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 15, 2002
SPRINT CORPORATION
(Exact name of Registrant as specified in its charter)
Kansas 1-04721 48-0457967
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
6200 Sprint Parkway, Overland Park, Kansas 66251
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
2330 Shawnee Mission Parkway, Westwood, Kansas 66205
(Former name or former address, if changed since last report)
P. O. Box 11315, Kansas City, Missouri 64112
(Mailing address of principal executive offices)
Item 5. Other Events.
1. Press Release. On April 15, 2002, the registrant ("Sprint")
announced 2002 first quarter results. The press release was as
follows:
Sprint Announces First Quarter Results
The Sprint FON Group (NYSE: FON) is comprised of Sprint's Global
Markets Division, Local Telecommunications Division, and product
distribution and directory publishing businesses.
The Sprint PCS Group (NYSE: PCS) consists of Sprint's mobile
wireless operations.
Overland Park, Kan. - April 15, 2002 - Sprint today announced
first quarter consolidated revenues of $6.76 billion, an increase
of 8 percent from $6.25 billion a year ago.
The PCS Group reported a first quarter loss per share of 15
cents, compared to the mean analyst estimate of a 20-cent loss
for the quarter and a reported loss of 40 cents a year ago.
First quarter diluted earnings per share for the FON Group was 32
cents compared to 36 cents a year ago and the mean analyst
estimate of 30 cents per share. Excluding losses associated with
ION, which was terminated in the fourth quarter of 2001, FON
Group diluted earnings per share was 33 cents compared to 46
cents reported a year ago.
"Despite a challenging economy, we are seeing improvements in our
traditional wireline business and continue to deliver outstanding
results in our wireless business. Nevertheless, we remain
focused on improving the efficiency of our operations enterprise-
wide," said William T. Esrey, chairman and chief executive
officer.
SPRINT PCS GROUP HIGHLIGHTS
The PCS Group, with its affiliate partners, reported strong
growth in subscribers, including approximately 725,000 net direct
subscriber additions and 228,000 net new affiliate subscribers.
o Net operating revenues increased 41 percent in the quarter
to $2.85 billion compared to $2.03 billion a year ago.
o EBITDA (measured as operating income or loss plus
depreciation and amortization) was $640 million, up strongly
from $253 million a year ago.
o The cost to acquire a new customer was down to $305 in the
first quarter from $325 a year ago, and the cash cost per user
for the quarter decreased to just under $32 from just over $35 a
year ago.
o Average monthly revenue per user (ARPU) for the quarter was
$60 compared to $59 a year ago.
2
o Customer churn for the quarter was approximately 3 percent,
which was flat sequentially, but better than expectations for the
quarter. Churn in the first quarter a year ago was 2.5 percent.
o Capital expenditures of $603 million for the quarter
reflected continued focus on capacity expansion, increased
coverage for the company's nationwide wireless network and
development of 3G capabilities.
"Our areas of focus at PCS this year continue to be increasing
profitability, growth in our customer base by building upon
Sprint's unsurpassed clarity in voice services and initiating
nationwide third-generation (3G) data services," Esrey said.
"This quarter, we have made progress on all fronts."
Sprint and its affiliates operate the nation's largest all-
digital, single-frequency PCS wireless network with coverage now
extending to a population of nearly 249 million, or approximately
87 percent of the country.
This summer, Sprint plans to be the first U.S. wireless carrier
to deliver third-generation (3G) wireless services nationwide.
Sprint's wireless data speeds are expected to average 50 to 70
kbps, with peak speeds bursting up to 144 kbps.
"The coming of 3G service to wireless is a true technology
breakthrough. It compares to television's move from black and
white to color broadcasting," Esrey said. "3G offers greater
speeds and the applications that businesses and consumers need on
a wide array of devices. With new data services such as e-mail
and photo attachments, 3G will allow Sprint customers to stay
connected with a broad range of applications."
In the quarter, Sprint continued to build on its aggressive plans
to deliver 3G services to Sprint customers nationwide. First-
quarter announcements included a pact between Handspring and
Sprint to work together on a new Handspring Treo communicator
featuring a color screen that will operate on Sprint's 3G
network; Sprint introducing toolkits designed specifically for
Java programmers who desire to place their applications on the
Sprint 3G network; Sprint unveiling two sleek and stylish 3G
phones from Samsung Telecommunications America; and Sprint
announcing plans to enable its wireless customers to send and
receive messages via the new Intercarrier Messaging feature of
Sprint PCS Short Mail.
SPRINT FON GROUP HIGHLIGHTS
o Net operating revenues declined 8 percent to $4.03 billion
compared to $4.36 billion in the same period a year ago. On a
sequential basis, revenues were slightly higher.
o Operating income in the quarter decreased 14 percent to $460
million from $532 million a year ago. Excluding losses from ION,
operating income for the quarter would have been $466 million
compared to $677 million a year ago.
o EBITDA was $1.11 billion, down 1 percent from $1.12 billion
in the first quarter a year ago. Excluding losses from ION,
EBITDA for the quarter would have been $1.11 billion compared to
$1.23 billion a year ago.
3
o Income from continuing operations was $286 million in the
first quarter, a decline of 9 percent from $316 million a year
ago.
o Capital expenditures were $543 million for the quarter.
"This quarter, the FON Group demonstrated its resilience in the
face of a challenging marketplace," Esrey said. "In our local
operations, we continue to aggressively manage costs, improve
operating profits, and sell our services in value-adding bundles.
In our Global Markets Division, we are experiencing sales success
in the enterprise data and Internet market despite aggressive
pricing in the marketplace."
Local Telecommunications Division
o Net operating revenues for the quarter were $1.55 billion,
the same as the first quarter of 2001.
o Operating income rose 10 percent in the quarter to $481
million from $438 million a year ago.
o Voice grade equivalent lines grew nearly 12 percent from the
first quarter a year ago. The number of access lines decreased
1.4 percent during the same period.
o EBITDA in the quarter increased 7 percent to $767 million
from $719 million in the previous first quarter.
The Local Telecommunications Division during the quarter
continued to reduce operating costs, which contributed to strong
operating income and operating cash flow growth, as well as
expanded margins. Cost-containment measures reduced sales,
general and administrative costs by 6 percent compared to a year
ago. Total cost of services and products for the quarter also
declined 6 percent from a year ago.
The division maintained strong sales of bundled services during
the quarter, resulting in increased penetration of Sprint's long
distance and wireless services in the local territories. The
division sold over 400,000 consumer and business bundles during
the quarter. Approximately 46 percent of Sprint's local
residential lines and 38 percent of its business lines now use
Sprint long distance services.
The local division's data-related service revenues continued to
improve during the quarter, increasing 16 percent from the year
ago period. The chief driver of the increase is a continued
strong demand for special access services and increases in DSL.
Global Markets Division (the following discussion assumes that
the Sprint ION termination event occurred prior to the periods
addressed below)
o Net operating revenues in the Global Markets Division for
the quarter were down 9 percent from a year ago due primarily to
lower long distance voice revenues. These declines were partially
offset by growth in data and dedicated IP services. First
quarter revenues were $2.34 billion compared to $2.56 billion a
year ago. On a sequential basis, revenues improved three
percent.
4
o Operating loss was $69 million for the quarter compared to
operating income of $170 million a year ago. Sequentially, losses
decreased $70 million, excluding one-time items.
o EBITDA in the first quarter decreased to $288 million from
$443 million a year ago. Excluding one-time items, EBITDA
increased by $100 million, sequentially.
o Long distance calling volumes rose 13 percent for the
quarter from a year ago.
In Global Markets, year-over-year comparisons illustrate the
competitiveness of the long distance market, although there were
encouraging sequential improvements. Total voice revenues,
which declined 11 percent in the quarter compared to a year ago,
rose sequentially. Despite aggressive pricing in the data
market, asynchronous transfer mode (ATM) revenues rose nearly 40
percent from the same period last year.
During the quarter, dedicated IP service revenues grew 33 percent
compared to the same period last year, but were offset by
contractual step-downs in dial IP pricing as Sprint migrates to a
significantly lower-cost dial IP infrastructure. Overall,
Internet revenues for the quarter grew 5 percent compared to the
same period last year. During the first quarter, Sprint closed
on 28 new managed hosting contracts and more than 200 new IP
consulting contracts.
On the international front, Sprint is building on the successful
completion last year of its IP network in Europe and Asia.
During the quarter, Sprint won new international agreements with
companies based in Europe, Asia and the Americas.
In the first quarter, Global Markets decreased sales, general and
administrative expenses 10 percent sequentially and 8 percent
year-over-year. Operating expense levels benefited from the
fourth-quarter restructuring and continued cost control measures.
Product Distribution and Directory Publishing
o Net operating revenues were $330 million in the quarter down
from $494 million a year ago due to continuing declines in
telecommunications equipment spending.
o Operating income was $57 million down 27 percent from $78
million a year ago.
o Within PDDP, Directory Publishing revenues were up modestly
year-over-year with 5 percent growth in operating income.
Financing actions during the quarter
During the quarter, Sprint took the following steps to increase
the company's financial flexibility and address the market's
concern about the company's liquidity:
0 Sprint signed a commitment letter for a $1 billion term-loan
facility. Due to an upsizing of Sprint's recent debt offering,
the amount of the facility was reduced to $700 million. The
facility is secured by certain assets relating to Sprint's
directory publishing business. To date, Sprint has not drawn
against this facility. Sprint has retained investment banking
advisors to explore the value the company could obtain if it were
to sell the directory publishing business.
5
0 Sprint announced plans to expand its existing accounts
receivables financing program to include PCS Group receivables.
Sprint expects that the program expansion will be in excess of
$500 million and available by end of second quarter
0 Sprint completed a $5 billion debt offering of 3-, 10- and
30-year senior notes. The $5 billion offering is the result of
upsizing a planned $2 billion offering.
As a result of these steps, Sprint's 2002 expected cash
requirements are fully funded.
BUSINESS OUTLOOK
The following statements are based on current expectations.
These statements are forward looking, and actual results may
differ materially.
Although encouraged by its first quarter performance, Sprint is
not materially changing guidance for either the FON or PCS
Groups.
Sprint continues to expect FON Group earnings per share,
excluding ION losses, to approach $1.40 for 2002. Sprint
continues to believe full-year FON Group revenues could decline
at a low single-digit rate in 2002. Full-year EBITDA is still
expected to reach approximately $4.6 billion. FON Group capital
expenditures for the year are now expected to be approximately
$2.7 billion. As a result, Sprint now expects the FON Group to
generate approximately $500 million in free cash flow this year.
Sprint continues to believe the PCS Group will achieve its
previously forecast 3 million net additions for the full-year,
assuming a consistent share of customer acquisitions and a modest
improvement in churn. ARPU is expected to remain stable at
around $60, assuming a continuation of strong voice minutes-of-
use. Sprint continues to target full year EBITDA for the PCS
Group at $3 billion and full-year capital expenditures to be
approximately $3.4 billion. In light of the recently passed
economic stimulus bill, Sprint anticipates a $400 million tax
refund that will be credited to the PCS Group due to the
utilization of PCS-generated losses. As a result, Sprint now
expects the PCS Group to require about $1.1 billion of funding in
2002.
On a consolidated basis, Sprint's funding requirements have been
reduced to approximately $600 million in 2002 given the actions
described above. While our expected funding requirements have
been met for 2002, other financing alternatives such as the PCS
accounts receivables program and possible sale of the directories
business will further augment Sprint's financial flexibility.
CONFERENCE CALL INFORMATION
Conference calls elaborating on the company's first quarter
results and the business outlook are scheduled for the afternoon
of April 15. Management will discuss FON Group earnings at 4:30
p.m. EDT in a conference call with a live Q&A session. The call-
in numbers are (toll free) 866-215-1938 or 800-473-8796. For
international callers, the numbers are 816-650-0742 or 816-650-
6
0765. A continuous replay will be available immediately following
the conference call and can be accessed by dialing (toll free)
888-775-8696 or, internationally, 402-220-1326. This replay will
be available through April 29, 2002.
The PCS Group earnings report will be discussed in a conference
call with a live Q&A session at 5:45 p.m. EDT. The call-in
numbers are (toll free) 1-866-215-1938 or 800-473-8796. For
international callers, the numbers are 816-650-0742 or 816-650-
0765. A continuous replay will be available immediately following
the conference call and can be accessed by dialing 888-775-8673
(toll free) or 402-220-1325 internationally. This replay will be
available through April 29, 2002.
Live audiocasts of the conference calls will also be available
simultaneously at www.sprint.com. Please note that questions can
not be submitted by those listening to the webcasts. Replays of
both calls can be accessed on our web site through April 29,
2002.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This news release includes "forward-looking statements" within
the meaning of securities laws. The statements in this news
release regarding the business outlook as well as other
statements that are not historical facts are forward-looking
statements. The words "estimate," "project," "intend," "expect,"
"believe," and similar expressions identify forward-looking
statements. Forward-looking statements are estimates and
projections reflecting management's judgment 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,
Sprint has made assumptions regarding, among other things,
customer and network usage, customer growth, pricing, costs to
acquire customers and to provide services, and the economic
environment. Important factors that could cause actual results to
differ materially from estimates or projections contained in the
forward-looking statements include:
o the effects of vigorous competition in the markets in which
Sprint operates;
o the costs and business risks associated with providing new
services and entering new markets necessary to provide nationwide
or global services;
o the ability of the PCS Group to continue to grow a
significant market presence;
o the effects of mergers and consolidations within the
telecommunications industry;
o the uncertainties related to Sprint's strategic investments;
o the impact of any unusual items resulting from ongoing
evaluations of Sprint's business strategies;
o the impact of new technologies on Sprint's business;
o unexpected results of litigation filed against Sprint;
o the possibility of one or more of the markets in which
Sprint competes being impacted by changes in political, economic
or other factors such as monetary policy, legal and regulatory
changes including the impact of the Telecommunications Act of
1996, or other external factors over which Sprint has no control;
and
o other risks referenced from time to time in Sprint's filings
with the Securities and Exchange Commission ("SEC").
7
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 of this release.
Sprint is not obligated to publicly release any revisions to
forward-looking statements to reflect events after the date of
this release. Sprint provides a detailed discussion of risk
factors in periodic SEC filings, including its 2001 Form 10-K/A,
and you are encouraged to review these filings.
About Sprint
Sprint is a global communications company serving more than 26
million business and residential customers in over 70 countries.
With approximately 80,000 employees worldwide and more than $26
billion in annual revenues, Sprint is widely recognized for
developing, engineering and deploying state of the art network
technologies, including the United States' first nationwide all-
digital, fiber-optic network. Sprint's award-winning Tier 1
Internet backbone is being extended to key global markets to
provide customers with a broad portfolio of scalable IP
products. Sprint's high-capacity, high-speed network gives
customers fast, dependable, nonstop access to the vast majority
of the world's Internet content. Sprint also operates the largest
100-percent digital, nationwide PCS wireless network in the
United States, already serving the majority of the nation's
metropolitan areas, including more than 4,000 cities and
communities.
8
Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
Sprint Corporation
------------------- Eliminations/
Consolidated Reclassifications Sprint FON Group Sprint PCS Group
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Quarters Ended March 31, 2002 2001 2002 2001 2002 2001 2002 2001
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Net operating revenues $ 6,762 $ 6,254 $ (115) $ (129) $ 4,029 $ 4,358 $ 2,848 $ 2,025
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Operating expenses
Costs of services and products 3,214 3,110 (115) (129) 1,926 2,105 1,403 1,134
Selling, general and administrative 1,771 1,771 (8) (2) 997 1,135 782 638
Depreciation 1,172 981 - - 646 580 526 401
Amortization (1) 1 140 - - - 6 1 134
Restructuring costs (2) 23 - - - - - 23 -
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Total operating expenses 6,181 6,002 (123) (131) 3,569 3,826 2,735 2,307
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Operating income (loss) 581 252 8 2 460 532 113 (282)
Interest expense (314) (307) - 5 (80) (91) (234) (221)
Intergroup interest charge - - - - 81 64 (81) (64)
Other income (expense), net (3) (30) (22) (8) (7) 3 5 (25) (20)
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Income (loss) before income taxes 237 (77) - - 464 510 (227) (587)
Income tax (expense) benefit (97) - - - (178) (194) 81 194
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Income (loss) from continuing operations 140 (77) - - 286 316 (146) (393)
Extraordinary items, net - (1) - - - (1) - -
Cumulative effect of change in accounting
principle, net - 2 - - - - - 2
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Net income (loss) 140 (76) - - 286 315 (146) (391)
Preferred stock dividends (paid) received (2) (2) - - 2 2 (4) (4)
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Earnings (Loss) applicable to common stock $ 138 $ (78) $ - $ - $ 288 $ 317 $ (150) $ (395)
------------------- ------------------- ------------------ ------------------
Diluted earnings (loss) per common share
Net income (loss) - recurring $ 0.32 $ 0.35 $ (0.15) $ (0.40)
One-time items (2,3) - 0.01 - -
- ----------------------------------------------------------------- ------------------- ------------------ ------------------
Total $ 0.32 $ 0.36 $ (0.15) $ (0.40)
------------------ ------------------
Diluted weighted average common shares outstanding 891.5 887.4 1,009.9 977.9
------------------ ------------------
Basic earnings (loss) per common share $ 0.32 $ 0.36 $ (0.15) $ (0.40)
------------------ ------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
<FN>
(1) Sprint adopted Financial Accounting Standard, No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002.
Accordingly, amortization of goodwill, spectrum licenses and trademarks ceased as of that date because they are indefinite
life intangibles.
</FN>
<FN>
(2) In the 2002 first quarter, Sprint recorded a $23 million restructuring charge representing the closing of five PCS call
centers, as well as additional steps to reduce operating costs in its PCS business units. This charge was offset by
favorable accounting true-ups. In total, the charge and true-ups had no effect on net loss or loss per share.
</FN>
<FN>
(3) In the 2001 first quarter, the FON Group recorded a gain on investment activities of $14 million which increased income from
continuing operations by $9 million or $0.01 per share.
</FN>
9
Sprint Corporation
CONSOLIDATED BALANCE SHEETS
(millions)
Sprint Corporation
------------------------- Eliminations/
Consolidated Reclassifications
------------------------- -------------------------
March 31, December 31, March 31, December 31,
2002 2001 2002 2001
------------------------- -------------------------
Assets
Current Assets
Cash and equivalents $ 2,166 $ 313 $ - $ -
Accounts receivable, net 3,690 3,806 - -
Inventories 646 690 - -
Inter-group receivable - - (120) (234)
Income tax receivable 402 - - -
Prepaid expenses and other 834 753 (447) -
- -------------------------------------------------------------------------------------- ------------ -----------
Total current assets 7,738 5,562 (567) (234)
Net property, plant and equipment 28,965 28,977 (47) (47)
Net intangible assets 9,048 9,062 - -
Other 1,868 2,192 (280) (280)
- -------------------------------------------------------------------------------------- -------------------------
Total $ 47,619 $ 45,793 $ (894) $ (561)
------------------------- -------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current maturities of
long-term debt $ 2,086 $ 4,401 $ - $ -
Accounts payable and accrued interconnection costs 2,128 2,682 - -
Construction obligations 365 577 - -
Accrued restructuring costs 299 390 - -
Inter-group payable - - (120) (234)
Other 3,400 3,386 (494) (47)
- -------------------------------------------------------------------------------------- -------------------------
Total current liabilities 8,278 11,436 (614) (281)
Noncurrent liabilities
Long-term debt and capital lease obligations 21,301 16,501 - -
Equity unit notes 1,725 1,725 - -
Deferred income taxes and investment tax credits 1,641 1,553 - -
Other 1,703 1,706 - -
- -------------------------------------------------------------------------------------- -------------------------
Total noncurrent liabilities 26,370 21,485 - -
Redeemable preferred stock 256 256 (280) (280)
Common stock and other shareholders' equity
Common stock
Class A FT 22 22 22 22
FON 1,781 1,778 1,781 1,778
PCS 990 987 990 987
Other shareholders' equity 9,922 9,829 9,922 9,829
Combined attributed net assets - - (12,715) (12,616)
- -------------------------------------------------------------------------------------- -------------------------
Total shareholders' equity 12,715 12,616 - -
- -------------------------------------------------------------------------------------- -------------------------
Total $ 47,619 $ 45,793 $ (894) $ (561)
------------------------- -------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
10
Sprint Corporation
CONSOLIDATED BALANCE SHEETS
(millions)
Sprint FON Group Sprint PCS Group
------------------------- -------------------------
March 31, December 31, March 31, December 31,
2002 2001 2002 2001
------------------------- -------------------------
Assets
Current Assets
Cash and equivalents $ 434 $ 134 $ 1,732 $ 179
Accounts receivable, net 2,293 2,415 1,397 1,391
Inventories 240 248 406 442
Inter-group receivable 120 234 - -
Income tax receivable 402 - - -
Prepaid expenses and other 434 454 847 299
- ------------------------------------------------------ ------------ ------------ ----------- ------------
Total current assets 3,923 3,485 4,382 2,311
Net property, plant and equipment 17,404 17,508 11,608 11,516
Net intangible assets 1,567 1,567 7,481 7,495
Other 1,638 1,604 510 868
- ----------------------------------------------------- -------------------------- -------------------------
Total $ 24,532 $ 24,164 $ 23,981 $ 22,190
-------------------------- -------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current maturities of
long-term debt $ 777 $ 2,056 $ 1,309 $ 2,345
Accounts payable and accrued interconnection costs 1,461 2,001 667 681
Construction obligations - - 365 577
Accrued restructuring costs 277 390 22 -
Inter-group payable - - 120 234
Other 2,115 1,851 1,779 1,582
- ------------------------------------------------------ -------------------------- -------------------------
Total current liabilities 4,630 6,298 4,262 5,419
Noncurrent liabilities
Long-term debt and capital lease obligations 5,023 3,258 16,278 13,243
Equity unit notes - - 1,725 1,725
Deferred income taxes and investment tax credits 1,641 1,552 - 1
Other 1,322 1,342 381 364
- ------------------------------------------------------ -------------------------- -------------------------
Total noncurrent liabilities 7,986 6,152 18,384 15,333
Redeemable preferred stock 10 10 526 526
Common stock and other shareholders' equity
Common stock
Class A FT - - - -
FON - - - -
PCS - - - -
Other shareholders' equity - - - -
Combined attributed net assets 11,906 11,704 809 912
- ------------------------------------------------------ -------------------------- -------------------------
Total shareholders' equity - - - -
- ------------------------------------------------------ -------------------------- -------------------------
Total $ 24,532 $ 24,164 $ 23,981 $ 22,190
-------------------------- -------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
11
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
Sprint Corporation
----------------------------
Consolidated Sprint FON Group
- ---------------------------------------------------------------------------------------- ----------------------------
Year-to-Date March 31, 2002 2001 2002 2001
- ---------------------------------------------------------------------------------------- ----------------------------
Operating Activities
Net income (loss) $ 140 $ (76) $ 286 $ 315
Depreciation and amortization 1,173 1,121 646 586
Deferred income taxes 495 (10) 128 69
Changes in assets and liabilities (1,210) (655) (598) (374)
Other, net 37 66 9 25
- ---------------------------------------------------------------------------------------- ----------------------------
Net cash provided (used) by operating activities 635 446 471 621
- ---------------------------------------------------------------------------------------- ----------------------------
Investing Activities
Capital expenditures (1,146) (1,774) (543) (1,119)
Investments in and loans to affiliates, net (8) (46) (8) (46)
Other, net 3 40 3 17
- ---------------------------------------------------------------------------------------- ----------------------------
Net cash used by investing activities (1,151) (1,780) (548) (1,148)
- ---------------------------------------------------------------------------------------- ----------------------------
Financing Activities
Increase in debt, net 2,485 1,365 485 606
Dividends paid (114) (109) (110) (105)
Other, net (2) 19 2 (36)
- ---------------------------------------------------------------------------------------- ----------------------------
Net cash provided by financing activities 2,369 1,275 377 465
- ---------------------------------------------------------------------------------------- ----------------------------
Increase (decrease) in cash and equivalents 1,853 (59) 300 (62)
Cash and equivalents at beginning of period 313 239 134 122
- ---------------------------------------------------------------------------------------- ----------------------------
Cash and equivalents at end of period $ 2,166 $ 180 $ 434 $ 60
---------------------------- ----------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
12
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
Sprint PCS Group
- --------------------------------------------------------- ----------------------------
Year-to-Date March 31, 2002 2001
- --------------------------------------------------------- ----------------------------
Operating Activities
Net income (loss) $ (146) $ (391)
Depreciation and amortization 527 535
Deferred income taxes 367 (79)
Changes in assets and liabilities (612) (281)
Other, net 28 41
- ----------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 164 (175)
- ----------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (603) (655)
Investments in and loans to affiliates, net - -
Other, net - 23
- ----------------------------------------------------------------------------------------
Net cash used by investing activities (603) (632)
- ----------------------------------------------------------------------------------------
Financing Activities
Increase in debt, net 2,000 759
Dividends paid (4) (4)
Other, net (4) 55
- ----------------------------------------------------------------------------------------
Net cash provided by financing activities 1,992 810
- ----------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents 1,553 3
Cash and equivalents at beginning of period 179 117
- ----------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 1,732 $ 120
----------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
13
Sprint Corporation
SELECTED OPERATING RESULTS
(millions)
Quarters Ended
March 31,
------------------------------
2002 2001
------------------------------
Global Markets Division
Net operating revenues (1)
Voice $ 1,536 $ 1,726
Data 484 472
Internet 245 234
Other 77 135
- ----------------------------------------------------------------------------------------------------
Net operating revenues 2,342 2,567
- ----------------------------------------------------------------------------------------------------
Operating expenses
Costs of services and products 1,421 1,489
Selling, general and administrative 639 751
Depreciation and amortization (2) 357 302
- ----------------------------------------------------------------------------------------------------
Total operating expenses 2,417 2,542
- ----------------------------------------------------------------------------------------------------
Operating income (loss) $ (75) $ 25
------------------------------
Local Division
Net operating revenues
Local service $ 761 $ 732
Network access 505 505
Long distance 168 186
Other 119 130
- ----------------------------------------------------------------------------------------------------
Net operating revenues 1,553 1,553
- ----------------------------------------------------------------------------------------------------
Operating expenses
Costs of services and products 468 496
Selling, general and administrative 318 338
Depreciation 286 281
- ----------------------------------------------------------------------------------------------------
Total operating expenses 1,072 1,115
- ----------------------------------------------------------------------------------------------------
Operating income $ 481 $ 438
------------------------------
Product Distribution and Directory Publishing
Net operating revenues $ 330 $ 494
------------------------------
Operating income $ 57 $ 78
------------------------------
See description of footnotes on the following page.
14
Sprint Corporation
SELECTED OPERATING RESULTS
(millions)
Quarters Ended
March 31,
------------------------------
2002 2001
------------------------------
PCS Group
Net operating revenues $ 2,848 $ 2,025
- ----------------------------------------------------------------------------------------------------
Operating expenses
Costs of services and products 1,403 1,134
Selling, general and administrative 782 638
Depreciation 526 401
Amortization (2) 1 134
Restructuring costs (3) 23 -
- ----------------------------------------------------------------------------------------------------
Total operating expenses 2,735 2,307
- ----------------------------------------------------------------------------------------------------
Operating income (loss) $ 113 $ (282)
------------------------------
Unallocated Corporate Operations and
Intercompany Eliminations
Net operating revenues $ (311) $ (385)
------------------------------
Operating income $ 5 $ (7)
------------------------------
Sprint's FON Group reporting segments are intended to reflect the operating results of its global markets, local services, and
product distribution and directory publishing businesses. The Global Markets segment includes domestic and international voice
services (except for consumer services provided to customers within Sprint's local franchise territories); data communications
services such as frame relay access and transport, web hosting, collocation, and security services; and Internet services. The
Local Services segment includes local phone services, access to its local network, consumer long distance services provided to
customers within our local franchise territories, and sales of telecommunications equipment. The Product Distribution and
Directory Publishing segment provides wholesale distribution services of telecommunications products and publishes and markets
white and yellow page phone directories. The FON Group is an integrated business of Sprint Corporation and does not constitute a
stand-alone entity.
Sprint's PCS Group includes Sprint's wireless personal communications services operations. The PCS Group is an integrated
business of Sprint Corporation and does not constitute a stand-alone entity.
<FN>
(1) Equipment revenue is now being fully reported as part of Other. This reclass has no impact on total net operating revenues.
</FN>
<FN>
(2) Sprint adopted Financial Accounting Standard, No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002.
Accordingly, amortization of goodwill, spectrum licenses and trademarks ceased as of that date because they are indefinite
life intangibles.
</FN>
<FN>
(3) In the 2002 first quarter, Sprint recorded a $23 million restructuring charge representing the closing of five PCS call
centers, as well as additional steps to reduce operating costs in its PCS business units. This charge was offset by
favorable accounting true-ups. In total, the charge and true-ups had no effect on operating income.
</FN>
15
Sprint Corporation
GLOBAL MARKETS GROUP SELECTED OPERATING RESULTS (1)
(millions)
Quarters Ended, December 31, September 30,
- ---------------------------------------------------------------------------------------------------- -----------------------
Previously Previously
As Adjusted Reported As Adjusted Reported
- ---------------------------------------------------------------------------------------------------- -----------------------
2001 2001 2001 2001
- ---------------------------------------------------------------------------------------------------- -----------------------
Global Markets Division
Net operating revenues
Voice $ 1,500 $ 1,508 $ 1,683 $ 1,692
Data 425 444 473 497
Internet 238 244 241 248
Other 118 85 108 68
- ---------------------------------------------------------------------------------------------------- ---------- ----------
Net operating revenues $ 2,281 $ 2,281 $ 2,505 $ 2,505
- ---------------------------------------------------------------------------------------------------- ---------- ----------
(1) Equipment revenue is now being fully reported as a part of Other. This reclass has no impact on total net operating
revenues.
16
Sprint Corporation
GLOBAL MARKETS GROUP SELECTED OPERATING RESULTS (1)
(millions)
Quarters Ended, June 30, March 31,
- --------------------------------------------------------------------------------------------- -----------------------
Previously Previously
As Adjusted Reported As Adjusted Reported
- --------------------------------------------------------------------------------------------- -----------------------
2001 2001 2001 2001
- --------------------------------------------------------------------------------------------- -----------------------
Global Markets Division
Net operating revenues
Voice $ 1,701 $ 1,708 $ 1,726 $ 1,736
Data 487 513 472 502
Internet 251 262 234 249
Other 124 80 135 80
- -------------------------------------------------------------------------------- ---------- ---------- ----------
Net operating revenues $ 2,563 $ 2,563 $ 2,567 $ 2,567
- --------------------------------------------------------------------------------- ---------- ---------- ----------
<FN>
(1) Equipment revenue is now being fully reported as a part of Other. This reclass has no impact on total net operating
revenues.
</FN>
17
Sprint Corporation
PRO FORMA SELECTED OPERATING RESULTS (1)
(millions)
- -----------------------------------------------------------------------------------------------------------------
Quarters Ended, March 31, December 31,
- ------------------------------------------------------------------------------------ ---------------------------
2002 2001 2001 2000
- ------------------------------------------------------------------------------------ ---------------------------
Global Markets Division (2)
Net operating revenues $ 2,337 $ 2,564 $ 2,276 $ 2,565
---------------------------- ---------------------------
Operating income (loss) $ (69) $ 170 $ (1,851) $ 14
---------------------------- ---------------------------
EBITDA (4) $ 288 $ 443 $ 187 $ 527
---------------------------- ---------------------------
Sprint FON Group (3)
Net operating revenues $ 4,024 $ 4,355 $ 4,007 $ 4,392
---------------------------- ---------------------------
Operating income (loss) $ 466 $ 677 $ (1,400) $ 520
---------------------------- ---------------------------
EBITDA (4) $ 1,112 $ 1,234 $ 1,032 $ 1,329
---------------------------- ---------------------------
<FN>
(1) Pro forma information is presented as if the Sprint ION termination occurred at the beginning of 2000. Costs incurred to
support and transition the remaining ION customers remain in the Global Markets Division and Sprint FON Group results.
This transition should be complete by December 2002.
</FN>
<FN>
(2) Results should be viewed in connection with the Selected Operating Results contained in this Press Release.
</FN>
<FN>
(3) Results should be viewed in connection with the Consolidated Statements of Operations for the quarter ended March 31
contained in this Press Release.
</FN>
<FN>
(4) EBITDA represents operating income or loss plus depreciation, amortization and one-time items.
</FN>
18
Sprint Corporation
PRO FORMA SELECTED OPERATING RESULTS (1)
(millions)
- ----------------------------------------------------------------------------------------------------------------
Quarters Ended, September 30, June 30,
- ----------------------------------------------------------------------------------- --------------------------
2001 2000 2001 2000
- ----------------------------------------------------------------------------------- --------------------------
Global Markets Division (2)
Net operating revenues $ 2,497 $ 2,645 $ 2,559 $ 2,684
-------------------------- --------------------------
Operating income (loss) $ 41 $ 354 $ 129 $ 365
-------------------------- --------------------------
EBITDA (4) $ 349 $ 620 $ 417 $ 620
-------------------------- --------------------------
Sprint FON Group (3)
Net operating revenues $ 4,236 $ 4,442 $ 4,306 $ 4,445
-------------------------- --------------------------
Operating income (loss) $ 582 $ 853 $ 664 $ 716
-------------------------- ---------------------------
EBITDA (4) $ 1,178 $ 1,405 $ 1,233 $ 1,418
-------------------------- --------------------------
<FN>
(1) Pro forma information is presented as if the Sprint ION termination occurred at the beginning of 2000. Costs incurred to
support and transition the remaining ION customers remain in the Global Markets Division and Sprint FON Group results.
This transition should be complete by December 2002.
</FN>
<FN>
(2) Results should be viewed in connection with the Selected Operating Results contained in this Press Release.
</FN>
<FN>
(3) Results should be viewed in connection with the Consolidated Statements of Operations for the quarter ended March 31
contained in this Press Release.
</FN>
<FN>
(4) EBITDA represents operating income or loss plus depreciation, amortization and one-time items.
</FN>
19
Sprint FON Group
SUMMARY FINANCIAL INFORMATION (1)
(all amounts per share data)
Quarters ended
March 31,
--------------------------------
2002 2001
--------------------------------
Diluted earnings per common share
Income from continuing operations - pro forma $ 0.33 $ 0.45
Sprint ION losses (0.01) (0.10)
- -----------------------------------------------------------------------------------------------
Income from continuing operations - recurring 0.32 0.35
One-time items
Gain on sale of investment - 0.01
- -----------------------------------------------------------------------------------------------
Total - 0.01
- -----------------------------------------------------------------------------------------------
Income from continuing operations $ 0.32 $ 0.36
--------------------------------
<FN>
(1) Pro forma information is presented as if the Sprint ION termination occurred prior to the periods shown and excludes one-time
items. Costs incurred to support and transition the remaining ION customers remain in the Sprint FON Group results. This
transition should be complete by December 2002. Pro forma and recurring results should be viewed in connection with the
Consolidated Statements of Operations for the first quarter 2002.
</FN>
19
Sprint Corporation
PCS GROUP
NET CUSTOMER ADDITIONS
(thousands)
Quarter ended March 31, 2002
--------------------------------------------------------------
Direct Resale Affiliate Total
-------------- ------------- ------------ ------------
Reported net additions 725 (47) 228 906
--------------------------------------------------------------
Ending customers - March 31, 2001 10,355 359 1,057 11,771
Ending customers - December 31, 2001 13,555 219 2,042 15,816
Ending customers - March 31, 2002 14,280 172 2,270 16,722
--------------------------------------------------------------
20
Sprint Corporation
PCS GROUP METRICS RESTATEMENT
(dollars)
Quarters Ended, December 31, 2001 September 30, 2001
- --------------------------------------------------------------------- -------------------------------
Previously Previously
As Adjusted Reported As Adjusted Reported
---------------- -------------- -------------- --------------
Cash Cost Per User (1) $ 35 $ 33 $ 35 $ 33
Cost Per Gross Addition (1) $ 315 $ 350 $ 285 $ 320
Average Revenue Per User (2) $ 61 $ 61 $ 62 $ 62
Quarters Ended, December 31, 2000 September 30, 2000
- --------------------------------------------------------------------- -------------------------------
Previously Previously
As Adjusted Reported As Adjusted Reported
---------------- -------------- -------------- --------------
Cash Cost Per User (1) $ 36 $ 34 $ 37 $ 35
Cost Per Gross Addition (1) $ 355 $ 380 $ 315 $ 340
<FN>
(1) Beginning in 2002, PCS changed its method of calculating both Cash Cost Per User (CCPU) and Costs Per Gross Addition (CPGA).
Retail customer service and handset subsidies for existing customers, both previously part of the calculation of CPGA, are
instead included in the calculation of CCPU. Activation customer care cost has been removed from the calculation of CCPU and
is now included in the calculation of CPGA. Both metrics have been restated for prior periods to be in conformity with
current year presentation. The recalculation of these metrics did not impact operating expenses, EBITDA, or loss from
continuing operations.
</FN>
<FN>
(2) In the second quarter of 2001, contract cancellation fees began to be reported net of anticipated write-offs. While this
reclassification had no impact on operating income, it did affect Average Revenue Per User (ARPU). Prior quarter's results
were not restated at that time. 2001 periods have been restated to be in conformity with current year presentation.
</FN>
21
Sprint Corporation
PCS GROUP METRICS RESTATEMENT
(dollars)
Quarters Ended, June 30, 2001 March 31, 2001
- --------------------------------------------------------------------- -------------------------------
Previously Previously
As Adjusted Reported As Adjusted Reported
---------------- -------------- -------------- --------------
Cash Cost Per User (1) $ 35 $ 32 $ 35 $ 34
Cost Per Gross Addition (1) $ 300 $ 340 $ 325 $ 360
Average Revenue Per User (2) $ 62 $ 61 $ 59 $ 60
Quarters Ended, June 30, 2000 March 31, 2000
- --------------------------------------------------------------------- -------------------------------
Previously Previously
As Adjusted Reported As Adjusted Reported
---------------- -------------- -------------- --------------
Cash Cost Per User (1) $ 37 $ 35 $ 38 $ 37
Cost Per Gross Addition (1) $ 325 $ 350 $ 370 $ 390
<FN>
(1) Beginning in 2002, PCS changed its method of calculating both Cash Cost Per User (CCPU) and Costs Per Gross Addition (CPGA).
Retail customer service and handset subsidies for existing customers, both previously part of the calculation of CPGA, are
instead included in the calculation of CCPU. Activation customer care cost has been removed from the calculation of CCPU and
is now included in the calculation of CPGA. Both metrics have been restated for prior periods to be in conformity with
current year presentation. The recalculation of these metrics did not impact operating expenses, EBITDA, or loss from
continuing operations.
</FN>
<FN>
(2) In the second quarter of 2001, contract cancellation fees began to be reported net of anticipated write-offs. While this
reclassification had no impact on operating income, it did affect Average Revenue Per User (ARPU). Prior quarter's results
were not restated at that time. 2001 periods have been restated to be in conformity with current year presentation.
</FN>
22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
SPRINT CORPORATION
Date: April 18, 2002 By: /s/ Michael T. Hyde
Michael T. Hyde
Assistant Secretary
23