Nextel Communications 8-K Nextel Reports Record First Quarter 2003 Results

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):  April 23, 2003 (April 23, 2003)

NEXTEL COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware	0-19656	36-3939651
(State or Other Jurisdiction of Incorporation)	(Commission File Numbers)	(I.R.S. Employer Identification Nos.)

2001 Edmund Halley Drive, Reston, Virginia	20191
(Address of Principal Executive Offices)	(Zip Code)

Registrants’ Telephone Number, Including Area Code:                               (703) 433 - 4000

     (Former Name or Former Address, if Changed Since Last Report)

Item 5.          Other Events and Regulation FD Information.

           On April 23, 2003, Nextel announced certain financial and operating results for the first quarter of 2003, including:

• a liquidity position of approximately $3.6 billion as of March 31, 2003;

• retirements of debt and mandatorily redeemable preferred stock, as further described below, for approximately $570 million in cash during the quarter, which will allow Nextel to avoid approximately $6.3 billion in future principal, interest and dividend payments over the life of these securities;

• approximately 21.1 billion total system minutes of use on the Nextel National Network for the quarter; and

• the following financial and operating data:

NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited

Consolidated Statements of Operations
(in millions, except per share amounts)

		For the three months ended
		March 31,
		2003			2002
Operating revenues
	Service revenues	$	2,210		$	1,831
	Handset and accessory revenues (1)		161			126
			2,371			1,957
Operating expenses
	Cost of service (exclusive of depreciation included below)		369			351
	Cost of handset and accessory revenues		310			305
	Selling and marketing		411			346
	Restructuring and impairment charges		—			35
	General and administrative		375			369
	Depreciation and amortization		413			382
Operating income			493			169
	Interest expense		(225	)		(273	)
	Interest income		12			15
	Loss on retirement of debt, net of debt conversion costs of $0 and $0		(5	)		—
	Equity in losses of NII Holdings — pre-bankruptcy emergence		—			(127	)
	Equity in losses of unconsolidated affiliates, net		(13	)		(25	)
Income (loss) before income tax provision			262			(241	)
	Income tax provision		(22	)		(350	)
Net income (loss)			240			(591	)
	Loss on retirement of mandatorily redeemable preferred stock		(2	)		—
	Mandatorily redeemable preferred stock dividends		(30	)		(63	)
Income (loss) available to common stockholders		$	208		$	(654	)
Earnings (loss) per share
	Basic	$	0.21		$	(0.82	)
	Diluted	$	0.20		$	(0.82	)
Weighted average number of common shares outstanding
	Basic		1,010			801
	Diluted		1,047			801

Selected Balance Sheet Data
(in millions)

	March 31,		December 31,
	2003		2002
Cash, cash equivalents and short-term investments	$	2,277	$	2,686
Accounts and notes receivable,net of allowance for doubtful accounts of $123 and $127		996		1,077
Property, plant and equipment, net		8,828		8,918
Intangible assets, net		6,903		6,607
Total assets		21,123		21,484
Long-term debt,including current portion		11,823		12,278
Capital lease and finance obligations,including current portion		202		272
Total liabilities		17,098		17,623
Mandatorily redeemable preferred stock		947		1,015
Stockholders’ equity		3,078		2,846

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited

Reconciliation of Earnings Per Share Data
(in millions, except per share amounts)

		For the three months ended				For the three months ended
		March 31, 2003				March 31, 2002
				Basic EPS					Basic EPS
Income (loss) available to common stockholders		$	208	$	0.21	$	(654	)	$	(0.82	)
	Restructuring and impairment charges		—		—		35			0.04
	Loss on retirement of debt, net		5		—		—			—
	Equity in losses of NII Holdings — pre-bankruptcy emergence		—		—		127			0.16
	SFAS No. 142 income tax provision adjustment		—		—		335			0.42
	Loss on retirement of mandatorily redeemable preferred stock		2		—		—			—
Adjusted income (loss) available to common stockholders		$	215	$	0.21	$	(157	)	$	(0.20	)

Other Data

	For the three months ended
	March 31,				December 31,
		2003			2002
Handsets in service, end of period(in thousands)(2)			11,092			10,612
Net handset additions(in thousands)(2)			480			503
Average monthly billable minutes of use per handset			650			640
Bad debt expense included in general and administrative expense(in millions)		$	56		$	74
Bad debt expense as a percentage of operating revenues			2.4	%		3.2	%

Capital Expenditures
(in millions)

		For the three months ended
		March 31,			March 31,
		2003			2002
Cash paid for capital expenditures, excluding capitalized interest		$	375		$	587
Changes in capital expenditures accrued or unpaid			(70	)		(113	)
	Capital expenditures, excluding capitalized interest		305			474
Capitalized interest			11			12
	Total capital expenditures	$	316		$	486

2

NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited

Condensed Consolidated Statements of Cash Flows
(in millions)

				For the three months ended
				March 31,
				2003			2002
Cash flows from operating activities
	Net income (loss)			$	240		$	(591	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			413			382
		Change in accrued interest on short-term investments			(3	)		(7	)
		Other			163			688
			Net cash provided by operating activities		813			472
Cash flows from investing activities
	Cash paid for capital expenditures, including capitalized interest				(386	)		(599	)
	Payments for licenses, acquisitions and other, net of cash acquired				(214	)		(252	)
	Net changes in short-term investments and other				(78	)		(313	)
			Net cash used in investing activities		(678	)		(1,164	)
Cash flows from financing activities
	Purchase and retirement of debt securities and mandatorily redeemable preferred stock				(570	)		—
	Repayments under capital lease and finance obligations				(16	)		(28	)
	Repayments under long-term credit facility				(49	)		—
	Borrowings under long-term credit facility				69			—
	Payment for capital lease buyout				(54	)		—
	Mandatorily redeemable preferred stock dividends				(15	)		—
	Other				10			1
			Net cash used in financing activities		(625	)		(27	)
Net decrease in cash and cash equivalents					(490	)		(719	)
Cash and cash equivalents, beginning of period					1,846			2,481
Cash and cash equivalents, end of period				$	1,356		$	1,762

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NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited

Long-Term Debt and Mandatorily Redeemable Preferred Stock Data
(dollars in millions)

						Accretion of
				Book		unamortized
		December 31,		value of		discount		March 31,
		2002		retirements		or dividends **		2003
10.65% senior redeemable discount notes due 2007		$	756	$	65	$	—	$	691
9.75% senior serial redeemable discount notes due 2007			1,086		154		—		932
4.75% convertible senior notes due 2007			284		—		—		284
9.95% senior serial redeemable discount notes due 2008,			1,364		79		16		1,301
	net of unamortized discount of $16 and $0
12% senior serial redeemable notes due 2008,			297		26		—		271
	net of unamortized discount of $3 and $3
9.375% senior serial redeemable notes due 2009			1,796		126		—		1,670
5.25% convertible senior notes due 2010			622		15		—		607
9.5% senior serial redeemable notes due 2011,			948		26		—		922
	including a fair value hedge adjustment of $58 at December 31, 2002 and $58 at March 31, 2003
6% convertible senior notes due 2011			608		—				608
Bank credit facility			4,500		49*		69		4,520
Other			17		—		—		17
	Total long-term debt, including current portion	$	12,278		540	$	85	$	11,823
13% series D exchangeable preferred stock mandatorily redeemable 2009		$	471		8	$	—	$	463
11.125% series E exchangeable preferred stock mandatorily redeemable 2010			454		69		7		392
Zero coupon convertible preferred stock mandatorily redeemable 2013			90		—		2		92
	Total mandatorily redeemable preferred stock	$	1,015		77	$	9	$	947
Total retirements				$	617

*	Represents scheduled principal payment on term loans.
**	Includes principal borrowing on revolving loan under the credit facility.

		Principal value
		of retirements
		for the three
		months ended
		March 31,
		2003
10.65% senior redeemable discount notes due 2007		$	65
9.75% senior serial redeemable discount notes due 2007			154
9.95% senior serial redeemable discount notes due 2008			79
12% senior serial redeemable notes due 2008			26
9.375% senior serial redeemable notes due 2009			126
5.25% convertible senior notes due 2010			15
9.5% senior serial redeemable notes due 2011			26
	Total senior notes retirements		491
13% series D exchangeable preferred stock mandatorily redeemable 2009			8
11.125% series E exchangeable preferred stock mandatorily redeemable 2010			69
	Total mandatorily redeemable preferred stock retirements		77
Total principal value of retirements		$	568

4

NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited

Notes to Financial Data

(1) In accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin, or SAB, No. 101, “Revenue Recognition in Financial Statements,” we recognize handset sales as revenues on a straight-line basis over 3.5 years, the estimated customer relationship period. Costs of handset sales are recognized over the same period in amounts equivalent to the revenues recognized from the handset sales. The handset costs in excess of the revenues (handset subsidies) generated from handset sales are expensed immediately as these amounts exceed our minimum contractual revenues. The following is a summary of handset and accessory revenues.

	For the three months ended
	March 31,
	2003			2002
	(in millions)
Current period handset and accessory sales	$	250		$	183
Net effect of SAB No. 101 handset deferrals		(89	)		(57	)
Handset and accessory revenues	$	161		$	126

(2) Net handset additions represent gross handsets activated during the period less handsets deactivated and does not include handsets attributable to test markets, such as the Boost Mobile program. These net handset additions reflect a customer churn rate of about 1.9% for the first quarter of 2003 and about 2.1% for the fourth quarter 2002. The customer churn rate is an indicator of customer retention and represents the monthly percentage of the customer base that disconnects from service. Customer churn is calculated by dividing the number of handsets disconnected from commercial service during the period by the average number of handsets in commercial service during the period. Churn is not a measurement under accounting principles generally accepted in the United States and may not be similar to churn calculations of other companies.

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Item 7.           Financial Statements and Exhibits.

(a)	Financial Statements of Business Acquired. Not applicable.
(b)	Pro Forma Financial Information. Not applicable.
(c)	Exhibits.

     The following exhibit is filed with this report:

Exhibit No	Exhibit Description
99.1	Press Release, dated April 23, 2003

Item 9.         Regulation FD Disclosure (Information Being Furnished Under Item 12).

           In accordance with the Securities and Exchange Commission Release No. 33-8216, the following information, which is intended to be furnished under Item 12, “Results of Operations and Financial Condition,” is instead being furnished under Item 9, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended , or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

           On April 23, 2003, Nextel issued a press release announcing certain financial and operating results for the first quarter of 2003. A copy of the press release is filed as Exhibit 99.1 hereto and is incorporated into Item 9 of this Form 8-K by reference.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NEXTEL COMMUNICATIONS, INC.

            /s/ Leonard J. Kennedy
By:        Leonard J. Kennedy
              Senior Vice President and General Counsel

Date:  April 23, 2003

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EXHIBIT INDEX

Exhibit No	Exhibit Description
99.1	Press Release, dated April 23, 2003

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