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): July 19, 2001
Sprint Corporation
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kansas 1-04721 48-0457967
--------------------------------- ------------------------------------- ------------------------------------------
(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
-------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 624-3000
Not Applicable
----------------------------------------------------------------
(Former name or former address, if changed since last report)
P.O. Box 11315, Kansas City, Missouri 64112
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(Mailing address of principal executive offices)
Item 5. Other Events
1. Press Release. On July 19, 2001, the registrant ("Sprint") announced
its second quarter results for the quarter ending June 30, 2001. The press
release was as follows:
SPRINT ANNOUNCES SECOND QUARTER RESULTS
EDITOR'S NOTE: In the second quarter of 2000, the local division transferred a
customer service operation to the PCS Group. Additionally, in the third quarter
of 2000, Sprint changed its transfer pricing for certain transactions between
the local division and the directory publishing business, which mainly had the
effect of reducing local division revenues. The discussion of the local
division's results assumes both events occurred at the beginning of 2000.
The Sprint FON Group (NYSE: FON) is comprised of Sprint's Global Markets
segment, Local Telecommunications Division and product distribution and
directory publishing businesses.
The Sprint PCS Group (NYSE: PCS) consists of Sprint's wireless PCS operations.
KANSAS CITY, Mo., - July 19, 2001 - Sprint today announced record second quarter
consolidated revenues of $6.42 billion, an increase of 10 percent from $5.82
billion a year ago. During the quarter, the PCS Group reported exceptional
operating cash flows (EBITDA) performance and strong customer growth, while
reducing churn, increasing average revenue per customer and maintaining good
cost control. The FON Group's earnings exceeded expectations due to solid
performance in local operations and lower-than-expected losses in the Global
Markets segment. In addition, the FON Group continued to increase bundled sales
of wireless and wireline offerings and expanded its broadband initiative,
opening new domestic Internet centers and deploying additional international
capabilities in Europe and Asia. The PCS Group reported a loss per share from
recurring operations of 26 cents compared to the 33 cent mean analyst estimate
for the quarter and 46 cents a year ago. Second quarter diluted earnings per
share for the FON Group's recurring operations were 33 cents compared to the 28
cent mean analyst estimate for the quarter and 50 cents a year ago.
"Sprint continues to build a strong foundation for future growth in both our
wireless and wireline businesses," said William T. Esrey, chairman and chief
executive officer. "Even in the face of a sluggish economy and heightened
competition, I'm very optimistic about our future in the higher-growth areas of
wireless, data and broadband services."
SPRINT PCS GROUP HIGHLIGHTS
The PCS Group reported EBITDA of $491 million in the quarter, $480 million above
the same period a year ago excluding nonrecurring items. Excluding $78 million
of quarterly goodwill and intangibles amortization from the 1998
recapitalization of the PCS Group, operating income was a positive $21 million
for the quarter -- the first quarter that the PCS Group has achieved this
milestone.
The Sprint PCS group added more than 1 million customers in the second quarter
including 843,000 direct customers and 220,000 affiliate customers.
2
The PCS Group's total customer base, including resale and affiliate customers,
increased to 12.8 million, up 60 percent from second quarter 2000. The company,
including affiliates, operates the nation's largest 100 percent digital, 100
percent PCS wireless network, which now covers a population of nearly 239
million people or more than 80 percent of the U.S. population based on newly
released 2000 U.S. Census data.
. Revenues increased 53 percent to $2.26 billion in the second quarter from
$1.48 billion during the same quarter a year ago.
. Monthly average revenue per user (ARPU) for the quarter was $61. In the
quarter, we began reporting contract cancellation fees on a net basis,
reducing reported ARPU by about $2 in the quarter. Had we restated prior
periods' measures, second quarter 2001 ARPU would have been $62, compared to
$59 in both the last and year ago quarters. Previous reporting would have
shown that ARPU was $63, compared to $60 last quarter and $59 a year ago.
. Average monthly operating cash cost per user (CCPU) for the quarter was $32.
Again, reporting contract cancellation fees on a net basis reduced reported
CCPU by about $2 in the quarter. Had we restated prior periods' measures,
second quarter 2001 CCPU would have been $33 in both the 2001 second and
first quarters, compared to $35 a year ago. Previous reporting would have
shown CCPU was $34, consistent with last quarter's $34 and better than $35 a
year ago.
. The average cost to acquire a customer was approximately $340 in the quarter
compared to $350 during the same period last year.
. Sprint PCS increased its business customer base by 62 percent compared to the
second quarter 2000. Continuing to fuel this strong growth was the Sprint PCS
Wireless Web for Business, a full suite of wireless products and services
offering wireless access to enterprise content and applications via Internet-
ready Sprint PCS phones. At the end of the quarter, Sprint PCS reported more
than 17,000 centrally managed business customers nationwide.
. Capital expenditures were $1.06 billion for the quarter, reflecting continued
network capacity expansion and development of new service capabilities.
"Sprint PCS has delivered stellar financial results, achieved strong subscriber
gains and continued to deliver excellent clarity, coverage, connectivity and
value for customers," Esrey said.
Esrey added that Sprint PCS is ideally positioned to be the U.S. wireless
industry leader in deployment of high-speed, third-generation (3G) services.
Unlike its wireless competitors, Sprint PCS believes it has adequate spectrum
for a seamless transition to 3G, and offers the most cost-efficient path to the
faster services, attributable to CDMA technology in 100 percent of its network.
"Sprint expects to provide its customers with high-speed 3G data rates that will
change the way people traditionally use wireless services," Esrey said. "With
3G, customers with Sprint phones and other devices are expected to be able to
take advantage of advanced mobile applications such as e-mail attachments,
downloadable photos and streaming audio and video."
3
During the quarter, the PCS Group reached major milestones in its aggressive
plans to bring high-speed 3G services to customers nationwide. Sprint announced
separate multi-year deals with Lucent Technologies and Nortel Networks for
deployment of enhanced wireless network equipment and professional services.
Also in the quarter, Sprint and Lucent completed the fastest-ever 3G over-the-
air data call for a U.S. mobile wireless carrier, at speeds of up to 2.4 mbps.
Additionally in the second quarter, Sprint PCS was named #1 in Customer Services
by Smart Money magazine. Also, Sprint announced nationwide availability of
voice-enabled web services through Sprint PCS Voice Command. The services allow
Sprint PCS customers to listen and respond to e-mail and access news, stocks,
traffic reports and other services just by pressing *TALK and speaking into any
Sprint PCS Phone.
SPRINT FON GROUP HIGHLIGHTS
. Second quarter revenues of $4.31 billion declined 3 percent compared to $4.45
billion in the same period a year ago.
. Net income was $290 million in the quarter compared to $443 million a year
ago, excluding 2000 second quarter costs associated with the terminated
WorldCom merger and a nonrecurring gain on a sale of an independent directory
publishing operation.
. Second quarter diluted earnings per share from recurring operations were 33
cents compared to 50 cents a year ago.
. Excluding the nonrecurring items, FON Group operating income in the quarter
was $488 million compared to $754 million a year ago.
. Operating cash flows in the quarter were $1.10 billion, compared to $1.31
billion in the second quarter a year ago, excluding nonrecurring items.
Local Telecommunications Division
. Revenues were up 3 percent for the quarter to $1.55 billion from $1.51
billion a year ago.
. Operating income rose 5 percent in the quarter to $466 million from $443
million a year ago.
. Voice grade equivalent lines grew 17 percent from the second quarter a year
ago. The number of access lines increased 1 percent over the past 12 months
and declined nearly 1 percent in the second quarter compared to the first
quarter of 2001.
. Operating cash flows in the quarter increased 2 percent to $741 million from
$726 million in the previous second quarter.
Global Markets
. Revenues in the Global Markets segment for the quarter were down nearly 5
percent from a year ago due to lower long distance voice revenues and reduced
sales of network management services and customer premise equipment. These
declines were partially offset by growth in Internet Protocol (IP) and
enterprise data services. Second quarter revenues were $2.56 billion compared
to $2.69 billion a year ago.
. Operating income declined in the quarter primarily due to lower long distance
margins and increased bad debt expense combined with incremental dilution
from Sprint ION(R), broadband fixed wireless activities and other growth
initiatives. Second quarter operating loss was $47 million compared to
operating income of $240 million a year ago.
. Operating cash flows in the second quarter were $287 million compared to $507
million a year ago.
. Long distance calling volumes rose 18 percent for the quarter compared to
last year.
4
Product Distribution and Directory Publishing
. Revenues grew 1 percent to $474 million in the second quarter from $471
million a year ago. Non-affiliate revenues, which accounted for about 58
percent of total revenues, declined by 8 percent reflecting a telecom
industry slowdown in capital spending.
. Operating income increased 16 percent to $79 million in the second quarter
from $68 million a year ago.
. Operating cash flows grew nearly 17 percent to $84 million in the second
quarter from $72 million a year ago.
"We continue to expand our broadband capabilities domestically and around the
globe, and we continue to build on Sprint's heritage of innovation by developing
and refining data capabilities and products designed for the next generation of
communications customers," Esrey said. "With the FON Group's enviable set of
assets, history of technological leadership and high degree of marketing
expertise, I remain confident about the FON Group's ability to perform in
today's highly-competitive marketplace," Esrey said.
The Local Telecommunications Division delivered solid results, largely driven by
increased dedicated access service revenues and growth in bundled sales. The
increase in bundled sales contributed to an increase in the sale of add-on
services such as Caller ID. Very strong expense control also enabled the
division to achieve solid operating income growth in the quarter.
The local division's revenues from data services for the quarter increased 28
percent from a year ago and accounted for 78 percent of the division's total
revenue growth.
The division sold over 400,000 consumer and business bundles during the quarter,
which contributed to an increased penetration of Sprint's long distance and
wireless services in the local territories. Nearly 43 percent of Sprint's local
residential lines and 36 percent of its business lines now use Sprint long
distance services. Increased bundle sales in the residential market continued to
boost penetration of vertical services such as Caller ID, call waiting and
voicemail services. The division also sold approximately 24,000 bundles of
local and Sprint PCS wireless service during the quarter.
The local division continued to expand its broadband footprint in the quarter,
installing over 7,000 new DSL lines and increasing the local division's total
number of DSL lines to over 35,000. DSL revenue per user for the quarter was
$57, a $2 increase sequentially.
In Global Markets, the long distance market proved once again to be highly
competitive. Total voice revenues declined 5 percent in the quarter compared to
a year ago. Business voice revenues continue to be impacted by aggressive market
pricing. In the quarter, Sprint continued to increase sales of current-
generation data services in spite of a sluggish economy and a competitive price
environment. Sprint reported particularly strong results from asynchronous
transfer mode (ATM) services. During the quarter, overall data revenue grew 6
percent compared to a year ago.
5
During the quarter, dedicated IP service revenues grew just over 30 percent
compared to the same period last year and increased 12 percent sequentially.
Overall, Internet revenues for the quarter grew 11 percent compared to the same
period last year. To support future Internet revenue growth, Sprint recently
opened a state-of-the-art Sprint E|Solutions Internet Center in Dallas-Fort
Worth to offer customers application and Web-hosting support, collocation, and
IT professional services. The new center joined similar facilities in
Sacramento, Reston, Kansas City, New York and Boston. The company plans to
open additional Internet centers in 4 more markets by the end of 2001.
During the quarter, Sprint signed an applications hosting agreement with
BroadVision(R), Inc., designed to bring together Sprint's Internet Center
capabilities with BroadVision's experience in delivering personalized, e-
business application solutions. Sprint also was commissioned by the state of
Texas to complete the nation's first-ever, comprehensive information technology
security assessment for the state.
Sprint's Tier 1 Internet backbone continued to expand internationally during the
quarter, with IP nodes deployed in Paris, Amsterdam, Brussels, Frankfurt,
Sydney, Stockholm, Copenhagen, and Tokyo. Sprint expects to ultimately connect
15 cities in 13 major European and Asian countries by the end of 2001 and 35
cities in 19 countries by the end of 2003. The international deployment will
provide multinational companies, ISPs and other communications companies with
direct access to Sprint's data network and broad portfolio of advanced products
and services.
Sprint Broadband Direct currently serves 13 residential and 14 small business
markets and has over 40,000 customers. Sprint Broadband Direct customers also
are aggressively purchasing other Sprint products with over 35 percent of new
customers choosing to bundle their data product with Sprint long distance
services. Finally, Sprint recently completed the first phase of trial testing
for next-generation technology related to Sprint Broadband Direct. Next-
generation technology is expected to not only lower our cost structure, but also
increase capacity and reduce line of sight issues. We expect to be able to
leverage our own network of PCS towers in this endeavor and improve our
opportunity for growth and selling bundled services.
Business Outlook
The following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially.
Sprint continues to expect that PCS Group net customer additions for the year
could be around 3.8 million. At this level, Sprint would expect that a
corresponding EBITDA level would be around $1.7 billion, which is about $100
million above our previous expectation. In the third quarter Sprint expects the
PCS Group to achieve EBITDA in the low $500 million range. Sprint continues to
expect that full year capital expenditures for the PCS Group will be
approximately $3.4 billion.
Sprint expects that total FON Group revenues will decline by 1-2% in the third
quarter compared to the same period last year. In the third quarter, Sprint
expects that FON Group earnings could approach 30 cents per share. Sprint
continues to expect that full year FON Group capital expenditures will be
approximately $5.9 billion although this level will likely be influenced by any
revisions to our plans for broadband initiatives. Sprint expects to provide an
update on its plans and expectations for Sprint ION in the late summer to early
fall timeframe.
6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This press release includes certain estimates, projections and other forward-
looking statements. 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 in the markets in which Sprint
operates;
. the costs and business risks related to entering new markets
necessary to provide nationwide or global services and providing new
services;
. the ability of the PCS Group to continue to grow a significant market
presence;
. the effects of mergers and consolidations within the
telecommunications industry;
. the uncertainties related to Sprint's strategic investments;
. the impact of any unusual items resulting from ongoing evaluations of
Sprint's business strategies;
. unexpected results of litigation filed against Sprint;
. the possibility of one or more of the markets in which Sprint
competes being impacted by changes in political, economic or other
factors such as monetary policy, legal and regulatory changes
including the impact of the Telecommunications Act of 1996, 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").
The words "estimate," "project," "intend," "expect," "believe" and similar
expressions are intended to identify forward-looking statements. You should not
place undue reliance on forward-looking statements, which speak only as of the
date of this press release. Sprint is not obligated to publicly release any
revisions to forward-looking statements to reflect events after the date of this
press release or unforeseen events. Sprint provides a detailed discussion of
risk factors in periodic SEC filings and you are encouraged to review these
filings.
7
Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(millions, except per share data)
Sprint Corporation
-------------------------------------
Consolidated
---------------------------------------------------------------------------------------------------
Quarters Ended June 30, 2001 2000
---------------------------------------------------------------------------------------------------
Net operating revenues $ 6,420 $ 5,821
---------------------------------------------------------------------------------------------------
Operating expenses
Costs of services and products 3,096 2,859
Selling, general and administrative 1,730 1,646
Depreciation 1,047 856
Amortization 116 151
Merger related costs (1) - 187
---------------------------------------------------------------------------------------------------
Total operating expenses 5,989 5,699
---------------------------------------------------------------------------------------------------
Operating income (loss) 431 122
Interest expense (310) (230)
Other income (expense), net (2) (22) 13
---------------------------------------------------------------------------------------------------
Income (loss) before income taxes 99 (95)
Income taxes (56) 4
---------------------------------------------------------------------------------------------------
Net income (loss) 43 (91)
Preferred stock dividends (paid) received (2) (1)
---------------------------------------------------------------------------------------------------
Earnings (Loss) applicable to common stock $ 41 $ (92)
-------------------------------------
Diluted earnings per common share
Income from continuing operations - recurring
Non-recurring items (1,2)
---------------------------------------------------------------------------------------------------
Total
Diluted weighted average common shares outstanding
Basic earnings per common share
Eliminations/Reclassifications
----------------------------------
Quarters Ended June 30, 2001 2000
-------------------------------------------------------------- ----------------------------------
Net operating revenues $ (154) $ (101)
-------------------------------------------------------------- ----------------------------------
Operating expenses
Costs of services and products (154) (101)
Selling, general and administrative - -
Depreciation - -
Amortization - -
Merger related costs (1) - -
-------------------------------------------------------------- ----------------------------------
Total operating expenses (154) (101)
-------------------------------------------------------------- ----------------------------------
Operating income (loss) - -
Interest expense 6 5
Other income (expense), net (2) (6) (5)
-------------------------------------------------------------- ----------------------------------
Income (loss) before income taxes - -
Income taxes - -
-------------------------------------------------------------- ----------------------------------
Net income (loss) - -
Preferred stock dividends (paid) received - -
-------------------------------------------------------------- ----------------------------------
Earnings (Loss) applicable to common stock $ - $ -
----------------------------------
Diluted earnings per common share
Income from continuing operations - recurring
Non-recurring items (1,2)
-------------------------------------------------------------- ----------------------------------
Total
Diluted weighted average common shares outstanding
Basic earnings per common share
8
Sprint FON Group Sprint PCS Group
---------------------------------- ------------------------------
Quarters Ended June 30, 2001 2000 2001 2000
-------------------------------------------------------------- ---------------------------------- ------------------------------
Net operating revenues $ 4,310 $ 4,446 $ 2,264 $ 1,476
-------------------------------------------------------------- ---------------------------------- ------------------------------
Operating expenses
Costs of services and products 2,089 2,023 1,161 937
Selling, general and administrative 1,118 1,118 612 528
Depreciation 609 534 438 322
Amortization 6 17 110 134
Merger related costs (1) - 163 - 24
-------------------------------------------------------------- ---------------------------------- ------------------------------
Total operating expenses 3,822 3,855 2,321 1,945
-------------------------------------------------------------- ---------------------------------- ------------------------------
Operating income (loss) 488 591 (57) (469)
Interest expense (16) (11) (300) (224)
Other income (expense), net (2) (1) 27 (15) (9)
-------------------------------------------------------------- ---------------------------------- ------------------------------
Income (loss) before income taxes 471 607 (372) (702)
Income taxes (181) (242) 125 246
-------------------------------------------------------------- ---------------------------------- ------------------------------
Net income (loss) 290 365 (247) (456)
Preferred stock dividends (paid) received 1 2 (3) (3)
-------------------------------------------------------------- ---------------------------------- ------------------------------
Earnings (Loss) applicable to common stock $ 291 $ 367 $ (250) $ (459)
---------------------------------- ------------------------------
Diluted earnings per common share
Income from continuing operations - recurring $ 0.33 $ 0.50 $ (0.26) $ (0.46)
Non-recurring items (1,2) - (0.09) - (0.02)
-------------------------------------------------------------- ---------------------------------- ------------------------------
Total $ 0.33 $ 0.41 $ (0.26) $ (0.48)
---------------------------------- ------------------------------
Diluted weighted average common shares outstanding 887.5 895.8 980.0 962.8
---------------------------------- ------------------------------
Basic earnings per common share $ 0.33 $ 0.42 $ (0.26) $ (0.48)
---------------------------------- ------------------------------
The FON Group and the PCS Group are integrated businesses of Sprint
Corporation and do not constitute stand-alone entities.
(1) Represents costs recorded in the 2000 second quarter associated with the
proposed WorldCom merger, which was terminated. These charges reduced FON
Group net income by $105 million, or $0.12 per share and increased PCS
Group net loss by $16 million or $0.02 per share.
(2) In the 2000 second quarter, the FON Group recorded a gain on sale of an
independent directory publishing operation of $45 million which increased
FON Group net income by $27 million or $0.03 per share.
9
Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(millions, except per share data)
Sprint Corporation
----------------------------
Consolidated
----------------------------
Year-to-Date June 30, 2001 2000
---------------------------------------------------------------------------------------------------
Net operating revenues $ 12,700 $ 11,350
---------------------------------------------------------------------------------------------------
Operating expenses
Costs of services and products 6,206 5,606
Selling, general and administrative 3,529 3,306
Depreciation 2,028 1,673
Amortization 256 300
Merger related costs (1) - 187
---------------------------------------------------------------------------------------------------
Total operating expenses 12,019 11,072
---------------------------------------------------------------------------------------------------
Operating income (loss) 681 278
Interest expense (617) (484)
Other income (expense), net (2) (42) 41
---------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 22 (165)
Income taxes (56) 9
---------------------------------------------------------------------------------------------------
Income (loss) from continuing operations (34) (156)
Discontinued operation, net - 675
Extraordinary items, net (1) (3)
Cumulative effect of changes in accounting principles, net 2 (2)
---------------------------------------------------------------------------------------------------
Net income (loss) (33) 514
Preferred stock dividends (paid) received (4) (3)
---------------------------------------------------------------------------------------------------
Earnings (Loss) applicable to common stock $ (37) $ 511
----------------------------
Diluted earnings per common share
Income from continuing operations - recurring
Non-recurring items (1,2)
---------------------------------------------------------------------------------------------------
Income from continuing operations
Discontinued operation
---------------------------------------------------------------------------------------------------
Total
Diluted weighted average common shares outstanding
Basic earnings per common share
10
Eliminations/Reclassifications
----------------------------------
Year-to-Date June 30, 2001 2000
----------------------------------------------------------------------- ----------------------------------
Net operating revenues $ (283) $ (196)
----------------------------------------------------------------------- ----------------------------------
Operating expenses
Costs of services and products (283) (196)
Selling, general and administrative - -
Depreciation - -
Amortization - -
Merger related costs (1) - -
----------------------------------------------------------------------- ----------------------------------
Total operating expenses (283) (196)
----------------------------------------------------------------------- ----------------------------------
Operating income (loss) - -
Interest expense 11 10
Other income (expense), net (2) (11) (10)
----------------------------------------------------------------------- ----------------------------------
Income (loss) from continuing operations before income taxes - -
Income taxes - -
----------------------------------------------------------------------- ----------------------------------
Income (loss) from continuing operations - -
Discontinued operation, net - -
Extraordinary items, net - -
Cumulative effect of changes in accounting principles, net - -
----------------------------------------------------------------------- ----------------------------------
Net income (loss) - -
Preferred stock dividends (paid) received - -
----------------------------------------------------------------------- ----------------------------------
Earnings (Loss) applicable to common stock $ - $ -
----------------------------------
Diluted earnings per common share
Income from continuing operations - recurring
Non-recurring items (1,2)
----------------------------------------------------------------------- ----------------------------------
Income from continuing operations
Discontinued operation
----------------------------------------------------------------------- ----------------------------------
Total
Diluted weighted average common shares outstanding
Basic earnings per common share
11
Sprint FON Group Sprint PCS Group
----------------------------- ------------------------------
Year-to-Date June 30, 2001 2000 2001 2000
---------------------------------------------------------------- ----------------------------- ------------------------------
Net operating revenues $ 8,668 $ 8,850 $ 4,315 $ 2,696
---------------------------------------------------------------- ----------------------------- ------------------------------
Operating expenses
Costs of services and products 4,194 3,971 2,295 1,831
Selling, general and administrative 2,253 2,271 1,276 1,035
Depreciation 1,189 1,062 839 611
Amortization 12 34 244 266
Merger related costs (1) - 163 - 24
---------------------------------------------------------------- ----------------------------- ------------------------------
Total operating expenses 7,648 7,501 4,654 3,767
---------------------------------------------------------------- ----------------------------- ------------------------------
Operating income (loss) 1,020 1,349 (339) (1,071)
Interest expense (43) (50) (585) (444)
Other income (expense), net (2) 4 34 (35) 17
---------------------------------------------------------------- ----------------------------- ------------------------------
Income (loss) from continuing operations before income taxes 981 1,333 (959) (1,498)
Income taxes (375) (523) 319 532
---------------------------------------------------------------- ----------------------------- ------------------------------
Income (loss) from continuing operations 606 810 (640) (966)
Discontinued operation, net - 675 - -
Extraordinary items, net (1) - - (3)
Cumulative effect of changes in accounting principles, net - (2) 2 -
---------------------------------------------------------------- ----------------------------- ------------------------------
Net income (loss) 605 1,483 (638) (969)
Preferred stock dividends (paid) received 3 4 (7) (7)
---------------------------------------------------------------- ----------------------------- ------------------------------
Earnings (Loss) applicable to common stock $ 608 $ 1,487 $ (645) $ (976)
----------------------------- ------------------------------
Diluted earnings per common share
Income from continuing operations - recurring $ 0.67 $ 0.98 $ (0.66) $ (1.02)
Non-recurring items (1,2) 0.01 (0.07) - -
---------------------------------------------------------------- ----------------------------- ------------------------------
Income from continuing operations 0.68 0.91 (0.66) (1.02)
Discontinued operation - 0.75 - -
---------------------------------------------------------------- ----------------------------- ------------------------------
Total $ 0.68 $ 1.66 $ (0.66) $ (1.02)
----------------------------- ------------------------------
Diluted weighted average common shares outstanding 887.6 895.2 979.0 959.5
----------------------------- ------------------------------
Basic earnings per common share $ 0.69 $ 1.69 $ (0.66) $ (1.02)
----------------------------- ------------------------------
The FON Group and the PCS Group are integrated businesses of Sprint
Corporation and do not constitute stand-alone entities.
(1) Represents costs recorded in the 2000 second quarter associated with the
proposed WorldCom merger, which was terminated. These charges reduced FON
Group income from continuing operations by $105 million, or $0.12 per share
and increased PCS Group net loss from continuing operations by $16 million,
or $0.02 per share.
(2) In the 2001 first quarter, the FON Group recorded net gains on investment
activities of $14 million which increased income from continuing operations
by $9 million or $0.01 per share. In the 2000 second quarter, the FON Group
recorded a gain on sale of an independent directory publishing operation of
$45 million, which increased income from continuing operations by $27
million or $0.03 per share. In the 2000 first quarter, the FON Group
recorded net gains on investment activities of $26 million, which increased
income from continuing operations by $17 million or $0.02 per diluted
share. In the 2000 first quarter, the PCS Group recorded a gain on sale of
network infrastructure and the right to manage customers to a PCS affiliate
of $28 million, which decreased PCS Group loss from continuing operations
by $18 million or $0.02 per share.
12
Sprint Corporation
CONSOLIDATED BALANCE SHEETS (unaudited)
(millions)
Sprint Corporation
----------------------
Consolidated Eliminations/Reclassifications
----------------------- ------------------------------
June 30, December 31, June 30, December 31,
2001 2000 2001 2000
----------------------- -------------------------
Assets
Current Assets
Cash and equivalents $ 176 $ 239 $ - $ -
Accounts receivable, net 4,064 4,028 - -
Inventories 961 949 - -
Receivables from the PCs Group - - (150) (361)
Prepaid expenses and other 750 757 - (28)
----------------------------------------------------------------------------------------------- -------------------------
Total current assets 5,951 5,973 (150) (389)
Net property, plant and equipment 27,584 25,316 (45) (39)
Net intangible assets 8,681 8,938 - -
Other 2,368 2,374 (405) (383)
----------------------------------------------------------------------------------------------- -------------------------
Total $44,584 $42,601 $ (600) $ (811)
--------------------- -------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current maturities of long-term debt 4,028 1,205 (69) (65)
Accounts payable and accrued interconnection costs 2,106 2,832 - -
Construction obligations 881 997 - -
Payables to the FON Group - - (81) (296)
Other 3,084 2,934 (45) (67)
----------------------------------------------------------------------------------------------- -------------------------
Total current liabilities 10,099 7,968 (195) (428)
Long-term debt and capital lease obligations 17,464 17,514 (111) (104)
Deferred income taxes and investment tax credits 1,409 1,360 (5) (6)
Other 1,794 1,787 - -
Redeemable preferred stock 256 256 (280) (280)
Common stock and other shareholders' equity
Common stock
Class A 43 216 43 216
FON 1,773 1,598 1,773 1,598
PCs 937 933 937 933
Other shareholders' equity 10,809 10,969 10,809 10,969
Combined attributed net assets - - (13,571) (13,709)
----------------------------------------------------------------------------------------------- -------------------------
Total shareholders' equity 13,562 13,716 (9) 7
----------------------------------------------------------------------------------------------- -------------------------
Total $44,584 $ 42,601 $ (600) $ (811)
--------------------- -------------------------
13
Sprint FON Group Sprint PCS Group
---------------------- ----------------------
June 30, December 31, June 30, December 31,
2001 2000 2001 2000
Assets
Current Assets
Cash and equivalents $ 40 $ 122 $ 136 $ 117
Accounts receivable, net 2,966 3,126 1,098 902
Inventories 420 434 541 515
Receivables from the PCs Group 150 361 - -
Prepaid expenses and other 486 469 264 316
------------------------------------------------------------------------ --------- ----------- ----------- ---------
Total current assets 4,062 4,512 2,039 1,850
Net property, plant and equipment 17,241 15,833 10,388 9,522
Net intangible assets 1,199 1,204 7,482 7,734
Other 2,097 2,100 676 657
------------------------------------------------------------------------ --------------------- ---------------------
Total $24,599 $23,649 $20,585 $19,763
--------------------- ---------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowings including current maturities of long-term debt 2,351 1,026 1,746 244
Accounts payable and accrued interconnection costs 1,626 2,145 480 687
Construction obligations - - 881 997
Payables to the FON Group - - 81 296
Other 1,816 1,833 1,313 1,168
------------------------------------------------------------------------ --------------------- ---------------------
Total current liabilities 5,793 5,004 4,501 3,392
Long-term debt and capital lease obligations 3,262 3,482 14,313 14,136
Deferred income taxes and investment tax credits 1,401 1,276 13 90
Other 1,502 1,534 292 253
Redeemable preferred stock 10 10 526 526
Common stock and other shareholders' equity
Common stock
Class A - - - -
FON - - - -
PCs - - - -
Other shareholders' equity - - - -
Combined attributed net assets 12,631 12,343 940 1,366
------------------------------------------------------------------------ --------------------- ---------------------
Total shareholders' equity - - - -
------------------------------------------------------------------------ --------------------- ---------------------
Total $24,599 $23,649 $20,585 $19,763
--------------------- ---------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation
and do not constitute stand-alone entities
14
Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (unaudited)
(millions)
Sprint Corporation
-------------------------------------
Consolidated
---------------------------------------------------------------------------------------------------------------------
Year-to-Date June 30, 2001 2000
---------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ (33) $ 514
Discontinued operation, net - (675)
Depreciation and amortization 2,284 1,973
Deferred income taxes 44 214
Changes in assets and liabilities (735) (96)
Other, net 62 (21)
---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,622 1,909
---------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (4,314) (3,186)
Investments in and loans to affiliates, net (49) (849)
Proceeds from sales of other assets 58 217
Other, net 33 3
---------------------------------------------------------------------------------------------------------------------
Net cash used by continuing operations (4,272) (3,815)
Proceeds from the sale of Global One - 1,403
---------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (4,272) (2,412)
---------------------------------------------------------------------------------------------------------------------
Financing Activities
Increase (Decrease) in debt, net 2,768 508
Proceeds from common stock issued 13 203
Dividends paid (226) (221)
Other, net 32 92
---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 2,587 582
---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in cash and equivalents (63) 79
Cash and equivalents at beginning of period 239 120
---------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 176 $ 199
-------------------------------------
15
Sprint FON Group
------------------------------------------------------------------------------------------------------------------------
Year-to-Date June 30, 2001 2000
------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ 605 $ 1,483
Discontinued operation, net - (675)
Depreciation and amortization 1,201 1,096
Deferred income taxes 140 336
Changes in assets and liabilities (177) (596)
Other, net 7 (29)
------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,776 1,615
------------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (2,602) (1,751)
Investments in and loans to affiliates, net (32) (649)
Proceeds from sales of other assets 15 51
Other, net 33 1
------------------------------------------------------------------------------------------------------------------------
Net cash used by continuing operations (2,586) (2,348)
Proceeds from the sale of Global One - 1,403
------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (2,586) (945)
------------------------------------------------------------------------------------------------------------------------
Financing Activities
Increase (Decrease) in debt, net 1,098 (519)
Proceeds from common stock issued 5 137
Dividends paid (219) (214)
Other, net (156) (64)
------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 728 (660)
------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in cash and equivalents (82) 10
Cash and equivalents at beginning of period 122 104
------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 40 $ 114
--------------------------------------
16
Sprint PCS Group
----------------------------------------------------------------------------------------------------------------------------
Year-to-Date June 30, 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income (loss) $ (638) $ (969)
Discontinued operation, net - -
Depreciation and amortization 1,083 877
Deferred income taxes (96) (122)
Changes in assets and liabilities (558) 500
Other, net 55 8
----------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (154) 294
----------------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (1,712) (1,435)
Investments in and loans to affiliates, net (17) (200)
Proceeds from sales of other assets 43 166
Other, net - 2
----------------------------------------------------------------------------------------------------------------------------
Net cash used by continuing operations (1,686) (1,467)
Proceeds from the sale of Global One - -
----------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (1,686) (1,467)
----------------------------------------------------------------------------------------------------------------------------
Financing Activities
Increase (Decrease) in debt, net 1,670 1,027
Proceeds from common stock issued 8 66
Dividends paid (7) (7)
Other, net 188 156
----------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 1,859 1,242
----------------------------------------------------------------------------------------------------------------------------
- -
Increase (Decrease) in cash and equivalents 19 69
- -
Cash and equivalents at beginning of period 117 16
----------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 136 $ 85
----------------------------------------------------------------------------------------------------------------------------
The FON Group and the PCS Group are integrated businesses of Sprint Corporation
and do not constitute stand-alone entities.
17
Sprint Corporation
SELECTED OPERATING RESULTS (unaudited)
(millions)
Quarters Ended Year-to-Date
June 30, June 30,
------------------------ ----------------------------
2001 2000 2001 2000
------------------------ ----------------------------
Global Markets Division
Net operating revenues
Voice $ 1,708 $ 1,795 $ 3,444 $ 3,575
Data 513 485 1,015 959
Internet 262 235 511 453
Other 80 172 160 327
--------------------------------------------------------------------------------------------------- ---------------------------
Net operating revenues 2,563 2,687 5,130 5,314
--------------------------------------------------------------------------------------------------- ----------------------------
Operating expenses
Costs of services and products 1,528 1,417 3,017 2,739
Selling, general and administrative 748 763 1,499 1,538
Depreciation and amortization 334 267 636 532
--------------------------------------------------------------------------------------------------- ----------------------------
Total operating expenses 2,610 2,447 5,152 4,809
--------------------------------------------------------------------------------------------------- ----------------------------
Operating income (loss) $ (47) $ 240 $ (22) $ 505
------------------------ ----------------------------
Local Division
Net operating revenues
Local service $ 735 $ 705 $ 1,467 $ 1,401
Network access 509 500 1,014 1,011
Long distance 177 178 363 349
Other 131 140 261 291
--------------------------------------------------------------------------------------------------- ----------------------------
Net operating revenues 1,552 1,523 3,105 3,052
--------------------------------------------------------------------------------------------------- ----------------------------
Operating expenses
Costs of services and products 484 471 980 951
Selling, general and administrative 327 313 665 650
Depreciation 275 283 556 562
--------------------------------------------------------------------------------------------------- ----------------------------
Total operating expenses 1,086 1,067 2,201 2,163
--------------------------------------------------------------------------------------------------- ----------------------------
Operating income $ 466 $ 456 $ 904 $ 889
---------------------------- ----------------------------
Product Distribution and Directory Publishing
Net operating revenues $ 474 $ 471 $ 968 $ 932
---------------------------- ----------------------------
Operating income $ 79 $ 68 $ 157 $ 135
---------------------------- ----------------------------
Sprint's FON Group reporting segments are intended to reflect the operating
results of its global markets, local services, and product distribution and
directory publishing businesses. The Global Markets segment includes domestic
and international voice services (except for consumer services provided to
customers within Sprint's local franchise territories); data communications
services such as frame relay access and transport, web hosting, collocation,
security services, our integrated communications services, referred to as Sprint
ION, and broadband fixed wireless services; and Internet services. The Local
Services segment includes local phone services, access to its local network,
consumer long distance services provided to customers within our local franchise
territories, and sales of telecommunications equipment. The Product Distribution
and Directory Publishing segment provides wholesale distribution services of
telecommunications products and publishes and markets white and yellow page
phone directories. The FON Group is an integrated business of Sprint Corporation
and does not constitute a stand-alone entity.
18
Sprint Corporation
SELECTED OPERATING RESULTS (continued) (unaudited)
(millions)
Quarters Ended Year-to-Date
June 30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
---------------------------- ----------------------------
PCS Group
Net operating revenues $ 2,264 $ 1,476 $ 4,315 $ 2,696
--------------------------------------------------------------------------------------------------- ----------------------------
Operating expenses
Costs of services and products 1,161 937 2,295 1,831
Selling, general and administrative 612 528 1,276 1,035
Depreciation 438 322 839 611
Amortization 110 134 244 266
Merger related costs - 24 - 24
---------------------------- ----------------------------
Total operating expenses 2,321 1,945 4,654 3,767
--------------------------------------------------------------------------------------------------- ----------------------------
Operating loss $ (57) $ (469) $ (339) $ (1,071)
---------------------------- ----------------------------
Unallocated Corporate Operations and
Intercompany Eliminations
Net operating revenues $ (433) $ (336) $ (818) $ (644)
-----------------------------------------------------------
Operating loss(1) $ (10) $ (173) $ (19) $ (180)
---------------------------- ----------------------------
Sprint's PCS Group includes Sprint's wireless personal communications services
operations. The PCS Group is an intergrated business of Sprint Corporation and
does not constitute a stand-alone entity.
(1) Includes FON Group merger costs of $163 million in the 2000 second quarter
related to costs associated with the proposed WorldCom merger, which was
terminted.
19
SPRINT CORPORATION
PCS GROUP
NET CUSTOMER ADDITIONS (unaudited)
(thousands)
Quarter ended June 30, 2001
--------------------------------------------------------------
Direct Resale Affiliate Total
-------------- ------------- ------------ ------------
Operational net additions 843 (11) 220 1,052
Purchases (Sales), net - - - -
-----------------------------------------------------------------------------------------------------------------------
Reported net additions 843 (11) 220 1,052
--------------------------------------------------------------
Year-to-date June 30, 2001
--------------------------------------------------------------
Direct Resale Affiliate Total
-------------- ------------- ------------ ------------
Operational net additions 1,669 38 454 2,161
Purchases (Sales), net (14) - 14 -
-----------------------------------------------------------------------------------------------------------------------
Reported net additions 1,655 38 468 2,161
--------------------------------------------------------------
Ending customers - June 30, 2000 7,437 137 424 7,998
Ending customers - December 31, 2000 9,543 310 809 10,662
Ending customers - June 30, 2001 11,198 348 1,277 12,823
--------------------------------------------------------------
20
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.
Dated: July 24, 2001 SPRINT CORPORATION
By: /s/ Michael T. Hyde
----------------------------------
Name: Michael T. Hyde
Title: Assistant Secretary
21