DELAWARE
(State or other jurisdiction of incorporation or organization)
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1-33409
(Commission
File Number)
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20-0836269
(I.R.S. Employer
Identification No.)
|
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12920 SE 38th Street
Bellevue,
Washington
(Address of principal executive offices)
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98006-1350
(Zip Code)
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Title of each class
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Trading Symbol
|
Name of each exchange on which registered
|
||
Common Stock, par value $0.00001 per share
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TMUS
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The Nasdaq Stock Market LLC
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Item 8.01.
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Other Events.
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●
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the historical audited condensed consolidated financial statements of T-Mobile as of and for the year ended December 31, 2020, included in
T-Mobile’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2021;
|
●
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the separate historical unaudited consolidated financial statements of Sprint as of and for the nine months ended December 31, 2019, included in
Sprint’s Quarterly Report on Form 10-Q filed with the SEC on January 27, 2020; and
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|
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●
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the separate historical audited consolidated financial statements of Sprint as of and for the year ended March 31, 2020, included in the Current
Report on Form 8-K filed by T-Mobile US with the SEC on May 18, 2020.
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Item 9.01.
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Financial Statements and Exhibits.
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Exhibit No.
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Description
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Unaudited pro forma condensed combined statement of operations of T-Mobile for the year ended December 31, 2020 and the notes thereto.
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||
104
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Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).
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T-MOBILE US, INC.
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||
March 16, 2021
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By:
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/s/ Peter Osvaldik
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Name:
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Peter Osvaldik
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Title:
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Executive Vice President and
Chief Financial Officer
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Historical
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Pro Forma
Consolidated
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|||||||||||||||||||||||||||||||||||
T-Mobile
|
Sprint Corporation
|
|||||||||||||||||||||||||||||||||||
Twelve Months Ended
December 31,
2020
|
Three Months Ended
March 31,
2020
|
Reclassification
Adjustments
|
Financing
Adjustments
|
Proforma
Adjustments
|
Year Ended
December 31,
2020
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|||||||||||||||||||||||||||||||
Revenues
|
||||||||||||||||||||||||||||||||||||
Total service revenues
|
50,395
|
5,352
|
(28)
|
|
3(a)
|
|
-
|
(92)
|
|
4(a)
|
|
54,801
|
||||||||||||||||||||||||
(826)
|
|
4(g)
|
|
|||||||||||||||||||||||||||||||||
Equipment revenues
|
17,312
|
-
|
2,452
|
3(b)
|
|
-
|
(25)
|
|
4(b)
|
|
19,054
|
|||||||||||||||||||||||||
(506)
|
|
4(g)
|
|
|||||||||||||||||||||||||||||||||
(160)
|
|
4(h)
|
|
|||||||||||||||||||||||||||||||||
(19)
|
|
4(a)
|
|
|||||||||||||||||||||||||||||||||
Equipment sales
|
-
|
1,215
|
(1,215)
|
|
3(b)
|
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Equipment rentals
|
-
|
1,237
|
(1,237)
|
|
3(b)
|
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Other revenues
|
690
|
-
|
28
|
3(a)
|
|
-
|
24
|
4(b)
|
|
742
|
||||||||||||||||||||||||||
Total Revenues
|
68,397
|
7,804
|
-
|
-
|
(1,604)
|
|
74,597
|
|||||||||||||||||||||||||||||
Operating Expenses
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||
Cost of services, exclusive of depreciation and amortization shown separately below
|
11,878
|
1,649
|
46
|
3(d)
|
|
-
|
(31)
|
|
4(g)
|
|
13,439
|
|||||||||||||||||||||||||
29
|
3(f)
|
|
(54)
|
|
4(k)
|
|
||||||||||||||||||||||||||||||
|
(78)
|
|
4(m)
|
|
||||||||||||||||||||||||||||||||
Cost of equipment rentals (exclusive of depreciation below)
|
-
|
150
|
(150)
|
|
3(c)
|
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Cost of equipment sales, exclusive of depreciation and amortization shown separately below
|
16,388
|
1,418
|
-
|
-
|
(519)
|
|
4(g)
|
|
17,117
|
|||||||||||||||||||||||||||
(160)
|
|
4(h)
|
|
|||||||||||||||||||||||||||||||||
(10)
|
|
4(l)
|
|
|||||||||||||||||||||||||||||||||
Selling, general and administrative
|
18,926
|
2,021
|
4
|
3(d)
|
|
-
|
(199)
|
|
4(c)
|
|
20,400
|
|||||||||||||||||||||||||
3
|
3(f)
|
|
(54)
|
|
4(b)
|
|
||||||||||||||||||||||||||||||
(300)
|
|
4(g)
|
|
|||||||||||||||||||||||||||||||||
(1)
|
|
4(m)
|
|
|||||||||||||||||||||||||||||||||
Depreciation and amortization
|
14,151
|
-
|
2,493
|
3(c)
|
|
-
|
(452)
|
|
4(d)
|
|
16,178
|
|||||||||||||||||||||||||
(32)
|
|
3(f)
|
|
33
|
4(k)
|
|
||||||||||||||||||||||||||||||
(15)
|
|
4(l)
|
|
|||||||||||||||||||||||||||||||||
Depreciation - network and other
|
-
|
1,160
|
(1,160)
|
|
3(c)
|
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Depreciation - equipment rentals
|
-
|
1,070
|
(1,070)
|
|
3(c)
|
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Amortization
|
-
|
113
|
(113)
|
|
3(c)
|
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Goodwill impairment
|
418
|
-
|
-
|
-
|
-
|
418
|
||||||||||||||||||||||||||||||
Other, net
|
-
|
50
|
(50)
|
|
3(d)
|
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
Total operating expense
|
61,761
|
7,631
|
-
|
-
|
(1,840)
|
|
67,552
|
|||||||||||||||||||||||||||||
Operating income
|
6,636
|
173
|
-
|
-
|
236
|
7,045
|
||||||||||||||||||||||||||||||
Other income (expense)
|
||||||||||||||||||||||||||||||||||||
Interest expense
|
(2,483)
|
|
(590)
|
|
-
|
(215)
|
|
4(f)
|
|
34
|
4(e)
|
|
(3,271)
|
|
||||||||||||||||||||||
(17)
|
|
4(k)
|
|
|||||||||||||||||||||||||||||||||
Interest expense to affiliates
|
(247)
|
-
|
|
-
|
63
|
4(f)
|
|
-
|
(184)
|
|
||||||||||||||||||||||||||
Interest income
|
29
|
-
|
14
|
3(e)
|
|
-
|
-
|
43
|
||||||||||||||||||||||||||||
Other expense, net
|
(405)
|
5
|
|
(14)
|
|
3(e)
|
|
-
|
-
|
(414)
|
|
|||||||||||||||||||||||||
Total other expense, net
|
(3,106)
|
|
(585)
|
|
-
|
(152)
|
|
17
|
(3,826)
|
|
||||||||||||||||||||||||||
Income (loss) before income taxes
|
3,530
|
|
(412)
|
-
|
(152)
|
|
253
|
3,219
|
||||||||||||||||||||||||||||
Income tax benefit (expense)
|
(786)
|
579
|
|
-
|
33
|
4(i)
|
|
(55)
|
|
4(i)
|
|
(229)
|
|
|||||||||||||||||||||||
Net Income (loss) from continuing operations
|
2,744
|
167
|
-
|
(119)
|
|
198
|
2,990
|
|||||||||||||||||||||||||||||
Less: Net loss (income) attributable to noncontrolling interest
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||
Net income (loss)
|
2,744
|
167
|
-
|
(119)
|
|
198
|
2,990
|
|||||||||||||||||||||||||||||
Earnings per share
|
||||||||||||||||||||||||||||||||||||
Basic
|
2.40
|
0.04
|
2.42
|
|||||||||||||||||||||||||||||||||
Diluted
|
2.37
|
0.04
|
2.39
|
|||||||||||||||||||||||||||||||||
Weighted-average shares outstanding
|
||||||||||||||||||||||||||||||||||||
Basic
|
1,144,206,326
|
4,102,000,000
|
*
|
1,237,025,580
|
||||||||||||||||||||||||||||||||
Diluted
|
1,154,749,428
|
4,102,000,000
|
*
|
1,249,266,006
|
*
|
Represents weighted-average shares outstanding for the twelve-months ended March 31, 2020 as presented in Sprint's audited
consolidated financial statements contained in Exhibit 99.1 to Parent's Current Report on Form 8-K filed on May 18, 2020.
|
Note 1. |
Basis of Presentation
|
|
● |
the historical audited condensed consolidated financial statements of T-Mobile as of and for the year ended December 31, 2020 included in Parent’s Annual Report on Form
10-K filed with the SEC on February 23, 2021;
|
|
● |
the separate historical unaudited consolidated financial statements of Sprint as of and for the nine months ended December 31, 2019, included in Sprint’s Quarterly
Report on Form 10-Q filed with the SEC on January 27, 2020; and
|
|
● |
the separate historical audited consolidated financial statements of Sprint as of and for the year ended March 31, 2020, included in the Current Report on Form 8-K
filed with the SEC by Parent on May 18, 2020.
|
Note 2.
|
Significant Accounting Policies
|
Note 3.
|
Reclassification Adjustments
|
|
(a) |
To reclassify $28 million of commissions earned from consigned inventory agreements to other revenues for the year ended December 31, 2020.
|
|
(b) |
To reclassify $1,237 million and $1,215 million of equipment rentals and equipment sales, respectively, to equipment revenues for the year ended December 31, 2020.
|
|
(c) |
To reclassify $150 million of cost of equipment rentals, $1,160 million of
depreciation – network and other, $1,070 million of depreciation – equipment rentals, and $113 million of amortization to depreciation and amortization for
the year ended December 31, 2020.
|
|
(d) |
To reclassify $50 million of other, net of which $46 million was reclassified to
cost of services and $4 million was reclassified to selling, general and administrative for the year ended December 31, 2020.
|
|
(e) |
To reclassify $14 million of other income to interest income for the year ended December 31, 2020.
|
|
(f) |
To reclassify $32 million of impairment charges from depreciation and amortization of which to $29 million was reclassified to cost of services and $3 million was
reclassified to selling, general, and administrative for the year ended December 31, 2020.
|
Note 4.
|
Notes to the Unaudited Pro Forma Condensed Combined Statement of Operations
|
|
(a) |
Reflects a reduction in revenues due to the fair value adjustment of deferred revenues and costs recognized in the historical financial statements of Sprint. As a
result, amortization associated with these items have been eliminated.
|
|
(b) |
This adjustment represents the elimination of historical amortization related to certain contract assets written off as part of purchase accounting as they had no fair
value. This adjustment is partially offset by the capitalization of incremental costs to acquire a contract upon adoption of ASC 340. As T-Mobile’s amortization period for these capitalized costs is generally shorter than Sprint’s
amortization period, this adjustment reflects an acceleration of expenses associated with costs to acquire a contract.
|
|
(c) |
Reflects the adjustments to (i) reverse non-recurring transaction costs, which were recorded in T-Mobile and Sprint’s selling, general and administrative expenses, and
(ii) reflect stock-based compensation expense for the post-combination portion of Sprint’s equity awards assumed by T-Mobile. The transaction costs reflected in the historical statements of operations and the adjustment to stock-based
compensation expense are as follows:
|
Pro Forma Year Ended
December 31, 2020
|
||||
(in millions)
|
||||
Reversal of T-Mobile transaction costs
|
$
|
(202)
|
|
|
Reversal of Sprint transaction costs
|
(19)
|
|
||
Adjustment to stock-based compensation expense from equity-based awards
|
22
|
|||
Adjustment for T-Mobile performance-based restricted stock unit awards expense
|
-
|
|||
Pro forma adjustments to selling, general and administrative expense
|
$
|
(199)
|
|
|
(d) |
Represents the adjustments to record (i) the elimination of historical depreciation expense and recognition of new depreciation expense based on the fair value of
property and equipment and (ii) the elimination of historical amortization expense and recognition of new amortization expense related to the identifiable intangible assets calculated on a straight-line basis, except for customer
relationships, which is calculated using the sum-of-the-years’ digits method. The amortization expense for customer relationships, which is not calculated on a straight-line basis, for the 5 years post-merger are $688 million for 2020, $636
million for 2021, $592 million for 2022, $538 million for 2023, and $485 million for 2024. The depreciation of property and equipment is based on the estimated remaining useful lives of the assets and is calculated on a straight-line basis.
The amortization of intangible assets is based on the periods over which the economic benefits of the intangible assets are expected to be realized.
|
Pro Forma Year Ended
December 31, 2020
|
||||
(in millions)
|
||||
Reversal of Sprint’s historical property and equipment depreciation
|
$
|
(2,230)
|
|
|
Depreciation of purchased property and equipment assets
|
1,984
|
|||
Reversal of Sprint’s historical intangible asset amortization
|
(1,098)
|
|
||
Amortization of purchased identifiable intangible assets
|
892
|
|||
Pro forma adjustments to depreciation and amortization
|
$
|
(452)
|
|
|
(e) |
Reflects the adjustment to interest expense to accrete the interest related to the fair value of Sprint’s debt assumed by T-Mobile.
|
|
(f) |
Reflects the adjustments to (i) reverse interest expense associated with Sprint Debt Repayments, T-Mobile Debt Repayments, and T-Mobile Maturity Amendments, (ii)
recognition of new interest expense associated with the new facilities, and (iii) recognition of new interest expense associated with T-Mobile Maturity Amendments.
|
Pro Forma Year Ended
December 31, 2020
|
||||
(in millions)
|
||||
Elimination of historical interest expense related to repayment of T-Mobile’s debt and T-Mobile’s modified notes
|
$
|
178
|
||
Interest Expense related to T-Mobile’s modified notes
|
(115)
|
|
||
Financing adjustments to interest expense to affiliates
|
$
|
63
|
||
Elimination of historical interest expense related to repayment of Sprint’s debt
|
$
|
117
|
||
Interest expense related to new facilities
|
(332)
|
|
||
Financing adjustments to interest expense
|
$
|
(215)
|
|
|
(g) |
Reflects the elimination of the identified revenues and expenses of the Prepaid business, which was sold as of July 1, 2020 and is presented in discontinued operations
as of the year ended December 31, 2020.
|
|
(h) |
Reflects the adjustment to equipment revenues and cost of equipment sales for device sales to align with T-Mobile’s revenue recognition policy.
|
|
(i) |
A blended federal and state statutory tax rate of 22.0%, net of tax effects on the state valuation allowance, for the year ended December 31, 2020, has been assumed for
the pro forma adjustments. Additionally, this adjustment accounts for certain deductible and non-deductible costs associated with the BCA Transactions. The blended tax rate is not necessarily indicative of the effective tax rate of the
combined company. The effective tax rate of the combined company could be significantly different (either higher or lower) depending on post-merger activities, cash needs, the geographical mix of income, and changes in tax law.
|
|
(j) |
Represents the pro forma weighted average shares outstanding that have been calculated using the historical weighted average shares of T-Mobile common stock outstanding
combined with the additional T-Mobile equity awards issued in conjunction with the BCA Transactions. No pro forma adjustment is made to shares and awards outstanding for the nine months ending December 31, 2020 as the shares were issued on
April 1, 2020.
|
Pro Forma Basic Weighted Average Shares
|
Pro Forma Year Ended
December 31, 2020
|
|||
Historical T-Mobile weighted average shares outstanding - basic
|
863,629,270
|
|||
Shares of T-Mobile common stock issued to Sprint stockholders pursuant to the Business Combination Agreement and Letter Agreement
|
373,396,310
|
|||
Pro forma weighted average shares - basic
|
1,237,025,580
|
Pro Forma Diluted Weighted Average Shares
|
Pro Forma Year Ended
December 31, 2020
|
|||
Historical T-Mobile weighted average shares - diluted
|
1,154,749,428
|
|||
Shares of T-Mobile common stock issued to Sprint stockholders pursuant to the Business Combination Agreement and Letter Agreement
|
93,349,078
|
|||
Diluted impact of T-Mobile’s stock options and awards to replace Sprint’s stock options
|
135,000
|
|||
Diluted impact of T-Mobile’s RSUs to replace Sprint’s RSUs and PSUs
|
1,032,500
|
|||
Pro Forma weighted average shares - diluted
|
1,249,266,006
|
|
(k)
|
Reflects the adjustment for the lease-out and leaseback transaction arrangement with a tower operator to reflect the leaseback as a financing obligation with the cell
towers included in property, plant and equipment. As a result, a portion of the payments are recognized as interest expense and the tower assets are depreciated to their residual value.
|
|
(l) |
Reflects the pro forma fair value adjustment to Sprint handset inventory and resulting decrease in cost of services and depreciation expense.
|
|
(m) |
Reflects the fair value adjustment for leased spectrum arrangements that have favorable and unfavorable terms compared to current market rates resulting in a net
decrease to cost of services.
|