,934
---
Operating income 66 237 479 758 2,072
---
Depreciation - network and other 1,071 1,065 1,088 3,256 3,132
Depreciation - equipment rentals 1,011 1,056 1,137 3,096 3,454
Amortization 474 106 145 698 475
---
EBITDA*(1) 2,622 2,464 2,849 7,808 9,133
---
Asset impairments (2) 19 2 231 -
Loss from asset dispositions, exchanges, and other, net(3) 22 105 22 173
Severance and exit costs (4) 20 19 30 66 63
Contract terminations costs (5) - 34
Merger costs (6) 78 69 67 230 216
Litigation expenses and other contingencies(7) (270) 50 (270) 50
Partial pension settlement (8) 57 57 -
Hurricanes (9) - (32)
--- ---
Adjusted EBITDA*(1) $2,548 $2,554 $3,101 $8,144 $9,637
--- ---
Adjusted EBITDA margin* 47.0% 48.4% 54.4% 50.1% 56.0%
Selected items:
Cash paid for capital expenditures - network and other $1,062 $1,109 $1,416 $3,360 $3,814
Cash paid for capital expenditures - leased devices $2,147 $1,786 $2,215 $5,449 $5,739
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
Net operating revenues
Service revenue
Postpaid $4,229 $4,218 $4,236 $12,646 $12,679
Prepaid 740 792 924 2,375 2,860
Wholesale, affiliate and other 226 35 289 541 868
---
Total service revenue 5,195 5,045 5,449 15,562 16,407
Equipment sales 1,372 1,192 1,589 3,784 4,180
Equipment rentals 1,292 1,330 1,313 3,981 3,778
Total net operating revenues 7,859 7,567 8,351 23,327 24,365
---
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,554 1,591 1,439 4,664 4,334
Cost of equipment sales 1,646 1,359 1,734 4,346 4,521
Cost of equipment rentals (exclusive of depreciation below) 201 240 182 666 457
Selling, general and administrative 1,923 1,815 1,885 5,517 5,338
Depreciation - network and other 1,023 1,023 1,035 3,116 2,975
Depreciation - equipment rentals 1,011 1,056 1,137 3,096 3,454
Amortization 474 106 145 698 475
Other, net 110 20 185 360 280
---
Total net operating expenses 7,942 7,210 7,742 22,463 21,834
---
Operating (loss) income $(83) $357 $609 $864 $2,531
---
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
Operating (loss) income $(83) $357 $609 $864 $2,531
Asset impairments (2) 19 1 223
Loss from asset dispositions, exchanges, and other, net(3) 22 105 22 173
Severance and exit costs (4) 22 19 30 68 45
Contract terminations costs (5) 34
Litigation expenses and other contingencies (7) 5 50 5 50
Partial pension settlement (8) 42 42
Hurricanes (9) (32)
Depreciation - network and other 1,023 1,023 1,035 3,116 2,975
Depreciation - equipment rentals 1,011 1,056 1,137 3,096 3,454
Amortization 474 106 145 698 475
Adjusted EBITDA*(1) $2,535 $2,562 $3,111 $8,134 $9,705
---
Adjusted EBITDA margin* 48.8% 50.8% 57.1% 52.3% 59.2%
Selected items:
Cash paid for capital expenditures - network and other $921 $963 $1,242 $2,911 $3,362
Cash paid for capital expenditures - leased devices $2,147 $1,786 $2,215 $5,449 $5,739
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
Net operating revenues $296 $300 $316 $903 $982
---
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 238 256 280 756 886
Selling, general and administrative 46 49 52 140 174
Depreciation and amortization 48 42 51 137 151
Other, net (262) 1 (254) 18
---
Total net operating expenses 70 348 383 779 1,229
---
Operating income (loss) $226 $(48) $(67) $124 $(247)
---
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
Operating income (loss) $226 $(48) $(67) $124 $(247)
Asset impairments (2) 1 8
Severance and exit costs (4) (2) (2) 18
Litigation expenses and other contingencies (7) (275) (275)
Partial pension settlement (8) 15 15
Depreciation and amortization 48 42 51 137 151
---
Adjusted EBITDA* $12 $(5) $(16) $7 $(78)
---
Adjusted EBITDA margin* 4.1% -1.7% -5.1% 0.8% -7.9%
Selected items:
Cash paid for capital expenditures - network and other $34 $30 $64 $92 $170
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
Year To Date
12/31/19
12/31/18
Operating activities
Net (loss) income $(514) $235
Asset impairments (2) 231
Depreciation and amortization 7,050 7,061
Provision for losses on accounts receivable 435 278
Share-based and long-term incentive compensation expense 90 101
Deferred income tax (benefit) expense (532) 25
Amortization of long-term debt premiums, net (47) (94)
Loss on disposal of property, plant and equipment 692 642
Deferred purchase price from sale of receivables (223)
Other changes in assets and liabilities:
Accounts and notes receivable (754) 65
Inventories and other current assets 650 248
Operating lease right-of-use assets 1,280
Accounts payable and other current liabilities (436) (530)
Current and long-term operating lease liabilities (1,433)
Non-current assets and liabilities, net (172) (601)
Other, net 225 375
Net cash provided by operating activities 6,765 7,582
---
Investing activities
Capital expenditures - network and other (3,360) (3,814)
Capital expenditures - leased devices (5,449) (5,739)
Expenditures relating to FCC licenses (24) (145)
Change in short-term investments, net 5 1,467
Proceeds from sales of assets and FCC licenses 819 416
Proceeds from deferred purchase price from sale of receivables 223
Proceeds from corporate owned life insurance policies 5 110
Other, net (27) 52
Net cash used in investing activities (8,031) (7,430)
---
Financing activities
Proceeds from debt and financings 4,731 6,416
Repayments of debt, financing and finance lease obligations (7,188) (6,937)
Debt financing costs (12) (286)
Proceeds from issuance of common stock, net (29) 281
Acquisition of noncontrolling interest (33)
Other, net 1
Net cash used in financing activities (2,530) (526)
---
Net decrease in cash, cash equivalents and restricted cash (3,796) (374)
Cash, cash equivalents and restricted cash, beginning of period 7,063 6,659
---
Cash, cash equivalents and restricted cash, end of period $3,267 $6,285
---
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
Quarter To Date
Year To Date
---
12/31/19
9/30/19
12/31/18
12/31/19
12/31/18
---
Net cash provided by operating activities $1,955 $2,566 $2,225 $6,765 $7,582
Capital expenditures - network and other (1,062) (1,109) (1,416) (3,360) (3,814)
---
Capital expenditures - leased devices (2,147) (1,786) (2,215) (5,449) (5,739)
Expenditures relating to FCC licenses, net (8) (7) (75) (24) (145)
Proceeds from sales of assets and FCC licenses 220 417 144 819 416
Proceeds from deferred purchase price from sale of receivables - 223
Other investing activities, net 6 4 129 10 189
Free cash flow* $(1,036) $85 $(1,208) $(1,239) $(1,288)
--- ---
Net proceeds (repayments) of financings related to devices and receivables 603 (130) 300 703 913
Adjusted free cash flow* $(433) $(45) $(908) $(536) $(375)
--- ---
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
12/31/19
3/31/19
ASSETS
Current assets
Cash and cash equivalents $3,179 $6,982
Short-term investments 62 67
Accounts and notes receivable, net 3,873 3,554
Device and accessory inventory 1,117 999
Prepaid expenses and other current assets 1,224 1,289
---
Total current assets 9,455 12,891
Property, plant and equipment, net 20,827 21,201
Costs to acquire a customer contract 1,808 1,559
Operating lease right-of-use assets 6,713
Goodwill 4,598 4,598
FCC licenses and other 41,492 41,465
Definite-lived intangible assets, net 918 1,769
Other assets 1,091 1,118
---
Total assets $86,902 $84,601
---
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $3,396 $3,961
Accrued expenses and other current liabilities 3,335 3,597
Current operating lease liabilities 1,860
Current portion of long-term debt, financing and finance lease obligations 3,880 4,557
---
Total current liabilities 12,471 12,115
Long-term debt, financing and finance lease obligations 33,507 35,366
Long-term operating lease liabilities 5,423
Deferred tax liabilities 7,038 7,556
Other liabilities 2,708 3,437
Total liabilities 61,147 58,474
---
Stockholders' equity
Common stock 41 41
Treasury shares, at cost (9)
Paid-in capital 28,402 28,306
Accumulated deficit (2,226) (1,883)
Accumulated other comprehensive loss (453) (392)
Total stockholders' equity 25,755 26,072
---
Noncontrolling interests 55
Total equity 25,755 26,127
---
Total liabilities and equity $86,902 $84,601
---
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
12/31/19
3/31/19
Total debt $37,387 $39,923
Less: Cash and cash equivalents (3,179) (6,982)
Less: Short-term investments (62) (67)
Net debt* $34,146 $32,874
---
SCHEDULE OF DEBT (Unaudited)
(Millions)
12/31/19
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 1,531
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 5,469
---
Sprint Communications, Inc.
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. 5,780
---
Sprint Capital Corporation
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 4,475
---
Credit facilities
Secured equipment credit facilities
2021 - 2022 505
Secured term loans due 2024
02/03/2024 5,870
Credit facilities 6,375
---
Accounts receivable facility 2021 3,310
Financing obligations, finance lease and other obligations
2020 - 2026 349
Total principal 37,758
---
Net premiums and debt financing costs (371)
Total debt $37,387
---
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1) For customers that elect to lease a
device rather than purchasing one
under our subsidized program, there is
a 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
nine month periods ended December 31,
2019, we leased devices through our
Sprint direct channels totaling
approximately $1,686 million and
$4,015 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.
(2) During the third quarter of fiscal year
2019, we recognized $19 million of
impairment charges primarily related
to an inbound roaming arrangement with
a third party in Puerto Rico. During
the second and first quarters of
fiscal year 2019, the company
recognized asset impairment expense
primarily related to the sale and
leaseback of our Overland Park, Kansas
campus.
(3) During the third quarter of fiscal year
2019, the company recorded losses on
disposals of property, plant and
equipment primarily related to network
costs that are no longer recoverable
as a result of changes in the
company's network plans. During the
third and second quarters of fiscal
year 2018, the company recorded losses
on disposals of property, plant and
equipment primarily related to cell
site construction costs and other
network costs that are no longer
recoverable as a result of changes in
the company's network plans.
(4) During the third, second and first
quarters of fiscal year 2019 and
third, second and first quarters of
fiscal year 2018, severance and exit
costs consist primarily of exit costs
related to access termination charges
and severance costs associated with
reductions in work force.
(5) During the first quarter of fiscal year
2018, we recognized contract
termination costs associated with 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.
(6) During the third, second and first
quarters of fiscal year 2019 and
third, second and first quarters of
fiscal year 2018, we recorded merger
costs of $78 million, $69 million, $83
million, $67 million, $56 million and
$93 million, respectively, due to the
proposed Business Combination
Agreement with T-Mobile.
(7) During the third quarter of fiscal year
2019, we had favorable developments in
litigation and other contingencies of
$270 million primarily associated with
legal recoveries for patent
infringement lawsuits. During the
third quarter of fiscal year 2018,
litigation expenses and other
contingencies consist of tax matters
settled with the State of New York.
(8) During the third quarter of fiscal year
2019, the partial pension settlement
is the result of a plan amendment to
the Sprint Retirement Pension Plan to
offer certain terminated participants
who had not begun receiving Plan
benefits the opportunity to
voluntarily elect to receive their
benefits as an immediate lump sum
distribution.
(9) During the second quarter of fiscal
year 2018 we recognized hurricane-
related reimbursements of $32 million.
*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.
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, 2019 and, when filed, our Quarterly Report on Form 10-Q for the quarter ended December 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 54.2 million connections as of December 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 a 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
