Exhibit 99
Sprint Reports Third Quarter Results
o Sprint reports strong positive cash flow, raises full-year forecast
o FON Group operating performance exceeds expectations
o PCS Group reports continued progress on profitability
OVERLAND PARK, Kan. - Oct. 23, 2003:
The Sprint FON Group (NYSE: FON) is comprised of Sprint's global markets
division, local 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.
Sprint today announced overall growth in revenues for the second consecutive
quarter and strong operating performance in both the FON and PCS Groups. The FON
Group reported stable sequential revenues and strong cash flow growth. The cash
flow growth has allowed substantial debt reductions, leading to significantly
lower net interest expense. The PCS Group doubled its operating income and added
nearly 500,000 new customers, including 184,000 post-paid retail additions.
"I'm pleased with Sprint's performance this quarter," said Gary Forsee, Sprint
chairman and chief executive officer. "We are staying focused on executing our
agenda of optimizing our wireline and wireless assets as a way of creating value
to our two shareholder groups.
Forsee added, "Under challenging market conditions the global markets division
again reported stability in business voice revenues and continued to produce a
more profitable product mix. The local division posted strong DSL growth and
contribution to cash flow.
In the quarter, Sprint extended its reach into local markets nationwide with the
launch of Sprint Complete Sense - bundles of local, long-distance and wireless
service. Products like Sprint Complete Sense highlight our company's
transformation initiative to realign internal resources based on customer needs
and preferences. This effort will enable Sprint to more effectively and
efficiently use its portfolio of assets to create communications solutions."
Also, in the quarter, the PCS Group continued to build on its data leadership,
passing the five million customer mark for total data subscribers. PCS also
executed an important strategic agreement with Qwest and finalized a revised
agreement with Alamosa, its largest affiliate.
Sprint Consolidated Highlights
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Sprint Corporation
Selected Financial Data
(millions) Quarters Ended
September 30, September 30, Percent
2003 2002 Change
- --------------------------------------------------------------------
Net operating revenues $6,714 $6,798 (1.2%)
Operating income (loss) (438) 524
Income (loss) from
continuing operations (497) 477
Net income (loss) $(498) $519
Year-to-Date
September 30, September 30, Percent
2003 2002 Change
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Net operating revenues $19,516 $20,138 (3.1%)
Operating income 536 1,712 (68.7%)
Income (loss) from
continuing operations (402) 471
Net income $1,177 $591
- --------------------------------------------------------------------
Third quarter consolidated net operating revenues were $6.7 billion, compared to
$6.8 billion in the same period last year. Net loss for the third quarter was
$498 million versus net income of $519 million for the same period last year.
Net loss in the third quarter of 2003 includes a net loss from special items of
$768 million, while the third quarter of last year includes a net gain from
special items of $260 million and net income from a discontinued operation of
$42 million. Operating loss was $438 million in the third quarter compared with
operating income of $524 million a year ago. Operating income adjusted for
special items* was up 15% to $785 million this quarter, compared with $681
million a year ago.
Special items in the 2003 third quarter primarily consisted of a write-down in
the fair value of Sprint's MMDS spectrum. Sprint's ongoing evaluation of
business use for this asset resulted in a decision to end pursuit of a
residential fixed wireless strategy. While alternative strategies continue to be
evaluated, this decision required a revaluation of the fair value of the asset,
resulting in a pre-tax, non-cash charge of $1.2 billion to the FON Group,
reducing the carrying value of the asset to $300 million.
Sprint continued to generate strong positive Free Cash Flow* in the quarter.
Including a $400 million outflow for a pension contribution, total Free Cash
Flow* was $436 million for the quarter, and year-to-date Free Cash Flow* stands
at $1.75 billion. At Sept. 30, cash on hand was $2.6 billion as Sprint continues
to be ahead of schedule on planned debt reduction. Net debt* was cut by $295
million in the quarter, and now stands at $17.1 billion.
The FON Group reported a loss per share from continuing operations of 48 cents,
for the third quarter, compared to earnings per share from continuing operations
of 54 cents, in the third quarter of 2002. Before special items described in the
FON discussion, FON Group EPS from continuing operations - adjusted was 38 cents
versus 39 cents in the year-ago period.
The PCS Group reported a loss of 7 cents per share for the third quarter,
compared to a loss of 1 cent per share in the third quarter of 2002. Before
special items described in the PCS discussion, the PCS Group reported a 7 cent
loss from continuing operations - adjusted versus a 13 cent loss in the year-ago
period.
Sprint FON Group Highlights
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Sprint FON Group
Selected Financial Data
(millions, except
per share data) Quarters Ended
September 30, September 30, Percent
2003 2002 Change
- ------------------------------------------------------------------
Net operating revenues $3,538 $3,816 (7.3%)
Operating income (loss) (733) 375
Income (loss) from
continuing operations (432) 484
Discontinued operation,
net (1) 42
Net income (loss) $(433) $526
Earnings (loss) per share $(0.48) $0.59
Capex $369 $469 (21.3%)
Free Cash Flow* $163 $600 (72.8%)
Year-to-Date
September 30, September 30, Percent
2003 2002 Change
- ------------------------------------------------------------------
Net operating revenues $10,649 $11,559 (7.9%)
Operating income (loss) (170) 1,213
Income (loss) from
continuing operations (63) 794
Discontinued operation,
net 1,321 120
Cumulative effect of
change in accounting
principle, net 258 -
Net income $1,516 $914 65.9%
Earnings per share $1.69 $1.03 64.1%
Capex $1,141 $1,550 (26.4%)
Free Cash Flow* $1,201 $899 33.6%
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o In the quarter, FON Group revenues declined 7% from the same period a year
ago. Revenues were up slightly compared to the second quarter.
o Operating income adjusted for special items* decreased 8% compared to last
year. Sequentially, this measure was up 3%.
o Adjusted EBITDA* of $1.11 billion decreased 7% year over year and increased
modestly on a sequential basis.
o The FON Group's Free Cash Flow* of $163 million decreased by $437 million
compared to $600 million in the year-ago quarter. Year to date, Free Cash
Flow* of $1.2 billion increased 34%. The 2003 FON Group's Free Cash Flow*
reflects a $400 million pension contribution made in the third quarter.
Sprint FON Group Earnings
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Sprint FON Group
Earnings per share Quarters Ended
September 30, September 30, Percent
2003 2002 Change
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GAAP earnings (loss) per
share $(0.48) $0.59
Discontinued operation - 0.05
Income (loss) from
continuing operations $(0.48) $0.54
Special items
Restructuring and
asset impairments 0.86 0.09
Worldcom bad debt - 0.02
Tax benefit - (0.26)
Earnings per share from
continuing operations -
adjusted $0.38 $0.39 (2.6%)
Year-to-Date
September 30, September 30, Percent
2003 2002 Change
- ----------------------------------------------------------------------
GAAP earnings per share $1.69 $1.03 64.1%
Discontinued operation 1.47 0.14
Cumulative effect of a
change in accounting
principle 0.29 -
Income (loss) from
continuing operations $(0.07) $0.89
Special items
Restructuring and
asset impairments 1.10 0.09
Executive separation 0.01 -
Shareholder
litigation charge 0.01 -
Premium on early
retirement of debt 0.02 -
WorldCom bad debt - 0.02
Tax benefit - (0.26)
EarthLink impairment - 0.27
Sale of customer
contracts - (0.03)
Earnings per share from
continuing operations -
adjusted $1.07 $0.98 9.2%
- ----------------------------------------------------------------------
The difference between reported FON Group EPS and EPS from continuing operations
- - adjusted, is the result of the following items:
o Restructuring and asset impairments - a pre-tax charge of $1.22 billion was
recorded in the third quarter of 2003 related to a revaluation of the fair
value of Sprint's MMDS spectrum. A pre-tax charge of $348 million was
recorded in the second quarter of 2003 along with an additional $2 million
in the third quarter of 2003 primarily associated with the decision to wind
down the Web hosting business. A pre-tax charge of $202 million was
recorded in the third quarter of 2002 related to the termination of
high-speed data services, as well as additional steps to reduce operating
costs. The charge was partially offset by a $76 million adjustment to
finalize the restructuring charge recorded in the 2001 fourth quarter.
o Discontinued operation - reflects the operational activity and 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 Executive separation agreements - a pre-tax charge of $17 million was
recorded in the second quarter of 2003 for the FON Group's share of charges
associated with executive separation agreements.
o Shareholder litigation charge - a pre-tax charge of $24 million was
recorded in the first quarter of 2003 for the FON Group's share of a
shareholder litigation settlement. This charge was partially offset by $8
million of insurance proceeds received in the third quarter of 2003.
o Premium on early retirement of debt - a pre-tax charge of $19 million was
recorded in the first quarter of 2003 and $2 million in the third quarter
of 2003 related to the early retirement of approximately $1.2 billion of
long-term debt.
o WorldCom bad debt - a pre-tax charge of $30 million was recorded in the
third quarter of 2002 related to the expected loss on receivables due to
WorldCom's bankruptcy declaration.
o Tax benefit - a tax benefit of $235 million was recorded in the third
quarter of 2002 related to capital losses that were previously not
recognizable.
o EarthLink impairment - a pre-tax charge of $241 million was recorded in the
second quarter of 2002 due to declining market value.
o Sale of customer contracts - a pre-tax gain of $40 million was recorded in
the second quarter of 2002 related to the sale of customer contracts.
Local Division
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Local
Selected Financial Data
(millions) Quarters Ended
September 30, September 30, Percent
2003 2002 Change
- ----------------------------------------------------------------------
Net operating revenues
Local service $757 $765 (1.0%)
Network access 525 526 (0.2%)
Long-distance 135 155 (12.9%)
Other 113 134 (15.7%)
Net operating revenues 1,530 1,580 (3.2%)
Operating expenses
Cost of services &
products 493 513 (3.9%)
Selling, general &
administrative 308 323 (4.6%)
Depreciation 270 291 (7.2%)
Restructuring and
asset impairments - 3
Total operating
expenses 1,071 1,130 (5.2%)
Operating Income $459 $450 2.0%
Capex $273 $305 (10.5)%
Year-to-Date
September 30, September 30, Percent
2003 2002 Change
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Net operating revenues
Local service $2,284 $2,289 (0.2%)
Network access 1,567 1,562 0.3%
Long-distance 412 479 (14.0%)
Other 332 363 (8.5%)
Net operating revenues 4,595 4,693 (2.1%)
Operating expenses
Cost of services &
products 1,473 1,467 0.4%
Selling, general &
administrative 946 946 -
Depreciation 808 865 (6.6%)
Restructuring and
asset impairments - 3
Total operating
expenses 3,227 3,281 (1.6%)
Operating Income $1,368 $1,412 (3.1%)
Capex $851 $871 (2.3)%
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o Third quarter revenues of $1.53 billion declined 3.2% from $1.58 billion in
the year-ago period. Revenues were flat, sequentially.
o Adjusted EBITDA* was $729 million for the quarter compared to $771 million
last year and $729 million in the second quarter. Year-to-date Adjusted
EBITDA* of $2.18 billion is 5% below the comparable period in 2002.
o Operating income adjusted for special items* was $459 million for the
quarter compared to $480 million a year ago and $457 million in the second
quarter.
o DSL subscribership grew by 41,000 to end the quarter with 264,000 lines.
o Total access lines declined at a 2.2% annual rate compared to 2.4% recorded
in the second quarter.
The local division continues to execute on key strategic initiatives including
increasing penetration of bundled services and DSL, expanding Sprint-branded
local service beyond existing local service territories, and converting
circuit-based networks to next-generation packet technology.
In the quarter, the division successfully converted two additional switch
complexes to packet technology and plans to have converted over 150,000 lines by
the end of the year.
The division reported continued gains in bundled service customers as nearly 60%
of new customers in the quarter signed up for a bundled plan. Consumer bundle
penetration increased nearly 700 basis points to over 31% and business bundle
penetration increased 400 basis points from the year-ago period to 26%.
Total third quarter expenses decreased 5% compared to a year ago. The 2002 third
quarter results include a WorldCom bad debt charge of $27 million. Lower
depreciation expense in 2003, is due to the adoption of SFAS No. 143, and
lowered depreciation rates on switching equipment. The decline in costs of
services and products is driven by general expense controls and lower costs
associated with equipment and long-distance revenues. Costs of services and
products and selling, general and administrative expenses were also impacted by
an increase in pension benefits.
Global Markets Division
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Global Markets
Selected Financial Data
(millions) Quarters Ended
September 30, September 30, Percent
2003 2002 Change
- ---------------------------------------------------------------------
Net operating revenues
Voice $1,240 $1,433 (13.5%)
Data 462 445 3.8%
Internet 233 258 (9.7%)
Other 39 95 (58.9%)
Net operating revenues 1,974 2,231 (11.5%)
Operating expenses
Cost of services &
products 1,059 1,189 (10.9%)
Selling, general &
administrative 522 604 (13.6%)
Depreciation 351 378 (7.1%)
Restructuring and
asset impairments 1,223 123
Total operating
expenses 3,155 2,294 37.5%
Operating loss $(1,181) $(63)
Capex $71 $143 (50.3%)
Year-to-Date
September 30, September 30, Percent
2003 2002 Change
- ---------------------------------------------------------------------
Net operating revenues
Voice $3,775 $4,437 (14.9%)
Data 1,386 1,396 (0.7%)
Internet 721 750 (3.9%)
Other 136 265 (48.7%)
Net operating revenues 6,018 6,848 (12.1%)
Operating expenses
Cost of services &
products 3,225 3,939 (18.1%)
Selling, general &
administrative 1,653 1,855 (10.9%)
Depreciation 1,073 1,099 (2.4%)
Restructuring and
asset impairments 1,571 123
Total operating
expenses 7,522 7,016 7.2%
Operating loss $(1,504) $(168)
Capex $218 $567 (61.6%)
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o Net operating revenues declined 11.5% to $1.97 billion from $2.23 billion a
year ago. Sequentially, revenue was down by a little over 1%.
o Excluding special items, operating income for the quarter was $42 million
compared to $63 million in the year-ago period.
o Adjusted EBITDA* was $393 million in the quarter, down 11% from the
year-ago period and up 1% sequentially. Year-to-date Adjusted EBITDA* of
$1.15 billion is 9% above the year-ago period.
In the quarter, total voice revenues were flat, sequentially. Retail business
voice revenues increased 3%, sequentially. Consumer revenues continued to be
impacted by product substitution and aggressive competition, but were stable
sequentially. Due to the loss of a major customer, wholesale voice revenues were
down year over year as expected.
Data revenues were again stable sequentially with mixed product performance.
Frame Relay revenues grew at a low double-digit rate compared to last year,
while ATM and Private Line declined. IP revenues were again impacted by a price
reduction of a large Dial IP contract. Other revenues were impacted by lower
equipment sales and the sale of our consulting business in the third quarter of
2002.
Excluding special items as described in the FON discussion, total expenses
declined 11% compared to the year-ago period, and 2% sequentially. The cost
savings are being driven by lower headcount and lower volume, and initiatives to
improve access unit costs. Additionally, bad debt expense including recoveries
of previously written-off accounts declined in the period.
Sprint PCS Group Highlights
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Sprint PCS Group
Selected Financial Data
(millions, except
per share data) Quarters Ended
September 30, September 30, Percent
2003 2002 Change
- --------------------------------------------------------------------
Net operating revenues $3,340 $3,157 5.8%
Operating expenses
Cost of services &
products 1,628 1,478 10.1%
Selling, general &
administrative 800 955 (16.2%)
Depreciation &
amortization 628 588 6.8%
Restructuring and
asset impairment - (5)
Total operating
expenses 3,056 3,016 1.3%
Operating Income $284 $141
Net loss $(65) $(7)
Loss per share $(0.07) $(0.01)
Capex $491 $650 (24.5%)
Free Cash Flow* $273 $(113)
Year-to-Date
September 30, September 30, Percent
2003 2002 Change
- ---------------------------------------------------------------------
Net operating revenues $9,383 $9,023 4.0%
Operating expenses
Cost of services &
products 4,597 4,316 6.5%
Selling, general &
administrative 2,248 2,556 (12.1%)
Depreciation &
amortization 1,853 1,658 11.8%
Restructuring & asset
impairments 10 18 (44.4%)
Total operating
expenses 8,708 8,548 1.9%
Operating Income $675 $475 42.1%
Net loss $(339) $(323) 5.0%
Loss per share $(0.34) $(0.33)
Capex $1,211 $2,078 (41.7%)
Free Cash Flow* $548 $(359)
- --------------------------------------------------------------------
o Third quarter net subscriber additions include 184,000 post-paid retail,
290,000 from wholesale channels and 22,000 from affiliates. At the end of
the period, PCS Group was serving a total of 19.3 million customers.
o Based on strong service revenue, net operating revenues for the PCS Group
were up nearly 6% year over year. Net operating revenues were up 8%,
sequentially.
o Operating income rose to $284 million, a 13% increase from the second
quarter's $251 million, and more than doubled from $141 million in the
third quarter of 2002.
o Adjusted EBITDA* was $912 million, a 25% improvement from $730 million a
year ago. Year to date, Adjusted EBITDA* of $2.56 billion is a 20% increase
from 2002.
o Average monthly service revenue per user (ARPU)* was just under $63 in the
third quarter, down slightly when compared to the year ago period and $1
higher sequentially. During the quarter, PCS customers increased their
average usage to nearly 14 hours per month, up from 11 hours in third
quarter of 2002.
o The cost to acquire a new customer (CPGA)* was $465, up sequentially from
$415 and $395 a year ago. CPGA* was impacted by increased marketing
spending, a $27 million inventory write-down reflecting a substantial
decline in camera phone replacement cost, and increased rebates as a result
of higher take rates on two-year contracts. Cash cost per user (CCPU)* was
$31, flat sequentially and decreased from $33 a year ago.
o Churn was 2.7% this quarter compared to 2.4% sequentially, but remained
much lower than the 3.8% reported a year ago. Ahead of the implementation
of WLNP (wireless local number portability) in the fourth quarter, the
company has implemented initiatives aimed at improved retention.
This quarter marked the one-year anniversary of PCS Vision utilizing the
nation's largest next-generation wireless network. The popularity of
Vision-enabled applications like Picture Mail drove the total number of PCS
Vision subscribers to 2.7 million, up from 2.1 million in the second quarter.
Combined with Sprint's first generation WAP (wireless application protocol) data
services, Sprint now supports more than five million total data subscribers.
The PCS Group continues to enhance its growth potential through strategic
alliances. These alliances leverage Sprint's network assets and broaden channels
for selling our services. The Virgin Mobile joint venture boosted resale
additions this quarter with back-to-school promotions.
Additionally, Sprint introduced Virgin's prepaid products to its retail
locations. During the quarter, Sprint completed a wholesale agreement with Qwest
Communications that is expected to add Qwest's wireless subscribers to the PCS
network in 2004. The agreement will offer Qwest subscribers the convenience of
nationwide calling plans, as well as access to the advanced applications and
features of Sprint-branded PCS Vision.
The PCS Group's year-to-date Free Cash Flow* of $548 million is an increase of
$907 million over the same period in 2002. The 2003 results exclude $525 million
of tax benefits from the FON Group associated with the sale of the directory
publishing business.
Sprint PCS Group Earnings
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Sprint PCS Group
Loss per share
Quarters Ended
September 30, September 30, Percent
2003 2002 Change
- --------------------------------------------------------------------
GAAP loss per share $(0.07) $(0.01)
Special items
Pegaso sale - (0.07)
Tax benefit - (0.05)
Loss per share from
continuing operations -
adjusted $(0.07) $(0.13) (46.2%)
Year-to-Date
September 30, September 30, Percent
2003 2002 Change
- --------------------------------------------------------------------
GAAP loss per share $(0.34) $(0.33) 3.0%
Special items
Executive separation 0.01 -
Shareholder
litigation charge 0.01 -
Pegaso sale - (0.07)
Tax benefit - (0.05)
Loss per share from
continuing operations -
adjusted $(0.32) $(0.45) (28.9%)
- --------------------------------------------------------------------
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 Executive separation agreements - a pre-tax charge of $19 million was
recorded in the second quarter of 2003 for the PCS Group's share of charges
associated with executive separation agreements.
o Shareholder litigation charge - a pre-tax charge of $26 million was
recorded in the first quarter of 2003 for the PCS Group's share of a
shareholder litigation settlement. This charge was partially offset by $9
million of insurance proceeds received in the third quarter of 2003.
o Pegaso sale - a pre-tax gain of $67 million was recorded in the third
quarter of 2002 related to the sale of the investment in Pegaso.
o Tax benefit - a tax benefit of $57 million was recorded in the third
quarter of 2002 related to capital losses that were previously not
recognizable.
*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:
Operating income (loss) adjusted for special items is defined as operating
income plus 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
operations.
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 discontinued operations, debt, investment in debt securities 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
currently expects to provide an update on business trends in the latter part of
the fourth quarter. Sprint has announced plans to transform its organization to
be structured around customer segments. These transformation activities will
result in additional restructuring costs being incurred in subsequent quarters.
Sprint now expects planning efforts for this transformation to extend through
the balance of the year. As a result, we are rescheduling our annual investment
community meeting to coincide with the release of fourth quarter earnings which
are expected to be in early February 2004. We will announce the specifics on the
meeting as soon as logistical arrangements are finalized.
Sprint is updating its 2003 guidance for the FON Group as follows:
Full-year EPS from continuing operations - adjusted in 2003 are expected to be
between $1.43 and $1.45 per diluted share. This is an increase from prior
guidance of $1.35 to $1.40. Our EPS guidance excludes all special items.
Full-year revenues are targeted to decline at around 7%. Our prior guidance
called for a 6-7% decline. In the fourth quarter, we expect relatively stable
revenues sequentially.
Sprint expects full-year FON Operating income adjusted for special items* to be
between $1.85 billion and $1.90 billion. The prior range was $1.80 billion to
$1.85 billion.
Capital expenditures are now expected to be approximately $1.7 billion, a $100
million reduction from our previous forecast. Capital spending in the local
division is expected to be approximately $1.2 billion and Global Markets capital
spending is expected to be a little under $400 million.
Sprint now expects full-year 2003 Free Cash Flow* for the FON Group to be
approximately $1.7 billion. This excludes $1.5 billion of net directory
proceeds.
Sprint is updating its 2003 guidance for the PCS Group as follows:
Sprint is confirming our previous guidance for the following items:
o Full-year loss per share from continuing operations - adjusted of $0.43 to
$0.48. Our EPS guidance excludes all special items.
o Operating income adjusted for special items* for 2003 in a range of $800 to
$900 million.
o Full-year Adjusted EBITDA* in the range of $3.3 billion to $3.4 billion.
o Full-year gross customer additions in the low- to mid-6 million range.
o Capital expenditures at around $2.1 billion.
PCS Group is revising full year 2003 Free Cash Flow* to approximately $300
million versus our prior estimate of $200 million. The increase is primarily due
to reduced working capital requirements. This excludes $700 million of tax
benefits associated with the sale of the directory publishing business.
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
Thursday, Oct. 23, 2003, beginning at 7:00 a.m. CT for FON and 7:45 a.m. CT for
PCS. Investors may participate by viewing the webcast at www.sprint.com.
Please plan on gaining access 10 minutes prior to the start of the calls.
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 Nov. 6,
2003, at the following numbers: 888-775-8696 (toll free) or 402-220-1326
(international).
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 Nov. 6,
2003, at the following numbers: 888-775-8673 (toll free) or 402-220-1325
(international).
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," "target" 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 and the Global Markets Division to continue to
grow a significant market presence;
o the ability of the PCS Group and the Global Markets Division to improve
profitability and reduce 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, emerging and competing technologies on Sprint's
business;
o unexpected results of litigation filed against Sprint;
o the impact of wireless local number portability on the PCS Group's growth
and churn rates, revenues and expenses;
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 integrated communications provider serving more than 26
million customers in over 100 countries. With approximately 70,000 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
communications services in 39 states and the District of Columbia and operates
the largest 100-percent digital, nationwide PCS wireless network in the United
States. For more information, visit www.sprint.com.
For further information, contact Corporate Communictions:
- - Media Relations:
Mark Bonavia
913-794-1088
mark.bonavia@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 September 30, 2003 2002 2003 2002
- ---------------------------------------------- ----------------------------------- ------------------------------------
Net operating revenues $ 6,714 $ 6,798 $ (164) $ (175)
- ----------------------------------------------------------------------------------- ------------------------------------
Operating expenses
Costs of services and products 3,034 2,995 (164) (175)
Selling, general and administrative (1) 1,644 1,900 (11) (8)
Depreciation and amortization 1,251 1,258 - -
Restructuring and asset impairments (2) 1,223 121 - -
- ----------------------------------------------------------------------------------- ------------------------------------
Total operating expenses 7,152 6,274 (175) (183)
- ----------------------------------------------------------------------------------- ------------------------------------
Operating income (loss) (438) 524 11 8
Interest expense (335) (345) - -
Intergroup interest charge - - - -
Premium on early retirement of debt (3) (2) - - -
Other income (expense), net (4) 4 74 (11) (8)
- ----------------------------------------------------------------------------------- ------------------------------------
Income (loss) before income taxes (771) 253 - -
Income tax benefit (5) 274 224 - -
- ----------------------------------------------------------------------------------- ------------------------------------
Income (loss) from continuing operations (497) 477 - -
Discontinued operation, net (6) (1) 42 - -
- ----------------------------------------------------------------------------------- ------------------------------------
Net income (loss) (498) 519 - -
Preferred stock dividends (paid) received (2) (1) - -
- ----------------------------------------------------------------------------------- ------------------------------------
Earnings (loss) applicable to common stock $ (500) $ 518 $ - $ -
---------------------------------- ------------------------------------
Diluted earnings (loss) per common share (8)
Income (loss) from continuing operations
Discontinued operation
- ----------------------------------------------------------------------------------- ------------------------------------
Total
Diluted weighted average common shares outstanding (9)
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 September 30, 2003 2002 2003 2002
- ----------------------------------------------------------------------------------- ------------------------------------
Net operating revenues $ 3,538 $ 3,816 $ 3,340 $ 3,157
- ----------------------------------------------------------------------------------- ------------------------------------
Operating expenses
Costs of services and products 1,570 1,692 1,628 1,478
Selling, general and administrative (1) 855 953 800 955
Depreciation and amortization 623 670 628 588
Restructuring and asset impairments (2) 1,223 126 - (5)
- ----------------------------------------------------------------------------------- ------------------------------------
Total operating expenses 4,271 3,441 3,056 3,016
- ----------------------------------------------------------------------------------- ------------------------------------
Operating income (loss) (733) 375 284 141
Interest expense (55) (75) (280) (270)
Intergroup interest charge 98 82 (98) (82)
Premium on early retirement of debt (3) (2) - - -
Other income (expense), net (4) 25 17 (10) 65
- ----------------------------------------------------------------------------------- ------------------------------------
Income (loss) before income taxes (667) 399 (104) (146)
Income tax benefit (5) 235 85 39 139
- ----------------------------------------------------------------------------------- ------------------------------------
Income (loss) from continuing operations (432) 484 (65) (7)
Discontinued operation, net (6) (1) 42 - -
- ----------------------------------------------------------------------------------- ------------------------------------
Net income (loss) (433) 526 (65) (7)
Preferred stock dividends (paid) received 2 2 (4) (3)
- ----------------------------------------------------------------------------------- ------------------------------------
Earnings (loss) applicable to common stock $ (431) $ 528 $ (69) $ (10)
-------------------------------- ------------------------------------
Diluted earnings (loss) per common share (8)
Income (loss) from continuing operations $ (0.48) $ 0.54 $ (0.07) $ (0.01)
Discontinued operation - 0.05 - -
- ----------------------------------------------------------------------------------- ------------------------------------
Total $ (0.48) $ 0.59 $ (0.07) $ (0.01)
------------------------------- ------------------------------------
Diluted weighted average common shares
outstanding (9) 903.0 894.6 1,033.1 1,018.6
Basic earnings (loss) per common share $ (0.48) $ 0.59 $ (0.07) $ (0.01)
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 Corporation
--------------------------------------
Consolidated Eliminations/Reclassifications
- ----------------------------------------------------------------------------------- ------------------------------------
Year-to-Date September 30, 2003 2002 2003 2002
- ----------------------------------------------------------------------------------- ------------------------------------
Net operating revenues $ 19,516 $ 20,138 $ (516) $ (444)
- ----------------------------------------------------------------------------------- -----------------------------------
Operating expenses
Costs of services and products 8,766 9,246 (516) (444)
Selling, general and administrative (1) 4,894 5,407 (31) (24)
Depreciation and amortization 3,739 3,629 - -
Restructuring and asset impairments (2) 1,581 144 - -
- ----------------------------------------------------------------------------------- ------------------------------------
Total operating expenses 18,980 18,426 (547) (468)
- ----------------------------------------------------------------------------------- ------------------------------------
Operating income (loss) 536 1,712 31 24
Interest expense (1,052) (1,044) - -
Intergroup interest charge - - - -
Premium on early retirement of debt (3) (21) - - -
Other expense, net (4) (78) (234) (31) (24)
- ----------------------------------------------------------------------------------- -------------------------------------
Income (loss) before income taxes (615) 434 - -
Income tax (expense) benefit (5) 213 37 - -
- ----------------------------------------------------------------------------------- -------------------------------------
Income (loss) from continuing operations (402) 471 - -
Discontinued operation, net (6) 1,321 120 - -
Cumulative effect of change in accounting principle,
net (7) 258 - - -
- ----------------------------------------------------------------------------------- --------------------------------------
Net income (loss) 1,177 591 - -
Preferred stock dividends (paid) received (5) (5) - -
- ----------------------------------------------------------------------------------- --------------------------------------
Earnings (loss) applicable to common stock $ 1,172 $ 586 $ - $ -
-------------------------------- -------------------------------------
Diluted earnings (loss) per common share (8)
Income (loss) from continuing operations
Discontinued operation
Cumulative effect of change in accounting principle
- ----------------------------------------------------------------------------------- -------------------------------------
Total
Diluted weighted average common shares outstanding (9)
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
- ----------------------------------------------------------------------------------- ------------------------------------
Year-to-Date September 30, 2003 2002 2003 2002
- ----------------------------------------------------------------------------------- ------------------------------------
Net operating revenues $ 10,649 $ 11,559 $ 9,383 $ 9,023
- ----------------------------------------------------------------------------------- ------------------------------------
Operating expenses
Costs of services and products 4,685 5,374 4,597 4,316
Selling, general and administrative (1) 2,677 2,875 2,248 2,556
Depreciation and amortization 1,886 1,971 1,853 1,658
Restructuring and asset impairments (2) 1,571 126 10 18
- ----------------------------------------------------------------------------------- ------------------------------------
Total operating expenses 10,819 10,346 8,708 8,548
- ----------------------------------------------------------------------------------- ------------------------------------
Operating income (loss) (170) 1,213 675 475
Interest expense (185) (232) (867) (812)
Intergroup interest charge 278 255 (278) (255)
Premium on early retirement of debt (3) (21) - - -
Other expense, net (4) 25 (181) (72) (29)
- ----------------------------------------------------------------------------------- ------------------------------------
Income (loss) before income taxes (73) 1,055 (542) (621)
Income tax (expense) benefit (5) 10 (261) 203 298
- ----------------------------------------------------------------------------------- ------------------------------------
Income (loss) from continuing operations (63) 794 (339) (323)
Discontinued operation, net (6) 1,321 120 - -
Cumulative effect of change in accounting principle,
net (7) 258 - - -
- ----------------------------------------------------------------------------------- ------------------------------------
Net income (loss) 1,516 914 (339) (323)
Preferred stock dividends (paid) received 6 5 (11) (10)
- ----------------------------------------------------------------------------------- ------------------------------------
Earnings (loss) applicable to common stock $ 1,522 $ 919 $ (350) $ (333)
----------------------------------- ------------------------------------
Diluted earnings (loss) per common share (8)
Income (loss) from continuing operations $ (0.07) $ 0.89 $ (0.34) $ (0.33)
Discontinued operation 1.47 0.14 - -
Cumulative effect of change in accounting
principle 0.29 - - -
- ----------------------------------------------------------------------------------- ------------------------------------
Total $ 1.69 $ 1.03 $ (0.34) $ (0.33)
----------------------------------- ------------------------------------
Diluted weighted average common shares
outstanding (9) 899.9 893.2 1,026.6 1,014.2
----------------------------------- ------------------------------------
Basic earnings (loss) per common share $ 1.69 $ 1.03 $ (0.34) $ (0.33)
----------------------------------- ------------------------------------
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
(1) In the 2003 second quarter, Sprint recorded charges of $36 million in
connection with the separation agreements agreed to by Sprint and three
former executive officers. This includes a $15 million non-cash charge
associated with accounting for modifications to certain terms of stock
options granted in prior periods. The charge to the FON Group was $17
million, which increased FON Group's loss from continuing operations by $10
million, or $0.01 per share. The charge to the PCS Group was $19 million,
which increased loss from continuing operations by $12 million, or $0.01
per share.
In the 2002 third quarter, Sprint recorded a charge to bad debt expense in
connection with the bankruptcy declaration of WorldCom, which reduced
operating income by $36 million and income from continuing operations by
$23 million. The charge to the FON Group was $30 million, which reduced
income from continuing operations by $19 million, or $0.02 per share. The
charge to the PCS Group was $6 million, which increased loss from
continuing operations by $4 million with no per share impact.
(2) In the 2003 third quarter, Sprint's ongoing evaluation of business use for
the FON Group's MMDS spectrum resulted in a decision to end pursuit of a
residential fixed wireless strategy. While alternative strategies continue
to be evaluated, this decision required a revaluation of the fair value of
the asset, resulting in a pre-tax, non-cash charge of $1.2 billion,
reducing the carrying value to $300 million. This charge increased FON
Group's loss from continuing operations by $777 million, or $0.86 per
share.
In the 2003 second quarter, the FON Group recorded restructuring and asset
impairment charges of $348 million primarily related to winding down the
Global Markets Division's Web hosting business. This includes a $337
million non-cash charge for the impairment of hosting assets and an $11
million charge related to cash requirements for employee terminations. The
2003 second quarter charge increased loss from continuing operations by
$218 million, or $0.24 per share. Sprint will record additional charges for
facility lease terminations, customer migration, employee termination and
other wind-down costs in subsequent periods. The associated 2003 third
quarter charge was $2 million, which increased loss from continuing
operations by $1 million with no per share impact.
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 per share
impact.
In the 2002 third quarter, Sprint recorded restructuring charge and asset
impairment activity of $121 million, which reduced income from continuing
operations by $76 million. The FON Group recorded a restructuring charge
and asset impairment of $202 million representing the termination of
high-speed data services. This charge was partially offset by a $76 million
reduction in the reserve related to a restructuring announced in the 2001
fourth quarter. This reduced income from continuing operations by $79
million, or $0.09 per share. Also, the PCS Group recorded a $6 million
reduction to the restructuring reserve recorded in the 2002 first quarter,
which was partially offset by a $1 million increase to the restructuring
reserve recorded in the 2001 fourth quarter. This reduced loss from
continuing operations by $3 million with no per share impact.
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.
(3) In the 2003 first quarter, the FON Group recorded a $19 million charge
reflecting the premiums paid on a debt tender offer. In the 2003 third
quarter, an additional $2 million premium was recorded primarily reflecting
the early retirement of local division debt. For the nine months ended
September 30, 2003, these charges increased FON Group loss from continuing
operations by $13 million, or $0.02 per share. There was no per share
impact of this event in the 2003 third quarter.
(4) In the 2003 first quarter, Sprint recorded to Other income (expense), a $50
million aggregate charge to settle a securities class action and derivative
lawsuit relating to the failed merger with WorldCom. In the 2003 third
quarter, Sprint recorded $17 million from an insurance settlement related
to this action. For the nine months ended September 30, 2003 Sprint
attributed $16 million of the net charge to the FON Group, which increased
loss from continuing operations by $10 million, or $0.01 per share. The
remaining net charge of $17 million was attributed to the PCS Group, which
increased loss from continuing operations by $11 million, or $0.01 per
share. There was no per share impact related to this event for either the
FON Group or PCS Group in the 2003 third quarter.
In the 2002 second quarter, the FON Group recorded in Other income
(expense), net, charges of $201 million, which reduced income from
continuing operations by $216 million, or $0.24 per share. These amounts
included a gain from the sale of customer contracts for $40 million with an
impact to income from continuing operations of $25 million, or $0.03 per
share. Also included is a write-down of an investment due to declining
market value of $241 million with the same impact on income from continuing
operations, or $0.27 per share.
In the 2002 third quarter, the PCS Group recorded to Other income
(expense), net, a gain on the sale of an equity method investment of $67
million with the same impact on loss from continuing operations, or $0.07
per share.
(5) In the 2002 third quarter, Sprint recognized a tax benefit related to the
capital losses not previously recognized of $292 million. The benefit to
the FON Group was $235 million, or $0.26 per share. The benefit to the PCS
Group was $57 million, or $0.05 per share.
(6) 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. Activity in subsequent quarters relates to final settlement
activity of the sale.
(7) Sprint adopted 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 favorable cumulative effect of change in accounting
principle of $258 million, net of tax. The ongoing impact of this
accounting change is expected to increase FON Group's net income through
reduced depreciation expense by less than $15 million annually.
(8) As the effects of including the incremental shares associated with options,
restricted stock units 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 for the FON
Group's 2003 periods and the PCS Group's 2003 and 2002 periods .
(9) As the effects of including the incremental shares associated with options,
restricted stock units and ESPP shares are antidilutive, they are not
included in the weighted average common shares outstanding for the FON
Group's 2003 periods or the PCS Group's 2003 periods and 2002 periods.
Sprint Corporation
CONSOLIDATED BALANCE SHEETS
(millions)
Sprint Corporation
----------------------------------------
Consolidated Eliminations/Reclassifications
---------------------------------------- -----------------------------------
September 30, December 31, September 30, December 31,
2003 2002 2003 2002
---------------------------------------- -----------------------------------
Assets
Current assets
Cash and equivalents $ 2,601 $ 1,035 $ - $ -
Accounts receivable, net 2,907 2,951 - -
Inventories 582 682 - -
Deferred tax asset 16 806 - -
Current tax benefit receivable from the
FON Group - - (186) -
Intergroup receivable - - (561) (536)
Prepaid expenses and other 537 604 - -
- -------------------------------------------------------------------------------------------- -----------------------------------
Total current assets 6,643 6,078 (747) (536)
Assets of discontinued operation - 391 - -
Net property, plant and equipment 27,387 28,745 (48) (46)
Net intangible assets 7,820 9,045 - -
Other 1,046 1,034 (279) (280)
- -------------------------------------------------------------------------------------------- -----------------------------------
Total $ 42,896 $ 45,293 $ (1,074) $ (862)
---------------------------------------- ----------------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current
maturities of long-term debt $ 979 $ 1,887 $ - $ -
Current maturities intergroup debt - - - -
Accounts payable and accrued interconnection
costs 2,581 2,777 - -
Accrued restructuring costs 155 277 - -
Intergroup payable - - (561) (536)
Other 2,721 2,867 (59) (46)
- -------------------------------------------------------------------------------------------- -----------------------------------
Total current liabilities 6,436 7,808 (620) (582)
Liabilities of discontinued operation
Current tax payable to PCS Group - - (175) -
Other - 299 - -
- -------------------------------------------------------------------------------------------- -----------------------------------
Total liabilities of discontinued operation - 299 (175) -
Noncurrent liabilities
Long-term debt and capital lease obligations 17,025 18,405 - -
Intergroup debt - - - -
Equity unit notes 1,725 1,725 - -
Deferred income taxes 1,839 2,025 - -
Other 2,330 2,481 - -
- -------------------------------------------------------------------------------------------- -----------------------------------
Total noncurrent liabilities 22,919 24,636 - -
Redeemable preferred stock 247 256 (279) (280)
Common stock and other shareholders' equity
Common stock
Class A FT - 22 - 22
FON 1,807 1,790 1,807 1,790
PCS 1,035 1,000 1,035 1,000
Other shareholders' equity 10,452 9,482 10,452 9,482
Combined attributed net assets - - (13,294) (12,294)
- -------------------------------------------------------------------------------------------- -----------------------------------
Total shareholders' equity 13,294 12,294 - -
- -------------------------------------------------------------------------------------------- -----------------------------------
Total $ 42,896 $ 45,293 $ (1,074) $ (862)
----------------------------------------- -----------------------------------
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
---------------------------------------- -----------------------------------
September 30, December 31, September 30, December 31,
2003 2002 2003 2002
---------------------------------------- -----------------------------------
Assets
Current assets
Cash and equivalents $ 1,145 $ 641 $ 1,456 $ 394
Accounts receivable, net 1,525 1,650 1,382 1,301
Inventories 215 219 367 463
Deferred tax asset 16 42 - 764
Current tax benefit receivable from the
FON Group - - 186 -
Intergroup receivable 561 536 - -
Prepaid expenses and other 296 329 241 275
- -------------------------------------------------------------------------------------------- -----------------------------------
Total current assets 3,758 3,417 3,632 3,197
Assets of discontinued operation - 391 - -
Net property, plant and equipment 16,159 16,894 11,276 11,897
Net intangible assets 350 1,569 7,470 7,476
Other 934 862 391 452
- -------------------------------------------------------------------------------------------- -----------------------------------
Total $ 21,201 $ 23,133 $ 22,769 $ 23,022
---------------------------------------- -----------------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current
maturities of long-term debt $ 42 $ 1,234 $ 937 $ 653
Current maturities intergroup debt (1,110) - 1,110 -
Accounts payable and accrued interconnection
costs 1,309 1,422 1,272 1,355
Accrued restructuring costs 152 251 3 26
Intergroup payable - - 561 536
Other 1,516 1,503 1,264 1,410
- -------------------------------------------------------------------------------------------- -----------------------------------
Total current liabilities 1,909 4,410 5,147 3,980
Liabilities of discontinued operation
Current tax payable to PCS Group 175 - - -
Other - 299 - -
- -------------------------------------------------------------------------------------------- -----------------------------------
Total liabilities of discontinued operation 175 299 - -
Noncurrent liabilities
Long-term debt and capital lease obligations 2,789 3,142 14,236 15,263
Intergroup debt - (406) - 406
Equity unit notes - - 1,725 1,725
Deferred income taxes 1,535 1,825 304 200
Other 1,690 2,039 640 442
- -------------------------------------------------------------------------------------------- -----------------------------------
Total noncurrent liabilities 6,014 6,600 16,905 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 13,103 11,814 191 480
- -------------------------------------------------------------------------------------------- -----------------------------------
Total shareholders' equity - - - -
- -------------------------------------------------------------------------------------------- -----------------------------------
Total $ 21,201 $ 23,133 $ 22,769 $ 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 September 30, 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ 1,177 $ 591
Discontinued operation, net (1,321) (120)
Cumulative effect of change in accounting principle, net (258) -
Depreciation and amortization 3,739 3,629
Deferred income taxes 440 526
Losses on write-down of assets 1,568 396
Changes in assets and liabilities (1,156) (556)
Other, net 190 (40)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of continuing operations 4,379 4,426
- --------------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (2,352) (3,628)
Investments in affiliates, net (16) (14)
Investments in debt securities (91) -
Proceeds from sales of other assets 81 97
- --------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities of continuing operations (2,378) (3,545)
- --------------------------------------------------------------------------------------------------------------------------
Financing Activities
Change in debt, net (2,342) (263)
Dividends paid (343) (341)
Other, net 20 44
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities of continuing operations (2,665) (560)
- --------------------------------------------------------------------------------------------------------------------------
Cash from discontinued operations 2,230 104
- --------------------------------------------------------------------------------------------------------------------------
Change in cash and equivalents 1,566 425
Cash and equivalents at beginning of period 1,035 313
- --------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 2,601 $ 738
-------------------------------------
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 Sprint PCS Group
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Year-to-Date September 30, 2003 2002 2003 2002
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Operating Activities
Net income (loss) $ 1,516 $ 914 $ (339) $ (323)
Discontinued operation, net (1,321) (120) - -
Cumulative effect of change in accounting principle, net (258) - - -
Depreciation and amortization 1,886 1,971 1,853 1,658
Deferred income taxes (428) 376 868 150
Losses on write-down of assets 1,558 395 10 1
Changes in assets and liabilities (454) (687) (702) 131
Other, net 95 (110) 95 70
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Net cash provided by operating activities of continuing operations 2,594 2,739 1,785 1,687
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Investing Activities
Capital expenditures (1,141) (1,550) (1,211) (2,078)
Investments in affiliates, net - (26) (16) 12
Investments in debt securities (91) - - -
Proceeds from sales of other assets 80 66 1 31
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Net cash used by investing activities of continuing operations (1,152) (1,510) (1,226) (2,035)
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Financing Activities
Change in debt, net (2,291) (983) (51) 720
Dividends paid (332) (330) (11) (11)
Other, net (20) (53) 40 97
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Net cash provided (used) by financing activities of
continuing operations (2,643) (1,366) (22) 806
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Cash from discontinued operations 1,705 104 525 -
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Change in cash and equivalents 504 (33) 1,062 458
Cash and equivalents at beginning of period 641 134 394 179
- ------------------------------------------------------------------- ------------------------------- ---------------------------
Cash and equivalents at end of period $ 1,145 $ 101 $ 1,456 $ 637
------------------------------- ---------------------------
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)
----------------------------------------------------------------------------
Quarter ended September 30, 2003
PCS FON
Consolidated Eliminations Group Group
----------------------------------------------------------------------------
Operating income (loss) $ (438) $ 11 $ 284 $ (733)
Special items 1,223 - - 1,223
----------------------------------------------------------------------------
Operating income (loss) adjusted for special items 785 11 284 490
Depreciation and amortization 1,251 - 628 623
----------------------------------------------------------------------------
Adjusted EBITDA 2,036 11 912 1,113
Adjust for special items (1,223) - - (1,223)
Other operating activities, net (1) 598 (11) (141) 750
----------------------------------------------------------------------------
Cash provided by operating activities-GAAP 1,411 - 771 640
Capital expenditures (860) - (491) (369)
Dividends paid (115) - (4) (111)
Other investing activities, net - - (3) 3
----------------------------------------------------------------------------
Free cash flow 436 - 273 163
Discontinued operation (1) - 175 (176)
Decrease in debt, net (483) - (21) (462)
Investments in debt securities (91) - - (91)
Other financing activities, net 1 - 32 (31)
----------------------------------------------------------------------------
Change in cash and equivalents - GAAP $ (138) $ - $ 459 $ (597)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarter ended September 30, 2002
PCS FON
Consolidated Eliminations Group Group
----------------------------------------------------------------------------
Operating income (loss) $ 524 $ 8 $ 141 $ 375
Special items 157 - 1 156
----------------------------------------------------------------------------
Operating income (loss) adjusted for special items 681 8 142 531
Depreciation and amortization 1,258 - 588 670
----------------------------------------------------------------------------
Adjusted EBITDA 1,939 8 730 1,201
Adjust for special items (157) - (1) (156)
Other operating activities, net (1) (72) (8) (193) 129
----------------------------------------------------------------------------
Cash provided by operating activities-GAAP 1,710 - 536 1,174
Capital expenditures (1,119) - (650) (469)
Dividends paid (115) - (4) (111)
Other investing activities, net 11 - 5 6
-----------------------------------------------------------------------------
Free cash flow 487 - (113) 600
Discontinued operation 40 - - 40
Decrease in debt, net (466) - (20) (446)
Other financing activities, net 30 - 168 (138)
-----------------------------------------------------------------------------
Change in cash and equivalents - GAAP $ 91 $ - $ 35 $ 56
-----------------------------------------------------------------------------
(1) Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous
operating activities and non-operating items in income (loss) from continuing operations.
See accompanying Footnotes to Consolidated Statements of Operations
Sprint Corporation
Reconciliation of Non-GAAP Liquidity Measures
(millions)
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Quarter ended September 30, 2003 Global
Local Markets
Division Division Other
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Operating income (loss) $ 459 $ (1,181) $ (11)
Special items - 1,223 -
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Operating income (loss) adjusted for special items 459 42 (11)
Depreciation and amortization 270 351 2
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Adjusted EBITDA $ 729 $ 393 $ (9)
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Adjust for special items
Other operating activities, net (1)
Cash provided by operating activities-GAAP
Capital expenditures
Dividends paid
Other investing activities, net
Free cash flow
Discontinued operation
Decrease in debt, net
Investments in debt securities
Other financing activities, net
Change in cash and equivalents - GAAP
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Quarter ended September 30, 2002 Global
Local Markets
Division Division Other
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Operating income (loss) $ 450 $ (63) $ (12)
Special items 30 126 -
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Operating income (loss) adjusted for special items 480 63 (12)
Depreciation and amortization 291 378 1
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Adjusted EBITDA $ 771 $ 441 $ (11)
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Adjust for special items
Other operating activities, net (1)
Cash provided by operating activities-GAAP
Capital expenditures
Dividends paid
Other investing activities, net
Free cash flow
Discontinued operation
Decrease in debt, net
Other financing activities, net
Change in cash and equivalents - GAAP
(1) Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating
activities and non-operating items in income (loss) from continuing operations.
See accompanying Footnotes to Consolidated Statements of Operations
Sprint Corporation
Reconciliation of Non-GAAP Liquidity Measures
(millions)
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Year-to-date September 30, 2003
PCS FON
Consolidated Eliminations Group Group
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Operating income (loss) $ 536 $ 31 $ 675 $ (170)
Special items 1,617 - 29 1,588
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Operating income (loss) adjusted for special items 2,153 31 704 1,418
Depreciation and amortization 3,739 - 1,853 1,886
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Adjusted EBITDA 5,892 31 2,557 3,304
Adjust for special items (1,617) - (29) (1,588)
Other operating activities, net (1) 104 (31) (743) 878
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Cash provided by operating activities-GAAP 4,379 - 1,785 2,594
Capital expenditures (2,352) - (1,211) (1,141)
Dividends paid (343) - (11) (332)
Other investing activities, net 65 - (15) 80
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Free cash flow 1,749 - 548 1,201
Discontinued operation 2,230 - 525 1,705
Decrease in debt, net (2,342) - (51) (2,291)
Investments in debt securities (91) - - (91)
Other financing activities, net 20 - 40 (20)
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Change in cash and equivalents - GAAP $ 1,566 $ - $ 1,062 $ 504
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Year-to-date September 30, 2002
PCS FON
Consolidated Eliminations Group Group
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Operating income (loss) $ 1,712 $ 24 $ 475 $ 1,213
Special items 157 - 1 156
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Operating income (loss) adjusted for special items 1,869 24 476 1,369
Depreciation and amortization 3,629 - 1,658 1,971
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Adjusted EBITDA 5,498 24 2,134 3,340
Adjust for special items (157) - (1) (156)
Other operating activities, net (1) (915) (24) (446) (445)
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Cash provided by operating activities-GAAP 4,426 - 1,687 2,739
Capital expenditures (3,628) - (2,078) (1,550)
Dividends paid (341) - (11) (330)
Other investing activities, net 83 - 43 40
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Free cash flow 540 - (359) 899
Discontinued operation 104 - - 104
Increase/(decrease) in debt, net (263) - 720 (983)
Other financing activities, net 44 - 97 (53)
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Change in cash and equivalents - GAAP $ 425 $ - $ 458 $ (33)
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(1) Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating
activities and non-operating items in income (loss) from continuing operations.
See accompanying Footnotes to Consolidated Statements of Operations
Sprint Corporation
Reconciliation of Non-GAAP Liquidity Measures
(millions)
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Year-to-date September 30, 2003 Global
Local Markets
Division Division Other
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Operating income (loss) $ 1,368 $ (1,504) $ (34)
Special items 8 1,580 -
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Operating income (loss) adjusted for special items 1,376 76 (34)
Depreciation and amortization 808 1,073 5
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Adjusted EBITDA $ 2,184 $ 1,149 $ (29)
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Adjust for special items
Other operating activities, net (1)
Cash provided by operating activities-GAAP
Capital expenditures
Dividends paid
Other investing activities, net
Free cash flow
Discontinued operation
Decrease in debt, net
Investments in debt securities
Other financing activities, net
Change in cash and equivalents - GAAP
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Year-to-date September 30, 2002 Global
Local Markets
Division Division Other
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Operating income (loss) $ 1,412 $ (168) $ (31)
Special items 30 126 -
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Operating income (loss) adjusted for special items 1,442 (42) (31)
Depreciation and amortization 865 1,099 7
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Adjusted EBITDA $ 2,307 $ 1,057 $ (24)
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Adjust for special items
Other operating activities, net (1)
Cash provided by operating activities-GAAP
Capital expenditures
Dividends paid
Other investing activities, net
Free cash flow
Discontinued operation
Increase/(decrease) in debt, net
Other financing activities, net
Change in cash and equivalents - GAAP
(1) Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating
activities and non-operating items in income (loss) from continuing operations.
See accompanying Footnotes to Consolidated Statements of Operations
Sprint Corporation
FON GROUP OPERATING STATISTICS
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Financial statistics in millions, expect per share data 1Q03 2Q03 3Q03 4Q03 YTD 2003
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Combined Operations
Financial Statistics
Net operating revenues $ 3,581 $ 3,530 $ 3,538 $ 10,649
Operating income (loss) $ 454 $ 109 $ (733) $ (170)
Adjusted EBITDA $ 1,082 $ 1,109 $ 1,113 $ 3,304
Diluted weighted average common shares 899.5 901.7 903.0 899.9
Basic weighted average common shares 896.6 899.9 903.0 899.9
Earnings per share from continuing operations - adjusted $ 0.34 $ 0.35 $ 0.38 $ 1.07
Basic earnings (loss) per common share $ 2.07 $ 0.11 $ (0.48) $ 1.69
Capital expenditures $ 360 $ 412 $ 369 $ 1,141
Sprint Local Division
Financial Statistics
Net operating revenues $ 1,536 $ 1,529 $ 1,530 $ 4,595
Operating income $ 460 $ 449 $ 459 $ 1,368
Adjusted EBITDA $ 726 $ 729 $ 729 $ 2,184
Capital expenditures $ 281 $ 297 $ 273 $ 851
Other Statistics
Total access lines (thousands) 8,066 7,982 7,945
Residential access lines 5,642 5,575 5,549
Business access lines 2,202 2,185 2,178
Wholesale access lines 222 222 218
Resold lines 165 160 153
UNE-P lines 57 62 65
YOY Access line growth (decline) -1.9% -2.4% -2.2%
Percentage of Sprint local customer lines with Sprint
long distance service 47% 48% 49%
Bundle penetration - residential 28% 30% 31%
Bundle penetration - business 24% 25% 26%
This information should be reviewed in connection with Sprint's consolidated financial statements
Sprint Corporation
FON GROUP OPERATING STATISTICS
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Financial statistics in millions, expect per share data 1Q03 2Q03 3Q03 4Q03 YTD 2003
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Sprint Local Division (cont.)
Percentage of Sprint local residential customers
with voicemail service 14% 14% 14%
Percentage of Sprint local residential customers
with call waiting service 42% 43% 43%
Percentage of Sprint local residential customers
with caller ID service 44% 45% 45%
YOY Data services revenue growth 10% 10% 12%
DSL lines in service (thousands) 185 223 264
DSL capable lines (thousands) 4,039 4,235 4,426
Global Markets Group
Financial Statistics
Total Global Markets net operating revenues $ 2,042 $ 2,002 $ 1,974 $ 6,018
Voice net operating revenue $ 1,292 $ 1,243 $ 1,240 $ 3,775
Data net operating revenue $ 461 $ 463 $ 462 $ 1,386
Internet net operating revenue $ 243 $ 245 $ 233 $ 721
Other net operating revenue $ 46 $ 51 $ 39 $ 136
Operating income (loss) $ 6 $ (329) $(1,181) $(1,504)
Adjusted EBITDA $ 366 $ 390 $ 393 $ 1,149
Capital expenditures $ 61 $ 86 $ 71 $ 218
Other Statistics
YOY Global Markets voice volume decline -7% -7% -4% -6%
This information should be reviewed in connection with Sprint's consolidated financial statements
Sprint Corporation
PCS GROUP OPERATING STATISTICS
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Financial statistics in millions, expect per share data 1Q03 2Q03 3Q03 4Q03 YTD 2003
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Net operating revenue $ 2,947 $ 3,096 $ 3,340 $ 9,383
Service revenues $ 2,679 $ 2,859 $ 3,000 $ 8,538
Wholesale and affiliate revenues $ 73 $ 56 $ 100 $ 229
Equipment revenues $ 268 $ 237 $ 340 $ 845
Equipment costs $ 577 $ 545 $ 670 $ 1,792
Operating income $ 140 $ 251 $ 284 $ 675
Adjusted EBITDA $ 758 $ 887 $ 912 $ 2,557
Diluted & basic weighted average common shares 1,022.1 1,024.3 1,033.1 1,026.6
GAAP diluted loss per common share $ (0.18) $ (0.09) $ (0.07) $ (0.34)
Free cash flow $ 83 $ 192 $ 273 $ 548
Capital expenditures $ 187 $ 533 $ 491 $ 1,211
Bad debt % of net operating revenues 3.0% 1.8% 2.3% 2.3%
Customer Additions
Post-paid retail net adds 199,000 360,000 184,000 743,000
Affiliate net adds 109,000 80,000 22,000 211,000
Reseller net adds 175,000 177,000 290,000 642,000
Net gross adds (excluding deactivations within 30 days) 1.57M 1.46M 1.42M 4.45M
% of gross adds sold through post-paid retail channels ~48% ~52% ~51%
% of post-paid retail base that upgraded phones in the quarter >6% nearly 7% >7%
This information should be reviewed in connection with Sprint's consolidated financial statements
Sprint Corporation
PCS GROUP OPERATING STATISTICS
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Financial statistics in millions, expect per share data 1Q03 2Q03 3Q03 4Q03 YTD 2003
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Other Wireless Statistics (approximate)
Average revenue per user $ 59 $ 62 $ 63 $ 61
Acquisition cost per gross add $ 365 $ 415 $ 465 $ 415
Cash cost per user $ 31 $ 31 $ 31 $ 31
Customer churn 3.1% 2.4% 2.7% 2.7%
Average monthly customer usage nearly 12 hrs nearly 13.5 hrs nearly 14 hrs
Total minutes provided 32 billion 37 billion 39 billion 108 billion
Number of cell sites on air 19,700 20,100 20,400
Number of carriers on air 33,600 34,500 35,400
Sprint PCS covered POPs (M) 198 199 199
Sprint PCS and affiliate covered POPs (M) 257 258 258
Vision/Wireless Web/Data/3G
Total Vision subscribers (approximate) 1.3M 2.1M 2.7M
Vision % of gross adds 26% nearly 40% >40%
Total Vision and Wireless Web subscribers 3.8M 4.6M ~5.1M
Data ARPU >$1 nearly $2 >$2
% of post-paid retail customer base using 1xRTT handsets ~53% >60% ~69%
% of post-paid retail customer base using vision handsets ~15% ~23% 31%
Marketing and Distribution
Total number of customers on Sprint PCS network 18.2M 18.8M 19.3M
Total post-paid retail subscribers 14.93M 15.29M 15.48M
Total affiliate customers 2.69M 2.77M 2.79M
Total wholesale/reseller customers .59M .77M 1.06M
Number of PCS stores and kiosks 520 540 570
Total number of distribution points ~16,600 ~17,600 ~17,100
This information should be reviewed in connection with Sprint's consolidated financial statements