Exhibit 99.1
[SPRINT LOGO]
Sprint Reports Third Quarter Results
o Raising 2004 outlook on stronger operating performance
o Solid execution enhances financial strength and flexibility
o Recognizes $3.5 billion pre-tax, non-cash Long Distance asset
impairment charge
Overland Park, Kan. - Oct. 19, 2004:
Sprint (NYSE: FON) today announced strong third quarter results driven by
double-digit customer, revenue and profit growth in Wireless and solid cash
contributions from Local and Long Distance. For the quarter, fully diluted loss
per share on a GAAP basis was $1.32 reflecting a $1.53 per share loss associated
with the Long Distance asset impairment previously announced on Oct. 15, 2004.
This compares to a 35 cent loss per share in the third quarter of 2003. Adjusted
EPS*, which removes the effects of special items, was 24 cents per share
compared to 19 cents per share in the same period a year ago, a 26% improvement.
Special items are described in the next section of this release.
Consolidated net operating revenues increased 3% compared to a year ago and 1%
sequentially. Sprint Consumer Solutions reported 4% sequential growth of
revenues on strong wireless performance, Sprint Local Consumer Solutions
reported a 1% sequential increase, and Sprint Business Solutions reported a 2%
sequential decline as lower wireline revenues were partially offset by growth in
wireless. Consolidated Adjusted EBITDA* in the quarter was $2.1 billion, a 1%
increase from a year ago and a 2% increase sequentially. Consolidated Adjusted
Operating Income* for the quarter increased 6% compared to the year-ago period,
and 5.5% sequentially. Third quarter Free Cash Flow* totaled $439 million and
year-to-date Free Cash Flow* was $1.4 billion.
Again this quarter, Wireless operations provided a strong balance of customer
gains and top-line growth, improved profitability and continued network
investment. Local operations reported strong DSL customer gains and produced
solid financial performance given the challenges of an unprecedented number of
major storms throughout its Southeast territory. These storms also added to
expense levels in Wireless. Long Distance operating performance was solid under
highly competitive conditions.
"Sprint continues to make strides on becoming the telecom services provider of
choice, and our results in the third quarter reflect this progress," said Gary
Forsee, Sprint chairman and chief executive officer. "Our steady execution has
led to consistent improvements in revenues, profitability and cash generation,
and we are on track to meet our net debt reduction targets. Our recent
announcement to further align resources with customer demand will enable us to
more fully leverage our portfolio of assets and capabilities as we increasingly
distinguish Sprint as a one-stop shop for services."
In the third quarter, Sprint also continued its strategies of partnering,
including the addition of several U.S. cable company agreements. In total, these
agreements now allow Sprint's national network to deliver wireline services to
nearly 20
1
million households passed by U.S. cable companies. Subscriber transitions to
Sprint's network under the Qwest wireless MVNO agreement also ramped up
significantly in the period.
Additionally, Sprint made solid progress on its financial strength and
flexibility. Following another strong Free Cash Flow* performance and the inflow
of $1.7 billion from the settlement of equity units, Sprint ended the quarter
with $4 billion in cash. In the quarter, Sprint had early debt retirements of
$516 million, and paid off more than $50 million of maturing debt. At the end of
the period, Net Debt* stood at $13.4 billion, placing Sprint well within reach
of its year-end goal.
Sprint Consolidated Highlights
Sprint Corporation
Selected Financial Data
(millions) Quarters
Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
(Restated)
Net operating revenues $6,922 $6,714 3.1%
Operating income (loss) (2,715) (430)
Adjusted operating income* 844 793 6.4%
Adjusted income from
continuing operations* 350 272 28.7%
Loss from continuing operations (1,910) (496)
Discontinued operations - (1)
Net income (loss) $(1,910) ($497)
Capex $966 $854 13.1%
Free cash flow* $439 $436 0.7%
Nine Months
Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
(Restated)
Net operating revenues $20,498 $19,516 5.0%
Operating income (loss) (1,273) 560
Adjusted operating income* 2,398 2,177 10.2%
Adjusted income from
continuing operations* 897 659 36.1%
Loss from continuing operations (1,449) (399)
Discontinued operations - 1,321
Cumulative effect of change in
accounting principle, net - 258
Net income (loss) $(1,449) $1,180
Capex $2,642 $2,333 13.2%
Free cash flow* $1,373 $1,749 (21.5%)
- ----------------------------------------------------------------
Consolidated third quarter net operating revenues were $6.9 billion compared to
$6.7 billion last year. Consolidated Operating loss for the third quarter was
$2.7 billion reflecting the $3.5 billion pre-tax, non-cash Long Distance asset
impairment charge. The consolidated operating loss of $430 million in last
year's third quarter includes the write-down of MMDS spectrum. Adjusted
Operating Income* as a percentage of net operating revenues was consistent year-
over-year. For the year-to-date period, pension-related costs and stock-based
compensation costs totaled $288 million vs. $161 million in the year-ago period.
During the third quarter, Sprint identified a calculation error that had
resulted, since 1999, in the overstatement of interest capitalized in connection
with the construction of Wireless capital assets. While the effects of this
calculation error were not material to any previously reported period, Sprint
has corrected this calculation by restating previously
2
issued financial statements. Additionally, during the fourth quarter of 2003,
Sprint recorded an adjustment related to an understatement of its long-term
disability liability. While the impact on prior years' financial statements was
fully disclosed and determined not to be material, Sprint has also restated its
previously issued financial statements to apply this adjustment to the
appropriate pre-2003 periods. The impacts of these restatements on prior period
financial statements are summarized in Note 1 of the attached Notes to Press
Release Statements.
Special Items
The difference between Sprint's reported operating income and Adjusted Operating
Income* is the result of the following special items:
o Asset impairments - In the third quarter of 2004, Sprint recorded a
pre-tax, non-cash charge of $3.5 billion for the impairment of its Long
Distance network assets. In the third quarter of 2003, a pre-tax, non-cash
charge of $1.2 billion was recorded for the write-down of Sprint's MMDS
spectrum.
o Restructuring - In 2004, pre-tax charges related to severance costs
associated with Sprint's transformation initiatives and Web Hosting
wind-down were $19 million for the third quarter and $145 million for the
year-to-date period. In 2003, pre-tax charges primarily related to the Web
Hosting wind-down were $358 million through the third quarter.
o Bankruptcy settlement - Sprint recorded a pre-tax benefit of $14 million in
the second quarter of 2004 as a result of the final payment of a bankruptcy
settlement reached with MCI (WorldCom).
o Executive separation agreements - In the second quarter of 2003, a $36
million pre-tax charge associated with executive separation agreements was
recorded.
The difference between Sprint's reported income from continuing operations and
Adjusted income from continuing operations* includes the impacts of the
following additional special items:
o Early retirement of debt - In 2004, a pre-tax charge of $41 million was
recorded in the third quarter and $29 million was recorded in the second
quarter related to the early retirement of $516 million of senior notes and
$750 million of equity unit notes, respectively. These charges consisted of
premiums paid and the recognition of deferred debt costs. In 2003, a
pre-tax charge of $19 million was recorded in the first quarter and $2
million was recorded in the third quarter related to the early retirement
of approximately $1.2 billion of long-term debt.
o Shareholder litigation charge - A pre-tax charge of $50 million was
recorded in the first quarter of 2003 for a shareholder litigation
settlement. This charge was partially offset by $17 million in insurance
proceeds received in the third quarter of 2003.
Finally, Sprint reported two items in the statement of operations below the
continuing operations line in the first quarter of 2003:
o Discontinued operation - Reflects the operational activity and gain on sale
of Sprint's directory publishing business.
o Cumulative effect of a change in accounting principle - Reflects a pre-tax
gain of $420 million recorded upon adoption of Statement of Financial
Accounting Standards No. 143, Accounting for Asset Retirement Obligations.
3
Wireless
- ----------------------------------------------------------------
Wireless
Selected Financial Data
(millions) Quarters Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
(Restated)
Net operating revenues
Service $3,244 $2,900 11.9%
Equipment 350 340 2.9%
Wholesale, affiliate and other 166 100 66.0%
Net operating revenues 3,760 3,340 12.6%
Operating expenses
Cost of services & products 1,768 1,628 8.6%
Selling, general & adminsitrative 908 789 15.1%
Depreciation 630 620 1.6%
Restructuring & asset
impairments 3 -
Total operating expenses 3,309 3,037 9.0%
Operating income $451 $303 48.8%
Capex $603 $485 24.3%
Nine Months Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
(Restated)
Net operating revenues
Service $9,285 $8,309 11.7%
Equipment 1,115 845 32.0%
Wholesale, affiliate and other 411 229 79.5%
Net operating revenues 10,811 9,383 15.2%
Operating expenses
Cost of services & products 5,245 4,597 14.1%
Selling, general & administrative 2,487 2,217 12.2%
Depreciation 1,914 1,829 4.6%
Restructuring & asset
impairments 19 10 90.0%
Total operating expenses 9,665 8,653 11.7%
Operating income $1,146 $730 57.0%
Capex $1,670 $1,192 40.1%
- ----------------------------------------------------------------
o Third quarter net subscriber additions include 429,000 through direct
channels, 422,000 from wholesale partners and 101,000 through affiliates.
At the end of the period, there were 23.2 million wireless subscribers,
consisting of 17.3 million direct, 3.1 million from affiliates and 2.8
million wholesale.
o Direct gross additions were approximately 1.8 million in the quarter, a 26%
year-over-year increase.
o Third quarter net operating revenues increased 13% compared to the year-ago
period and increased 4% sequentially.
o Third quarter Adjusted Operating Income* was up 50% from the year-ago
period and 7% sequentially.
o Adjusted EBITDA* was $1.08 billion, an increase of 17% from the third
quarter of 2003 and 2% from the second quarter of 2004.
o Average monthly service revenue per user (ARPU)* was $63 in the third
quarter and in the year-ago period, and $62 in the second quarter of 2004.
o During the quarter, average subscriber usage was just under 17 hours per
month.
o Subscriber churn was a little less than 2.7% in the third quarter, which
was in line with the year-ago period, and compares to a rate of slightly
more than 2.3% in the second quarter of 2004. Sequentially, voluntary churn
was flat while involuntary churn increased consistent with past seasonal
patterns.
At the end of the period, there were nearly 7.3 million Sprint PCS data
subscribers, including 5.6 million Sprint PCS Vision(sm) subscribers. For the
full quarter, data contributed 8% to overall ARPU*.
In addition to a strong ARPU* and growth in the direct subscriber base, revenues
in the quarter were aided by a growing contribution from wholesale and affiliate
partners. Quarterly wholesale revenues reached the $100 million mark and were up
70% sequentially.
Total third quarter operating expenses increased 9% compared to the year-ago
period. The increases primarily were due to higher spending on sales and
distribution associated with higher gross additions, including the addition of
new PCS stores. Additionally in the quarter, cost of services and products
includes incremental storm- related costs of $14 million, while selling, general
and administrative expenses include a $26 million adjustment resulting from an
updated analysis of cell site acquisition and development.
4
Local
- ----------------------------------------------------------------
Local
Selected Financial Data
(millions) Quarters Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
Net operating revenues
Voice $1,105 $1,152 (4.1%)
Data 214 187 14.4%
Other 177 188 (5.9%)
Net operating revenues 1,496 1,527 (2.0%)
Operating expenses
Cost of services & products 499 491 1.6%
Selling, general & administrative 311 304 2.3%
Depreciation 272 269 1.1%
Restructuring & asset impairments 3 -
Total operating expenses 1,085 1,064 2.0%
Operating income $411 $463 (11.2%)
Capex $257 $269 (4.5%)
Nine Months Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
Net operating revenues
Voice $3,388 $3,500 (3.2%)
Data 614 536 14.6%
Other 510 549 (7.1%)
Net operating revenues 4,512 4,585 (1.6%)
Operating expenses
Cost of services & products 1,412 1,467 (3.7%)
Selling, general & administrative 967 935 3.4%
Depreciation 811 805 0.7%
Restructuring & asset impairments 20 -
Total operating expenses 3,210 3,207 0.1%
Operating income $1,302 $1,378 (5.5%)
Capex $713 $839 (15.0%)
- ----------------------------------------------------------------
o Third quarter revenues were $1.50 billion, a 2% decline from $1.53 billion
in the year-ago period. Third quarter revenues were down 1% sequentially.
o Adjusted EBITDA* was $686 million for the quarter compared to $732 million
in the year-ago period and $718 million in the second quarter of 2004.
o Adjusted Operating Income* of $414 million for the third quarter compares
to $463 million in the third quarter of 2003 and $447 million in the second
quarter of 2004.
o Local added a record 49,000 new DSL lines in service in the quarter and
ended the period with a base of 432,000 lines in service.
o Total access lines in service declined 2.7% from the year-ago period
compared with a 2.4% annual rate of decline in the second quarter.
In the quarter, growth in data services partially offset pressures on voice
revenues due to lower access lines in service, reduced regulatory cost
recoveries, and the impact of an unfavorable recent FCC ruling that reduced
revenues by $14 million. This ruling applied to earnings under interstate price
cap rules in effect a decade ago.
Access lines continue to be negatively impacted by wireless substitution and
competition from cable providers. Hurricane-related disconnects also contributed
to third quarter losses.
The 14% year-over-year growth in data was driven by a gain of 168,000 DSL lines
in service over the past 12 months. The gain in DSL lines compares with a net
loss of 217,000 voice access lines in the same 12-month period.
In the quarter, Local expanded marketing of satellite video services provided
through EchoStar. At the end of the quarter, Local had 13,000 video subscribers.
Penetration of wireless also increased, driven in part by the integrated
wireless and wireline service offering Sprint Home and On the Go (sm).
Total third quarter operating expenses increased $21 million compared to the
year-ago period and $20 million sequentially. In the current quarter, operating
expenses include approximately $30 million of incremental storm-related costs.
5
Long Distance
- ----------------------------------------------------------------
Long Distance
Selected Financial Data
(millions) Quarters Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
Net operating revenues
Voice $1,131 $1,243 (9.0%)
Data 427 463 (7.8%)
Internet 180 233 (22.7%)
Other 70 38 84.2%
Net operating revenues 1,808 1,977 (8.5%)
Operating expenses
Cost of services & products 1,085 1,061 2.3%
Selling, general & administrative 421 526 (20.0%)
Depreciation 319 352 (9.4%)
Restructuring & asset impairments 3,553 1,223
Total operating expenses 5,378 3,162 70.1%
Operating loss $(3,570) $(1,185)
Capex $71 $75 (5.3%)
Nine Months Ended
Sept 30, Sept 30, Percent
2004 2003 Change
- ----------------------------------------------------------------
Net operating revenues
Voice $3,481 $3,780 (7.9%)
Data 1,317 1,391 (5.3%)
Internet 617 721 (14.4%)
Other 178 136 30.9%
Net operating revenues 5,593 6,028 (7.2%)
Operating expenses
Cost of services & products 3,233 3,231 0.1%
Selling, general & administrative 1,452 1,664 (12.7%)
Depreciation 960 1,076 (10.8%)
Restructuring & asset impairments 3,646 1,571
Total operating expenses 9,291 7,542 23.2%
Operating loss $(3,698) $(1,514)
Capex $191 $230 (17.0%)
- ----------------------------------------------------------------
o Net operating revenues declined by 8.5% to $1.81 billion from $1.98 billion
in the year-ago period and declined 3.5% sequentially.
o Adjusted EBITDA* of $302 million in the quarter compared to $390 million in
the third quarter of 2003 and $255 million in the second quarter of 2004.
o The Adjusted Operating Loss* was $17 million for the third quarter compared
to income of $38 million in the year-ago period and a loss of $66 million
in the second quarter of 2004.
o Restructuring and asset impairment expenses of $3.6 billion are primarily
related to the impairment of the Long Distance network assets.
In the quarter, overall revenues continued to be impacted by the effects of
lower market pricing, product substitution and competitive conditions. Long
Distance revenues were also impacted by the previously reported expiration of a
major Dial IP contract that reduced reported revenues by nearly 2%. Revenue
comparisons benefited by about 1% due to a tariff change on certain
access-related surcharges and costs that, beginning in the quarter, were
recorded as revenue vs. being recorded against related cost. This change had no
impact on Adjusted EBITDA* or reported Adjusted Operating Income*.
Compared to the year-ago period, consumer voice revenues declined 17% while
business voice revenues, including wholesale and affiliates, declined by 7%. The
decline in consumer is mainly driven by lower volumes while the business decline
is primarily due to lower pricing.
Frame Relay and Private Line services declined at a high-single digit rate
compared to the year-ago period while ATM revenues were flat. Dedicated IP
revenues increased at a mid-single digit rate but this was not sufficient to
offset declining Dial IP services and the impact from the exit of the Web
Hosting business in 2003.
The year-over-year increase in operating expenses is driven by the Long Distance
network asset impairment of $3.5 billion. Third quarter selling, general and
administrative expenses declined 20% year-over-year and 13% year to date due to
lower selling costs, reduced headcount and lower bad debt expense. In the
quarter, bad debt expense was a little under 1% of revenues vs. 3% in the second
quarter, which was impacted by higher bad debt in the wholesale market.
As a result of the impairment of the network assets, Long Distance will report a
substantially reduced depreciation expense beginning in the fourth quarter of
2004. It is currently estimated that this expense will be reduced by
approximately 60%, or $190 million, in the fourth quarter.
6
Forward-looking Guidance
Revenue
Sprint now expects full year revenue growth in 2004 of 4-5% vs. previous
guidance of 3-4%. Wireless is expected to produce solid double-digit growth
while Local is expected to report a low single-digit decline and Long Distance
is expected to report a high single-digit decline.
Adjusted EBITDA*
Sprint now expects full year Adjusted EBITDA to trend toward the upper end of
prior guidance that called for a range of $8.1 to $8.2 billion. Wireless is
expected to produce nearly $4.2 billion, Local is forecasted to contribute a
little less than $2.9 billion, and Long Distance is forecasted at around $1.15
billion.
Adjusted Operating Income*
Excluding the benefit of lower fourth quarter Long Distance depreciation, full
year 2004 consolidated Adjusted Operating Income* is expected to be $3.2 to $3.3
billion vs. previous guidance of $3.1 to $3.2 billion. After taking into account
the lower Long Distance depreciation expense beginning in the fourth quarter,
full year Adjusted Operating Income* is expected to be $3.4 to $3.5 billion.
Adjusted EPS*
The lower Long Distance depreciation expense is expected to add approximately 8
cents to fourth quarter earnings per share. Excluding this impact, Sprint
expects full year Adjusted EPS* to be in a range of 84 cents to 86 cents vs. our
prior forecast of 74 to 78 cents. After taking into account the lower fourth
quarter Long Distance depreciation expense, guidance calls for a full-year 2004
range of 92 cents to 94 cents.
Free Cash Flow* and Capital Expenditures
Sprint now expects full year Free Cash Flow* of approximately $1.8 to $1.9
billion vs. our prior estimate of $1.8 billion. Sprint continues to forecast
overall capital spending of around $4 billion. Sprint continues to expect
Wireless capital investment of approximately $2.5 billion. Local is expected to
require a little over $1 billion, and Long Distance is forecasted to invest
approximately $300 million.
*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. Sprint provides reconciliations of these
non-GAAP measures in its financial reporting. Because Sprint does not predict
special items that might occur in the future, and our forecasts are developed at
a level of detail different than that used to prepare GAAP-based financial
measures, Sprint does not provide reconciliations to GAAP of its forward-looking
financial measures. The financial measures used in this release include the
following:
Adjusted Operating Income (Loss) 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 income (loss) from continuing operations is defined as income or loss
from continuing operations plus special items, net of tax. 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 earnings per share (EPS) or Adjusted loss per share is defined as
diluted earnings (loss) per share from continuing operations 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 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, proceeds from
common stock 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, and equity unit
notes, 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
statements of financial position and cash flows.
7
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.
Conference Call and Webcast Information
Sprint management will provide an overview of the company's performance and
participate in an interactive Q&A via conference call on Tuesday, Oct. 19, 2004,
beginning at 7 a.m. CDT. Call-in numbers are 866-215-1938 (toll free) and
816-650-0742 (international). Please plan on gaining access 10 minutes prior to
the start of the call.
A simultaneous webcast will be available at www.sprint.com/sprint/ir/ai/web.html
and will be available for replay through Nov. 2, 2004.
A continuous replay of the call will be available through Nov. 2, 2004, and can
be accessed by dialing 888-775-8696 (toll free) or 402-220-1326 (international).
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This news release includes "forward-looking statements" within the meaning of
the 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," "forecast," "intend," "expect," "believe," "target," "providing
guidance" and similar expressions are intended to 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,
management has made assumptions regarding, among other things, customer and
network usage, customer growth and retention, pricing, operating costs, the
timing of various events and the economic environment.
Future performance cannot be ensured. Actual results may differ materially from
those in the forward-looking statements. Some factors that could cause actual
results to differ include:
o the effects of vigorous competition and the overall demand for Sprint's
service offerings in the markets in which Sprint operates;
o the costs and business risks associated with providing new services and
entering new markets;
o adverse change in the ratings afforded our debt securities by ratings
agencies;
o the ability of Wireless to continue to grow and improve profitability;
o the ability of Local and Long Distance to maintain cash flow generation;
o the effects of mergers and consolidations in the telecommunications
industry and unexpected announcements or developments from others in the
telecommunications industry;
o the uncertainties related to bankruptcies affecting the telecommunications
industry;
o the impact of financial difficulties of third-party affiliates on Wireless
network coverage;
o the uncertainties related to Sprint's investments in networks, systems and
other businesses;
o the uncertainties related to the implementation of Sprint's business
strategies, including our initiative to realign services to enhance the
focus on business and consumer customers;
o the impact of new, emerging and competing technologies on Sprint's
business;
o unexpected results of litigation filed against Sprint;
o the risk of equipment failure, natural disasters, terrorist acts, or other
breaches of network or information technology security;
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 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 or unforeseen events. Unless
specifically discussed in this release, no forward-looking statements made by
Sprint before the date of this release should be deemed to be reiterated,
confirmed or updated by any statement in this release. Sprint provides a
detailed discussion of risk factors in various SEC filings, including its 2003
Form 10-K, and you are encouraged to review these filings.
8
About Sprint
Sprint is a global integrated communications provider serving more than 26
million customers in over 100 countries. With more than $26 billion in annual
revenues in 2003, 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 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 Communications:
- - Media Relations:
Scott Stoffel
913-794-3603
scott.e.stoffel@mail.sprint.com
- - Investor Relations:
Kurt Fawkes
913-794-1126
Investorrelation.sprintcom@mail.sprint.com
9
Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
Quarter-to-Date Year-to-Date
---------------------------------------------------------------
- -------------------------------------------------------------
Periods Ended September 30, 2004 2003 2004 2003
- ------------------------------------------------------------- ------------------------------- -----------------------------
(Restated) (1) (Restated) (1)
Net Operating Revenues $ 6,922 $ 6,714 $ 20,498 $ 19,516
- ------------------------------------------------------------- ------------------------------- -----------------------------
Operating Expenses
Costs of services and products 3,190 3,034 9,415 8,766
Selling, general and administrative (2) 1,666 1,644 4,984 4,894
Depreciation and amortization 1,222 1,243 3,687 3,715
Restructuring and asset impairments (3) 3,559 1,223 3,685 1,581
- ------------------------------------------------------------- ------------------------------- -----------------------------
Total operating expenses 9,637 7,144 21,771 18,956
- ------------------------------------------------------------- ------------------------------- -----------------------------
Operating Income (Loss) (2,715) (430) (1,273) 560
Interest expense (305) (341) (947) (1,071)
Premium on early retirement of debt (4) (38) (2) (58) (21)
Other income (expense), net (4), (5) 13 4 (17) (78)
- ------------------------------------------------------------- ------------------------------- -----------------------------
Loss from continuing operations before income taxes (3,045) (769) (2,295) (610)
Income tax benefit 1,135 273 846 211
- ------------------------------------------------------------- ------------------------------- -----------------------------
Loss from Continuing Operations (1,910) (496) (1,449) (399)
Discontinued operation, net (6) - (1) - 1,321
Cumulative effect of change in accounting principle, net (7) - - - 258
- ------------------------------------------------------------- ------------------------------- -----------------------------
Net Income (Loss) (1,910) (497) (1,449) 1,180
Earnings allocated to participating securities (8) (3) - (9) -
Preferred stock dividends paid (2) (2) (5) (5)
- ------------------------------------------------------------- ------------------------------- -----------------------------
------------------------------- -----------------------------
Earnings Applicable to Common Stock $ (1,915) $ (499) $ (1,463) $ 1,175
------------------------------- -----------------------------
Diluted Earnings (Loss) per Common Share (9), (10)
Continuing operations $ (1.32) $ (0.35) $ (1.02) $ (0.29)
Discontinued operation - - - 0.93
Cumulative effect of change in accounting principle, net - - - 0.18
- ------------------------------------------------------------- ------------------------------- -----------------------------
------------------------------- -----------------------------
Total $ (1.32) $ (0.35) $ (1.02) $ 0.83
------------------------------- -----------------------------
Diluted weighted average common shares (10), (11) 1,450.6 1,419.6 1,433.8 1,413.1
------------------------------- -----------------------------
Basic Earnings (Loss) per Common Share (10) $ (1.32) $ (0.35) $ (1.02) $ 0.83
------------------------------- -----------------------------
See accompanying Notes to Press Release Statements.
10
Sprint Corporation
CONSOLIDATED BALANCE SHEETS
(millions)
----------------------------------------------
September 30, December 31,
2004 2003
----------------------------------------------
Assets (Restated) (1)
Current assets
Cash and equivalents $ 4,016 $ 2,424
Accounts receivable, net 3,207 2,876
Inventories 691 582
Deferred tax asset 20 26
Prepaid expenses and other 694 703
- -----------------------------------------------------------------------------------------------------------------
Total current assets 8,628 6,611
Net property, plant and equipment 22,359 27,101
Net intangible assets 7,848 7,815
Other 944 1,148
- -----------------------------------------------------------------------------------------------------------------
Total $ 39,779 $ 42,675
-----------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 1,414 $ 594
Accounts payable and accrued interconnection costs 2,621 2,700
Accrued restructuring costs 160 117
Other 2,798 3,065
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 6,993 6,476
Noncurrent liabilities
Long-term debt and capital lease obligations 16,038 16,841
Equity unit notes - 1,725
Deferred income taxes 857 1,725
Other 2,467 2,548
- -------------------------------------------------------------------------------------------------------------------
Total noncurrent liabilities 19,362 22,839
Redeemable preferred stock 247 247
Common stock and other shareholders' equity
Common stock 2,941 2,844
Other shareholders' equity 10,236 10,269
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 13,177 13,113
- -------------------------------------------------------------------------------------------------------------------
Total $ 39,779 $ 42,675
-------------------------------------------------
See accompanying Notes to Press Release Statements.
11
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
- ---------------------------------------------------------------------------------------------------------------------------------
Year-to-Date September 30, 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
(Restated) (1)
Operating Activities
Net income (loss) $ (1,449) $ 1,180
Discontinued operation, net - (1,321)
Cumulative effect of change in accounting principle, net - (258)
Depreciation and amortization 3,687 3,715
Deferred income taxes (879) 442
Losses on write-down of assets 3,540 1,568
Changes in assets and liabilities (624) (1,156)
Other, net 251 190
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of continuing operations 4,526 4,360
- ---------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (2,642) (2,333)
Investments in affiliates, net (10) (16)
Investments in debt securities, net 116 (91)
Other, net (16) 81
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities of continuing operations (2,552) (2,359)
- ---------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Change in debt, net (1,685) (2,342)
Dividends paid (485) (343)
Proceeds from common stock issued 1,802 6
Other, net (14) 14
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities of continuing operations (382) (2,665)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash from discontinued operations - 2,230
- ---------------------------------------------------------------------------------------------------------------------------------
Change in cash and equivalents 1,592 1,566
Cash and equivalents at beginning of period 2,424 1,035
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 4,016 $ 2,601
-------------------------------------------------------
See accompanying Notes to Press Release Statements.
12
Sprint Corporation
NOTES TO PRESS RELEASE STATEMENTS
(1) Prior period results have been restated to reflect the adjustment required
to correct a calculation error identified in the 2004 third quarter that
had resulted, since 1999, in the overstatement of interest capitalized
during the construction of Wireless capital assets, with a corresponding
understatement of interest expense. The error subsequently resulted in an
overstatement of depreciation expense after the associated capital assets
were placed in service. Additionally, during the fourth quarter of 2003,
Sprint recorded an adjustment related to an understatement of its long-term
disability liability. Prior period results have also been restated to apply
this adjustment to the appropriate pre-2003 periods.
Sprint will file amendments to its filings with the Securities and Exchange
Commission to reflect the impact of the restatement on its previously
issued audited annual and unaudited interim financial statements and
related disclosures.
The impacts of these restatements were not material for any previously
reported periods. The impacts of these restatements are summarized below
(in millions, except per share information):
Increase/(Decrease)
-------------------------------------------------------------------------------
Income from Diluted
Operating Continuing Net Earnings Per
Statement of Operations: Income Operations Income Share
-------------------------------------------------------------------------------
Year Ending December 31, 2004
First quarter $ 10 $ 3 $ 3 $ 0.01
Second quarter 11 3 3 -
Year Ended December 31, 2003
First quarter 8 2 2 -
Second quarter 8 - - -
Third quarter 8 1 1 -
Fourth quarter 122 72 72 0.05
----------------------------------------------------------------------------
Total 2003 146 75 75 0.06
----------------------------------------------------------------------------
Year Ended December 31, 2002 (4) (20) (20) (0.01)
Year Ended December 31, 2001 (9) (46) (46) (0.03)
Increase/(Decrease)
-----------------------------------------------------------------------------
Net Property, Postretirement Deferred Total
Plant and and Other Benefit Income Tax Shareholders'
Balance Sheet: Equipment Obligations Liability Equity
-----------------------------------------------------------------------------
As of December 31, 2003 $ (175) $ - $ (64) $ (111)
As of December 31, 2002 (180) 114 (108) (186)
Increase/(Decrease)
-----------------------------------
Net Cash
Provided by Capital
Statement of Cash Flows: Operations Expenditures
----------------------------------
Six Months Ended June 30, 2004 $ (12) $ (12)
Nine Months Ended September 30, 2003 (19) (19)
Year Ended December 31, 2003 (27) (27)
Year Ended December 31, 2002 (28) (28)
Year Ended December 31, 2001 (64) (64)
13
Sprint Corporation
NOTES TO PRESS RELEASE STATEMENTS (continued)
(2) In the 2004 second quarter, Sprint recognized a $14 million pre-tax benefit
to bad debt expense as a result of the final payment of the settlement of
claims with MCI (WorldCom) that previously had been fully reserved. This
settlement reduced loss from continuing operations by $9 million.
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. This charge increased loss from
continuing operations by $22 million.
(3) In the 2004 third quarter, Sprint recorded restructuring and asset
impairment charges of $3.56 billion, which increased loss from continuing
operations by $2.24 billion. The impairment of Sprint's long distance
network assets, which was determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, resulted in a pre-tax,
non-cash charge of $3.54 billion. This charge was the result of the
analysis of long distance business trends and projections that considered
current industry and competitive conditions, recent regulatory rulings,
evolving technologies and the company's strategy to expand its position as
a leader in the development and delivery of customer solutions requiring
transparent wireless and wireline connectivity. This charge reduced the net
book value of Sprint's long distance property, plant and equipment by about
60%, to $2.3 billion at September 30, 2004. Restructuring charges related
to Sprint's transformation initiatives and the termination of the Web
Hosting business aggregated $19 million in the quarter.
In the 2004 year-to-date period, Sprint recorded $3.69 billion in
restructuring charges and asset impairments, which increased loss from
continuing operations by $2.31 billion. In addition to the 2004 third
quarter charges noted above, Sprint recorded $126 million of restructuring
charges associated with Sprint's transformation initiatives and the
termination of the Web Hosting business.
In the 2003 third quarter, Sprint's ongoing evaluation of business use for
its MMDS spectrum resulted in a decision to end pursuit of a residential
fixed wireless strategy. This decision required a revaluation of the fair
value of the asset, resulting in a pre-tax, non-cash charge of $1.22
billion, reducing the carrying value to $300 million. This charge increased
Sprint's loss from continuing operations by $778 million.
In the 2003 year-to-date period, Sprint recorded restructuring and asset
impairments aggregating $1.58 billion, which increased loss from continuing
operations by $1.00 billion. In addition to the 2003 third quarter charge
noted above, Sprint recorded restructuring and asset impairments of $358
million associated with the termination of the Web Hosting business and a
software development project.
(4) In the 2004 third quarter, Sprint recorded a $38 million charge reflecting
premiums paid for the early retirement of $516 million of senior notes. In
connection with this retirement, Sprint recognized $3 million of deferred
debt costs and other fees in Other income (expense), net. These charges
increased loss from continuing operations by $25 million.
In the 2004 second quarter, Sprint recorded a $20 million charge reflecting
premiums paid for the early retirement of $750 million of equity unit
notes. In connection with this retirement, Sprint recognized $9 million of
deferred debt costs in Other income (expense), net. These charges increased
loss from continuing operations by $18 million.
In the 2003 third quarter, Sprint recorded a $2 million charge reflecting
premiums paid on the early retirement of local division debt. This charge
increased loss from continuing operations by $1 million.
In the 2003 first quarter, Sprint recorded a $19 million charge related to
the debt tender offer of approximately $1.1 billion of long term debt. This
charge increased loss from continuing operations by $12 million.
(5) In the 2003 first quarter, Sprint recorded 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, these charges increased loss from
continuing operations by $21 million.
(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.
(7) Sprint adopted SFAS No. 143, Accounting for Asset Retirement Obligations,
on January 1, 2003. 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, Sprint 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.
(8) EITF 03-6, Participating Securities and the Two Class Method under SFAS No.
128, Earnings Per Share, requires that rights of securities to participate
in the earnings of an enterprise must be reflected in the reporting of
earnings per share. Sprint's equity unit securities, traded as SDE prior to
maturity in the 2004 third quarter, qualified as "participating
securities." The proportionate share of 2004 third quarter and year-to-date
earnings attributable to these securities is being excluded from the
earnings available to common shareholders.
(9) 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. Earnings per
share data may not add due to rounding.
(10) On April 23, 2004 Sprint recombined its two tracking stocks. Each share of
PCS common stock automatically converted into 0.5 shares of FON common
stock. All per share amounts have been restated to reflect the
recombination of the FON common stock and PCS common stock as of the
earliest period presented at an identical conversion ratio (0.5). The
conversion ratio was also applied to dilutive PCS securities (mainly stock
options, ESPP, convertible preferred stock and restricted stock units) to
determine diluted weighted average shares on a consolidated basis.
(11) 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.
14
Sprint Corporation
RECONCILIATION OF NON-GAAP LIQUIDITY MEASURES
(millions)
-----------------------------------------------------------------------------------
Quarter-to-date September 30, 2004
Long Other &
Consolidated Wireless Local Distance Eliminations
------------------------------------------------------------------------------------
Operating income (loss) $ (2,715) $ 451 $ 411 $ (3,570) $ (7)
Special items 3,559 3 3 3,553 -
------------------------------------------------------------------------------------
Adjusted operating income (loss)* 844 454 414 (17) (7)
Depreciation and amortization 1,222 630 272 319 1
------------------------------------------------------------------------------------
Adjusted EBITDA* 2,066 $ 1,084 $ 686 $ 302 $ (6)
------------------------------------------------------------------
Adjust for special items (3,559)
Other operating activities, net (1) 3,085
-----------------
Cash provided by operating activities-GAAP 1,592
Capital expenditures (966)
Dividends paid (190)
Investments in affiliates, net (5)
Other investing activities, net 8
-----------------
Free Cash Flow* 439
Decrease in debt, net (573)
Investments in debt securities, net 37
Proceeds from common stock issued 1,757
Other financing activities, net (22)
-----------------
Change in cash and equivalents - GAAP $ 1,638
-----------------
------------------------------------------------------------------------------------
Quarter-to-date September 30, 2003
(Restated) (2)
Long Other &
Consolidated Wireless Local Distance Eliminations
------------------------------------------------------------------------------------
Operating income (loss) $ (430) $ 303 $ 463 $ (1,185) $ (11)
Special items 1,223 - - 1,223 -
------------------------------------------------------------------------------------
Adjusted operating income (loss)* 793 303 463 38 (11)
Depreciation and amortization 1,243 620 269 352 2
------------------------------------------------------------------------------------
Adjusted EBITDA* 2,036 $ 923 $ 732 $ 390 $ (9)
------------------------------------------------------------------
Adjust for special items (1,223)
Other operating activities, net (1) 592
-----------------
Cash provided by operating activities-GAAP 1,405
Capital expenditures (854)
Dividends paid (115)
Other investing activities, net -
-----------------
Free Cash Flow* 436
Discontinued operation (1)
Decrease in debt, net (483)
Investments in debt securities (91)
Other financing activities, net 1
-----------------
-----------------
Change in cash and equivalents - GAAP $ (138)
-----------------
<FN>
(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.
(2) See note 1 of Notes to Press Release Statements.
</FN>
15
Sprint Corporation
RECONCILIATION OF NON-GAAP LIQUIDITY MEASURES
(millions)
-----------------------------------------------------------------------------------
Year-to-date September 30, 2004
Long Other &
Consolidated Wireless Local Distance Eliminations
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Operating income (loss) $ (1,273) $ 1,146 $ 1,302 $ (3,698) $ (23)
Special items 3,671 14 19 3,638 -
-----------------------------------------------------------------------------------
Adjusted operating income (loss)* 2,398 1,160 1,321 (60) (23)
Depreciation and amortization 3,687 1,914 811 960 2
-----------------------------------------------------------------------------------
Adjusted EBITDA* 6,085 $ 3,074 $ 2,132 $ 900 $ (21)
------------------------------------------------------------------
Adjust for special items (3,671)
Other operating activities, net (1) 2,112
-----------------
Cash provided by operating activities-GAAP 4,526
Capital expenditures (2,642)
Dividends paid (485)
Investments in affiliates, net (10)
Other investing activities, net (16)
-----------------
Free Cash Flow* 1,373
Decrease in debt, net (1,685)
Investments in debt securities, net 116
Proceeds from common stock issued 1,802
Other financing activities, net (14)
------------------
Change in cash and equivalents - GAAP $ 1,592
------------------
------------------------------------------------------------------------------------
Year-to-date September 30, 2003
(Restated) (2)
Long Other &
Consolidated Wireless Local Distance Eliminations
------------------------------------------------------------------------------------
Operating income (loss) $ 560 $ 730 $ 1,378 $ (1,514) $ (34)
Special items 1,617 29 8 1,580 -
------------------------------------------------------------------------------------
Adjusted operating income (loss)* 2,177 759 1,386 66 (34)
Depreciation and amortization 3,715 1,829 805 1,076 5
------------------------------------------------------------------------------------
Adjusted EBITDA* 5,892 $ 2,588 $ 2,191 $ 1,142 $ (29)
------------------------------------------------------------------
Adjust for special items (1,617)
Other operating activities, net (1) 85
-----------------
Cash provided by operating activities-GAAP 4,360
Capital expenditures (2,333)
Dividends paid (343)
Other investing activities, net 65
-----------------
Free Cash Flow* 1,749
Discontinued operation 2,230
Decrease in debt, net (2,342)
Investments in debt securities (91)
Other financing activities, net 20
-----------------
Change in cash and equivalents - GAAP $ 1,566
-----------------
<FN>
(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.
(2) See note 1 of Notes to Press Release Statements.
</FN>
16
Sprint Corporation
RECONCILIATIONS OF EARNINGS PER SHARE
(millions, except per share date)
Quarter-to-Date Year-to-Date
- ---------------------------------------------------------- ---------------------------------- -------------------------------
Periods Ended September 30, 2004 2003 2004 2003
- ---------------------------------------------------------- ---------------------------------- -------------------------------
(Restated) (1) (Restated) (1)
Earnings (Loss) Applicable to Common Stock $ (1,915) $ (499) $ (1,463) $ 1,175
Earnings allocated to participating securities 3 - 9 -
Preferred stock dividends paid 2 2 5 5
- ---------------------------------------------------------- ---------------------------------- ------------------------------
GAAP Net income (loss) (1,910) (497) (1,449) 1,180
Discontinued operation, net - 1 - (1,321)
Cumulative effect of change in accounting principle - - - (258)
- ---------------------------------------------------------- ---------------------------------- ------------------------------
Loss from continuing operations (1,910) (496) (1,449) (399)
Special items (net of taxes)
Restructuring and asset impairments 2,235 778 2,312 1,002
MCI settlement - - (9) -
Premium on early retirement of debt 25 1 43 13
Shareholder litigation charge - (11) - 21
Executive separations - - - 22
- ---------------------------------------------------------- ---------------------------------- ------------------------------
Adjusted income from continuing operations $ 350 $ 272 $ 897 $ 659
- ---------------------------------------------------------- ---------------------------------- ------------------------------
GAAP earnings (loss) per share $ (1.32) $ (0.35) $ (1.02) $ 0.83
Discontinued operation - - - (0.93)
Cumulative effect of change in accounting principle - - - (0.18)
- ---------------------------------------------------------- ---------------------------------- ------------------------------
Earnings (loss) per share from continuing operations (1.32) (0.35) (1.02) (0.29)
Special items 1.56 0.54 1.64 0.75
- ---------------------------------------------------------- ---------------------------------- ------------------------------
Adjusted Earnings Per Share (2) $ 0.24 $ 0.19 $ 0.62 $ 0.46
- ---------------------------------------------------------- ---------------------------------- ------------------------------
<FN>
(1) See note 1 of Notes to Press Release Statements.
(2) Earnings per share data may not add due to rounding.
</FN>
17
Sprint Corporation
Selected Information
(millions)
YTD
Sprint Corporation (Pre Restatement) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------------------- --------- --------- --------- --------- --------- -------- -------
Operating expenses $ 6,162 $ 5,993 $ 25,336 $ 6,356 $ 7,152 $ 6,093 $ 5,735
Operating income (loss) 707 714 861 325 (438) 370 604
Interest expense 310 320 1,374 322 335 351 366
Income (loss) from continuing operations 233 222 (367) 35 (497) (2) 97
Net income (loss) 233 222 1,215 38 (498) 7 1,668
Diluted earnings (loss) per common share (2) 0.16 0.15 0.85 0.03 (0.35) - 1.18
Adjusted EBITDA* 2,032 1,987 7,917 2,025 2,036 2,006 1,850
Adjusted EPS* (2) 0.20 0.17 0.63 0.17 0.19 0.17 0.10
Net property, plant and equipment 27,276
Total shareholders' equity 13,224
YTD
Sprint Corporation (Restated) (1) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------------------- --------- --------- --------- --------- --------- -------- -------
Operating expenses $ 6,151 $ 5,983 $ 25,190 $ 6,234 $ 7,144 $ 6,085 $ 5,727
Operating income (loss) 718 724 1,007 447 (430) 378 612
Interest expense 316 326 1,401 330 341 358 372
Income (loss) from continuing operations 236 225 (292) 107 (496) (2) 99
Net income (loss) 236 225 1,290 110 (497) 7 1,670
Diluted earnings (loss) per common share (2) 0.16 0.16 0.91 0.08 (0.35) - 1.18
Adjusted EBITDA* 2,032 1,987 7,917 2,025 2,036 2,006 1,850
Adjusted EPS* (2) 0.21 0.17 0.64 0.17 0.19 0.17 0.10
Net property, plant and equipment 27,101
Total shareholders' equity 13,113
YTD YTD
Sprint Corporation (Pre Restatement) 2002 2001
- --------------------------------------------- ---------- ----------
Operating expenses $ 24,579 $ 26,463
Operating income (loss) 2,100 (901)
Interest expense 1,406 1,180
Income (loss) from continuing operations 471 (1,553)
Net income (loss) 630 (1,401)
Diluted earnings (loss) per common share (2) 0.44 (1.02)
Adjusted EBITDA* 7,414 5,527
Adjusted EPS* (2) 0.41 (0.24)
Net property, plant and equipment 28,745 28,960
Total shareholders' equity 12,294 12,616
YTD YTD
Sprint Corporation (Restated) (1) 2002 2001
- -------------------------------------------- ---------- ----------
Operating expenses $ 24,583 $ 26,472
Operating income (loss) 2,096 (910)
Interest expense 1,434 1,244
Income (loss) from continuing operations 451 (1,599)
Net income (loss) 610 (1,447)
Diluted earnings (loss) per common share (2) 0.43 (1.05)
Adjusted EBITDA* 7,388 5,503
Adjusted EPS* (2) 0.39 (0.27)
Net property, plant and equipment 28,565 28,786
Total shareholders' equity 12,108 12,450
<FN>
(1) See note 1 of Notes to Press Release Statements.
(2) On April 23, 2004 Sprint recombined its two tracking stocks. Each share of
PCS common stock automatically converted into 0.5 shares of FON common
stock. All per share amounts have been restated to reflect the
recombination of the FON common stock and PCS common stock as of the
earliest period presented at an identical conversion ratio (0.5). The
conversion ratio was also applied to dilutive PCS securities (mainly stock
options, ESPP, convertible preferred stock and restricted stock units) to
determine diluted weighted average shares on a consolidated basis.
</FN>
18
Sprint Corporation
Selected Information
(millions)
YTD
Wireless (Pre Restatement) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------- ---------- ---------- ---------- --------- ---------- ---------- ---------
Net operating revenues $ 3,614 $ 3,437 $ 12,690 $ 3,307 $ 3,340 $ 3,096 $ 2,947
Operating expenses
Costs of services and products 1,733 1,744 6,155 1,558 1,628 1,521 1,448
Selling, general and administrative 811 768 3,094 877 789 697 731
Depreciation and amortization 651 654 2,486 633 628 617 608
Restructuring and asset impairments 12 4 362 352 - - 10
- ------------------------------------------------------------------------------ -------------------------------------------------
Total operating expenses 3,207 3,170 12,097 3,420 3,045 2,835 2,797
- ------------------------------------------------------------------------------ -------------------------------------------------
Operating income (loss) $ 407 $ 267 $ 593 $ (113) $ 295 $ 261 $ 150
---------------------------------- -------------------------------------------------
Adjusted EBITDA* $ 1,065 $ 925 $ 3,469 $ 881 $ 923 $ 897 $ 768
---------------------------------- -------------------------------------------------
Capital expenditures $ 667 $ 412 $ 2,150 $ 939 $ 491 $ 533 $ 187
---------------------------------- -------------------------------------------------
YTD
Wireless (Restated) (1) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------- ---------- ---------- --------- --------- ---------- ---------- ---------
Net operating revenues $ 3,614 $ 3,437 $ 12,690 $ 3,307 $ 3,340 $ 3,096 $ 2,947
Operating expenses
Costs of services and products 1,733 1,744 6,155 1,558 1,628 1,521 1,448
Selling, general and administrative 811 768 3,085 868 789 697 731
Depreciation and amortization 640 644 2,454 625 620 609 600
Restructuring and asset impairments 12 4 362 352 - - 10
- ------------------------------------------------------------------------------ ------------------------------------------------
Total operating expenses 3,196 3,160 12,056 3,403 3,037 2,827 2,789
- ------------------------------------------------------------------------------ ------------------------------------------------
Operating income (loss) $ 418 $ 277 $ 634 $ (96) $ 303 $ 269 $ 158
----------------------------------- ------------------------------------------------
Adjusted EBITDA* $ 1,065 $ 925 $ 3,469 $ 881 $ 923 $ 897 $ 768
---------------------------------- ------------------------------------------------
Capital expenditures $ 661 $ 406 $ 2,123 $ 931 $ 485 $ 526 $ 181
---------------------------------- ------------------------------------------------
<FN>
(1) See note 1 of Notes to Press Release Statements.
</FN>
19
Sprint Corporation
Selected Information
(millions)
YTD
Local (Pre Restatement) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------- ---------- ---------- ---------- --------- ---------- ---------- ---------
Net operating revenues $ 1,510 $ 1,506 $ 6,130 $ 1,545 $ 1,527 $ 1,526 $ 1,532
Operating expenses
Costs of services and products 462 451 1,943 476 491 489 487
Selling, general and administrative 329 327 1,278 343 304 313 318
Depreciation and amortization 271 268 1,081 276 269 271 265
Restructuring and asset impairments 3 14 24 24 - - -
- ------------------------------------------------------------------------------ ------------------------------------------------
Total operating expenses 1,065 1,060 4,326 1,119 1,064 1,073 1,070
- ------------------------------------------------------------------------------ ------------------------------------------------
Operating income $ 445 $ 446 $ 1,804 $ 426 $ 463 $ 453 $ 462
----------------------------------- ------------------------------------------------
Adjusted EBITDA* $ 718 $ 728 $ 2,940 $ 749 $ 732 $ 732 $ 727
----------------------------------- ------------------------------------------------
YTD
Local (Restated) (1) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------- ---------- ---------- ---------- --------- ---------- ---------- ---------
Net operating revenues $ 1,510 $ 1,506 $ 6,130 $ 1,545 $ 1,527 $ 1,526 $ 1,532
Operating expenses
Costs of services and products 462 451 1,943 476 491 489 487
Selling, general and administrative 329 327 1,220 285 304 313 318
Depreciation and amortization 271 268 1,081 276 269 271 265
Restructuring and asset impairments 3 14 24 24 - - -
- ------------------------------------------------------------------------------ ------------------------------------------------
Total operating expenses 1,065 1,060 4,268 1,061 1,064 1,073 1,070
- ------------------------------------------------------------------------------ ------------------------------------------------
Operating income $ 445 $ 446 $ 1,862 $ 484 $ 463 $ 453 $ 462
----------------------------------- ------------------------------------------------
Adjusted EBITDA* $ 718 $ 728 $ 2,940 $ 749 $ 732 $ 732 $ 727
---------------------------------- ------------------------------------------------
<FN>
(1) See note 1 of Notes to Press Release Statements.
</FN>
20
Sprint Corporation
Selected Information
(millions)
YTD
Long Distance (Pre Restatement) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------- ---------- ---------- ---------- --------- ---------- ---------- ---------
Net operating revenues $ 1,873 $ 1,912 $ 8,005 $ 1,977 $ 1,977 $ 2,005 $ 2,046
Operating expenses
Costs of services and products 1,095 1,053 4,252 1,021 1,061 1,064 1,106
Selling, general and administrative 515 516 2,245 581 526 563 575
Depreciation and amortization 321 320 1,432 356 352 363 361
Restructuring and asset impairments 81 12 1,564 (7) 1,223 348 -
- ------------------------------------------------------------------------------- ------------------------------------------------
Total operating expenses 2,012 1,901 9,493 1,951 3,162 2,338 2,042
- ------------------------------------------------------------------------------- ------------------------------------------------
Operating income (loss) $ (139) $ 11 $(1,488) $ 26 $(1,185) $ (333) $ 4
---------------------------------- ------------------------------------------------
Adjusted EBITDA* $ 255 $ 343 $ 1,548 $ 406 $ 390 $ 387 $ 365
---------------------------------- ------------------------------------------------
YTD
Long Distance (Restated) (1) 2Q04 1Q04 2003 4Q03 3Q03 2Q03 1Q03
- -------------------------------- ---------- ---------- ---------- --------- ---------- ---------- ---------
Net operating revenues $ 1,873 $ 1,912 $ 8,005 $ 1,977 $ 1,977 $ 2,005 $ 2,046
Operating expenses
Costs of services and products 1,095 1,053 4,252 1,021 1,061 1,064 1,106
Selling, general and administrative 515 516 2,199 535 526 563 575
Depreciation and amortization 321 320 1,432 356 352 363 361
Restructuring and asset impairments 81 12 1,564 (7) 1,223 348 -
- ----------------------------------------------------------------------------- ------------------------------------------------
Total operating expenses 2,012 1,901 9,447 1,905 3,162 2,338 2,042
- ----------------------------------------------------------------------------- ------------------------------------------------
Operating income (loss) $ (139) $ 11 $ (1,442) $ 72 $(1,185) $ (333) $ 4
---------------------------------- ------------------------------------------------
Adjusted EBITDA* $ 255 $ 343 $ 1,548 $ 406 $ 390 $ 387 $ 365
---------------------------------- ------------------------------------------------
<FN>
(1) See note 1 of Notes to Press Release Statements
</FN>
21
Sprint Corporation
WIRELESS OPERATING STATISTICS
- ---------------------------------------------------------------------------------------------------------------------------------
1Q04 2Q04 3Q04 4Q04 YTD 2004
- ---------------------------------------------------------------------------------------------------------------------------------
(Restated) (1) (Restated) (1)
Financial Statistics (millions)
Net operating revenue $ 3,437 $ 3,614 $ 3,760 $ 10,811
Service revenues $ 2,939 $ 3,102 $ 3,244 $ 9,285
Wholesale, affiliate and other revenues $ 121 $ 124 $ 166 $ 411
Equipment revenues $ 377 $ 388 $ 350 $ 1,115
Equipment costs $ 722 $ 674 $ 662 $ 2,058
Operating income (loss) $ 277 $ 418 $ 451 $ 1,146
Adjusted EBITDA $ 925 $ 1,065 $ 1,084 $ 3,074
Capital expenditures $ 406 $ 661 $ 603 $ 1,670
Adjusted EBITDA less capital expenditures $ 519 $ 404 $ 481 $ 1,404
Bad debt % of net operating revenues 1.1% 1.3% 1.7% 1.4%
Subscriber Additions
Direct net adds before subscriber acquisition 414,000 505,000 429,000 1,348,000
Subscriber acquisition from affiliate - 91,000 91,000
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Direct net adds 414,000 596,000 429,000 1,439,000
Affiliate net adds before subcriber sale 138,000 93,000 101,000 332,000
Subscriber sale to Sprint - (91,000) (91,000)
------------------------------------------------------------------------
Affiliate net adds 138,000 2,000 101,000 241,000
Reseller net adds 420,000 299,000 422,000 1,141,000
Net gross adds (excluding deactivations within 30 days) (M) 1.80 1.67 1.79 5.26
% of gross adds sold through direct retail 51% 52% 51%
% of direct retail base that upgraded phones 7% 7% 7%
in the quarter
Other Wireless Statistics (approximate)
Average revenue per user $ 61 $ 62 $ 63 $ 62
Subscriber churn 2.9% 2.3% 2.7% 2.6%
Average monthly subscriber usage (hours) 15 16 17
Total minutes provided (billions) 45 51 53 149
Number of cell sites on air 21,800 22,700 23,600
Number of carriers on air 39,500 40,700 42,400
Sprint PCS covered POPs (M) (2) 191 197 197
Sprint PCS and affiliate covered POPs (M) (2) 246 251 251
Vision/Wireless Web/Data/3G
Total Vision subscribers (approximate) (M) 4.2 5.0 5.6
Vision % of gross adds 55% 55% 55%
Total Vision and Wireless Web subscribers (M) 6.2 6.9 7.3
Data ARPU $ 4 $ 4 $ 5
% of direct retail subscriber base with Vision handsets 48% 57% 64%
Marketing and Distribution
Total number of subscribers on Sprint PCS network (thousands) 21,329 22,226 23,178
Total direct subscribers 16,281 16,877 17,306
Total affiliate subscribers 3,017 3,019 3,120
Total wholesale/reseller subscribers 2,031 2,330 2,752
Number of PCS stores and kiosks 660 715 775
Total number of distribution points 17,400 16,700 17,200
(M) - in millions
<FN>
(1) See note 1 of Notes to Press Release Statements.
(2) Beginning with the 2004 second quarter, covered POPs reflect updated census data
This information should be reviewed in connection with Sprint's consolidated financial statements.
</FN>
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Sprint Corporation
OPERATING STATISTICS
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1Q04 2Q04 3Q04 4Q04 YTD 2004
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Local
Financial Statistics (millions)
Total Local Division net operating revenues $ 1,506 $ 1,510 $ 1,496 $ 4,512
Voice net operating revenue $ 1,147 $ 1,136 $ 1,105 $ 3,388
Data net operating revenue $ 195 $ 205 $ 214 $ 614
Other net operating revenue $ 164 $ 169 $ 177 $ 510
Operating income $ 446 $ 445 $ 411 $ 1,302
Adjusted EBITDA* $ 728 $ 718 $ 686 $ 2,132
Capital expenditures $ 209 $ 247 $ 257 $ 713
Adjusted EBITDA less capital expenditures $ 519 $ 471 $ 429 $ 1,419
Other Statistics
Total access lines (thousands) 7,876 7,780 7,718
Residential access lines 5,507 5,430 5,376
Business access lines 2,142 2,132 2,119
Wholesale access lines 227 218 223
YOY Access line decline -2.2% -2.4% -2.7%
Percentage of Sprint local access lines
with Sprint long distance service 51% 52% 54%
- Residential 53% 54% 56%
- Business 45% 46% 47%
Access minutes of use (thousands) 8,459 7,851 7,889 24,199
Long distance minutes of use (thousands) 990 1,105 1,257 3,352
Strategic product penetration - residential 67% 68% 69%
DSL lines in service (thousands) 349 383 432
- Residential 274 299 340
- Business 75 84 92
DSL capable lines (thousands) 4,910 5,005 5,186
Long Distance
Financial Statistics (millions)
Total Long Distance net operating revenues $ 1,912 $ 1,873 $ 1,808 $ 5,593
Voice net operating revenue $ 1,186 $ 1,164 $ 1,131 $ 3,481
Data net operating revenue $ 452 $ 438 $ 427 $ 1,317
Internet net operating revenue $ 223 $ 214 $ 180 $ 617
Other net operating revenue $ 51 $ 57 $ 70 $ 178
Operating income (loss) $ 11 $ (139) $ (3,570) $ (3,698)
Adjusted EBITDA* $ 343 $ 255 $ 302 $ 900
Capital expenditures $ 56 $ 64 $ 71 $ 191
Adjusted EBITDA less capital expenditures $ 287 $ 191 231 $ 709
Other Statistics
YOY Long Distance voice volume growth 9% 13% 14% 12%
This information should be reviewed in connection with Sprint's consolidated financial statements.
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