Exhibit 99
[SPRINT LOGO]
Investor Update
4Q 2004
Sprint Reports Fourth Quarter and Full-Year 2004 Results
o Strong direct and affiliate and robust wholesale performance drives 1.58
million net Wireless subscriber additions
o Outstanding quarterly DSL customer additions in Local
o Strong growth in profits
o Free Cash Flow*, debt reduction exceed targets
Overland Park, Kan. - Feb. 3, 2005:
Sprint (NSYE: FON) today announced fourth quarter and full-year 2004 financial
results. Sprint completed the year with record Wireless and DSL subscriber
gains, substantial bottom-line improvement and increased financial strength.
For the quarter, fully diluted earnings per share from continuing operations on
a GAAP basis were 29 cents. This compares to 7 cents earnings per share in the
fourth quarter of 2003. Adjusted EPS*, which removes the effects of special
items, was 31 cents per share compared to 17 cents per share in the same period
a year ago, an 82% improvement. For the full year on a GAAP basis, Sprint
reported a loss from continuing operations of 71 cents per share compared to a
loss of 21 cents per share in 2003. Full-year Adjusted EPS* was 93 cents
compared to 63 cents a year ago, a 48% improvement. Special items are described
in the next section of this release.
Fourth quarter Free Cash Flow* totaled $624 million and full-year Free Cash
Flow* was $2.0 billion. As a result of this strong cash production, Sprint
finished the year with Net Debt* of approximately $12.6 billion, beating its
year-end goal of $13 billion.
Total consolidated revenues for 2004 were $27.4 billion, a 5% increase compared
to 2003. Fourth quarter revenues increased 4% compared to the year-ago period
and were flat sequentially. In the quarter, Sprint reported a double-digit
year-over-year increase in Wireless revenues and steady Local performance offset
by a decline in Long Distance. In the quarter, each of Sprint's customer-facing
sales units reported revenues consistent with third quarter levels.
Consolidated Adjusted EBITDA* in the quarter was $2.05 billion, a 1% increase
over the year-ago period, but a 1% decline sequentially. Full-year Adjusted
EBITDA* was $8.13 billion, a 3% increase compared to 2003. In the quarter, Local
delivered strong Adjusted EBITDA* performance while Long Distance declined.
Fourth quarter Wireless Adjusted EBITDA* increased more than 20% year-over-year.
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Consolidated Adjusted Operating Income* in the quarter was $1.0 billion, a 32%
increase from the year-ago period and a 20% sequential improvement. Fourth
quarter Adjusted Operating Income* was aided by lower depreciation expense in
Long Distance following an asset impairment recorded in the third quarter.
Full-year Adjusted Operating Income* was $3.4 billion, a 16% improvement
compared to 2003.
In the fourth quarter, Sprint continued to achieve strong gains in strategic
industry growth areas. The 1.58 million net wireless additions in the fourth
quarter included 526,000 from direct, 923,000 from wholesale and 133,000 through
affiliate partners, making this a record quarter. There were more than 17.8
million total direct customers at the end of 2004, reflecting a full-year
increase of just under 2.0 million. At the end of the year, Wireless was serving
a total of 24.8 million customers, an increase of 4.4 million, or 22%, from a
year ago. Local added 60,000 DSL subscribers in the quarter and ended the year
with nearly 500,000 customers, an increase of more than 60% from a year ago.
"At the onset of 2004, we described our intent to transform our business to
focus on the distinctive needs of businesses and consumers, as well as outlined
growth and expense reduction goals," said Gary Forsee, Sprint chairman and chief
executive officer. "We exit the year in full stride in delivering solid
operational and financial performance. This execution has led to substantial
value creation for our shareholders and set a foundation that is expected to
benefit our customers and investors in the years ahead."
Sprint Consolidated Highlights
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Sprint Corporation
Selected Financial Data
(millions) Quarters Ended
Dec 31, Dec 31, Percent
2004 2003 Change
- -----------------------------------------------------------
Net operating revenues $6,930 $6,681 3.7%
Operating income 970 447 NM
Adjusted operating income 1,016 767 32.5%
Adjusted income from
continuing operations 468 248 88.7%
Income from continuing
operations 437 107 NM
Discontinued operations - 3 (100%)
Net Income $437 $110 NM
CapEx $1,338 $1,464 (8.6%)
Free Cash Flow* $624 $581 7.4%
Year-to-Date
Dec 31, Dec 31, Percent
2004 2003 Change
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Net operating revenues $27,428 $26,197 4.7%
Operating income (loss) (303) 1,007 NM
Adjusted operating income 3,414 2,944 16.0%
Adjusted income from
continuing operations 1,365 907 50.5%
Loss from continuing
operations (1,012) (292) NM
Discontinued operations - 1,324 (100.0%)
Cumulative effect of
change in accounting
principle, net - 258 (100.0%)
Net Income (Loss) ($1,012) $1,290 NM
CapEx $3,980 $3,797 4.8%
Free Cash Flow* $1,997 $2,330 (14.3%)
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Consolidated fourth quarter net operating revenues were $6.9 billion compared to
$6.7 billion last year. Consolidated Operating income for the fourth quarter was
$970 million. The consolidated operating income of $447 million in the 2003
fourth quarter includes restructuring and asset impairment charges of $370
million and a one-time gain from a bad debt recovery of $50 million. Adjusted
Operating Income* as a percent of net operating revenues was approximately 320
basis points higher than the same period a year ago. The improvement was largely
aided by lower Long Distance depreciation expense following an asset impairment
charge taken in the third quarter of 2004. For the year-to-date period,
pension-related costs and stock-based compensation costs totaled $356 million
vs. $215 million in the year-ago period. Full-year interest expense decreased
$153 million, or 11%, from 2003.
Full-year capital expenditures totaled $4.0 billion. In Wireless, Sprint
invested $2.6 billion adding network
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capacity, improving coverage and beginning the EV-DO buildout. Long Distance
invested $282 million maintaining and adding capacity to the network and
deploying our Next Generation Voice Network for cable customers and new VoIP
services. Local spent a little more than $1.0 billion adding new capabilities,
supporting customer requirements and maintaining current facilities.
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 2003, a pre-tax, non-cash charge of $1.9
billion was recorded for the write-down of Sprint's MMDS spectrum, Web
Hosting wind-down, and termination of a software billing platform.
o Restructuring - In 2004, pre-tax charges related to severance costs
associated with Sprint's transformation initiatives and Web Hosting
wind-down were $46 million for the fourth quarter and $191 million for the
year-to-date period. In 2003, pre-tax charges primarily related to Sprint's
transformation initiatives and the Web Hosting wind-down were approximately
$78 million.
o Bankruptcy settlement - Sprint recorded a pre-tax benefit of $14 million in
the second quarter of 2004 and $50 million in 2003 as a result of a
bankruptcy settlement reached with MCI (WorldCom).
o Executive separation agreements - In 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 $2 million was
recorded in the fourth quarter, 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 senior notes and equity unit
notes. These charges consisted of premiums paid and the recognition of
deferred debt costs. In 2003, pre-tax charges of $21 million were recorded
related to the early retirement of long-term debt.
o Shareholder litigation charge - A pre-tax charge of $50 million was
recorded in 2003 for a shareholder litigation settlement. This charge was
partially offset by $35 million in insurance proceeds received during 2003.
o Tax benefits - Tax benefits of $49 million were recorded in 2003 related to
the recognition of certain federal and state income tax credits and the
cumulative impact of changes in state income tax apportionments.
Finally, Sprint reported two items in the statement of operations below the
continuing operations line in 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.
For additional explanation of any of these special items, refer to the attached
schedules, Notes to Consolidated Statements of Operations and Reconciliations of
Earnings per Share.
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Wireless
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Wireless
Selected Financial Data
(millions)
Quarters Ended
Dec 31, Dec 31, Percent
2004 2003 Change
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Net operating revenues
Service $3,244 $2,908 11.6%
Equipment 395 298 32.6%
Wholesale, affiliate and
other 197 101 95.0%
Net operating revenues 3,836 3,307 16.0%
Operating expenses
Cost of services &
products 1,851 1,558 18.8%
Selling, general &
administrative 919 868 5.9%
Depreciation 649 625 3.8%
Restructuring & asset
impairments 11 352 (96.9%)
Total operating expenses 3,430 3,403 0.8%
Operating income (loss) $406 ($96) NM
Capex $889 $931 (4.5%)
Year-to-Date
Dec 31, Dec 31, Percent
2004 2003 Change
- ------------------------------------------------------------
Net operating revenues
Service $12,529 $11,217 11.7%
Equipment 1,510 1,143 32.1%
Wholesale, affiliate and
other 608 330 84.2%
Net operating revenues 14,647 12,690 15.4%
Operating expenses
Cost of services &
products 7,096 6,155 15.3%
Selling, general &
administrative 3,406 3,085 10.4%
Depreciation 2,563 2,454 4.4%
Restructuring & asset
impairments 30 362 (91.7%)
Total operating expenses 13,095 12,056 8.6%
Operating income $1,552 $634 NM
Capex $2,559 $2,123 20.5%
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o Direct gross additions were approximately 1.9 million in the quarter, a 16%
year-over-year increase. Full-year direct gross additions were
approximately 7.2 million.
o Fourth quarter net operating revenues increased 16% compared to the
year-ago period and increased 2% sequentially. In addition to strong direct
service revenues and growth in equipment revenues, the quarter's revenues
were aided by a growing contribution from wholesale partners. Wholesale and
affiliate revenues were up 95% year-over-year and 19% sequentially.
o Fourth quarter Adjusted Operating Income* increased 63% from the year-ago
period, primarily from increased revenue, as discussed above. Adjusted
Operating Income* decreased 8% sequentially, primarily due to higher
acquisition costs associated with increased direct gross additions.
o Adjusted EBITDA* was $1.07 billion, an increase of 21% from the fourth
quarter of 2003, but a decline of 2% from the third quarter of 2004.
Full-year Adjusted EBITDA* increased 19% compared to 2003.
o For the full year, Adjusted EBITDA* exceeded capital spending by $1.58
billion, a 17% improvement over the prior year.
o Average monthly service revenue per user (ARPU)* was $62 in the fourth
quarter and in the year-ago period, and $63 in the third quarter of 2004.
o During the quarter, average subscriber usage was approximately 16 hours per
month.
o Subscriber churn was approximately 2.7% in the fourth quarter, which
mirrors both the year-ago period and the third quarter of 2004.
At the end of the period, there were nearly 7.7 million direct wireless data
subscribers, including 6.2 million Sprint PCS Visionsm subscribers. In the
quarter, data contributed 9% to overall ARPU*.
Wireless continues to position itself as the partner of choice in the mobile
virtual network operator (MVNO) market, announcing a new agreement with ESPN in
the fourth quarter. The MVNO initiative allows Sprint to partner with other
leading national brands to add new distribution channels and leverage our
network investment.
Fourth quarter cost of services and products increased 19% compared to the
year-ago period and 5% sequentially, primarily due to higher equipment costs
associated with increased gross additions and cost of service increases
associated with a larger subscriber base and higher minutes of use. Higher
customer acquisition expenses and a broader direct distribution presence
contributed to a 6% year-over-year increase in selling, general and
administrative expenses and a 1% increase sequentially. The 2004 fourth quarter
includes a $30 million gain on sale of previously written-off customer
receivables. As previously reported, the 2004 third quarter included an
additional $26 million of cell site acquisition and development expenses.
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Local
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Local
Selected Financial Data
(millions)
Quarters Ended
Dec 31, Dec 31, Percent
2004 2003 Change
- -----------------------------------------------------------
Net operating revenues
Voice $1,110 $1,154 (3.8%)
Data 219 194 12.9%
Other 180 197 (8.6%)
Net operating revenues 1,509 1,545 (2.3%)
Operating expenses
Cost of services &
products 465 476 (2.3%)
Selling, general &
administrative 287 285 0.7%
Depreciation 273 276 (1.1%)
Restructuring & asset
impairments 20 24 (16.7%)
Total operating expenses 1,045 1,061 (1.5%)
Operating Income $464 $484 (4.1%)
Capex $329 $387 (15.0%)
Year-to-Date
Dec 31, Dec 31, Percent
2004 2003 Change
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Net operating revenues
Voice $4,498 $4,654 (3.4%)
Data 833 730 14.1%
Other 690 746 (7.5%)
Net operating revenues 6,021 6,130 (1.8%)
Operating expenses
Cost of services &
products 1,877 1,943 (3.4%)
Selling, general &
administrative 1,254 1,220 2.8%
Depreciation 1,084 1,081 0.3%
Restructuring & asset
impairments 40 24 66.7%
Total operating expenses 4,255 4,268 (0.3%)
Operating Income $1,766 $1,862 (5.2%)
Capex $1,042 $1,226 (15.0%)
- -----------------------------------------------------------
o Fourth quarter revenues declined 2% from the year-ago period. Full-year
revenues were also down 2%. Fourth quarter revenues were up 1% from the
third quarter. The sequential increase was primarily due to a 2004 third
quarter revenue reduction of $14 million related to an unfavorable FCC
ruling that was noted in our third quarter report.
o Adjusted EBITDA* was up 1% compared to the year-ago period, and 10%
sequentially. Full-year Adjusted EBITDA of $2.89 billion declined 2% from
2003. In the quarter, Adjusted EBITDA* was 50.2% of revenues.
o For the full year, Adjusted EBITDA* exceeded capital spending by $1.85
billion, an 8% annual increase.
o Adjusted Operating Income* of $484 million for the fourth quarter compares
to $473 million in the fourth quarter of 2003 and $414 million in the third
quarter of 2004.
o Local added nearly 190,000 new DSL subscribers in 2004.
o Total voice access lines in service declined 2.9%, or 229,000 lines, from
the year-ago period as access lines continue to be impacted by wireless
substitution and competition from cable providers.
DSL service revenues reached nearly $225 million in 2004. This growth drove a
13% year-over-year increase in quarterly data revenues.
Penetration of residential strategic products continued to increase, and Local
ended the quarter with over 70% of residential customers purchasing at least one
strategic product in addition to basic telephone service. Local had 24,000
satellite video subscribers, an increase of more than 80% from 2004 third
quarter. Penetration of wireless also continued to increase, driven in part by
the integrated wireless and wireline service offering, Sprint Home and On the
Go(sm), which ended the quarter with 43,000 customers, a sequential increase of
150%.
Fourth quarter costs of services and products declined 2% from the year-ago
period and 7% sequentially, primarily due to broad cost containment measures.
Additionally, the 2004 third quarter included $30 million of hurricane-related
costs. Selling, general and administrative expenses were up 1% compared to the
year-ago period. In the fourth quarter a year ago, this line item includes a $35
million credit for a bad debt recovery from a bankrupt business customer.
Without this item, 2004 expenses were down 10%. Sequentially, selling, general
and administrative expenses were down 8%. This decline was primarily due to a
2004 fourth quarter adjustment which decreased post retirement benefit expense.
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Long Distance
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Long Distance
Selected Financial Data
(millions)
Quarters Ended
Dec 31, Dec 31, Percent
2004 2003 Change
- -----------------------------------------------------------
Net operating revenues
Voice $1,079 $1,219 (11.5%)
Data 405 462 (12.3%)
Internet 176 252 (30.2%)
Other 74 44 68.2%
Net operating revenues 1,734 1,977 (12.3%)
Operating expenses
Cost of services &
products 1,091 1,021 6.9%
Selling, general &
administrative 408 535 (23.7%)
Depreciation 111 356 (68.8%)
Restructuring & asset
impairments 15 (7) NM
Total operating expenses 1,625 1,905 (14.7%)
Operating income $109 $72 51.4%
Capex $91 $109 (16.5%)
Year-to-Date
Dec 31, Dec 31, Percent
2004 2003 Change
- -----------------------------------------------------------
Net operating revenues
Voice $ 4,560 $ 4,999 (8.8%)
Data 1,722 1,853 (7.1%)
Internet 793 973 (18.5%)
Other 252 180 40.0%
Net operating revenues 7,327 8,005 (8.5%)
Operating expenses
Cost of services &
products 4,324 4,252 1.7%
Selling, general &
administrative 1,860 2,199 (15.4%)
Depreciation 1,071 1,432 (25.2%)
Restructuring & asset
impairments 3,661 1,564 NM
Total operating expenses 10,916 9,447 15.5%
Operating loss $(3,589) $(1,442) NM
Capex $282 $339 (16.8%)
- -----------------------------------------------------------
o Net operating revenues declined by 12% from the year-ago period and
declined 4% sequentially. Fourth quarter reported revenues were reduced by
$22 million due to customer billing adjustments related to prior quarters'
activity.
o Adjusted EBITDA* was $235 million in the quarter compared to $406 million
in the fourth quarter of 2003 and $302 million in the third quarter of
2004. The declines are primarily due to lower revenues including the
billing adjustments discussed above, competitive pressure on margins and
increased bad debt expense. Full-year Adjusted EBITDA* of $1.14 billion was
15.5% of revenues.
o In 2004, Adjusted EBITDA* exceeded capital spending by $853 million
compared to $1.21 billion in 2003.
o Adjusted Operating Income* was $124 million for the fourth quarter compared
to $50 million in the year-ago period and a loss of $17 million in the
third quarter of 2004. In the fourth quarter, depreciation expense declined
by $245 million from a year ago primarily due to the third quarter asset
impairment.
In the quarter, total voice revenues declined approximately 12% from the
year-ago period and 5% sequentially. In addition to the higher billing
adjustments, the sequential comparison was impacted by a favorable change in
regulatory fee accounting related to an FCC ruling that was noted in our third
quarter report. In the quarter, consumer voice revenues declined 25% compared to
a year ago while business voice revenues, including wholesale and affiliates,
declined by 8%.
Data revenues decreased 12% from the fourth quarter of 2003 and 5% sequentially.
Frame Relay and Private Line services declined at low double-digit rates
compared to the year-ago period while ATM revenues were 4% lower. Dedicated IP
revenues increased 8% year-over-year and 4% sequentially, but this was more than
offset by the impact from exiting Dial IP and Web Hosting services.
In the fourth quarter, selling, general and administrative expenses were 24%
below the year-ago period, reflecting lower headcount and a refined go-to-market
strategy for long-distance that increased business sales efforts in
multi-product bundles, IP and wireless solutions while reducing sales efforts on
stand-alone wireline services. In the quarter, bad debt expense was 2.2% of
revenues vs. 0.9% in the third quarter. Excluding a credit to bad debt that was
noted as a special item in the fourth quarter a year ago, bad debt would have
been 1.4% of revenues. The increase in the current period was due to several
small business customer bankruptcies.
Sprint continued to expand its cable initiative, which now enables it to help
cable companies deliver a wide range of local and long distance voice services
through agreements with cable partners like Time Warner, Charter Communications,
Mediacom and others. Sprint was also selected by Comcast to provide certain
transport services in support of Comcast's deployment of voice services in
selected markets. The number of orders Sprint received per day in the 2004
fourth quarter through its cable agreements increased approximately 50%
sequentially.
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Forward-looking Guidance
Sprint is reiterating 2005 guidance which it previously provided on December 20,
2004. This guidance includes full-year low single-digit revenue growth,
full-year Adjusted EBITDA* of $8.5 billion to $8.7 billion, and full-year
capital spending of $4.0 billion to $4.2 billion. Sprint will make a
presentation to the investment community on the morning of February 10, 2005.
More detailed forward-looking guidance will be provided on that date.
Information about the meeting and the directions for an individual to
participate through a live webcast are available at www.sprint.com/IR. An audio
"listen-only" option will also be available.
*Financial Measures
Sprint provides 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. These non-GAAP measures are not
measurements under accounting principles generally accepted in the United
States. These measurements should be considered in addition to, but not as a
substitute for, the information contained in our financial reporting. We have
defined below each of the non-GAAP measures we use, but these measures may not
be synonymous to similar measurement terms used by other companies.
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 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.
We believe this measure is useful because it allows investors to evaluate our
operating results for different periods on a more comparable basis by excluding
special items.
Adjusted income (loss) from continuing operations and Adjusted earnings per
share (EPS) or Adjusted loss per share are defined as income or loss from
continuing operations plus special items, net of tax and the diluted EPS
calculated thereon. These non-GAAP measures should be used in addition to, but
not as a substitute for, the analysis provided in the statement of operations.
We believe that these measures are useful because they allow investors to
evaluate our performance for different periods on a more comparable basis by
excluding items that do not relate to the ongoing operations of our businesses.
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.
We believe that Adjusted EBITDA provides useful information to investors because
it is an indicator of the strength and performance of our ongoing business
operations, including our ability to fund discretionary spending such as capital
expenditures, spectrum acquisitions and other investments and our ability to
incur and service debt. While depreciation and amortization are considered
operating costs under generally accepted accounting principles, these expenses
primarily represent non-cash current period allocation of costs associated with
long-lived assets acquired or constructed in prior periods. Adjusted EBITDA is a
calculation commonly used as a basis for investors, analysts and credit rating
agencies to evaluate and compare the periodic and future operating performance
and value of companies within the telecommunications industry.
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.
We believe that Free Cash Flow provides useful information to investors,
analysts and our management about the cash generated by our core operations
after interest and dividends and our ability to fund scheduled debt maturities
and other financing activities, including discretionary refinancing and
retirement of debt and purchase or sale of investments.
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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.
We believe that Net Debt provides useful information to investors, analysts and
credit rating agencies about the capacity of the company to reduce the debt load
and improve its capital structure.
ARPU (Average monthly service revenue per user) is calculated by dividing
wireless service revenues from direct subscribers by weighted average monthly
wireless direct subscribers. This industry operating metric is used to measure
revenue on a per-user basis. While this measure is not defined under accounting
principles generally accepted in the United States, the measure uses GAAP as the
basis for calculation.
We believe that ARPU provides useful information concerning the appeal of our
rate plans and service offerings and our performance in attracting and retaining
high value customers.
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 Thursday, February 3,
2005, beginning at 7 a.m. CST. 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 from February 7, 2005, through February 21,
2005. A continuous replay of the call will be available through February 21,
2005, 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 uncertainties related to our proposed merger with Nextel;
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 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;
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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/A, and you are encouraged to review these filings.
About Sprint
Sprint offers an extensive range of innovative communication products and
solutions, including global IP, wireless, local and multiproduct bundles. A
Fortune 100 company with more than $27 billion in annual revenues in 2004,
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; an award-winning Tier 1 Internet
backbone; and one of the largest 100-percent digital, nationwide wireless
networks in the United States. For more information, visit www.sprint.com.
For further information, contact
Corporate Communications:
o Media Relations:
Scott Stoffel
913-794-3603
scott.e.stoffel@mail.sprint.com
o Investor Relations:
Kurt Fawkes
913-794-1126
Investorrelation.sprintcom@mail.sprint.com
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Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
Quarter-to-Date Year-to-Date
-------------------------------------------------------------
- ----------------------------------------------------------------
Periods Ended December 31, 2004 2003 2004 2003
- ---------------------------------------------------------------- ------------------------------- --------------------------
Net Operating Revenues $ 6,930 $ 6,681 $ 27,428 $ 26,197
- ---------------------------------------------------------------- -------------------------------- --------------------------
Operating Expenses
Costs of services and products 3,241 2,892 12,656 11,658
Selling, general and administrative (1) 1,640 1,714 6,624 6,608
Depreciation and amortization 1,033 1,258 4,720 4,973
Restructuring and asset impairments (2) 46 370 3,731 1,951
- ---------------------------------------------------------------- ------------------------------- ---------------------------
Total operating expenses 5,960 6,234 27,731 25,190
- ---------------------------------------------------------------- ------------------------------- ---------------------------
Operating Income (Loss) 970 447 (303) 1,007
Interest expense (301) (330) (1,248) (1,401)
Premium on early retirement of debt (3) (2) - (60) (21)
Other income (expense), net (3), (4) 25 (11) 8 (89)
- ---------------------------------------------------------------- ------------------------------- ----------------------------
Income (Loss) from continuing operations before income taxes 692 106 (1,603) (504)
Income tax (expense) benefit (5) (255) 1 591 212
- ---------------------------------------------------------------- ------------------------------- ----------------------------
Income (Loss) from Continuing Operations 437 107 (1,012) (292)
Discontinued operation, net (6) - 3 - 1,324
Cumulative effect of change in accounting principle, net (7) - - - 258
- ---------------------------------------------------------------- ------------------------------- ----------------------------
Net Income (Loss) 437 110 (1,012) 1,290
Earnings allocated to participating securities (8) - - (9) -
Preferred stock dividends paid (2) (2) (7) (7)
- ---------------------------------------------------------------- ------------------------------- ----------------------------
Earnings (Loss) Applicable to Common Stock $ 435 $ 108 $ (1,028) $ 1,283
------------------------------- ----------------------------
Diluted Earnings (Loss) per Common Share (9), (10)
Continuing operations $ 0.29 $ 0.07 $ (0.71) $ (0.21)
Discontinued operation - - - 0.94
Cumulative effect of change in accounting principle, net - - - 0.18
- ---------------------------------------------------------------- ------------------------------- ----------------------------
Total $ 0.29 $ 0.08 $ (0.71) $ 0.91
------------------------------- ----------------------------
Diluted weighted average common shares (10), (11) 1,487.5 1,426.2 1,443.4 1,415.3
------------------------------- ----------------------------
Basic Earnings (Loss) per Common Share (10) $ 0.30 $ 0.08 $ (0.71) $ 0.91
------------------------------- ----------------------------
See accompanying Notes to Consolidated Statements of Operations
10
Sprint Corporation
NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS
(1) In the 2003 fourth quarter, Sprint recognized a $50 million pre-tax benefit
to bad debt expense as a result of the settlement of accounts receivable
claims with MCI (WorldCom) that had been previously fully reserved. This
settlement reduced loss from continuing operations by $31 million. In the
2004 second quarter, Sprint recognized an additional $14 million pre-tax
benefit to bad debt expense as a result of the final payment of the
settlement of claims with MCI. This additional 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.
(2) In the 2004 fourth quarter, Sprint recorded $46 million of pre-tax
restructuring and asset impairment charges related to its ongoing
organizational realignment initiatives as well as the termination of the
Web Hosting business. These charges decreased income from continuing
operations by $30 million.
In the 2004 year-to-date period, Sprint recorded $3.73 billion of pre-tax
restructuring charges and asset impairments, which increased loss from
continuing operations by $2.34 billion. In addition to the 2004 fourth
quarter charges noted above, Sprint recorded a pre-tax, non-cash charge of
$3.54 billion related to 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. 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. This charge reduced
the net book value of Sprint's long distance property, plant and equipment
by about 60%. Sprint also recorded $145 million of pre-tax restructuring
charges associated with Sprint's organizational realignment initiatives and
the termination of the Web Hosting business.
In the 2003 fourth quarter, Sprint recorded pre-tax restructuring and asset
impairment charges of $370 million related mainly to Sprint's
organizational realignment initiatives, the termination of the Web Hosting
business, a terminated billing platform development project and the
finalization of all 2001 and 2002 restructuring liabilities. These charges
reduced income from continuing operations by $233 million.
In the 2003 year-to-date period, Sprint recorded pre-tax restructuring and
asset impairments aggregating $1.95 billion, which increased loss from
continuing operations by $1.24 billion. In addition to the 2003 fourth
quarter charges noted above, Sprint recorded pre-tax restructuring and
asset impairments of $1.58 billon related to the revaluation of MMDS
spectrum assets to fair value, the termination of the Web Hosting business
and the termination of a software development project.
(3) In the 2004 fourth quarter, Sprint recorded a $2 million charge reflecting
premiums paid for the early retirement of debt. This charge reduced income
from continuing operations by $1 million.
In the 2004 year-to-date period, Sprint recorded charges of $60 million
reflecting premiums paid for early retirements of debt. In connection with
these retirements, Sprint recognized $12 million of deferred debt costs in
Other income (expense), net. These charges increased loss from continuing
operations by $44 million.
In the 2003 year-to-date period, Sprint recorded a $21 million charge
reflecting premiums paid on the early retirement of debt. This charge
increased loss from continuing operations by $13 million.
(4) 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 and in the 2003
fourth quarter, an $18 million settlement from a second insurer was
recorded. These actions reduced the loss from continuing operations by $12
million in the 2003 fourth quarter and increased the loss from continuing
operations by $9 million in the 2003 year-to-date period.
(5) In the 2003 fourth quarter, Sprint recognized a tax benefit of $49 million
for the recognition of certain federal and state income tax credits
relating to various taxing jurisdictions and the cumulative impact of
changes in state tax apportionments.
(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 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 in the 2004 and
2003 year-to-date periods, both basic earnings per share and diluted
earnings per share reflect the same calculation for these periods. 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 in the 2004 and
2003 year-to-date periods, they are not included in the weighted average
common shares outstanding for these periods.
11
Sprint Corporation
CONSOLIDATED BALANCE SHEETS
(millions)
------------------------------------------------
December 31, December 31,
2004 2003
------------------------------------------------
Assets
Current assets
Cash and equivalents $ 4,556 $ 2,424
Accounts receivable, net 3,107 2,876
Inventories 651 582
Deferred tax asset 1,049 26
Prepaid expenses and other 612 703
- --------------------------------------------------------------------------------------------------------------
Total current assets 9,975 6,611
Net property, plant and equipment 22,628 27,101
Net intangible assets 7,836 7,815
Other 882 1,148
- --------------------------------------------------------------------------------------------------------------
Total $ 41,321 $ 42,675
------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 1,288 $ 594
Accounts payable and accrued interconnection costs 2,671 2,700
Accrued restructuring costs 168 117
Other 2,775 3,065
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 6,902 6,476
Noncurrent liabilities
Long-term debt and capital lease obligations 15,916 16,841
Equity unit notes - 1,725
Deferred income taxes 2,176 1,725
Other 2,559 2,548
- --------------------------------------------------------------------------------------------------------------
Total noncurrent liabilities 20,651 22,839
Redeemable preferred stock 247 247
Common stock and other shareholders' equity
Common stock 2,950 2,844
Other shareholders' equity 10,571 10,269
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 13,521 13,113
- --------------------------------------------------------------------------------------------------------------
Total $ 41,321 $ 42,675
------------------------------------------------
12
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
- --------------------------------------------------------------------------------------------------------------------------
Year-to-Date December 31, 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ (1,012) $ 1,290
Discontinued operation, net - (1,324)
Cumulative effect of change in accounting principle, net - (258)
Depreciation and amortization 4,720 4,973
Deferred income taxes (576) 439
Losses on write-down of assets 3,540 1,873
Changes in assets and liabilities, net (353) (692)
Other, net 306 214
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of continuing operations 6,625 6,515
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (3,980) (3,797)
Investments in and loans to affiliates, net (20) (32)
Investments in debt securities, net 145 (302)
Other, net 42 101
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities of continuing operations (3,813) (4,030)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities
Change in debt, net (1,884) (2,908)
Dividends paid (670) (457)
Proceeds from common stock issued 1,874 12
Other, net - 24
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities of continuing operations (680) (3,329)
- ----------------------------------------------------------------------------------------------------------------------------
Cash from discontinued operations - 2,233
- ----------------------------------------------------------------------------------------------------------------------------
Change in cash and equivalents 2,132 1,389
Cash and equivalents at beginning of period 2,424 1,035
- ----------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 4,556 $ 2,424
--------------------------------------------------
13
Sprint Corporation
RECONCILIATION OF NON-GAAP LIQUIDITY MEASURES
(millions)
-------------------------------------------------------------------------------
Quarter-to-date December 31, 2004
Long Other &
Consolidated Wireless Local Distance Eliminations
-------------------------------------------------------------------------------
Operating income (loss) $ 970 $ 406 $ 464 $ 109 $ (9)
Special items 46 11 20 15 -
------------------------------------------------------------------------------
Adjusted operating income (loss)* 1,016 417 484 124 (9)
Depreciation and amortization 1,033 649 273 111 -
------------------------------------------------------------------------------
Adjusted EBITDA* 2,049 $ 1,066 $ 757 $ 235 $ (9)
-----------------------------------------------------------
Adjust for special items (46)
Other operating activities, net (1) 96
--------------
Cash provided by operating activities-GAAP 2,099
Capital expenditures (1,338)
Dividends paid (185)
Investments in and loans to affiliates, net (10)
Other investing activities, net 58
--------------
Free Cash Flow* 624
Decrease in debt, net (199)
Investments in debt securities, net 29
Proceeds from common stock issued 72
Other financing activities, net 14
--------------
Change in cash and equivalents - GAAP $ 540
--------------
------------------------------------------------------------------------------
Quarter-to-date December 31, 2003
Long Other &
Consolidated Wireless Local Distance Eliminations
------------------------------------------------------------------------------
Operating income (loss) $ 447 $ (96) $ 484 $ 72 $ (13)
Special items 320 352 (11) (22) 1
------------------------------------------------------------------------------
Adjusted operating income (loss)* 767 256 473 50 (12)
Depreciation and amortization 1,258 625 276 356 1
------------------------------------------------------------------------------
Adjusted EBITDA* 2,025 $ 881 $ 749 $ 406 $ (11)
------------------------------------------------------------------------------
Adjust for special items (320)
Other operating activities, net (1) 450
--------------
Cash provided by operating activities-GAAP 2,155
Capital expenditures (1,464)
Dividends paid (114)
Other investing activities, net 4
--------------
Free Cash Flow* 581
Discontinued operation 3
Decrease in debt, net (566)
Investments in debt securities, net (211)
Other financing activities, net 16
--------------
Change in cash and equivalents - GAAP $ (177)
--------------
<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.
</FN>
See accompanying Notes to Consolidated Statements of Operations
14
Sprint Corporation
RECONCILIATION OF NON-GAAP LIQUIDITY MEASURES
(millions)
-------------------------------------------------------------------------------
Year-to-date December 31, 2004
Long Other &
Consolidated Wireless Local Distance Eliminations
-------------------------------------------------------------------------------
Operating income (loss) $ (303) $ 1,552 $ 1,766 $ (3,589) $ (32)
Special items 3,717 25 39 3,653 -
------------------------------------------------------------------------------
Adjusted operating income (loss)* 3,414 1,577 1,805 64 (32)
Depreciation and amortization 4,720 2,563 1,084 1,071 2
------------------------------------------------------------------------------
Adjusted EBITDA* 8,134 $ 4,140 $ 2,889 $ 1,135 $ (30)
----------------------------------------------------------
Adjust for special items (3,717)
Other operating activities, net (1) 2,208
--------------
Cash provided by operating activities-GAAP 6,625
Capital expenditures (3,980)
Dividends paid (670)
Investments in and loans to affiliates, net (20)
Other investing activities, net 42
--------------
Free Cash Flow* 1,997
Decrease in debt, net (1,884)
Investments in debt securities, net 145
Proceeds from common stock issued 1,874
Other financing activities, net -
--------------
Change in cash and equivalents - GAAP $ 2,132
--------------
------------------------------------------------------------------------------
Year-to-date December 31, 2003
Long Other &
Consolidated Wireless Local Distance Eliminations
------------------------------------------------------------------------------
Operating income (loss) $ 1,007 $ 634 $ 1,862 $ (1,442) $ (47)
Special items 1,937 381 (3) 1,558 1
------------------------------------------------------------------------------
Adjusted operating income (loss)* 2,944 1,015 1,859 116 (46)
Depreciation and amortization 4,973 2,454 1,081 1,432 6
------------------------------------------------------------------------------
Adjusted EBITDA* 7,917 $ 3,469 $ 2,940 $ 1,548 $ (40)
------------------------------------------------------------
Adjust for special items (1,937)
Other operating activities, net (1) 535
----------------
Cash provided by operating activities-GAAP 6,515
Capital expenditures (3,797)
Dividends paid (457)
Other investing activities, net 69
----------------
Free Cash Flow* 2,330
Discontinued operation 2,233
Decrease in debt, net (2,908)
Investments in debt securities (302)
Other financing activities, net 36
---------------
Change in cash and equivalents - GAAP $ 1,389
---------------
<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.
</FN>
See accompanying Notes to Consolidated Statements of Operations
15
Sprint Corporation
RECONCILIATIONS OF EARNINGS PER SHARE
(millions, except per share date)
Quarter-to-Date Year-to-Date
- ------------------------------------------------------------ --------------------------------- --------------------------------
Periods Ended December 31, 2004 2003 2004 2003
- ------------------------------------------------------------ --------------------------------- --------------------------------
Earnings (Loss) Applicable to Common Stock $ 435 $ 108 $ (1,028) $ 1,283
Earnings allocated to participating securities - - 9 -
Preferred stock dividends paid 2 2 7 7
- ------------------------------------------------------------ -------------------------------- --------------------------------
GAAP Net income (loss) 437 110 (1,012) 1,290
Discontinued operation, net - (3) - (1,324)
Cumulative effect of change in accounting principle - - - (258)
- ------------------------------------------------------------ -------------------------------- --------------------------------
Income (Loss) from continuing operations 437 107 (1,012) (292)
Special items (net of taxes)
Restructuring and asset impairments 30 233 2,342 1,235
MCI settlement - (31) (9) (31)
Executive separations - - - 22
Premium on early retirement of debt 1 - 44 13
Shareholder litigation charge - (12) - 9
Tax benefit - (49) - (49)
- ------------------------------------------------------------ -------------------------------- --------------------------------
Adjusted income from continuing operations $ 468 $ 248 $ 1,365 $ 907
- ------------------------------------------------------------ -------------------------------- --------------------------------
GAAP earnings (loss) per share $ 0.29 $ 0.08 $ (0.71) $ 0.91
Discontinued operation - - - (0.94)
Cumulative effect of change in accounting principle - - - (0.18)
- ------------------------------------------------------------ -------------------------------- --------------------------------
Earnings (loss) per share from continuing operations 0.29 0.07 (0.71) (0.21)
Special items 0.02 0.10 1.65 0.84
- ------------------------------------------------------------ -------------------------------- --------------------------------
Adjusted Earnings Per Share (1) $ 0.31 $ 0.17 $ 0.93 $ 0.63
- ------------------------------------------------------------ -------------------------------- --------------------------------
<FN>
(1) Earnings per share data may not add due to rounding.
</FN>
16
Sprint Corporation
WIRELESS OPERATING STATISTICS
- ----------------------------------------------------------------------------------------------------------------------------------
1Q04 2Q04 3Q04 4Q04 YTD 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Statistics (millions)
Net operating revenue $ 3,437 $ 3,614 $ 3,760 $ 3,836 $ 14,647
Service revenues $ 2,939 $ 3,102 $ 3,244 $ 3,244 $ 12,529
Equipment revenues $ 377 $ 388 $ 350 $ 395 $ 1,510
Wholesale, affiliate and other revenues $ 121 $ 124 $ 166 $ 197 $ 608
Equipment costs $ 722 $ 674 $ 662 $ 738 $ 2,796
Operating income (loss) $ 277 $ 418 $ 451 $ 406 $ 1,552
Adjusted EBITDA $ 925 $ 1,065 $ 1,084 $ 1,066 $ 4,140
Capital expenditures $ 406 $ 661 $ 603 $ 889 $ 2,559
Adjusted EBITDA less capital expenditures $ 519 $ 404 $ 481 $ 177 $ 1,581
Bad debt % of net operating revenues 1.1% 1.3% 1.7% 1.4% 1.4%
Customer Additions
Direct net adds before subscriber acquisition 414,000 505,000 429,000 526,000 1,874,000
Subscriber acquisition from affiliate - 91,000 - - 91,000
-------------------------------------------------------------------
Direct net adds 414,000 596,000 429,000 526,000 1,965,000
Affiliate net adds before subscriber sale 138,000 93,000 101,000 133,000 465,000
Subscriber sale to Sprint - (91,000) - - (91,000)
-------------------------------------------------------------------
Affiliate net adds 138,000 2,000 101,000 133,000 374,000
Reseller net adds 420,000 299,000 422,000 923,000 2,064,000
Gross adds (excluding deactivations within 30 days) (M) 1.80 1.67 1.79 1.94 7.19
% of gross adds sold through direct retail 51% 52% 51% 53%
% of direct retail base that upgraded phones in
the quarter 7% 7% 7% 7%
Other Wireless Statistics (approximate)
Average revenue per user $ 61 $ 62 $ 63 $ 62 $ 62
Customer churn 2.9% 2.3% 2.7% 2.7% 2.6%
Average monthly customer usage (hours) (1) 15 16 16 16
Total minutes provided (billions) (1) 44 49 52 53 198
Number of cell sites on air 21,800 22,700 23,600 24,700
Number of carriers on air 39,500 40,700 42,400 44,300
Sprint PCS covered POPs (M) (2) 191 197 197 199
Sprint PCS and affiliate covered POPs (M) (2) 246 251 251 253
Vision/Wireless Web/Data/3G (approximate)
Total Vision direct subscribers (M) 4.2 5.0 5.6 6.2
Vision % of gross adds 55% 55% 55% 60%
Total Vision and Wireless Web direct subscribers (M) 6.2 6.9 7.3 7.7
Data ARPU $ 3.50 $ 4.50 $ 5.00 $ 5.50
% of direct retail subscriber base using Vision handsets 48% 57% 64% 72%
Marketing and Distribution
Total number of subscribers on Wireless network (thousands) 21,329 22,226 23,178 24,760
Total direct subscribers 16,281 16,877 17,306 17,832
Total affiliate subscribers 3,017 3,019 3,120 3,253
Total wholesale/reseller subscribers 2,031 2,330 2,752 3,675
Number of PCS stores and kiosks 660 715 770 805
Total number of distribution points 17,400 16,700 17,200 15,600
<FN>
(M) - in millions
</FN>
<FN>
(1) Prior periods have been restated to reflect the current period calculation method for minutes of use for certain
calling features.
</FN>
<FN>
(2) Beginning with the 2004 second quarter, covered POPs reflect updated census data.
</FN>
This information should be reviewed in connection with Sprint's consolidated financial statements.
17
Sprint Corporation
OPERATING STATISTICS
- ----------------------------------------------------------------------------------------------------------------------------------
1Q04 2Q04 3Q04 4Q04 YTD 2004
- ----------------------------------------------------------------------------------------------------------------------------------
Local
Financial Statistics (millions)
Total Local net operating revenues $ 1,506 $ 1,510 $ 1,496 $ 1,509 $ 6,021
Voice net operating revenue $ 1,147 $ 1,136 $ 1,105 $ 1,110 $ 4,498
Data net operating revenue $ 195 $ 205 $ 214 $ 219 $ 833
DSL service revenues $ 48 $ 53 $ 59 $ 64 $ 224
Other net operating revenue $ 164 $ 169 $ 177 $ 180 $ 690
Operating income $ 446 $ 445 $ 411 $ 464 $ 1,766
Adjusted EBITDA* $ 728 $ 718 $ 686 $ 757 $ 2,889
Capital expenditures $ 209 $ 247 $ 257 $ 329 $ 1,042
Adjusted EBITDA less capital expenditures $ 519 $ 471 $ 429 $ 428 $ 1,847
Other Statistics
Total access lines (thousands) 7,876 7,780 7,718 7,668
Residential access lines 5,507 5,430 5,376 5,336
Business access lines 2,142 2,132 2,119 2,107
Wholesale access lines 227 218 223 225
YOY Access line decline -2.2% -2.4% -2.7% -2.9%
Percentage of Sprint local access lines with
Sprint long distance service 51% 52% 54% 54%
- Residential 53% 54% 56% 57%
- Business 45% 46% 47% 48%
Access minutes of use (thousands) 8,459 7,851 7,889 7,718 31,917
Long distance minutes of use (thousands) 990 1,105 1,257 1,290 4,642
Strategic product penetration - residential 67% 68% 69% 70%
DSL lines in service (thousands) 349 383 432 492
- Residential 274 299 340 391
- Business 75 84 92 101
DSL capable lines (thousands) 4,910 5,005 5,186 5,477
Long Distance
Financial Statistics (millions)
Total Long Distance net operating revenues $ 1,912 $ 1,873 $ 1,808 $ 1,734 $ 7,327
Voice net operating revenue $ 1,186 $ 1,164 $ 1,131 $ 1,079 $ 4,560
Data net operating revenue $ 452 $ 438 $ 427 $ 405 $ 1,722
Internet net operating revenue $ 223 $ 214 $ 180 $ 176 $ 793
Other net operating revenue $ 51 $ 57 $ 70 $ 74 $ 252
Operating income (loss) $ 11 $ (139) $ (3,570) $ 109 $ (3,589)
Adjusted EBITDA* $ 343 $ 255 $ 302 $ 235 $ 1,135
Capital expenditures $ 56 $ 64 $ 71 $ 91 $ 282
Adjusted EBITDA less capital expenditures $ 287 $ 191 $ 231 $ 144 $ 853
Other Statistics
YOY Long Distance voice volume growth 9% 13% 14% 13% 13%
This information should be reviewed in connection with Sprint's consolidated financial statements.
18