S
$8.94
Sprint
($.02)
(.22%)
Earnings Details
3rd Quarter December 2016
Tuesday, January 31, 2017 7:30:03 AM
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Summary

Sprint Misses

Sprint (S) reported a 3rd Quarter December 2016 loss of $0.12 per share on revenue of $8.5 billion. The consensus estimate was a loss of $0.08 per share on revenue of $8.3 billion. The Earnings Whisper number was for a loss of $0.10 per share. Revenue grew 5.5% on a year-over-year basis.

Sprint Corp is a communications company offering wireless and wireline communications products and services to individual consumers, businesses, government subscribers and resellers.

Results
Reported Earnings
($0.12)
Earnings Whisper
($0.10)
Consensus Estimate
($0.08)
Reported Revenue
$8.55 Bil
Revenue Estimate
$8.26 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Sprint Continues Year-over-Year Growth in Net Operating Revenues and Postpaid Phone Net Additions with Third Quarter of Fiscal Year 2016 Results

Postpaid phone net additions of 368,000 were the highest in four years Beat both Verizon and AT&T for the fourth consecutive quarter

--Ninth consecutive quarter of year-over-year improvement

--Postpaid net port positive for the third quarter in a row

Net loss of $479 million, Operating income of $311 million and Adjusted EBITDA* of $2.5 billion Operating income and Adjusted EBITDA* both improved by more than $500 million year-over-year

More than $1.6 billion of year-to-date reductions in cost of service and selling, general, and administrative expenses

Diversified funding sources, lowered cost of capital, and enhanced cash and liquidity position Issued $3.5 billion of spectrum-backed notes at 3.36 percent - about half of Sprint’s current effective interest rate

--Moody’s Investor Service upgraded the company’s debt rating

Network performing at best-ever levels with most metro RootMetrics(R) RootScore(R) awards in the company’s history in the second half of calendar 2016

Sprint Corporation (S) today reported operating results for the third quarter of fiscal year 2016, including more than 5 percent year-over-year growth in net operating revenues and the highest postpaid phone net additions in four years. The company also reported operating income of $311 million and Adjusted EBITDA* of $2.5 billion, both improvements of more than $500 million year-over-year.

"Sprint is turning the corner," said Sprint CEO Marcelo Claure. "Even with all the aggressive promotional offers from our competitors, we were still able to add more postpaid phone customers than both Verizon and AT&T while continuing to grow revenues, take costs out of the business, and improve the network."

Highest Postpaid Phone Net Additions in Four Years During Very Competitive Quarter

Sprint’s focus on delivering the best value proposition in wireless resulted in 368,000 postpaid phone net additions in the quarter, its ninth consecutive quarter of year-over-year improvement. Even in a highly competitive quarter with multiple promotional offers from its competitors, Sprint was able to add more postpaid phone customers than both Verizon and AT&T and report its highest postpaid phone net additions in four years. The company also remained postpaid net port positive for the third quarter in a row and had its highest postpaid phone gross additions in four years.

The company also reported the following results:

Total net additions were 577,000 in the quarter, including postpaid net additions of 405,000, prepaid net losses of 501,000, and wholesale and affiliate net additions of 673,000.

Total postpaid churn was 1.67 percent and postpaid phone churn was 1.57 percent in the quarter.

Top Line Growing as Cost Reductions Continue

Sprint made continued progress on growing revenues and improving the cost structure of the business. Total net operating revenues of $8.5 billion grew by $442 million year-over-year, or more than 5 percent, and cost of service and selling, general and administrative expenses declined by nearly $500 million year-over-year, bringing the year-to-date cost reduction to more than $1.6 billion.

As part of its ongoing cost reduction program, the company modified the terms of its vendor agreements associated with the service and repair program on Jan. 1, 2017, which are expected to be accretive to Adjusted EBITDA* by approximately $25 million to $50 million per quarter. Under the terms of the new agreements, the company will now only record the net margin and therefore expects the reduction to wireless service revenues of approximately $200 million per quarter to be more than offset by a greater reduction in cost of service expenses.

The company remains on track to achieve its goal of a sustainable reduction of $2 billion or more of run-rate operating expenses exiting fiscal year 2016 and has plans for further reductions in fiscal year 2017 and beyond.

The company also reported the following financial results:

Net loss of $479 million, or $0.12 per share, in the quarter compared to a net loss of $836 million, or $0.21 per share, in the year-ago period, an improvement of $357 million, or $0.09 per share.

Operating income of $311 million in the quarter compared to an operating loss of $197 million in the year-ago period, an improvement of $508 million.

Adjusted EBITDA* of $2.5 billion in the quarter compared to $1.9 billion in the year-ago period, an increase of approximately $552 million or 29 percent.

Net cash provided by operating activities was $650 million in the quarter compared to $806 million in the year-ago period.

Adjusted free cash flow* was negative $646 million in the quarter compared to positive $339 million in the year-ago period. The prior year quarter included $1.1 billion of proceeds from the first sale-leaseback transaction with Mobile Leasing Solutions, LLC (MLS), while this quarter included a cash outflow of approximately $370 million related to the repurchase of the devices sold in the first MLS transaction.

Improved Operating Performance and Liquidity Position Bolsters Credit Rating

During the quarter the company issued $3.5 billion of spectrum-backed senior secured notes at 3.36 percent, which is about half of Sprint’s current effective interest rate, as part of a $7 billion program aimed at diversifying the company’s funding sources, lowering its cost of capital, and reducing future cash interest expenses. The company also retired $2.3 billion of debt maturities with significantly higher coupon payments and repurchased the devices sold in the first MLS transaction, thus eliminating the associated future lease obligation.

Total liquidity was $9.1 billion at the end of the quarter, including $6.1 billion of cash, cash equivalents and short-term investments. Additionally, the company also has $1.2 billion of availability under vendor financing agreements that can be used toward the purchase of 2.5GHz network equipment.

Based on the company’s sustained operational performance and improved liquidity, Moody’s Investor Service recently upgraded Sprint’s corporate family rating from B3 to B2.

In addition, the company is in the process of refinancing its $3.3 billion unsecured revolving credit facility and expects to complete that process in the coming weeks.

Network Improvements Expected to Continue with High Performance User Equipment (HPUE)

Sprint continues to unlock the value of the largest spectrum holdings in the U.S. by densifying and optimizing its network to provide customers the best experience. Third party sources continue to validate the company’s network performance improvements.

Independent mobile analytics firm RootMetrics(R) awarded Sprint a company record 246 first-place (outright or shared) Metropolitan area RootScore(R) awards for reliability, speed, data, call, text, or overall network performance in the second half of 2016, including more call RootScore awards than Verizon, AT&T, or T-Mobile for the first time ever. Additionally, Sprint has received nearly 50 percent more total awards compared to its award tally in the prior testing period.(1)

Sprint’s overall network reliability continues to beat T-Mobile and performs within 1 percent of Verizon and AT&T, based on an analysis of Nielsen data.(2)

The Sprint LTE Plus network, which includes advanced technologies such as antenna beamforming and two-channel carrier aggregation, is now available in more than 250 markets, with three-channel carrier aggregation deployed in more than 100 of those markets.

Sprint also recently announced a breakthrough innovation called HPUE, a new technology that can extend the coverage of its 2.5GHz spectrum by up to 30 percent to nearly match its mid-band 1.9GHz spectrum performance on capable devices, including indoors where the majority of wireless traffic is generated. HPUE-capable devices are expected to be available in the coming months.

Fiscal Year 2016 Outlook

The company now expects Adjusted EBITDA* of $9.7 billion to $10 billion, at the high end of its previous expectation of $9.5 billion to $10 billion.

The company now expects operating income of $1.4 billion to $1.7 billion, at the high end of its previous expectation of $1.2 billion to $1.7 billion.

The company now expects cash capital expenditures, excluding devices leased through indirect channels, of $2 billion to $2.3 billion. The company’s previous expectation was less than $3 billion.

The company continues to expect Adjusted free cash flow* around break-even.

Conference Call and Webcast

-- Date/Time: 8:30 a.m. (ET) Tuesday, Jan. 31, 2017

Call-in Information -- U.S./Canada: 866-360-1063 (ID: 47845527)

-- International: 443-961-0242 (ID: 47845527)

-- Webcast available at www.sprint.com/investors

Additional information about results is available on our Investor Relations website

(1) Rankings based on RootMetrics 125 Metro RootScore Reports (1H and 2H 2016) for mobile performance as tested on best available plans and devices on 4 mobile networks across all available network types. Your experience may vary. The RootMetrics awards are not an endorsement of Sprint. Visit www.rootmetrics.com.

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

Wireless Operating Statistics (Unaudited)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Sprint platform (1):
Net additions (losses) (in thousands)
Postpaid
405
344
501
929
1,189
Prepaid
(501 )
(427 )
(491 )
(1,259 )
(1,045 )
Wholesale and affiliate
673
823
481
2,024
2,078
Total Sprint platform wireless net additions
577
740
491
1,694
2,222
End of period connections (in thousands)
Postpaid (d)
31,694
31,289
30,895
31,694
30,895
Prepaid (d) (e)
11,812
13,547
14,661
11,812
14,661
Wholesale and affiliate (d) (e)
16,009
15,357
12,803
16,009
12,803
Total Sprint platform end of period connections
59,515
60,193
58,359
59,515
58,359
Churn
Postpaid
1.67 %
1.52 %
1.62 %
1.58 %
1.57 %
Prepaid (e)
5.80 %
5.63 %
5.82 %
5.66 %
5.31 %
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid
1,960
1,874
1,676
1,960
1,676
Wholesale and affiliate
10,594
9,951
7,930
10,594
7,930
Total
12,554
11,825
9,606
12,554
9,606
Sprint platformARPU (1) (a)
Postpaid
$
49.70
$
50.54
$
52.48
$
50.59
$
53.97
Prepaid (e)
$
27.61
$
27.31
$
27.44
$
27.41
$
27.64
Sprint platformpostpaid phone
(1)
Postpaid phone net additions
368
347
366
888
416
Postpaid phone end of period connections (d)
26,037
25,669
25,294
26,037
25,294
Postpaid phone churn
1.57 %
1.37 %
1.53 %
1.44 %
1.50 %
NON-GAAP RECONCILIATION - ABPA*, POSTPAID PHONE ARPU AND ABPU*
(Unaudited)
(Millions, except accounts, connections, ABPA*, ARPU, and ABPU*)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Sprint platformABPA* (1)
Postpaid service revenue
$
4,686
$
4,720
$
4,813
$ 14,184
$
14,670
Add: Installment plan billings
291
274
300
829
903
Add: Lease revenue
887
811
531
2,453
1,176
Total for Sprint platform postpaid connections
$
5,864
$
5,805
$
5,644
$ 17,466
$
16,749
Sprint platform postpaid accounts (in thousands)
11,413
11,363
11,261
11,368
11,211
Sprint platform postpaid ABPA* (b)
$ 171.28
$ 170.29
$ 167.11
$ 170.71
$
166.00
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Sprint platformpostpaid phone ARPU and
ABPU* (1)
Postpaid phone service revenue
$
4,420
$
4,441
$
4,529
$ 13,350
$
13,819
Add: Installment plan billings
261
248
280
752
848
Add: Lease revenue
873
797
522
2,411
1,150
Total for Sprint platform postpaid phone connections
$
5,554
$
5,486
$
5,331
$ 16,513
$
15,817
Sprint platform postpaid average phone connections (in thousands)
25,795
25,514
25,040
25,528
24,927
Sprint platform postpaid phone ARPU (a)
$
57.12
$
58.03
$
60.30
$
58.11
$
61.60
Sprint platform postpaid phone ABPU* (c)
$
71.77
$
71.69
$
70.99
$
71.87
$
70.51
(a) ARPU is calculated by dividing service revenue by the
sum of the monthly average number of connections in the applicable
service category. Changes in average monthly service revenue reflect
connections for either the postpaid or prepaid service category who
change rate plans, the level of voice and data usage, the amount of
service credits which are offered to connections, plus the net
effect of average monthly revenue generated by new connections and
deactivating connections. Sprint platform postpaid phone ARPU
represents revenues related to our postpaid phone connections.
(b) Sprint platform postpaid ABPA* is calculated by dividing service
revenue earned from connections plus installment plan billings and
lease revenue by the sum of the monthly average number of accounts
during the period.
(c) Sprint platform postpaid phone ABPU* is calculated by dividing
postpaid phone service revenue earned from postpaid phone
connections plus installment plan billings and lease revenue by the
sum of the monthly average number of postpaid phone connections
during the period.
(d) As part of the transaction involving Shenandoah
Telecommunications Company (Shentel), 186,000 and 92,000 subscribers
were transferred in May 2016 from postpaid and prepaid,
respectively, to affiliates. An additional 270,000 nTelos’
subscribers are now part of our affiliate relationship with Shentel
and are being reported in wholesale and affiliate subscribers during
the quarter ended June 30, 2016.
(e) As a result of aligning all prepaid brands, including prepaid
affiliate subscribers, under one churn and retention program as of
December 31, 2016, end of period prepaid and affiliate subscribers
were reduced by 1,234,000 and 21,000, respectively.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and sales and connections
mix)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Postpaid sales (in thousands)
4,812
3,747
4,799
11,827
12,956
Postpaid sales mix
Subsidy/other
20 %
27 %
35 %
25 %
35 %
Installment plans
37 %
34 %
10 %
33 %
12 %
Leasing
43 %
39 %
55 %
42 %
53 %
Installment plans
Installment sales financed
$
1,036
$
745
$
251
$
2,188
$
748
Installment billings
291
274
300
829
903
Leasing
Lease revenue
$
887
$
811
$
531
$
2,453
$
1,176
Lease depreciation
837
724
535
2,205
1,231
Leased device additions:
Cash paid for capital expenditures - leased devices
$
767
$
358
$
607
$
1,530
$
1,724
Transfers from inventory - leased devices
1,095
645
1,073
2,281
2,623
Leased devices in property, plant and equipment, net
$
4,454
$ 3,759
$ 3,321
$
4,454
$
3,321
Leased device net proceeds
Proceeds from MLS sale
$
-
$
-
$ 1,136
$
1,055
$
1,136
Repayments to MLS
(176 )
(161 )
-
(502 )
-
Proceeds from lease securitization
-
-
-
-
-
Repayments of lease securitization
(55 )
(23 )
-
(153 )
-
Net (repayments) proceeds of device financings and sales of
$
(231 )
$
(184 )
$ 1,136
$
400
$
1,136
future lease receivables
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Net operating revenues
Service revenue
$ 6,323
$
6,413
$ 6,683
$ 19,252
$ 20,600
Equipment revenue
2,226
1,834
1,424
5,556
3,509
Total net operating revenues
8,549
8,247
8,107
24,808
24,109
Net operating expenses
Cost of services (exclusive of depreciation and amortization below)
1,925
2,101
2,348
6,125
7,194
Cost of products (exclusive of depreciation and amortization below)
1,985
1,693
1,589
5,097
4,244
Selling, general and administrative
2,080
1,995
2,129
5,992
6,540
Depreciation - network and other
1,000
986
1,014
3,022
2,971
Depreciation - leased devices
837
724
535
2,205
1,231
Amortization
255
271
316
813
994
Other, net
156
(145 )
373
260
633
Total net operating expenses
8,238
7,625
8,304
23,514
23,807
Operating income (loss)
311
622
(197 )
1,294
302
Interest expense
(619 )
(630 )
(546 )
(1,864 )
(1,630 )
Other (expense) income, net
(60 )
(15 )
4
(67 )
13
Loss before income taxes
(368 )
(23 )
(739 )
(637 )
(1,315 )
Income tax expense
(111 )
(119 )
(97 )
(286 )
(126 )
Net loss
$
(479 )
$
(142 )
$
(836 )
$
(923 )
$ (1,441 )
Basic and diluted net loss per common share
$ (0.12 )
$
(0.04 )
$ (0.21 )
$
(0.23 )
$
(0.36 )
Weighted average common shares outstanding
3,983
3,979
3,970
3,979
3,969
Effective tax rate
-30.2 %
-517.4 %
-13.1 %
-44.9 %
-9.6 %
NON-GAAP RECONCILIATION - NET LOSS TO ADJUSTED EBITDA* (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Net loss
$
(479 )
$
(142 )
$
(836 )
$
(923 )
$ (1,441 )
Income tax expense
111
119
97
286
126
Loss before income taxes
(368 )
(23 )
(739 )
(637 )
(1,315 )
Other expense (income), net
60
15
(4 )
67
(13 )
Interest expense
619
630
546
1,864
1,630
Operating income (loss)
311
622
(197 )
1,294
302
Depreciation - network and other
1,000
986
1,014
3,022
2,971
Depreciation - leased devices
837
724
535
2,205
1,231
Amortization
255
271
316
813
994
EBITDA* (3)
2,403
2,603
1,668
7,334
5,498
Loss (gain) from asset dispositions and exchanges, net (4)
28
(354 )
-
(326 )
85
Severance and exit costs (5)
19
(5 )
209
30
247
Contract terminations (6)
-
-
-
113
-
Litigation and other contingencies (7)
-
103
21
103
178
Reduction in liability - U.S. Cellular asset acquisition (8)
-
-
-
-
(20 )
Adjusted EBITDA* (3)
$ 2,450
$ 2,347
$ 1,898
$ 7,254
$
5,988
Adjusted EBITDA margin*
38.7 %
36.6 %
28.4 %
37.7 %
29.1 %
Selected items:
Cash paid for capital expenditures - network and other
$
478
$
470
$
994
$ 1,421
$
3,958
Cash paid for capital expenditures - leased devices
$
767
$
358
$
607
$ 1,530
$
1,724
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Net operating revenues
Service revenue
Sprint platform (1):
Postpaid
$ 4,686
$ 4,720
$ 4,813
$ 14,184
$
14,670
Prepaid
1,077
1,129
1,224
3,371
3,783
Wholesale, affiliate and other
183
168
182
509
548
Total Sprint platform
5,946
6,017
6,219
18,064
19,001
Total transactions (2)
-
-
27
-
216
Total service revenue
5,946
6,017
6,246
18,064
19,217
Equipment revenue
2,226
1,834
1,424
5,556
3,509
Total net operating revenues
8,172
7,851
7,670
23,620
22,726
Net operating expenses
Cost of services (exclusive of depreciation and amortization below)
1,649
1,793
2,031
5,226
6,147
Cost of products (exclusive of depreciation and amortization below)
1,985
1,693
1,589
5,097
4,244
Selling, general and administrative
2,032
1,931
2,041
5,797
6,273
Depreciation - network and other
947
936
961
2,868
2,821
Depreciation - leased devices
837
724
535
2,205
1,231
Amortization
255
271
316
813
994
Other, net
150
(151 )
353
248
611
Total net operating expenses
7,855
7,197
7,826
22,254
22,321
Operating income (loss)
$
317
$
654
$
(156 )
$
1,366
$
405
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Operating income (loss)
$
317
$
654
$
(156 )
$ 1,366
$
405
Loss (gain) from asset dispositions and exchanges, net (4)
28
(354 )
-
(326 )
85
Severance and exit costs (5)
13
(11 )
189
18
225
Contract terminations (6)
-
-
-
113
-
Litigation and other contingencies (7)
-
103
21
103
178
Reduction in liability - U.S. Cellular asset acquisition (8)
-
-
-
-
(20 )
Depreciation - network and other
947
936
961
2,868
2,821
Depreciation - leased devices
837
724
535
2,205
1,231
Amortization
255
271
316
813
994
Adjusted EBITDA* (3)
$ 2,397
$ 2,323
$ 1,866
$ 7,160
$
5,919
Adjusted EBITDA margin*
40.3 %
38.6 %
29.9 %
39.6 %
30.8 %
Selected items:
Cash paid for capital expenditures - network and other
$
389
$
358
$
869
$ 1,123
$
3,512
Cash paid for capital expenditures - leased devices
$
767
$
358
$
607
$ 1,530
$
1,724
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Net operating revenues
Voice
$ 153
$ 172
$ 201
$
506
$
646
Data
41
43
42
127
134
Internet
281
288
317
871
968
Other
22
18
21
59
72
Total net operating revenues
497
521
581
1,563
1,820
Net operating expenses
Costs of services (exclusive of depreciation and amortization below)
400
436
466
1,284
1,495
Selling, general and administrative
49
62
82
189
254
Depreciation and amortization
51
48
50
148
144
Other, net
6
7
20
13
22
Total net operating expenses
506
553
618
1,634
1,915
Operating loss
$
(9 )
$ (32 )
$ (37 )
$
(71 )
$
(95 )
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Operating loss
$
(9 )
$ (32 )
$ (37 )
$ (71 )
$
(95 )
Severance and exit costs (5)
6
7
20
13
22
Depreciation and amortization
51
48
50
148
144
Adjusted EBITDA*
$
48
$
23
$
33
$
90
$
71
Adjusted EBITDA margin*
9.7 %
4.4 %
5.7 %
5.8 %
3.9 %
Selected items:
Cash paid for capital expenditures - network and other
$
24
$
31
$
74
$
75
$
205
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)**
(Millions)
Year to Date
12/31/16
12/31/15
Operating activities
Net loss
$
(923 )
$ (1,441 )
Depreciation and amortization
6,040
5,196
Provision for losses on accounts receivable
406
385
Share-based and long-term incentive compensation expense
57
58
Deferred income tax expense
276
120
Gains from asset dispositions and exchanges
(354 )
-
Amortization of long-term debt premiums, net
(234 )
(236 )
Loss on disposal of property, plant and equipment
368
228
Contract terminations
96
-
Other changes in assets and liabilities:
Accounts and notes receivable
(542 )
(1,482 )
Inventories and other current assets
(2,254 )
(2,165 )
Deferred purchase price from sale of receivables
(220 )
2,048
Accounts payable and other current liabilities
(97 )
(816 )
Non-current assets and liabilities, net
(313 )
112
Other, net
594
596
Net cash provided by operating activities
2,900
2,603
Investing activities
Capital expenditures - network and other
(1,421 )
(3,958 )
Capital expenditures - leased devices
(1,530 )
(1,724 )
Expenditures relating to FCC licenses
(46 )
(75 )
Change in short-term investments, net
(2,349 )
125
Proceeds from sales of assets and FCC licenses
126
36
Proceeds from sale-leaseback transaction
-
1,136
Other, net
26
(25 )
Net cash used in investing activities
(5,194 )
(4,485 )
Financing activities
Proceeds from debt and financings
6,830
755
Repayments of debt, financing and capital lease obligations
(3,266 )
(727 )
Debt financing costs
(272 )
(1 )
Other, net
68
20
Net cash provided by financing activities
3,360
47
Net increase (decrease) in cash and cash equivalents
1,066
(1,835 )
Cash and cash equivalents, beginning of period
2,641
4,010
Cash and cash equivalents, end of period
$
3,707
$
2,175
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP)
(Unaudited)
(Millions)
Quarter To Date
Year to Date
12/31/16
9/30/16
12/31/15
12/31/16
12/31/15
Net cash provided by operating activities
$
650
$ 1,708
$
806
$
2,900
$
2,603
Capital expenditures - network and other
(478 )
(470 )
(994 )
(1,421 )
(3,958 )
Capital expenditures - leased devices
(767 )
(358 )
(607 )
(1,530 )
(1,724 )
Expenditures relating to FCC licenses, net
(14 )
(17 )
(30 )
(46 )
(75 )
Proceeds from sales of assets and FCC licenses
60
39
32
126
36
Other investing activities, net
134
(11 )
(4 )
98
(25 )
Free cash flow* (9)
$ (415 )
$
891
$
(797 )
$
127
$ (3,143 )
Net (repayments) proceeds of device financings and sales of future
(231 )
(184 )
1,136
400
1,136
lease receivables
Adjusted free cash flow*
$ (646 )
$
707
$
339
$
527
$ (2,007 )
**Certain prior period amounts have been reclassified to conform to
the current period presentation.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
12/31/16
3/31/16
ASSETS
Current assets
Cash and cash equivalents
$
3,707
$
2,641
Short-term investments
2,349
-
Accounts and notes receivable, net
1,236
1,099
Device and accessory inventory
1,296
1,173
Prepaid expenses and other current assets
1,984
1,920
Total current assets
10,572
6,833
Property, plant and equipment, net
19,333
20,297
Goodwill
6,579
6,575
FCC licenses and other
40,556
40,073
Definite-lived intangible assets, net
3,582
4,469
Other assets
673
728
Total assets
$ 81,295
$ 78,975
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
2,894
$
2,899
Accrued expenses and other current liabilities
4,189
4,374
Current portion of long-term debt, financing and capital lease
6,554
4,690
obligations
Total current liabilities
13,637
11,963
Long-term debt, financing and capital lease obligations
30,759
29,268
Deferred tax liabilities
14,238
13,959
Other liabilities
3,665
4,002
Total liabilities
62,299
59,192
Stockholders’ equity
Common stock
40
40
Treasury shares, at cost
-
(3 )
Paid-in capital
27,694
27,563
Accumulated deficit
(8,301 )
(7,378 )
Accumulated other comprehensive loss
(437 )
(439 )
Total stockholders’ equity
18,996
19,783
Total liabilities and stockholders’ equity
$ 81,295
$ 78,975
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
12/31/16
3/31/16
Total debt
$ 37,313
$ 33,958
Less: Cash and cash equivalents
(3,707 )
(2,641 )
Less: Short-term investments
(2,349 )
-
Net debt*
$ 31,257
$ 31,317
SCHEDULE OF DEBT (Unaudited)
(Millions)
12/31/16
ISSUER
MATURITY
PRINCIPAL
Sprint Corporation
7.25% Senior notes due 2021
09/15/2021
$
2,250
7.875% Senior notes due 2023
09/15/2023
4,250
7.125% Senior notes due 2024
06/15/2024
2,500
7.625% Senior notes due 2025
02/15/2025
1,500
Sprint Corporation
10,500
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint
Spectrum Co III LLC
3.36% Senior secured notes due 2021
09/20/2021
3,500
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint
3,500
Spectrum Co III LLC
Sprint Communications, Inc.
Export Development Canada Facility (Tranche 4)
12/15/2017
250
Export Development Canada Facility (Tranche 3)
12/17/2019
300
9.125% Senior notes due 2017
03/01/2017
1,000
8.375% Senior notes due 2017
08/15/2017
1,300
9% Guaranteed notes due 2018
11/15/2018
3,000
7% Guaranteed notes due 2020
03/01/2020
1,000
7% Senior notes due 2020
08/15/2020
1,500
11.5% Senior notes due 2021
11/15/2021
1,000
9.25% Debentures due 2022
04/15/2022
200
6% Senior notes due 2022
11/15/2022
2,280
Sprint Communications, Inc.
11,830
Sprint Capital Corporation
6.9% Senior notes due 2019
05/01/2019
1,729
6.875% Senior notes due 2028
11/15/2028
2,475
8.75% Senior notes due 2032
03/15/2032
2,000
Sprint Capital Corporation
6,204
Clearwire Communications LLC
8.25% Exchangeable notes due 2017 (a)
12/01/2017
629
Clearwire Communications LLC
629
Secured equipment credit facilities
2017 - 2021
586
Financing obligations
2017 - 2021
3,401
Capital leases and other obligations
2017 - 2024
480
Total principal
37,130
Net premiums and debt financing costs
183
Total debt
$
37,313
(a) $629 million Clearwire 8.25% Exchangeable Notes due
2040 have both a par call and put in December 2017.
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1)
Sprint platform refers to the Sprint network that supports the
wireless service we provide through our multiple brands.
(2)
Postpaid and prepaid connections from transactions are defined as
retail postpaid and prepaid connections acquired from Clearwire in
July 2013 who had not deactivated or been recaptured on the Sprint
platform.
(3)
As more of our customers elect to lease a device rather than
purchasing one under our subsidized program, there is a significant
positive impact to EBITDA* and Adjusted EBITDA* from direct channel
sales primarily due to the fact the cost of the device is not
recorded as cost of products but rather is depreciated over the
customer lease term. Under our device leasing program for the direct
channel, devices are transferred from inventory to property and
equipment and the cost of the leased device is recognized as
depreciation expense over the customer lease term to an estimated
residual value. The customer payments are recognized as revenue over
the term of the lease. Under our subsidized program, the cash
received from the customer for the device is recognized as equipment
revenue at the point of sale and the cost of the device is
recognized as cost of products. During the three and nine-month
periods ended December 31, 2016, we leased devices through our
Sprint direct channels totaling approximately $1,095 million and
$2,281 million, respectively, which would have increased cost of
products and reduced EBITDA* if they had been purchased under our
subsidized program. Also, during the three and nine-month periods
ended December 31, 2016, the equipment revenue derived from
customers electing to finance their devices through device leasing
or installment billing programs in our direct channel was 66% and
67%, respectively.
The impact to EBITDA* and Adjusted EBITDA* resulting from the sale
of devices under our installment billing program is generally
neutral except for the impact from the time value of money element
related to the imputed interest on the installment receivable.
(4)
During the third quarter of fiscal year 2016 and the second quarter
of fiscal year 2015, the company recorded losses on dispositions of
assets primarily related to cell site construction and network
development costs that are no longer relevant as a result of changes
in the company’s network plans. During the second quarter of fiscal
year 2016 the company recorded a pre-tax non-cash gain of $354
million related to spectrum swaps with other carriers.
(5)
Severance and exit costs consist of lease exit costs primarily
associated with tower and cell sites, access exit costs related to
payments that will continue to be made under the company’s backhaul
access contracts for which the company will no longer be receiving
any economic benefit, and severance costs associated with reduction
in its work force.
(6)
Contract terminations primarily relate to the termination of our
pre-existing wholesale arrangement with Ntelos Holding Corp.
(7)
Litigation and other contingencies consist of unfavorable
developments associated with legal as well as federal and state
matters such as sales, use or property taxes.
(8)
As a result of the U.S. Cellular asset acquisition, we recorded a
liability related to network shut-down costs, which primarily
consisted of lease exit costs, for which we agreed to reimburse U.S.
Cellular. During the third quarter of fiscal year 2014, we
identified favorable trends in actual costs and, as a result,
reduced the liability resulting in a gain of $41 million. During the
first quarter of fiscal year 2015, we revised our estimate and, as a
result, reduced the liability resulting in approximately $20 million
of income.
(9)
Free cash flow* for the three and nine-month periods ended December
31, 2016, included net cash outflows of approximately $370 million
related to the termination of our MLS Tranche 1 arrangement, which
included the repurchase of the devices.

*FINANCIAL MEASURES

Sprint provides financial measures determined in accordance with GAAP and adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other companies.

Sprint provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint does not provide reconciliations to GAAP of its forward-looking financial measures.

The measures used in this release include the following:

EBITDA is operating income/(loss) before depreciation and amortization. Adjusted EBITDA is EBITDA excluding severance, exit costs, and other special items. Adjusted EBITDA Margin represents Adjusted EBITDA divided by non-equipment net operating revenues for Wireless and Adjusted EBITDA divided by net operating revenues for Wireline. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of long-lived tangible and definite-lived intangible assets. Adjusted EBITDA and Adjusted EBITDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry.

Sprint Platform Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid customers plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid accounts during the period. We believe that ABPA provides useful information to investors, analysts and our management to evaluate average Sprint platform postpaid customer billings per account as it approximates the expected cash collections, including installment plan billings and lease revenue, per postpaid account each month.

Sprint Platform Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from postpaid phone customers plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid phone connections during the period. We believe that ABPU provides useful information to investors, analysts and our management to evaluate average Sprint platform postpaid phone customer billings as it approximates the expected cash collections, including installment plan billings and lease revenue, per postpaid phone user each month.

Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments, including changes in restricted cash, if any, and excluding the sale-leaseback of devices. Adjusted Free Cash Flow is Free Cash Flow plus the proceeds from device financings and sales of future lease receivables, net of repayments. We believe that Free Cash Flow and Adjusted Free Cash Flow provide useful information to investors, analysts and our management about the cash generated by our core operations and net proceeds obtained to fund certain leased devices, respectively, after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

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

SAFE HARBOR

This release includes "forward-looking statements" within the meaning of the securities laws. The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan", "outlook," "providing guidance," and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future -- including statements relating to our network, cost reductions, connections growth, and liquidity; and statements expressing general views about future operating results -- are forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services; efficiencies and cost savings of new technologies and services; customer and network usage; connection growth and retention; service, speed, coverage and quality; availability of devices; availability of various financings, including any leasing transactions; the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company’s historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2016. 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 (S) is a communications services company that creates more and better ways to connect its customers to the things they care about most. Sprint served 59.5 million connections as of Dec. 31, 2016 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Sprint has been named to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.

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