Close

Form 8-K SPRINT Corp For: Jan 26

January 26, 2016 7:43 AM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
_______________________________________ 
FORM 8-K
 _______________________________________ 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 26, 2016
 
_______________________________________ 
SPRINT CORPORATION
(Exact name of Registrant as specified in its charter)
 
_______________________________________ 
 
 
 
 
 
 
Delaware
  
1-04721
  
46-1170005
(State of Incorporation)
  
(Commission File Number)
  
(I.R.S. Employer
Identification No.)
 
 
 
 
6200 Sprint Parkway, Overland Park, Kansas
  
66251
(Address of principal executive offices)
  
(Zip Code)
Registrant’s telephone number, including area code (855) 848-3280
(Former name or former address, if changed since last report)
  
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02 Results of Operations and Financial Condition.

On January 26, 2016, Sprint Corporation announced its results for the quarter ended December 31, 2015. The press release is furnished as Exhibit 99.1 and its Quarterly Investor Update is attached as Exhibit 99.2.
 
Item 9.01 Financial Statements and Exhibits.

(d) Exhibits
The following exhibits are furnished with this report:
 
 
 
 
Exhibit No.
  
Description
99.1

  
Press Release Announcing Results for the Quarter Ended December 31, 2015
99.2

 
Quarterly Investor Update






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
SPRINT CORPORATION
 
 
 
 
Date: January 26, 2016
 
 
 
 
 
/s/ Timothy O’Grady
 
 
 
 
 
 
By:
 
Timothy O’Grady
 
 
 
 
 
 
 
 
Corporate Secretary






EXHIBIT INDEX
 
 
 
 
Number
  
Exhibit
99.1

  
Press Release Announcing Results for the Quarter Ended December 31, 2015
99.2

 
Quarterly Investor Update


News Release
 


SPRINT REPORTS HIGHEST POSTPAID PHONE NET ADDITIONS IN THREE YEARS, LOWEST-EVER THIRD QUARTER POSTPAID CHURN, AND INCREASES ADJUSTED EBITDA* GUIDANCE WITH THIRD FISCAL QUARTER 2015 RESULTS

Operating loss of $197 million and Adjusted EBITDA* of $1.9 billion
Nearly $800 million of year-to-date reduction in cost of service and selling, general, and administrative expenses builds momentum for 2016 targets

Raising fiscal year 2015 Adjusted EBITDA* guidance from previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion
Preliminary estimate for fiscal year 2016 Adjusted EBITDA* of approximately $9.5 billion to $10 billion

Sprint platform postpaid net additions of 501,000 improved by 471,000 year-over-year
Highest postpaid net ports on record and net port positive for the fourth consecutive quarter

Sprint platform postpaid phone net additions of 366,000 compared to net losses of 205,000 in the prior year quarter - an improvement of 571,000 year-over-year
Highest net additions in three years and positive for the second consecutive quarter

Lowest-ever third quarter Sprint platform postpaid churn of 1.62 percent improved 68 basis points from the prior year quarter
Best year-over-year improvement in 12 years

Significant steps taken to improve liquidity
Completed first sale-leaseback transaction with Mobile Leasing Solutions, LLC, providing $1.1 billion in cash in December
Increased existing receivables facility by $1 billion to $4.3 billion of total capacity

Network performing at best-ever levels across voice and data metrics with average download speeds more than tripling over the last two years
Delivered the fastest download speeds of any national carrier according to Nielsen crowd-sourced data
Most metro RootMetrics® RootScore® awards in the company’s history in the second half of 2015

OVERLAND PARK, Kan. - Jan. 26, 2016 - Sprint Corporation (NYSE: S) today reported operating results for the third fiscal quarter of 2015, including growth in postpaid phone customers for the second consecutive quarter with the highest net additions in three years at 366,000, the lowest-ever postpaid churn for a third quarter at 1.62 percent, and the highest postpaid net ports on record. The company also reported net operating revenue of $8.1 billion, operating loss of $197 million, and Adjusted EBITDA* of $1.9 billion, and is raising its fiscal year 2015 Adjusted EBITDA* guidance from the previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion. In addition, the company’s preliminary estimate for fiscal year 2016 Adjusted EBITDA* is approximately $9.5 billion to $10 billion.

“It’s clear from our quarterly results that we are making great progress on achieving our goals,” said Sprint CEO Marcelo Claure. “Revenue has stabilized, costs are coming out faster than expected, postpaid phone net additions were the highest in three years, postpaid churn was the lowest-ever for a third quarter, and the network is performing at best-ever levels.”
 









 
 
 



News Release
 

Building Momentum on Cost Reduction Effort
Sprint remains on track to exceed its cost reduction target for fiscal 2015 and has realized a nearly $800 million reduction in cost of service and selling, general, and administrative expenses year-to-date, including $500 million in the third quarter. Sprint continues to progress toward a sustainable reduction of $2 billion or more of run rate operating expenses exiting fiscal 2016 and expects approximately $1 billion of transformation program costs, which are expected to be split relatively evenly between operating expenses and capital expenditures, to be incurred across fiscal 2015 and 2016 to achieve that run rate benefit.

“Our transformation is taking hold and the momentum is accelerating,” said Sprint CFO Tarek Robbiati. “Most importantly, we expect these cost reductions to be achieved without compromising network quality or impacting the customer experience.”

Quarterly Financial Results
Net operating revenues of $8.1 billion decreased 10 percent year-over-year, but have stabilized over the last three quarters, and grew two percent sequentially. The year-over-year decline was due to lower wireless service revenues, primarily related to customer shifts to rate plans associated with device financing options, and lower equipment revenues due to a shift from installment billing and subsidized sales, which recognize more revenue at the point of sale, to leasing sales, which recognize revenues over time.
Wireless service revenues plus installment plan billings and lease revenue of $7.1 billion increased one percent from the prior year period, primarily because of higher lease revenue and growth in postpaid phone customers.
Consolidated Adjusted EBITDA* of $1.9 billion improved from the prior year period, as expense reductions more than offset the decline in operating revenues. Total expenses improved primarily because of lower cost of product expenses related to device leasing options for which the associated cost is recorded as depreciation expense, and $500 million of lower selling, general, and administrative expenses.
Operating loss of $197 million included $209 million of severance and exit costs and compared to an operating loss of $2.5 billion in the year-ago quarter, an improvement of approximately $2.3 billion. Adjusting for the $209 million of severance and exit costs in the current quarter and a non-cash impairment charge of approximately $2.1 billion in the prior year quarter, operating loss would have improved by approximately $400 million year-over-year.
Net loss of $836 million, or $0.21 per share, compared to a net loss of $2.4 billion, or $0.60 per share, in the year-ago period, an improvement of approximately $1.5 billion. Adjusting for the aforementioned severance and exit costs and impairment charge, net loss would have improved by approximately $300 million year-over-year, or $0.08 per share.

Positive Postpaid Phone Net Additions Help Stabilize Top Line
Sprint continues to focus on attracting and retaining more postpaid phone customers by providing a compelling value proposition, including the recently introduced 50 percent off Verizon, AT&T and T-Mobile rate plans promotion, which has been extended to Feb. 11 because of its popularity. A better network experience has also resulted in dramatic year-over-year improvements in postpaid churn. For the second quarter in a row, the company reported positive postpaid phone net additions and posted year-over-year growth in wireless service revenues plus installment plan billings and lease revenue, which is a better representation of the total service and equipment charges on its customers’ monthly bills.

The company also reported the following Sprint platform results, which reflect its focus on higher value postpaid connections:
Total net additions were 491,000 compared to 967,000 in the prior year quarter - a decline of 476,000 year-over-year.
Postpaid net additions of 501,000 compared to 30,000 in the prior year quarter - an improvement of 471,000 year-over-year.
Postpaid phone net additions were 366,000 compared to net losses of 205,000 in the prior year quarter - an improvement of 571,000 year-over-year.
Prepaid net losses of 491,000 compared to net additions of 410,000 in the prior year quarter - a decline of 901,000 year-over-year.





 
 
 



News Release
 

Based on the success of the base loyalty program that the company implemented last quarter for Boost and Virgin, it has decided to implement the program more broadly for its prepaid base. As a result, the company will report these customers as part of its prepaid base and has adjusted the 175,000 previously recorded last quarter as postpaid back into prepaid for better comparability across periods.
Wholesale and affiliate net additions of 481,000 compared to 527,000 in the prior year quarter - a decline of 46,000 year-over-year.

Company Delivers on Funding Initiatives with More to Come
Total liquidity was $6 billion at the end of the quarter, including $2.2 billion of cash, cash equivalents and short-term investments, $3 billion of undrawn borrowing capacity under the revolving bank credit facility, and approximately $800 million of undrawn availability under the receivables facility. In addition, the company had approximately $600 million of availability under vendor financing agreements that can be used toward the purchase of 2.5 GHz network equipment, with approximately $500 million of additional availability coming in April. During the quarter, the company closed two significant transactions that immediately improved its liquidity position.
Completed the first sale-leaseback transaction with Mobile Leasing Solutions, LLC providing a $1.1 billion cash infusion, as well as creating a repeatable structure for the company to mitigate the working capital impacts associated with the leasing model. The company expects to execute future transactions generally on a quarterly basis, and expects to receive proceeds totaling $3 billion to $4 billion in fiscal 2016, depending on the amount of qualified leasing sales to its customers.
Amended existing receivables facility to include the sale of certain future lease receivables, thus increasing the maximum funding limit by $1 billion to a total of $4.3 billion. These future lease receivables are related to devices not included in the aforementioned sale-leaseback transaction with Mobile Leasing Solutions, LLC.

Sprint continues to use its assets to help fund the business and fuel future growth. Together with SoftBank and its partners, the company is establishing a network-related financing entity that could provide $3 billion to $5 billion of incremental funding in fiscal 2016. This entity is expected to raise proceeds from Sprint’s existing radio access equipment, as well as a combination of new assets associated with the network densification and a small portion of its spectrum portfolio. Sprint expects the first transaction to close by the middle of calendar 2016. Together with existing facilities, these sources of liquidity are expected to fund the transformation and repayment of all maturities that come due over the next year.

LTE Plus Network Delivers Fastest Download Speeds
Sprint remains focused on building a network that delivers the consistent reliability, capacity and speed that customers demand, and its recent deployment of two-channel (2x20 MHz) carrier aggregation in the 2.5 GHz band is driving network performance that is beating the competition. An analysis of Nielsen Mobile Performance crowd-sourced data from October through December 2015 showed that Sprint’s LTE Plus Network beat Verizon, AT&T and T-Mobile by delivering the fastest LTE download speeds. The company has deployed its LTE Plus Network in more than 150 major markets across the country and has plans for expansion in the coming months.




 
 
 



News Release
 


Additionally, independent mobile analytics firm RootMetrics® awarded Sprint a company record 212 first-place (outright or shared) RootScore® Awards for overall, reliability, speed, data, call, or text network performance in the 125 metro markets measured in the second half of 2015, beating T-Mobile for the first time ever and receiving 57 percent more awards than the prior year periodi. The company also saw median downlink speeds in these metro markets more than triple on average from the first half of 2014 testing period and measured the fastest median download speeds of any carrier in 16 cities, including Austin, Dallas, Denver, Houston, Indianapolis, Kansas City, and Phoenix.

The company remains committed to its plan of significantly densifying the network through the deployment of small cells to further improve network performance and customer experience.

Financial Outlook
As a result of accelerated cost reductions, the company is raising its guidance for fiscal year 2015 Adjusted EBITDA* from its previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion.
The company is also raising its guidance for fiscal year 2015 operating income from its previous expectation of an operating loss of $50 million to $250 million to operating income of $100 million to $300 million.
The company continues to expect fiscal year 2015 cash capital expenditures to be approximately $5 billion, excluding the impact of leased devices sold through indirect channels.
The company’s preliminary estimate for fiscal year 2016 Adjusted EBITDA* is approximately $9.5 billion to $10 billion.











 
 
 



News Release
 

Conference Call and Webcast
Date/Time: 8:30 a.m. (ET) Tuesday, Jan. 26, 2016
Call-in Information
U.S./Canada: 866-360-1063 (ID: 21719348)
International: 706-634-7849 (ID: 21719348)
Webcast available via the Internet at www.sprint.com/investors
Additional information about results, including the “Quarterly Investor Update,” is available on our Investor Relations website
Contact Information
Media Contact: Dave Tovar, 913-315-1451, [email protected]
Investor Contact: Jud Henry, 800-259-3755, [email protected]












 
 
 



News Release
 

Wireless Operating Statistics (Unaudited)
 
 Quarter To Date
 
 Year To Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
Sprint platform (1):
 
 
 
 
 
 
Net additions (losses) (in thousands)
 
 
 
 
 
 
Postpaid
501

378

30

 
1,189

(423
)
Prepaid
(491
)
(188
)
410

 
(1,045
)
(97
)
Wholesale and affiliate
481

866

527

 
2,078

1,857

Total Sprint platform wireless net additions
491

1,056

967

 
2,222

1,337

 
 
 
 
 
 
 
End of period connections (in thousands)
 
 
 
 
 
 
Postpaid
30,895

30,394

29,495

 
30,895

29,495

Prepaid
14,661

15,152

15,160

 
14,661

15,160

Wholesale and affiliate
12,803

12,322

10,233

 
12,803

10,233

Total Sprint platform end of period connections
58,359

57,868

54,888

 
58,359

54,888

 
 
 
 
 
 
 
Churn
 
 
 
 
 
 
Postpaid
1.62
%
1.54
%
2.30
%
 
1.57
%
2.18
%
Prepaid
5.82
%
5.06
%
3.94
%
 
5.31
%
4.05
%
 
 
 
 
 
 
 
Supplemental data - connected devices
 
 
 
 
 
 
End of period connections (in thousands)
 
 
 
 
 
 
Retail postpaid
1,676

1,576

1,180

 
1,676

1,180

Wholesale and affiliate
7,930

7,338

5,175

 
7,930

5,175

Total
9,606

8,914

6,355

 
9,606

6,355

 
 
 
 
 
 
 
Supplemental data - total company
 
 
 
 
 
 
End of period connections (in thousands)
 
 
 
 
 
 
Sprint platform (1)
58,359

57,868

54,888

 
58,359

54,888

Transactions (2) 

710

1,041

 

1,041

Total
58,359

58,578

55,929

 
58,359

55,929

 
 
 
 
 
 
 
Sprint platform ARPU (1) (a)
 
 
 
 
 
 
Postpaid
$
52.48

$
53.99

$
58.90

 
$
53.97

$
60.52

Prepaid
$
27.44

$
27.66

$
27.12

 
$
27.64

$
27.23

NON-GAAP RECONCILIATION - ABPA*, POSTPAID PHONE ARPU AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, ARPU, and ABPU*)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
Sprint platform ABPA* (1)
 
 
 
 
 
 
Postpaid service revenue
$
4,813

$
4,893

$
5,202

 
$
14,670

$
16,132

Add: Installment plan billings and lease revenue
831

694

288

 
2,079

618

Total for Sprint platform postpaid connections
$
5,644

$
5,587

$
5,490

 
$
16,749

$
16,750

 
 
 
 
 
 
 
Sprint platform postpaid accounts (in thousands)
11,261

11,197

11,341

 
11,211

11,538

Sprint platform postpaid ABPA* (b)
$
167.11

$
166.26

$
161.35

 
$
166.00

$
161.27

 
 
 
 
 
 
 
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
Sprint platform postpaid phone ARPU and ABPU* (1)
 
 
 
 
 
 
Postpaid phone service revenue
$
4,529

$
4,608

$
4,933

 
$
13,819

$
15,323

Add: Installment plan billings and lease revenue
802

665

276

 
1,998

588

Total for Sprint platform postpaid phone connections
$
5,331

$
5,273

$
5,209

 
$
15,817

$
15,911

 
 
 
 
 
 
 
Sprint platform postpaid average phone connections (in thousands)
25,040

24,886

25,163

 
24,927

25,578

Sprint platform postpaid phone ARPU (a)
$
60.30

$
61.71

$
65.35

 
$
61.60

$
66.57

Sprint platform postpaid phone ABPU* (c)
$
70.99

$
70.62

$
69.01

 
$
70.51

$
69.12

(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.

 
 
 

News Release
 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net operating revenues
 
 
 
 
 
 
Service revenue
$
6,683

$
6,880

$
7,272

 
$
20,600

$
22,404

Equipment revenue
1,424

1,095

1,701

 
3,509

3,846

Total net operating revenues
8,107

7,975

8,973

 
24,109

26,250

Net operating expenses
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
2,348

2,453

2,330

 
7,194

7,279

Cost of products (exclusive of depreciation and amortization below)
1,589

1,290

2,952

 
4,244

7,482

Selling, general and administrative
2,129

2,224

2,647

 
6,540

7,232

Depreciation and amortization
1,865

1,743

1,320

 
5,196

3,895

Impairments (3)

85

2,133

 
85

2,133

Other, net
373

182

131

 
548

442

Total net operating expenses
8,304

7,977

11,513

 
23,807

28,463

Operating (loss) income
(197
)
(2
)
(2,540
)
 
302

(2,213
)
Interest expense
(546
)
(542
)
(506
)
 
(1,630
)
(1,528
)
Other income, net
4

5

10

 
13

19

Loss before income taxes
(739
)
(539
)
(3,036
)
 
(1,315
)
(3,722
)
Income tax (expense) benefit
(97
)
(46
)
657

 
(126
)
601

Net loss
$
(836
)
$
(585
)
$
(2,379
)
 
$
(1,441
)
$
(3,121
)
 
 
 
 
 
 
 
Basic and diluted net loss per common share
$
(0.21
)
$
(0.15
)
$
(0.60
)
 
$
(0.36
)
$
(0.79
)
Weighted average common shares outstanding
3,970

3,969

3,957

 
3,969

3,950

Effective tax rate
-13.1
 %
-8.5
 %
21.6
%
 
-9.6
 %
16.1
%


NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED EBITDA* (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net loss
$
(836
)
$
(585
)
$
(2,379
)
 
$
(1,441
)
$
(3,121
)
Income tax expense (benefit)
97

46

(657
)
 
126

(601
)
Loss before income taxes
(739
)
(539
)
(3,036
)
 
(1,315
)
(3,722
)
Other income, net
(4
)
(5
)
(10
)
 
(13
)
(19
)
Interest expense
546

542

506

 
1,630

1,528

Operating (loss) income
(197
)
(2
)
(2,540
)
 
302

(2,213
)
Depreciation and amortization
1,865

1,743

1,320

 
5,196

3,895

EBITDA* (4)
1,668

1,741

(1,220
)
 
5,498

1,682

Impairments (3)

85

2,133

 
85

2,133

Severance and exit costs (5)
209

25

22

 
247

333

Litigation (6)
21

157

91

 
178

91

Partial pension settlement (7)


59

 

59

Reduction in liability - U.S. Cellular asset acquisition (8)


(41
)
 
(20
)
(41
)
Adjusted EBITDA* (4)
$
1,898

$
2,008

$
1,044

 
$
5,988

$
4,257

Adjusted EBITDA margin*
28.4
%
29.2
%
14.4
%
 
29.1
%
19.0
%
Selected items:
 
 
 
 
 
 
Cash paid for capital expenditures - network and other
$
994

$
1,162

$
1,425

 
$
3,958

$
3,814

Cash paid for capital expenditures - leased devices
$
607

$
573

$
143

 
$
1,724

$
143


 
 
 

News Release
 

WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net operating revenues
 
 
 
 
 
 
Service revenue
 
 
 
 
 
 
Sprint platform (1):
 
 
 
 
 
 
Postpaid
$
4,813

$
4,893

$
5,202

 
$
14,670

$
16,132

Prepaid
1,224

1,259

1,215

 
3,783

3,633

Wholesale, affiliate and other
182

185

191

 
548

535

Total Sprint platform
6,219

6,337

6,608

 
19,001

20,300

 
 
 
 
 
 
 
Total transactions (2)
27

84

124

 
216

409

Total service revenue
6,246

6,421

6,732

 
19,217

20,709

 
 
 
 
 
 
 
Equipment revenue
1,424

1,095

1,701

 
3,509

3,846

Total net operating revenues
7,670

7,516

8,433

 
22,726

24,555

 
 
 
 
 
 
 
Net operating expenses
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
2,031

2,111

1,902

 
6,147

5,939

Cost of products (exclusive of depreciation and amortization below)
1,589

1,290

2,952

 
4,244

7,482

Selling, general and administrative
2,041

2,136

2,545

 
6,273

6,937

Depreciation and amortization
1,812

1,694

1,259

 
5,046

3,703

Impairments (3)

85

1,900

 
85

1,900

Other, net
353

181

107

 
526

378

Total net operating expenses
7,826

7,497

10,665

 
22,321

26,339

Operating (loss) income
$
(156
)
$
19

$
(2,232
)
 
$
405

$
(1,784
)
 
 
 
 
 
 
 

WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Operating (loss) income
$
(156
)
$
19

$
(2,232
)
 
$
405

$
(1,784
)
Impairments (3)

85

1,900

 
85

1,900

Severance and exit costs (5)
189

24

21

 
225

292

Litigation (6)
21

157

84

 
178

84

Partial pension settlement (7)


43

 

43

Reduction in liability - U.S. Cellular asset acquisition (8)


(41
)
 
(20
)
(41
)
Depreciation and amortization
1,812

1,694

1,259

 
5,046

3,703

Adjusted EBITDA* (4)
$
1,866

$
1,979

$
1,034

 
$
5,919

$
4,197

Adjusted EBITDA margin*
29.9
%
30.8
%
15.4
%
 
30.8
%
20.3
%
Selected items:
 
 
 
 
 
 
Cash paid for capital expenditures - network and other
$
869

$
1,003

$
1,233

 
$
3,512

$
3,342

Cash paid for capital expenditures - leased devices
$
607

$
573

$
143

 
$
1,724

$
143


 
 
 

News Release
 

WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
Net operating revenues
 
 
 
 
 
 
Voice
$
201

$
212

$
289

 
$
646

$
910

Data
42

43

52

 
134

161

Internet
317

323

333

 
968

1,018

Other
21

31

18

 
72

57

Total net operating revenues
581

609

692

 
1,820

2,146

 
 
 
 
 
 
 
Net operating expenses
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
466

495

581

 
1,495

1,800

Selling, general and administrative
82

85

100

 
254

273

Depreciation and amortization
50

48

59

 
144

186

Impairments (3)


233

 

233

Other, net
20

1

24

 
22

63

Total net operating expenses
618

629

997

 
1,915

2,555

Operating loss
$
(37
)
$
(20
)
$
(305
)
 
$
(95
)
$
(409
)


WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Operating loss
$
(37
)
$
(20
)
$
(305
)
 
$
(95
)
$
(409
)
Impairments (3)


233

 

233

Severance and exit costs (5)
20

1

2

 
22

41

Litigation (6)


6

 

6

Partial pension settlement (7)


16

 

16

Depreciation and amortization
50

48

59

 
144

186

Adjusted EBITDA*
$
33

$
29

$
11

 
$
71

$
73

Adjusted EBITDA margin*
5.7
%
4.8
%
1.6
%
 
3.9
%
3.4
%
Selected items:
 
 
 
 
 
 
Cash paid for capital expenditures - network and other
$
74

$
63

$
81

 
$
205

$
205



 
 
 

News Release
 

CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
 
Year to Date
 
12/31/15
12/31/14
Operating activities
 
 
Net loss
$
(1,441
)
$
(3,121
)
Impairments (3)
85

2,133

Depreciation and amortization
5,196

3,895

Provision for losses on accounts receivable
385

730

Share-based and long-term incentive compensation expense
58

89

Deferred income tax expense (benefit)
120

(634
)
Amortization of long-term debt premiums, net
(236
)
(226
)
Loss on disposal of leased assets
143


Other changes in assets and liabilities:




Accounts and notes receivable
(1,351
)
(1,356
)
Inventories and other current assets
(278
)
(1,044
)
Accounts payable and other current liabilities
(811
)
1,183

Non-current assets and liabilities, net
137

(281
)
Other, net
596

106

Net cash provided by operating activities
2,603

1,474

 
 
 
Investing activities
 
 
Capital expenditures - network and other
(3,958
)
(3,814
)
Capital expenditures - leased devices
(1,724
)
(143
)
Expenditures relating to FCC licenses
(75
)
(121
)
Reimbursements relating to FCC licenses

95

Change in short-term investments, net
125

966

Proceeds from sales of assets and FCC licenses
36

114

Proceeds from sale-leaseback transaction
1,136


Other, net
(25
)
(9
)
Net cash used in investing activities
(4,485
)
(2,912
)
 
 
 
Financing activities
 
 
Proceeds from debt and financings
755

300

Repayments of debt, financing and capital lease obligations
(727
)
(390
)
Debt financing costs
(1
)
(37
)
Proceeds from issuance of common stock, net
10

50

Other, net
10


Net cash provided by (used in) financing activities
47

(77
)
 
 
 
Net decrease in cash and cash equivalents
(1,835
)
(1,515
)
 
 
 
Cash and cash equivalents, beginning of period
4,010

4,970

Cash and cash equivalents, end of period
$
2,175

$
3,455


RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
806

$
1,669

$
(233
)
 
$
2,603

$
1,474

 
 
 
 
 
 
 
Capital expenditures - network and other
(994
)
(1,162
)
(1,425
)
 
(3,958
)
(3,814
)
Capital expenditures - leased devices
(607
)
(573
)
(143
)
 
(1,724
)
(143
)
Expenditures relating to FCC licenses, net
(30
)
(19
)
(42
)
 
(75
)
(26
)
Proceeds from sales of assets and FCC licenses
32

3

13

 
36

114

Other investing activities, net
(4
)
(18
)
(3
)
 
(25
)
(9
)
Free cash flow*
$
(797
)
$
(100
)
$
(1,833
)
 
$
(3,143
)
$
(2,404
)

 
 
 

News Release
 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
 
12/31/15
3/31/15
ASSETS
 
 
Current assets
 
 
Cash and cash equivalents
$
2,175

$
4,010

Short-term investments
41

166

Accounts and notes receivable, net
1,033

2,290

Device and accessory inventory
995

1,359

Deferred tax assets

62

Prepaid expenses and other current assets
2,317

1,890

Total current assets
6,561

9,777

 
 
 
Property, plant and equipment, net
20,645

19,721

Goodwill
6,575

6,575

FCC licenses and other
40,052

39,987

Definite-lived intangible assets, net
4,807

5,893

Other assets
911

1,077

Total assets
$
79,551

$
83,030

 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
Current liabilities
 
 
Accounts payable
$
3,078

$
4,347

Accrued expenses and other current liabilities
4,474

5,293

Current portion of long-term debt, financing and capital lease obligations
3,324

1,300

Deferred tax liabilities
186


Total current liabilities
11,062

10,940

 
 
 
Long-term debt, financing and capital lease obligations
30,429

32,531

Deferred tax liabilities
13,773

13,898

Other liabilities
3,954

3,951

Total liabilities
59,218

61,320

 
 
 
Stockholders' equity
 
 
Common stock
40

40

Treasury shares, at cost

(7
)
Paid-in capital
27,536

27,468

Accumulated deficit
(6,824
)
(5,383
)
Accumulated other comprehensive loss
(419
)
(408
)
Total stockholders' equity
20,333

21,710

Total liabilities and stockholders' equity
$
79,551

$
83,030



NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
 
12/31/15
3/31/15
 
 
 
Total debt
$
33,753

$
33,831

Less: Cash and cash equivalents
(2,175
)
(4,010
)
Less: Short-term investments
(41
)
(166
)
Net debt*
$
31,537

$
29,655




 
 
 

News Release
 

SCHEDULE OF DEBT (Unaudited)
(Millions)
 
 
 
12/31/15
ISSUER
 COUPON
 MATURITY
 PRINCIPAL
Sprint Corporation
 
 
 
7.25% Notes due 2021
7.250%
09/15/2021
$
2,250

7.875% Notes due 2023
7.875%
09/15/2023
4,250

7.125% Notes due 2024
7.125%
06/15/2024
2,500

7.625% Notes due 2025
7.625%
02/15/2025
1,500

Sprint Corporation
 
 
10,500

 
 
 
 
Sprint Communications, Inc.
 
 
 
Export Development Canada Facility (Tranche 4)
5.556%
12/15/2017
250

Export Development Canada Facility (Tranche 3)
3.783%
12/17/2019
300

6% Senior notes due 2016
6.000%
12/01/2016
2,000

9.125% Senior notes due 2017
9.125%
03/01/2017
1,000

8.375% Senior notes due 2017
8.375%
08/15/2017
1,300

9% Guaranteed notes due 2018
9.000%
11/15/2018
3,000

7% Guaranteed notes due 2020
7.000%
03/01/2020
1,000

7% Senior notes due 2020
7.000%
08/15/2020
1,500

11.5% Senior notes due 2021
11.500%
11/15/2021
1,000

9.25% Debentures due 2022
9.250%
04/15/2022
200

6% Senior notes due 2022
6.000%
11/15/2022
2,280

Sprint Communications, Inc.
 
 
13,830

 
 
 
 
Sprint Capital Corporation
 
 
 
6.9% Senior notes due 2019
6.900%
05/01/2019
1,729

6.875% Senior notes due 2028
6.875%
11/15/2028
2,475

8.75% Senior notes due 2032
8.750%
03/15/2032
2,000

Sprint Capital Corporation
 
 
6,204

 
 
 
 
Clearwire Communications LLC
 
 
 
14.75% First-priority senior secured notes due 2016
14.750%
12/01/2016
300

8.25% Exchangeable notes due 2040
8.250%
12/01/2040
629

Clearwire Communications LLC
 
 
929

 
 
 
 
Secured equipment credit facilities
1.991% - 2.745%
2017 - 2021
960

 
 
 
 
Tower financing obligation
6.098%
08/31/2021
237

Capital lease obligations and other
2.348% - 10.517%
2016 - 2023
231

Total principal
 
 
32,891

 
 
 
 
Net premiums
 
 
862

Total debt
 
 
$
33,753

*This table excludes (i) our unsecured revolving bank credit facility, which will expire in 2018 and has no outstanding balance, (ii) $323 million in letters of credit outstanding under the unsecured revolving bank credit facility, and (iii) all capital leases and other financing obligations.

 
 
 

News Release
 

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)
During the second quarter of fiscal year 2015, we recorded $85 million of asset impairments primarily related to network development costs that are no longer relevant as a result of changes in the Company's network plans. For the third quarter of fiscal year 2014, impairment losses were recorded after determining that the carrying value exceeded estimated fair value of both the Sprint trade name and Wireline asset group, which consists primarily of property, plant and equipment.
(4)
As more of our customers elect to lease a device rather than purchasing one under our subsidized program, there is a positive impact to EBITDA* and Adjusted EBITDA* primarily due to the fact the cost of the device is not recorded as cost of products but rather is depreciated over the customer lease term. Under our device leasing program for the direct channel, devices are transferred from inventory to property and equipment and the cost of the leased device is recognized as depreciation expense over the customer lease term to an estimated residual value. The customer payments are recognized as revenue over the term of the lease. Under our subsidized program, the cash received from the customer for the device is recognized as equipment revenue at the point of sale and the cost of the device is recognized as cost of products. During the three and nine-month periods ended December 31, 2015, we leased devices through our Sprint direct channels totaling approximately $1.0 and $2.6 billion, 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 nine-month periods ended December 31, 2015, the equipment revenue derived from customers electing to finance their devices through device leasing or installment billing programs was 58% and 59%, respectively, while the remainder of total equipment revenue was derived from customers purchasing devices under our subsidized program as compared to 17% and 16% in prior periods, respectively.
The impact to EBITDA* and Adjusted EBITDA* resulting from the sale of devices under our installment billing program is neutral except for the impact from the time value of money element related to the imputed interest on the installment receivable.
(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 our backhaul access contracts for which we will no longer be receiving any economic benefit, and severance costs associated with reduction in our work force.
(6)
For the third and second quarters of fiscal year 2015 and third quarter of fiscal year 2014, litigation activity is a result of unfavorable developments in connection with pending litigation.
(7)
The partial pension settlement resulted from amounts paid to eligible terminated participants who voluntarily elected to receive lump sum distributions as a result of an approved plan amendment to the Sprint Retirement Pension Plan by the Board of Directors in June 2014.
(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.



 
 
 

News Release
 

*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 proceeds from the sale-leaseback of assets. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

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





 
 
 



News Release
 

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, 2015. 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 more than 58.4 million connections as of December 31, 2015 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.


i Rankings and underlying data metrics based on 125 RootMetrics Metro RootScore Reports from 2H 2014 and 2H 2015 for mobile performance as tested on best available plans and devices on four mobile networks across all available network types. 16 markets that measured the fastest median download speeds in 2H 2015: Austin, TX; Chattanooga, TN; Corpus Christi, TX; Dallas, TX; Denton, TX; Denver, CO; Houston, TX; Indianapolis, IN; Kansas City, MO; McAllen, TX; Ogden, UT; Phoenix, AZ; Spokane, WA; Toledo, OH; Wichita, KS; and Youngstown, OH . Your experiences may vary. The RootMetrics award is not an endorsement of Sprint. Visit www.rootmetrics.com for more details.







###







 
 
 







SPRINT REPORTS HIGHEST POSTPAID PHONE NET ADDITIONS IN THREE YEARS, LOWEST-EVER THIRD QUARTER POSTPAID CHURN, AND INCREASES ADJUSTED EBITDA* GUIDANCE WITH THIRD FISCAL QUARTER 2015 RESULTS

Operating loss of $197 million and Adjusted EBITDA* of $1.9 billion
Nearly $800 million of year-to-date reduction in cost of service and selling, general, and administrative expenses builds momentum for 2016 targets

Raising fiscal year 2015 Adjusted EBITDA* guidance from previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion
Preliminary estimate for fiscal year 2016 Adjusted EBITDA* of approximately $9.5 billion to $10 billion

Sprint platform postpaid net additions of 501,000 improved by 471,000 year-over-year
Highest postpaid net ports on record and net port positive for the fourth consecutive quarter

Sprint platform postpaid phone net additions of 366,000 compared to net losses of 205,000 in the prior year quarter - an improvement of 571,000 year-over-year
Highest net additions in three years and positive for the second consecutive quarter

Lowest-ever third quarter Sprint platform postpaid churn of 1.62 percent improved 68 basis points from the prior year quarter
Best year-over-year improvement in 12 years

Significant steps taken to improve liquidity
Completed first sale-leaseback transaction with Mobile Leasing Solutions, LLC, providing $1.1 billion in cash in December
Increased existing receivables facility by $1 billion to $4.3 billion of total capacity

Network performing at best-ever levels across voice and data metrics with average download speeds more than tripling over the last two years
Delivered the fastest download speeds of any national carrier according to Nielsen crowd-sourced data
Most metro RootMetrics® RootScore® awards in the company’s history in the second half of 2015
TABLE OF CONTENTS
 
 
 
Customer Metrics
3

Sales
5

Network
6

Financials
7

The Sprint Quarterly Investor Update is a publication of the Sprint Investor Relations department, which can be reached by phone at 1-800-259-3755 or via e-mail at [email protected].

Financial and Operational Results Tables
11

Notes to the Financial Information
18

Financial Measures
19

Trended financial performance metrics can also be found on our Investor Relations website at sprint.com/investors.

Safe Harbor
20


 













 
Sprint continues to focus on attracting and retaining more postpaid phone customers by providing a compelling value proposition, including the recently introduced 50 percent off Verizon, AT&T and T-Mobile rate plans promotion, which has been extended to Feb. 11 because of its popularity. A better network experience has also resulted in dramatic year-over-year improvements in postpaid churn. For the second quarter in a row, the company reported positive postpaid phone net additions and posted year-over-year growth in wireless service revenues plus installment plan billings and lease revenue, which is a better representation of the total service and equipment charges on its customers’ monthly bills.

The company had 58.4 million connections at the end of the quarter, all of which were on the Sprint platform, including 30.9 million postpaid, 14.7 million prepaid, and 12.8 million wholesale and affiliate connections. The Sprint platform had 491,000 net additions in the current quarter compared with 1.1 million in the previous quarter and 967,000 in the year-ago period. The year-over-year and sequential reduction in net additions was primarily due to higher prepaid net losses, partially offset by stronger postpaid phone net additions. The sequential decrease was also impacted by lower wholesale net additions. The company has added nearly 3.5 million Sprint platform net additions over the last four quarters.
 

Postpaid^

Net additions were 501,000 during the quarter compared to 30,000 in the year-ago period and 378,000 in the prior quarter. As a result of expanding the recently launched Boost and Virgin loyalty program, customers who join the program will no longer be included in the postpaid customer base. The year-over-year improvement was driven by lower churn while the sequential improvement was primarily driven by higher phone gross additions. The company had the highest postpaid net ports on record and was net port positive for the fourth consecutive quarter.
Churn of 1.62 percent was the lowest ever for a fiscal third quarter, and compared to 2.30 percent for the year-ago period and 1.54 percent in the prior quarter. The 68 basis point year-over-year improvement, the best year-over-year improvement in 12 years, was primarily driven by improved quality of recently acquired customers and improved network experience, while the sequential increase was driven by seasonality. The last three quarters are the lowest in company history.
Phone net additions of 366,000 compared to net losses of 205,000 for the year-ago period and net 62,000 additions in the prior quarter. This quarter represents the highest postpaid phone net additions in the last three years. The year-over-year improvement was primarily


SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
^ indicates results specific to Sprint Platform           3












 
driven by lower churn, while the sequential increase was driven by an increase in prime credit quality phone gross additions. The company ended the quarter with 25.3 million phone connections.
Tablet net additions were 82,000 in the quarter compared to 189,000 for the year-ago period and 228,000 for the prior quarter. Both the year-over-year and sequential decline were mostly due to lower gross additions as the company continues to focus on growing phone connections. The company ended the quarter with 3.2 million tablet connections.
Average Postpaid Subscribers per Account of 2.72 at quarter end compared to 2.60 in the prior year period and 2.70 in the prior quarter.    

Prepaid^
Net losses of 491,000 during the quarter compared to net additions of 410,000 in the year-ago quarter and net losses of 188,000 in the prior quarter. The year-over-year and sequential declines were mostly driven by increased competitive pressure and less promotional activity.
Churn was 5.82 percent compared to 3.94 percent for the year-ago period and 5.06 percent for the prior quarter. The increases in year-over-year and sequential churn were primarily due to an increase in competitive offers in the market.

Wholesale & Affiliate^
Net additions were 481,000 in the quarter compared to 527,000 in the year-ago quarter and 866,000 in the prior quarter. Connected devices represented the majority of the net additions.






SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
^ indicates results specific to Sprint Platform           4














 

Retail Sales were 8.2 million during the quarter compared to 9.0 million in the year-ago quarter and 7.5 million in the prior quarter. The year-over-year decrease was mostly driven by fewer postpaid upgrades, while the sequential increase was mostly due to seasonally higher postpaid phone sales.

Postpaid^

Device financing take rate was 65 percent for the quarter (55 percent on leasing and 10 percent on installment plans), compared to 46 percent for the year-ago period (25 percent on leasing and 21 percent on installment plans) and relatively flat sequentially. At the end of the quarter, 44 percent of the postpaid connection base was active on a device financing agreement (30 percent on leasing and 14 percent on installment plans), compared to 18 percent in the year-ago quarter and 37 percent in the prior quarter.
Upgrade rate was 9.3 percent during the quarter compared to 11.5 percent for the year-ago quarter and 7.8 percent for the prior quarter. The year-over-year decrease was mostly due to a lower percentage of the base being eligible for upgrades compared to the prior year, while the sequential increase was due to seasonality.
Tri-band phones represented 64 percent of the 25.3 million ending postpaid phone connection base compared to 27 percent at the end of the year-ago quarter and 54 percent at the end of the prior quarter. During the quarter, 93 percent of postpaid phones sold were tri-band, an increase from 78 percent in the year-ago period and 89 percent in the prior quarter.
Two-channel (2x20 MHz) carrier aggregation capable phones, which allow for higher data speeds, were 76 percent of postpaid phones sold during the quarter, increasing the number of these phones within the phone base to 21 percent.














SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
^ indicates results specific to Sprint Platform           5





Sprint’s new LTE Plus Network DELIVERS faster download speeds than Verizon, AT&T and T-Mobile





 
Sprint remains focused on building a network that delivers the consistent reliability, capacity and speed that customers demand, and its recent deployment of two-channel (2x20 MHz) carrier aggregation in the 2.5 GHz band is driving network performance that is beating the competition. An analysis of Nielsen Mobile Performance crowd-sourced data from October through December 2015 showed that Sprint’s LTE Plus Network beat Verizon, AT&T and T-Mobile by delivering the fastest LTE download speeds. The company has deployed its LTE Plus Network in more than 150 major markets across the country and has plans for expansion in the coming months.

Additionally, independent mobile analytics firm RootMetrics® awarded Sprint a company record 212 first-place (outright or shared) RootScore® Awards for overall, reliability, speed, data, call, or text network performance in the 125 metro markets measured in the second half of 2015, beating T-Mobile for the first time ever and receiving 57 percent more awards than the prior year periodi. The company also saw median downlink speeds in these metro markets more than triple on average from the first half of 2014 testing period and measured the fastest median download speeds of any carrier in 16 cities, including Austin, Dallas, Denver, Houston, Indianapolis, Kansas City, and Phoenix.

The company remains committed to its plan of significantly densifying the network through the deployment of small cells to further improve network performance and customer experience.





 








i Rankings and underlying data metrics based on 125 RootMetrics Metro RootScore Reports from 2H 2014 and 2H 2015 for mobile performance as tested on best available plans and devices on four mobile networks across all available network types. 16 markets that measured the fastest median download speeds in 2H 2015: Austin, TX; Chattanooga, TN; Corpus Christi, TX; Dallas, TX; Denton, TX; Denver, CO; Houston, TX; Indianapolis, IN; Kansas City, MO; McAllen, TX; Ogden, UT; Phoenix, AZ; Spokane, WA; Toledo, OH; Wichita, KS; and Youngstown, OH . Your experiences may vary. The RootMetrics award is not an endorsement of Sprint. Visit www.rootmetrics.com for more details.


SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
6















 
Revenues
Net operating revenues of $8.1 billion for the quarter decreased 10 percent year-over-year, but have stabilized over the last three quarters, and grew two percent sequentially. The year-over-year decline was due to lower wireless service revenue, primarily related to customer shifts to rate plans associated with device financing options, and lower equipment revenue due to a shift from installment billing and subsidized sales, which recognize more revenue at the point of sale, to leasing sales, which recognize revenue over time.
Wireless service revenue + installment plan billings and lease revenue represents total service and equipment charges on customers’ monthly bills. The combined revenue of $7.1 billion for the quarter increased one percent year-over-year and was flat sequentially. The year-over-year increase was primarily due to higher lease revenue and growth in postpaid phone customers.
Wireline revenues of $581 million for the quarter declined $111 million year-over-year and $28 million sequentially. The year-over-year and sequential declines were primarily driven by lower voice rates and volumes.
Postpaid Phone Average Billings Per User (ABPU)^* of $70.99 for the quarter increased three percent year-over-year and was flat sequentially. The year-over-year increase was primarily related to higher lease revenue associated with device financing, partially offset by a shift to lower priced rate plans offered in conjunction with device financing options.
Postpaid Average Billings Per Account (ABPA)^* of $167.11 for the quarter increased four percent year-over-year and was flat sequentially. The year-over-year increase was due to higher lease revenue, in addition to growth in lines per account, partially offset by lower rate plans offered in conjunction with device financing options.
Prepaid Average Revenue Per User (ARPU)^ of $27.44 for the quarter increased one percent year-over-year and decreased one percent sequentially. The year-over-year increase was primarily driven by changes in the mix of our customer base among our prepaid brands. The sequential decrease was mostly driven by a shift to lower priced rate plans.








SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
^ indicates results specific to Sprint Platform           7











 
Operating Expenses
Cost of services of $2.3 billion for the quarter increased $18 million year-over-year and decreased $105 million sequentially. The year-over-year increase was due to higher wireless service and repair costs, which were mostly offset by lower wireline cost of service and wireless roaming expenses. The sequential decrease was impacted by seasonally lower roaming expenses and wireless service and repair expenses.
Cost of products of $1.6 billion for the quarter declined $1.4 billion year-over-year and increased $299 million sequentially. The year-over-year decrease was related to lower retail sales volumes and the higher adoption of device leasing options, for which the associated cost is recorded as depreciation expense as opposed to cost of products. The increase from the prior quarter was due to seasonally higher sales volumes, as well as the lease payments associated with the sale-leaseback transaction with Mobile Leasing Solutions, LLC.
SG&A expenses of $2.1 billion for the quarter decreased by $518 million year-over-year and $95 million sequentially. The year-over-year decrease was primarily driven by lower bad debt expense as our customer credit profile improved, lower marketing spend, and general and administrative expense reductions. The sequential decrease was primarily driven by lower marketing and general and administrative expenses, partially offset by seasonally higher selling expenses.
Depreciation and amortization expense of $1.9 billion for the quarter increased $545 million year-over-year and $122 million sequentially. Both the year-over-year and sequential increases were primarily related to depreciation of devices associated with our leasing options. Leased device depreciation was $535 million in the quarter, $54 million in the prior year, and $420 million in the prior quarter. Depreciation related to devices sold to Mobile Leasing Solutions, LLC will no longer be included in Sprint’s financial results.
















SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
8












 

Adjusted EBITDA* & Operating Loss

Adjusted EBITDA* was $1.9 billion for the quarter compared to $1.0 billion in the year-ago quarter and $2.0 billion in the prior quarter. Adjusted EBITDA* increased 82 percent year-over-year, as expense reductions more than offset the decline in operating revenues. Total expenses improved primarily because of lower cost of product expenses related to device leasing options for which the associated cost is recorded as depreciation expense, and over $500 million of lower selling, general, and administrative expenses. Sequentially, Adjusted EBITDA* decreased by five percent. The decrease was driven by a higher cost of products, and was partially offset by lower cost of services, and lower selling, general and administrative expenses.
Operating loss of $197 million compares to an operating loss of $2.5 billion in the year-ago quarter, and an operating loss of $2 million in the prior quarter. The year-over-year improvement was approximately $2.3 billion. Adjusting for the $209 million of severance and exit costs in the current quarter and a non-cash impairment charge of approximately $2.1 billion in the prior year quarter, operating loss would have improved by approximately $400 million year-over-year. The decrease sequentially was impacted by higher depreciation expense and severance costs in the current quarter.
  

Capital Expenditures & Free Cash Flow*
Cash capital expenditures were $1.6 billion in the quarter compared to $1.6 billion in the year-ago quarter and $1.7 billion in the prior quarter. Capital expenditures for leased devices were $607 million in the current quarter compared to $143 million in the year-ago quarter and $573 million in the prior quarter. Year-over-year, new spending for leased devices in our indirect channels has offset the decrease in network spending, which benefitted from software driven deployments of capacity through carrier aggregation. The sequential decrease of $134 million was primarily driven by lower network capital expenditures.
Free Cash Flow* was negative $797 million for the quarter compared to negative $1.8 billion in the year-ago quarter and negative $100 million in the prior quarter. The current quarter free cash flow* includes $800 million related to cash received from the receivables facility, while the prior quarter includes $400 million related to cash received from the receivables facility.




SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
9













 
Liquidity & Debt
Total liquidity was $6 billion at the end of the quarter, including $2.2 billion of cash, cash equivalents and short-term investments, $3 billion of undrawn borrowing capacity under the revolving bank credit facility, and approximately $800 million of undrawn availability under the receivables facility. In addition, the company had approximately $600 million of availability under vendor financing agreements that can be used toward the purchase of 2.5 GHz network equipment, with approximately $500 million of additional availability coming in April. During the quarter, the company closed two significant transactions that immediately improved its liquidity position.
The company completed the first sale-leaseback transaction with Mobile Leasing Solutions, LLC providing a $1.1 billion cash infusion, as well as creating a repeatable structure for the company to mitigate the working capital impacts associated with the leasing model.
Amended existing receivables facility to include the sale of certain future lease receivables, thus increasing the maximum funding limit by $1 billion to a total of $4.3 billion. These future lease receivables are related to devices not included in the aforementioned sale-leaseback transaction with Mobile Leasing Solutions, LLC.

Device Financing
There were no net installment receivables at quarter end, due to a sale in October of approximately $1.2 billion under the receivables facility. Net installment receivables were $1.5 billion at end of the year-ago quarter and $1.1 billion in the prior quarter.
Leased devices included in net PP&E at the end of the quarter were $3.3 billion compared to $937 million in the prior year and $3.6 billion in the prior quarter. The $2.4 billion increase from the prior year was due to the growth of leasing sales. The $288 million sequential decrease was due to the sale of leased devices as part of the sale-leaseback transaction with Mobile Leasing Solutions, LLC, partially offset by additional leasing sales to customers.

Financial Outlook
l
As a result of accelerated cost reductions, the company is raising its guidance for fiscal year 2015 Adjusted EBITDA* from its previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion.

 
l
The company continues to expect fiscal year 2015 cash capital expenditures to be approximately $5 billion, excluding the impact of leased devices sold through indirect channels.

 
 
 
 
 
l
The company is also raising its guidance for fiscal year 2015 operating income from its previous expectation of an operating loss of $50 million to $250 million to operating income of $100 million to $300 million.

 
l
The company’s preliminary estimate for fiscal year 2016 Adjusted EBITDA* is approximately $9.5 billion to $10 billion.


SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
10




Wireless Operating Statistics (Unaudited)
 
 Quarter To Date
 
 Year To Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15

12/31/14

Sprint platform (1):
 
 
 
 
 
 
Net additions (losses) (in thousands)
 
 
 
 
 
 
Postpaid
501

378

30

 
1,189

(423
)
Prepaid
(491
)
(188
)
410

 
(1,045
)
(97
)
Wholesale and affiliate
481

866

527

 
2,078

1,857

Total Sprint platform wireless net additions
491

1,056

967

 
2,222

1,337

 
 
 
 
 
 
 
End of period connections (in thousands)
 
 
 
 
 
 
Postpaid
30,895

30,394

29,495

 
30,895

29,495

Prepaid
14,661

15,152

15,160

 
14,661

15,160

Wholesale and affiliate
12,803

12,322

10,233

 
12,803

10,233

Total Sprint platform end of period connections
58,359

57,868

54,888

 
58,359

54,888

 
 
 
 
 
 
 
Churn
 
 
 
 
 
 
Postpaid
1.62
%
1.54
%
2.30
%
 
1.57
%
2.18
%
Prepaid
5.82
%
5.06
%
3.94
%
 
5.31
%
4.05
%
 
 
 
 
 
 
 
Supplemental data - connected devices
 
 
 
 
 
 
End of period connections (in thousands)
 
 
 
 
 
 
Retail postpaid
1,676

1,576

1,180

 
1,676

1,180

Wholesale and affiliate
7,930

7,338

5,175

 
7,930

5,175

Total
9,606

8,914

6,355

 
9,606

6,355

 
 
 
 
 
 
 
Supplemental data - total company
 
 
 
 
 
 
End of period connections (in thousands)
 
 
 
 
 
 
Sprint platform (1)
58,359

57,868

54,888

 
58,359

54,888

Transactions (2)

710

1,041

 

1,041

Total
58,359

58,578

55,929

 
58,359

55,929

 
 
 
 
 
 
 
Sprint platform ARPU (1) (a)
 
 
 
 
 
 
Postpaid
$
52.48

$
53.99

$
58.90

 
$
53.97

$
60.52

Prepaid
$
27.44

$
27.66

$
27.12

 
$
27.64

$
27.23

NON-GAAP RECONCILIATION - ABPA*, POSTPAID PHONE ARPU and ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, ARPU, and ABPU*)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
Sprint platform ABPA* (1)
 
 
 
 
 
 
Postpaid service revenue
$
4,813

$
4,893

$
5,202

 
$
14,670

$
16,132

Add: Installment plan billings and lease revenue
831

694

288

 
2,079

618

Total for Sprint platform postpaid connections
$
5,644

$
5,587

$
5,490

 
$
16,749

$
16,750

 
 
 
 
 
 
 
Sprint platform postpaid accounts (in thousands)
11,261

11,197

11,341

 
11,211

11,538

Sprint platform postpaid ABPA* (b)
$
167.11

$
166.26

$
161.35

 
$
166.00

$
161.27

 
 
 
 
 
 
 
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
Sprint platform postpaid phone ARPU and ABPU* (1)
 
 
 
 
 
 
Postpaid phone service revenue
$
4,529

$
4,608

$
4,933

 
$
13,819

$
15,323

Add: Installment plan billings and lease revenue
802

665

276

 
1,998

588

Total for Sprint platform postpaid phone connections
$
5,331

$
5,273

$
5,209

 
$
15,817

$
15,911

 
 
 
 
 
 
 
Sprint platform postpaid average phone connections (in thousands)
25,040

24,886

25,163

 
24,927

25,578

Sprint platform postpaid phone ARPU (a)
$
60.30

$
61.71

$
65.35

 
$
61.60

$
66.57

Sprint platform postpaid phone ABPU* (c)
$
70.99

$
70.62

$
69.01

 
$
70.51

$
69.12

(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.

SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
11




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net operating revenues



 


Service revenue
$
6,683

$
6,880

$
7,272

 
$
20,600

$
22,404

Equipment revenue
1,424

1,095

1,701

 
3,509

3,846

Total net operating revenues
8,107

7,975

8,973

 
24,109

26,250

Net operating expenses
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
2,348

2,453

2,330

 
7,194

7,279

Cost of products (exclusive of depreciation and amortization below)
1,589

1,290

2,952

 
4,244

7,482

Selling, general and administrative
2,129

2,224

2,647

 
6,540

7,232

Depreciation and amortization
1,865

1,743

1,320

 
5,196

3,895

Impairments (3)

85

2,133

 
85

2,133

Other, net
373

182

131

 
548

442

Total net operating expenses
8,304

7,977

11,513

 
23,807

28,463

Operating (loss) income
(197
)
(2
)
(2,540
)
 
302

(2,213
)
Interest expense
(546
)
(542
)
(506
)
 
(1,630
)
(1,528
)
Other income, net
4

5

10

 
13

19

Loss before income taxes
(739
)
(539
)
(3,036
)
 
(1,315
)
(3,722
)
Income tax (expense) benefit
(97
)
(46
)
657

 
(126
)
601

Net loss
$
(836
)
$
(585
)
$
(2,379
)
 
$
(1,441
)
$
(3,121
)
 
 
 
 
 
 
 
Basic and diluted net loss per common share
$
(0.21
)
$
(0.15
)
$
(0.60
)
 
$
(0.36
)
$
(0.79
)
Weighted average common shares outstanding
3,970

3,969

3,957

 
3,969

3,950

Effective tax rate
-13.1
 %
-8.5
 %
21.6
%
 
-9.6
 %
16.1
%


NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED EBITDA* (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net loss
$
(836
)
$
(585
)
$
(2,379
)
 
$
(1,441
)
$
(3,121
)
Income tax expense (benefit)
97

46

(657
)
 
126

(601
)
Loss before income taxes
(739
)
(539
)
(3,036
)
 
(1,315
)
(3,722
)
Other income, net
(4
)
(5
)
(10
)
 
(13
)
(19
)
Interest expense
546

542

506

 
1,630

1,528

Operating (loss) income
(197
)
(2
)
(2,540
)
 
302

(2,213
)
Depreciation and amortization
1,865

1,743

1,320

 
5,196

3,895

EBITDA* (4)
1,668

1,741

(1,220
)
 
5,498

1,682

Impairments (3)

85

2,133

 
85

2,133

Severance and exit costs (5)
209

25

22

 
247

333

Litigation (6)
21

157

91

 
178

91

Partial pension settlement (7)


59

 

59

Reduction in liability - U.S. Cellular asset acquisition (8)


(41
)
 
(20
)
(41
)
Adjusted EBITDA* (4)
$
1,898

$
2,008

$
1,044

 
$
5,988

$
4,257

Adjusted EBITDA margin*
28.4
%
29.2
%
14.4
%
 
29.1
%
19.0
%
Selected items:
 
 
 
 
 
 
Cash paid for capital expenditures - network and other
$
994

$
1,162

$
1,425

 
$
3,958

$
3,814

Cash paid for capital expenditures - leased devices
$
607

$
573

$
143

 
$
1,724

$
143



SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
12




WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net operating revenues
 
 
 
 
 
 
Service revenue
 
 
 
 
 
 
Sprint platform (1):
 
 
 
 
 
 
Postpaid
$
4,813

$
4,893

$
5,202

 
$
14,670

$
16,132

Prepaid
1,224

1,259

1,215

 
3,783

3,633

Wholesale, affiliate and other
182

185

191

 
548

535

Total Sprint platform
6,219

6,337

6,608

 
19,001

20,300

 
 
 
 
 
 
 
Total transactions (2)
27

84

124

 
216

409

Total service revenue
6,246

6,421

6,732

 
19,217

20,709

 
 
 
 
 
 
 
Equipment revenue
1,424

1,095

1,701

 
3,509

3,846

Total net operating revenues
7,670

7,516

8,433

 
22,726

24,555

 
 
 
 
 
 
 
Net operating expenses
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
2,031

2,111

1,902

 
6,147

5,939

Cost of products (exclusive of depreciation and amortization below)
1,589

1,290

2,952

 
4,244

7,482

Selling, general and administrative
2,041

2,136

2,545

 
6,273

6,937

Depreciation and amortization
1,812

1,694

1,259

 
5,046

3,703

Impairments (3)

85

1,900

 
85

1,900

Other, net
353

181

107

 
526

378

Total net operating expenses
7,826

7,497

10,665

 
22,321

26,339

Operating (loss) income
$
(156
)
$
19

$
(2,232
)
 
$
405

$
(1,784
)
 
 
 
 
 
 
 


WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Operating (loss) income
$
(156
)
$
19

$
(2,232
)
 
$
405

$
(1,784
)
Impairments (3)

85

1,900

 
85

1,900

Severance and exit costs (5)
189

24

21

 
225

292

Litigation (6)
21

157

84

 
178

84

Partial pension settlement (7)


43

 

43

Reduction in liability - U.S. Cellular asset acquisition (8)


(41
)
 
(20
)
(41
)
Depreciation and amortization
1,812

1,694

1,259

 
5,046

3,703

Adjusted EBITDA* (4)
$
1,866

$
1,979

$
1,034

 
$
5,919

$
4,197

Adjusted EBITDA margin*
29.9
%
30.8
%
15.4
%
 
30.8
%
20.3
%
Selected items:
 
 
 
 
 
 
Cash paid for capital expenditures - network and other
$
869

$
1,003

$
1,233

 
$
3,512

$
3,342

Cash paid for capital expenditures - leased devices
$
607

$
573

$
143

 
$
1,724

$
143



SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
13




WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
Net operating revenues
 
 
 
 
 
 
Voice
$
201

$
212

$
289

 
$
646

$
910

Data
42

43

52

 
134

161

Internet
317

323

333

 
968

1,018

Other
21

31

18

 
72

57

Total net operating revenues
581

609

692

 
1,820

2,146

 
 
 
 
 
 
 
Net operating expenses
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
466

495

581

 
1,495

1,800

Selling, general and administrative
82

85

100

 
254

273

Depreciation and amortization
50

48

59

 
144

186

Impairments (3)


233

 

233

Other, net
20

1

24

 
22

63

Total net operating expenses
618

629

997

 
1,915

2,555

Operating loss
$
(37
)
$
(20
)
$
(305
)
 
$
(95
)
$
(409
)


WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Operating loss
$
(37
)
$
(20
)
$
(305
)
 
$
(95
)
$
(409
)
Impairments (3)


233

 

233

Severance and exit costs (5)
20

1

2

 
22

41

Litigation (6)


6

 

6

Partial pension settlement (7)


16

 

16

Depreciation and amortization
50

48

59

 
144

186

Adjusted EBITDA*
$
33

$
29

$
11

 
$
71

$
73

Adjusted EBITDA margin*
5.7
%
4.8
%
1.6
%
 
3.9
%
3.4
%
Selected items:
 
 
 
 
 
 
Cash paid for capital expenditures - network and other
$
74

$
63

$
81

 
$
205

$
205



SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
14




CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
 
Year to Date
 
12/31/15
12/31/14
Operating activities
 
 
Net loss
$
(1,441
)
$
(3,121
)
Impairments (3)
85

2,133

Depreciation and amortization
5,196

3,895

Provision for losses on accounts receivable
385

730

Share-based and long-term incentive compensation expense
58

89

Deferred income tax expense (benefit)
120

(634
)
Amortization of long-term debt premiums, net
(236
)
(226
)
Loss on disposal of leased assets
143


Other changes in assets and liabilities:
 
 
Accounts and notes receivable
(1,351
)
(1,356
)
Inventories and other current assets
(278
)
(1,044
)
Accounts payable and other current liabilities
(811
)
1,183

Non-current assets and liabilities, net
137

(281
)
Other, net
596

106

Net cash provided by operating activities
2,603

1,474

 
 
 
Investing activities
 
 
Capital expenditures - network and other
(3,958
)
(3,814
)
Capital expenditures - leased devices
(1,724
)
(143
)
Expenditures relating to FCC licenses
(75
)
(121
)
Reimbursements relating to FCC licenses

95

Change in short-term investments, net
125

966

Proceeds from sales of assets and FCC licenses
36

114

Proceeds from sale-leaseback transaction
1,136


Other, net
(25
)
(9
)
Net cash used in investing activities
(4,485
)
(2,912
)
 
 
 
Financing activities
 
 
Proceeds from debt and financings
755

300

Repayments of debt, financing and capital lease obligations
(727
)
(390
)
Debt financing costs
(1
)
(37
)
Proceeds from issuance of common stock, net
10

50

Other, net
10


Net cash provided by (used in) financing activities
47

(77
)
 
 
 
Net decrease in cash and cash equivalents
(1,835
)
(1,515
)
 
 
 
Cash and cash equivalents, beginning of period
4,010

4,970

Cash and cash equivalents, end of period
$
2,175

$
3,455


RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
 
Quarter to Date
 
Year to Date
 
12/31/15
9/30/15
12/31/14
 
12/31/15
12/31/14
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
$
806

$
1,669

$
(233
)
 
$
2,603

$
1,474

 
 
 
 
 
 
 
Capital expenditures - network and other
(994
)
(1,162
)
(1,425
)
 
(3,958
)
(3,814
)
Capital expenditures - leased devices
(607
)
(573
)
(143
)
 
(1,724
)
(143
)
Expenditures relating to FCC licenses, net
(30
)
(19
)
(42
)
 
(75
)
(26
)
Proceeds from sales of assets and FCC licenses
32

3

13

 
36

114

Other investing activities, net
(4
)
(18
)
(3
)
 
(25
)
(9
)
Free cash flow*
$
(797
)
$
(100
)
$
(1,833
)
 
$
(3,143
)
$
(2,404
)

SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
15




CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
 
12/31/15
3/31/15
ASSETS
 
 
Current assets
 
 
Cash and cash equivalents
$
2,175

$
4,010

Short-term investments
41

166

Accounts and notes receivable, net
1,033

2,290

Device and accessory inventory
995

1,359

Deferred tax assets

62

Prepaid expenses and other current assets
2,317

1,890

Total current assets
6,561

9,777

 
 
 
Property, plant and equipment, net
20,645

19,721

Goodwill
6,575

6,575

FCC licenses and other
40,052

39,987

Definite-lived intangible assets, net
4,807

5,893

Other assets
911

1,077

Total assets
$
79,551

$
83,030

 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
Current liabilities
 
 
Accounts payable
$
3,078

$
4,347

Accrued expenses and other current liabilities
4,474

5,293

Current portion of long-term debt, financing and capital lease obligations
3,324

1,300

Deferred tax liabilities
186


Total current liabilities
11,062

10,940

 
 
 
Long-term debt, financing and capital lease obligations
30,429

32,531

Deferred tax liabilities
13,773

13,898

Other liabilities
3,954

3,951

Total liabilities
59,218

61,320

 
 
 
Stockholders' equity
 
 
Common stock
40

40

Treasury shares, at cost

(7
)
Paid-in capital
27,536

27,468

Accumulated deficit
(6,824
)
(5,383
)
Accumulated other comprehensive loss
(419
)
(408
)
Total stockholders' equity
20,333

21,710

Total liabilities and stockholders' equity
$
79,551

$
83,030



NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
 
12/31/15
3/31/15
 
 
 
Total debt
$
33,753

$
33,831

Less: Cash and cash equivalents
(2,175
)
(4,010
)
Less: Short-term investments
(41
)
(166
)
Net debt*
$
31,537

$
29,655




SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
16




SCHEDULE OF DEBT (Unaudited)
(Millions)
 
 
 
12/31/15
ISSUER
 COUPON
 MATURITY
 PRINCIPAL
Sprint Corporation
 
 
 
7.25% Notes due 2021
7.250%
09/15/2021
$
2,250

7.875% Notes due 2023
7.875%
09/15/2023
4,250

7.125% Notes due 2024
7.125%
06/15/2024
2,500

7.625% Notes due 2025
7.625%
02/15/2025
1,500

Sprint Corporation
 
 
10,500

 
 
 
 
Sprint Communications, Inc.
 
 
 
Export Development Canada Facility (Tranche 4)
5.556%
12/15/2017
250

Export Development Canada Facility (Tranche 3)
3.783%
12/17/2019
300

6% Senior notes due 2016
6.000%
12/01/2016
2,000

9.125% Senior notes due 2017
9.125%
03/01/2017
1,000

8.375% Senior notes due 2017
8.375%
08/15/2017
1,300

9% Guaranteed notes due 2018
9.000%
11/15/2018
3,000

7% Guaranteed notes due 2020
7.000%
03/01/2020
1,000

7% Senior notes due 2020
7.000%
08/15/2020
1,500

11.5% Senior notes due 2021
11.500%
11/15/2021
1,000

9.25% Debentures due 2022
9.250%
04/15/2022
200

6% Senior notes due 2022
6.000%
11/15/2022
2,280

Sprint Communications, Inc.
 
 
13,830

 
 
 
 
Sprint Capital Corporation
 
 
 
6.9% Senior notes due 2019
6.900%
05/01/2019
1,729

6.875% Senior notes due 2028
6.875%
11/15/2028
2,475

8.75% Senior notes due 2032
8.750%
03/15/2032
2,000

Sprint Capital Corporation
 
 
6,204

 
 
 
 
Clearwire Communications LLC
 
 
 
14.75% First-priority senior secured notes due 2016
14.750%
12/01/2016
300

8.25% Exchangeable notes due 2040
8.250%
12/01/2040
629

Clearwire Communications LLC
 
 
929

 
 
 
 
Secured equipment credit facilities
1.991% - 2.745%
2017 - 2021
960

 
 
 
 
Tower financing obligation
6.098%
08/31/2021
237

Capital lease obligations and other
2.348% - 10.517%
2016 - 2023
231

Total principal
 
 
32,891

 
 
 
 
Net premiums
 
 
862

Total debt
 
 
$
33,753

*This table excludes (i) our unsecured revolving bank credit facility, which will expire in 2018 and has no outstanding balance, (ii) $323 million in letters of credit outstanding under the unsecured revolving bank credit facility, and (iii) all capital leases and other financing obligations.

SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
17





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)
During the second quarter of fiscal year 2015, we recorded $85 million of asset impairments primarily related to network development costs that are no longer relevant as a result of changes in the Company's network plans. For the third quarter of fiscal year 2014, impairment losses were recorded after determining that the carrying value exceeded estimated fair value of both the Sprint trade name and Wireline asset group, which consists primarily of property, plant and equipment.
(4)
As more of our customers elect to lease a device rather than purchasing one under our subsidized program, there is a positive impact to EBITDA* and Adjusted EBITDA* primarily due to the fact the cost of the device is not recorded as cost of products but rather is depreciated over the customer lease term. Under our device leasing program for the direct channel, devices are transferred from inventory to property and equipment and the cost of the leased device is recognized as depreciation expense over the customer lease term to an estimated residual value. The customer payments are recognized as revenue over the term of the lease. Under our subsidized program, the cash received from the customer for the device is recognized as equipment revenue at the point of sale and the cost of the device is recognized as cost of products. During the three and nine-month periods ended December 31, 2015, we leased devices through our Sprint direct channels totaling approximately $1.0 and $2.6 billion, 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 nine-month periods ended December 31, 2015, the equipment revenue derived from customers electing to finance their devices through device leasing or installment billing programs was 58% and 59%, respectively, while the remainder of total equipment revenue was derived from customers purchasing devices under our subsidized program as compared to 17% and 16% in prior periods, respectively.
The impact to EBITDA* and Adjusted EBITDA* resulting from the sale of devices under our installment billing program is neutral except for the impact from the time value of money element related to the imputed interest on the installment receivable.
(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 our backhaul access contracts for which we will no longer be receiving any economic benefit, and severance costs associated with reduction in our work force.
(6)
For the third and second quarters of fiscal year 2015 and third quarter of fiscal year 2014, litigation activity is a result of unfavorable developments in connection with pending litigation.
(7)
The partial pension settlement resulted from amounts paid to eligible terminated participants who voluntarily elected to receive lump sum distributions as a result of an approved plan amendment to the Sprint Retirement Pension Plan by the Board of Directors in June 2014.
(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.












SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
18




*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 proceeds from the sale-leaseback of assets. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

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



SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
19




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, 2015. 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 more than 58.4 million connections as of December 31, 2015 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.










###







SPRINT QUARTERLY INVESTOR UPDATE - FISCAL 3Q15
20



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

SEC Filings