Sprint Delivers Best Financial Results In Company History With Highest Ever Net Income And Operating Income In Fiscal Year 2017

News provided by

Sprint

May 02, 2018, 04:06 ET

OVERLAND PARK, Kan., May 2, 2018 /PRNewswire/ --  

  • Fiscal year 2017 postpaid phone net additions of 606,000
    • Third consecutive year of postpaid phone net additions
    • Highest postpaid phone gross additions in six years
    • Fiscal fourth quarter postpaid phone net additions of 55,000 marked the eleventh consecutive quarter of net additions
  • Fiscal year 2017 prepaid net additions of 363,000 compared to net losses of 1 million in the prior year
    • Prepaid net additions for the first time in three years
    • Prepaid churn of 4.58 percent was the lowest in three years
    • Fiscal fourth quarter prepaid net additions of 170,000
  • Fiscal year 2017 net income of $7.4 billion, operating income of $2.7 billion and Adjusted EBITDA* of $11.1 billion
    • Net income for the first time in 11 years, even when excluding $7.1 billion of one-time favorable impact from tax reform
    • Highest operating income in company history and highest Adjusted EBITDA* in 11 years
    • Fiscal fourth quarter net income of $69 million, operating income of $236 million, and Adjusted EBITDA* of $2.8 billion
  • Fiscal year 2017 net cash provided by operating activities of $10.1 billion and adjusted free cash flow* of $945 million
    • Second consecutive year of positive adjusted free cash flow*
  • Completed thousands of tri-band upgrades on macro sites, added thousands of outdoor small cells and deployed more than 200,000 Sprint Magic Boxes

Sprint Corporation (NYSE: S) today reported operating results for the fiscal 2017 fourth quarter and full year, including its highest annual retail phone net additions in five years and the best profitability in company history with its highest annual operating income at $2.7 billion and annual net income for the first time in 11 years, even when excluding the one-time favorable impact from tax reform. The company also reported its highest adjusted EBITDA* in 11 years at $11.1 billion and its second consecutive year of positive adjusted free cash flow* at $945 million.

"In the fourth year of our turnaround, Sprint delivered the best financial results in company history as a result of growing our customer base and continuously improving our cost structure, while significantly improving our LTE network and initiating deployment for the first truly mobile 5G network in the U.S," said Sprint CEO Marcelo Claure. "By executing our turnaround, we have positioned Sprint for strategic opportunities which led to our proposed merger with T-Mobile, which will create an entirely new level of innovation and disruption in the industry." 

Sprint Adds Nearly 1 Million Retail Phone Customers in Fiscal Year 2017
Sprint's focus on both its postpaid and prepaid businesses resulted in nearly 1 million retail phone net additions in fiscal year 2017, an improvement of more than 1 million compared to the prior year.

  • Postpaid phone net additions of 606,000 marked the third consecutive year of net additions, as postpaid phone gross additions reached their highest level in six years. For the fourth quarter, postpaid phone net additions of 55,000 marked the eleventh consecutive quarter of net additions, including net additions in the business space for the sixth consecutive quarter. The current quarter and full year results included 44,000 net migrations from prepaid to non-Sprint branded postpaid.
  • Prepaid net additions of 363,000 compared to net losses of 1 million in the prior year, an improvement of nearly 1.4 million driven by a resurgence in the Boost brand. Prepaid churn of 4.58 percent, the lowest in three years, improved by 80 basis points year-over-year. For the fourth quarter, prepaid net additions were 170,000, including the highest share of gross additions in two years and year-over-year improvement in churn for the seventh consecutive quarter.

Cost Reduction Program Contributes to Improved Cash Flows
Sprint continued to make progress on its multi-year plan to improve its cost structure. Excluding approximately $100 million of hurricane-related and other non-recurring charges in fiscal year 2017, the company reported approximately $1.1 billion of combined year-over-year reductions in cost of services and selling, general and administrative expenses, making it the fourth consecutive year of more than $1 billion of year-over-year reductions and bringing the total reduction over the last four years to approximately $6 billion. The year-over-year reductions were primarily driven by changes to the device insurance program, as well as lower network expenses.

Fiscal year 2017 net cash provided by operating activities of $10.1 billion improved by $13.4 billion year-over-year, primarily due to a modification of our accounts receivable facility in February 2017. Adjusted free cash flow* of $945 million improved by $338 million year-over-year, mostly due to operational improvements in the business.

Net income of $7.4 billion in fiscal year 2017 included a one-time $7.1 billion non-cash benefit from tax reform, resulting from a re-measurement of our deferred tax assets and liabilities under provisions contained in the new tax law.

The company also reported the following financial results:

(Millions, except per share data)

Fiscal
4Q17

Fiscal
4Q16

Change

Fiscal
2017

Fiscal
2016

Change

Net income (loss)

$69

($283)

$352

$7,389

($1,206)

$8,595

Basic income (loss) per share

$0.02

($0.07)

$0.09

$1.85

($0.30)

$2.15

Operating income

$236

$470

($234)

$2,727

$1,764

$963

Adjusted EBITDA*

$2,768

$2,680

$88

$11,069

$9,934

$1,135

Net cash provided by (used in) operating activities

$2,653

($523)

$3,176

$10,062

($3,290)

$13,352

Adjusted free cash flow*

($240)

$80

($320)

$945

$607

$338

Network Quality Improves as Progress Toward First Mobile 5G Network Continues
Sprint is building a super-reliable, high-capacity mobile network that will deliver a great LTE experience and enable industry-leading 5G capabilities. The company's Next-Gen Network plan involves:

  • Upgrading existing towers to leverage all three of the company's spectrum bands
  • Building new macro cell sites
  • Adding more small cells including mini-macros, strand mounts with cable operators and Sprint Magic Boxes
  • Deploying 5G technologies such as Massive MIMO

With more than 160 MHz of 2.5 GHz spectrum in the top 100 markets, Sprint is one of the only operators in the world with enough capacity to operate LTE and 5G simultaneously using Massive MIMO and huge channels of 100-200 MHz of licensed spectrum on the same radios. Sprint expects to launch the first mobile 5G network in the U.S. in the first half of 2019.

Sprint completed thousands of tri-band upgrades on macro sites, added thousands of outdoor small cells and deployed more than 200,000 Sprint Magic Boxes in fiscal year 2017. These deployments helped drive continued improvement in network quality, as seen in Ookla's Speedtest Intelligence data.

  • Sprint saw a 36 percent year-over-year increase in its national average download speed, the largest increase of the top four national carriers.1
  • Sprint is #1 for fastest average download speed in 100 cities, more than twice as many cities as last year and more than AT&T for the third consecutive quarter.2

Fiscal Year 2018 Outlook

  • The company expects adjusted EBITDA* of $11.3 billion to $11.8 billion. Including the impact of the new revenue recognition accounting standard, adjusted EBITDA* is expected to increase to a range of $11.6 billion to $12.1 billion.
  • The company expects cash capital expenditures excluding leased devices to be $5 billion to $6 billion.

Conference Call and Webcast

  • Date/Time: 4:30 p.m. (ET) Wednesday, May 2, 2018
  • Call-in Information
    • U.S./Canada: 866-360-1063 (ID: 4588039)
    • International: 443-961-0242 (ID: 4588039)
  • Webcast available at www.sprint.com/investors
  • Additional information about results is available on our Investor Relations website

1 Based on Ookla's analysis of Speedtest Intelligence data comparing March 2017 to March 2018 for all mobile results.
2 Based on Ookla's analysis of Speedtest Intelligence data from 1/1/18 to 3/31/18 for all mobile results when comparing cities where the top four national carriers rank

Wireless Operating Statistics (Unaudited)

 Quarter To Date 

 Year To Date 

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17

Net additions (losses) (in thousands)





Postpaid(a)

39

256

(118)

424

811

Postpaid phone (a)

55

184

42

606

930

Prepaid(b)

170

63

195

363

(1,020)

Wholesale and affiliate(b)

(165)

66

291

81

2,342

Total wireless net additions

44

385

368

868

2,133







End of period connections (in thousands)





Postpaid(a) (c) (d) 

32,119

31,942

31,576

32,119

31,576

Postpaid phone(a) (c)

26,813

26,616

26,079

26,813

26,079

Prepaid(a) (b) (c) (e) (f) (g)

8,989

8,997

8,688

8,989

8,688

Wholesale and affiliate (b) (c) (f)

13,517

13,642

13,375

13,517

13,375

Total end of period connections

54,625

54,581

53,639

54,625

53,639







Churn





Postpaid

1.78%

1.80%

1.75%

1.74%

1.62%

Postpaid phone

1.68%

1.71%

1.58%

1.62%

1.48%

Prepaid (f)

4.30%

4.63%

4.69%

4.58%

5.38%







Supplemental data - connected devices

End of period connections (in thousands)





Retail postpaid

2,335

2,259

2,001

2,335

2,001

Wholesale and affiliate

11,162

11,272

10,880

11,162

10,880

Total

13,497

13,531

12,881

13,497

12,881







ARPU(h)





Postpaid

$     44.40

$      45.13

$      47.34

$     45.70

$    49.77

Postpaid phone

$     50.44

$      51.26

$      54.10

$     51.98

$    57.09

Prepaid(f)

$     37.15

$      37.46

$      38.48

$     37.67

$    34.46







NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)

(Millions, except accounts, connections, ABPA*, and ABPU*)

Quarter To Date

 Year To Date 

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17

ABPA*





Postpaid service revenue

$     4,270

$      4,297

$      4,493

$   17,396

$  18,677

Add: Installment plan and non-operating lease billings 

368

379

343

1,512

1,172

Add: Equipment rentals

1,136

1,047

842

4,048

3,295

Total for postpaid connections

$     5,774

$      5,723

$      5,678

$   22,956

$  23,144







Average postpaid accounts (in thousands)

11,259

11,193

11,405

11,260

11,378

Postpaid ABPA*(i)

$    171.38

$     170.39

$    165.92

$   169.99

$  169.51








Quarter To Date

 Year To Date 

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17

Postpaid phone ABPU*





Postpaid phone service revenue

$     4,048

$      4,069

$      4,228

$   16,463

$  17,578

Add: Installment plan and non-operating lease billings 

324

335

309

1,349

1,061

Add: Equipment rentals

1,126

1,037

829

4,003

3,240

Total for postpaid phone connections

$     5,498

$      5,441

$      5,366

$   21,815

$  21,879







Postpaid average phone connections (in thousands)

26,754

26,461

26,053

26,394

25,659

Postpaid phone ABPU* (j)

$     68.51

$      68.54

$      68.66

$     68.88

$    71.06

(a)During the three-month period ended March 31, 2018, a non-Sprint branded postpaid offering was introduced allowing prepaid customers to purchase a device under our installment billing program. As a result of the extension of credit, approximately 167,000 prepaid subscribers were migrated from the prepaid subscriber base into the postpaid subscriber base. In addition, net subscriber additions under the non-Sprint branded postpaid offering were 44,000 during the three-month period ended March 31, 2018.

(b)Sprint is no longer reporting Lifeline subscribers due to regulatory changes resulting in tighter program restrictions. We have excluded them from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale MVNOs.

(c)  As part of the Shentel transaction, 186,000 and 92,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates, of which 18,000 prepaid subscribers were subsequently excluded from our customer base as a result of the Lifeline regulatory change as noted in (b) above. An additional 270,000 of nTelos' subscribers are now part of our affiliate relationship with Shentel and are being reported in wholesale and affiliate subscribers beginning with the quarter ended June 30, 2016. In addition, during the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates and, during the three-month period ended March 31, 2018, 29,000 and 11,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates as a result of the transfer of additional subscribers to Shentel.

(d)  During the three-month period ended June 30, 2017, 2,000 Wi-Fi connections were adjusted from the postpaid subscriber base.

(e)During the three-month period ended September 30, 2017, the Prepaid Data Share platform It's On was decommissioned as the Company continues to focus on higher value contribution offerings resulting in a 49,000 reduction to prepaid end of period subscribers.

(f)During the three-month period ended December 31, 2016, the Company aligned all prepaid brands, excluding Assurance Wireless but including prepaid affiliate subscribers, under one churn and retention program. As a result of this change, end of period prepaid and affiliate subscribers as of December 31, 2016 were reduced by 1,234,000 and 21,000, respectively.  

(g)During the three-month period ended December 31, 2017, prepaid end of period subscribers increased by 169,000 in conjunction with the PRWireless HoldCo, LLC joint venture.

(h)  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.  Postpaid phone ARPU represents revenues related to our postpaid phone connections.

(i)  Postpaid ABPA* is calculated by dividing postpaid service revenue earned from postpaid customers plus billings from installment plans and non-operating leases, as well as equipment rentals, by the sum of the monthly average number of postpaid accounts during the period. Installment plan billings represent the substantial majority of the total billings in the table above for all periods presented.

(j)  Postpaid phone ABPU* is calculated by dividing service revenue earned from postpaid phone customers plus billings from installment plans and non-operating leases, as well as equipment rentals, by the sum of the monthly average number of postpaid phone connections during the period. Installment plan billings represent the substantial majority of the total billings in the table above for all periods presented.

Wireless Device Financing Summary (Unaudited)

(Millions, except sales, connections, and leased devices in property, plant and equipment)

 Quarter To Date 

 Year To Date 

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17







Postpaid activations (in thousands)

3,737

4,874

3,471

16,196

15,298

Postpaid activations financed

84%

84%

82%

85%

76%

Postpaid activations - operating leases

70%

72%

42%

67%

42%







Installment plans





Installment sales financed

$          214

$         276

$        696

$    1,311

$     2,884

Installment billings

$          342

$         353

$        343

$    1,436

$     1,172

Installment receivables, net

$       1,149

$      1,383

$      1,764

$    1,149

$     1,764







Equipment rentals and depreciation - equipment rentals





Equipment rentals   

$       1,136

$      1,047

$        842

$    4,048

$     3,295

Depreciation - equipment rentals

$       1,060

$         990

$        911

$    3,792

$     3,116







Leased device additions





Cash paid for capital expenditures - leased devices

$       1,928

$      2,468

$      1,080

$    7,461

$     4,976







Leased devices  





Leased devices in property, plant and equipment, net

$       6,012

$      5,683

$      4,162

$    6,012

$     4,162







Leased device units





Leased devices in property, plant and equipment (units in thousands)

14,543

14,002

11,888

14,543

11,888







Leased device and receivables financings net proceeds





Proceeds

$            -

$      1,125

$        100

$    2,679

$     1,155

Repayments

(555)

(598)

(414)

(2,574)

(1,069)

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

$         (555)

$         527

$       (314)

$       105

$          86

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Millions, except per share data)

Quarter To Date

Year To Date

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17

Net operating revenues





Service revenue

$       5,866

$      5,930

$      6,116

$    23,834

$     25,368

Equipment sales

1,081

1,262

1,581

4,524

4,684

Equipment rentals

1,136

1,047

842

4,048

3,295

Total net operating revenues

8,083

8,239

8,539

32,406

33,347

Net operating expenses





Cost of services (exclusive of depreciation and amortization below)

1,661

1,733

1,736

6,801

7,861

Cost of equipment sales

1,487

1,673

1,980

6,109

6,583

Cost of equipment rentals (exclusive of depreciation below)

146

123

141

493

975

Selling, general and administrative

2,028

2,108

2,002

8,087

7,994

Depreciation - network and other

1,015

987

960

3,976

3,982

Depreciation - equipment rentals

1,060

990

911

3,792

3,116

Amortization

184

196

239

812

1,052

Other, net

266

(298)

100

(391)

20

Total net operating expenses

7,847

7,512

8,069

29,679

31,583

Operating income

236

727

470

2,727

1,764

Interest expense

(576)

(581)

(631)

(2,365)

(2,495)

Other (expense) income, net

(9)

(42)

27

(59)

(40)

(Loss) income before income taxes

(349)

104

(134)

303

(771)

Income tax benefit (expense)

412

7,052

(149)

7,074

(435)

Net income (loss)

63

7,156

(283)

7,377

(1,206)

Less: Net loss attributable to noncontrolling interests

6

6

-

12

-

Net income (loss) attributable to Sprint Corporation

$           69

$      7,162

$        (283)

$      7,389

$      (1,206)







Basic net income (loss) per common share

$         0.02

$        1.79

$       (0.07)

$       1.85

$        (0.30)

Diluted net income (loss) per common share

$         0.02

$        1.76

$       (0.07)

$       1.81

$        (0.30)

Weighted average common shares outstanding

4,004

4,001

3,988

3,999

3,981

Diluted weighted average common shares outstanding

4,055

4,061

3,988

4,078

3,981







Effective tax rate

118.1%

-6,780.8%

-111.2%

-2,334.7%

-56.4%














NON-GAAP RECONCILIATION - NET INCOME (LOSS) TO ADJUSTED EBITDA* (Unaudited)

(Millions)

Quarter To Date

Year To Date

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17







Net income (loss)

$           63

$      7,156

$        (283)

$      7,377

$      (1,206)

Income tax (benefit) expense

(412)

(7,052)

149

(7,074)

435

(Loss) income before income taxes

(349)

104

(134)

303

(771)

Other expense (income), net

9

42

(27)

59

40

Interest expense

576

581

631

2,365

2,495

Operating income

236

727

470

2,727

1,764

Depreciation - network and other

1,015

987

960

3,976

3,982

Depreciation - equipment rentals

1,060

990

911

3,792

3,116

Amortization

184

196

239

812

1,052

EBITDA*(1)

2,495

2,900

2,580

11,307

9,914

Loss (gain) from asset dispositions, exchanges, and other, net(2)

189

-

-

(115)

(326)

Severance and exit costs (3)

67

13

36

80

66

Contract terminations (4)

-

-

27

(5)

140

Litigation and other contingencies(5)

10

(260)

37

(305)

140

Hurricanes (6)

7

66

-

107

-

Adjusted EBITDA*(1)

$       2,768

$      2,719

$      2,680

$    11,069

$       9,934







Adjusted EBITDA margin*

47.2%

45.9%

43.8%

46.4%

39.2%














Selected items:





Cash paid for capital expenditures - network and other

$          780

$         696

$         529

$      3,319

$       1,950

Cash paid for capital expenditures - leased devices

$       1,928

$      2,468

$      1,080

$      7,461

$       4,976

WIRELESS STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

Quarter To Date

Year To Date

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17

Net operating revenues





Service revenue





Postpaid

$           4,270

$           4,297

$           4,493

$         17,396

$         18,677

Prepaid (7)

989

993

982

3,971

4,078

Wholesale, affiliate and other(7)

314

329

269

1,198

1,053

Total service revenue

5,573

5,619

5,744

22,565

23,808







Equipment sales

1,081

1,262

1,581

4,524

4,684

Equipment rentals

1,136

1,047

842

4,048

3,295

Total net operating revenues

7,790

7,928

8,167

31,137

31,787







Net operating expenses





Cost of services (exclusive of depreciation and amortization below)

1,401

1,466

1,448

5,701

6,674

Cost of equipment sales

1,487

1,673

1,980

6,109

6,583

Cost of equipment rentals (exclusive of depreciation below)

146

123

141

493

975

Selling, general and administrative

1,947

2,024

1,944

7,782

7,741

Depreciation - network and other

968

931

911

3,768

3,779

Depreciation - equipment rentals

1,060

990

911

3,792

3,116

Amortization

184

196

239

812

1,052

Other, net

258

16

91

(35)

(1)

Total net operating expenses

7,451

7,419

7,665

28,422

29,919

Operating income

$             339

$             509

$             502

$           2,715

$           1,868





















WIRELESS NON-GAAP RECONCILIATION (Unaudited)

(Millions)

Quarter To Date

Year To Date

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17







Operating income

$             339

$             509

$             502

$           2,715

$           1,868

Loss (gain) from asset dispositions, exchanges, and other, net(2)

189

-

-

(115)

(326)

Severance and exit costs (3)

59

4

27

58

45

Contract terminations (4)

-

-

27

(5)

140

Litigation and other contingencies (5)

10

63

37

73

140

Hurricanes (6)

7

66

-

107

-

Depreciation - network and other

968

931

911

3,768

3,779

Depreciation - equipment rentals

1,060

990

911

3,792

3,116

Amortization

184

196

239

812

1,052

Adjusted EBITDA*(1)

$           2,816

$           2,759

$           2,654

$         11,205

$           9,814







Adjusted EBITDA margin*

50.5%

49.1%

46.2%

49.7%

41.2%














Selected items:





Cash paid for capital expenditures - network and other

$             681

$             565

$             468

$           2,760

$           1,591

Cash paid for capital expenditures - leased devices

$           1,928

$           2,468

$           1,080

$           7,461

$           4,976

WIRELINE STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

Quarter To Date

Year To Date

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17







Net operating revenues

344

393

480

1,579

2,043







Net operating expenses





Cost of services (exclusive of depreciation and amortization below)

316

352

402

1,427

1,686

Selling, general and administrative

76

71

49

270

238

Depreciation and amortization

50

55

47

205

195

Other, net

9

(314)

8

(300)

21

Total net operating expenses

451

164

506

1,602

2,140

Operating (loss) income

$            (107)

$             229

$              (26)

$              (23)

$              (97)














WIRELINE NON-GAAP RECONCILIATION (Unaudited)

(Millions)

Quarter To Date

Year To Date

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17







Operating (loss) income

$            (107)

$             229

$              (26)

$              (23)

$              (97)

Loss from asset dispositions, exchanges, and other, net(2)

1

-

-

1

-

Severance and exit costs (3)

8

9

8

22

21

Litigation and other contingencies (5)

-

(323)

-

(323)

-

Depreciation and amortization

50

55

47

205

195

Adjusted EBITDA*

$              (48)

$              (30)

$               29

$            (118)

$             119







Adjusted EBITDA margin*

-14.0%

-7.6%

6.0%

-7.5%

5.8%














Selected items:





Cash paid for capital expenditures - network and other

$               34

$               30

$               19

$             166

$               94

CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)

(Millions)



Year To Date





3/31/18

3/31/17

Operating activities





Net income (loss)



$  7,377

$ (1,206)

Depreciation and amortization



8,580

8,150

Provision for losses on accounts receivable



362

555

Share-based and long-term incentive compensation expense 



182

93

Deferred income tax (benefit) expense



(7,119)

433

Gains from asset dispositions and exchanges



(479)

(354)

Loss on early extinguishment of debt



65

-

Amortization of long-term debt premiums, net



(158)

(302)

Loss on disposal of property, plant and equipment



868

509

Contract terminations



(5)

111

Deferred purchase price from sale of receivables



(1,140)

(10,498)

Other changes in assets and liabilities:





Accounts and notes receivable



83

(1,017)

Inventories and other current assets 



705

457

Accounts payable and other current liabilities 



57

(365)

Non-current assets and liabilities, net 



271

(308)

Other, net 



413

452

Net cash provided by (used in) operating activities



10,062

(3,290)







Investing activities





Capital expenditures - network and other



(3,319)

(1,950)

Capital expenditures - leased devices



(7,461)

(4,976)

Expenditures relating to FCC licenses



(115)

(83)

Change in short-term investments, net



3,090

(5,444)

Proceeds from sales of assets and FCC licenses



527

219

Proceeds from deferred purchase price from sale of receivables



1,140

10,498

Other, net



3

41

Net cash used in investing activities 



(6,135)

(1,695)







Financing activities





Proceeds from debt and financings



8,529

10,966

Repayments of debt, financing and capital lease obligations



(8,518)

(5,417)

Debt financing costs



(93)

(358)

Call premiums paid on debt redemptions



(131)

-

Other, net



3

95

Net cash (used in) provided by financing activities 



(210)

5,286







Net increase in cash, cash equivalents and restricted cash



3,717

301







Cash, cash equivalents and restricted cash, beginning of period



2,942

2,641

Cash, cash equivalents and restricted cash, end of period



$  6,659

$  2,942














RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)

(Millions)

Quarter To Date

Year To Date

3/31/18

12/31/17

3/31/17

3/31/18

3/31/17







Net cash provided by (used in) operating activities

$ 2,653

$ 2,683

$  (523)

$ 10,062

$ (3,290)







Capital expenditures - network and other

(780)

(696)

(529)

(3,319)

(1,950)

Capital expenditures - leased devices

(1,928)

(2,468)

(1,080)

(7,461)

(4,976)

Expenditures relating to FCC licenses, net

(23)

(73)

(37)

(115)

(83)

Proceeds from sales of assets and FCC licenses

160

149

93

527

219

Proceeds from deferred purchase price from sale of receivables

231

269

2,476

1,140

10,498

Other investing activities, net

2

6

(6)

6

103

Free cash flow*

$   315

$   (130)

$   394

$     840

$     521







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

(555)

527

(314)

105

86

Adjusted free cash flow*

$  (240)

$    397

$     80

$     945

$     607

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Millions)

3/31/18

3/31/17

ASSETS

Current assets

Cash and cash equivalents

$       6,610

$           2,870

Short-term investments

2,354

5,444

Accounts and notes receivable, net

3,711

4,138

Device and accessory inventory

1,003

1,064

Prepaid expenses and other current assets

575

601

Total current assets

14,253

14,117



Property, plant and equipment, net

19,925

19,209

Goodwill

6,586

6,579

FCC licenses and other

41,309

40,585

Definite-lived intangible assets, net

2,465

3,320

Other assets

921

1,313

Total assets

$     85,459

$         85,123



LIABILITIES AND EQUITY

Current liabilities

Accounts payable

$       3,409

$           3,281

Accrued expenses and other current liabilities

3,962

4,141

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

3,429

5,036

Total current liabilities

10,800

12,458



Long-term debt, financing and capital lease obligations

37,463

35,878

Deferred tax liabilities

7,294

14,416

Other liabilities

3,483

3,563

Total liabilities 

59,040

66,315



Stockholders' equity

Common stock

40

40

Paid-in capital

27,884

27,756

Accumulated deficit

(1,332)

(8,584)

Accumulated other comprehensive loss

(236)

(404)

Total stockholders' equity

26,356

18,808

Noncontrolling interests

63

-

Total equity

26,419

18,808

Total liabilities and equity

$     85,459

$         85,123






NET DEBT* (NON-GAAP) (Unaudited)

(Millions)

3/31/18

3/31/17

Total debt

$     40,892

$         40,914

Less: Cash and cash equivalents

(6,610)

(2,870)

Less: Short-term investments

(2,354)

(5,444)

Net debt*

$     31,928

$         32,600

SCHEDULE OF DEBT (Unaudited)

(Millions)


3/31/18

ISSUER

 MATURITY 

 PRINCIPAL 

Sprint Corporation

7.25% Senior notes due 2021

09/15/2021

$        2,250

7.875% Senior notes due 2023

09/15/2023

4,250

7.125% Senior notes due 2024

06/15/2024

2,500

7.625% Senior notes due 2025

02/15/2025

1,500

7.625% Senior notes due 2026

03/01/2026

1,500

Sprint Corporation

12,000



Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC

3.36% Senior secured notes due 2021

09/20/2021

3,063

4.738% Senior secured notes due 2025

03/20/2025

2,100

5.152% Senior secured notes due 2028

03/20/2028

1,837

Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC

7,000



Sprint Communications, Inc.

Export Development Canada secured loan

12/17/2019

300

9% Guaranteed notes due 2018

11/15/2018

1,753

7% Guaranteed notes due 2020

03/01/2020

1,000

7% Senior notes due 2020

08/15/2020

1,500

11.5% Senior notes due 2021

11/15/2021

1,000

9.25% Secured debentures due 2022

04/15/2022

200

6% Senior notes due 2022

11/15/2022

2,280

Sprint Communications, Inc.

8,033



Sprint Capital Corporation

6.9% Senior notes due 2019

05/01/2019

1,729

6.875% Senior notes due 2028

11/15/2028

2,475

8.75% Senior notes due 2032

03/15/2032

2,000

Sprint Capital Corporation

6,204



Credit facilities

PRWireless secured term loan

06/28/2020

182

Secured equipment credit facilities

2020 - 2021

527

Secured term loan

02/03/2024

3,960

Credit facilities

4,669



Accounts receivable facility

11/18/2019

2,411



Financing obligations

08/31/2021

150



Capital leases and other obligations

2018 - 2026

536

Total principal

41,003



Net premiums and debt financing costs

(111)

Total debt

$      40,892

NOTES TO THE FINANCIAL INFORMATION (Unaudited)


(1)

As more of our customers elect to lease a device rather than purchasing one under our subsidized program, there is a significant positive impact to EBITDA* and Adjusted EBITDA* from direct channel sales primarily due to the fact the cost of the device is not recorded as cost of equipment sales 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 revenue from equipment sales at the point of sale and the cost of the device is recognized as cost of equipment sales. During the three and twelve-month periods ended March 31, 2018, we leased devices through our Sprint direct channels totaling approximately $1,213 million and $4,884 million, respectively, which would have increased cost of equipment sales and reduced EBITDA* if they had been purchased under our subsidized program.



The impact to EBITDA* and Adjusted EBITDA* resulting from the sale of devices under our installment billing program is generally neutral except for the impact from the time value of money element related to the imputed interest on the installment receivable.

(2)

During the fourth and first quarters of fiscal year 2017, the company recorded losses on dispositions of assets primarily related to cell site construction and network development costs that are no longer relevant as a result of changes in the company's network plans. Additionally, the company recorded a pre-tax non-cash gain related to spectrum swaps with other carriers. During the third quarter of fiscal year 2016, the company recorded losses on dispositions of assets primarily related to cell site construction and network development costs that are no longer relevant as a result of changes in the company's network plans. During the second quarter of fiscal year 2016 the company recorded a pre-tax non-cash gain of $354 million related to spectrum swaps with other carriers.  

(3)

Severance and exit costs consist of lease exit costs primarily associated with tower and cell sites, access exit costs related to payments that will continue to be made under the company's backhaul access contracts for which the company will no longer be receiving any economic benefit, and severance costs associated with reduction in its work force.

(4)

During the first quarter of fiscal year 2017, we recorded a $5 million gain due to reversal of a liability recorded in relation to the termination of our relationship with General Wireless Operations, Inc. (Radio Shack).  During the fourth quarter of fiscal year 2016, we terminated our relationship with Radio Shack and incurred net contract termination charges of approximately $27 million primarily related to cash termination payments and write-downs of leasehold improvements at associated retail stores that were shut down as of March 31, 2017. During the first quarter of fiscal year 2016, contract terminations primarily relate to the termination of our pre-existing wholesale arrangement with NTELOS Holding Corp.

(5)

During the fourth, third and first quarters of fiscal year 2017, litigation and other contingencies consist of reductions associated with legal settlements or favorable developments in pending legal proceedings as well as non-recurring charges of $51 million related to a regulatory fee matter. During the fourth and second quarters of fiscal year 2016, litigation and other contingencies consist of unfavorable developments associated with legal matters as well as federal and state matters such as sales, use or property taxes.

(6)

During the fourth, third and second quarters of fiscal year 2017 we recorded estimated hurricane-related charges of $7 million, $66 million and $34 million, respectively, consisting of customer service credits, incremental roaming costs, network repairs and replacements.

(7)

Sprint is no longer reporting Lifeline subscribers due to recent regulatory changes resulting in tighter program restrictions. We have excluded them from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale Lifeline mobile virtual network operators (MVNO). The table reflects the reclassification of the related Assurance Wireless prepaid revenue from Prepaid service revenue to Wholesale, affiliate and other revenue of $85 million and $360 million for the three and twelve-month periods ended March 31, 2017, respectively. Revenue associated with subscribers through our wholesale Lifeline MVNO's continue to remain in Wholesale, affiliate and other revenue following this change.

*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.

Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid customers plus billings from installment plans and non-operating leases, as well as equipment rentals, 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 postpaid customer billings per account as it approximates the expected cash collections, including billings from installment plans and non-operating leases, as well as equipment rentals, per postpaid account each month.   

Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from postpaid phone customers plus billings from installment plans and non-operating leases, as well as equipment rentals 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 postpaid phone customer billings as it approximates the expected cash collections, including billings from installment plans and non-operating leases, as well as equipment rentals, 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 and equity method investments. Adjusted Free Cash Flow is Free Cash Flow plus the proceeds from device financings and sales of receivables, net of repayments. We believe that Free Cash Flow and Adjusted Free Cash Flow provide useful information to investors, analysts and our management about the cash generated by our core operations and net proceeds obtained to fund certain leased devices, respectively, after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

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

SAFE HARBOR

This release includes "forward-looking statements" within the meaning of the securities laws. The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan", "outlook," "providing guidance," and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to our network, cost reductions, connections growth, and liquidity; and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services; efficiencies and cost savings of new technologies and services; customer and network usage; connection growth and retention; service, speed, coverage and quality; availability of devices; availability of various financings, including any leasing transactions; the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation's Annual Report on Form 10-K for the fiscal year ended March 31, 2017, and, when filed, its Annual Report on Form 10-K for the fiscal year ended March 31, 2018. 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 54.6 million connections as of March 31, 2018 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. Today, Sprint's legacy of innovation and service continues with an increased investment to dramatically improve coverage, reliability, and speed across its nationwide network and commitment to launching the first 5G mobile network in the U.S. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.

SOURCE Sprint

Related Links

http://www.sprint.com

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