Sprint.com

  • Wireless service revenue of $7.3 billion grew year-over-year for the 13th consecutive quarter
    • Best-ever Sprint platform postpaid service revenue of $5.8 billion
    • Best-ever Sprint platform postpaid ARPU of $64.28
  • Net income of $1.1 billion in predecessor period and net loss of $699 million for successor period results in combined quarterly net income of $383 million
    • Operating Loss of $398 million
    • Adjusted EBITDA* of $1.34 billion, up 5 percent year-over-year
  • Smartphones account for record 92 percent of Sprint platform postpaid handset sales
  • Network Vision deployment on track to cover 200 million people with 4G LTE by the end of 2013
  • Introduced innovative new pricing programs
    • Unlimited, My WaySM and My All-InSM Plans
    • Sprint Unlimited GuaranteeSM
    • Sprint One UpSM

The company’s third quarter 2013 earnings conference call will be held at 8 a.m. ET today. Participants may dial 800-938-1120 in the U.S. or Canada (706-634-7849 internationally) and provide the following ID: 72584884 or may listen via the Internet at www.sprint.com/investors.

Additional information about results can be found in the “Quarterly Investor Update” posted on our Investor Relations website at www.sprint.com/investors.

Financial results in the enclosed tables for 2013 include a predecessor period from July 1, 2013, through the closing of the SoftBank transaction on July 10, 2013, and a successor period for the three months ended September 30, 2013. In order to present financial results in a way that offers investors a more meaningful calendar period-to-period comparison, we have combined the current year results of operations for the predecessor and successor periods. In addition, information provided with respect to forecasts of financial measures is provided on a combined basis. The enclosed remarks are in reference to the unaudited combined period unless otherwise noted. For additional information please reference the section titled Financial Measures.

OVERLAND PARK, Kan. (BUSINESS WIRE), October 30, 2013 - Sprint Corporation (NYSE:S) today reported third quarter 2013 results including continued year-over-year growth in wireless service revenue for the 13th consecutive quarter. Quarterly net income was $383 million, operating loss was $398 million, and Adjusted EBITDA* was $1.34 billion.

“During the third quarter Sprint platform postpaid service revenue and ARPU once again hit record levels and we continue to make great strides in our 4G LTE rollout,” said Dan Hesse, Sprint CEO. “We expect our network investments will bring customers greater speeds and capacity and, when combined with our unique unlimited for life offers, will improve our competitive positioning.”

Sprint Platform Highlights

The company recorded best-ever Sprint platform postpaid ARPU and service revenue. Sprint sold nearly 5 million smartphones in the third quarter with postpaid smartphone sales mix reaching record levels. Sprint sold nearly 1.4 million iPhones® during the quarter of which 40 percent were to new customers. For the quarter, the Sprint platform lost 360,000 postpaid subscribers and gained 84,000 prepaid subscribers and 181,000 wholesale and affiliate subscribers.

Net Income and Operating Loss Include Transaction-Related Impacts; Adjusted EBITDA* Improved 5 percent Year-Over-Year

Quarterly net income was $383 million and operating loss for the quarter was $398 million. Net income and operating loss included pre-tax expenses of $217 million primarily related to the Clearwire and SoftBank transactions including fees, severance and exit costs. Additionally, net income included a one-time, non-cash, $1.4 billion gain, net of taxes related to the write-up of Sprint’s previously held investment in Clearwire.

For the third quarter 2012, net loss was $767 million and operating loss was $231 million, including pre-tax, accelerated depreciation of $397 million primarily associated with the Nextel platform shutdown.

Adjusted EBITDA* of $1.34 billion improved 5 percent year-over-year as growth in Sprint platform service revenue, network savings resulting from the Nextel platform shutdown and lower net subsidy expense were partially offset by the loss of Nextel platform revenue and transaction-related dilution including the impact from purchase price allocations of approximately $125 million and the inclusion of 100 percent of Clearwire’s net loss.

Network Vision Surpasses 26,000 Sites on Air

Sprint continued to make strong progress on the Network Vision deployment in the quarter and currently has more than 26,000 Network Vision sites on air compared to more than 20,000 reported with second quarter results. Additionally, Sprint began realizing significant cost savings from the shutdown of the Nextel platform including tower rent, backhaul and utilities.

As part of Network Vision, Sprint has launched 4G LTE in 230 total markets across the country and expects to provide 200 million people with 4G LTE by the end of 2013.

Sprint Continues to Lead with Innovative Plans

During the quarter, Sprint also continued its commitment to offer customers the best value in wireless by launching new Unlimited, My Way and My All-In plans featuring unlimited talk, text and data while on the Sprint network. Customers signing up for these plans are also eligible for the new Sprint Unlimited Guarantee, which offers customers unlimited talk, text and data while on the Sprint network, for the life of the line of servicei. Finally, Sprint began offering Sprint One Up, a new upgrade program that gives customers unlimited talk, text and high speed data while on the Sprint Network plus the ability to upgrade their smartphone every 12 monthsii.

Sprint’s Leadership Continues to Receive Accolades

Third parties continued to recognize Sprint and its brands in the third quarter. Sprint was recognized as an “Enterprise Trusted Advisor” within the new Nemertes Enterprise Trusted Advisor™ program. Boost Mobile once again received the highest ranking in the J.D. Power 2013 U.S. Wireless Purchase Experience Non-Contract StudySM, Volume 2. It was Boost’s second consecutive highest ranking for Non-Contract Providers and sixth J.D. Power award overall since 2011. Virgin Mobile was the top rated wireless carrier in the 2013 Temkin Customer Service Ratings.

Sprint also received top honors for its environmental efforts. The company was the only telecommunications company named to CDP’s S&P 500 Climate Performance Leadership Index, which highlights companies that demonstrate strategies committed to improving their impact on the environment. Sprint was also named to the Dow Jones Sustainability Index (DJSI) North America, which tracks the corporate sustainability performance of the top 20 percent of the 600 largest companies by industry in the United States and Canada.

Forecast

The company continues to expect 2013 Adjusted EBITDA* to be between $5.1 billion and $5.3 billion including the dilutive effects of the SoftBank and Clearwire transactions.

The company continues to expect 2013 capital expenditures of approximately $8 billion.

 

     

 

   

 

   

 

 

 

 

   

 

                                 
Wireless Operating Statistics (Unaudited)
               
        Quarter To Date     Year To Date
        9/30/13     6/30/13     9/30/12     9/30/13     9/30/12
Net (Losses) Additions (in thousands)                                
Sprint platform:                                
Postpaid (3)       (360 )     194       410       (154 )     1,115  
Prepaid (4)       84       (486 )     459       166       1,780  
Wholesale and affiliate       181       (228 )     14       (271 )     1,187  
Total Sprint platform       (95 )     (520 )     883       (259 )     4,082  
Nextel platform:                                
Postpaid (3)       -       (1,060 )     (866 )     (1,632 )     (2,009 )
Prepaid (4)       -       (255 )     (440 )     (454 )     (1,131 )
Total Nextel platform       -       (1,315 )     (1,306 )     (2,086 )     (3,140 )
Transactions: (a)                                
Postpaid (3)       (175 )     (179 )     -       (354 )     -  
Prepaid (4)       (56 )     (20 )     -       (76 )     -  
Wholesale       13       -       -       13       -  
Total transactions       (218 )     (199 )     -       (417 )     -  
                                 
Total retail postpaid net losses       (535 )     (1,045 )     (456 )     (2,140 )     (894 )
Total retail prepaid net additions (losses)       28       (761 )     19       (364 )     649  
Total wholesale and affiliate net additions (losses)       194       (228 )     14       (258 )     1,187  
Total Wireless Net (Losses) Additions       (313 )     (2,034 )     (423 )     (2,762 )     942  
                                 
End of Period Subscribers (in thousands)                                
Sprint platform:                                
Postpaid (3)       30,091       30,451       29,844       30,091       29,844  
Prepaid (4)       15,299       15,215       14,608       15,299       14,608  
Wholesale and affiliate       7,862       7,710       8,405       7,862       8,405  
Total Sprint platform       53,252       53,376       52,857       53,252       52,857  
Nextel platform:                                
Postpaid (3)       -       -       2,276       -       2,276  
Prepaid (4)       -       -       830       -       830  
Total Nextel platform       -       -       3,106       -       3,106  
Transactions: (a)                                
Postpaid (3)       815       173       -       815       -  
Prepaid (4)       704       39       -       704       -  
Wholesale       106       -       -       106       -  
Total transactions       1,625       212       -       1,625       -  
                                 
Total retail postpaid end of period subscribers       30,906       30,624       32,120       30,906       32,120  
Total retail prepaid end of period subscribers       16,003       15,254       15,438       16,003       15,438  
Total wholesale and affiliate end of period subscribers       7,968       7,710       8,405       7,968       8,405  
Total End of Period Subscribers       54,877       53,588       55,963       54,877       55,963  
                                 
Supplemental Data - Connected Devices                                
End of Period Subscribers (in thousands)                                
Retail postpaid       834       798       817       834       817  
Wholesale and affiliate       3,298       3,057       2,542       3,298       2,542  
Total       4,132       3,855       3,359       4,132       3,359  
                                 
                                 
Churn                                
Sprint platform:                                
Postpaid       1.99 %     1.83 %     1.88 %     1.89 %     1.86 %
Prepaid       3.57 %     5.22 %     2.93 %     3.96 %     3.01 %
Nextel platform:                                
Postpaid       -       33.90 %     4.38 %     16.40 %     2.85 %
Prepaid       -       32.13 %     9.39 %     18.58 %     8.37 %
Transactions: (a)                                
Postpaid       6.38 %     26.64 %     -       9.47 %     -  
Prepaid       8.84 %     16.72 %     -       9.15 %     -  
                                 
Total retail postpaid churn       2.09 %     2.63 %     2.09 %     2.27 %     1.96 %
Total retail prepaid churn       3.78 %     5.51 %     3.37 %     4.18 %     3.50 %
                                 
Nextel Platform Subscriber Recaptures                                
Subscribers (in thousands) (5):                                
Postpaid       -       364       516       628       1,175  
Prepaid       -       101       152       168       432  
Rate (6):                                
Postpaid       -       34 %     59 %     38 %     56 %
Prepaid       -       39 %     34 %     37 %     29 %
                                           

(a)

 

We acquired approximately 352,000 postpaid subscribers and 59,000 prepaid subscribers through the acquisition of assets from U.S. Cellular when the transaction closed on May 17, 2013. We acquired approximately 788,000 postpaid subscribers, 721,000 prepaid subscribers, 93,000 wholesale subscribers and transferred 29,000 Sprint wholesale subscribers that were originally recognized through our Clearwire MVNO arrangement to Transactions postpaid subscribers as a result of the Clearwire acquisition when the transaction closed on July 9, 2013.

     
                                           
Wireless Operating Statistics (Unaudited) (continued)
                     
        Combined (1)     Successor     Predecessor
       

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

 

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

        9/30/13     9/30/13     9/30/13     9/30/13     7/10/13     7/10/13     6/30/13     9/30/12     9/30/12
ARPU (b)                                                        
Sprint platform:                                                        
Postpaid       $ 64.28     $ 64.05     $ 64.24     $ 64.24     $ 64.71     $ 63.98     $ 64.20     $ 63.21     $ 63.05
Prepaid       $ 25.33     $ 26.09     $ 25.14     $ 25.14     $ 26.99     $ 26.49     $ 26.96     $ 26.19     $ 25.78
Nextel platform:                                                        
Postpaid       $ -     $ 35.84     $ -     $ -     $ -     $ 35.84     $ 36.66     $ 38.65     $ 40.11
Prepaid       $ -     $ 32.60     $ -     $ -     $ -     $ 32.60     $ 34.48     $ 34.73     $ 35.96
Transactions: (a)                                                        
Postpaid       $ 40.00     $ 43.03     $ 37.44     $ 37.44     $ 35.75     $ 56.98     $ 59.87     $ -     $ -
Prepaid       $ 43.20     $ 42.28     $ 40.62     $ 40.62     $ 12.78     $ 18.26     $ 19.17     $ -     $ -
                                                         
Total retail postpaid ARPU       $ 63.69     $ 63.24     $ 63.48     $ 63.48     $ 64.55     $ 63.10     $ 63.59     $ 61.18     $ 60.64
Total retail prepaid ARPU       $ 26.04     $ 26.38     $ 25.86     $ 25.86     $ 26.96     $ 26.57     $ 27.02     $ 26.77     $ 26.73
                                                         

(a)

 

We acquired approximately 352,000 postpaid subscribers and 59,000 prepaid subscribers through the acquisition of assets from U.S. Cellular when the transaction closed on May 17, 2013. We acquired approximately 788,000 postpaid subscribers, 721,000 prepaid subscribers, 93,000 wholesale subscribers and transferred 29,000 Sprint wholesale subscribers that were originally recognized through our Clearwire MVNO arrangement to Transactions postpaid subscribers as a result of the Clearwire acquisition when the transaction closed on July 9, 2013.

     

(b)

 

ARPU is calculated by dividing service revenue by the sum of the average number of subscribers in the applicable service category. Changes in average monthly service revenue reflect subscribers 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 subscribers, plus the net effect of average monthly revenue generated by new subscribers and deactivating subscribers. Combined ARPU for the quarter to date September 30, 2013 period aggregate service revenue of the ten days ended July 10, 2013 predecessor period and the quarter to date September 30, 2013 successor period divided by the sum of the average subscribers during the quarter. Combined ARPU for the year to date September 30, 2013 period aggregate service revenue of the 191 days ended July 10, 2013 predecessor period and the year to date September 30, 2013 successor period divided by the sum of the average subscribers during the year to date period.

     
                               
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
        Combined (1)     Successor     Predecessor
       

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

 

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

          9/30/13         9/30/13         9/30/13         9/30/13         7/10/13         7/10/13         6/30/13         9/30/12         9/30/12  
                                                         
Net Operating Revenues       $ 8,681       $ 26,351       $ 7,749       $ 7,749       $ 932       $ 18,602       $ 8,877       $ 8,763       $ 26,340  
Net Operating Expenses                                                        
Cost of services         2,756         8,143         2,470         2,470         286         5,673         2,747         2,702         8,277  
Cost of products         2,153         6,744         1,872         1,872         281         4,872         2,298         2,391         6,912  
Selling, general and administrative         2,548         7,362         2,259         2,295         289         5,067         2,442         2,391         7,208  
Depreciation and amortization         1,524         4,648         1,403         1,403         121         3,245         1,632         1,488         5,050  
Other, net         98         733         103         103         (5 )       630         632         22         8  
Total net operating expenses         9,079         27,630         8,107         8,143         972         19,487         9,751         8,994         27,455  
Operating Loss         (398 )       (1,279 )       (358 )       (394 )       (40 )       (885 )       (874 )       (231 )       (1,115 )
Interest expense         (691 )       (1,551 )       (416 )       (416 )       (275 )       (1,135 )       (428 )       (377 )       (996 )
Equity in earnings (losses) of unconsolidated investments and other, net         3,070         2,481         165         18         2,905         2,463         (240 )       (112 )       (783 )
Income (Loss) before Income Taxes         1,981         (349 )       (609 )       (792 )       2,590         443         (1,542 )       (720 )       (2,894 )
Income tax expense         (1,598 )       (1,631 )       (90 )       (30 )       (1,508 )       (1,601 )       (55 )       (47 )       (110 )
Net Income (Loss)       $ 383       $ (1,980 )     $ (699 )     $ (822 )     $ 1,082       $ (1,158 )     $ (1,597 )     $ (767 )     $ (3,004 )
                                                         
Effective Tax Rate         NM         NM         -14.8 %       -3.8 %       58.2 %       361.4 %       -3.6 %       -6.5 %       -3.8 %
                                                         
                                                         
NON-GAAP RECONCILIATION - NET INCOME (LOSS) TO ADJUSTED EBITDA* (Unaudited)
(Millions)
        Combined (1)     Successor     Predecessor
       

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

 

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

          9/30/13         9/30/13         9/30/13         9/30/13         7/10/13         7/10/13         6/30/13         9/30/12         9/30/12  
                                                         
Net Income (Loss)       $ 383       $ (1,980 )     $ (699 )     $ (822 )     $ 1,082       $ (1,158 )     $ (1,597 )     $ (767 )     $ (3,004 )
Income tax expense         1,598         1,631         90         30         1,508         1,601         55         47         110  
Income (Loss) before Income Taxes         1,981         (349 )       (609 )       (792 )       2,590         443         (1,542 )       (720 )       (2,894 )
Equity in earnings (losses) of unconsolidated investments and other, net         (3,070 )       (2,481 )       (165 )       (18 )       (2,905 )       (2,463 )       240         112         783  
Interest expense         691         1,551         416         416         275         1,135         428         377         996  
Operating Loss         (398 )       (1,279 )       (358 )       (394 )       (40 )       (885 )       (874 )       (231 )       (1,115 )
Depreciation and amortization         1,524         4,648         1,403         1,403         121         3,245         1,632         1,488         5,050  
EBITDA*         1,126         3,369         1,045         1,009         81         2,360         758         1,257         3,935  
Severance and exit costs (7)         98         755         103         103         (5 )       652         632         22         206  
Gains from asset dispositions and exchanges (8)         -         -         -         -         -         -         -         -         (29 )
Asset impairments and abandonments (9)         -         -         -         -         -         -         -         -         18  
Spectrum hosting contract termination, net (10)         -         -         -         -         -         -         -         -         (170 )
Access costs (11)         -         -         -         -         -         -         -         -         (17 )
Litigation (12)         -         (22 )       -         -         -         (22 )       -         -         -  
Business combinations (13)         119         153         100         100         19         53         34         -         -  
Adjusted EBITDA*       $ 1,343       $ 4,255       $ 1,248       $ 1,212       $ 95       $ 3,043       $ 1,424       $ 1,279       $ 3,943  
Capital expenditures (2)         1,841         5,550         1,666         1,666         175         3,884         1,897         1,489         3,447  
Adjusted EBITDA* less Capex       $ (498 )     $ (1,295 )     $ (418 )     $ (454 )     $ (80 )     $ (841 )     $ (473 )     $ (210 )     $ 496  
                                                         
Adjusted EBITDA Margin*         16.8 %       17.7 %       17.5 %       17.0 %       11.1 %       18.0 %       17.7 %       16.0 %       16.4 %
                                                         
                                                         
Selected item:                                                        
Deferred tax asset valuation allowance       $ 851       $ 1,737       $ 327       $ 327       $ 524       $ 1,410       $ 621       $ 308       $ 1,210  
                                                         
                                       
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
        Combined (1)     Successor     Predecessor
       

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

 

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

          9/30/13         9/30/13         9/30/13         9/30/13         7/10/13         7/10/13         6/30/13         9/30/12         9/30/12  
Net Operating Revenues                                                        
Service revenue                                                        
Sprint platform:                                                        
Postpaid (3)       $ 5,835       $ 17,443       $ 5,201       $ 5,201       $ 634       $ 12,242       $ 5,835       $ 5,625       $ 16,573  
Prepaid (4)         1,160         3,630         1,028         1,028         132         2,602         1,276         1,127         3,207  
Wholesale, affiliate and other         131         395         116         116         15         279         131         121         348  
Total Sprint platform         7,126         21,468         6,345         6,345         781         15,123         7,242         6,873         20,128  
Nextel platform:                                                        
Postpaid (3)         -         217         -         -         -         217         74         311         1,236  
Prepaid (4)         -         50         -         -         -         50         17         108         457  
Total Nextel platform         -         267         -         -         -         267         91         419         1,693  
Transactions:                                                        
Postpaid (3)         91         115         89         89         2         26         24         -         -  
Prepaid (4)         82         83         81         81         1         2         1         -         -  
Wholesale         8         8         8         8         -         -         -         -         -  
Total transactions         181         206         178         178         3         28         25         -         -  
                                                         
Equipment revenue         710         2,343         636         636         74         1,707         820         750         2,238  
Total net operating revenues         8,017         24,284         7,159         7,159         858         17,125         8,178         8,042         24,059  
                                                         
Net Operating Expenses                                                        
Cost of services         2,327         6,790         2,087         2,087         240         4,703         2,292         2,256         6,824  
Cost of products         2,153         6,744         1,872         1,872         281         4,872         2,298         2,391         6,912  
Selling, general and administrative         2,356         6,880         2,100         2,100         256         4,780         2,294         2,277         6,854  
Depreciation and amortization         1,448         4,367         1,338         1,338         110         3,029         1,526         1,377         4,737  
Other, net         88         720         93         93         (5 )       627         632         22         25  
Total net operating expenses         8,372         25,501         7,490         7,490         882         18,011         9,042         8,323         25,352  
Operating Loss       $ (355 )     $ (1,217 )     $ (331 )     $ (331 )     $ (24 )     $ (886 )     $ (864 )     $ (281 )     $ (1,293 )
                                                         
Supplemental Revenue Data                                                        
Total retail service revenue       $ 7,168       $ 21,538       $ 6,399       $ 6,399       $ 769       $ 15,139       $ 7,227       $ 7,171       $ 21,473  
Total service revenue       $ 7,307       $ 21,941       $ 6,523       $ 6,523       $ 784       $ 15,418       $ 7,358       $ 7,292       $ 21,821  
                                                         
                                                         
                                                         
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
        Combined (1)     Successor     Predecessor
       

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

 

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

          9/30/13         9/30/13         9/30/13         9/30/13         7/10/13         7/10/13         6/30/13         9/30/12         9/30/12  
                                                         
Operating Loss       $ (355 )     $ (1,217 )     $ (331 )     $ (331 )     $ (24 )     $ (886 )     $ (864 )     $ (281 )     $ (1,293 )
Severance and exit costs (7)         88         742         93         93         (5 )       649         632         22         206  
Gains from asset dispositions and exchanges (8)         -         -         -         -         -         -         -         -         (29 )
Asset impairments and abandonments (9)         -         -         -         -         -         -         -         -         18  
Spectrum hosting contract termination, net (10)         -         -         -         -         -         -         -         -         (170 )
Litigation (12)         -         (22 )       -         -         -         (22 )       -         -         -  
Business combinations (13)         25         25         25         25         -         -         -         -         -  
Depreciation and amortization         1,448         4,367         1,338         1,338         110         3,029         1,526         1,377         4,737  
Adjusted EBITDA*         1,206         3,895         1,125         1,125         81         2,770         1,294         1,118         3,469  
Capital expenditures (2)         1,683         5,117         1,527         1,527         156         3,590         1,728         1,376         3,098  
Adjusted EBITDA* less Capex       $ (477 )     $ (1,222 )     $ (402 )     $ (402 )     $ (75 )     $ (820 )     $ (434 )     $ (258 )     $ 371  
                                                         
Adjusted EBITDA Margin*         16.5 %       17.8 %       17.2 %       17.2 %       10.3 %       18.0 %       17.6 %       15.3 %       15.9 %
                                                         
                                       
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
        Combined (1)     Successor     Predecessor
       

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

 

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

          9/30/13         9/30/13         9/30/13         9/30/13         7/10/13         7/10/13         6/30/13         9/30/12         9/30/12  
Net Operating Revenues                                                        
Voice       $ 375       $ 1,104       $ 333       $ 333       $ 42       $ 771       $ 377       $ 399       $ 1,242  
Data         64         245         57         57         7         188         87         95         302  
Internet         420         1,286         373         373         47         913         432         428         1,330  
Other         16         43         14         14         2         29         14         17         58  
Total net operating revenues         875         2,678         777         777         98         1,901         910         939         2,932  
                                                         
Net Operating Expenses                                                        
Costs of services and products         648         1,978         576         576         72         1,402         669         667         2,113  
Selling, general and administrative         95         311         84         84         11         227         112         114         351  
Depreciation         71         274         61         61         10         213         105         106         310  
Other, net         10         13         10         10         -         3         -         -         (17 )
Total net operating expenses         824         2,576         731         731         93         1,845         886         887         2,757  
Operating Income       $ 51       $ 102       $ 46       $ 46       $ 5       $ 56       $ 24       $ 52       $ 175  
                                                         
                                                         
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
        Combined (1)     Successor     Predecessor
       

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

 

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

          9/30/13         9/30/13         9/30/13         9/30/13         7/10/13         7/10/13         6/30/13         9/30/12         9/30/12  
                                                         
Operating Income       $ 51       $ 102       $ 46       $ 46       $ 5       $ 56       $ 24       $ 52       $ 175  
Severance and exit costs (7)         10         13         10         10         -         3         -         -         -  
Access costs (11)         -         -         -         -         -         -         -         -         (17 )
Depreciation         71         274         61         61         10         213         105         106         310  
Adjusted EBITDA*         132         389         117         117         15         272         129         158         468  
Capital expenditures (2)         84         238         73         73         11         165         93         60         184  
Adjusted EBITDA* less Capex       $ 48       $ 151       $ 44       $ 44       $ 4       $ 107       $ 36       $ 98       $ 284  
                                                         
Adjusted EBITDA Margin*         15.1 %       14.5 %       15.1 %       15.1 %       15.3 %       14.3 %       14.2 %       16.8 %       16.0 %
                                                         
                                     
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
                                    Combined (1)     Successor     Predecessor
                                   

Year
To
Date

   

Year
To
Date

   

191 Days
Ended

   

Year
To
Date

                                      9/30/13         9/30/13         7/10/13         9/30/12  
Operating Activities                                                      
Net loss                                   $ (1,980 )     $ (822 )     $ (1,158 )     $ (3,004 )
Depreciation and amortization                                     4,648         1,403         3,245         5,050  
Provision for losses on accounts receivable       313         119         194         413  
Share-based and long-term incentive compensation expense       95         58         37         57  
Deferred income taxes                                     1,608         22         1,586         142  
Gain on previously-held equity interests       (2,926 )       -         (2,926 )       -  
Equity in losses of unconsolidated investments, net       482         -         482         927  
Interest expense related to beneficial conversion feature on convertible bond       247         -         247         -  
Contribution to pension plan                                     -         -         -         (108 )
Spectrum hosting contract termination, net (10)             -         -         -         (170 )
Other working capital changes, net             758         30         728         (479 )
Other, net                                     126         (110 )       236         (45 )
Net cash provided by operating activities             3,371         700         2,671         2,783  
                                                       
Investing Activities                                                      
Capital expenditures (2)                                     (5,018 )       (1,878 )       (3,140 )       (2,784 )
Expenditures relating to FCC licenses             (156 )       (31 )       (125 )       (152 )
Change in short-term investments, net             888         (336 )       1,224         (534 )
Acquisitions, net of cash acquired             (18,151 )       (14,112 )       (4,039 )       -  
Increase in restricted cash             (3,050 )       (3,050 )       -         -  
Investment in Clearwire (including debt securities)             (308 )       -         (308 )       (128 )
Other, net                                     3         -         3         13  
Net cash used in investing activities                   (25,792 )       (19,407 )       (6,385 )       (3,585 )
                                                       
Financing Activities                                                      
Proceeds from debt and financings       7,030         6,826         204         3,577  
Debt financing costs       (118 )       (107 )       (11 )       (90 )
Repayments of debt and capital lease obligations       (859 )       (497 )       (362 )       (2,508 )
Proceeds from issuance of common stock and warrants, net       18,612         18,552         60         21  
Other, net       (14 )       (14 )       -         -  
Net cash provided by (used in) financing activities       24,651         24,760         (109 )       1,000  
                                                       
Net Increase (Decrease) in Cash and Cash Equivalents       2,230         6,053         (3,823 )       198  
                                                       
Cash and Cash Equivalents, beginning of period       3,828         5         6,351         5,447  
                                                       
Cash and Cash Equivalents, end of period     $ 6,058       $ 6,058       $ 2,528       $ 5,645  
                                                       
                                                       
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
      Combined (1)     Successor     Predecessor
     

Quarter
To
Date

   

Year
To
Date

   

Quarter
To
Date

   

Year
To
Date

   

10 Days
Ended

   

191 Days
Ended

   

Quarter
To
Date

   

Quarter
To
Date

   

Year
To
Date

        9/30/13         9/30/13         9/30/13         9/30/13         7/10/13         7/10/13         6/30/13         9/30/12         9/30/12  
                                                       
Net Cash Provided by Operating Activities     $ 1,190       $ 3,371       $ 694       $ 700       $ 496       $ 2,671       $ 1,235       $ 628       $ 2,783  
                                                       
Capital expenditures (2)       (2,066 )       (5,018 )       (1,878 )       (1,878 )       (188 )       (3,140 )       (1,571 )       (1,073 )       (2,784 )
Expenditures relating to FCC licenses, net       (33 )       (156 )       (31 )       (31 )       (2 )       (125 )       (68 )       (45 )       (152 )
Other investing activities, net       -         3         -         -         -         3         -         3         13  
Free Cash Flow*       (909 )       (1,800 )       (1,215 )       (1,209 )       306         (591 )       (404 )       (487 )       (140 )
                                                       
Debt financing costs       (107 )       (118 )       (107 )       (107 )       -         (11 )       (1 )       (33 )       (90 )
Increase (decrease) in debt and other, net       6,329         6,171         6,329         6,329         -         (158 )       (303 )       73         1,069  
Acquisitions, net of cash acquired       (17,642 )       (18,151 )       (14,112 )       (14,112 )       (3,530 )       (4,039 )       (509 )       -         -  
Proceeds from issuance of common stock and warrants, net       18,561         18,612         18,552         18,552         9         60         44         14         21  
Increase in restricted cash       (3,050 )       (3,050 )       (3,050 )       (3,050 )       -         -         -         -         -  
Investment in Clearwire (including debt securities)       (68 )       (308 )       -         -         (68 )       (308 )       (160 )       -         (128 )
Other financing activities, net       (14 )       (14 )       (14 )       (14 )       -         -         -         -         -  
Net Increase (Decrease) in Cash, Cash Equivalents and Short-Term Investments     $ 3,100       $ 1,342       $ 6,383       $ 6,389       $ (3,283 )     $ (5,047 )     $ (1,333 )     $ (433 )     $ 732  
                                                       
               
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
        Successor     Predecessor
          9/30/13         12/31/12         12/31/12  
Assets                    
Current assets                    
Cash and cash equivalents       $ 6,058       $ 5       $ 6,351  
Restricted cash         3,050         -         -  
Short-term investments         1,436         -         1,849  
Accounts and notes receivable, net         3,193         6         3,658  
Device and accessory inventory         1,028         -         1,200  
Deferred tax assets         167         -         1  
Prepaid expenses and other current assets         498         -         700  
Total current assets         15,430         11         13,759  
                     
Investments and other assets         474         3,104         1,833  
Property, plant and equipment, net         15,312         -         13,607  
Goodwill         6,819         -         359  
FCC licenses and other         41,459         -         20,677  
Definite-lived intangible assets, net         8,483         -         1,335  
Total       $ 87,977       $ 3,115       $ 51,570  
                     
Liabilities and Shareholders' Equity                    
Current liabilities                    
Accounts payable       $ 3,777       $ -       $ 3,487  
Accrued expenses and other current liabilities         6,042         4         5,008  
Current portion of long-term debt, financing and capital lease obligations         1,131         -         379  
Total current liabilities         10,950         4         8,874  
                     
Long-term debt, financing and capital lease obligations         32,420         -         23,962  
Deferred tax liabilities         14,263         1         7,047  
Other liabilities         3,861         -         4,600  
Total liabilities         61,494         5         44,483  
                     
Shareholders' equity                    
Common shares         39         -         6,019  
Paid-in capital         27,289         3,137         47,016  
Accumulated deficit         (849 )       (27 )       (44,815 )
Accumulated other comprehensive loss         4         -         (1,133 )
Total shareholders' equity         26,483         3,110         7,087  
Total       $ 87,977       $ 3,115       $ 51,570  
                     
                     
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
        Successor     Predecessor
          9/30/13         12/31/12         12/31/12  
                     
Total Debt       $ 33,551       $ -       $ 24,341  
Less: Cash and cash equivalents         (6,058 )       -         (6,351 )
Less: Restricted cash         (3,050 )       -         -  
Less: Short-term investments         (1,436 )       -         (1,849 )
Net Debt*       $ 23,007       $ -       $ 16,141  
                     
                     
SCHEDULE OF DEBT (Unaudited)
(Millions)
                    9/30/13

ISSUER

      COUPON     MATURITY     PRINCIPAL
Sprint Corporation                    
7.25% Notes due 2021       7.250%     09/15/2021     $ 2,250
7.875% Notes due 2023       7.875%     09/15/2023       4,250
Sprint Corporation                     6,500
                     
Sprint Communications, Inc.                    
Export Development Canada Facility (Tranche 2)       3.618%     12/15/2015       500
6% Senior Notes due 2016       6.000%     12/01/2016       2,000
9.125% Senior Notes due 2017       9.125%     03/01/2017       1,000
8.375% Senior Notes due 2017       8.375%     08/15/2017       1,300
9% Guaranteed Notes due 2018       9.000%     11/15/2018       3,000
7% Guaranteed Notes due 2020       7.000%     03/01/2020       1,000
7% Senior Notes due 2020       7.000%     08/15/2020       1,500
11.5% Senior Notes due 2021       11.500%     11/15/2021       1,000
9.25% Debentures due 2022       9.250%     04/15/2022       200
6% Senior Notes due 2022       6.000%     11/15/2022       2,280
Sprint Communications, Inc.                     13,780
                     
Sprint Capital Corporation                    
6.9% Senior Notes due 2019       6.900%     05/01/2019       1,729
6.875% Senior Notes due 2028       6.875%     11/15/2028       2,475
8.75% Senior Notes due 2032       8.750%     03/15/2032       2,000
Sprint Capital Corporation                     6,204
                     
Clearwire Communications LLC                    
12% Senior Secured Notes due 2015       12.000%     12/01/2015       2,350
14.75% First-Priority Senior Secured Notes due 2016       14.750%     12/01/2016       300
12% Second-Priority Secured Notes due 2017       12.000%     12/01/2017       500
8.25% Exchangeable Notes due 2040       8.250%     12/01/2040       629
Clearwire Communications LLC                     3,779
                     
iPCS Inc.                    
Second Lien Senior Secured Floating Rate Notes due 2014       3.515%     05/01/2014       181
iPCS Inc.                     181
                     
EKN Secured Equipment Facility ($1 Billion)       2.030%     03/30/2017       715
                     
Vendor financing notes - Clearwire Communications LLC             2015       27
                     
Tower financing obligation       6.092%     09/30/2021       351
Capital lease obligations and other             2014 - 2023       199
TOTAL PRINCIPAL                     31,736
                     
Net premiums                     1,815
TOTAL DEBT                   $ 33,551
   
Supplemental information:  
 
The Company had $2.1 billion of borrowing capacity available under our unsecured revolving bank credit facility as of September 30, 2013. Our unsecured revolving bank credit facility expires in February 2018.
   
In May 2012, certain of our subsidiaries entered into a $1.0 billion secured equipment credit facility to finance equipment-related purchases for Network Vision. The facility is equally divided into two consecutive tranches of $500 million, with the drawdown availability contingent upon Sprint's acquisition of equipment-related purchases from Ericsson, up to the maximum of each tranche, ending on May 31, 2013 and May 31, 2014, for the first and second tranche, respectively. Interest and principal are payable semi-annually with a final maturity of March 2017 for both tranches.

 

NOTES TO THE FINANCIAL INFORMATION (Unaudited)

 
(1)   References to the combined quarter to date September 30, 2013 period aggregate the results of the ten days ended July 10, 2013 predecessor period and the quarter to date September 30, 2013 successor period. References to the combined year to date September 30, 2013 period aggregate the results of the 191 days ended July 10, 2013 predecessor period and the year to date September 30, 2013 successor period. For all periods other than the third quarter 2013, results are on a consolidated basis. For the third quarter 2013, results are on a combined basis.
     
(2)   Capital expenditures is an accrual based amount that includes the changes in unpaid capital expenditures and excludes capitalized interest. Cash paid for capital expenditures includes total capitalized interest of $1 million, $13 million and $29 million for the predecessor third and second quarters and year to date periods of 2013, respectively, $14 million for the successor third quarter and year to date periods of 2013, and $52 million, $102 million, and $269 million for the third and second quarters and year to date periods of 2012, respectively, and can be found in the Condensed Consolidated Cash Flow Information and the Reconciliation to Free Cash Flow*.
     
(3)   Postpaid subscribers on the Sprint platform are defined as retail postpaid subscribers on the CDMA network, including subscribers utilizing WiMax and LTE technology. Postpaid subscribers previously on the Nextel platform are defined as retail postpaid subscribers on the iDEN network through June 30, 2013. Postpaid subscribers from transactions are defined as retail postpaid subscribers acquired from U.S. Cellular in May 2013 and Clearwire in July 2013 who had not deactivated or been recaptured on the Sprint platform.
     
(4)   Prepaid subscribers on the Sprint platform are defined as retail prepaid subscribers and session-based tablet users who utilize the CDMA network and WiMax and LTE technology via our multi-brand offerings. Prepaid subscribers previously on the Nextel platform are defined as retail prepaid subscribers who utilized iDEN technology through June 30, 2013. Prepaid subscribers from transactions are defined as retail prepaid subscribers acquired from U.S. Cellular in May 2013 and Clearwire in July 2013 who had not deactivated or been recaptured on the Sprint platform.
     
(5)   Nextel Subscriber Recaptures are defined as the number of subscribers that deactivated service from the postpaid or prepaid Nextel platform, as applicable, during each period but remained with the Company as subscribers on the postpaid or prepaid Sprint platform, respectively. Subscribers that deactivated service from the Nextel platform and activated service on the Sprint platform are included in the Sprint platform net additions for the applicable period.
     
(6)   The Postpaid and Prepaid Nextel Recapture Rates are defined as the portion of total subscribers that left the postpaid or prepaid Nextel platform, as applicable, during the period and were retained on the postpaid or prepaid Sprint platform, respectively.
     
(7)   Severance and lease exit costs are primarily associated with workforce reductions and with exit costs associated with the Nextel platform and acquisition of Clearwire.
     
(8)   For the first quarter of 2012, gains from asset dispositions and exchanges are primarily due to spectrum exchange transactions.
     
(9)   For the first quarter of 2012, asset impairment and abandonment activity includes $18 million related to a change in our backhaul architecture in connection to our Network Vision design from microwave to a more cost effective fiber backhaul.
     
(10)   On March 16, 2012, we elected to terminate the arrangement with LightSquared LP and LightSquared, Inc. (LightSquared). As we have no future service obligations with respect to the arrangement with LightSquared, we recognized $236 million of the advanced payments as other operating income in the first quarter of 2012. As a result of the termination of the hosting agreement, we impaired capitalized costs specific to LightSquared's 1.6 GHz spectrum that the company no longer intends to deploy which totaled $66 million.
     
(11)   Favorable developments during the first quarter of 2012 relating to disagreements with local exchange carriers resulted in a reduction in expected access costs of $17 million.
     
(12)   For the first quarter of 2013, litigation activity is primarily a result of favorable developments in connection with a tax (non-income) related contingency.
     
(13)   For the third and second quarters of 2013, included in selling, general and administrative expenses are fees paid to unrelated parties for the transaction with SoftBank and our acquisition of Clearwire.
     

*FINANCIAL MEASURES

On July 9, 2013, Sprint Communications, Inc. (formerly Sprint Nextel Corporation) completed its acquisition of Clearwire. On July 10, 2013 we consummated the SoftBank Merger with Starburst II, which immediately changed its name to Sprint Corporation (now referred to as the Company or Sprint). As a result of these transactions, the assets and liabilities of Sprint Communications, Inc. and Clearwire were adjusted to fair value on the respective closing dates. The Company's financial statement presentations herein distinguish between a predecessor period relating to Sprint Communications, Inc. for periods prior to the SoftBank Merger (Predecessor) and a successor period (Successor). The Successor information includes the activity and accounts of Sprint Corporation as of and for the three and nine month periods ended September 30, 2013, which includes the activity and accounts of Sprint Communications, Inc., prospectively, beginning on July 11, 2013. The Predecessor information contained herein represents the historical basis of presentation for Sprint Communications, Inc. for all periods prior to the SoftBank Merger date. As a result of the valuation of assets acquired and liabilities assumed at fair value at the time of the SoftBank Merger and Clearwire Acquisition, the financial statements for the successor period are presented on a measurement basis different than the predecessor period, which was Sprint Communication’s historical cost, and are, therefore, not comparable.

In order to present financial results in a way that offers investors a more meaningful calendar period to period comparison, we have combined the current year results of operations for the predecessor 191 day and 10 day periods ended July 10, 2013 with current year successor results of operations for the three and nine month periods ended Sept. 30, 2013, on an unaudited combined basis. The combined information for the period July 1, 2013 through Sept. 30, 2013 does not purport to represent what our consolidated results of operations would have been if the Successor had actually been formed on July 1, 2013, nor have we made any attempt to either include or exclude expenses or income that would have resulted had the acquisition actually occurred on July 1, 2013.

Sprint provides financial measures determined in accordance with accounting principles generally accepted in the United States (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. Other than the use of non-GAAP combined results as described above, 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, including our ability to fund discretionary spending such as capital expenditures, spectrum acquisitions and other investments and our ability to incur and service debt. 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, including changes in restricted cash, and amounts included as investments in Clearwire during the period. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations 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,” “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 network performance, 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 ability to operationalize the anticipated benefits from the SoftBank, Clearwire and U.S. Cellular transactions, the development and deployment of new technologies; efficiencies and cost savings of multimode technologies; customer and network usage; customer growth and retention; service, coverage and quality; availability of devices; 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 Nextel’s Annual Report on Form 10-K for the year ended December 31, 2012, our Quarterly Report on Form 10-Q for the second quarter of 2013, and when filed, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. 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) offers a comprehensive range of wireless and wireline communications services bringing the freedom of mobility to consumers, businesses and government users. Sprint served more than 54 million customers at the end of the third quarter of 2013 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; offering industry-leading mobile data services, leading prepaid 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. The American Customer Satisfaction Index rated Sprint as the most improved company in customer satisfaction, across all 47 industries, during the last five years. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.

i The guarantee applies to customers as long as they remain on the Unlimited, My Way or My All-in plans, meet the terms and conditions of the plan and pay their bill in full and on time. Price and phone selection are subject to change. Other plans may receive prioritized bandwidth availability. Streaming video speeds may be limited to 1 Mbps.

ii Requires installment agreement with no down payment, 24 monthly payments (final payment amount varies; balance not to exceed full purchase price), 0% APR on approved credit, & a qualifying wireless plan. If you cancel wireless service, remaining balance on device becomes due. Offer is for well-qualified buyers, subject to credit approval. Tax due at sale. Restrictions apply.

Contact(s):

Sprint Corporation
Media:
Scott Sloat, 240-855-0164
scott.sloat@sprint.com
or
Investors:
Brad Hampton, 800-259-3755
investor.relations@sprint.com