Sprint Reports Highest Retail Net Additions In Nearly Three Years And Raises Adjusted Free Cash Flow* Guidance With Fiscal 2017 Third Quarter Results

Feb 02, 2018

OVERLAND PARK, Kan., Feb. 2, 2018 /PRNewswire/ --

  • Postpaid net additions of 256,000, including 184,000 phone net additions
    • Tenth consecutive quarter of postpaid phone net additions
  • Prepaid net additions of 63,000 compared to net losses of 460,000 in the prior year
    • Fourth consecutive quarter of net additions and improved by 523,000 year-over-year
    • Prepaid churn improved year-over-year for the sixth consecutive quarter
  • Net income of $7.2 billion, operating income of $727 million, and adjusted EBITDA* of $2.7 billion
    • Net income includes approximately $7.1 billion of favorable impact from tax reform 
    • Eighth consecutive quarter of operating income
    • Highest fiscal third quarter adjusted EBITDA* in 11 years
  • Net cash provided by operating activities of $1.2 billion and adjusted free cash flow* of $397 million
    • Adjusted free cash flow* improved by more than $1 billion year-over-year
    • Raising fiscal year 2017 adjusted free cash flow* guidance from around break-even to a range of $500 million to $700 million
  • Sprint Next-Gen Network to drive further network improvements and provide path to 5G

Sprint Corp. Logo (PRNewsfoto/Sprint Corp.)

Sprint Corporation (NYSE: S) today reported operating results for the third quarter of fiscal year 2017, including its highest retail net additions in nearly three years with postpaid net additions of 256,000 and prepaid net additions of 63,000. The company also reported its eighth consecutive quarter of operating income and the highest fiscal third quarter adjusted EBITDA* in 11 years.

Net cash provided by operating activities of $1.2 billion improved by more than $500 million year-over-year. Adjusted free cash flow* of $397 million improved by more than $1 billion year-over-year and the company is raising its fiscal year 2017 expectation from around break-even to a range of $500 million to $700 million.

"Sprint has now added postpaid phone customers for 10 consecutive quarters and added prepaid customers for four consecutive quarters," said Sprint CEO Marcelo Claure. "This momentum, along with a continued focus on the cost structure, is driving improvements in profitability metrics and adjusted free cash flow*."

Customer Growth Continues in Both Postpaid and Prepaid Businesses

Sprint's execution in both its postpaid and prepaid businesses resulted in the highest retail net additions in nearly three years. Postpaid net additions of 256,000 in the quarter included 184,000 phone net additions, the tenth consecutive quarter of postpaid phone net additions.

Sprint's prepaid business also continued to add customers with 63,000 net additions, its fourth consecutive quarter of net additions and a 523,000 improvement compared to the prior year. Prepaid churn improved year-over-year for the sixth consecutive quarter and prepaid gross additions grew year-over-year for the second consecutive quarter. The sustained improvement in prepaid customer trends has translated into better financial results, as prepaid wireless service revenue grew year-over-year for the first time in nearly three years.

More Progress on Cost Reduction Program

Sprint continued to make progress on its multi-year plan to improve its cost structure. Excluding approximately $100 million of hurricane-related and other non-recurring charges in the quarter, the company reported approximately $260 million of combined year-over-year reductions in cost of services and selling, general and administrative expenses, bringing the year-to-date total reduction to more than $1 billion. The year-to-date reductions were primarily driven by changes to the device insurance program, as well as lower network expenses.

Net income of $7.2 billion included $7.1 billion of non-cash benefit from tax reform, resulting from a re-measurement of our deferred tax assets and liabilities under provisions contained in the new tax law.

The company also reported the following financial results:

(Millions, except per share data)

Fiscal 3Q17

Fiscal 3Q16

Change

Net income (loss)

$7,162

($479)

$7,641

Basic income (loss) per share

$1.79

($0.12)

$1.91

Operating income

$727

$311

$416

Adjusted EBITDA*

$2,719

$2,450

$269

Net cash provided by operating activities

$1,166

$650

$516

Adjusted free cash flow*

$397

($646)

$1,043

Sprint Next-Gen Network to Drive Further Network Improvements and Provide Path to 5G

Sprint is unlocking the value of the largest mobile broadband spectrum holdings in the U.S. and its Next-Gen Network is designed to drive significant improvements to network performance and the customer experience by investing in four main areas.

  • Upgrade existing towers to leverage all three of the company's spectrum bands – 800 MHz, 1.9 GHz and 2.5 GHz – for faster, more reliable service.
  • Build thousands of new cell sites to expand its coverage footprint and extend coverage to more popular customer destinations.
  • Add more small cells -- including Sprint Magic Boxes, mini-macros and strand mounts to densify every major market and significantly boost capacity and data speeds – and leverage the recent strategic agreements with Altice and Cox. The company has already deployed more than 80,000 Sprint Magic Boxes in approximately 200 cities across the country and plans to deploy more than 1 million as part of its multi-year roadmap.
  • Deploy game-changing 64T64R Massive MIMO 2.5 GHz radios to increase capacity up to 10 times that of current LTE systems and increase data speeds for more customers in high-traffic locations. Massive MIMO, a key enabler for 5G, will allow the company to support both LTE and 5G NR (New Radio) modes simultaneously without additional tower climbs.

Sprint's network has already seen significant improvements. According to Ookla Speedtest Intelligence data, Sprint was the most improved operator in 2017 with a 60 percent year-over-year increase in its national average download speed.1

Fiscal Year 2017 Outlook

  • The company is raising its expectation for operating income to $2.5 billion to $2.7 billion. Its previous expectation was $2.1 billion to $2.5 billion.
  • The company expects adjusted EBITDA* to be around the mid-point of its prior expectation of $10.8 billion to $11.2 billion.
  • The company expects cash capital expenditures, excluding devices leased through indirect channels, to be at the low end of its prior expectation of $3.5 billion to $4 billion.
  • The company is raising its expectation for adjusted free cash flow* to $500 million to $700 million.  Its previous expectation was around break-even.

Conference Call and Webcast

  • Date/Time: 8:30 a.m. (ET) Friday, Feb. 2, 2018
  • Call-in Information
    • U.S./Canada: 866-360-1063 (ID: 6374738)
    • International: 443-961-0242 (ID: 6374738)
  • Webcast available at www.sprint.com/investors
  • Additional information about results is available on our Investor Relations website

1 Average download speed increase based on Ookla's analysis of Speedtest Intelligence data comparing December 2016 to December 2017 for all mobile results.

 

Wireless Operating Statistics (Unaudited)






 Quarter To Date 



 Year To Date 


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16

Net additions (losses) (in thousands)







Postpaid 

256

168

405


385

929

Postpaid phone 

184

279

368


551

888

Prepaid (f)

63

95

(460)


193

(1,215)

Wholesale and affiliate(f)

66

115

619


246

2,051

Total wireless net additions

385

378

564


824

1,765








End of period connections (in thousands)







Postpaid (d) (e) 

31,942

31,686

31,694


31,942

31,694

Postpaid phone(d)

26,616

26,432

26,037


26,616

26,037

Prepaid(d) (f) (g) (h) (i)

8,997

8,765

8,493


8,997

8,493

Wholesale and affiliate (d) (f) (h)

13,642

13,576

13,084


13,642

13,084

Total end of period connections

54,581

54,027

53,271


54,581

53,271








Churn







Postpaid

1.80%

1.72%

1.67%


1.73%

1.58%

Postpaid phone

1.71%

1.59%

1.57%


1.60%

1.44%

Prepaid (h)

4.63%

4.83%

5.74%


4.68%

5.57%








Supplemental data - connected devices







End of period connections (in thousands)







Retail postpaid

2,259

2,158

1,960


2,259

1,960

Wholesale and affiliate

11,272

11,221

10,594


11,272

10,594

Total

13,531

13,379

12,554


13,531

12,554








ARPU(a)







Postpaid

$          45.13

$          46.00

$          49.70


$          46.14

$          50.59

Postpaid phone

$          51.26

$          52.34

$          57.12


$          52.50

$          58.11

Prepaid(h)

$          37.46

$          37.83

$          33.97


$          37.84

$          33.35








NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)







(Millions, except accounts, connections, ABPA*, and ABPU*)








Quarter To Date


 Year To Date 


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16

ABPA*







Postpaid service revenue

$          4,297

$          4,363

$          4,686


$          13,126

$          14,184

Add: Installment plan and non-operating lease billings 

379

397

291


1,144

829

Add: Lease revenue - operating

1,047

966

887


2,912

2,453

Total for postpaid connections

$          5,723

$          5,726

$           5,864


$          17,182

$          17,466








Average postpaid accounts (in thousands)

11,193

11,277

11,413


11,261

11,368

Postpaid ABPA*(b)

$        170.39

$         169.25

$          171.28


$          169.53

$          170.71









Quarter To Date


 Year To Date 


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16

Postpaid phone ABPU*







Postpaid phone service revenue

$            4,069

$          4,132

$          4,420


$          12,415

$          13,350

Add: Installment plan and non-operating lease billings 

335

358

261


1,025

752

Add: Lease revenue - operating

1,037

953

873


2,877

2,411

Total for postpaid phone connections

$            5,441

$          5,443

$          5,554


$          16,317

$          16,513








Postpaid average phone connections (in thousands)

26,461

26,312

25,795


26,275

25,528

Postpaid phone ABPU* (c)

$            68.54

$          68.95

$          71.77


$            69.00

$            71.87








(a)  ARPU is calculated by dividing service revenue by the sum of the monthly average number of connections in the applicable service category. Changes in average monthly service revenue reflect connections for either the postpaid or prepaid service category who change rate plans, the level of voice and data usage, the amount of service credits which are offered to connections, plus the net effect of average monthly revenue generated by new connections and deactivating connections.  Postpaid phone ARPU represents revenues related to our postpaid phone connections.

(b)  Postpaid ABPA* is calculated by dividing service revenue earned from connections plus billings from installment plans and non-operating leases, as well as, operating lease revenue by the sum of the monthly average number of accounts during the period. Installment plan billings represent the substantial majority of the total billings in the table above for all periods presented.

(c)  Postpaid phone ABPU* is calculated by dividing postpaid phone service revenue earned from postpaid phone connections plus billings from installment plans and non-operating leases, as well as, operating lease revenue by the sum of the monthly average number of postpaid phone connections during the period. Installment plan billings represent the substantial majority of the total billings in the table above for all periods presented.

(d)  As part of the Shentel transaction, 186,000 and 92,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates, of which 18,000 prepaid subscribers were subsequently excluded from our customer base as a result of the Lifeline regulatory change as noted in (f) below. An additional 270,000 of nTelos' subscribers are now part of our affiliate relationship with Shentel and were reported in wholesale and affiliate subscribers beginning with the quarter ended June 30, 2016. In addition, during the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates as a result of a the transfer of additional subscribers to Shentel.

(e)  During the three-month period ended June 30, 2017, 2,000 Wi-Fi connections were adjusted from the postpaid subscriber base.

(f)Sprint is no longer reporting Lifeline subscribers due to recent regulatory changes resulting in tighter program restrictions. We have excluded them from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale MVNO's.

(g)During the three-month period ended September 30, 2017, the Prepaid Data Share platform It's On was decommissioned as the Company continues to focus on higher value contribution offerings resulting in the reduction of 49,000 to prepaid end of period subscribers.

(h)As a result of aligning all prepaid brands, including prepaid affiliate subscribers, under one churn and retention program as of December 31, 2016, end of period prepaid and affiliate subscribers were reduced by 1,234,000 and 21,000, respectively.  

(i)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.

 

Wireless Device Financing Summary (Unaudited)

(Millions, except sales, connections, and leased devices in property, plant and equipment)



 Quarter To Date 



 Year To Date 


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16








Postpaid activations (in thousands)

4,874

3,917

4,812


12,459

11,827

Postpaid activations financed

84%

85%

80%


85%

75%

Postpaid activations - operating leases

72%

68%

43%


66%

42%








Installment plans







Installment sales financed

$                276

$                 268

$              1,036


$                1,097

$                2,188

Installment billings

$                353

$                 373

$                 291


$                1,094

$                   829

Installment receivables, net

$             1,383

$              1,583

$                      -


$                1,383

$                        -








Leasing revenue and depreciation







Lease revenue - operating

$             1,047

$                 966

$                 887


$                2,912

$                2,453

Lease depreciation

$                990

$                 888

$                 837


$                2,732

$                2,205








Leased device additions







Cash paid for capital expenditures - leased devices

$                682

$                 608

$                 767


$                1,787

$                1,530

Transfers from inventory - leased devices

$             1,761

$              1,060

$              1,095


$                3,671

$                2,281








Leased devices  







Leased devices in property, plant and equipment, net

$             5,683

$              4,709

$              4,454


$                5,683

$                4,454








Leased device units







Leased devices in property, plant and equipment (units in thousands)

14,002

13,019

11,981


14,002

11,981








Leased device and receivables financings net proceeds







Proceeds

$             1,125

$                 789

$                      -


$                2,679

$                1,055

Repayments

(598)

(1,148)

(231)


(2,019)

(655)

Net proceeds (repayments) of financings related to devices and receivables

$                527

$                (359)

$                (231)


$                   660

$                   400

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Millions, except per share data)


Quarter To Date


Year To Date


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16

Net operating revenues







Service revenue

$          5,930

$             5,967

$              6,323


$              17,968

$              19,252

Equipment revenue

2,309

1,960

2,226


6,355

5,556

Total net operating revenues

8,239

7,927

8,549


24,323

24,808

Net operating expenses







Cost of services (exclusive of depreciation and amortization below)

1,733

1,698

1,925


5,140

6,125

Cost of products (exclusive of depreciation and amortization below)

1,673

1,404

1,985


4,622

5,097

Selling, general and administrative

2,108

2,013

2,080


6,059

5,992

Depreciation - network and other

987

997

1,000


2,961

3,022

Depreciation - leased devices

990

888

837


2,732

2,205

Amortization

196

209

255


628

813

Other, net

(175)

117

156


(310)

260

Total net operating expenses

7,512

7,326

8,238


21,832

23,514

Operating income

727

601

311


2,491

1,294

Interest expense

(581)

(595)

(619)


(1,789)

(1,864)

Other (expense) income, net

(42)

44

(60)


(50)

(67)

Income (loss) before income taxes

104

50

(368)


652

(637)

Income tax benefit (expense)

7,052

(98)

(111)


6,662

(286)

Net income (loss)

7,156

(48)

(479)


7,314

(923)

Less: Net loss attributable to noncontrolling interests

6

-

-


6

-

Net income (loss) attributable to Sprint Corporation

$             7,162

$                (48)

$              (479)


$              7,320

$                 (923)








Basic net income (loss) per common share

$               1.79

$             (0.01)

$              (0.12)


$              1.83

$                (0.23)

Diluted net income (loss) per common share

$               1.76

$             (0.01)

$              (0.12)


$              1.79

$                (0.23)

Weighted average common shares outstanding

4,001

3,998

3,983


3,998

3,979

Diluted weighted average common shares outstanding

4,061

3,998

3,983


4,080

3,979








Effective tax rate

-6,780.8%

196.0%

-30.2%


-1,021.8%

-44.9%















NON-GAAP RECONCILIATION - NET INCOME (LOSS) TO ADJUSTED EBITDA* (Unaudited)

(Millions)


Quarter To Date


Year To Date


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16








Net income (loss)

$            7,156

$                (48)

$              (479)


$              7,314

$                 (923)

Income tax (benefit) expense

(7,052)

98

111


(6,662)

286

Income (loss) before income taxes

104

50

(368)


652

(637)

Other expense (income), net

42

(44)

60


50

67

Interest expense

581

595

619


1,789

1,864

Operating income

727

601

311


2,491

1,294

Depreciation - network and other

987

997

1,000


2,961

3,022

Depreciation - leased devices

990

888

837


2,732

2,205

Amortization

196

209

255


628

813

EBITDA*(1)

2,900

2,695

2,403


8,812

7,334

Loss (gain) from asset dispositions, exchanges, and other, net(2)

-

-

28


(304)

(326)

Severance and exit costs (3)

13

-

19


13

30

Contract terminations (4)

-

-

-


(5)

113

Litigation and other contingencies(5)

(260)

-

-


(315)

103

Hurricanes (6)

66

34

-


100

-

Adjusted EBITDA*(1)

$             2,719

$             2,729

$              2,450


$              8,301

$               7,254








Adjusted EBITDA margin*

45.9%

45.7%

38.7%


46.2%

37.7%















Selected items:







Cash paid for capital expenditures - network and other

$                 696

$                682

$              478


$              2,499

$               1,421

Cash paid for capital expenditures - leased devices

$                 682

$                608

$              767


$              1,787

$               1,530

 

WIRELESS STATEMENTS OF OPERATIONS (Unaudited)

(Millions)


Quarter To Date


Year To Date


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16

Net operating revenues







Service revenue







Postpaid

$             4,297

$             4,363

$             4,686


$             13,126

$             14,184

Prepaid (7)

993

990

985


2,982

3,096

Wholesale, affiliate and other(7)

329

296

275


884

784

 Total service revenue

5,619

5,649

5,946


16,992

18,064








Equipment revenue

2,309

1,960

2,226


6,355

5,556

Total net operating revenues

7,928

7,609

8,172


23,347

23,620








Net operating expenses







Cost of services (exclusive of depreciation and amortization below)

1,466

1,422

1,649


4,300

5,226

Cost of products (exclusive of depreciation and amortization below)

1,673

1,404

1,985


4,622

5,097

Selling, general and administrative

2,024

1,936

2,032


5,835

5,797

Depreciation - network and other

931

944

947


2,800

2,868

Depreciation - leased devices

990

888

837


2,732

2,205

Amortization

196

209

255


628

813

Other, net

139

117

150


54

248

Total net operating expenses

7,419

6,920

7,855


20,971

22,254

Operating income

$                509

$               689

$                317


$              2,376

$              1,366





























WIRELESS NON-GAAP RECONCILIATION (Unaudited)

(Millions)


Quarter To Date


Year To Date


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16








Operating income

$                509

$               689

$                317


$              2,376

$              1,366

Loss (gain) from asset dispositions, exchanges, and other, net(2)

-

-

28


(304)

(326)

Severance and exit costs (3)

4

-

13


(1)

18

Contract terminations (4)

-

-

-


(5)

113

Litigation and other contingencies (5)

63

-

-


63

103

Hurricanes (6)

66

34

-


100

-

Depreciation - network and other

931

944

947


2,800

2,868

Depreciation - leased devices

990

888

837


2,732

2,205

Amortization

196

209

255


628

813

Adjusted EBITDA*(1)

$             2,759

$             2,764

$             2,397


$              8,389

$              7,160








Adjusted EBITDA margin*

49.1%

48.9%

40.3%


49.4%

39.6%















Selected items:







Cash paid for capital expenditures - network and other

$                565

$               539

$                389


$              2,042

$              1,123

Cash paid for capital expenditures - leased devices

$                682

$               608

$                767


$              1,787

$              1,530

 

WIRELINE STATEMENTS OF OPERATIONS (Unaudited)

(Millions)


Quarter To Date


Year To Date


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16

Net operating revenues







Voice

$              94

$                109

$                153


$                327

$                506

Data

29

33

41


96

127

Internet

254

256

281


765

871

Other

16

11

22


47

59

Total net operating revenues

393

409

497


1,235

1,563








Net operating expenses







Cost of services (exclusive of depreciation and amortization below)

352

372

400


1,111

1,284

Selling, general and administrative

71

66

49


194

189

Depreciation and amortization

55

49

51


155

148

Other, net

(314)

-

6


(309)

13

Total net operating expenses

164

487

506


1,151

1,634

Operating income (loss)

$             229

$                (78)

$                  (9)


$                  84

$                (71)















WIRELINE NON-GAAP RECONCILIATION (Unaudited)

(Millions)


Quarter To Date


Year To Date


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16








Operating income (loss)

$             229

$                (78)

$                  (9)


$                  84

$                (71)

Severance and exit costs (3)

9

-

6


14

13

Litigation and other contingencies (5)

(323)

-

-


(323)

-

Depreciation and amortization

55

49

51


155

148

Adjusted EBITDA*

$              (30)

$                (29)

$                  48


$                (70)

$                 90








Adjusted EBITDA margin*

-7.6%

-7.1%

9.7%


-5.7%

5.8%















Selected items:







Cash paid for capital expenditures - network and other

$               30

$                  40

$                  24


$                132

$                 75

 

CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)

(Millions)




Year To Date






12/31/17

12/31/16

Operating activities







Net income (loss)





$ 7,314

$   (923)

Depreciation and amortization





6,321

6,040

Provision for losses on accounts receivable





312

406

Share-based and long-term incentive compensation expense 





137

57

Deferred income tax (benefit) expense





(6,707)

276

Gains from asset dispositions and exchanges





(479)

(354)

Call premiums paid on debt redemptions





(129)

-

Loss on early extinguishment of debt





65

-

Amortization of long-term debt premiums, net





(125)

(234)

Loss on disposal of property, plant and equipment





533

368

Contract terminations





(5)

96

Other changes in assets and liabilities:







  Accounts and notes receivable





(74)

(542)

  Inventories and other current assets 





(3,216)

(2,254)

  Deferred purchase price from sale of receivables





-

(220)

  Accounts payable and other current liabilities 





(104)

(97)

  Non-current assets and liabilities, net 





260

(313)

Other, net 





302

594

Net cash provided by operating activities





4,405

2,900








Investing activities







Capital expenditures - network and other





(2,499)

(1,421)

Capital expenditures - leased devices





(1,787)

(1,530)

Expenditures relating to FCC licenses





(92)

(46)

Change in short-term investments, net





5,271

(2,349)

Proceeds from sales of assets and FCC licenses





367

126

Other, net





16

26

Net cash provided by (used in) investing activities 





1,276

(5,194)








Financing activities







Proceeds from debt and financings





3,073

6,830

Repayments of debt, financing and capital lease obligations





(7,159)

(3,266)

Debt financing costs





(19)

(272)

Other, net





(6)

68

Net cash (used in) provided by financing activities 





(4,111)

3,360








Net increase in cash and cash equivalents





1,570

1,066








Cash and cash equivalents, beginning of period





2,870

2,641

Cash and cash equivalents, end of period





$ 4,440

$ 3,707















RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)

(Millions)


Quarter To Date


Year To Date


12/31/17

9/30/17

12/31/16


12/31/17

12/31/16








Net cash provided by operating activities

$           1,166

$           1,959

$             650


$ 4,405

$ 2,900








Capital expenditures - network and other

(696)

(682)

(478)


(2,499)

(1,421)

Capital expenditures - leased devices

(682)

(608)

(767)


(1,787)

(1,530)

Expenditures relating to FCC licenses, net

(73)

(6)

(14)


(92)

(46)

Proceeds from sales of assets and FCC licenses

149

117

60


367

126

Other investing activities, net

6

(1)

134


2

98

Free cash flow*

$            (130)

$             779

$            (415)


$    396

$    127








Net proceeds (repayments) of financings related to devices and receivables

527

(359)

(231)


660

400

Adjusted free cash flow*

$             397

$             420

$            (646)


$ 1,056

$    527

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Millions)



12/31/17

3/31/17

ASSETS




 Current assets




Cash and cash equivalents


$             4,440

$               2,870

Short-term investments


173

5,444

Accounts and notes receivable, net


3,917

4,138

Device and accessory inventory


1,009

1,064

Prepaid expenses and other current assets


626

601

     Total current assets


10,165

14,117





 Property, plant and equipment, net


19,712

19,209

 Goodwill


6,586

6,579

 FCC licenses and other


41,222

40,585

 Definite-lived intangible assets, net


2,667

3,320

 Other assets


1,067

1,313

Total assets


$             81,419

$             85,123





LIABILITIES AND EQUITY




 Current liabilities




Accounts payable


$               3,176

$               3,281

Accrued expenses and other current liabilities


3,859

4,141

Current portion of long-term debt, financing and capital lease obligations


4,036

5,036

     Total current liabilities


11,071

12,458





 Long-term debt, financing and capital lease obligations


32,825

35,878

 Deferred tax liabilities


7,709

14,416

 Other liabilities


3,509

3,563

  Total liabilities 


55,114

66,315





 Stockholders' equity




Common stock


40

40

Paid-in capital


27,825

27,756

Accumulated deficit


(1,264)

(8,584)

Accumulated other comprehensive loss


(366)

(404)

     Total stockholders' equity


26,235

18,808

Noncontrolling interests


70

-

     Total equity


26,305

18,808

Total liabilities and equity


$              81,419

$             85,123









NET DEBT* (NON-GAAP) (Unaudited)

(Millions)



12/31/17

3/31/17

Total debt


$             36,861

$             40,914

 Less: Cash and cash equivalents


(4,440)

(2,870)

 Less: Short-term investments


(173)

(5,444)

Net debt*


$             32,248

$             32,600

 

SCHEDULE OF DEBT (Unaudited)

(Millions)






12/31/17

ISSUER




 MATURITY 

 PRINCIPAL 

Sprint Corporation






7.25% Senior notes due 2021




09/15/2021

$        2,250

7.875% Senior notes due 2023




09/15/2023

4,250

7.125% Senior notes due 2024




06/15/2024

2,500

7.625% Senior notes due 2025




02/15/2025

1,500

Sprint Corporation





10,500







Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC






3.36% Senior secured notes due 2021




09/20/2021

3,281

Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC





3,281







Sprint Communications, Inc.






Export Development Canada secured loan




12/17/2019

300

9% Guaranteed notes due 2018




11/15/2018

1,800

7% Guaranteed notes due 2020




03/01/2020

1,000

7% Senior notes due 2020




08/15/2020

1,500

11.5% Senior notes due 2021




11/15/2021

1,000

9.25% Secured debentures due 2022




04/15/2022

200

6% Senior notes due 2022




11/15/2022

2,280

Sprint Communications, Inc.





8,080







Sprint Capital Corporation






6.9% Senior notes due 2019




05/01/2019

1,729

6.875% Senior notes due 2028




11/15/2028

2,475

8.75% Senior notes due 2032




03/15/2032

2,000

Sprint Capital Corporation





6,204







Credit facilities






PRWireless secured term loan




06/28/2020

183

Secured equipment credit facilities




2020 - 2021

555

Secured term loan




02/03/2024

3,970

Credit facilities





4,708







Accounts receivable facility




11/18/2019

2,966







Financing obligations




2018 - 2021

614







Capital leases and other obligations




2018 - 2026

532

Total principal





36,885







Net premiums and debt financing costs





(24)

Total debt





$      36,861

 

NOTES TO THE FINANCIAL INFORMATION (Unaudited)



(1)

As more of our customers elect to lease a device rather than purchasing one under our subsidized program, there is a significant positive impact to EBITDA* and Adjusted EBITDA* from direct channel sales primarily due to the fact the cost of the device is not recorded as cost of products but rather is depreciated over the customer lease term. Under our device leasing program for the direct channel, devices are transferred from inventory to property and equipment and the cost of the leased device is recognized as depreciation expense over the customer lease term to an estimated residual value. The customer payments are recognized as revenue over the term of the lease. Under our subsidized program, the cash received from the customer for the device is recognized as equipment revenue at the point of sale and the cost of the device is recognized as cost of products. During the three and nine-month periods ended December 31, 2017, we leased devices through our Sprint direct channels totaling approximately $1,761 million and $3,671 million, respectively, which would have increased cost of products and reduced EBITDA* if they had been purchased under our subsidized program.

The impact to EBITDA* and Adjusted EBITDA* resulting from the sale of devices under our installment billing program is generally neutral except for the impact from the time value of money element related to the imputed interest on the installment receivable.

(2)

During the first quarter of fiscal year 2017, the company recorded losses on dispositions of assets primarily related to cell site construction and network development costs that are no longer relevant as a result of changes in the company's network plans. Additionally, the company recorded a pre-tax non-cash gain related to spectrum swaps with other carriers. During the third quarter of fiscal year 2016, the company recorded losses on dispositions of assets primarily related to cell site construction and network development costs that are no longer relevant as a result of changes in the company's network plans. During the second quarter of fiscal year 2016 the company recorded a pre-tax non-cash gain of $354 million related to spectrum swaps with other carriers.  

(3)

Severance and exit costs consist of lease exit costs primarily associated with tower and cell sites, access exit costs related to payments that will continue to be made under the company's backhaul access contracts for which the company will no longer be receiving any economic benefit, and severance costs associated with reduction in its work force.

(4)

During the first quarter of fiscal year 2017, we recorded a $5 million gain due to reversal of a liability recorded in relation to the termination of our relationship with General Wireless Operations, Inc. (Radio Shack).  During the first quarter of fiscal year 2016, contract terminations primarily relate to the termination of our pre-existing wholesale arrangement with NTELOS Holding Corp.

(5)

During the third and first quarters of fiscal year 2017, litigation and other contingencies consist of reductions associated with legal settlements or favorable developments in pending legal proceedings as well as non-recurring charges of $51 million related to a regulatory fee matter. During the second quarter of fiscal year 2016, litigation and other contingencies consist of unfavorable developments associated with legal matters as well as federal and state matters such as sales, use or property taxes.

(6)

During the third and second quarters of fiscal year 2017 we recorded estimated hurricane-related charges of $66 million and $34 million, respectively, consisting of customer service credits, incremental roaming costs, network repairs and replacements.

(7)

Sprint is no longer reporting Lifeline subscribers due to recent regulatory changes resulting in tighter program restrictions. We have excluded them from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale Lifeline mobile virtual network operators (MVNO). The table reflects the reclassification of the related Assurance Wireless prepaid revenue from Prepaid service revenue to Wholesale, affiliate and other revenue of $92 million and $275 million for the three and nine-month periods ended December 31, 2016, respectively. Revenue associated with subscribers through our wholesale Lifeline MVNO's continue to remain in Wholesale, affiliate and other revenue following this change.

*FINANCIAL MEASURES

Sprint provides financial measures determined in accordance with GAAP and adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other companies.

Sprint provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint does not provide reconciliations to GAAP of its forward-looking financial measures.

The measures used in this release include the following:

EBITDA is operating income/(loss) before depreciation and amortization. Adjusted EBITDA is EBITDA excluding severance, exit costs, and other special items. Adjusted EBITDA Margin represents Adjusted EBITDA divided by non-equipment net operating revenues for Wireless and Adjusted EBITDA divided by net operating revenues for Wireline. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of long-lived tangible and definite-lived intangible assets. Adjusted EBITDA and Adjusted EBITDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry.

Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid customers plus billings from installment plans and non-operating leases, as well as, operating lease revenue by the sum of the monthly average number of postpaid accounts during the period. We believe that ABPA provides useful information to investors, analysts and our management to evaluate average postpaid customer billings per account as it approximates the expected cash collections, including billings from installment plans and non-operating leases, as well as, operating lease revenue, per postpaid account each month. 

Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from postpaid phone customers plus billings from installment plans and non-operating leases, as well as, operating lease revenue by the sum of the monthly average number of postpaid phone connections during the period. We believe that ABPU provides useful information to investors, analysts and our management to evaluate average postpaid phone customer billings as it approximates the expected cash collections, including billings from installment plans and non-operating leases, as well as, operating lease revenue, per postpaid phone user each month. 

Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments, including changes in restricted cash, if any, and excluding the sale-leaseback of devices and equity method investments. Adjusted Free Cash Flow is Free Cash Flow plus the proceeds from device financings and sales of receivables, net of repayments. We believe that Free Cash Flow and Adjusted Free Cash Flow provide useful information to investors, analysts and our management about the cash generated by our core operations and net proceeds obtained to fund certain leased devices, respectively, after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, short-term investments and, if any, restricted cash. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.

SAFE HARBOR

This release includes "forward-looking statements" within the meaning of the securities laws. The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan", "outlook," "providing guidance," and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to our network, cost reductions, connections growth, and liquidity; and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services; efficiencies and cost savings of new technologies and services; customer and network usage; connection growth and retention; service, speed, coverage and quality; availability of devices; availability of various financings, including any leasing transactions; the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation's Annual Report on Form 10-K for the fiscal year ended March 31, 2017. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

About Sprint:

Sprint (NYSE: S) is a communications services company that creates more and better ways to connect its customers to the things they care about most. Sprint served 54.6 million connections as of December 31, 2017 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Sprint has been named to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.

 

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SOURCE Sprint Corporation

Media contact: Dave Tovar, David.Tovar@sprint.com; or Investor contact: Jud Henry, Investor.Relations@sprint.com