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) October 17, 2001
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.)
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2330 Shawnee Mission Parkway, Westwood, Kansas 66205
(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 11315, Kansas City, Missouri 64112
(Mailing address of principal executive offices)
Item 5. Other Events.
1. Press Release Regarding Third Quarter Results. On October 17, 2001, the registrant ("Sprint") announced its third quarter results for the quarter ending September 30, 2001. The press release was as follows:
Sprint Announces Third Quarter Results
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., - October 17, 2001 - Sprint today announced record third quarter consolidated revenues of $6.72 billion, an increase of 11 percent from $6.04 billion a year ago. During the quarter, the PCS Group reported exceptional year-over-year customer growth, solid average customer revenue and improved cost metrics. In the quarter, the FON Group achieved growth significantly above the market rate in sales of dedicated Internet Protocol (IP) services, continued to successfully penetrate the market with sales of bundled wireless and wireline products and significantly increased operating margin in its local telecommunications division. In a separate press release, Sprint also announced today that it is terminating Sprint ION development and restructuring various elements of the FON Group.
The PCS Group reported a third quarter loss per share from recurring operations of 29 cents compared to the mean analyst estimate of 22 cents for the quarter and a reported 41 cents a year ago. Because of the PCS Group's exceptional level of customer acquisitions, sales related expenses, while below estimates on a per customer basis, were higher overall. Third quarter diluted earnings per share for the FON Group's recurring operations were 28 cents compared to the 28-cent mean analyst estimate for the quarter and 43 cents a year ago. The year-over- year decline in FON Group earnings is due to lower yields in the long distance business and higher broadband development costs partially offset by strong profit growth in local operations.
"In the quarter, we continued to see exceptional growth in our wireless business and a continued evolution in our wireline business as it adapts to challenging market conditions," said William T. Esrey, Sprint chairman and chief executive officer. "With the announcements that we are terminating our ION efforts and restructuring several facets of our FON Group operations, we are taking significant steps toward reducing our cost structure, gaining efficiencies and aligning our investments to the areas with the best potential for growth and return on investment."
SPRINT PCS GROUP HIGHLIGHTS
The PCS Group recorded its thirteenth consecutive industry-leading quarter of
customer growth, adding over 1.2 million direct customers and 384,000 affiliate
customers. The net gain in subscribers marked the largest increase for any
quarter in Sprint PCS' five-year history and the single largest quarterly net
total for a carrier in the history of the U.S. wireless industry. Customer gains
in the quarter were driven by strong demand for the account spending limit offer
for consumers and strong performance in business markets.
The PCS Group's total customer base, including resale and affiliate customers, increased to 14.4 million, up 57 percent from third quarter 2000. The company operates the nation's largest 100-percent digital, 100-percent PCS wireless network, which now covers a population of nearly 244 million people or more than 85 percent of the U.S. population.
o Net operating revenues increased 55 percent to $2.65 billion in the third
quarter from $1.71 billion during the same quarter a year ago.
o Monthly average revenue per user (ARPU) for the quarter was $62. This is
consistent with ARPU level in the second quarter and ahead of the $61 reported
in the third quarter last year.
o Average monthly operating cash cost per user (CCPU) for the quarter was $33,
which was also consistent with the second quarter CCPU level and improved from
the $35 reported a year ago.
o The average cost to acquire a customer was approximately $320 in the quarter
compared to $340 in the same period last year.
o Operating cash flows (EBITDA) were $402 million in the quarter, compared to
$122 million in the third quarter of 2000. The decrease in EBITDA from $491
million in the second quarter of 2001 was largely driven by one-time
acquisition costs due to customer growth.
o Sprint PCS increased its business customer base by 63 percent compared to the
third quarter 2000. At the end of the quarter, Sprint PCS reported nearly
20,000 centrally managed business accounts nationwide.
o Capital expenditures were $1.15 billion for the quarter, reflecting continued
network capacity expansion and development of new service capabilities.
Esrey reaffirmed Sprint's plans to launch high-speed, third-generation (3G 1X) services nationally by the middle of 2002. He added that Sprint's plans for a national 3G rollout remain unchanged since March when the company announced detailed plans. "Unlike its wireless competitors," Esrey said, "we believe Sprint PCS has adequate spectrum for a smooth transition to 3G and offers the most cost-efficient path to the faster services, attributable to CDMA technology in its nationwide network."
He added, "While our competitors promote the introduction of faster-speed voice and data services in a few markets, the true success of 3G service will be in its seamless, national deployment. Make no mistake, 3G isn't a race to the starting line, it's a race to the finish. And the finish line in Sprint's view is faster and better voice and data services clear across the country."
The PCS Group continued to demonstrate the company's aggressive plans to deliver 3G services on time to Sprint customers nationwide:
o During the third quarter, the PCS Group continued to deploy 3G channel cards
to cell sites throughout its nationwide network, as scheduled.
o Sprint recently announced it intends to deploy the Java 2 Platform, Micro
Edition (J2ME) on Sprint PCS phones upon 3G 1X deployment. With applications
that use the J2ME platform, Sprint customers should experience improved
graphics and personalized services on their wireless devices.
o Sprint recently hosted its first-ever Application Developers Program,
featuring presentations, case studies and tutorials that will help application
developers create wireless applications in Sprint's 3G 1X network environment.
Additionally during the quarter, Sprint PCS teamed with Samsung Telecommunications America to introduce the SPH-N300, the first phone in the United States to meet the Federal Communications Commission (FCC) handset mandate for Enhanced 911 (E911) capabilities. The new phone features an embedded Global Positioning System (GPS) chip that enables E911 emergency safety features and other location-based services as they become available in the Sprint PCS markets.
Earlier this month, Sprint PCS and the Virgin Group announced a joint venture to offer pay-as-you-go wireless communications services and handsets to the U.S. market under the Virgin brand name using Sprint PCS' nationwide wireless network. Sprint PCS also extended its wireless network to Puerto Rico this quarter and announced it will offer the same services and capabilities there as it does in the continental United States, including 3G service by mid-2002.
SPRINT FON GROUP HIGHLIGHTS
o Third quarter revenues of $4.24 billion declined 4.5 percent compared to $4.44
billion in the same period a year ago.
o Net income was $244 million in the quarter compared to $384 million a year
ago, excluding three nonrecurring charges in the quarter: a write-down of an
equity investment of $157 million, a loss on the sale of an investment of $8
million and a gain of $75 million related to an amendment in retirement plan
benefits.
o Including a loss of 11 cents per share from ION, third quarter diluted
earnings per share from recurring operations were 28 cents compared to 43
cents a year ago, which included losses of 9 cents per share from ION.
Including net charges from nonrecurring items totaling 10 cents per share,
diluted earnings per share was 18 cents.
o FON Group operating income in the quarter was $422 million compared to $724
million a year ago. Excluding losses from ION, operating income for the
quarter would have been $582 million compared to $853 million a year ago.
o Operating cash flows in the quarter were $1.07 billion compared to $1.30
billion in the third quarter a year ago.
Local Telecommunications Division
o Net operating revenues were up 1 percent for the quarter to $1.56 billion
from $1.55 billion a year ago.
o Operating income rose 11 percent in the quarter to $477 million from $431
million a year ago. Operating margin increased to 30.5 percent from 27.9
percent during the same period a year ago.
o Voice grade equivalent lines grew 15 percent from the third quarter a year
ago. The number of access lines decreased 0.7 percent over the past 12
months and declined 0.4 percent in the third quarter compared to the second
quarter of 2001.
o Operating cash flows in the quarter increased 7 percent to $761 million
from $714 million in the previous third quarter.
Global Markets
o Net operating revenues in the Global Markets segment for the quarter were
down 5 percent from a year ago due to lower long distance voice revenues
and a reduced focus on one-time cable sales. These declines were partially
offset by growth in Internet Protocol (IP) and enterprise data services.
Third quarter revenues were $2.51 billion compared to $2.65 billion a year
ago.
o Operating income declined in the quarter primarily due to lower yields and
increased network and depreciation expense. Third quarter operating loss
was $119 million compared to operating income of $226 million a year ago.
Excluding losses associated with the ION efforts, which are being
terminated, operating income in the quarter would have been $41 million
compared to $355 million in the same period a year ago.
o Operating cash flows in the third quarter were $237 million compared to
$513 million a year ago. Excluding ION, operating cash flows would have
been $349 million compared to $621 million in the third quarter of 2000.
o Voice long distance calling volumes rose 21 percent for the quarter
compared to last year.
Product Distribution and Directory Publishing
o Net operating revenues for the quarter were $434 million
compared to $496 million a year ago. Non-affiliate revenues, which
accounted for about 59 percent of total revenues, declined by 19 percent
reflecting a telecom industry slowdown in capital spending.
o Operating income was $73 million in the third quarter compared to $75
million a year ago.
o Operating cash flows were $78 million in the third quarter compared to $79
million a year ago.
"In the midst of an economic slowdown, significant shifts in customer preferences for products and services and continued pricing pressures in our core long distance business, the FON Group posted solid results," Esrey said. "To meet revenue challenges, the FON Group is making progress in expanding distribution channels and taking an even more aggressive approach to offering long distance service bundled with PCS and local communications offerings. Of equal
importance is accelerating efforts to grow revenues in our Internet, data services, web hosting and international businesses."
The Local Telecommunications Division during the quarter demonstrated sustained cost management enabling the division to deliver double-digit operating income growth and expanded margins. The division maintained strong sales of bundled services, contributing to an increase in the sale of add-on services such as Caller ID and an increased penetration of Sprint's long distance and wireless services in the local territories.
The division sold nearly 350,000 consumer and business bundles during the quarter. Approximately 44 percent of Sprint's local residential lines and 36 percent of its business lines now use Sprint long distance services.
The local division's data-related service revenues continued to improve during the quarter, increasing 26 percent from the year-ago period. The chief driver of the increase is a continued strong demand for special access services.
During the quarter, rigorous cost containment measures trimmed the cost of services and products by 3 percent from the same period a year ago. Sales, general and administrative costs decreased 3 percent compared to a year ago.
In Global Markets, the long distance market proved once again to be highly competitive. Total voice revenues declined 6 percent in the quarter compared to a year ago. Business voice revenues continue to be impacted by aggressive market pricing. In the quarter, Sprint increased sales of current-generation data services by 6 percent compared to a year ago, in spite of a sluggish economy and a competitive price environment.
During the quarter, dedicated IP service revenues grew nearly 50 percent
compared to the same period last year and increased 9 percent sequentially.
Overall, Internet revenues for the quarter grew 11 percent compared to the same
period last year. To support future Internet revenue growth, the FON Group
announced:
o an alliance with Dell, the world's No. 1 computer systems company, to
enhance and grow web hosting and e-commerce offerings to the small and
medium business markets, which is expected to generate several hundred
million dollars in sales over the next seven years.
o an enhancement to its managed Internet services portfolio by offering
Microsoft's messaging, e-commerce and database services to Sprint
E|Solutions' Internet Center customers. The alliance offers Sprint
customers outsourcing of the integration, maintenance and management of
Microsoft Exchange 2000 Server, Microsoft Commerce Server 2000 and
Microsoft SQL Server 2000 to Sprint E|Solutions.
o an agreement with Sprint Canada, Inc., a wholly owned subsidiary of
Call-Net Enterprises Inc. (TSE: CN and CN.B) under which Sprint Canada will
market Sprint E|Solutions' wide range of services throughout Canada.
On the international front during the quarter, Sprint announced the opening of its new Asia Pacific regional headquarters in Hong Kong. In addition to dedicated Internet access in that market, Sprint will be offering a broad portfolio of IP services, including Sprint IPVPN (IP virtual private network), Sprint International Private Line, collocation, backhaul, and managed network services.
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are
forward-looking, and actual results may differ materially.
We now expect that full-year net customer additions in the PCS Group could be approximately 4.2 million. This is an increase from our previous forecast of 3.8 million and implies that we expect to add approximately 1.3 million customers in the fourth quarter. The fourth quarter estimate is consistent with our previous expectation. With this level of additions, we expect full year EBITDA could be around $1.6 billion or about $100 million below our previous estimate. The decline is principally due to higher acquisition costs incurred in the third quarter in support of stronger than expected customer additions. Due to stronger customer usage, higher than expected customer additions and an acceleration of a portion of 1X related capital from next year into 2001, we now expect capital expenditures could be approximately $3.6 billion for the full year 2001. This is above our previous estimate of about $3.4 billion.
Our earnings expectations for the FON Group for the fourth quarter may vary depending upon the timing of our actions to complete the termination of services to our ION customer base and completion of the restructuring we announced today. We currently expect that these actions will be substantially complete by the end of the fourth quarter. When fully implemented, these actions are currently expected to reduce net operating costs by approximately $1 billion on an annualized basis. Assuming the mid-point on timing of the completion of these actions, pro forma earnings could be in the upper 30-cent range in the fourth quarter. We expect that total FON Group revenues will decline at a mid-single digit rate in the fourth quarter. FON Group capital expenditures for the full year 2001 are now expected to be approximately $5.4 billion, which is below our previous estimate of $5.9 billion.
Sprint is planning to host a meeting with the FON Group and PCS Group's investment community on December 4. On that date we plan to provide an update on our expectations for the fourth quarter as well as our views on 2002.
Third Quarter Results Conference Calls
Conference calls elaborating on the company's third quarter results are
scheduled for the morning of October 18. Management will discuss the PCS Group
third quarter earnings at 7:45 a.m. EDT in a listen-only format conference call.
The call-in numbers are 1-800-659-6183 or, for international callers,
816-650-0741. Callers may also use the following secondary phone numbers: 1-
800-347-3350 or 816-650-0701. A continuous replay will be available immediately
following the conference call and can be accessed by dialing 1-888-775-8673 or
402-220-1325 (international), or through our web site, www.sprint.com. This
replay will be available through October 25, 2001.
The FON Group third quarter earnings report and an update on ION and other company initiatives will be discussed in a conference call at 8:30 a.m. EDT. The call will be live and will conclude with an interactive Q&A session. The total duration of the call is expected to be approximately one hour. The call-in numbers are 1-866-215-1938 or, for international callers, 816-650-0742. Callers may also use the following secondary numbers: 1-800-659-6183 or 816-650-0741. There will also be a live audio cast of the call on our web site at www.sprint.com. Participants on the web cast will not have the ability to ask questions in the Q&A session. A continuous replay will be available immediately following the conference call and can be accessed by dialing 1-888-775-8696 or 402-220-1326 (international), or through our web site. This replay will be available through October 25, 2001.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This press release includes "forward-looking statements" within the meaning of
securities laws. The statements in this press release regarding the business
outlook as well as other statements that are not historical facts are
forward-looking statements. The words "estimate," "project," "intend," "expect,"
"believe," and similar expressions 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,
Sprint has made assumptions regarding, among other things, customer and network
usage, customer growth, pricing, costs to acquire customers and to provide
services, the timing of the restructuring, and the economic environment.
Important factors that could cause actual results to differ materially from
estimates or projections contained in the forward-looking statements include:
o the effects of vigorous competition in the markets in which Sprint operates;
o the costs and business risks associated with providing new services and
entering new markets necessary to provide nationwide or global services;
o the ability of the PCS Group to continue to grow a significant market
presence;
o the effects of mergers and consolidations within the telecommunications
industry;
o the uncertainties related to Sprint's strategic investments;
o the impact of any unusual items resulting from ongoing evaluations of
Sprint's business strategies;
o the impact of new technologies on Sprint's business;
o unexpected results of litigation filed against Sprint;
o 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
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. Sprint provides a detailed discussion of risk factors in periodic SEC filings as well as its registration statements (see Registration No. 333-65402) and you are encouraged to review these filings.
Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(millions, except per share data)
Sprint Corporation
--------------------- Eliminations/
Consolidated Reclassifications Sprint FON Group Sprint PCS Group
------------------------------------------------------- --------------------- -------------------- ----------------------
Quarters Ended September 30, 2001 2000 2001 2000 2001 2000 2001 2000
------------------------------------------------------- --------------------- -------------------- ----------------------
Net operating revenues $ 6,715 $ 6,040 $ (180) $ (111) $ 4,244 $ 4,444 $ 2,651 $ 1,707
------------------------------------------------------- --------------------- -------------------- ----------------------
Operating expenses
Costs of services and products 3,442 2,935 (180) (111) 2,106 2,064 1,516 982
Selling, general and
administrative 1,805 1,686 - - 1,072 1,083 733 603
Depreciation 1,096 908 - - 638 556 458 352
Amortization 66 154 - - 6 17 60 137
------------------------------------------------------- --------------------- -------------------- ----------------------
Total operating expenses 6,409 5,683 (180) (111) 3,822 3,720 2,767 2,074
------------------------------------------------------- --------------------- -------------------- ----------------------
Operating income (loss) 306 357 - - 422 724 (116) (367)
Interest expense (290) (233) 4 4 (13) (8) (281) (229)
Other expense, net (1) (95) (89) (4) (4) (56) (84) (35) (1)
------------------------------------------------------- --------------------- -------------------- ----------------------
Income (loss) before income
taxes (79) 35 - - 353 632 (432) (597)
Income taxes (55) (41) - - (199) (248) 144 207
------------------------------------------------------- --------------------- -------------------- ----------------------
Net income (loss) (134) (6) - - 154 384 (288) (390)
Preferred stock dividends (paid)
received (1) (3) - - 2 1 (3) (4)
------------------------------------------------------- --------------------- -------------------- ----------------------
Earnings (Loss) applicable to
common stock $ (135) $ (9) $ - $ - $ 156 $ 385 $ (291) $ (394)
--------------------- --------------------- -------------------- ----------------------
Diluted earnings (loss) per
common share
Income (loss) from continuing
operations - recurring $ 0.28 $ 0.43 $ (0.29) $ (0.41)
Non-recurring items (1) (0.10) - - -
------------------------------------------------------ --------------------- -------------------- ----------------------
Total $ 0.18 $ 0.43 $ (0.29) $ (0.41)
-------------------- ----------------------
Diluted weighted average common
shares outstanding 889.6 890.8 993.0 971.3
-------------------- ----------------------
Basic earnings (loss) per common
share $ 0.18 $ 0.44 $ (0.29) $ (0.41)
-------------------- ----------------------
The FON Group and the PCS Group are integrated
businesses of Sprint Corporation and do not
constitute stand-alone entities.
(1) In the 2001 third quarter, the FON Group recorded in Other expense, net, non-recurring charges of
$62 million with an impact on continuing operations of $90 million or $0.10 per share. These
amounts included a write-down of an equity investment for $157 million with the same impact on
continuing operations or $0.18 per share, and a loss on the sale of an investment of $25 million with
an impact on continuing operations of $8 million or $0.01 per share. Additionally, Sprint modified
certain retirement plan benefits resulting in a curtailment gain of $120 million with an impact on
continuing operations of $75 million or $0.09 per share.
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Sprint Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(millions, except per share data)
Sprint Corporation
--------------------- Eliminations/
Consolidated Reclassifications Sprint FON Group Sprint PCS Group
--------------------------------------------------- --------------------- --------------------- --------------------
Year-to-Date September 30, 2001 2000 2001 2000 2001 2000 2001 2000
--------------------------------------------------- --------------------- --------------------- --------------------
Net operating revenues $ 19,415 $ 17,390 $ (463) $ (307) $ 12,912 $ 13,294 $ 6,966 $ 4,403
---------------------------------------------------- --------------------- --------------------- ---------------------
Operating expenses
Costs of services and
products 9,648 8,541 (463) (307) 6,300 6,035 3,811 2,813
Selling, general and
administrative 5,334 4,992 - - 3,325 3,354 2,009 1,638
Depreciation 3,124 2,581 - - 1,827 1,618 1,297 963
Amortization 322 454 - - 18 51 304 403
Merger related costs (1) - 187 - - - 163 - 24
---------------------------------------------------- --------------------- --------------------- ---------------------
Total operating expenses 18,428 16,755 (463) (307) 11,470 11,221 7,421 5,841
---------------------------------------------------- --------------------- --------------------- ---------------------
Operating income (loss) 987 635 - - 1,442 2,073 (455) (1,438)
Interest expense (907) (717) 15 14 (56) (58) (866) (673)
Other income (expense), net (2) (137) (48) (15) (14) (52) (50) (70) 16
---------------------------------------------------- --------------------- --------------------- ---------------------
Income (loss) from continuing
operations before income taxes (57) (130) - - 1,334 1,965 (1,391) (2,095)
Income taxes (111) (32) - - (574) (771) 463 739
---------------------------------------------------- --------------------- --------------------- ---------------------
Income (loss) from continuing
operations (168) (162) - - 760 1,194 (928) (1,356)
Discontinued operation, net - 675 - - - 675 - -
Extraordinary items, net (1) (3) - - (1) - - (3)
Cumulative effect of changes
in accounting principles, net 2 (2) - - - (2) 2 -
---------------------------------------------------- --------------------- --------------------- ---------------------
Net income (loss) (167) 508 - - 759 1,867 (926) (1,359)
Preferred stock dividends
(paid) received (5) (6) - - 5 5 (10) (11)
---------------------------------------------------- --------------------- --------------------- ---------------------
Earnings (Loss) applicable to
common stock $ (172) $ 502 $ - $ - $ 764 $ 1,872 $ (936) $ (1,370)
----------------------- --------------------- --------------------- ---------------------
Diluted earnings (loss) per
common share
Income (loss) from continuing
operations - recurring $ 0.95 $ 1.41 $ (0.95) $ (1.42)
Non-recurring items (1,2) (0.09) (0.07) - -
---------------------------------------------------- --------------------- --------------------- ---------------------
Income (loss) from continuing
operations 0.86 1.34 (0.95) (1.42)
Discontinued operation - 0.75 - -
---------------------------------------------------- --------------------- --------------------- ---------------------
Total $ 0.86 $ 2.09 $ (0.95) $ (1.42)
--------- --------- ---------- --------
Diluted weighted average
common shares outstanding 888.3 894.5 983.7 963.5
--------------------- ---------------------
Basic earnings (loss) per
common share $ 0.86 $ 2.13 $ (0.95) $ (1.42)
--------------------- ---------------------
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 third quarter, the FON Group recorded in Other
income (expense), net, non-recurring charges of $62 million
with an impact on continuing operations of $90 million or
$0.10 per share. These amounts included a write-down of an
equity investment for $157 million with the same impact on
continuing operations or $0.18 per share, and a loss on the
sale of an investment of $25 million with an impact on
continuing operations of $8 million or $0.01 per share.
Additionally, Sprint modified certain retirement plan benefits
resulting in a curtailment gain of $120 million with an impact on
continuing operations of $75 million or $0.09 per share. 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 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.
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Sprint Corporation
SELECTED OPERATING RESULTS (unaudited)
(millions)
Quarters Ended Year-to-Date
September 30, September 30,
------------------------ ------------------------
2001 2000 2001 2000
------------------------ ------------------------
Global Markets Division
Net operating revenues
Voice $ 1,692 $ 1,795 $ 5,136 $ 5,370
Data 497 470 1,512 1,429
Internet 248 223 759 676
Other 68 158 228 485
---------------------------------------------------------------- ------------------------
Net operating revenues 2,505 2,646 7,635 7,960
---------------------------------------------------------------- ------------------------
Operating expenses
Costs of services and products 1,544 1,410 4,561 4,149
Selling, general and administrative 724 723 2,223 2,261
Depreciation and amortization 356 287 992 819
---------------------------------------------------------------- ------------------------
Total operating expenses 2,624 2,420 7,776 7,229
---------------------------------------------------------------- ------------------------
Operating income (loss) $ (119) $ 226 $ (141) $ 731
------------------------ ------------------------
Local Division
Net operating revenues
Local service $ 732 $ 720 $ 2,199 $ 2,121
Network access 507 486 1,521 1,497
Long distance 186 187 549 536
Other 139 152 400 443
---------------------------------------------------------------- ------------------------
Net operating revenues 1,564 1,545 4,669 4,597
---------------------------------------------------------------- ------------------------
Operating expenses
Costs of services and products 496 513 1,476 1,464
Selling, general and administrative 307 318 972 968
Depreciation 284 283 840 845
---------------------------------------------------------------- ------------------------
Total operating expenses 1,087 1,114 3,288 3,277
---------------------------------------------------------------- ------------------------
Operating income $ 477 $ 431 $ 1,381 $ 1,320
------------------------ ------------------------
Product Distribution and Directory
Publishing
Net operating revenues $ 434 $ 496 $ 1,402 $ 1,428
------------------------ ------------------------
Operating income $ 73 $ 75 $ 230 $ 210
------------------------ ------------------------
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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.
Sprint Corporation
SELECTED OPERATING RESULTS (unaudited)
(millions)
Quarters Ended Year-to-Date
September 30, September 30,
------------------------ ---------------------
2001 2000 2001 2000
------------------------ ---------------------
PCS Group
Net operating revenues $ 2,651 $ 1,707 $ 6,966 $ 4,403
------------------------------------------------------------------ ---------------------
Operating expenses
Costs of services and products 1,516 982 3,811 2,813
Selling, general and administrative 733 603 2,009 1,638
Depreciation 458 352 1,297 963
Amortization 60 137 304 403
Merger related costs - - - 24
------------------------------------------------------------------ ----------------------
Total operating expenses 2,767 2,074 7,421 5,841
------------------------------------------------------------------ ----------------------
Operating loss $ (116) $ (367) $ (455) $ (1,438)
----------------------- ----------------------
Unallocated Corporate Operations and
Intercompany Eliminations
Net operating revenues $ (439) $ (354) $ (1,257) $ (998)
----------------------- ----------------------
Operating income (1) $ (9) $ (8) $ (28) $ (188)
----------------------- ----------------------
Sprint's PCS Group includes Sprint's wireless personal communications
services operations. The PCS Group is an integrated 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 terminated.
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Sprint Corporation
CONSOLIDATED BALANCE SHEETS (unaudited)
(millions)
Sprint Corporation
------------------- Eliminations/
Consolidated Reclassifications Sprint FON Group Sprint PCS Group
------------------- ------------------- -------------------- --------------------
Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30, Dec. 31,
2001 2000 2001 2000 2001 2000 2001 2000
------------------- ------------------- -------------------- --------------------
Assets
Current Assets
Cash and equivalents $ 205 $ 239 $ - $ - $ 64 $ 122 $ 141 $ 117
Accounts receivable, net 4,230 4,028 - - 2,863 3,126 1,367 902
Inventories 638 949 - - 371 434 267 515
Receivables from the PCS Group - - (443) (361) 443 361 - -
Prepaid expenses and other 769 757 - (28) 482 469 287 316
------------------------------------------------------- ------------------- --------------------- ---------------------
Total current assets 5,842 5,973 (443) (389) 4,223 4,512 2,062 1,850
Net property, plant and
equipment 28,951 25,316 (47) (39) 17,904 15,833 11,094 9,522
Net intangible assets 8,609 8,938 - - 1,194 1,204 7,415 7,734
Other 2,169 2,374 (279) (383) 1,635 2,100 813 657
------------------------------------------------------- ------------------- --------------------- ---------------------
Total $ 45,571 $ 42,601 $ (769) $ (811) $ 24,956 $ 23,649 $ 21,384 $ 19,763
---------------------- ------------------- --------------------- ---------------------
Liabilities and shareholders'
equity
Current liabilities
Short-term borrowings including
current maturites of long-term
debt $ 4,548 $ 1,205 $ (113) $ (65) $ 2,447 $ 1,026 $ 2,214 $ 244
Accounts payable and accrued
interconnection costs 2,202 2,832 - - 1,577 2,145 625 687
Construction obligations 737 997 - - - - 737 997
Payables to the FON Group - - (319) (296) - - 319 296
Other 3,492 2,934 (47) (67) 1,985 1,833 1,554 1,168
------------------------------------------------------- ------------------- --------------------- ---------------------
Total current liabilities 10,979 7,968 (479) (428) 6,009 5,004 5,449 3,392
Noncurrent liabilities
Long-term debt and capital
lease obligations 15,434 17,514 - (104) 3,624 3,482 11,810 14,136
Equity units 1,725 - - - - - 1,725 -
Deferred income taxes and
investment tax credits 1,620 1,360 (4) (6) 1,624 1,276 - 90
Other 1,676 1,787 2 - 1,349 1,534 325 253
------------------------------------------------------- ------------------- --------------------- ---------------------
Total noncurrent liabilities 20,455 20,661 (2) (110) 6,597 6,292 13,860 14,479
Redeemable preferred stock 256 256 (280) (280) 10 10 526 526
Common stock and other
shareholders' equity
Common stock
Class A FT 22 108 22 108 - - - -
Class A DT - 108 - 108 - - - -
FON 1,775 1,598 1,775 1,598 - - - -
PCS 984 933 984 933 - - - -
Other shareholders' equity 11,100 10,969 11,100 10,969 - - - -
Combined attributed net assets - - (13,889) (13,709) 12,340 12,343 1,549 1,366
------------------------------------------------------- ------------------- --------------------- ---------------------
Total shareholders' equity 13,881 13,716 (8) 7 - - - -
------------------------------------------------------- ------------------- --------------------- ---------------------
Total $ 45,571 $42,601 $ (769) $ (811) $ 24,956 $ 23,649 $ 21,384 $ 19,763
---------------------- ------------------- --------------------- ---------------------
The FON Group and the PCS Group are integrated businesses of Sprint
Corporation and do not constitute stand-along entities.
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Sprint Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (unaudited)
(millions)
Sprint Corporation
-------------------- Eliminations/
Consolidated Reclassifications Sprint FON Group Sprint PCS Group
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Year-to-Date September 30, 2001 2000 2001 2000 2001 2000 2001 2000
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Operating Activities
Net income (loss) $ (167) $ 508 $ - $ - $ 759 $ 1,867 $ (926) $ (1,359)
Discontinued operation, net - (675) - - - (675) - -
Equity in net losses of
affiliates 144 197 - - 64 166 80 31
Depreciation and
amortization 3,446 3,035 - - 1,845 1,669 1,601 1,366
Deferred income taxes 155 9 - - 384 456 (229) (447)
Changes in assets and
liabilities (392) (25) 2 - (295) (686) (99) 661
Other, net (40) (135) (2) - 4 (106) (42) (29)
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Net cash provided by operating
activities 3,146 2,914 - - 2,761 2,691 385 223
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Investing Activities
Capital expenditures (6,760) (4,765) - - (3,899) (2,655) (2,861) (2,110)
Investments in and loans to
affiliates, net (61) (882) - - (32) (681) (29) (201)
Proceeds from sales of
other assets 286 255 (70) - 319 51 37 204
Other, net 33 (10) - (17) 33 18 - (11)
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Net cash used by continuing
operations (6,502) (5,402) (70) (17) (3,579) (3,267) (2,853) (2,118)
Proceeds from the sale of
Global One - 1,403 - - - 1,403 - -
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Net cash used by investing
activities (6,502) (3,999) (70) (17) (3,579) (1,864) (2,853) (2,118)
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Financing Activities
Increase (Decrease) in
debt, net 1,257 1,167 70 - 1,192 (504) (5) 1,671
Proceeds from equity units 1,725 - - - - - 1,725 -
Proceeds from common stock
issued 605 264 - - 22 156 583 108
Dividends paid (340) (333) - - (329) (322) (11) (11)
Other, net 75 86 - 17 (125) (132) 200 201
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Net cash provided (used) by
financing activities 3,322 1,184 70 17 760 (802) 2,492 1,969
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Increase (Decrease) in cash and
equivalents (34) 99 - - (58) 25 24 74
Cash and equivalents at
beginning of period 239 120 - - 122 104 117 16
------------------------------------------------------- ----------------------- ------------------------ ----------------------
Cash and equivalents at end of
period $ 205 $ 219 $ - $ - $ 64 $ 129 $ 141 $ 90
--------------------- ----------------------- ------------------------ ----------------------
The FON Group and the PCS Group are integrated businesses of
Sprint Corporation and do not constitute stand-alone entities.
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Sprint Corporation
PRO FORMA SELECTED OPERATING RESULTS (unaudited) (1)
(millions, except per share data)
--------------------------------------------------------------------------------------------------------------------
Quarters Ended September 30 June 30 March 31 December 31
------------------------------------------------ --------------------- ---------------------- ------------
2001 2000 2001 2000 2001 2000 2000
------------------------------------------------ --------------------- ---------------------- ------------
Global Markets Division
Net operating revenues $ 2,497 $ 2,644 $ 2,559 $ 2,686 $ 2,564 $ 2,627 $ 2,566
------- ------- ------- ------- ------- ------- -------
Operating income (2) $ 41 $ 355 $ 129 $ 365 $ 170 $ 383 $ 14
------- ------- ------- ------- ------- ------- -------
EBITDA (2) $ 349 $ 621 $ 417 $ 620 $ 443 $ 629 $ 289
------- ------- ------- ------- ------- ------- -------
Sprint FON Group
Net operating revenues $ 4,236 $ 4,442 $ 4,306 $ 4,445 $ 4,355 $ 4,404 $ 4,392
------- ------- ------- ------- ------- ------- -------
Operating income (2),(3) $ 582 $ 853 $ 664 $ 716 $ 677 $ 876 $ 520
------- ------- ------- ------- ------- ------- -------
EBITDA (2),(3) $ 1,178 $ 1,405 $ 1,233 $ 1,255 $ 1,234 $ 1,402 $ 1,091
------- ------- ------- ------- ------- ------- -------
Diluted earnings per
common share
As reported $ 0.18 $ 0.43 $ 0.33 $ 0.41 $ 0.36 $ 1.25 $ 0.11
Sprint ION losses (4) 0.11 0.09 0.12 0.09 0.10 0.08 0.12
------- ------- ------- -------- ------- ------- -------
Pro forma (1) $ 0.29 $ 0.52 $ 0.45 $ 0.50 $ 0.46 $ 1.33 $ 0.23
------- ------- ------- -------- ------- ------- -------
(1) Pro forma information is presented as if the Sprint ION
termination occurred at the beginning of 2000.
(2) In the 2000 fourth quarter, the FON Group recorded a nonrecurring
charge of $238 million, which principally represents a write-down
of goodwill.
(3) In the 2000 second quarter, the FON Group recorded a nonrecurring
charge of $163 million for costs associated with the proposed WorldCom
merger, which was terminated.
(4) Does not include certain corporate overhead.
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Sprint Corporation
PCS GROUP
NET CUSTOMER ADDITIONS (unaudited)
(thousands)
Quarter ended September 30, 2001
-----------------------------------------------
Direct Resale Affiliate Total
------ ------ --------- -----
Operational net additions 1,243 (61) 384 1,566
Purchases (Sales), net - - - -
-------------------------------------------------------------------------------------
Reported net additions 1,243 (61) 384 1,566
-----------------------------------------------
Year-to-date September 30, 2001
-------------------------------
Direct Resale Affiliate Total
------ ------ --------- ------
Operational net additions 2,912 (23) 838 3,727
Purchases (Sales), net (14) - 14 -
--------------------------------------------------------------------------------------
Reported net additions 2,898 (23) 852 3,727
------------------------------------------------
Ending customers -
September 30, 2000 8,348 259 550 9,157
Ending customers -
December 31, 2000 9,543 310 809 10,662
Ending customers -
September 30, 2001 12,441 287 1,661 14,389
-------------------------------------------------
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2. Press Release Regarding Termination of ION and Additional Actions to Improve Competitive Positioning and Reduce Operating Costs. On October 17, 2001, Sprint also announced that it will terminate its efforts to develop and provide Sprint ION services along with additional steps to improve the competitive positioning and reduce operating costs in the business units that comprise the FON Group tracking stock. The press release was as follows:
Sprint to Terminate ION Efforts; Announces Additional Actions to Improve Competitive Positioning and Reduce Operating Costs in FON Group
Kansas City, Mo., - October 17, 2001 - Sprint (NYSE: FON, PCS) today announced that it will terminate its efforts to develop and provide Sprint ION services along with additional aggressive steps to improve the competitive positioning and reduce operating costs in the business units that comprise the FON Group tracking stock.
The actions taken will include:
o Discontinuation of Sprint ION consumer and business offerings. Sprint will
ensure an orderly transition of ION customers to alternative service
arrangements. A substantial portion of the assets that support the ION
offerings are expected to be written off in the fourth quarter.
o Ending customer acquisition for the company's fixed wireless (MMDS) services
and freezing the number of MMDS markets served until substantial progress is
made on second-generation MMDS technology. The current MMDS customer base will
be maintained, as will all video services offered through the fixed wireless
spectrum.
o Consolidation of marketing functions and streamlining of network operations
within Sprint's Global Markets Group. In addition, consumer and small business
operations will be combined to form a single mass market organization, whose
focus will be on acquiring customers through bundled PCS and local telephone
offerings and through affiliate and partnership sales channels.
o Streamlining of selected marketing and network support functions in local
telephone operations, product supply and directory publishing businesses, as
well as streamlining corporate support functions.
The actions taken will result in a workforce reduction of approximately 6,000 employees. This is approximately 7 percent of Sprint's workforce worldwide. In addition, 1,500 contractor positions will be eliminated.
"We are taking significant steps to reduce our cost structure and sharpen our focus on the products and services that hold the best potential for growth and return on investment," said William T. Esrey, Sprint's chairman and chief executive officer.
Added Esrey: "Several factors influenced our decision to discontinue the Sprint ION initiative, including the rapidly changing industry landscape and future funding requirements for ION
especially in light of the economic slowdown and the uncertainty of the timing of a recovery. Great progress was made over the past several months on the technical challenges to developing an on-demand, integrated product offering. The knowledge that we have gained throughout the development of ION is already being put to use in delivering multiple services over our backbone network and will be of additional value as technology continues to evolve. We believe our vision that customers will desire integrated communications services still holds true. However, it is clear that with our current efforts an appropriate return on investment can not be achieved in an acceptable time frame and we are adjusting our plans accordingly."
"Today we find ourselves operating in a more difficult economic climate and a highly competitive telecommunications marketplace. Despite these challenges the industry overall continues to expand, with some sectors enjoying rapid growth. We believe that we are well positioned in these high growth segments - wireless communications and Internet and data services - and by shifting resources we can maximize our competitive advantage in these areas."
Accounting charges related to the wind-down of ION, associated asset write-offs, and the workforce reductions are expected to result in an estimated $2 billion one-time pre-tax charge to fourth quarter 2001 earnings. Total cash exit costs of terminating ION and severance packages for the workforce reduction are expected to be approximately $600 million including an estimated $200 million for severance. The balance of cash exit costs will cover the costs of terminating ION services, supplier agreements, real estate leases and other contractual obligations. Using third quarter 2001 costs as a baseline, the annualized pre-tax savings from the termination of ION, organizational realignments and suspension of MMDS marketing, is currently estimated at about $1 billion beginning in 2002.
Additional guidance on FON Group's fourth quarter 2001 results can be found in Sprint's third quarter earnings announcement that was also released this afternoon.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This press release includes "forward-looking statements" within the meaning of
securities laws. The words "estimate," "project," "intend," "expect,"
"believe," and similar expressions 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. Important factors that could cause actual results
to differ materially from estimates or projections contained in the
forward-looking statements include:
o the effects of vigorous competition in the markets in which Sprint operates;
o the costs and business risks associated with providing new services and
entering new markets necessary to provide nationwide or global services;
o the ability of the PCS Group to continue to grow a significant market
presence;
o the effects of mergers and consolidations within the telecommunications
industry;
o the uncertainties related to Sprint's strategic investments;
o the impact of any unusual items resulting from ongoing evaluations of
Sprint's business strategies;
o the impact of new technologies on Sprint's business;
o unexpected results of litigation filed against Sprint;
o 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
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. Sprint provides a detailed discussion of risk factors in periodic SEC filings as well as its registration statements (see Registration No. 333-65402) and you are encouraged to review these filings.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
12. Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends.
99. Second Supplemental Indenture, dated as of October 15, 2001, among Sprint Capital Corporation, Sprint Corporation and Bank One, N.A., as Trustee.
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: October 29, 2001 By: /s/ Michael T. Hyde
Michael T. Hyde
Assistant Secretary
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EXHIBIT INDEX
Exhibit
Number Description Page
12. Computation of Ratios of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
99. Second Supplemental Indenture, dated as of October 15,
2001, among Sprint Capital Corporation, Sprint
Corporation and Bank One, N.A., as Trustee.
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Exhibit 12
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND Sprint Corporation
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS (Unaudited)
Quarters Ended Year-to-Date
September 30, September 30,
--------------------------------------------------
2001 2000 2001 2000
-------------------------------------------------------------------------------
(millions)
Earnings
Income (Loss) from
continuing operations
before income taxes $ (79) $ 35 $ (57) $ (130)
Capitalized interest (48) (47) (136) (130)
Equity in net losses
of less than 50%
owned entities 55 121 144 197
-------------------------------------------------------------------------------
Subtotal (72) 109 (49) (63)
-------------------------------------------------------------------------------
Fixed charges
Interest charges 338 280 1,043 847
Interest factor of
operating rents 115 83 292 242
-------------------------------------------------------------------------------
Total fixed charges 453 363 1,335 1,089
-------------------------------------------------------------------------------
Earnings, as adjusted $ 381 $ 472 $ 1,286 $ 1,026
------------------------------------------------
Ratio of earnings
to fixed charges -(1) 1.30 -(2) -(3)
------------------------------------------------
Total fixed charges $ 453 $ 363 $ 1,335 $ 1,089
Pre-tax cost of preferred
stock dividends 2 5 8 9
-------------------------------------------------------------------------------
Total fixed charges
and preferred stock
dividends $ 455 $ 368 $ 1,343 $ 1,098
------------------------------------------------
Ratio of earnings to
combined fixed
charges and preferred stock
dividends -(1) 1.28 -(2) -(3)
-----------------------------------------------
(1) Earnings, as adjusted, were inadequate to cover fixed
charges by $72 million and combined fixed charges and
preferred stock dividends by $74 million in the quarter ended
September 30, 2001. Earnings, as adjusted, includes a
nonrecurring write-down of an investment of $157 million, a
loss on the sale of an investment of $25 million and a gain
from the amendment of certain retirement plan benefits of $120
million. Excluding these items, earnings, as adjusted, would
have been inadequate to cover fixed charges by $10 million and
inadequate to cover combined fixed charges and preferred stock
dividends by $12 million.
(2) Earnings, as adjusted, were inadequate to cover fixed
charges by $49 million and combined fixed charges and
preferred stock dividends by $57 million in the year-to-date
period ended September 30, 2001. Earnings, as adjusted,
includes nonrecurring gains in the first quarter of 2001 of
$14 million from investment activities. Earnings, as adjusted,
includes nonrecurring items in the third quarter of 2001 of a
write-down of an investment of $157 million, a loss on the
sale of an investment of $25 million and a gain from the
amendment of certain retirement plan benefits of $120 million.
Excluding these items, earnings, as adjusted would have been
inadequate to cover fixed charges by $1 million and inadequate
to cover combined fixed charges and preferred stock dividends
by $9 million.
(3) Earnings, as adjusted, were inadequate to cover fixed
charges by $63 million and combined fixed charges and
preferred stock dividends by $72 million in the year-to-date
period ended September 30, 2000. Earnings, as adjusted,
includes nonrecurring items in the first quarter of 2000 of a
net gain from investment activities of $26 million and a
nonrecurring gain of $28 million on the sale of network
infrastructure and the right to manage customers to a PCS
affiliate. Earnings, as adjusted, includes nonrecurring items
in the second quarter of 2000 of $187 million for costs
associated with the proposed WorldCom merger, which was
terminated, and a gain on the sale of an independent directory
publishing operation of $45 million. Excluding these items,
the ratio of earnings to fixed charges would have been 1.02
and the ratio of earnings to combined fixed charges and
preferred stock dividends would have been 1.01.
Note: The ratios of earnings to fixed charges were computed by
dividing fixed charges into the sum of earnings (after
certain adjustments) and fixed charges. Earnings include
income from continuing operations before taxes, plus equity
in the net losses of less-than-50% owned entities, less
capitalized interest. Fixed charges include interest on all
debt of continuing operations, including amortization of debt
issuance costs, and the interest component of operating
rents. The ratios of earnings to fixed charges and preferred
stock dividends were computed by dividing the sum of fixed
charges and the pre-tax costs of preferred stock dividends
into the sum of earnings (after certain adjustments) and
fixed charges.
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Exhibit 99
SPRINT CAPITAL CORPORATION
AND
SPRINT CORPORATION
TO
BANK ONE, N.A.
Trustee
Second Supplemental Indenture Dated as of October 15, 2001
SUPPLEMENTAL TO
INDENTURE
Dated as of October 1, 1998
SECOND SUPPLEMENTAL INDENTURE, dated as of October 15, 2001, among SPRINT CAPITAL CORPORATION, a Delaware corporation (herein called the "Company"), having its principal office at 2330 Shawnee Mission Parkway, Westwood, Kansas, SPRINT CORPORATION, a Kansas corporation (herein called the "Guarantor"), having its principal office at 2330 Shawnee Mission Parkway, Westwood, Kansas, and Bank One, N.A., a national banking association, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY AND THE GUARANTOR
WHEREAS, the Company and the Guarantor have heretofore executed and delivered to the Trustee an Indenture, dated as of October 1, 1998 (the "Original Indenture"), providing for the issuance from time to time of the Company's unsecured debentures, notes or other evidences of indebtedness (herein and therein called the "Securities"), to be issued in one or more series as in the Original Indenture provided; and
WHEREAS, the Company and the Guarantor have heretofore executed and delivered to the Trustee a First Supplemental Indenture, dated as of January 15, 1999 (the "First Supplemental Indenture" and, together with the Original Indenture, the "Indenture") amending Article VIII of the Original Indenture; and
WHEREAS, Section 901(5) of the Indenture provides that the Company, when authorized by or pursuant to a Board Resolution, the Guarantor, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into an indenture supplemental to the Indenture for the purpose of adding, changing or eliminating any provision of the Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (1) shall neither apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor modify the rights of the Holder of any such Security with respect to such provision or (2) shall become effective only when there is no Security Outstanding; and
WHEREAS, the Company and the Guarantor, pursuant to the foregoing authority, propose in and by this Second Supplemental Indenture to amend the Indenture in certain respects, such amendment to be effective for Securities of any series created on or after the date of this Second Supplemental Indenture; and
WHEREAS, all things necessary to make this Second Supplemental Indenture a valid agreement of the Company and the Guarantor, in accordance with its terms, have been done.
AGREEMENT
NOW, THEREFORE, the Company, the Guarantor and the Trustee hereby agree as follows:
1. The Indenture is hereby amended by deleting Article VIII, Section 801
thereof in its entirety and inserting in lieu thereof a new Article VIII,
Section 801 as follows:
Section 801. Company or Guarantor May Consolidate, Etc., Only on Certain Terms.
Neither the Company nor the Guarantor shall consolidate with or merge into any other Person or convey, transfer or lease all or substantially all its properties and assets in any one transaction or series of transactions, and neither the Company nor the Guarantor shall permit any Person to consolidate with or merge into the Company or the Guarantor or convey, transfer or lease all or substantially all its properties and assets in any one transaction or series of transactions to the Company or the Guarantor, unless:
(1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease all or substantially all its properties and assets in any one transaction or series of transactions, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, all or substantially all the properties and assets of the Company in any one transaction or series of transactions shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed.
(2) in case the Guarantor shall consolidate with or merge into another Person or convey, transfer or lease all or substantially all its properties and assets in any one transaction or series of transactions, the Person formed by such consolidation or into which the Guarantor is merged or the Person which acquires by conveyance or transfer, or which leases, all or substantially all the properties and assets of the Guarantor in any one transaction or series of transactions shall be a corporation, partnership or trust, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all obligations under the Guarantees and the performance or observance of every covenant of this Indenture on the part of the Guarantor to be performed or observed;
(3) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company, the Guarantor or any Subsidiary as a result of such transaction as having been incurred by the Company, the Guarantor or such Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing;
(4) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company or the Guarantor, as the case may be, would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company, the
Guarantor or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities or the Guarantees, as the case may be, equally and ratably with (or prior to) all indebtedness secured thereby; and
(5) the Company or the Guarantor, as the case may be, has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
* * *
2. All provisions of this Second Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented by this Second Supplemental Indenture, shall be read, taken and construed as one and the same instrument.
3. The Trustee accepts the trusts created by the Indenture, as supplemented by this Second Supplement Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as supplemented by this Second Supplemental Indenture, set forth, and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Second Supplemental Indenture or the due execution hereof by the Company or the Guarantor or for or in respect of the recitals contained herein, all of which recitals are made by the Company and the Guarantor solely. In general, each and every term and condition contained in Article VI of the Indenture shall apply to this Second Supplemental Indenture with the same force and effect as if the same were herein set forth in full, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Second Supplemental Indenture.
4. The amendments to the Indenture made by Section 1 hereof shall have effect with respect to the Securities of all series created under the Indenture after the date hereof.
5. All capitalized terms used and not defined herein shall have the respective meanings assigned to them in the Indenture.
6. This Second Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date first above written.
SPRINT CAPITAL CORPORATION
By /s/ Tom Gerke
Name: Thomas A. Gerke
Title: Vice President
[Corporate Seal]
Attest:
/s/ Michael T. Hyde
Name: Michael T. Hyde
Title: Assistant Secretary
|
SPRINT CORPORATION
By /s/ Tom Gerke
Name: Thomas A. Gerke
Title: Vice President
[Corporate Seal]
Attest:
/s/ Michael T. Hyde
Name: Michael T. Hyde
Title: Assistant Secretary
|
BANK ONE, N.A., as Trustee
By /s/ David B. Knox
Name: David B. Knox
Title: Authorized Signer
[Corporate Seal]
Attest:
/s/ John J. Rothrock
Name: John J. Rothrock
Title: Authorized Signer
|
STATE OF KANSAS )
) SS.:
COUNTY OF JOHNSON )
|
On the 24th day of October, 2001, before me personally came Thomas A. Gerke, to me known, who, being by me duly sworn, did depose and say that he is Vice President of Sprint Capital Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority.
/s/ Johanna Dickman My Commission Expires: Feb. 7, 2005 |
STATE OF KANSAS )
) SS.:
COUNTY OF JOHNSON )
|
On the 24th day of October, 2001, before me personally came Thomas A. Gerke, to me known, who, being by me duly sworn, did depose and say that he is Vice President of Sprint Corporation, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority.
/s/ Johanna Dickman My Commission Expires: Feb. 7, 2005 |
STATE OF OHIO )
) SS.:
COUNTY OF FRANKLIN )
|
On the 25th day of October, 2001, before me personally came David B. Knox, to me known, who, being by me duly sworn, did depose and say that he is an Authorized Signer of Bank One, N.A., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation; and that he signed his name thereto by like authority.
/s/ Donna J. Parisi My Commission Expires: Feb. 28, 2005 |