Sprint.com

May 03, 2017

Sprint Returns to Net Operating Revenue Growth, Near-Record Operating Income, and Positive Adjusted Free Cash Flow* with Fiscal Year 2016 Results

  • Fiscal year 2016 postpaid phone net additions of 930,000 more than doubled year-over-year
    • Highest postpaid phone gross additions in four years
    • Fiscal fourth quarter postpaid phone net additions of 42,000 were the tenth consecutive quarter of year-over-year improvement
  • Return to prepaid customer growth with 180,000 net additions in the fiscal fourth quarter
  • Fiscal year 2016 net operating revenues of $33.3 billion grew for the first time in three years
    • Fiscal fourth quarter net operating revenues of $8.5 billion grew 6 percent year-over-year
  • Fiscal year 2016 net loss of $1.2 billion, operating income of $1.8 billion, and Adjusted EBITDA* of nearly $10 billion
    • Highest operating income in 10 years and highest Adjusted EBITDA* in nine years
    • $2.1 billion of year-over-year reductions in cost of service and selling, general, and administrative expenses in fiscal year 2016
    • Fiscal fourth quarter net loss of $283 million, operating income of $470 million, and Adjusted EBITDA* of $2.7 billion
  • Fiscal year 2016 net cash provided by operating activities of $4.2 billion and adjusted free cash flow* of $607 million

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*This table excludes (i) our secured revolving bank credit facility, which will expire in 2021 and has no outstanding balance, (ii) $215 million in letters of credit outstanding under the unsecured revolving bank credit facility, (iii) $540 million of capital leases and other obligations, and (iv) net premiums and debt financing costs. (Photo: Business Wire)

OVERLAND PARK, Kan. (BUSINESS WIRE), May 03, 2017 - Sprint Corporation (NYSE: S) today reported operating results for the fiscal year 2016 fourth quarter and full year, including annual growth in net operating revenues for the first time in three years and more than twice as many postpaid phone net additions as last year. The company also reported its highest annual operating income in 10 years at $1.8 billion, Adjusted EBITDA* of nearly $10 billion for the year, which grew 22 percent year-over-year, and positive adjusted free cash flow*.

This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20170503005676/en/

For the fiscal fourth quarter, the company reported operating income of $470 million and Adjusted EBITDA* of $2.7 billion, both improvements of more than $450 million year-over-year.

“Sprint took a big step forward in the second year of our turnaround plan,” said Sprint CEO Marcelo Claure. “Net operating revenues returned to growth and cost reductions accelerated, leading to the highest operating income in a decade and a return to positive adjusted free cash flow*.”

Postpaid Phone Net Additions More Than Double Year-Over-Year and Prepaid Returns to Growth

Sprint’s focus on delivering the most attractive value proposition in wireless resulted in 930,000 postpaid phone net additions in fiscal year 2016, more than twice as many as the prior year. The company also reported its highest postpaid phone gross additions in four years and improved its share of gross additions for the second year in a row.

In a competitive quarter where Verizon and AT&T introduced new unlimited data plans, Sprint added 42,000 postpaid phone customers and recorded its tenth consecutive quarter of year-over-year improvement. Sprint continued to take share and has now added more postpaid phone customers than Verizon for five consecutive quarters and more than AT&T for 10 consecutive quarters.

The company also saw significant improvements in its prepaid business in the quarter, adding 180,000 customers and returning to customer growth for the first time in two years. With the resurgence of prepaid and the continued growth in postpaid phone customers, the company reported positive net additions for both in the same quarter for the first time in four years.

The company also reported the following results:

  • Total net additions were 187,000 in the quarter, including postpaid net losses of 118,000, prepaid net additions of 180,000, and wholesale and affiliate net additions of 125,000. For the full year, total net additions were 1.9 million, including postpaid net additions of 811,000, prepaid net losses of 1.1 million, and wholesale and affiliate net additions of 2.1 million.
  • Postpaid phone churn was 1.58 percent and total postpaid churn was 1.75 percent in the quarter. For the full year, postpaid phone churn of 1.48 percent was the lowest in company history and total postpaid churn was 1.62 percent.

Another Year of Significant Cost Reductions

Sprint continued to make progress on its multi-year plan to transform the way it does business and significantly lower its cost structure. The company delivered $2.1 billion of year-over-year reductions in cost of service and selling, general and administrative expenses in fiscal year 2016, bringing the two-year total reduction to $3.4 billion.

The company also reported the following financial results:

  • Net operating revenues of $8.5 billion in the quarter grew 6 percent year-over-year and increased year-over-year for the third consecutive quarter. For the full year, net operating revenues of $33.3 billion grew 4 percent and increased year-over-year for the first time in three years.
  • Net loss of $283 million, or $0.07 per share, in the quarter compared to a net loss of $554 million, or $0.14 per share, in the year-ago period, an improvement of $271 million, or $0.07 per share. For the full year, net loss of $1.2 billion, or $0.30 per share, compared to a net loss of $2 billion, or $0.50 per share, in the year-ago period, an improvement of $789 million, or $0.20 per share.
  • Operating income of $470 million in the quarter compared to $8 million in the year-ago period, an improvement of $462 million. For the full year, operating income of $1.8 billion improved by $1.5 billion year-over-year and reached its highest level in 10 years.
  • Adjusted EBITDA* of $2.7 billion in the quarter grew year-over-year by $522 million or 24 percent. For the full year, Adjusted EBITDA* of nearly $10 billion grew year-over-year by $1.8 billion or 22 percent.
  • Net cash provided by operating activities of $1.3 billion in the quarter was in line with the year-ago period. For the full year, net cash provided by operating activities was $4.2 billion compared to $3.9 billion in the year-ago period.
  • Adjusted free cash flow* was $80 million in the quarter compared to $603 million in the year-ago period. For the full year, adjusted free cash flow* was positive $607 million compared to negative $1.4 billion in the year-ago period, an improvement of $2 billion.

Obtaining Lower Cost Funding to Retire Higher Cost Debt

Sprint continued to execute its financing strategy of diversifying its funding sources, lowering its cost of capital, and reducing its future cash interest expenses. During the quarter Sprint replaced its $3.3 billion unsecured revolving bank credit facility with a new $6 billion secured credit facility, consisting of a $4 billion seven-year term loan and a $2 billion four-year revolving bank credit facility. At closing, the company borrowed $4 billion on the term loan facility at a rate of LIBOR plus 250 basis points, which is about half of Sprint’s current effective interest rate.

The company also retired approximately $1.6 billion of debt maturities with higher interest payments in the quarter, including $1 billion of 9.125 percent senior notes, $300 million associated with its Network LeaseCo facility, and $250 million related to the early retirement of tranche 4 of its EDC facility.

Total liquidity was $10.9 billion at the end of the quarter, including $8.3 billion of cash, cash equivalents and short-term investments. Additionally, the company has $1.2 billion of availability under vendor financing agreements that can be used toward the purchase of 2.5GHz network equipment.

New Technology Expected to Continue Network Improvements

Sprint is unlocking the value of the largest spectrum holdings in the U.S. in a capital-efficient manner and third party sources continue to validate the company’s network performance improvements.

  • Independent mobile analytics firm RootMetrics® awarded Sprint over 30 percent more first-place (outright or shared) Metropolitan area RootScore® Awards (from 103 to 135) for reliability, speed, data, call, text, or overall network performance in the 76 markets measured in the first half of 2017 compared to the year-ago testing period.1 Additionally, Sprint ranked #2 nationally in Call performance for the fourth consecutive time in the second half of 2016 report, including more metro Call RootScore awards (108) than Verizon, AT&T, or T-Mobile for the first time ever.
  • Sprint’s overall network reliability continues to beat T-Mobile and performs within 1 percent of Verizon and AT&T, based on an analysis of Nielsen data.2

As previously announced, Sprint helped develop a breakthrough innovation called High Performance User Equipment (HPUE), a new technology that extends the coverage of its 2.5GHz spectrum by up to 30 percent to nearly match its mid-band 1.9GHz spectrum performance on capable devices. In one of the fastest progressions from global standard approval to commercial availability, HPUE-capable devices are already available to Sprint customers, including the recently launched LG G6, Samsung Galaxy S8, and ZTE Max XL.

The company will be announcing another exciting technology innovation on today’s conference call.

Fiscal Year 2017 Outlook

  • The company expects Adjusted EBITDA* of $10.7 billion to $11.2 billion.
  • The company expects operating income of $2 billion to $2.5 billion.
  • The company expects cash capital expenditures, excluding devices leased through indirect channels, of $3.5 billion to $4 billion.

Conference Call and Webcast

  • Date/Time: 8:30 a.m. (ET) Wednesday, May 3, 2017
  • Call-in Information
    • U.S./Canada: 866-360-1063 (ID: 3938447)
    • International: 443-961-0242 (ID: 3938447)
  • Webcast available at www.sprint.com/investors
  • Additional information about results is available on our Investor Relations website
 

1 Rankings based on RootMetrics Metro RootScore Reports from 1H 2016, 2H 2016, and 1H 2017 and, National RootScore Report from 2H 2016 for mobile performance as tested on best available plans and devices on four mobile networks across all available network types. Your experiences may vary. The RootMetrics award is not an endorsement of Sprint. Visit www.rootmetrics.com for more details.

2 Average network reliability (voice & data) based on Sprint’s analysis of latest Nielsen drive test data in the top 106 metro markets.

 
 
Wireless Operating Statistics (Unaudited)
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
Sprint platform (1):                                  
Net additions (losses) (in thousands)                                  
Postpaid         (118 )       405         56           811         1,245  
Prepaid         180         (501 )       (264 )         (1,079 )       (1,309 )
Wholesale and affiliate         125         673         655           2,149         2,733  
Total Sprint platform wireless net additions         187         577         447           1,881         2,669  
                                   
End of period connections (in thousands)                                  
Postpaid (d)         31,576         31,694         30,951           31,576         30,951  
Prepaid (d) (e)         11,992         11,812         14,397           11,992         14,397  
Wholesale and affiliate (d) (e)         16,134         16,009         13,458           16,134         13,458  
Total Sprint platform end of period connections         59,702         59,515         58,806           59,702         58,806  
                                   
Churn                                  
Postpaid         1.75 %       1.67 %       1.72 %         1.62 %       1.61 %
Prepaid (e)         4.99 %       5.80 %       5.65 %         5.51 %       5.39 %
                                   
Supplemental data - connected devices                                  
End of period connections (in thousands)                                  
Retail postpaid         2,001         1,960         1,771           2,001         1,771  
Wholesale and affiliate         10,880         10,594         8,575           10,880         8,575  
Total         12,881         12,554         10,346           12,881         10,346  
                                   
Sprint platform ARPU (1) (a)                                  
Postpaid       $ 47.34       $ 49.70       $ 51.68         $ 49.77       $ 53.39  
Prepaid (e)       $ 30.08       $ 27.61       $ 27.72         $ 28.01       $ 27.66  
                                   
Sprint platform postpaid phone (1)                                  
Postpaid phone net additions         42         368         22           930         438  
Postpaid phone end of period connections (d)         26,079         26,037         25,316           26,079         25,316  
Postpaid phone churn         1.58 %       1.57 %       1.56 %         1.48 %       1.52 %
 
NON-GAAP RECONCILIATION - ABPA*, POSTPAID PHONE ARPU AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, ARPU, and ABPU*)
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
Sprint platform ABPA* (1)                                  
Postpaid service revenue       $ 4,493       $ 4,686       $ 4,793         $ 18,677       $ 19,463  
Add: Installment plan billings         343         291         287           1,172         1,190  
Add: Lease revenue         842         887         662           3,295         1,838  
Total for Sprint platform postpaid connections       $ 5,678       $ 5,864       $ 5,742         $ 23,144       $ 22,491  
                                   
Sprint platform postpaid accounts (in thousands)         11,405         11,413         11,358           11,378         11,248  
Sprint platform postpaid ABPA* (b)       $ 165.92       $ 171.28       $ 168.49         $ 169.51       $ 166.63  
                                   
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
Sprint platform postpaid phone ARPU and ABPU* (1)                                  
Postpaid phone service revenue       $ 4,228       $ 4,420       $ 4,512         $ 17,578       $ 18,331  
Add: Installment plan billings         309         261         268           1,061         1,116  
Add: Lease revenue         829         873         649           3,240         1,799  
Total for Sprint platform postpaid phone connections       $ 5,366       $ 5,554       $ 5,429         $ 21,879       $ 21,246  
                                   
Sprint platform postpaid average phone connections (in thousands)         26,053         25,795         25,297           25,659         25,020  
Sprint platform postpaid phone ARPU (a)       $ 54.10       $ 57.12       $ 59.45         $ 57.09       $ 61.05  
Sprint platform postpaid phone ABPU* (c)       $ 68.66       $ 71.77       $ 71.53         $ 71.06       $ 70.77  
(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.

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

 
 
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and sales and connections mix)
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
                                   
Postpaid sales (in thousands)         3,471         4,812         3,438           15,298         16,394  
Postpaid sales mix                                  
Subsidy/other         18 %       20 %       37 %         24 %       36 %
Installment plans         40 %       37 %       18 %         34 %       13 %
Leasing         42 %       43 %       45 %         42 %       51 %
                                   
Installment plans                                  
Installment sales financed       $ 696       $ 1,036       $ 311         $ 2,884       $ 1,059  
Installment billings       $ 343       $ 291       $ 287         $ 1,172       $ 1,190  
                                   
Leasing                                  
Lease revenue       $ 842       $ 887       $ 662         $ 3,295       $ 1,838  
Lease depreciation       $ 911       $ 837       $ 550         $ 3,116       $ 1,781  
                                   
Leased device additions                                  
Cash paid for capital expenditures - leased devices       $ 395       $ 767       $ 568         $ 1,925       $ 2,292  
Transfers from inventory - leased devices       $ 639       $ 1,095       $ 621         $ 2,920       $ 3,244  
                                   
Leased devices in property, plant and equipment, net       $ 4,162       $ 4,454       $ 3,645         $ 4,162       $ 3,645  
                                   
Leased device and receivables financings net proceeds                                  
Proceeds from MLS sale       $ -       $ -       $ -         $ 1,055       $ 1,136  
Repayments to MLS         (151 )       (176 )       -           (653 )       -  
Proceeds from lease securitization         -         -         600           -         600  
Repayments of lease securitization         (102 )       (55 )       -           (255 )       -  
Proceeds from receivables securitization         100         -         -           100         -  
Repayments of receivables securitization         (161 )       -         -           (161 )       -  

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

      $ (314 )     $ (231 )     $ 600         $ 86       $ 1,736  
 
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
Net operating revenues                                  
Service revenue       $ 6,116       $ 6,323       $ 6,574         $ 25,368       $ 27,174  
Equipment revenue         2,423         2,226         1,497           7,979         5,006  
Total net operating revenues         8,539         8,549         8,071           33,347         32,180  
Net operating expenses                                  
Cost of services (exclusive of depreciation and amortization below)         1,736         1,925         2,245           7,861         9,439  
Cost of products (exclusive of depreciation and amortization below)         1,980         1,985         1,551           7,077         5,795  
Selling, general and administrative         2,002         2,080         1,939           7,994         8,479  
Depreciation - network and other         960         1,000         1,042           3,982         4,013  
Depreciation - leased devices         911         837         550           3,116         1,781  
Amortization         239         255         300           1,052         1,294  
Other, net         241         156         436           501         1,069  
Total net operating expenses         8,069         8,238         8,063           31,583         31,870  
Operating income         470         311         8           1,764         310  
Interest expense         (631 )       (619 )       (552 )         (2,495 )       (2,182 )
Other income (expense), net         27         (60 )       5           (40 )       18  
Loss before income taxes         (134 )       (368 )       (539 )         (771 )       (1,854 )
Income tax expense         (149 )       (111 )       (15 )         (435 )       (141 )
Net loss       $ (283 )     $ (479 )     $ (554 )       $ (1,206 )     $ (1,995 )
                                   
Basic and diluted net loss per common share       $ (0.07 )     $ (0.12 )     $ (0.14 )       $ (0.30 )     $ (0.50 )
Weighted average common shares outstanding         3,988         3,983         3,972           3,981         3,969  
                                   
Effective tax rate         -111.2 %       -30.2 %       -2.8 %         -56.4 %       -7.6 %
 
NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED EBITDA* (Unaudited)
(Millions)
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
                                   
Net loss       $ (283 )     $ (479 )     $ (554 )       $ (1,206 )     $ (1,995 )
Income tax expense         149         111         15           435         141  
Loss before income taxes         (134 )       (368 )       (539 )         (771 )       (1,854 )
Other (income) expense, net         (27 )       60         (5 )         40         (18 )
Interest expense         631         619         552           2,495         2,182  
Operating income         470         311         8           1,764         310  
Depreciation - network and other         960         1,000         1,042           3,982         4,013  
Depreciation - leased devices         911         837         550           3,116         1,781  
Amortization         239         255         300           1,052         1,294  
EBITDA* (3)         2,580         2,403         1,900           9,914         7,398  
Loss (gain) from asset dispositions and exchanges, net (4)         -         28         81           (326 )       166  
Severance and exit costs (5)         36         19         162           66         409  
Contract terminations (6)         27         -         -           140         -  
Litigation and other contingencies (7)         37         -         15           140         193  
Reduction in liability - U.S. Cellular asset acquisition (8)         -         -         -           -         (20 )
Adjusted EBITDA* (3)       $ 2,680       $ 2,450       $ 2,158         $ 9,934       $ 8,146  
                                   
Adjusted EBITDA margin*         43.8 %       38.7 %       32.8 %         39.2 %       30.0 %
                                   
                                   
Selected items:                                  
Cash paid for capital expenditures - network and other       $ 529       $ 478       $ 722         $ 1,950       $ 4,680  
Cash paid for capital expenditures - leased devices       $ 395       $ 767       $ 568         $ 1,925       $ 2,292  
   
 
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
Net operating revenues                                  
Service revenue                                  
Sprint platform (1):                                  
Postpaid       $ 4,493       $ 4,686       $ 4,793         $ 18,677       $ 19,463  
Prepaid         1,067         1,077         1,203           4,438         4,986  
Wholesale, affiliate and other         184         183         155           693         703  
Total Sprint platform         5,744         5,946         6,151           23,808         25,152  
                                   
Total transactions (2)         -         -         3           -         219  
Total service revenue         5,744         5,946         6,154           23,808         25,371  
                                   
Equipment revenue         2,423         2,226         1,497           7,979         5,006  
Total net operating revenues         8,167         8,172         7,651           31,787         30,377  
                                   
Net operating expenses                                  
Cost of services (exclusive of depreciation and amortization below)         1,448         1,649         1,922           6,674         8,069  
Cost of products (exclusive of depreciation and amortization below)         1,980         1,985         1,551           7,077         5,795  
Selling, general and administrative         1,944         2,032         1,868           7,741         8,141  
Depreciation - network and other         911         947         991           3,779         3,812  
Depreciation - leased devices         911         837         550           3,116         1,781  
Amortization         239         255         300           1,052         1,294  
Other, net         232         150         434           480         1,045  
Total net operating expenses         7,665         7,855         7,616           29,919         29,937  
Operating income       $ 502       $ 317       $ 35         $ 1,868       $ 440  
 
 
WIRELESS NON-GAAP RECONCILIATION (Unaudited)                                  
(Millions)                                  
        Quarter To Date       Year To Date      
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
                                   
Operating income       $ 502       $ 317       $ 35         $ 1,868       $ 440  
Loss (gain) from asset dispositions and exchanges, net (4)         -         28         81           (326 )       166  
Severance and exit costs (5)         27         13         160           45         385  
Contract terminations (6)         27         -         -           140         -  
Litigation and other contingencies (7)         37         -         15           140         193  
Reduction in liability - U.S. Cellular asset acquisition (8)         -         -         -           -         (20 )
Depreciation - network and other         911         947         991           3,779         3,812  
Depreciation - leased devices         911         837         550           3,116         1,781  
Amortization         239         255         300           1,052         1,294  
Adjusted EBITDA* (3)       $ 2,654       $ 2,397       $ 2,132         $ 9,814       $ 8,051  
                                   
Adjusted EBITDA margin*         46.2 %       40.3 %       34.6 %         41.2 %       31.7 %
                                   
                                   
Selected items:                                  
Cash paid for capital expenditures - network and other       $ 468       $ 389       $ 577         $ 1,591       $ 4,089  
Cash paid for capital expenditures - leased devices       $ 395       $ 767       $ 568         $ 1,925       $ 2,292  
 
 
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
Net operating revenues                                  
Voice       $ 143       $ 153       $ 194         $ 649       $ 840  
Data         39         41         37           166         171  
Internet         276         281         316           1,147         1,284  
Other         22         22         15           81         87  
Total net operating revenues         480         497         562           2,043         2,382  
                                   
Net operating expenses                                  
Costs of services (exclusive of depreciation and amortization below)         402         400         467           1,686         1,962  
Selling, general and administrative         49         49         74           238         328  
Depreciation and amortization         47         51         50           195         194  
Other, net         8         6         3           21         25  
Total net operating expenses         506         506         594           2,140         2,509  
Operating loss       $ (26 )     $ (9 )     $ (32 )       $ (97 )     $ (127 )
 
 
WIRELINE NON-GAAP RECONCILIATION (Unaudited)                                  
(Millions)                                  
        Quarter To Date       Year To Date
        3/31/17     12/31/16     3/31/16       3/31/17     3/31/16
                                   
Operating loss       $ (26 )     $ (9 )     $ (32 )       $ (97 )     $ (127 )
Severance and exit costs (5)         8         6         3           21         25  
Depreciation and amortization         47         51         50           195         194  
Adjusted EBITDA*       $ 29       $ 48       $ 21         $ 119       $ 92  
                                   
Adjusted EBITDA margin*         6.0 %       9.7 %       3.7 %         5.8 %       3.9 %
                                   
                                   
Selected items:                                  
Cash paid for capital expenditures - network and other       $ 19       $ 24       $ 74         $ 94       $ 279  
 
 
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)**
(Millions)                              
                        Year to Date
                        3/31/17     3/31/16
Operating activities                              
Net loss                       $ (1,206 )     $ (1,995 )
Depreciation and amortization                         8,150         7,088  
Provision for losses on accounts receivable                         555         455  
Share-based and long-term incentive compensation expense                         93         75  
Deferred income tax expense                         433         123  
Gains from asset dispositions and exchanges                         (354 )       -  
Amortization of long-term debt premiums, net                         (302 )       (316 )
Loss on disposal of property, plant and equipment                         509         487  
Litigation                         140         193  
Contract terminations                         111         -  
Other changes in assets and liabilities:                              
Accounts and notes receivable                         (1,017 )       (1,663 )
Inventories and other current assets                         (2,305 )       (3,065 )
Deferred purchase price from sale of receivables                         (289 )       2,478  
Accounts payable and other current liabilities                         (365 )       (574 )
Non-current assets and liabilities, net                         (308 )       111  
Other, net                         323         500  
Net cash provided by operating activities                         4,168         3,897  
                               
Investing activities                              
Capital expenditures - network and other                         (1,950 )       (4,680 )
Capital expenditures - leased devices                         (1,925 )       (2,292 )
Expenditures relating to FCC licenses                         (83 )       (98 )
Change in short-term investments, net                         (5,444 )       166  
Proceeds from sales of assets and FCC licenses                         219         62  
Proceeds from sale-leaseback transaction                         -         1,136  
Other, net                         (42 )       (29 )
Net cash used in investing activities                         (9,225 )       (5,735 )
                               
Financing activities                              
Proceeds from debt and financings                         10,966         1,355  
Repayments of debt, financing and capital lease obligations                         (5,417 )       (899 )
Debt financing costs                         (358 )       (11 )
Other, net                         95         24  
Net cash provided by financing activities                         5,286         469  
                               
Net increase (decrease) in cash and cash equivalents                         229         (1,369 )
                               
Cash and cash equivalents, beginning of period                         2,641         4,010  
Cash and cash equivalents, end of period                       $ 2,870       $ 2,641  
                               
                               
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)                  
(Millions)                              
      Quarter To Date     Year to Date
      3/31/17     12/31/16     3/31/16     3/31/17     3/31/16
                               
Net cash provided by operating activities     $ 1,268       $ 650       $ 1,294       $ 4,168       $ 3,897  
                               
Capital expenditures - network and other       (529 )       (478 )       (722 )       (1,950 )       (4,680 )
Capital expenditures - leased devices       (395 )       (767 )       (568 )       (1,925 )       (2,292 )
Expenditures relating to FCC licenses, net       (37 )       (14 )       (23 )       (83 )       (98 )
Proceeds from sales of assets and FCC licenses       93         60         26         219         62  
Other investing activities, net       (6 )       134         (4 )       92         (29 )
Free cash flow* (9)     $ 394       $ (415 )     $ 3       $ 521       $ (3,140 )
                               
Net (repayments) proceeds of financings related to devices and receivables       (314 )       (231 )       600         86         1,736  
Adjusted free cash flow*     $ 80       $ (646 )     $ 603       $ 607       $ (1,404 )
                               
                               
**Certain prior period amounts have been reclassified to conform to the current period presentation.
 
             
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)            
(Millions)            
      3/31/17     3/31/16
ASSETS            
Current assets            
Cash and cash equivalents     $ 2,870       $ 2,641  
Short-term investments       5,444         -  
Accounts and notes receivable, net       4,138         1,099  
Device and accessory inventory       1,064         1,173  
Prepaid expenses and other current assets       601         1,920  
Total current assets       14,117         6,833  
             
Property, plant and equipment, net       19,209         20,297  
Goodwill       6,579         6,575  
FCC licenses and other       40,585         40,073  
Definite-lived intangible assets, net       3,320         4,469  
Other assets       1,313         728  
Total assets     $ 85,123       $ 78,975  
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities            
Accounts payable     $ 3,281       $ 2,899  
Accrued expenses and other current liabilities       4,141         4,374  
Current portion of long-term debt, financing and capital lease obligations       5,036         4,690  
Total current liabilities       12,458         11,963  
             
Long-term debt, financing and capital lease obligations       35,878         29,268  
Deferred tax liabilities       14,416         13,959  
Other liabilities       3,563         4,002  
Total liabilities       66,315         59,192  
             
Stockholders' equity            
Common stock       40         40  
Treasury shares, at cost       -         (3 )
Paid-in capital       27,756         27,563  
Accumulated deficit       (8,584 )       (7,378 )
Accumulated other comprehensive loss       (404 )       (439 )
Total stockholders' equity       18,808         19,783  
Total liabilities and stockholders' equity     $ 85,123       $ 78,975  
             
             
NET DEBT* (NON-GAAP) (Unaudited)            
(Millions)            
        3/31/17         3/31/16  
Total debt     $ 40,914       $ 33,958  
Less: Cash and cash equivalents       (2,870 )       (2,641 )
Less: Short-term investments       (5,444 )       -  
Net debt*     $ 32,600       $ 31,317  
             
               
SCHEDULE OF DEBT (Unaudited)              
(Millions)              
              3/31/17

ISSUER

      MATURITY     PRINCIPAL
Sprint Corporation              
7.25% Senior notes due 2021       09/15/2021     $ 2,250
7.875% Senior notes due 2023       09/15/2023       4,250
7.125% Senior notes due 2024       06/15/2024       2,500
7.625% Senior notes due 2025       02/15/2025       1,500
Sprint Corporation               10,500
               
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint Spectrum Co III LLC              
3.36% Senior secured notes due 2021       09/20/2021       3,500
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint Spectrum Co III LLC               3,500
               
Sprint Communications, Inc.              
Export Development Canada secured loan       12/17/2019       300
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.               10,580
               
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              
8.25% Exchangeable notes due 2017 (a)       12/01/2017       629
Clearwire Communications LLC               629
               
Credit facilities              
Secured equipment credit facilities       2019 - 2021       431
Accounts receivable facility       11/19/2018       1,964
Secured term loan       02/03/2024       4,000
Credit facilities               6,395
               
Financing obligations       2017 - 2021       2,476
               
Capital leases and other obligations       2017 - 2024       540
Total principal               40,824
               
Net premiums and debt financing costs               90
Total debt             $ 40,914
                 
(a)     $629 million Clearwire 8.25% Exchangeable Notes due 2040 have both a par call and put in December 2017.
       
 
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 twelve-month periods ended March 31, 2017, we leased devices through our Sprint direct channels totaling approximately $639 million and $2,920 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 twelve-month periods ended March 31, 2017, the equipment revenue derived from customers electing to finance their devices through device leasing or installment billing programs in our direct channel was 52% and 62%, respectively.

 

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 third quarter of fiscal year 2016 and the fourth quarter of fiscal year 2015, the company recorded losses on dispositions of assets primarily related to cell site construction and network development costs that are no longer relevant as a result of changes in the company's network plans. During the second quarter of fiscal year 2016 the company recorded a pre-tax non-cash gain of $354 million related to spectrum swaps with other carriers.
(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)     During the fourth quarter of fiscal year 2016, we terminated our relationship with General Wireless Operations Inc. (Radio Shack) and incurred net contract termination charges of approximately $27 million primarily related to cash termination payments and write-downs of leasehold improvements at associated retail stores that were shut down as of March 31, 2017. During the first quarter of fiscal year 2016 contract terminations primarily relate to the termination of our pre-existing wholesale arrangement with NTELOS Holding Corp.
(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 $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.
(9)     Free cash flow* for the three-month period ended December 31, 2016 and the twelve-month period ended March 31, 2017, included net cash outflows of approximately $370 million related to the termination of our MLS Tranche 1 arrangement, which included the repurchase of the devices.
       

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

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

SAFE HARBOR

This release includes “forward-looking statements” within the meaning of the securities laws. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan”, “outlook,” “providing guidance,” and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to our network, cost reductions, connections growth, and liquidity; and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services; efficiencies and cost savings of new technologies and services; customer and network usage; connection growth and retention; service, speed, coverage and quality; availability of devices; availability of various financings, including any leasing transactions; the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016, and, when filed, its Annual Report on Form 10-K for the fiscal year ended March 31, 2017. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

About Sprint:

Sprint (NYSE: S) is a communications services company that creates more and better ways to connect its customers to the things they care about most. Sprint served 59.7 million connections as of March 31, 2017 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Sprint has been named to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.

 

Contact(s):

Sprint Corporation
Media:
Dave Tovar
David.Tovar@sprint.com
or
Investors:
Jud Henry
Investor.Relations@sprint.com


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