Slide 1: Investor Update
3Q 2004
Sprint Reports Third Quarter Results
• Raising 2004 outlook on stronger operating performance • Solid execution enhances financial strength and flexibility • 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 1
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
Slide 2: 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 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, 2004 2003 (Restated) $6,922 (2,715) 844 $6,714 (430) 793 6.4%
Percent Change
Net operating revenues Operating income (loss) Adjusted operating income* Adjusted income from continuing operations* Loss from continuing operations Discontinued operations Net income (loss) Capex Free cash flow*
3.1%
350
272
28.7%
(1,910) $(1,910) $966 $439
(496) (1) ($497) $854 $436 13.1% 0.7%
Nine Months Ended Sept 30, Sept 30, 2004 2003 (Restated) Net operating revenues Operating income (loss) Adjusted operating income* Adjusted income from continuing operations* Loss from continuing operations Discontinued operations Cumulative effect of change in accounting principle, net Net income (loss) Capex Free cash flow* $20,498 (1,273) 2,398 $19,516 560 2,177
Percent Change
5.0% 10.2%
897
659
36.1%
(1,449) -
(399) 1,321
$(1,449) $2,642 $1,373
258 $1,180 $2,333 $1,749 13.2% (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-overFor the year-to-date period, pensionyear. related costs and stock-based compensation costs totaled $288 million vs. $161 million in the year-ago period.
2
Slide 3: 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 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: • 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. • 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-todate period. In 2003, pre-tax charges primarily related to the Web Hosting winddown were $358 million through the third quarter. • 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). • 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: 3
•
•
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. 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: • Discontinued operation – Reflects the operational activity and gain on sale of Sprint’s directory publishing business. • 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.
Slide 4: Wireless
Wireless Selected Financial Data (millions) Quarters Ended Sept 30, Sept 30, 2004 2003 (Restated) Net operating revenues Service Equipment Wholesale, affiliate and other Net operating revenues Operating expenses Cost of services & products Selling, general & administrative Depreciation Restructuring & asset impairments Total operating expenses Operating income Capex $3,244 350 166 3,760 1,768 908 630 3 3,309 $451 $603 $2,900 340 100 3,340 1,628 789 620 3,037 $303 $485 9.0% 48.8% 24.3% Percent Change
•
•
11.9% 2.9% 66.0% 12.6% 8.6% 15.1% 1.6%
•
2003 and 2% from the second quarter of 2004. 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. During the quarter, average subscriber usage was just under 17 hours per month. 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.
Nine Months Ended Sept 30, Sept 30, 2004 2003 (Restated) Net operating revenues Service Equipment Wholesale, affiliate and other Net operating revenues Operating expenses Cost of services & products Selling, general & administrative Depreciation Restructuring & asset impairments Total operating expenses Operating income Capex $9,285 1,115 411 10,811 5,245 2,487 1,914 19 9,665 $1,146 $1,670 $8,309 845 229 9,383 4,597 2,217 1,829 10 8,653 $730 $1,192
Percent Change
At the end of the period, there were nearly 7.3 million Sprint PCS data subscribers, including 5.6 sm million Sprint PCS Vision 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.
11.7% 32.0% 79.5% 15.2% 14.1% 12.2% 4.6% 90.0% 11.7% 57.0% 40.1%
•
• • • •
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. Direct gross additions were approximately 1.8 million in the quarter, a 26% year-overyear increase. Third quarter net operating revenues increased 13% compared to the year-ago period and increased 4% sequentially. Third quarter Adjusted Operating Income* was up 50% from the year-ago period and 7% sequentially. Adjusted EBITDA* was $1.08 billion, an increase of 17% from the third quarter of 4
Slide 5: Local
Local Selected Financial Data (millions) Quarters Ended Sept 30, Sept 30, 2004 2003 Net operating revenues Voice Data Other Net operating revenues Operating expenses Cost of services & products Selling, general & administrative Depreciation Restructuring & asset impairments Total operating expenses Operating income Capex $1,105 214 177 1,496 499 311 272 3 1,085 $411 $257 $1,152 187 188 1,527 491 304 269 1,064 $463 $269 2.0% (11.2%) (4.5%) Percent Change (4.1%) 14.4% (5.9%) (2.0%) 1.6% 2.3% 1.1%
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 sm Home and On the Go . 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.
Nine Months Ended Sept 30, Sept 30, 2004 2003 Net operating revenues Voice Data Other Net operating revenues Operating expenses Cost of services & products Selling, general & administrative Depreciation Restructuring & asset impairments Total operating expenses Operating income Capex $3,388 614 510 4,512 1,412 967 811 20 3,210 $1,302 $713 $3,500 536 549 4,585 1,467 935 805 3,207 $1,378 $839
Percent Change (3.2%) 14.6% (7.1%) (1.6%) (3.7%) 3.4% 0.7%
0.1% (5.5%) (15.0%)
•
•
•
• •
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. Adjusted EBITDA* was $686 million for the quarter compared to $732 million in the yearago period and $718 million in the second quarter of 2004. 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. 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. 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.
5
Slide 6: Long Distance
Long Distance Selected Financial Data (millions) Quarters Ended Sept 30, Sept 30, 2004 2003 Net operating revenues Voice Data Internet Other Net operating revenues Operating expenses Cost of services & products Selling, general & administrative Depreciation Restructuring & asset impairments Total operating expenses Operating loss Capex $1,131 427 180 70 1,808 1,085 421 319 3,553 5,378 $(3,570) $71 $1,243 463 233 38 1,977 1,061 526 352 1,223 3,162 $(1,185) $75 (5.3%) 70.1% Percent Change (9.0%) (7.8%) (22.7%) 84.2% (8.5%) 2.3% (20.0%) (9.4%)
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.
Nine Months Ended Sept 30, Sept 30, 2004 2003 Net operating revenues Voice Data Internet Other Net operating revenues Operating expenses Cost of services & products Selling, general & administrative Depreciation Restructuring & asset impairments Total operating expenses Operating loss Capex $3,481 1,317 617 178 5,593 3,233 1,452 960 3,646 9,291 $(3,698) $191 $3,780 1,391 721 136 6,028 3,231 1,664 1,076 1,571 7,542 $(1,514) $230
Percent Change (7.9%) (5.3%) (14.4%) 30.9% (7.2%) 0.1% (12.7%) (10.8%)
23.2% (17.0%)
• •
•
•
Net operating revenues declined by 8.5% to $1.81 billion from $1.98 billion in the yearago period and declined 3.5% sequentially. 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. 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. 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. 6
Slide 7: 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 doubledigit 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 fullyear 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 nonGAAP measure should be used in addition to, but not as a substitute for, the analysis provided in the statement of cash flows. 7
Slide 8: 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. 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 816-6500742 (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. 8
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: • • • • • • the effects of vigorous competition and the overall demand for Sprint’s service offerings in the markets in which Sprint operates; the costs and business risks associated with providing new services and entering new markets; adverse change in the ratings afforded our debt securities by ratings agencies; the ability of Wireless to continue to grow and improve profitability; the ability of Local and Long Distance to maintain cash flow generation; the effects of mergers and consolidations in the telecommunications industry and unexpected announcements or developments from others in the telecommunications industry; the uncertainties related to bankruptcies affecting the telecommunications industry; the impact of financial difficulties of thirdparty affiliates on Wireless network coverage; the uncertainties related to Sprint's investments in networks, systems and other businesses; 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; the impact of new, emerging and competing technologies on Sprint's business; unexpected results of litigation filed against Sprint; the risk of equipment failure, natural disasters, terrorist acts, or other breaches of network or information technology security; 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 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
Slide 9: 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.
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 alldigital, 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
Slide 10: CONSOLIDATED STATEMENTS OF OPERATIONS
(millions, except per share data)
Sprint Corporation
Periods Ended September 30,
Quarter-to-Date 2004 2003
(Restated)
(1)
Year-to-Date 2004 2003
(Restated)
(1)
Net Operating Revenues Operating Expenses Costs of services and products Selling, general and administrative Depreciation and amortization Restructuring and asset impairments Total operating expenses Operating Income (Loss) Interest expense Premium on early retirement of debt Other income (expense), net Income tax benefit Loss from Continuing Operations Discontinued operation, net Net Income (Loss) Earnings allocated to participating securities Preferred stock dividends paid Earnings Applicable to Common Stock Diluted Earnings (Loss) per Common Share (9), (10) Continuing operations Discontinued operation Cumulative effect of change in accounting principle, net Total Diluted weighted average common shares
(10), (11) (10) (8) (6) (7) (4), (5) (4) (3) (2)
$
6,922 3,190 1,666 1,222 3,559 9,637 (2,715) (305) (38) 13 (3,045) 1,135 (1,910) (1,910) (3) (2)
$
6,714 3,034 1,644 1,243 1,223 7,144 (430) (341) (2) 4 (769) 273 (496) (1) (497) (2)
$
20,498 9,415 4,984 3,687 3,685 21,771 (1,273) (947) (58) (17) (2,295) 846 (1,449) (1,449) (9) (5)
$
19,516 8,766 4,894 3,715 1,581 18,956 560 (1,071) (21) (78) (610) 211 (399) 1,321 258 1,180 (5)
Loss from continuing operations before income taxes
Cumulative effect of change in accounting principle, net
$
(1,915)
$
(499)
$
(1,463)
$
1,175
$
(1.32) -
$
(0.35) -
$
(1.02) -
$
(0.29) 0.93 0.18
$ $
(1.32) 1,450.6 (1.32)
$ $
(0.35) 1,419.6 (0.35)
$ $
(1.02) 1,433.8 (1.02)
$ $
0.83 1,413.1 0.83
Basic Earnings (Loss) per Common Share
See accompanying Notes to Press Release Statements.
10
Slide 11: CONSOLIDATED BALANCE SHEETS
(millions)
Sprint Corporation
September 30, 2004 Assets Current assets Cash and equivalents Accounts receivable, net Inventories Deferred tax asset Prepaid expenses and other Total current assets Net property, plant and equipment Net intangible assets Other Total Liabilities and Shareholders' Equity Current liabilities Current maturities of long-term debt Accounts payable and accrued interconnection costs Accrued restructuring costs Other Total current liabilities Noncurrent liabilities Long-term debt and capital lease obligations Equity unit notes Deferred income taxes Other Total noncurrent liabilities $
December 31, 2003
(Restated)
(1)
$
4,016 3,207 691 20 694 8,628 22,359 7,848 944 39,779
$
2,424 2,876 582 26 703 6,611 27,101 7,815 1,148
$
42,675
$
1,414 2,621 160 2,798 6,993
$
594 2,700 117 3,065 6,476
16,038 857 2,467 19,362
16,841 1,725 1,725 2,548 22,839
Redeemable preferred stock Common stock and other shareholders' equity Common stock Other shareholders' equity Total shareholders' equity Total $
247
247
2,941 10,236 13,177 39,779 $
2,844 10,269 13,113 42,675
See accompanying Notes to Press Release Statements.
11
Slide 12: CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(millions)
Sprint Corporation
Year-to-Date September 30, Operating Activities Net income (loss) Discontinued operation, net Cumulative effect of change in accounting principle, net Depreciation and amortization Deferred income taxes Losses on write-down of assets Changes in assets and liabilities Other, net Net cash provided by operating activities of continuing operations Investing Activities Capital expenditures Investments in affiliates, net Investments in debt securities, net Other, net Net cash used by investing activities of continuing operations Financing Activities Change in debt, net Dividends paid Proceeds from common stock issued Other, net Net cash used by financing activities of continuing operations Cash from discontinued operations Change in cash and equivalents Cash and equivalents at beginning of period Cash and equivalents at end of period $
2004
2003
(Restated)
(1)
$
(1,449) 3,687 (879) 3,540 (624) 251 4,526
$
1,180 (1,321) (258) 3,715 442 1,568 (1,156) 190 4,360
(2,642) (10) 116 (16) (2,552)
(2,333) (16) (91) 81 (2,359)
(1,685) (485) 1,802 (14) (382) 1,592 2,424 4,016 $
(2,342) (343) 6 14 (2,665) 2,230 1,566 1,035 2,601
See accompanying Notes to Press Release Statements.
12
Slide 13: NOTES TO PRESS RELEASE STATEMENTS
(1)
Sprint Corporation
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):
Statement of Operations: Year Ending December 31, 2004 First quarter Second quarter Year Ended December 31, 2003 First quarter Second quarter Third quarter Fourth quarter Total 2003 Year Ended December 31, 2002 Year Ended December 31, 2001
Operating Income
Increase/(Decrease) Income from Continuing Net Operations Income
Diluted Earnings Per Share
$
10 11
$
3 3
$
3 3
$
0.01 -
8 8 8 122 146 (4) (9)
2 1 72 75 (20) (46) -
2 1 72 75 (20) (46)
0.05 0.06 (0.01) (0.03)
Balance Sheet: As of December 31, 2003 As of December 31, 2002
Net Property, Plant and Equipment $ (175) (180)
Increase/(Decrease) Postretirement Deferred and Other Benefit Income Tax Obligations Liability $ 114 $ (64) (108)
Total Shareholders' Equity $ (111) (186)
Statement of Cash Flows: Six Months Ended June 30, 2004 Nine Months Ended September 30, 2003 Year Ended December 31, 2003 Year Ended December 31, 2002 Year Ended December 31, 2001
Increase/(Decrease) Net Cash Provided by Capital Operations Expenditures $ (12) (19) (27) (28) (64) $ (12) (19) (27) (28) (64)
13
Slide 14: NOTES TO PRESS RELEASE STATEMENTS (continued)
Sprint Corporation
(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. 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. 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. 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. 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. 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. 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.
(6) (7)
(8)
(9)
(10)
(11)
14
Slide 15: RECONCILIATION OF NON-GAAP LIQUIDITY MEASURES
(millions)
Sprint Corporation
Quarter-to-date September 30, 2004
Long Consolidated Wireless Local Distance Other & Eliminations
Operating income (loss) Special items Adjusted operating income (loss)* Depreciation and amortization Adjusted EBITDA* Adjust for special items (1) Other operating activities, net Cash provided by operating activities-GAAP Capital expenditures Dividends paid Investments in affiliates, net Other investing activities, net Free Cash Flow* Decrease in debt, net Investments in debt securities, net Proceeds from common stock issued Other financing activities, net Change in cash and equivalents - GAAP
$
$
(2,715) $ 3,559 844 1,222 2,066 $ (3,559) 3,085 1,592 (966) (190) (5) 8 439 (573) 37 1,757 (22) 1,638
451 3 454 630 1,084
$
$
411 3 414 272 686
$
$
(3,570) $ 3,553 (17) 319 302 $
(7) (7) 1 (6)
Quarter-to-date September 30, 2003 (Restated) (2)
Consolidated Wireless Local
Long Distance
Other & Eliminations
Operating income (loss) Special items Adjusted operating income (loss)* Depreciation and amortization Adjusted EBITDA* Adjust for special items Other operating activities, net (1) Cash provided by operating activities-GAAP Capital expenditures Dividends paid Other investing activities, net Free Cash Flow* Discontinued operation Decrease in debt, net Investments in debt securities Other financing activities, net Change in cash and equivalents - GAAP
$
$
(430) $ 1,223 793 1,243 2,036 $ (1,223) 592 1,405 (854) (115) 436 (1) (483) (91) 1 (138)
303 303 620 923
$
$
463 463 269 732
$
$
(1,185) $ 1,223 38 352 390 $
(11) (11) 2 (9)
(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.
15
Slide 16: RECONCILIATION OF NON-GAAP LIQUIDITY MEASURES
(millions)
Sprint Corporation
Year-to-date September 30, 2004
Long Consolidated Wireless Local Distance Other & Eliminations
Operating income (loss) Special items Adjusted operating income (loss)* Depreciation and amortization Adjusted EBITDA* Adjust for special items (1) Other operating activities, net Cash provided by operating activities-GAAP Capital expenditures Dividends paid Investments in affiliates, net Other investing activities, net Free Cash Flow* Decrease in debt, net Investments in debt securities, net Proceeds from common stock issued Other financing activities, net Change in cash and equivalents - GAAP
$
$
(1,273) $ 3,671 2,398 3,687 6,085 $ (3,671) 2,112 4,526 (2,642) (485) (10) (16) 1,373 (1,685) 116 1,802 (14) 1,592
1,146 14 1,160 1,914 3,074
$
$
1,302 19 1,321 811 2,132
$
$
(3,698) $ 3,638 (60) 960 900 $
(23) (23) 2 (21)
Year-to-date September 30, 2003 (Restated) (2)
Consolidated Wireless Local
Long Distance
Other & Eliminations
Operating income (loss) Special items Adjusted operating income (loss)* Depreciation and amortization Adjusted EBITDA* Adjust for special items Other operating activities, net (1) Cash provided by operating activities-GAAP Capital expenditures Dividends paid Other investing activities, net Free Cash Flow* Discontinued operation Decrease in debt, net Investments in debt securities Other financing activities, net Change in cash and equivalents - GAAP
$
$
560 $ 1,617 2,177 3,715 5,892 $ (1,617) 85 4,360 (2,333) (343) 65 1,749 2,230 (2,342) (91) 20 1,566
730 29 759 1,829 2,588
$
$
1,378 8 1,386 805 2,191
$
$
(1,514) $ 1,580 66 1,076 1,142 $
(34) (34) 5 (29)
(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.
16
Slide 17: RECONCILIATIONS OF EARNINGS PER SHARE
(millions, except per share date)
Sprint Corporation
Periods Ended September 30,
Quarter-to-Date 2004 2003 (Restated) $ (1,915) 3 2 (1,910) (1,910) 2,235 25 $ 350 $ $
(1)
2004
Year-to-Date 2003 (Restated) $
(1)
Earnings (Loss) Applicable to Common Stock Earnings allocated to participating securities Preferred stock dividends paid GAAP Net income (loss) Discontinued operation, net Cumulative effect of change in accounting principle Loss from continuing operations Special items (net of taxes) Restructuring and asset impairments MCI settlement Premium on early retirement of debt Shareholder litigation charge Executive separations Adjusted income from continuing operations
(499) 2 (497) 1
$
(1,463) 9 5 (1,449) (1,449) 2,312 (9) 43 -
1,175 5 1,180 (1,321) (258) (399) 1,002 13 21 22
(496) 778 1 (11) 272 $
897
$
659
GAAP earnings (loss) per share Discontinued operation Cumulative effect of change in accounting principle Earnings (loss) per share from continuing operations Special items Adjusted Earnings Per Share (2)
$
(1.32) (1.32) 1.56
$
(0.35) (0.35) 0.54
$
(1.02) (1.02) 1.64
$
0.83 (0.93) (0.18) (0.29) 0.75
$
0.24
$
0.19
$
0.62
$
0.46
(1)
See note 1 of Notes to Press Release Statements. Earnings per share data may not add due to rounding.
(2)
17
Slide 18: Sprint Corporation
Selected Information
(millions)
Sprint Corporation (Pre Restatement)
Operating expenses Operating income (loss) Interest expense Income (loss) from continuing operations Net income (loss) Diluted earnings (loss) per common share (2) Adjusted EBITDA* Adjusted EPS* (2) Net property, plant and equipment Total shareholders' equity
2Q04 $ 6,162 707 310 233 233 0.16 2,032 0.20
1Q04 $ 5,993 714 320 222 222 0.15 1,987 0.17
YTD 2003 $25,336 861 1,374 (367) 1,215 0.85 7,917 0.63 27,276 13,224
4Q03 $ 6,356 325 322 35 38 0.03 2,025 0.17
3Q03 $ 7,152 (438) 335 (497) (498) (0.35) 2,036 0.19
2Q03 $ 6,093 370 351 (2) 7 2,006 0.17
1Q03 $ 5,735 604 366 97 1,668 1.18 1,850 0.10
YTD 2002 $24,579 2,100 1,406 471 630 0.44 7,414 0.41 28,745 12,294
YTD 2001 $26,463 (901) 1,180 (1,553) (1,401) (1.02) 5,527 (0.24) 28,960 12,616
YTD
YTD 4Q03 $ 6,234 447 330 107 110 0.08 2,025 0.17 3Q03 $ 7,144 (430) 341 (496) (497) (0.35) 2,036 0.19 2Q03 $ 6,085 378 358 (2) 7 2,006 0.17 1Q03 $ 5,727 612 372 99 1,670 1.18 1,850 0.10 2002 $24,583 2,096 1,434 451 610 0.43 7,388 0.39 28,565 12,108
YTD 2001 $26,472 (910) 1,244 (1,599) (1,447) (1.05) 5,503 (0.27) 28,786 12,450
Sprint Corporation (Restated)
Operating expenses Operating income (loss) Interest expense
(1)
2Q04 $ 6,151 718 316 236 236 0.16 2,032 0.21
1Q04 $ 5,983 724 326 225 225 0.16 1,987 0.17
2003 $25,190 1,007 1,401 (292) 1,290 0.91 7,917 0.64 27,101 13,113
Income (loss) from continuing operations Net income (loss) Diluted earnings (loss) per common share (2) Adjusted EBITDA* Adjusted EPS* (2) Net property, plant and equipment Total shareholders' equity
(1)
See note 1 of Notes to Press Release Statements. 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.
(2)
18
Slide 19: Sprint Corporation
Selected Information
(millions)
Wireless (Pre Restatement)
Net operating revenues Operating expenses Costs of services and products Selling, general and administrative Depreciation and amortization Restructuring and asset impairments Total operating expenses Operating income (loss) Adjusted EBITDA* Capital expenditures $ $ $ $
2Q04 3,614 $
1Q04 3,437 $
YTD 2003 12,690 $
4Q03 3,307 $
3Q03 3,340 $
2Q03 3,096 $
1Q03 2,947
1,733 811 651 12 3,207 407 1,065 667 $ $ $
1,744 768 654 4 3,170 267 925 412 $ $ $
6,155 3,094 2,486 362 12,097 593 3,469 2,150 $ $ $
1,558 877 633 352 3,420 (113) 881 939 $ $ $
1,628 789 628 3,045 295 923 491 $ $ $
1,521 697 617 2,835 261 897 533 $ $ $
1,448 731 608 10 2,797 150 768 187
YTD
Wireless (Restated)
Net operating revenues
(1)
2Q04 $ 3,614 $
1Q04 3,437 $
2003 12,690 $
4Q03 3,307 $
3Q03 3,340 $
2Q03 3,096 $
1Q03 2,947
Operating expenses Costs of services and products Selling, general and administrative Depreciation and amortization Restructuring and asset impairments Total operating expenses Operating income (loss) Adjusted EBITDA* Capital expenditures $ $ $
1,733 811 640 12 3,196 418 1,065 661 $ $ $
1,744 768 644 4 3,160 277 925 406 $ $ $
6,155 3,085 2,454 362 12,056 634 3,469 2,123 $ $ $
1,558 868 625 352 3,403 (96) 881 931 $ $ $
1,628 789 620 3,037 303 923 485 $ $ $
1,521 697 609 2,827 269 897 526 $ $ $
1,448 731 600 10 2,789 158 768 181
(1)
See note 1 of Notes to Press Release Statements.
19
Slide 20: Sprint Corporation
Selected Information
(millions)
Local (Pre Restatement)
Net operating revenues Operating expenses Costs of services and products Selling, general and administrative Depreciation and amortization Restructuring and asset impairments Total operating expenses Operating income Adjusted EBITDA* $ $ $
2Q04 1,510 $
1Q04 1,506 $
YTD 2003 6,130 $
4Q03 1,545 $
3Q03 1,527 $
2Q03 1,526 $
1Q03 1,532
462 329 271 3 1,065 445 718 $ $
451 327 268 14 1,060 446 728 $ $
1,943 1,278 1,081 24 4,326 1,804 2,940 $ $
476 343 276 24 1,119 426 749 $ $
491 304 269 1,064 463 732 $ $
489 313 271 1,073 453 732 $ $
487 318 265 1,070 462 727
YTD
Local (Restated)
(1)
2Q04 $ 1,510 $
1Q04 1,506 $
2003 6,130 $
4Q03 1,545 $
3Q03 1,527 $
2Q03 1,526 $
1Q03 1,532
Net operating revenues Operating expenses Costs of services and products Selling, general and administrative Depreciation and amortization Restructuring and asset impairments Total operating expenses Operating income Adjusted EBITDA*
462 329 271 3 1,065 $ $ 445 718 $ $
451 327 268 14 1,060 446 728 $ $
1,943 1,220 1,081 24 4,268 1,862 2,940 $ $
476 285 276 24 1,061 484 749 $ $
491 304 269 1,064 463 732 $ $
489 313 271 1,073 453 732 $ $
487 318 265 1,070 462 727
(1)
See note 1 of Notes to Press Release Statements.
20
Slide 21: Sprint Corporation
Selected Information
(millions)
Long Distance (Pre Restatement)
Net operating revenues Operating expenses Costs of services and products Selling, general and administrative Depreciation and amortization Restructuring and asset impairments Total operating expenses Operating income (loss) Adjusted EBITDA* $ $ $
2Q04 1,873 $
1Q04 1,912 $
YTD 2003 8,005 $
4Q03 1,977 $
3Q03 1,977 $
2Q03 2,005 $
1Q03 2,046
1,095 515 321 81 2,012 (139) 255 $ $
1,053 516 320 12 1,901 11 343 $ $
4,252 2,245 1,432 1,564 9,493 (1,488) 1,548 $ $
1,021 581 356 (7) 1,951 26 406 $ $
1,061 526 352 1,223 3,162 (1,185) 390 $ $
1,064 563 363 348 2,338 (333) 387 $ $
1,106 575 361 2,042 4 365
YTD
Long Distance (Restated)
Net operating revenues
(1)
2Q04 $ 1,873 $
1Q04 1,912 $
2003 8,005 $
4Q03 1,977 $
3Q03 1,977 $
2Q03 2,005 $
1Q03 2,046
Operating expenses Costs of services and products Selling, general and administrative Depreciation and amortization Restructuring and asset impairments Total operating expenses Operating income (loss) Adjusted EBITDA* $ $
1,095 515 321 81 2,012 (139) 255 $ $
1,053 516 320 12 1,901 11 343 $ $
4,252 2,199 1,432 1,564 9,447 (1,442) 1,548 $ $
1,021 535 356 (7) 1,905 72 406 $ $
1,061 526 352 1,223 3,162 (1,185) 390 $ $
1,064 563 363 348 2,338 (333) 387 $ $
1,106 575 361 2,042 4 365
(1)
See note 1 of Notes to Press Release Statements.
21
Slide 22: WIRELESS OPERATING STATISTICS
Sprint Corporation
1Q04 (Restated)
(1)
2Q04 (Restated)
(1)
3Q04
4Q04
YTD 2004
Financial Statistics (millions) Net operating revenue Service revenues Wholesale, affiliate and other revenues Equipment revenues Equipment costs Operating income (loss) Adjusted EBITDA Capital expenditures Adjusted EBITDA less capital expenditures Bad debt % of net operating revenues Subscriber Additions Direct net adds before subscriber acquisition Subscriber acquisition from affiliate Direct net adds Affiliate net adds before subcriber sale Subscriber sale to Sprint Affiliate net adds Reseller net adds Net gross adds (excluding deactivations within 30 days) (M) % of gross adds sold through direct retail % of direct retail base that upgraded phones in the quarter Other Wireless Statistics (approximate) Average revenue per user Subscriber churn Average monthly subscriber usage (hours) Total minutes provided (billions) Number of cell sites on air Number of carriers on air Sprint PCS covered POPs (M)
(2)
$ $ $ $ $ $ $ $ $
3,437 2,939 121 377 722 277 925 406 519 1.1%
$ $ $ $ $ $ $ $ $
3,614 3,102 124 388 674 418 1,065 661 404 1.3%
$ $ $ $ $ $ $ $ $
3,760 3,244 166 350 662 451 1,084 603 481 1.7%
$ $ $ $ $ $ $ $ $
10,811 9,285 411 1,115 2,058 1,146 3,074 1,670 1,404 1.4%
414,000 414,000 138,000 138,000 420,000 1.80 51% 7%
505,000 91,000 596,000 93,000 (91,000) 2,000 299,000 1.67 52% 7%
429,000 429,000 101,000 101,000 422,000 1.79 51% 7%
1,348,000 91,000 1,439,000 332,000 (91,000) 241,000 1,141,000 5.26
$
61 2.9% 15 45 21,800 39,500 191 246
$
62 2.3% 16 51 22,700 40,700 197 251
$
63 2.7% 17 53 23,600 42,400 197 251
$
62 2.6%
149
Sprint PCS and affiliate covered POPs (M) (2) Vision/Wireless Web/Data/3G Total Vision subscribers (approximate) (M) Vision % of gross adds Total Vision and Wireless Web subscribers (M) Data ARPU % of direct retail subscriber base with Vision handsets Marketing and Distribution Total number of subscribers on Sprint PCS network (thousands) Total direct subscribers Total affiliate subscribers Total wholesale/reseller subscribers Number of PCS stores and kiosks Total number of distribution points (M) - in millions
(1) (2)
4.2 55% 6.2 $4 48%
5.0 55% 6.9 $4 57%
5.6 55% 7.3 $5 64%
21,329 16,281 3,017 2,031 660 17,400
22,226 16,877 3,019 2,330 715 16,700
23,178 17,306 3,120 2,752 775 17,200
See note 1 of Notes to Press Release Statements. 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.
22
Slide 23: Sprint Corporation
OPERATING STATISTICS 1Q04 2Q04 3Q04 4Q04 YTD 2004
Local
Financial Statistics (millions) Total Local Division net operating revenues Voice net operating revenue Data net operating revenue Other net operating revenue Operating income Adjusted EBITDA* Capital expenditures Adjusted EBITDA less capital expenditures Other Statistics Total access lines (thousands) Residential access lines Business access lines Wholesale access lines YOY Access line decline Percentage of Sprint local access lines with Sprint long distance service - Residential - Business Access minutes of use (thousands) Long distance minutes of use (thousands) Strategic product penetration - residential DSL lines in service (thousands) - Residential - Business DSL capable lines (thousands) 7,876 5,507 2,142 227 -2.2% 51% 53% 45% 8,459 990 67% 349 274 75 4,910 7,780 5,430 2,132 218 -2.4% 52% 54% 46% 7,851 1,105 68% 383 299 84 5,005 7,718 5,376 2,119 223 -2.7% 54% 56% 47% 7,889 1,257 69% 432 340 92 5,186 24,199 3,352 $ $ $ $ $ $ $ $ 1,506 1,147 195 164 446 728 209 519 $ $ $ $ $ $ $ $ 1,510 1,136 205 169 445 718 247 471 $ $ $ $ $ $ $ $ 1,496 1,105 214 177 411 686 257 429 $ $ $ $ $ $ $ $ 4,512 3,388 614 510 1,302 2,132 713 1,419
Long Distance
Financial Statistics (millions) Total Long Distance net operating revenues Voice net operating revenue Data net operating revenue Internet net operating revenue Other net operating revenue Operating income (loss) Adjusted EBITDA* Capital expenditures Adjusted EBITDA less capital expenditures Other Statistics YOY Long Distance voice volume growth 9% 13% 14% 12% $ $ $ $ $ $ $ $ $ 1,912 1,186 452 223 51 11 343 56 287 $ $ $ $ $ $ $ $ $ 1,873 1,164 438 214 57 (139) 255 64 191 $ $ $ $ $ $ $ $ 1,808 1,131 427 180 70 (3,570) 302 71 231 $ $ $ $ $ $ $ $ $ 5,593 3,481 1,317 617 178 (3,698) 900 191 709
This information should be reviewed in connection with Sprint's consolidated financial statements.
23
