-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q5IFanGuUZYb1PArO9BaJ2GNG6y+/WyHWCYPylt6np5KHeemc2W+5VOG9abO/YMq RTu2w26UZXs+DuUnav6f+g== 0000101830-05-000019.txt : 20050204 0000101830-05-000019.hdr.sgml : 20050204 20050204142047 ACCESSION NUMBER: 0000101830-05-000019 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050203 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050204 DATE AS OF CHANGE: 20050204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPRINT CORP CENTRAL INDEX KEY: 0000101830 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 480457967 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-75664 FILM NUMBER: 05576545 BUSINESS ADDRESS: STREET 1: PO BOX 7997 CITY: SHAWNEE MISSION STATE: KS ZIP: 66207-0997 BUSINESS PHONE: 9136243000 MAIL ADDRESS: STREET 1: PO BOX 7997 CITY: SHAWNEE MISSION STATE: KS ZIP: 66207-0997 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TELECOMMUNICATIONS INC DATE OF NAME CHANGE: 19920316 FORMER COMPANY: FORMER CONFORMED NAME: UNITED UTILITIES INC DATE OF NAME CHANGE: 19731011 8-K 1 k20050203.txt FOURTH QUARTER 2004 EARNINGS RELEASE UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 3, 2005 SPRINT CORPORATION (Exact name of Registrant as specified in its charter) Kansas 1-04721 48-0457967 (State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 6200 Sprint Parkway, Overland Park, Kansas 66251 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (913) 624-3000 (Former name or former address, if changed since last report) P. O. Box 7997, Shawnee Mission, Kansas 66207-0997 (Mailing address of principal executive offices) Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition On February 3, 2005, Sprint Corporation announced its fourth quarter and full year 2004 results. The press release is furnished as Exhibit 99. Item 9.01 Financial Statements and Exhibits Exhibits 99 Press Release announcing fourth quarter and full year 2004 results. 1 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. SPRINT CORPORATION Date: February 4, 2005 By: /s/ Michael T. Hyde Michael T. Hyde, Assistant Secretary 2 EXHIBIT INDEX Exhibit Number Description Page 99 Press Release announcing fourth quarter and full year 2004 results. EX-99 2 k20050203exh99.txt PRESS RELEASE 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. 1 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 - ----------------------------------------------------------- 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 - ----------------------------------------------------------- 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%) - -----------------------------------------------------------
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 2 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. 3
Wireless - ------------------------------------------------------------ Wireless Selected Financial Data (millions) Quarters Ended Dec 31, Dec 31, Percent 2004 2003 Change - ------------------------------------------------------------ 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% - -----------------------------------------------------------
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. 4
Local - ----------------------------------------------------------- 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 - ----------------------------------------------------------- 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. 5
Long Distance - ----------------------------------------------------------- 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. 6 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. 7 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; 8 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 9
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) -------------- (1) Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating activities and non-operating items in income (loss) from continuing operations. See accompanying 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 --------------- (1) Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating activities and non-operating items in income (loss) from continuing operations. See accompanying 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 - ------------------------------------------------------------ -------------------------------- -------------------------------- (1) Earnings per share data may not add due to rounding.
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 (M) - in millions (1) Prior periods have been restated to reflect the current period calculation method for minutes of use for certain calling features. (2) Beginning with the 2004 second quarter, covered POPs reflect updated census data. This information should be reviewed in connection with Sprint's consolidated financial statements.
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 -----END PRIVACY-ENHANCED MESSAGE-----