Sprint.com

October 25, 2016

Sprint Reports Year-over-Year Growth in Net Operating Revenues for the First Time in over Two Years and a Year-over-Year Increase of More Than Five Times in Postpaid Phone Net Additions

Record Low Postpaid Phone Churn with Second Quarter of Fiscal Year 2016 Results

  • Net operating revenues of $8.25 billion grew year-over-year for the first time in over two years
  • Net loss of $142 million, operating income of $622 million and Adjusted EBITDA* of $2.35 billion
    • More than $1.1 billion of year-to-date reductions in cost of service and selling, general, and administrative expenses
  • Net cash provided by operating activities of $1.71 billion; Adjusted free cash flow* of $707 million
    • Nearly $1.2 billion of Adjusted free cash flow* in the first half of fiscal year 2016
  • Postpaid phone net additions of 347,000 doubled from the prior quarter and improved from 62,000 in the prior year – a year-over-year increase of more than five times
    • Postpaid phone churn of 1.37 percent is the best in company history and improved year-over-year for the seventh consecutive quarter
    • Postpaid phone gross additions increased nearly 20 percent year-over-year
    • Postpaid net port positive against all three national carriers for the second quarter in a row
  • Successful launch of Unlimited Freedom plan offering exceptional value and simplicity for customers
  • Increased liquidity and dramatically lowered cost of capital with spectrum-backed notes priced at 3.36 percent – less than half of Sprint’s current effective interest rate

OVERLAND PARK, Kan. (BUSINESS WIRE), October 25, 2016 - Sprint Corporation (NYSE:S) today reported operating results for the second quarter of fiscal year 2016, including the first year-over-year increase in total net operating revenues in over two years, a year-over-year increase of more than five times in postpaid phone net additions, and record low postpaid phone churn. The company also reported a net loss of $142 million, operating income of $622 million, and Adjusted EBITDA* of $2.35 billion.

“We took another step forward in our plan toward sustainable profitability and cash generation with this quarter’s results,” said Sprint CEO Marcelo Claure. “The top line is now growing, we continue to take costs out of the business, and we are successfully raising money at materially lower rates to reduce our future cash interest expenses.”

Revenue Grows as Cost Structure Improves
Sprint reported year-over-year growth in total net operating revenues for the first time in over two years, another sign its plan to transform the company is progressing. Total net operating revenues of $8.25 billion grew 3 percent year-over-year and wireless net operating revenues of $7.85 billion grew nearly 5 percent year-over-year.

Sprint continues to improve the cost structure of the business, realizing more than $1.1 billion of year-to-date reductions in cost of services and selling, general and administrative (SG&A) expenses, with nearly $600 million of the reduction coming in the fiscal second quarter. The company remains on track to achieve its goal of a sustainable reduction of $2 billion or more of run-rate operating expenses exiting fiscal year 2016 and has plans for further reductions in fiscal year 2017 and beyond.

The company also reported the following financial results:

  • Net loss of $142 million, or $0.04 per share, in the quarter compared to a net loss of $585 million, or $0.15 per share, in the year-ago period, an improvement of $443 million, or $0.11 per share.
  • Operating income of $622 million in the quarter compared to an operating loss of $2 million in the year-ago period, an improvement of $624 million. The current quarter included a non-cash pre-tax gain of $354 million related to spectrum swaps with other carriers that was partially offset by $103 million of litigation and other contingency expenses.
  • Adjusted EBITDA* of $2.35 billion in the quarter compared to $2.01 billion in the year-ago period, an increase of approximately $340 million or 17 percent. The improvement was primarily due to higher operating revenues and lower cost of services and SG&A expenses, partially offset by higher cost of products expenses.
  • Net cash provided by operating activities was $1.71 billion in the quarter compared to $1.67 billion in the year-ago period, an improvement of $39 million.
  • Adjusted free cash flow* was positive $707 million in the quarter compared to negative $100 million in the year-ago period, an improvement of $807 million.

Spectrum-Backed Notes Improve Liquidity Position
Total liquidity was $11.3 billion at the end of the quarter, including $5.7 billion of cash, cash equivalents and short-term investments. Additionally, the company also has $1.1 billion of availability under vendor financing agreements that can be used toward the purchase of 2.5GHz network equipment.

Last week, the company priced $3.5 billion of spectrum-backed senior secured notes at 3.36 percent, which is less than half of the company’s current effective interest rate. This transaction represents the latest example of Sprint’s strategy to diversify its sources of financing, lower its cost of capital, and reduce future interest expenses by retiring upcoming maturities with higher coupon payments. In conjunction with closing of the spectrum-backed notes, which is expected on Oct. 27, the company’s $2.5 billion unsecured financing facility will terminate.

Postpaid Phone Customers Continue to Choose Sprint
Sprint’s focus on delivering the best value proposition in wireless resulted in its fifth consecutive quarter of positive postpaid phone net additions with 347,000 in the quarter, an improvement of 285,000 compared to the year-ago period. The year-over-year improvement was driven by both better acquisition and retention, as postpaid phone gross additions were up nearly 20 percent year-over-year and postpaid phone churn of 1.37 percent improved 12 basis points to reach the lowest level in company history. Postpaid phone churn has improved year-over-year for seven consecutive quarters.

Sprint enhanced its rate plan options for customers by launching Unlimited Freedom in August, an exceptional offer of value and simplicity. The popularity of this new plan has grown quickly and today about half of new customers are choosing the Unlimited Freedom plan when they join Sprint. This attractive new rate plan helped the company remain postpaid net port positive against all three national carriers for the second quarter in a row.

The company also reported the following Sprint platform results:

  • Total net additions were 740,000 in the quarter, including postpaid net additions of 344,000, prepaid net losses of 427,000, and wholesale and affiliate net additions of 823,000.
  • Total postpaid churn of 1.52 percent in the quarter improved by two basis points year-over-year.

Third Party Sources and Record Low Churn Reinforce Network Improvements
Sprint aims to unlock the value of the largest spectrum holdings in the U.S. by densifying and optimizing its network to provide customers the best experience. The company’s LTE Plus Network, which combines a rich tri-band spectrum portfolio with the LTE Advanced features of carrier aggregation and antenna beamforming, has been deployed across the country. Third party sources, along with record low postpaid phone churn, continue to validate the network improvements.

  • Sprint ranked second for wireless network quality performance in five out of six geographic regions of the U.S. according to J.D. Power, a leader in independent industry benchmark studies, in its 2016 Wireless Network Quality Performance Study – Volume 2.
  • Sprint’s LTE Plus Network continued to outperform Verizon, AT&T, and T-Mobile by delivering the fastest LTE download speeds based on recent crowd-sourced data from Nielsen.1 Additionally, Sprint’s reliability beat T-Mobile and performed within 1 percent of AT&T and Verizon.2
  • Independent mobile analytics firm RootMetrics® awarded Sprint 52 percent more first or shared first place RootScore® Awards (from 90 to 137) in the 70 markets measured in the second half of 2016 compared to the prior testing period.3

Sprint’s LTE Plus Network is now available in more than 250 markets and the company has started to deploy three-channel carrier aggregation in such markets as Chicago, San Francisco, Minneapolis, Dallas, Denver, Kansas City, Cleveland, and Columbus. These deployments will provide peak download speeds of more than 200Mbps on capable devices when available. The company currently has 10 three-channel carrier aggregation capable devices, including the recently launched iPhone 7 and Samsung Galaxy S7.

Fiscal Year 2016 Outlook

  • The company is raising its guidance for operating income from its previous expectation of $1 billion to $1.5 billion to a range of $1.2 billion to $1.7 billion, partially due to the net benefit of special items in the quarter.
  • The company now expects cash capital expenditures, excluding devices leased through indirect channels, to be less than $3 billion, as the company has better visibility into the timing of payments associated with its network densification plan.
  • The company continues to expect Adjusted EBITDA* of $9.5 billion to $10 billion and Adjusted free cash flow* around break-even.

Conference Call and Webcast

  • Date/Time: 8:30 a.m. (ET) Tuesday, Oct. 25, 2016
  • Call-in Information
    • U.S./Canada: 866-360-1063 (ID: 84455839)
    • International: 443-961-0242 (ID: 84455839)
  • Webcast available at www.sprint.com/investors
  • Additional information about results is available on our Investor Relations website

1 Sprint’s analysis of Nielsen NMP data for average LTE download speeds, based on a population weighted average of all 99 Sprint markets in the U.S.
2 Average network reliability (voice & data) based on Sprint’s analysis of Nielsen drive test data in the top 106 metro markets.
3 Rankings based on RootMetrics 70 Metro RootScore Reports (January-October 2016) for mobile performance as tested on best available plans and devices on 4 mobile networks across all available network types. Your experience may vary. The RootMetrics awards are not an endorsement of Sprint. Visit www.rootmetrics.com.

                           
Wireless Operating Statistics (Unaudited)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
Sprint platform (1):                          
Net additions (losses) (in thousands)                          
Postpaid   344         180         378         524         688  
Prepaid   (427 )       (331 )       (188 )       (758 )       (554 )
Wholesale and affiliate   823         528         866         1,351         1,597  
Total Sprint platform wireless net additions   740         377         1,056         1,117         1,731  
                           
End of period connections (in thousands)                          
Postpaid (d)   31,289         30,945         30,394         31,289         30,394  
Prepaid (d)   13,547         13,974         15,152         13,547         15,152  
Wholesale and affiliate (d)   15,357         14,534         12,322         15,357         12,322  
Total Sprint platform end of period connections   60,193         59,453         57,868         60,193         57,868  
                           
Churn                          
Postpaid   1.52 %       1.56 %       1.54 %       1.54 %       1.55 %
Prepaid   5.63 %       5.55 %       5.06 %       5.59 %       5.07 %
                           
Supplemental data - connected devices                          
End of period connections (in thousands)                          
Retail postpaid   1,874         1,822         1,576         1,874         1,576  
Wholesale and affiliate   9,951         9,244         7,338         9,951         7,338  
Total   11,825         11,066         8,914         11,825         8,914  
                           
Supplemental data - total company                          
End of period connections (in thousands)                          
Sprint platform (1)(d)   60,193         59,453         57,868         60,193         57,868  
Transactions (2)   -         -         710         -         710  
Total   60,193         59,453         58,578         60,193         58,578  
                           
Sprint platform ARPU (1) (a)                          
Postpaid $ 50.54       $ 51.54       $ 53.99       $ 51.04       $ 54.73  
Prepaid $ 27.31       $ 27.34       $ 27.66       $ 27.32       $ 27.73  
                           
Sprint platform postpaid phone (1)                          
Postpaid phone net additions   347         173         62         520         50  
Postpaid phone end of period connections (d)   25,669         25,322         24,928         25,669         24,928  
Postpaid phone churn   1.37 %       1.39 %       1.49 %       1.38 %       1.49 %
                           
NON-GAAP RECONCILIATION - ABPA*, POSTPAID PHONE ARPU AND ABPU* (Unaudited)                  
(Millions, except accounts, connections, ABPA*, ARPU, and ABPU*)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
Sprint platform ABPA* (1)                          
Postpaid service revenue $ 4,720       $ 4,778       $ 4,893       $ 9,498       $ 9,857  
Add: Installment plan billings   274         264         305         538         603  
Add: Lease revenue   811         755         389         1,566         645  
Total for Sprint platform postpaid connections $ 5,805       $ 5,797       $ 5,587       $ 11,602       $ 11,105  
                           
Sprint platform postpaid accounts (in thousands)   11,363         11,329         11,197         11,346         11,186  
Sprint platform postpaid ABPA* (b) $ 170.29       $ 170.56       $ 166.26       $ 170.43       $ 165.45  
                           
  Quarter To Date           Year To Date
    9/30/16         6/30/16         9/30/15         9/30/16         9/30/15  
Sprint platform postpaid phone ARPU and ABPU* (1)                          
Postpaid phone service revenue $ 4,441       $ 4,489       $ 4,608       $ 8,930       $ 9,290  
Add: Installment plan billings   248         243         286         491         568  
Add: Lease revenue   797         741         379         1,538         628  
Total for Sprint platform postpaid phone connections $ 5,486       $ 5,473       $ 5,273       $ 10,959       $ 10,486  
                           
Sprint platform postpaid average phone connections (in thousands)   25,514         25,275         24,886         25,394         24,871  
Sprint platform postpaid phone ARPU (a) $ 58.03       $ 59.20       $ 61.71       $ 58.61       $ 62.25  
Sprint platform postpaid phone ABPU* (c) $ 71.69       $ 72.17       $ 70.62       $ 71.93       $ 70.27  

(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. Sprint platform postpaid phone ARPU represents revenues related to our postpaid phone connections.
(b) Sprint platform postpaid ABPA* is calculated by dividing service revenue earned from connections plus installment plan billings and lease revenue by the sum of the monthly average number of accounts during the period.
(c) Sprint platform postpaid phone ABPU* is calculated by dividing postpaid phone service revenue earned from postpaid phone connections plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid phone connections during the period.
(d) As part of the transaction involving Shenandoah Telecommunications Company (Shentel), 186,000 and 92,000 subscribers were transferred in May 2016 from postpaid and prepaid, respectively, to affiliates. An additional 270,000 nTelos' subscribers are now part of our affiliate relationship with Shentel and are being reported in wholesale and affiliate subscribers during the quarter ended June 30, 2016.

                             
Wireless Device Financing Summary (Unaudited)                            
(Millions, except sales, connections, and sales and connections mix)
    Quarter To Date     Year To Date
    9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
                             
Postpaid sales (in thousands)     3,747         3,268         4,117         7,015         8,157  
Postpaid sales mix                            
Subsidy/other     27 %       31 %       36 %       29 %       36 %
Installment plans     34 %       25 %       13 %       30 %       13 %
Leasing     39 %       44 %       51 %       41 %       51 %
                             
Installment plans                            
Installment sales financed   $ 745       $ 407       $ 242       $ 1,152       $ 497  
Installment billings     274         264         305         538         603  
Installments receivables, net     -         -         1,113         -         1,113  
                             
Leasing                            
Lease revenue   $ 811       $ 755       $ 389       $ 1,566       $ 645  
Lease depreciation     724         644         420         1,368         696  
                             
Leased device additions:                            
Cash paid for capital expenditures - leased devices   $ 358       $ 405       $ 573       $ 763       $ 1,117  
Transfers from inventory - leased devices     645         541         742         1,186         1,550  
                             
Leased devices in property, plant and equipment, net   $ 3,759       $ 3,766       $ 3,609       $ 3,759       $ 3,609  
                             
Leased device net proceeds                            
Proceeds from MLS sale   $ -       $ 1,055       $ -       $ 1,055       $ -  
Repayments to MLS     (161 )       (165 )       -         (326 )       -  
Proceeds from lease securitization     -         -         -         -         -  
Repayments of lease securitization     (23 )       (75 )       -         (98 )       -  
Net (repayments) proceeds of device financings and sales of future lease receivables   $ (184 )     $ 815       $ -       $ 631       $ -  
                             
                   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)                  
(Millions, except per share data)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
Net operating revenues                          
Service revenue $ 6,413       $ 6,516       $ 6,880       $ 12,929       $ 13,917  
Equipment revenue   1,834         1,496         1,095         3,330         2,085  
Total net operating revenues   8,247         8,012         7,975         16,259         16,002  
Net operating expenses                          
Cost of services (exclusive of depreciation and amortization below)   2,101         2,099         2,453         4,200         4,846  
Cost of products (exclusive of depreciation and amortization below)   1,693         1,419         1,290         3,112         2,655  
Selling, general and administrative   1,995         1,917         2,224         3,912         4,411  
Depreciation - network and other   986         1,036         992         2,022         1,957  
Depreciation - leased devices   724         644         420         1,368         696  
Amortization   271         287         331         558         678  
Other, net   (145 )       249         267         104         260  
Total net operating expenses   7,625         7,651         7,977         15,276         15,503  
Operating income (loss)   622         361         (2 )       983         499  
Interest expense   (630 )       (615 )       (542 )       (1,245 )       (1,084 )
Other (expense) income, net   (15 )       8         5         (7 )       9  
Loss before income taxes   (23 )       (246 )       (539 )       (269 )       (576 )
Income tax expense   (119 )       (56 )       (46 )       (175 )       (29 )
Net loss $ (142 )     $ (302 )     $ (585 )     $ (444 )     $ (605 )
                           
Basic and diluted net loss per common share $ (0.04 )     $ (0.08 )     $ (0.15 )     $ (0.11 )     $ (0.15 )
Weighted average common shares outstanding   3,979         3,975         3,969         3,977         3,968  
                           
Effective tax rate   -517.4 %       -22.8 %       -8.5 %       -65.1 %       -5.0 %
                           
                           
NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED EBITDA* (Unaudited)                        
(Millions)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
                           
Net loss $ (142 )     $ (302 )     $ (585 )     $ (444 )     $ (605 )
Income tax expense   119         56         46         175         29  
Loss before income taxes   (23 )       (246 )       (539 )       (269 )       (576 )
Other expense (income), net   15         (8 )       (5 )       7         (9 )
Interest expense   630         615         542         1,245         1,084  
Operating income (loss)   622         361         (2 )       983         499  
Depreciation - network and other   986         1,036         992         2,022         1,957  
Depreciation - leased devices   724         644         420         1,368         696  
Amortization   271         287         331         558         678  
EBITDA* (3)   2,603         2,328         1,741         4,931         3,830  
(Gain) loss from asset dispositions and exchanges, net (4)   (354 )       -         85         (354 )       85  
Severance and exit costs (5)   (5 )       16         25         11         38  
Contract terminations (6)   -         113         -         113         -  
Litigation and other contingencies (7)   103         -         157         103         157  
Reduction in liability - U.S. Cellular asset acquisition (8)   -         -         -         -         (20 )
Adjusted EBITDA* (3) $ 2,347       $ 2,457       $ 2,008       $ 4,804       $ 4,090  
                           
Adjusted EBITDA margin*   36.6 %       37.7 %       29.2 %       37.2 %       29.4 %
                           
                           
Selected items:                          
Cash paid for capital expenditures - network and other $ 470       $ 473       $ 1,162       $ 943       $ 2,964  
Cash paid for capital expenditures - leased devices $ 358       $ 405       $ 573       $ 763       $ 1,117  
                           
                           
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)                          
(Millions)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
Net operating revenues                          
Service revenue                          
Sprint platform (1):                          
Postpaid $ 4,720       $ 4,778       $ 4,893       $ 9,498       $ 9,857  
Prepaid   1,129         1,165         1,259         2,294         2,559  
Wholesale, affiliate and other   168         158         185         326         366  
Total Sprint platform   6,017         6,101         6,337         12,118         12,782  
                           
Total transactions (2)   -         -         84         -         189  
Total service revenue   6,017         6,101         6,421         12,118         12,971  
                           
Equipment revenue   1,834         1,496         1,095         3,330         2,085  
Total net operating revenues   7,851         7,597         7,516         15,448         15,056  
                           
Net operating expenses                          
Cost of services (exclusive of depreciation and amortization below)   1,793         1,784         2,111         3,577         4,116  
Cost of products (exclusive of depreciation and amortization below)   1,693         1,419         1,290         3,112         2,655  
Selling, general and administrative   1,931         1,834         2,136         3,765         4,232  
Depreciation - network and other   936         985         943         1,921         1,860  
Depreciation - leased devices   724         644         420         1,368         696  
Amortization   271         287         331         558         678  
Other, net   (151 )       249         266         98         258  
Total net operating expenses   7,197         7,202         7,497         14,399         14,495  
Operating income $ 654       $ 395       $ 19       $ 1,049       $ 561  
                           
                           
                           
                           
WIRELESS NON-GAAP RECONCILIATION (Unaudited)                          
(Millions)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
                           
Operating income $ 654       $ 395       $ 19       $ 1,049       $ 561  
(Gain) loss from asset dispositions and exchanges, net (4)   (354 )       -         85         (354 )       85  
Severance and exit costs (5)   (11 )       16         24         5         36  
Contract terminations (6)   -         113         -         113         -  
Litigation and other contingencies (7)   103         -         157         103         157  
Reduction in liability - U.S. Cellular asset acquisition (8)   -         -         -         -         (20 )
Depreciation - network and other   936         985         943         1,921         1,860  
Depreciation - leased devices   724         644         420         1,368         696  
Amortization   271         287         331         558         678  
Adjusted EBITDA* (3) $ 2,323       $ 2,440       $ 1,979       $ 4,763       $ 4,053  
                           
Adjusted EBITDA margin*   38.6 %       40.0 %       30.8 %       39.3 %       31.2 %
                           
                           
Selected items:                          
Cash paid for capital expenditures - network and other $ 358       $ 376       $ 1,003       $ 734       $ 2,643  
Cash paid for capital expenditures - leased devices $ 358       $ 405       $ 573       $ 763       $ 1,117  
                                     
                           
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)                          
(Millions)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
Net operating revenues                          
Voice $ 172       $ 181       $ 212       $ 353       $ 445  
Data 43       43       43       86       92  
Internet 288       302       323       590       651  
Other 18       19       31       37       51  
Total net operating revenues 521       545       609       1,066       1,239  
                           
Net operating expenses                          
Costs of services (exclusive of depreciation and amortization below) 436       448       495       884       1,029  
Selling, general and administrative 62       78       85       140       172  
Depreciation and amortization 48       49       48       97       94  
Other, net 7       -       1       7       2  
Total net operating expenses 553       575       629       1,128       1,297  
Operating loss $ (32 )     $ (30 )     $ (20 )     $ (62 )     $ (58 )
                           
                           
WIRELINE NON-GAAP RECONCILIATION (Unaudited)                          
(Millions)                          
  Quarter To Date     Year To Date
  9/30/16       6/30/16       9/30/15       9/30/16       9/30/15  
                           
Operating loss $ (32 )     $ (30 )     $ (20 )     $ (62 )     $ (58 )
Severance and exit costs (5) 7       -       1       7       2  
Depreciation and amortization 48       49       48       97       94  
Adjusted EBITDA* $ 23       $ 19       $ 29       $ 42       $ 38  
                           
Adjusted EBITDA margin* 4.4 %     3.5 %     4.8 %     3.9 %     3.1 %
                           
                           
Selected items:                          
Cash paid for capital expenditures - network and other $ 31       $ 20       $ 63       $ 51       $ 131  
                           
                   
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)**                  
(Millions)                          
                  Year to Date
                    9/30/16           9/30/15  
Operating activities                          
Net loss                 $ (444 )       $ (605 )
Depreciation and amortization                   3,948           3,331  
Provision for losses on accounts receivable                   232           278  
Share-based and long-term incentive compensation expense                   29           40  
Deferred income tax expense                   157           28  
Gains from asset dispositions and exchanges                   (354 )         -  
Amortization of long-term debt premiums, net                   (159 )         (157 )
Loss on disposal of property, plant and equipment                   231           85  
Contract terminations                   96           -  
Other changes in assets and liabilities:                          
Accounts and notes receivable                   (126 )         (1,357 )
Inventories and other current assets                   (892 )         (1,025 )
Deferred purchase price from sale of receivables                   (400 )         1,198  
Accounts payable and other current liabilities                   (195 )         (509 )
Non-current assets and liabilities, net                   (205 )         125  
Other, net                   332           365  
Net cash provided by operating activities                   2,250           1,797  
                           
Investing activities                          
Capital expenditures - network and other                   (943 )         (2,964 )
Capital expenditures - leased devices                   (763 )         (1,117 )
Expenditures relating to FCC licenses                   (32 )         (45 )
Change in short-term investments, net                   (1,650 )         63  
Proceeds from sales of assets and FCC licenses                   66           4  
Other, net                   (36 )         (21 )
Net cash used in investing activities                   (3,358 )         (4,080 )
                           
Financing activities                          
Proceeds from debt and financings                   3,278           434  
Repayments of debt, financing and capital lease obligations                   (667 )         (206 )
Debt financing costs                   (175 )         (1 )
Other, net                   37           18  
Net cash provided by financing activities                   2,473           245  
                           
Net increase (decrease) in cash and cash equivalents                   1,365           (2,038 )
                           
Cash and cash equivalents, beginning of period                   2,641           4,010  
Cash and cash equivalents, end of period                 $ 4,006         $ 1,972  
                           
                           
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)                  
(Millions)                          
  Quarter To Date   Year to Date
  9/30/16       6/30/16       9/30/15     9/30/16         9/30/15  
                           
Net cash provided by operating activities $ 1,708       $ 542       $ 1,669     $ 2,250         $ 1,797  
                           
Capital expenditures - network and other   (470 )       (473 )       (1,162 )     (943 )         (2,964 )
Capital expenditures - leased devices   (358 )       (405 )       (573 )     (763 )         (1,117 )
Expenditures relating to FCC licenses, net   (17 )       (15 )       (19 )     (32 )         (45 )
Proceeds from sales of assets and FCC licenses   39         27         3       66           4  
Other investing activities, net   (11 )       (25 )       (18 )     (36 )         (21 )
Free cash flow* $ 891       $ (349 )     $ (100 )   $ 542         $ (2,346 )
                           
Net (repayments) proceeds of device financings and sales of future lease receivables   (184 )       815         -       631           -  
Adjusted free cash flow* $ 707       $ 466       $ (100 )   $ 1,173         $ (2,346 )
                           
                           
**Certain prior period amounts have been reclassified to conform to the current period presentation.
 
           
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)          
(Millions)          
    9/30/16       3/31/16  
ASSETS          
Current assets          
Cash and cash equivalents   $ 4,006       $ 2,641  
Short-term investments     1,650         -  
Accounts and notes receivable, net     1,004         1,099  
Device and accessory inventory     981         1,173  
Prepaid expenses and other current assets     2,215         1,920  
Total current assets     9,856         6,833  
           
Property, plant and equipment, net     19,176         20,297  
Goodwill     6,575         6,575  
FCC licenses and other     40,541         40,073  
Definite-lived intangible assets, net     3,861         4,469  
Other assets     819         728  
Total assets   $ 80,828       $ 78,975  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities          
Accounts payable   $ 2,649       $ 2,899  

Accrued expenses and other current liabilities

    4,285         4,374  
Current portion of long-term debt, financing and capital lease obligations     7,014         4,690  
Total current liabilities     13,948         11,963  
           
Long-term debt, financing and capital lease obligations     29,541         29,268  
Deferred tax liabilities     14,120         13,959  
Other liabilities     3,796         4,002  
Total liabilities     61,405         59,192  
           
Stockholders' equity          
Common stock     40         40  
Treasury shares, at cost     -         (3 )
Paid-in capital     27,637         27,563  
Accumulated deficit     (7,822 )       (7,378 )
Accumulated other comprehensive loss     (432 )       (439 )
Total stockholders' equity     19,423         19,783  
Total liabilities and stockholders' equity   $ 80,828       $ 78,975  
           
           
NET DEBT* (NON-GAAP) (Unaudited)          
(Millions)          
      9/30/16         3/31/16  
Total debt   $ 36,555       $ 33,958  
Less: Cash and cash equivalents     (4,006 )       (2,641 )
Less: Short-term investments     (1,650 )       -  
Net debt*   $ 30,899       $ 31,317  
           
               
SCHEDULE OF DEBT (Unaudited)              
(Millions)              
                9/30/16

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 Communications, Inc.              
Export Development Canada Facility (Tranche 4)       12/15/2017       250
Export Development Canada Facility (Tranche 3)       12/17/2019       300
6% Senior notes due 2016       12/01/2016       2,000
9.125% Senior notes due 2017       03/01/2017       1,000
8.375% Senior notes due 2017       08/15/2017       1,300
9% Guaranteed notes due 2018       11/15/2018       3,000
7% Guaranteed notes due 2020       03/01/2020       1,000
7% Senior notes due 2020       08/15/2020       1,500
11.5% Senior notes due 2021       11/15/2021       1,000
9.25% Debentures due 2022       04/15/2022       200
6% Senior notes due 2022       11/15/2022       2,280
Sprint Communications, Inc.               13,830
               
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
               
Clearwire Communications LLC              
14.75% First-priority senior secured notes due 2016       12/01/2016       300
8.25% Exchangeable notes due 2040       12/01/2040       629
Clearwire Communications LLC               929
               
Secured equipment credit facilities       2017 - 2021       618
               
Financing obligations       2017 - 2021       3,670
               
Capital leases and other obligations       2016 - 2023       471
Total principal               36,222
               
Net premiums and debt financing costs               333
Total debt             $ 36,555
               
 
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
       

(1)

    Sprint platform refers to the Sprint network that supports the wireless service we provide through our multiple brands.
(2)     Postpaid and prepaid connections from transactions are defined as retail postpaid and prepaid connections acquired from Clearwire in July 2013 who had not deactivated or been recaptured on the Sprint platform.
(3)     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 six-month periods ended September 30, 2016, we leased devices through our Sprint direct channels totaling approximately $645 million and $1,186 million, respectively, which would have increased cost of products and reduced EBITDA* if they had been purchased under our subsidized program. Also, during the three and six-month periods ended September 30, 2016, the equipment revenue derived from customers electing to finance their devices through device leasing or installment billing programs in our direct channel was 68%.

 

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.

(4)     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. During the second quarter of fiscal year 2015, the company recorded losses on dispositions of assets primarily related to network development costs that are no longer relevant as a result of changes in the company's network plans.
(5)     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.
(6)     Contract terminations primarily relate to the termination of our pre-existing wholesale arrangement with Ntelos Holding Corp.
(7)     Litigation and other contingencies consist of unfavorable developments associated with legal as well as federal and state matters such as sales, use or property taxes.
(8)     As a result of the U.S. Cellular asset acquisition, we recorded a liability related to network shut-down costs, which primarily consisted of lease exit costs, for which we agreed to reimburse U.S. Cellular. During the third quarter of fiscal year 2014, we identified favorable trends in actual costs and, as a result, reduced the liability resulting in a gain of approximately $41 million. During the first quarter of fiscal year 2015, we revised our estimate and, as a result, reduced the liability resulting in approximately $20 million of income.
       

*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.

Sprint Platform Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid customers plus installment plan billings and 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 Sprint platform postpaid customer billings per account as it approximates the expected cash collections, including installment plan billings and lease revenue, per postpaid account each month.

Sprint Platform Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from postpaid phone customers plus installment plan billings and 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 Sprint platform postpaid phone customer billings as it approximates the expected cash collections, including installment plan billings and 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. Adjusted Free Cash Flow is Free Cash Flow plus the proceeds from device financings and sales of future lease 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, 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, 2016. 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 60.2 million connections as of Sept. 30, 2016 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.

 

Contact(s):

Sprint Corporation
Media:
Dave Tovar, 913-315-1451
David.Tovar@sprint.com
or
Investors:
Jud Henry, 800-259-3755
Investor.Relations@sprint.com


Overlay Title

You must be logged in to view this item.



Login

This area is reserved for members of the news media. If you qualify, please update your user profile and check the box marked "Check here to register as an accredited member of the news media". Please include any notes in the "Supporting information for media credentials" box. We will notify you of your status via e-mail in one business day.