Exhibit 99
Sprint Reports First Quarter Results and Updates Guidance for 2003
o Dramatic improvement in Sprint's financial strength -
debt reduced $1.6 billion and cash increased more than $1 billion,
to $2.1 billion;
o FON Group income from continuing operations up 13 percent;
o PCS Group reports strong improvement in financial and operating performance
OVERLAND PARK, KAN, APRIL 21, 2003:
The Sprint FON Group (NYSE: FON) is comprised of Sprint's global markets
division, local telecommunications division and other businesses consisting
primarily of wholesale distribution of telecommunications products.
The Sprint PCS Group (NYSE: PCS) consists of Sprint's mobile wireless
operations.
First quarter operating income of $604 million improved 17 percent from last
year on slightly lower revenues. First quarter net income was $1.67 billion,
compared to $140 million in 2002, and includes a $1.31 billion net gain on the
sale of our directory publishing business, as well as a $258 million net gain
related to the adoption of a new accounting principle. First quarter net income
also includes a $50 million pre-tax charge to settle shareholder litigation.
SPRINT CONSOLIDATED HIGHLIGHTS
- -----------------------------------------------------------
Sprint Corporation
Selected Financial Data
(millions) Quarters Ended
Mar. 31, Mar. 31,
2003 2002
- -----------------------------------------------------------
Net operating revenues $6,339 $6,637
Operating income 604 518
Income from continuing operations 97 100
Net Income $1,668 $140
- -----------------------------------------------------------
Cash flows improved significantly in the first quarter of 2003 compared to last
year, allowing Sprint to reduce debt by $1.56 billion during the quarter and to
increase cash by more than $1 billion. Sprint ended the quarter with a cash
balance of $2.10 billion. This cash performance was aided by $2.22 billion in
proceeds from the sale of our directory publishing business.
"We faced the challenges of a sluggish economy and heightened competition in the
first quarter," said Gary Forsee, chief executive officer of Sprint. "In this
challenging environment, each of our businesses performed admirably. The PCS
Group reported better operating performance, added an improving mix of
customers, and delivered higher quality customer service. The FON Group produced
double-digit operating income growth. Our local division executed on our
strategic priorities and aggressively managed costs. Our global markets division
improved operating income and cash production despite much lower revenues."
The FON Group reported first quarter earnings per share (EPS) of $2.06 compared
to $0.32 per share a year ago. EPS for the quarter includes $1.46 per share for
the gain on the sale of the directory publishing business and $0.29 per share
for the gain related to the adoption of a new accounting principle. EPS also
includes $0.02 per share for the charge to settle shareholder litigation, and
$0.01 per share for premiums paid to repurchase debt.
The PCS Group reported a first quarter loss of $0.18 per share compared to a
loss of $0.15 per share in the first quarter of 2002. EPS for the PCS Group also
includes $0.02 per share for the charge to settle shareholder litigation.
"Going forward, the asset mix at Sprint positions us to differentiate ourselves
based on an integrated product offering," Forsee said. "We will capitalize on
our portfolio and our ability to integrate, to drive profitable top-line growth
and to realize cost synergies. At the same time, Sprint must continue to improve
its bottom line, and build upon its financial strength and flexibility through
its continued debt reduction initiative."
SPRINT FON GROUP HIGHLIGHTS
- -----------------------------------------------------------
Sprint FON Group
Selected Financial Data
(millions, except per share data) Quarters Ended
Mar. 31, Mar. 31,
2003 2002
- -----------------------------------------------------------
Net operating revenues $3,581 $3,904
Operating income 454 397
Income from continuing operations 279 246
Discontinued operation, net 1,313 40
Cumulative effect of change in
accounting principle, net 258 -
Net income $1,850 $286
Earnings per share $2.06 $0.32
Capex $360 $543
Free Cash Flow* $2,520 $(187)
- -----------------------------------------------------------
o First quarter FON Group revenues declined 8% from a year ago.
o First quarter FON Group operating income was up 14% over last year.
o First quarter FON Group operating margin was 13%, up 250 basis points compared
to a year ago.
o First quarter FON Group Adjusted EBITDA* of $1.08 billion increased by 4%
compared to the year-ago quarter.
o First quarter FON Group net income benefited from the gain on the sale of our
directory publishing business.
o The FON Group's Free Cash Flow* of $2.52 billion increased by $2.71 billion
compared to the year-ago quarter, including proceeds of $2.22 billion from the
sale of our directory publishing business.
SPRINT FON GROUP EARNINGS
- -----------------------------------------------------------
Sprint FON Group
Earnings per share Quarters Ended
Mar. 31, Mar. 31,
2003 2002
- -----------------------------------------------------------
GAAP earnings per share $2.06 $0.32
Discontinued operation 1.46 0.05
Cumulative effect of a change in
accounting principle 0.29 -
Income from continuing operations 0.31 0.27
Special items
Shareholder litigation charge 0.02 -
Premium on early retirement
of debt 0.01 -
Earnings per share from
continuing operations - adjusted $0.34 $0.27
- -----------------------------------------------------------
The difference between reported FON Group EPS and EPS from continuing operations
- - adjusted, is the result of the following items:
o Discontinued operation - a pre-tax gain of $2.13 billion was recorded in the
first quarter of 2003 associated with the sale of Sprint's directory
publishing business.
o Cumulative effect of a change in accounting principle - a pre-tax gain of
$420 million was recorded in the first quarter of 2003 upon adoption of
Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations.
o Shareholder litigation charge - FON Group's share of the pre-tax charge was
$24 million, recorded in the first quarter of 2003 to settle shareholder
litigation.
Local Telecommunications Division
- -----------------------------------------------------------
Local Telecommunications
Selected Financial Data
(millions) Quarters Ended
Mar. 31, Mar. 31,
2003 2002
- -----------------------------------------------------------
Net operating revenues
Local service $765 $761
Network access 523 518
Long distance 144 168
Other 104 118
Net operating revenues 1,536 1,565
Operating expenses
Cost of services & products 490 480
Selling, general & administrative 320 318
Depreciation 266 286
Total operating expenses 1,076 1,084
Operating Income $460 $481
Capex $281 $290
- -----------------------------------------------------------
o First quarter revenues declined 2% from the same period last year.
o First quarter operating margin was 30% compared to 31% in the year-ago period.
o Adjusted EBITDA* was $726 million, compared to $767 million in the first
quarter 2002.
o Total access lines declined 1.9%; but voice grade equivalent lines grew 7%.
The local division delivered a solid performance in the quarter in spite of a
challenging operating environment in which wireless substitution, competition
and a difficult economy contributed to declines in revenue and operating income.
Results were also impacted by a $24 million pre-tax increase in pension and
retiree benefit costs.
DSL subscriber growth remained strong with the addition of 34,000 lines. At the
end of the quarter there were 185,000 lines in service. The division reported
continued gains in bundled service customers and further increased Sprint's
long-distance penetration.
In the quarter, the division launched a second edge-out market in Orlando, and
is on track to expand to additional markets in the second half of the year.
Global Markets Division
- -----------------------------------------------------------
Global Markets
Selected Financial Data
(millions) Quarters Ended
Mar. 31, Mar. 31,
2003 2002
- -----------------------------------------------------------
Net operating revenues
Voice $1,292 $1,536
Data 461 484
Internet 243 245
Other 46 77
Net operating revenues 2,042 2,342
Operating expenses
Cost of services & products 1,103 1,421
Selling, general & administrative 573 639
Depreciation 360 357
Total operating expenses 2,036 2,417
Operating income (loss) $6 $(75)
Capex $61 $204
- -----------------------------------------------------------
o Net operating revenues declined 13% from a year ago and 2.5% sequentially.
o Access management initiatives and tight cost controls contributed to
positive operating income versus a loss in the year-ago period.
o Adjusted EBITDA* was $366 million, an increase of 30% from first quarter
2002.
The global markets division continues to focus on product mix and cost
management in response to a difficult telecommunications market. In the first
quarter, the division reported double-digit, year-over-year reductions in both
cost of services and products, and selling, general and administration expenses.
In the quarter, data services revenues decreased 5 percent year-over-year
primarily due to a decline in private line. Growth in dedicated IP and hosting
revenues were offset by a substantial decline in dial IP.
Internationally, we continued the expansion of our global IP network in key
markets in Europe and Asia. During the quarter, Sprint's growing international
capabilities won new business from enterprises and service providers with global
connectivity requirements.
SPRINT PCS GROUP HIGHLIGHTS
- -----------------------------------------------------------
Sprint PCS
Selected Financial Data
(millions, except per share data) Quarters Ended
Mar. 31, Mar. 31,
2003 2002
- -----------------------------------------------------------
Net operating revenues $2,947 $2,848
Operating expenses
Cost of services & products 1,448 1,403
Selling, general & administrative 741 782
Depreciation & amortization 608 527
Restructuring & asset impairments 10 23
Total operating expenses 2,807 2,735
Operating income $140 $113
Loss per share $(0.18) $(0.15)
Capex $187 $603
Free Cash Flow* $83 $(443)
- -----------------------------------------------------------
o First quarter net operating revenues increased 3.5% compared to a year ago.
o First quarter operating income was up 24% from last year.
o Adjusted EBITDA* was $758 million, an increase of 18% from first quarter
2002.
o First quarter net adds were 199,000.
o Churn of 3.1% decreased 40 basis points sequentially.
o CCPU* of just under $31 is down 11% sequentially and 3% from first quarter
2002.
o CPGA* was $365 versus $305 in the year-ago first quarter and $370 in the
fourth quarter of 2002.
In the first quarter, the PCS Group achieved a strong gain in operating
profitability, solid improvement in receivables management, improved customer
retention, and rising customer satisfaction.
A majority of direct gross additions were prime credit customers. Combined,
direct, non-equity affiliate and resale net additions reached 483,000.
For the first quarter of 2003, ARPU* was just under $59, compared to $62 in the
fourth quarter and $60 in the first quarter a year ago. An increase in the
average monthly recurring charge was more than offset by lower overage charges
and a decrease in the affiliate travel rate. Average customer usage in the
quarter was a little over 11 1/2 hours per month compared to 11 hours per month
in the fourth quarter.
CCPU* improvement in the quarter was mainly driven by lower bad debt expense.
CPGA* increased from the year-ago period mainly due to lower gross adds.
Churn improved 40 basis points sequentially in the first quarter to 3.1 percent.
This decline was driven primarily by a reduction in involuntary churn resulting
from credit management changes made in the fourth quarter. Additionally,
voluntary churn experienced modest improvements as a result of customer
satisfaction initiatives.
At the end of the quarter, the division's total direct customer base was almost
15 million, and including non-equity affiliates and resellers, the total number
of customers served on the Sprint PCS network was more than 18.2 million. At the
end of the quarter, there were nearly 1.3 million PCS Vision users.
The PCS Group's first quarter 2003 free cash flow increased by over $500 million
from the year-ago quarter, driven by increased cash from operating activities
and substantially lower capital expenditures. Capital expenditures are expected
to ramp up over the remainder of the year.
SPRINT PCS GROUP EARNINGS
- -----------------------------------------------------------
Sprint PCS Group
Loss per share Quarters Ended
Mar. 31, Mar. 31,
2003 2002
- -----------------------------------------------------------
GAAP loss per share $(0.18) $(0.15)
Special items
Shareholder litigation charge 0.02 -
Asset impairment 0.00 -
Total 0.02 -
Loss per share from continuing
operations - adjusted $(0.16) $(0.15)
- -----------------------------------------------------------
The difference between reported PCS Group loss per share and loss per share from
continuing operations - adjusted, is the result of the following charges:
o Shareholder litigation charge - PCS Group's share of the pre-tax charge was
$26 million, recorded in the first quarter of 2003 to settle shareholder
litigation.
o Asset impairment - a pre-tax charge of $10 million was recorded in the first
quarter of 2003 associated with the termination of a software development
project. The impact increased the loss per share by less than $0.01.
Effect of Adoption of New Accounting Principles
Effective January 1, 2003, Sprint adopted Statement of Financial Accounting
Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations. Upon
adoption, the FON Group recorded a reduction in its historical depreciation
reserves of $420 million, pre-tax, resulting in a cumulative effect of a change
in accounting principles of $258 million, net of tax.
In the 2003 first quarter, Sprint began to expense the fair value of stock-based
employee compensation. Sprint applies the method prescribed in SFAS No. 123,
Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure, to all option grants
made after January 1, 2003. Because stock options were granted late in the
quarter, the impact of adoption was minimal in the first quarter. Sprint
estimates that adoption will result in a charge to 2003 earnings of about $0.01
per share each for FON Group and PCS Group.
*Financial Measures
Sprint provides readers financial measures generated using generally accepted
accounting principles (GAAP) and using adjustments to 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. The financial measures used in this
release include the following:
Adjusted EBITDA is defined as operating income plus depreciation, amortization
and special items. This non-GAAP measure should be used in addition to, but not
as a substitute for, the analysis provided in the statement of cash flows.
Free Cash Flow is defined as the change in cash and equivalents less the change
in debt and other financing activities, net. This non-GAAP measure should be
used in addition to, but not as a substitute for, the analysis provided in the
statement of cash flows.
Net Debt is consolidated debt, including current maturities, less cash and cash
equivalents. This non-GAAP measure should be used in addition to, but not as a
substitute for, the analysis provided in the statement of cash flows.
ARPU (Average monthly service revenue per user) is calculated by dividing
wireless service revenues by weighted average monthly wireless subscribers. ARPU
is used to measure revenue on a per user basis. This is a measure which uses
GAAP as the basis for calculation.
CCPU (Cash cost per user) is calculated by dividing costs of wireless service
revenues, service delivery and other general and administrative costs by
weighted average monthly wireless subscribers. CCPU is a measure analysts use to
evaluate the cash costs to operate the business on a per user basis. This is a
measure which uses GAAP as the basis for calculation.
CPGA (Cost per gross addition) is calculated by dividing the costs of acquiring
a new wireless subscriber, including equipment subsidies, marketing costs and
selling expenses, by gross additional subscribers. Analysts use this measure in
conjunction with the other measures to evaluate the profitability of the
operation. This is a measure which uses GAAP as the basis for calculation.
Business Outlook
The following statements are based on current expectations for 2003. These
statements are forward looking, and actual results may differ materially.
Sprint is updating its 2003 guidance for the FON Group as follows:
Full-year earnings in 2003 are expected to be between $1.30 and $1.35 per
diluted share. Incorporated into this estimate is increased pension and retiree
benefit costs, currently estimated to reduce earnings by 10 cents per share.
This new estimate also includes the shareholder litigation charge recorded in
the first quarter, higher net interest costs including the first quarter debt
redemption costs, the effects of adopting stock option expensing in the first
quarter, and reduced profit expectations from global markets. This estimate
excludes the following first quarter events; the gain from the sale of the
directory publishing business, and the cumulative effect of adopting SFAS 143.
Revenues are targeted to decline 6 - 7 percent for the full year. Global markets
division revenues are expected to decline 8 -10 percent, and local
telecommunications division revenue is expected to be flat to down modestly.
Capital expenditures are expected to be approximately $2.0 billion. In 2003, the
global markets division has targeted capital of $600 million, and the local
division capital plan is $1.3 billion.
Cash provided by operating activities is expected to be approximately $3.9
billion.
Sprint is updating its 2003 guidance for the PCS Group as follows:
Full-year net loss in 2003 is expected to be between $0.45 and $0.50 per share.
This estimate incorporates the first quarter shareholder litigation charge of
$0.02, per share and assumes the adoption of stock option expensing has a
full-year dilutive effect of $0.01.
Operating income in 2003 is expected to be between $800 million and $900
million. Adjusted EBITDA* is expected to be between $3.3 billion and $3.4
billion.
Sprint has targeted gross customer additions to be in the low- to mid-6 million
range.
Capital expenditures are expected to be approximately $2.1 billion.
Cash provided by operating activities is expected to be approximately $2.3
billion, before any tax sharing payments associated with the sale of the
directory publishing business.
Consolidated cash requirements: In 2003, Sprint expects consolidated free cash
flow to be approximately $3.8 billion, consisting of $2.2 billion of proceeds
from the sale of the directory publishing business, $1.4 billion from FON Group
operations and $200 million from PCS Group operations. FON Group expects to
retain about $1.5 billion of the cash proceeds from the sale of the directory
publishing business, with the balance to be paid to the PCS Group in the form of
tax sharing payments throughout 2003.
Conference Call Information
Sprint management will provide an overview of the company's performance and
business outlook, and participate in an interactive Q&A that will be webcast
Monday, Apr. 21, 2003, beginning at 4:30 p.m. EDT for PCS and 5:30 p.m. EDT for
FON.
Please plan on gaining access 10 minutes prior to the start of the calls.
For PCS Group results, call 866-215-1938 (toll free) or 816-650-0742
(international).
A continuous replay of the PCS Group call will be available through May 5, 2003,
at the following numbers: 888-775-8673 (toll free) or 402-220-1325
(international).
For FON Group results, call 866-215-1938 (toll free) or 816-650-0742
(international).
A continuous replay of the FON Group call will be available through May 5, 2003,
at the following numbers: 888-775-8696 (toll free) or 402-220-1326
(international).
A simultaneous audiocast will be available at www.sprint.com. A link to the
audiocast will be posted at www.sprint.com. Please note that questions may only
be submitted through the conference call option.
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 and expected performance 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, the timing of various events 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 extent and duration of the current economic downturn;
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 adverse change in the ratings afforded our debt securities by ratings
agencies;
o the ability of the PCS Group to continue to grow a significant market
presence;
o the ability of the PCS Group to improve its profitability and reduce its
cash requirements;
o the effects of mergers and consolidations within the telecommunications
industry and unexpected announcements or developments from others in
the telecommunications industry;
o the uncertainties related to the outcome of bankruptcies affecting the
telecommunications industry;
o the impact to the PCS Group's network coverage due to financial
difficulties of third-party affiliates,
o the uncertainties related to Sprint's investments;
o the impact of any unusual items resulting from ongoing evaluations of
Sprint's business strategies;
o the impact of new and emerging 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 or other factors such as
monetary policy, legal and regulatory changes including the impact of
the Telecommunications Act of 1996 (Telecom Act), 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").
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 2002 Form
10-K, 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 72,000
employees worldwide and nearly $27 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 and an award-winning Tier 1 Internet backbone. Sprint
provides local voice and data services in 18 states and operates the largest
100-percent digital, nationwide PCS wireless network in the United States.
For further information, contact Corporate
Communications:
- - Media Relations:
Mark Bonavia
913-794-1088
mark.bonavia@mail.sprint.com
Bill White
913-794-1099
bill.white@mail.sprint.com
- - Investor Relations:
Kurt Fawkes
913-794-1126
Investorrelation.sprintcom@mail.sprint.com
Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
Sprint Corporation
--------------------------
Consolidated Eliminations/Reclassifications
- ---------------------------------------------------------------------------- ---------------------------
Quarters Ended March 31, 2003 2002 2003 2002
- ---------------------------------------------------------------------------- ---------------------------
Net operating revenues $ 6,339 $ 6,637 $ (189) $ (115)
- ---------------------------------------------------------------------------- ---------------------------
Operating expenses
Costs of services and products 2,839 3,170 (189) (115)
Selling, general and administrative 1,650 1,755 (10) (8)
Depreciation 1,236 1,170 - -
Amortization - 1 - -
Restructuring and asset impairments (1) 10 23 - -
- ---------------------------------------------------------------------------- ---------------------------
Total operating expenses 5,735 6,119 (199) (123)
- ---------------------------------------------------------------------------- ---------------------------
Operating income 604 518 10 8
Interest expense (366) (313) - -
Intergroup interest charge - - - -
Premium on early retirement of debt (2) (19) - - -
Other income (expense), net (3) (61) (31) (10) (8)
- ---------------------------------------------------------------------------- ---------------------------
Income (loss) before income taxes 158 174 - -
Income tax (expense) benefit (61) (74) - -
- ---------------------------------------------------------------------------- ---------------------------
Income (loss) from continuing operations 97 100 - -
Discontinued operation, net (4) 1,313 40 - -
Cumulative effect of change in accounting principle,
net (5) 258 - - -
- ---------------------------------------------------------------------------- ---------------------------
Net income (loss) 1,668 140 - -
Preferred stock dividends (paid) received (2) (2) - -
- ---------------------------------------------------------------------------- ---------------------------
Earnings (Loss) applicable to common stock $ 1,666 $ 138 $ - $ -
-------------------------- ---------------------------
Diluted earnings (loss) per common share (6)
Income (loss) from continuing operations
Discontinued operation
Cumulative effect of change in accounting principle
- ---------------------------------------------------------------------------- ---------------------------
Total
Diluted weighted average common shares outstanding (7)
Basic earnings (loss) per common share
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
See accompanying footnotes.
Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
Sprint FON Group Sprint PCS Group
- ---------------------------------------------- -------------------------- ---------------------------
Quarters Ended March 31, 2003 2002 2003 2002
- ---------------------------------------------------------------------------- ---------------------------
Net operating revenues $ 3,581 $ 3,904 $ 2,947 $ 2,848
- ---------------------------------------------------------------------------- ---------------------------
Operating expenses
Costs of services and products 1,580 1,882 1,448 1,403
Selling, general and administrative 919 981 741 782
Depreciation 628 644 608 526
Amortization - - - 1
Restructuring and asset impairments (1) - - 10 23
- ---------------------------------------------------------------------------- ---------------------------
Total operating expenses 3,127 3,507 2,807 2,735
- ---------------------------------------------------------------------------- ---------------------------
Operating income 454 397 140 113
Interest expense (65) (79) (301) (234)
Intergroup interest charge 82 81 (82) (81)
Premium on early retirement of debt (2) (19) - - -
Other income (expense), net (3) (4) 2 (47) (25)
- ---------------------------------------------------------------------------- ---------------------------
Income (loss) before income taxes 448 401 (290) (227)
Income tax (expense) benefit (169) (155) 108 81
- ---------------------------------------------------------------------------- ---------------------------
Income (loss) from continuing operations 279 246 (182) (146)
Discontinued operation, net (4) 1,313 40 - -
Cumulative effect of change in accounting
principle, net (5) 258 - - -
- ---------------------------------------------------------------------------- ---------------------------
Net income (loss) 1,850 286 (182) (146)
Preferred stock dividends (paid) received 2 2 (4) (4)
- ---------------------------------------------------------------------------- ---------------------------
Earnings (Loss) applicable to common stock $ 1,852 $ 288 $ (186) $ (150)
-------------------------- ---------------------------
Diluted earnings (loss) per common share (6)
Income (loss) from continuing operations $ 0.31 $ 0.27 $ (0.18) $ (0.15)
Discontinued operation 1.46 0.05 - -
Cumulative effect of change in accounting principle 0.29 - - -
- ------------------------------------------------ -------------------------- ---------------------------
Total $ 2.06 $ 0.32 $ (0.18) $ (0.15)
-------------------------- ---------------------------
Diluted weighted average common shares
outstanding (7) 899.5 891.5 1,022.1 1,009.9
-------------------------- ---------------------------
Basic earnings (loss) per common share $ 2.07 $ 0.32 $ (0.18) $ (0.15)
-------------------------- ---------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
See accompanying footnotes.
Sprint Corporation
FOOTNOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
(1) In the 2003 first quarter, the PCS Group recorded a charge of $10 million
associated with the termination of a software development project. This
increased loss from continuing operations by $6 million with no impact on
earnings per share.
In the 2002 first quarter, the PCS Group 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.
(2) In the 2003 first quarter, the FON Group recorded a $19 million charge
reflecting the premiums paid on a debt tender offer. This decreased income
from continuing operations by $12 million, or $0.01 per share.
(3) In the 2003 first quarter, Sprint recorded a $50 million charge to settle
shareholder litigation. The charge to the FON Group was $24 million which
reduced income from continuing operations by $15 million, or $0.02 per
share. The charge to the PCS Group was $26 million which increased loss
from continuing operations by $17 million, or $0.02 per share.
(4) In the 2003 first quarter, Sprint recorded an after-tax gain of $1.3
billion associated with the sale of its directory publishing business to
R.H. Donnelley.
(5) Sprint adopted Statement of Financial Accounting Standards (SFAS) No. 143,
"Accounting for Asset Retirement Obligations," on January 1, 2003. In the
FON Group, the local division historically accrued costs of removal in its
depreciation reserves consistent with industry practice. These costs of
removal do not meet the SFAS No. 143 definition of an asset retirement
obligation. Accordingly, the FON Group recorded a credit of $420 million to
remove the accumulated excess cost of removal resulting in a cumulative
effect of change in accounting principle credit of $258 million, net of
tax. The annual impact of this accounting change is expected to decrease
FON Group's 2003 depreciation expense by approximately $40 million and
increase 2003 expenses incurred for removal costs by approximately $20
million.
(6) As the effects of including the incremental shares associated with options
and ESPP shares are antidilutive, both basic earnings per share and diluted
earnings per share reflect the same calculation in these consolidated
statements of operations of the PCS Group.
(7) As the effects of including the incremental shares associated with options
and ESPP shares are antidilutive, they are not included in the weighted
average common shares outstanding for the PCS Group.
(8) In the 2002 fourth quarter, Sprint recorded restructuring charges and asset
impairments aggregating $245 million. The FON Group recorded a
restructuring charge of $111 million representing consolidations in
Sprint's Network, Information Technology, and Billing and Accounts
Receivable organizations, as well as additional steps to reduce overall
operating costs. Additionally, it recorded a network asset impairment
related to the Global Markets Division of $14 million. The PCS Group
recorded a restructuring charge of $35 million representing the
consolidations in Sprint's Network, Information Technology, and Billing and
Accounts Receivable organizations, as well as a charge of $43 million to
create a more competitive cost structure by reducing operating expenses.
Additionally, the PCS Group recorded an asset impairment of $42 million
representing abandoned projects.
Sprint Corporation
CONSOLIDATED BALANCE SHEETS
(millions)
Sprint Corporation
-------------------------
Consolidated Eliminations/Reclassifications
------------------------- -------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
------------------------- -------------------------
Assets
Current assets
Cash and equivalents $ 2,095 $ 1,035 $ - $ -
Accounts receivable, net 2,813 2,951 - -
Inventories 750 682 - -
Deferred tax asset - 806 - -
Current tax benefit receivable from the FON Group - - (760) -
Intergroup receivable - - (592) (536)
Intergroup debt receivable - - (36) -
Prepaid expenses and other 647 604 - -
- ------------------------------------------------------------------------------- -------------------------
Total current assets 6,305 6,078 (1,388) (536)
Assets of discontinued operation - 391 - -
Net property, plant and equipment 28,453 28,745 (46) (46)
Net intangible assets 9,043 9,045 - -
Intergroup debt receivable - - (1,041) (406)
Other 964 1,034 (279) (280)
- ------------------------------------------------------------------------------- -------------------------
Total $44,765 $45,293 $(2,754) $(1,268)
--------------------------- -------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current
maturities of long-term debt $ 987 $ 1,887 $ - $ -
Current maturities intergroup debt - - (36) -
Accounts payable and accrued interconnection costs 2,545 2,777 - -
Accrued restructuring costs 216 277 - -
Intergroup payable - - (592) (536)
Other 2,663 2,867 (106) (46)
- ------------------------------------------------------------------------------- -------------------------
Total current liabilities 6,411 7,808 (734) (582)
Liabilities of discontinued operation
Current tax payable to PCS Group - - (700) -
Other - 299 - -
Noncurrent liabilities
Long-term debt and capital lease obligations 17,753 18,405 - -
Intergroup debt - - (1,041) (406)
Equity unit notes 1,725 1,725 - -
Deferred income taxes 2,117 2,025 - -
Other 2,624 2,481 - -
- ------------------------------------------------------------------------------- -------------------------
Total noncurrent liabilities 24,219 24,636 (1,041) (406)
Redeemable preferred stock 247 256 (279) (280)
Common stock and other shareholders' equity
Common stock
Class A FT - 22 - 22
FON 1,796 1,790 1,796 1,790
PCS 1,023 1,000 1,023 1,000
Other shareholders' equity 11,069 9,482 11,069 9,482
Combined attributed net assets - - (13,888) (12,294)
- ------------------------------------------------------------------------------- -------------------------
Total shareholders' equity 13,888 12,294 - -
- ------------------------------------------------------------------------------- -------------------------
Total $44,765 $45,293 $(2,754) $(1,268)
------------------------- --------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
Sprint Corporation
CONSOLIDATED BALANCE SHEETS
(millions)
Sprint FON Group Sprint PCS Group
------------------------- -------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
------------------------- -------------------------
Assets
Current assets
Cash and equivalents $ 1,638 $ 641 $ 457 $ 394
Accounts receivable, net 1,614 1,650 1,199 1,301
Inventories 214 219 536 463
Deferred tax asset - 42 - 764
Current tax benefit receivable from the FON Group - - 760 -
Intergroup receivable 592 536 - -
Intergroup debt receivable 36 - - -
Prepaid expenses and other 343 329 304 275
- ------------------------------------------------------------------------------- -------------------------
Total current assets 4,437 3,417 3,256 3,197
Assets of discontinued operation - 391 - -
Net property, plant and equipment 17,028 16,894 11,471 11,897
Net intangible assets 1,569 1,569 7,474 7,476
Intergroup debt receivable 1,041 406 - -
Other 818 862 425 452
- ------------------------------------------------------------------------------- -------------------------
Total $ 24,893 $ 23,539 $ 22,626 $ 23,022
------------------------- -------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current maturities
of long-term debt $ 371 $ 1,234 $ 616 $ 653
Current maturities intergroup debt - - 36 -
Accounts payable and accrued interconnection costs 1,293 1,422 1,252 1,355
Accrued restructuring costs 209 251 7 26
Intergroup payable - - 592 536
Other 1,497 1,503 1,272 1,410
- ------------------------------------------------------------------------------- -------------------------
Total current liabilities 3,370 4,410 3,775 3,980
Liabilities of discontinued operation
Current tax payable to PCS Group 700 - - -
Other - 299 - -
Noncurrent liabilities
Long-term debt and capital lease obligations 3,144 3,142 14,609 15,263
Intergroup debt - - 1,041 406
Equity unit notes - - 1,725 1,725
Deferred income taxes 2,026 1,825 91 200
Other 2,066 2,039 558 442
- ------------------------------------------------------------------------------- -------------------------
Total noncurrent liabilities 7,236 7,006 18,024 18,036
Redeemable preferred stock - 10 526 526
Common stock and other shareholders' equity
Common stock
Class A FT - - - -
FON - - - -
PCS - - - -
Other shareholders' equity - - - -
Combined attributed net assets 13,587 11,814 301 480
- ------------------------------------------------------------------------------- -------------------------
Total shareholders' equity - - - -
- ------------------------------------------------------------------------------- -------------------------
Total $ 24,893 $ 23,539 $ 22,626 $ 23,022
------------------------- -------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
Sprint Corporation
---------------------------------
Consolidated
- -------------------------------------------------------------------------------------------------------------
Year-to-Date March 31, 2003 2002
- -------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ 1,668 $ 140
Discontinued operation, net (1,313) (40)
Cumulative effect of change in accounting principle, net (258) -
Depreciation and amortization 1,236 1,171
Deferred income taxes 736 498
Changes in assets and liabilities (1,085) (1,231)
Other, net 73 37
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of continuing operations 1,057 575
- -------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (547) (1,146)
Investments in affiliates, net (12) (8)
Other, net 3 3
- -------------------------------------------------------------------------------------------------------------
Net cash used by investing activities of continuing operations (556) (1,151)
- -------------------------------------------------------------------------------------------------------------
Financing Activities
Change in debt, net (1,555) 2,485
Dividends paid (113) (114)
Other, net 12 (2)
- -------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities of continuing operations (1,656) 2,369
- -------------------------------------------------------------------------------------------------------------
Cash from discontinued operation 2,215 60
- -------------------------------------------------------------------------------------------------------------
Change in cash and equivalents 1,060 1,853
Cash and equivalents at beginning of period 1,035 313
- -------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 2,095 $ 2,166
---------------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
Sprint FON Group
- ------------------------------------------------------------------------- --------------------------------
Year-to-Date March 31, 2003 2002
- ------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ 1,850 $ 286
Discontinued operation, net (1,313) (40)
Cumulative effect of change in accounting principle, net (258) -
Depreciation and amortization 628 644
Deferred income taxes 81 131
Changes in assets and liabilities (237) (619)
Other, net 21 9
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of continuing operations 772 411
- -------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (360) (543)
Investments in affiliates, net - (8)
Other, net 3 3
- -------------------------------------------------------------------------------------------------------------
Net cash used by investing activities of continuing operations (357) (548)
- -------------------------------------------------------------------------------------------------------------
Financing Activities
Change in debt, net (1,534) 485
Dividends paid (110) (110)
Other, net 11 2
- -------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities of continuing operations (1,633) 377
- -------------------------------------------------------------------------------------------------------------
Cash from discontinued operation 2,215 60
- -------------------------------------------------------------------------------------------------------------
Change in cash and equivalents 997 300
Cash and equivalents at beginning of period 641 134
- -------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 1,638 $ 434
---------------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
Sprint PCS Group
- ------------------------------------------------------------------------- --------------------------------
Year-to-Date March 31, 2003 2002
- ------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ (182) $ (146)
Discontinued operation, net - -
Cumulative effect of change in accounting principle, net - -
Depreciation and amortization 608 527
Deferred income taxes 655 367
Changes in assets and liabilities (848) (612)
Other, net 52 28
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of continuing operations 285 164
- -------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (187) (603)
Investments in affiliates, net (12) -
Other, net - -
- -------------------------------------------------------------------------------------------------------------
Net cash used by investing activities of continuing operations (199) (603)
- -------------------------------------------------------------------------------------------------------------
Financing Activities
Change in debt, net (21) 2,000
Dividends paid (3) (4)
Other, net 1 (4)
- -------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities of continuing operations (23) 1,992
- -------------------------------------------------------------------------------------------------------------
Cash from discontinued operation - -
- -------------------------------------------------------------------------------------------------------------
Change in cash and equivalents 63 1,553
Cash and equivalents at beginning of period 394 179
- -------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 457 $ 1,732
---------------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation and do not constitute stand-alone entities.
Sprint Corporation
Reconciliation of Non-GAAP Liquidity Measures
(millions)
-------------------------------------------------------------------------------------
Global
Quarter ended March 31, 2003 PCS FON Local Markets
Consolidated Eliminations Group Group Division Division Other
-------------------------------------------------------------------------------------
Operating income (loss) $ 604 $ 10 $ 140 $ 454 $ 460 $ 6 $ (12)
Special items (1) 10 - 10 - - - -
-------------------------------------------------------------------------------------
Operating income (loss) adjusted for
special items 614 10 150 454 460 6 (12)
Depreciation and amortization 1,236 - 608 628 266 360 2
-------------------------------------------------------------------------------------
Adjusted EBITDA 1,850 10 758 1,082 $ 726 $ 366 $ (10)
-----------------------------------
Adjust for special items (10) - (10) -
Other operating activities, net (783) (10) (463) (310)
--------------------------------------------------
Cash provided by operating activities-GAAP 1,057 - 285 772
Capital expenditures (547) - (187) (360)
Dividends paid (113) - (3) (110)
Discontinued operation 2,215 - - 2,215
Other investing activities, net (9) - (12) 3
--------------------------------------------------
Free cash flow 2,603 - 83 2,520
Decrease in debt, net (1,555) - (21) (1,534)
Other financing activities, net 12 - 1 11
--------------------------------------------------
Change in cash and equivalents - GAAP $ 1,060 $ - $ 63 $ 997
--------------------------------------------------
Other operating activities, net includes the change in working capital, change in deferred income taxes, misc operating activities
and nonoperating items in income (loss) from continuing operations.
See accompanying footnotes.
Global
Quarter ended December 31, 2002 PCS FON Local Markets
Consolidated Eliminations Group Group Division Division Other
-------------------------------------------------------------------------------------
Operating income (loss) $ 388 $ 9 $ - $ 379 $ 418 $ (32) $ (7)
Special items (8) 245 - 120 125 53 71 1
-------------------------------------------------------------------------------------
Operating income (loss) adjusted for
special items 633 9 120 504 471 39 (6)
Depreciation and amortization 1,283 - 609 674 292 380 2
-------------------------------------------------------------------------------------
Adjusted EBITDA 1,916 9 729 1,178 $ 763 $ 419 $ (4)
-----------------------------------
Adjust for special items (245) - (120) (125)
Other operating activities, net 109 (9) (266) 384
--------------------------------------------------
Cash provided by operating activities-GAAP 1,780 - 343 1,437
Capital expenditures (1,221) - (590) (631)
Dividends paid (113) - (3) (110)
Discontinued operation 50 - - 50
Other investing activities, net 171 - 17 154
--------------------------------------------------
Free cash flow 667 - (233) 900
Decrease in debt, net (379) - (9) (370)
Other financing activities, net 9 - (1) 10
--------------------------------------------------
Change in cash and equivalents - GAAP $ 297 $ - $ (243) $ 540
------------------------------------------------
Other operating activities, net includes the change in working capital, change in deferred income taxes, misc operating activities
and nonoperating items in income (loss) from continuing operations.
See accompanying footnotes.
Global
Quarter ended March 31, 2002 PCS FON Local Markets
Consolidated Eliminations Group Group Division Division Other
-------------------------------------------------------------------------------------
Operating income (loss) $ 518 $ 8 $ 113 $ 397 $ 481 $ (75) $ (9)
Depreciation and amortization 1,171 - 527 644 286 357 1
-------------------------------------------------------------------------------------
Adjusted EBITDA 1,689 8 640 1,041 $ 767 $ 282 $ (8)
-----------------------------------
Other operating activities, net (1,114) (8) (476) (630)
--------------------------------------------------
Cash provided by operating activities-GAAP 575 - 164 411
Capital expenditures (1,146) - (603) (543)
Dividends paid (114) - (4) (110)
Discontinued operation 60 - - 60
Other investing activities, net (5) - - (5)
--------------------------------------------------
Free cash flow (630) - (443) (187)
Increase in debt, net 2,485 - 2,000 485
Other financing activities, net (2) - (4) 2
--------------------------------------------------
Change in cash and equivalents - GAAP $ 1,853 $ - $ 1,553 $ 300
--------------------------------------------------
Other operating activities, net includes the change in working capital, change in deferred income taxes, misc operating activities
and nonoperating items in income (loss) from continuing operations.
See accompanying footnotes.
Sprint Corporation
FON Group-- Local Division Selected Information (1)
(millions)
- ----------------------------------------------------------------------------------------------------------------------------------
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
Quarters Ended 2003 2002 2002 2002 2002
- ----------------------------------------------------------------------------------------------------------------------------------
Net operating revenues
Local service $ 765 $ 765 $ 765 $ 763 $ 761
Network access 523 521 526 518 518
Long distance 144 149 155 156 168
Other 104 129 134 111 118
- ----------------------------------------------------------------------------------------------------------------------------------
1,536 1,564 1,580 1,548 1,565
- ----------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Costs of services and products 490 478 513 474 480
Selling, general and administrative 320 323 323 305 318
Depreciation 266 292 291 288 286
Restructuring charge - 53 3 - -
- ----------------------------------------------------------------------------------------------------------------------------------
1,076 1,146 1,130 1,067 1,084
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income $ 460 $ 418 $ 450 $ 481 $ 481
----------------------------------------------------------------------------------------
(1) Prior period amounts have been reclassified to spearately show, government-mandated charges and associated reimbursements
from customers for Universal Service Fund. This change in presentation had no impact on operating income.
Sprint Corporation
PCS GROUP
NET CUSTOMER ADDITIONS
(thousands)
Quarter ended March 31, 2003
--------------------------------------------------------------
Direct Resale Affiliate Total
-------------- ------------- ------------ ------------
Reported net additions 199 175 109 483
--------------------------------------------------------------
Ending customers - March 31, 2002 14,280 172 2,270 16,722
Ending customers - December 31, 2002 14,760 415 2,585 17,760
Ending customers - March 31, 2003 14,959 590 2,694 18,243
--------------------------------------------------------------