OVERLAND PARK, Kan.--(BUSINESS WIRE)--Sprint Corporation (NYSE: S) today reported Sprint Nextel’s second quarter 2013 results including record quarterly Sprint platform wireless service revenue of $7.2 billion and continued growth in Sprint platform postpaid subscribers. For the quarter, operating loss was $874 million and Adjusted OIBDA* was $1.4 billion as Sprint continued to make significant investments in the business.
“This is a historic time for Sprint. We recently shut down the Nextel platform and completed the Clearwire, SoftBank and U.S. Cellular transactions. In the second quarter, we achieved record levels in Sprint platform postpaid subscribers, service revenue and postpaid ARPU, and increased our 4G LTE footprint,” said Dan Hesse, Sprint CEO. “Sprint pioneered unlimited voice, text and data in 2008, and we recently introduced the first lifetime guarantee, solidifying our commitment to the simplicity and peace of mind that unlimited brings.”
Sprint Platform Again Achieves Record Revenue, ARPU and Subscribers
Sprint platform service revenue, postpaid ARPU and postpaid subscribers all reached best-ever levels in the second quarter. The Sprint platform had postpaid net additions for the 13th consecutive quarter and a postpaid Nextel recapture rate of 34 percent. Sprint platform postpaid ARPU grew year-over-year for the 11th consecutive quarter.
As expected, the Sprint platform lost prepaid customers as a result of planned deactivations related to regulatory changes impacting the lower-ARPU Assurance brand. This was partially offset by strong Assurance gross additions and continued growth in both Virgin Mobile and Boost Mobile subscribers. Virgin Mobile gross additions improved 70 percent year-over-year.
Adjusted OIBDA* Relatively Flat Year-Over-Year Despite Higher Network Vision Dilution
Adjusted OIBDA* of $1.4 billion decreased by 2 percent year-over-year primarily due to lower Nextel platform revenue, higher Network Vision dilution and slightly higher SG&A expenses offset by growth in Sprint platform service revenue.
EPS and Operating Loss Include Accelerated Depreciation, Nextel Shutdown Costs
Operating loss of $874 million, net loss of $1.6 billion and diluted net loss of $.53 per share for the quarter included, pre-tax, accelerated depreciation of approximately $430 million and noncash charges of $623 million related to the Nextel platform shutdown. For the second quarter of 2012, operating loss was $629 million, net loss was $1.4 billion and diluted net loss was $.46 per share including, pre-tax, accelerated depreciation of $782 million and noncash charges of $184 million related to the thinning of the Nextel platform. Net loss and diluted net loss in the year-ago period also included a pre-tax impairment of $204 million related to Sprint’s investment in Clearwire.
Network Vision Momentum Continues with Nextel Platform Shutdown, More Than 20,000 Sites On Air
Sprint made strong progress on the Network Vision deployment in the quarter including the shutdown of the Nextel platform on June 30, which enables significant future improvement to Sprint’s cost structure. Over 4 million Nextel subscribers were recaptured to the Sprint platform since Network Vision commenced in early 2011.
To date more than 20,000 Network Vision sites are on air compared to more than 13,500 reported with first quarter results. The number of sites that are either ready for construction, already underway or completed has grown to more than 30,000.
As part of Network Vision, Sprint has launched 4G LTE in 151 cities, including Los Angeles, Dallas, Atlanta, Miami and Boston. Sprint expects to provide 200 million people with LTE by the end of 2013.
Iconic Smartphones Paired With Unlimited Data Remain Key Differentiator
Eighty-six percent of quarterly Sprint platform postpaid handset sales were smartphones, including approximately 1.4 million iPhones® sold during the quarter. Forty-one percent of iPhone sales were to new customers.
In addition, Sprint launched other popular smartphones including Samsung Galaxy S® 4 and HTC One® during the quarter and earlier this month introduced HTC® 8XT, Sprint’s first Windows 8 smartphone. Also this month, Sprint launched the first three tri-band 4G LTE data devices, which are expected to bring customers improved network performance and stronger in-building coverage by providing access to Sprint’s 4G LTE network at 800 MHz, 1.9 GHz and 2.5 GHz where available.
In July, Sprint strengthened its unique pairing of an unbeatable device portfolio with simplicity and value by launching The Sprint Unlimited GuaranteeSM that offers customers unlimited talk, text and data while on the Sprint network, for the life of the line of service. The guarantee is for new and existing customers who sign up for Sprint’s new Unlimited, My WaySM plan or My All-inSM plans featuring unlimited talk, text and data while on the Sprint network for as little as $80 per month for the first line, with greater savings for additional lines. The guarantee will apply to customers as long as they remain on the plan, meet the terms and conditions of the plan and pay their bill in full and on time.
Third Parties Recognize Sprint’s Leadership
According to results from the 2013 American Customer Satisfaction Index (ACSI) released in May, Sprint is the most improved U.S. company in customer satisfaction, across all 47 industries studied, during the last five years. The ACSI survey also ranked Sprint No. 1 in delivering the best value among national wireless carriers. Among the study’s customer experience benchmarks, Sprint also ranked highest in bill rating and data plan choice.
Sprint VelocitySM, an end-to-end mobile integration solution developed specifically for auto manufacturers, received two prestigious awards from Pipeline magazine’s 2013 COMET Innovations Awards program. Sprint was the service provider winner for Innovation in Connectivity and was runner-up in the Innovative Collaborations category. In addition, Sprint Velocity won the Telematics Update Industry Newcomer Award.
The Environmental Investment Organisation named Sprint the highest ranking of all companies in the U.S. and No. 13 globally in its 2013 Environmental Tracking Carbon Rankings. Sprint was named a leader for North America and the continent’s highest ranked telecommunications company.
Forecast
On a stand-alone basis, Sprint would be increasing its 2013 Adjusted OIBDA* forecast to between $5.5 billion and $5.7 billion. The company’s previous forecast was for Adjusted OIBDA* to be at the high end of between $5.2 billion and $5.5 billion and did not include the dilutive effects of the SoftBank and Clearwire transactions, which are estimated to be approximately $400 million, subject to finalization of fair values. Including the impacts of these transactions, the company now expects 2013 Adjusted OIBDA* to be between $5.1 billion and $5.3 billion.
The company expects 2013 capital expenditures of approximately $8 billion.
| Wireless Operating Statistics (Unaudited) | |||||||||||||||
| Quarter To Date | Year To Date | ||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | |||||||||||
| Net Additions (Losses) (in thousands) | |||||||||||||||
| Sprint platform: | |||||||||||||||
| Postpaid (2) | 194 | 12 | 442 | 206 | 705 | ||||||||||
| Prepaid (3) | (486 | ) | 568 | 451 | 82 | 1,321 | |||||||||
| Wholesale and affiliate | (228 | ) | (224 | ) | 388 | (452 | ) | 1,173 | |||||||
| Total Sprint platform | (520 | ) | 356 | 1,281 | (164 | ) | 3,199 | ||||||||
| Nextel platform: | |||||||||||||||
| Postpaid (2) | (1,060 | ) | (572 | ) | (688 | ) | (1,632 | ) | (1,143 | ) | |||||
| Prepaid (3) | (255 | ) | (199 | ) | (310 | ) | (454 | ) | (691 | ) | |||||
| Total Nextel platform | (1,315 | ) | (771 | ) | (998 | ) | (2,086 | ) | (1,834 | ) | |||||
| Transactions: (a) | |||||||||||||||
| Postpaid (2) | (179 | ) | - | - | (179 | ) | - | ||||||||
| Prepaid (3) | (20 | ) | - | - | (20 | ) | - | ||||||||
| Total transactions | (199 | ) | - | - | (199 | ) | - | ||||||||
| Total retail postpaid net losses | (1,045 | ) | (560 | ) | (246 | ) | (1,605 | ) | (438 | ) | |||||
| Total retail prepaid net (losses) additions | (761 | ) | 369 | 141 | (392 | ) | 630 | ||||||||
| Total wholesale and affiliate net (losses) additions | (228 | ) | (224 | ) | 388 | (452 | ) | 1,173 | |||||||
| Total Wireless Net (Losses) Additions | (2,034 | ) | (415 | ) | 283 | (2,449 | ) | 1,365 | |||||||
| End of Period Subscribers (in thousands) | |||||||||||||||
| Sprint platform: | |||||||||||||||
| Postpaid (2) | 30,451 | 30,257 | 29,434 | 30,451 | 29,434 | ||||||||||
| Prepaid (3) | 15,215 | 15,701 | 14,149 | 15,215 | 14,149 | ||||||||||
| Wholesale and affiliate | 7,710 | 7,938 | 8,391 | 7,710 | 8,391 | ||||||||||
| Total Sprint platform | 53,376 | 53,896 | 51,974 | 53,376 | 51,974 | ||||||||||
| Nextel platform: | |||||||||||||||
| Postpaid (2) | - | 1,060 | 3,142 | - | 3,142 | ||||||||||
| Prepaid (3) | - | 255 | 1,270 | - | 1,270 | ||||||||||
| Total Nextel platform | - | 1,315 | 4,412 | - | 4,412 | ||||||||||
| Transactions: (a) | |||||||||||||||
| Postpaid (2) | 173 | - | - | 173 | - | ||||||||||
| Prepaid (3) | 39 | - | - | 39 | - | ||||||||||
| Total transactions | 212 | - | - | 212 | - | ||||||||||
| Total retail postpaid end of period subscribers | 30,624 | 31,317 | 32,576 | 30,624 | 32,576 | ||||||||||
| Total retail prepaid end of period subscribers | 15,254 | 15,956 | 15,419 | 15,254 | 15,419 | ||||||||||
| Total wholesale and affiliate end of period subscribers | 7,710 | 7,938 | 8,391 | 7,710 | 8,391 | ||||||||||
| Total End of Period Subscribers | 53,588 | 55,211 | 56,386 | 53,588 | 56,386 | ||||||||||
| Supplemental Data - Connected Devices | |||||||||||||||
| End of Period Subscribers (in thousands) | |||||||||||||||
| Retail postpaid | 798 | 824 | 809 | 798 | 809 | ||||||||||
| Wholesale and affiliate | 3,057 | 2,803 | 2,361 | 3,057 | 2,361 | ||||||||||
| Total | 3,855 | 3,627 | 3,170 | 3,855 | 3,170 | ||||||||||
| (a) We acquired approximately 352,000 postpaid subscribers and 59,000 prepaid subscribers through the acquisition of assets from U.S. Cellular when the transaction closed on May 17, 2013. |
| Wireless Operating Statistics (Unaudited) (continued) | ||||||||||||||||||||
| Quarter To Date | Year To Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Churn | ||||||||||||||||||||
| Sprint platform: | ||||||||||||||||||||
| Postpaid | 1.83 | % | 1.84 | % | 1.69 | % | 1.83 | % | 1.85 | % | ||||||||||
| Prepaid | 5.22 | % | 3.05 | % | 3.16 | % | 4.15 | % | 3.04 | % | ||||||||||
| Nextel platform: | ||||||||||||||||||||
| Postpaid | 33.90 | % | 7.57 | % | 2.56 | % | 16.40 | % | 2.31 | % | ||||||||||
| Prepaid | 32.13 | % | 12.46 | % | 7.18 | % | 18.58 | % | 8.04 | % | ||||||||||
| Transactions: (a) | ||||||||||||||||||||
| Postpaid | 26.64 | % | - | - | 26.64 | % | - | |||||||||||||
| Prepaid | 16.72 | % | - | - | 16.72 | % | - | |||||||||||||
| Total retail postpaid churn | 2.63 | % | 2.09 | % | 1.79 | % | 2.36 | % | 1.90 | % | ||||||||||
| Total retail prepaid churn | 5.51 | % | 3.26 | % | 3.53 | % | 4.39 | % | 3.57 | % | ||||||||||
| ARPU (b) | ||||||||||||||||||||
| Sprint platform: | ||||||||||||||||||||
| Postpaid | $ | 64.20 | $ | 63.67 | $ | 63.38 | $ | 63.94 | $ | 62.96 | ||||||||||
| Prepaid | $ | 26.96 | $ | 25.95 | $ | 25.49 | $ | 26.46 | $ | 25.57 | ||||||||||
| Nextel platform: | ||||||||||||||||||||
| Postpaid | $ | 36.66 | $ | 35.43 | $ | 40.25 | $ | 35.84 | $ | 40.62 | ||||||||||
| Prepaid | $ | 34.48 | $ | 31.75 | $ | 37.20 | $ | 32.60 | $ | 36.37 | ||||||||||
| Transactions: (a) | ||||||||||||||||||||
| Postpaid | $ | 59.87 | $ | - | $ | - | $ | 59.87 | $ | - | ||||||||||
| Prepaid | $ | 19.17 | $ | - | $ | - | $ | 19.17 | $ | - | ||||||||||
| Total retail postpaid ARPU | $ | 63.59 | $ | 62.47 | $ | 60.88 | $ | 63.02 | $ | 60.38 | ||||||||||
| Total retail prepaid ARPU | $ | 27.02 | $ | 26.08 | $ | 26.59 | $ | 26.55 | $ | 26.70 | ||||||||||
| Nextel Platform Subscriber Recaptures | ||||||||||||||||||||
| Subscribers (in thousands) (4): | ||||||||||||||||||||
| Postpaid | 364 | 264 | 431 | 628 | 659 | |||||||||||||||
| Prepaid | 101 | 67 | 143 | 168 | 280 | |||||||||||||||
| Rate (5): | ||||||||||||||||||||
| Postpaid | 34 | % | 46 | % | 60 | % | 38 | % | 55 | % | ||||||||||
| Prepaid | 39 | % | 34 | % | 32 | % | 37 | % | 27 | % | ||||||||||
| (a) We acquired approximately 352,000 postpaid subscribers and 59,000 prepaid subscribers through the acquisition of assets from U.S. Cellular when the transaction closed on May 17, 2013. |
| (b) ARPU is calculated by dividing service revenue by the sum of the average number of subscribers in the applicable service category. Changes in average monthly service revenue reflect subscribers for either the postpaid or prepaid service category who change rate plans, the level of voice and data usage, the amount of service credits which are offered to subscribers, plus the net effect of average monthly revenue generated by new subscribers and deactivating subscribers. |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||||||
| (Millions, except per Share Data) | ||||||||||||||||||||
| Quarter To Date | Year To Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Net Operating Revenues | $ | 8,877 | $ | 8,793 | $ | 8,843 | $ | 17,670 | $ | 17,577 | ||||||||||
| Net Operating Expenses | ||||||||||||||||||||
| Cost of services | 2,747 | 2,640 | 2,788 | 5,387 | 5,575 | |||||||||||||||
| Cost of products | 2,298 | 2,293 | 2,223 | 4,591 | 4,521 | |||||||||||||||
| Selling, general and administrative | 2,442 | 2,336 | 2,381 | 4,778 | 4,817 | |||||||||||||||
| Depreciation and amortization | 1,632 | 1,492 | 1,896 | 3,124 | 3,562 | |||||||||||||||
| Other, net | 632 | 3 | 184 | 635 | (14 | ) | ||||||||||||||
| Total net operating expenses | 9,751 | 8,764 | 9,472 | 18,515 | 18,461 | |||||||||||||||
| Operating (Loss) Income | (874 | ) | 29 | (629 | ) | (845 | ) | (884 | ) | |||||||||||
| Interest expense | (428 | ) | (432 | ) | (321 | ) | (860 | ) | (619 | ) | ||||||||||
| Equity in losses of unconsolidated investments and other, net | (240 | ) | (202 | ) | (398 | ) | (442 | ) | (671 | ) | ||||||||||
| Loss before Income Taxes | (1,542 | ) | (605 | ) | (1,348 | ) | (2,147 | ) | (2,174 | ) | ||||||||||
| Income tax expense | (55 | ) | (38 | ) | (26 | ) | (93 | ) | (63 | ) | ||||||||||
| Net Loss | $ | (1,597 | ) | $ | (643 | ) | $ | (1,374 | ) | $ | (2,240 | ) | $ | (2,237 | ) | |||||
| Basic and Diluted Net Loss Per Common Share | $ | (0.53 | ) | $ | (0.21 | ) | $ | (0.46 | ) | $ | (0.74 | ) | $ | (0.75 | ) | |||||
| Weighted Average Common Shares outstanding | 3,022 | 3,013 | 3,000 | 3,017 | 3,000 | |||||||||||||||
| Effective Tax Rate | -3.6 | % | -6.3 | % | -1.9 | % | -4.3 | % | -2.9 | % | ||||||||||
| NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED OIBDA* (Unaudited) | ||||||||||||||||||||
| (Millions) | ||||||||||||||||||||
| Quarter To Date | Year To Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Net Loss | $ | (1,597 | ) | $ | (643 | ) | $ | (1,374 | ) | $ | (2,240 | ) | $ | (2,237 | ) | |||||
| Income tax expense | 55 | 38 | 26 | 93 | 63 | |||||||||||||||
| Loss before Income Taxes | (1,542 | ) | (605 | ) | (1,348 | ) | (2,147 | ) | (2,174 | ) | ||||||||||
| Equity in losses of unconsolidated investments and other, net | 240 | 202 | 398 | 442 | 671 | |||||||||||||||
| Interest expense | 428 | 432 | 321 | 860 | 619 | |||||||||||||||
| Operating (Loss) Income | (874 | ) | 29 | (629 | ) | (845 | ) | (884 | ) | |||||||||||
| Depreciation and amortization | 1,632 | 1,492 | 1,896 | 3,124 | 3,562 | |||||||||||||||
| OIBDA* | 758 | 1,521 | 1,267 | 2,279 | 2,678 | |||||||||||||||
| Severance and exit costs (6) | 632 | 25 | 184 | 657 | 184 | |||||||||||||||
| Gains from asset dispositions and exchanges (7) | - | - | - | - | (29 | ) | ||||||||||||||
| Asset impairments and abandonments (8) | - | - | - | - | 18 | |||||||||||||||
| Spectrum hosting contract termination, net (9) | - | - | - | - | (170 | ) | ||||||||||||||
| Access costs (10) | - | - | - | - | (17 | ) | ||||||||||||||
| Litigation (11) | - | (22 | ) | - | (22 | ) | - | |||||||||||||
| Business combinations (12) | 34 | - | - | 34 | - | |||||||||||||||
| Adjusted OIBDA* | 1,424 | 1,524 | 1,451 | 2,948 | 2,664 | |||||||||||||||
| Capital expenditures (1) | 1,897 | 1,812 | 1,158 | 3,709 | 1,958 | |||||||||||||||
| Adjusted OIBDA* less Capex | $ | (473 | ) | $ | (288 | ) | $ | 293 | $ | (761 | ) | $ | 706 | |||||||
| Adjusted OIBDA Margin* | 17.7 | % | 19.1 | % | 17.9 | % | 18.4 | % | 16.6 | % | ||||||||||
| Selected item: | ||||||||||||||||||||
| Deferred tax asset valuation allowance | $ | 621 | $ | 265 | $ | 554 | $ | 886 | $ | 902 | ||||||||||
| WIRELESS STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||||||
| (Millions) | ||||||||||||||||||||
| Quarter To Date | Year To Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Net Operating Revenues | ||||||||||||||||||||
| Service revenue | ||||||||||||||||||||
| Sprint platform: | ||||||||||||||||||||
| Postpaid (2) | $ | 5,835 | $ | 5,773 | $ | 5,540 | $ | 11,608 | $ | 10,948 | ||||||||||
| Prepaid (3) | 1,276 | 1,194 | 1,064 | 2,470 | 2,080 | |||||||||||||||
| Wholesale, affiliate and other | 131 | 133 | 124 | 264 | 227 | |||||||||||||||
| Total Sprint platform | 7,242 | 7,100 | 6,728 | 14,342 | 13,255 | |||||||||||||||
| Nextel platform: | ||||||||||||||||||||
| Postpaid (2) | 74 | 143 | 425 | 217 | 925 | |||||||||||||||
| Prepaid (3) | 17 | 33 | 161 | 50 | 349 | |||||||||||||||
| Total Nextel platform | 91 | 176 | 586 | 267 | 1,274 | |||||||||||||||
| Transactions: | ||||||||||||||||||||
| Postpaid (2) | 24 | - | - | 24 | - | |||||||||||||||
| Prepaid (3) | 1 | - | - | 1 | - | |||||||||||||||
| Total transactions | 25 | - | - | 25 | - | |||||||||||||||
| Equipment revenue | 820 | 813 | 753 | 1,633 | 1,488 | |||||||||||||||
| Total net operating revenues | 8,178 | 8,089 | 8,067 | 16,267 | 16,017 | |||||||||||||||
| Net Operating Expenses | ||||||||||||||||||||
| Cost of services | 2,292 | 2,171 | 2,279 | 4,463 | 4,568 | |||||||||||||||
| Cost of products | 2,298 | 2,293 | 2,223 | 4,591 | 4,521 | |||||||||||||||
| Selling, general and administrative | 2,294 | 2,230 | 2,266 | 4,524 | 4,577 | |||||||||||||||
| Depreciation and amortization | 1,526 | 1,393 | 1,796 | 2,919 | 3,360 | |||||||||||||||
| Other, net | 632 | - | 184 | 632 | 3 | |||||||||||||||
| Total net operating expenses | 9,042 | 8,087 | 8,748 | 17,129 | 17,029 | |||||||||||||||
| Operating (Loss) Income | $ | (864 | ) | $ | 2 | $ | (681 | ) | $ | (862 | ) | $ | (1,012 | ) | ||||||
| Supplemental Revenue Data | ||||||||||||||||||||
| Total retail service revenue | $ | 7,227 | $ | 7,143 | $ | 7,190 | $ | 14,370 | $ | 14,302 | ||||||||||
| Total service revenue | $ | 7,358 | $ | 7,276 | $ | 7,314 | $ | 14,634 | $ | 14,529 | ||||||||||
| WIRELESS NON-GAAP RECONCILIATION (Unaudited) | ||||||||||||||||||||
| (Millions) | ||||||||||||||||||||
| Quarter To Date | Year To Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Operating (Loss) Income | $ | (864 | ) | $ | 2 | $ | (681 | ) | $ | (862 | ) | $ | (1,012 | ) | ||||||
| Severance and exit costs (6) | 632 | 22 | 184 | 654 | 184 | |||||||||||||||
| Gains from asset dispositions and exchanges (7) | - | - | - | - | (29 | ) | ||||||||||||||
| Asset impairments and abandonments (8) | - | - | - | - | 18 | |||||||||||||||
| Spectrum hosting contract termination, net (9) | - | - | - | - | (170 | ) | ||||||||||||||
| Litigation (11) | - | (22 | ) | - | (22 | ) | - | |||||||||||||
| Depreciation and amortization | 1,526 | 1,393 | 1,796 | 2,919 | 3,360 | |||||||||||||||
| Adjusted OIBDA* | 1,294 | 1,395 | 1,299 | 2,689 | 2,351 | |||||||||||||||
| Capital expenditures (1) | 1,728 | 1,706 | 1,012 | 3,434 | 1,722 | |||||||||||||||
| Adjusted OIBDA* less Capex | $ | (434 | ) | $ | (311 | ) | $ | 287 | $ | (745 | ) | $ | 629 | |||||||
| Adjusted OIBDA Margin* | 17.6 | % | 19.2 | % | 17.8 | % | 18.4 | % | 16.2 | % | ||||||||||
| WIRELINE STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||||||||||
| (Millions) | ||||||||||||||||||||
| Quarter To Date | Year To Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Net Operating Revenues | ||||||||||||||||||||
| Voice | $ | 377 | $ | 352 | $ | 426 | $ | 729 | $ | 843 | ||||||||||
| Data | 87 | 94 | 99 | 181 | 207 | |||||||||||||||
| Internet | 432 | 434 | 449 | 866 | 902 | |||||||||||||||
| Other | 14 | 13 | 21 | 27 | 41 | |||||||||||||||
| Total net operating revenues | 910 | 893 | 995 | 1,803 | 1,993 | |||||||||||||||
| Net Operating Expenses | ||||||||||||||||||||
| Costs of services and products | 669 | 661 | 730 | 1,330 | 1,446 | |||||||||||||||
| Selling, general and administrative | 112 | 104 | 116 | 216 | 237 | |||||||||||||||
| Depreciation | 105 | 98 | 104 | 203 | 204 | |||||||||||||||
| Other, net | - | 3 | - | 3 | (17 | ) | ||||||||||||||
| Total net operating expenses | 886 | 866 | 950 | 1,752 | 1,870 | |||||||||||||||
| Operating Income | $ | 24 | $ | 27 | $ | 45 | $ | 51 | $ | 123 | ||||||||||
| WIRELINE NON-GAAP RECONCILIATION (Unaudited) | ||||||||||||||||||||
| (Millions) | ||||||||||||||||||||
| Quarter To Date | Year To Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Operating Income | $ | 24 | $ | 27 | $ | 45 | $ | 51 | $ | 123 | ||||||||||
| Severance and exit costs (6) | - | 3 | - | 3 | - | |||||||||||||||
| Access costs (10) | - | - | - | - | (17 | ) | ||||||||||||||
| Depreciation | 105 | 98 | 104 | 203 | 204 | |||||||||||||||
| Adjusted OIBDA* | 129 | 128 | 149 | 257 | 310 | |||||||||||||||
| Capital expenditures (1) | 93 | 61 | 79 | 154 | 124 | |||||||||||||||
| Adjusted OIBDA* less Capex | $ | 36 | $ | 67 | $ | 70 | $ | 103 | $ | 186 | ||||||||||
| Adjusted OIBDA Margin* | 14.2 | % | 14.3 | % | 15.0 | % | 14.3 | % | 15.6 | % | ||||||||||
| CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited) | ||||||||||||||||||||
| (Millions) | ||||||||||||||||||||
| Year to Date | ||||||||||||||||||||
| 6/30/13 | 6/30/12 | |||||||||||||||||||
| Operating Activities | ||||||||||||||||||||
| Net loss | $ | (2,240 | ) | $ | (2,237 | ) | ||||||||||||||
| Depreciation and amortization | 3,124 | 3,562 | ||||||||||||||||||
| Provision for losses on accounts receivable | 182 | 269 | ||||||||||||||||||
| Share-based compensation expense | 33 | 39 | ||||||||||||||||||
| Deferred income taxes | 76 | 84 | ||||||||||||||||||
| Equity in losses of unconsolidated investments and other, net | 442 | 671 | ||||||||||||||||||
| Contribution to pension plan | - | (92 | ) | |||||||||||||||||
| Spectrum hosting contract termination, net (9) | - | (170 | ) | |||||||||||||||||
| Other working capital changes, net | 288 | (33 | ) | |||||||||||||||||
| Other, net | 270 | 62 | ||||||||||||||||||
| Net cash provided by operating activities | 2,175 | 2,155 | ||||||||||||||||||
| Investing Activities | ||||||||||||||||||||
| Capital expenditures (1) | (2,952 | ) | (1,711 | ) | ||||||||||||||||
| Expenditures relating to FCC licenses | (123 | ) | (107 | ) | ||||||||||||||||
| Change in short-term investments, net | 1,009 | (752 | ) | |||||||||||||||||
| Acquisitions, net of cash acquired | (509 | ) | - | |||||||||||||||||
| Investment in Clearwire (including debt securities) | (240 | ) | (128 | ) | ||||||||||||||||
| Other, net | 3 | 10 | ||||||||||||||||||
| Net cash used in investing activities | (2,812 | ) | (2,688 | ) | ||||||||||||||||
| Financing Activities | ||||||||||||||||||||
| Proceeds from debt and financings | 204 | 2,000 | ||||||||||||||||||
| Debt financing costs | (11 | ) | (57 | ) | ||||||||||||||||
| Repayments of debt and capital lease obligations | (362 | ) | (1,004 | ) | ||||||||||||||||
| Other, net | 51 | 7 | ||||||||||||||||||
| Net cash (used in) provided by financing activities | (118 | ) | 946 | |||||||||||||||||
| Net (Decrease) Increase in Cash and Cash Equivalents | (755 | ) | 413 | |||||||||||||||||
| Cash and Cash Equivalents, beginning of period | 6,351 | 5,447 | ||||||||||||||||||
| Cash and Cash Equivalents, end of period | $ | 5,596 | $ | 5,860 | ||||||||||||||||
| RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited) | ||||||||||||||||||||
| (Millions) | ||||||||||||||||||||
| Quarter Ended | Year to Date | |||||||||||||||||||
| 6/30/13 | 3/31/13 | 6/30/12 | 6/30/13 | 6/30/12 | ||||||||||||||||
| Net Cash Provided by Operating Activities | $ | 1,235 | $ | 940 | $ | 1,177 | $ | 2,175 | $ | 2,155 | ||||||||||
| Capital expenditures (1) | (1,571 | ) | (1,381 | ) | (928 | ) | (2,952 | ) | (1,711 | ) | ||||||||||
| Expenditures relating to FCC licenses, net | (68 | ) | (55 | ) | (51 | ) | (123 | ) | (107 | ) | ||||||||||
| Other investing activities, net | - | 3 | 11 | 3 | 10 | |||||||||||||||
| Free Cash Flow* | (404 | ) | (493 | ) | 209 | (897 | ) | 347 | ||||||||||||
| Debt financing costs | (1 | ) | (10 | ) | (21 | ) | (11 | ) | (57 | ) | ||||||||||
| (Decrease) increase in debt and other, net | (303 | ) | 145 | (1,002 | ) | (158 | ) | 996 | ||||||||||||
| Acquisitions, net of cash acquired | (509 | ) | - | - | (509 | ) | - | |||||||||||||
| Investment in Clearwire (including debt securities) | (160 | ) | (80 | ) | - | (240 | ) | (128 | ) | |||||||||||
| Other financing activities, net | 44 | 7 | 4 | 51 | 7 | |||||||||||||||
|
Net (Decrease) Increase in Cash, Cash Equivalents and Short-Term Investments |
$ | (1,333 | ) | $ | (431 | ) | $ | (810 | ) | $ | (1,764 | ) | $ | 1,165 | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||||||
| (Millions) | |||||||||||
| 6/30/13 | 12/31/12 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 5,596 | $ | 6,351 | |||||||
| Short-term investments | 840 | 1,849 | |||||||||
| Accounts and notes receivable, net | 3,413 | 3,658 | |||||||||
| Device and accessory inventory | 899 | 1,200 | |||||||||
| Deferred tax assets | - | 1 | |||||||||
| Prepaid expenses and other current assets | 651 | 700 | |||||||||
| Total current assets | 11,399 | 13,759 | |||||||||
| Investments and other assets | 1,580 | 1,833 | |||||||||
| Property, plant and equipment, net | 14,403 | 13,607 | |||||||||
| Goodwill | 368 | 359 | |||||||||
| FCC licenses and other | 21,370 | 20,677 | |||||||||
| Definite-lived intangible assets, net | 1,241 | 1,335 | |||||||||
| Total | $ | 50,361 | $ | 51,570 | |||||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 3,560 | $ | 3,487 | |||||||
| Accrued expenses and other current liabilities | 5,588 | 5,008 | |||||||||
| Current portion of long-term debt, financing and capital lease obligations | 305 | 379 | |||||||||
| Deferred tax liabilities | 36 | - | |||||||||
| Total current liabilities | 9,489 | 8,874 | |||||||||
| Long-term debt, financing and capital lease obligations | 23,903 | 23,962 | |||||||||
| Deferred tax liabilities | 7,176 | 7,047 | |||||||||
| Other liabilities | 4,813 | 4,600 | |||||||||
| Total liabilities | 45,381 | 44,483 | |||||||||
| Shareholders' equity | |||||||||||
| Common shares | 6,048 | 6,019 | |||||||||
| Paid-in capital | 47,056 | 47,016 | |||||||||
| Accumulated deficit | (47,056 | ) | (44,815 | ) | |||||||
| Accumulated other comprehensive loss | (1,068 | ) | (1,133 | ) | |||||||
| Total shareholders' equity | 4,980 | 7,087 | |||||||||
| Total | $ | 50,361 | $ | 51,570 | |||||||
| NET DEBT* (NON-GAAP) (Unaudited) | |||||||||||
| (Millions) | |||||||||||
| 6/30/13 | 12/31/12 | ||||||||||
| Total Debt | $ | 24,208 | $ | 24,341 | |||||||
| Less: Cash and cash equivalents | (5,596 | ) | (6,351 | ) | |||||||
| Less: Short-term investments | (840 | ) | (1,849 | ) | |||||||
| Net Debt* | $ | 17,772 | $ | 16,141 | |||||||
| SCHEDULE OF DEBT (Unaudited) | |||||||||||
| (Millions) | |||||||||||
| 6/30/13 | |||||||||||
|
ISSUER |
COUPON | MATURITY | PRINCIPAL | ||||||||
| Sprint Nextel Corporation | |||||||||||
| Export Development Canada Facility (Tranche 2) | 4.196 | % | 12/15/2015 | $ | 500 | ||||||
| 6% Senior Notes due 2016 | 6.000 | % | 12/01/2016 | 2,000 | |||||||
| 9.125% Senior Notes due 2017 | 9.125 | % | 03/01/2017 | 1,000 | |||||||
| 8.375% Senior Notes due 2017 | 8.375 | % | 08/15/2017 | 1,300 | |||||||
| 9% Guaranteed Notes due 2018 | 9.000 | % | 11/15/2018 | 3,000 | |||||||
| 1% Convertible Bond due 2019 | 1.000 | % | 10/15/2019 | 3,100 | |||||||
| 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 Nextel Corporation | 16,880 | ||||||||||
| 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 | ||||||||||
| iPCS Inc. | |||||||||||
| Second Lien Senior Secured Floating Rate Notes due 2014 | 3.524 | % | 05/01/2014 | 181 | |||||||
| iPCS Inc. | 181 | ||||||||||
| EKN Secured Equipment Facility ($1 Billion) | 2.030 | % | 03/30/2017 | 445 | |||||||
| Tower financing obligation | 9.500 | % | 01/15/2030 | 696 | |||||||
| Capital lease obligations and other | 2014 - 2022 | 67 | |||||||||
| TOTAL PRINCIPAL | 24,473 | ||||||||||
| Net discount from beneficial conversion feature on convertible bond | (229 | ) | |||||||||
| Net discounts | (36 | ) | |||||||||
| TOTAL DEBT | $ | 24,208 | |||||||||
| Supplemental information: |
| The Company had $2.1 billion of borrowing capacity available under our unsecured revolving bank credit facility as of June 30, 2013. Our unsecured revolving bank credit facility expires in February 2018. The company was limited by a restriction of debt incurrence in one of our debt issuances. However, this restriction was substantially mitigated by, among other things, the close of the SoftBank Merger in July 2013. |
| In May 2012, certain of our subsidiaries entered into a $1.0 billion secured equipment credit facility to finance equipment-related purchases for Network Vision. The facility is equally divided into two consecutive tranches of $500 million, with the drawdown availability contingent upon Sprint's acquisition of equipment-related purchases from Ericsson, up to the maximum of each tranche, ending on May 31, 2013 and May 31, 2014, for the first and second tranche, respectively. Interest and principal are payable semi-annually with a final maturity of March 2017 for both tranches. |
| NOTES TO THE FINANCIAL INFORMATION (Unaudited) | ||
| (1) | Capital expenditures is an accrual based amount that includes the changes in unpaid capital expenditures and excludes capitalized interest. Cash paid for capital expenditures includes total capitalized interest of $13 million, $15 million and $28 million for the second and first quarter and year-to-date periods of 2013, respectively, and $102 million, $115 million, and $217 million for the second and first quarters and year-to-date periods of 2012, respectively, and can be found in the Condensed Consolidated Cash Flow Information and the Reconciliation to Free Cash Flow*. | |
| (2) | Postpaid subscribers on the Sprint platform are defined as retail postpaid subscribers on the CDMA network, including subscribers with PowerSource devices, and those utilizing WiMax and LTE technology. Postpaid subscribers on the Nextel platform are defined as retail postpaid subscribers on the iDEN network through June 30, 2013. Postpaid subscribers from transactions are defined as retail postpaid subscribers acquired from U.S. Cellular in May 2013 who had not deactivated or been recaptured on the Sprint platform. | |
| (3) | Prepaid subscribers on the Sprint platform are defined as retail prepaid subscribers and session-based tablet users who utilize the CDMA network and WiMax and LTE technology via our multi-brand offerings. Prepaid subscribers on the Nextel platform are defined as retail prepaid subscribers who utilized iDEN technology through June 30, 2013. Prepaid subscribers from transactions are defined as retail prepaid subscribers acquired from U.S. Cellular in May 2013 who had not deactivated or been recaptured on the Sprint platform. | |
| (4) | Nextel Subscriber Recaptures are defined as the number of subscribers that deactivated service from the postpaid or prepaid Nextel platform, as applicable, during each period but remained with the Company as subscribers on the postpaid or prepaid Sprint platform, respectively. Subscribers that deactivate service from the Nextel platform and activate service on the Sprint platform are included in the Sprint platform net additions for the applicable period. | |
| (5) | The Postpaid and Prepaid Nextel Recapture Rates are defined as the portion of total subscribers that left the postpaid or prepaid Nextel platform, as applicable, during the period and were retained on the postpaid or prepaid Sprint platform, respectively. | |
| (6) | Severance and lease exit costs are primarily associated with workforce reductions and with exit costs associated with the Nextel platform. | |
| (7) | For the first quarter of 2012, gains from asset dispositions and exchanges are primarily due to spectrum exchange transactions. | |
| (8) | For the first quarter of 2012, asset impairment and abandonment activity includes $18 million related to a change in our backhaul architecture in connection to our Network Vision design from microwave to a more cost effective fiber backhaul. | |
| (9) | On March 16, 2012, we elected to terminate the arrangement with LightSquared LP and LightSquared, Inc. (LightSquared). As we have no future service obligations with respect to the arrangement with LightSquared, we recognized $236 million of the advanced payments as other operating income in the first quarter of 2012. As a result of the termination of the hosting agreement, we impaired capitalized costs specific to LightSquared's 1.6 GHz spectrum that the company no longer intends to deploy which totaled $66 million. | |
| (10) | Favorable developments during the first quarter of 2012 relating to disagreements with local exchange carriers resulted in a reduction in expected access costs of $17 million. | |
| (11) | For the first quarter of 2013, litigation activity is primarily a result of favorable developments in connection with a tax (non-income) related contingency. | |
| (12) | For the second quarter of 2013, included in selling, general and administrative expenses are fees paid to unrelated parties necessary for the proposed transactions with SoftBank and our acquisition of Clearwire. | |
*FINANCIAL MEASURES
Sprint provides financial measures determined in accordance with accounting principles generally accepted in the United States (GAAP) and adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. 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:
OIBDA is operating income/(loss) before depreciation and amortization. Adjusted OIBDA is OIBDA excluding severance, exit costs, and other special items. Adjusted OIBDA Margin represents Adjusted OIBDA divided by non-equipment net operating revenues for Wireless and Adjusted OIBDA divided by net operating revenues for Wireline. We believe that Adjusted OIBDA and Adjusted OIBDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, spectrum acquisitions and other investments and our ability to incur and service debt. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of long-lived tangible and definite-lived intangible assets. Adjusted OIBDA and Adjusted OIBDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry.
Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments and amounts included as investments in Clearwire during the period. We believe that Free Cash Flow provides useful information to investors, analysts and our management about the cash generated by our core operations after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.
Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, short-term investments and if any, restricted cash. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.
SAFE HARBOR
This release includes “forward-looking statements” within the meaning of the securities laws. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan,” “providing guidance,” and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to network performance, subscriber growth, and liquidity, and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the ability to operationalize the anticipated benefits from the SoftBank, Clearwire and U.S. Cellular transactions, the development and deployment of new technologies; efficiencies and cost savings of multimode technologies; customer and network usage; customer growth and retention; service, coverage and quality; availability of devices; the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in the company’s Annual Report on Form 10-K for the year ended December 31, 2012 and when filed, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
About Sprint
Sprint offers a comprehensive range of wireless and wireline communications services bringing the freedom of mobility to consumers, businesses and government users. Sprint served more than 53 million customers at the end of the second quarter of 2013 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; offering industry-leading mobile data services, leading prepaid brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. The American Customer Satisfaction Index rated Sprint as the most improved company in customer satisfaction, across all 47 industries, during the last five years. Newsweek ranked Sprint No. 3 in both its 2011 and 2012 Green Rankings, listing it as one of the nation’s greenest companies, the highest of any telecommunications company. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.
