-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JuzF8+45UKaKjdR+E0jNQA/6OS/x3CxFfpRFJW20h1CcwKlnK9HyFqt/iFPUAuiZ uJZEdHvcDNctClHKX5pk3g== 0000101830-99-000002.txt : 19990204 0000101830-99-000002.hdr.sgml : 19990204 ACCESSION NUMBER: 0000101830-99-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990202 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPRINT CORP CENTRAL INDEX KEY: 0000101830 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 480457967 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-04721 FILM NUMBER: 99520030 BUSINESS ADDRESS: STREET 1: 2330 SHAWNEE MISSION PKWY STREET 2: P O BOX 11315 CITY: WESTWOOD STATE: KS ZIP: 66205 BUSINESS PHONE: 9136243000 MAIL ADDRESS: STREET 1: 2330 SHAWNEE MISSION PKWY STREET 2: NULL CITY: WESTWOOD STATE: KS ZIP: 66205 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TELECOMMUNICATIONS INC DATE OF NAME CHANGE: 19920316 FORMER COMPANY: FORMER CONFORMED NAME: UNITED UTILITIES INC DATE OF NAME CHANGE: 19731011 8-K 1 CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 2, 1999 SPRINT CORPORATION (Exact name of Registrant as specified in its charter) Kansas 0-4721 48-0457967 (State of Incorporation) (Commission File Number) (I.R.S. 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 (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 Fourth Quarter 1998 and Calendar Year 1998 Results Announced On February 2, 1999, Sprint Corporation ("Sprint") announced fourth quarter 1998 and calendar year 1998 results in both its FON Group and its PCS Group. Information concerning the results is contained in the news release, a copy of which is filed as Exhibit 99 to this report and is incorporated in this report by reference. Clinton Administration Recommendation Regarding Tax Treatment of Tracking Stock Issuances The Clinton administration's annual budget proposal recommends changes in the tax law which, if enacted, would affect future issuances of tracking stocks, the definition of which Sprint believes would appear to include the PCS Stock and possibly the FON Stock issued by Sprint. Such recommendation may or may not be incorporated in proposed legislation, or enacted into law, and if incorporated or enacted it is not possible to determine the form in which such legislation would be presented. Under the recommendation, upon the issuance of tracking stock (or a recapitalization of stock or securities into tracking stock), gain would be recognized in an amount equal to the excess of the fair market value of the tracked assets over their adjusted basis. A "grandfather" clause is included, which provides that the recommendation would be effective for tracking stock issued on or after the date of enactment. Therefore, the recommendation to tax the issuance of tracking stocks would not affect currently outstanding shares of PCS Stock or FON Stock or shares of PCS Stock that Sprint issues in its offering pursuant to its Registration Statement No. 333-64241. If enacted, however, the recommendation could adversely affect Sprint's ability to utilize tracking stock to raise equity capital in the future. Item 7. Financial Statements and Exhibits. (c) Exhibits 4(a) First Supplemental Indenture, dated as of January 15, 1999, to Indenture dated as of October 1, 1998, between Sprint Corporation and Bank One, N.A., as Trustee 4(b) First Supplemental Indenture, dated as of January 15, 1999, to Indenture dated as of October 1, 1998, among Sprint Capital Corporation, Sprint Corporation and Bank One, N.A., as Trustee 99. News Release Relating to Fourth Quarter 1998 and Calendar Year 1998 Results SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. SPRINT CORPORATION Date: February 2, 1999 By: /s/ Michael T. Hyde Michael T. Hyde Assistant Secretary EXHIBIT INDEX Exhibit Number Description Page 4(a) First Supplemental Indenture, dated as of January 15, 1999, to Indenture dated as of October 1, 1998, between Sprint Corporation and Bank One, N.A., as Trustee 4(b) First Supplemental Indenture, dated as of January 15, 1999, to Indenture dated as of October 1, 1998, among Sprint Capital Corporation, Sprint Corporation and Bank One, N.A., as Trustee 99. News Release Relating to Fourth Quarter 1998 and Calendar Year 1998 Results. EX-4 2 FIRST SUPP. INDEN. (SPRINT CORP. AND BANK ONE) Exhibit 4(a) SPRINT CORPORATION TO BANK ONE, N.A. Trustee _____________________ First Supplemental Indenture Dated as of January 15, 1999 ______________________ SUPPLEMENTAL TO INDENTURE Dated as of October 1, 1998 FIRST SUPPLEMENTAL INDENTURE, dated as of January 15, 1999, between SPRINT CORPORATION, a Kansas corporation (herein called the "Company"), 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 WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated as of October 1, 1998 (the "Indenture"), providing for the issuance from time to time of its 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 Indenture provided; and WHEREAS, Section 901(5) of the Indenture provides that the Company, 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, there is no Security Outstanding under the Indenture; and WHEREAS, the Company, pursuant to the foregoing authority, proposes in and by this First Supplemental Indenture to amend the Indenture in certain respects; and WHEREAS, all things necessary to make this First Supplemental Indenture a valid agreement of the Company, in accordance with its terms, have been done. AGREEMENT NOW, THEREFORE, the Company and the Trustee hereby agree as follows: 1. The Indenture is hereby amended by deleting Article VIII thereof in its entirety and inserting in lieu thereof a new Article VIII as follows: 2 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not 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 the Company shall not permit any Person to consolidate with or merge into the Company or convey, transfer or lease all or substantially all its properties and assets in any one transaction or series of transactions to the Company, 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) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Company or any Subsidiary as a result of such transaction as having been incurred by the Company 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; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Company 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. 3 Section 802. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company in any one transaction or series of transactions in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. * * * 2. All provisions of this First Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented by this First 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 First Supplement Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as supplemented by this First 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 First Supplemental Indenture or the due execution hereof by the Company or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article VI of the Indenture shall apply to this First 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 First 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, whether created before or 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 First 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. 4 IN WITNESS WHEREOF, the parties hereto have caused this First 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 CORPORATION By /s/ Don A. Jensen Name: Don A. Jensen 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/ Jeffery L. Eubank Name: Jeffery L. Eubank Title: Authorized Signer 5 STATE OF KANSAS ) ) SS.: COUNTY OF JOHNSON ) On the 28th day of January, 1999, before me personally came Don A. Jensen, 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/ Lora E. Burton My Commission Expires: 10/31/2002 STATE OF OHIO ) ) SS.: COUNTY OF FRANKLIN ) On the 29th day of January, 1999, 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/ Meletha Dawson My Commission Expires: 11-5-2003 EX-4 3 FIRST SUPP. INDEN. (SPRINT CAP. SPRINT, BANK ONE) Exhibit 4(b) SPRINT CAPITAL CORPORATION AND SPRINT CORPORATION TO BANK ONE, N.A. Trustee _____________________ First Supplemental Indenture Dated as of January 15, 1999 ______________________ SUPPLEMENTAL TO INDENTURE Dated as of October 1, 1998 FIRST SUPPLEMENTAL INDENTURE, dated as of January 15, 1999, 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 "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 Indenture provided; 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 Securities of all series created prior to the date hereof have the benefit of Article VIII as amended herein in lieu of Article VIII of the Indenture prior to the amendment thereof and consequently are not entitled to the benefit of Article VIII of the Indenture prior to the amendment thereof contained herein; and WHEREAS, the Company and the Guarantor, pursuant to the foregoing authority, propose in and by this First Supplemental Indenture to amend the Indenture in certain respects; and WHEREAS, all things necessary to make this First 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 thereof in its entirety and inserting in lieu thereof a new Article VIII as follows: 2 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 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 or 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 Company or the Guarantor, as the case may be, 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 or the Guarantor, as the case may be, 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, in the case of the Company, 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, and, in the case of the Guarantor, 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; (2) 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; (3) 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 3 (4) 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. Section 802. Successor Substituted. Upon any consolidation of the Company or the Guarantor with, or merger of the Company or the Guarantor into, any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company or the Guarantor in any one transaction or series of transactions in accordance with Section 801, the successor Person formed by such consolidation or into which the Company or the Guarantor is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or the Guarantor herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities or the Guarantees, as the case may be. * * * 2. All provisions of this First Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as supplemented by this First 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 First Supplement Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as supplemented by this First 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 First 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 First 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 First 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, whether created before or after the date hereof. 4 5. All capitalized terms used and not defined herein shall have the respective meanings assigned to them in the Indenture. 6. This First 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 First 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/ Don A. Jensen Name: Don A. Jensen Title: Vice President [Corporate Seal] Attest: /s/ Michael T. Hyde Name: Michael T. Hyde Title: Assistant Secretary SPRINT CORPORATION By /s/ Don A. Jensen Name: Don A. Jensen Title: Vice President [Corporate Seal] Attest: /s/ Michael T. Hyde Name: Michael T. Hyde Title: Assistant Secretary 5 BANK ONE, N.A., as Trustee By /s/ David B. Knox Name: David B. Knox Title: Authorized Signer [Corporate Seal] Attest: /s/ Jeffery L. Eubank Name: Jeffery L. Eubank Title: Authorized Signer 6 STATE OF KANSAS ) ) SS.: COUNTY OF JOHNSON ) On the 28th day of January, 1999, before me personally came Don A. Jensen, 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/ Lora E. Burton My Commission Expires: 10/31/2002 STATE OF KANSAS ) ) SS.: COUNTY OF JOHNSON ) On the 28th day of January, 1999, before me personally came Don A. Jensen, 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/ Lora E. Burton My Commission Expires: 10/31/2002 7 STATE OF OHIO ) ) SS.: COUNTY OF FRANKLIN ) On the 29th day of January, 1999, 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/ Meletha Dawson My Commission Expires: 11-2-2003 8 EX-99 4 NEWS RELEASE Exhibit 99 Contacts: Bill White, Sprint (O) 913-624-2226 E-mail: bill.white@mail.sprint.com Tom Murphy, Sprint PCS (O) 816-559-6703 E-mail: tmurph01@sprintspectrum.com For Immediate Release SPRINT ANNOUNCES RECORD FOURTH QUARTER, YEARLY RESULTS - -- Double Digit Long Distance Traffic and Operating Income Growth- - --U.S. Record Wireless Subscriber Increase-- KANSAS CITY, Mo., Feb. 2, 1999 - Sprint today announced record fourth quarter and yearly results in both its FON and PCS Groups. The quarterly results were driven by a nearly 10 percent gain in revenues and a more than 30 percent increase in operating income in the company's long distance division and the addition of 836,000 new PCS customers in the quarter, which is a U.S. wireless industry record. The FON Group (NYSE: FON) is comprised of Sprint's wireline telecommunications operations, including long distance, local telephone and product distribution and directory publishing businesses. It also includes activities related to the development of Sprint's -more- -2- Integrated On-demand Network (ION) and other ventures, consisting mainly of Sprint's investment in Global One. The PCS Group (NYSE: PCS) consists of Sprint's wireless personal communication services operations. Overall 1998 revenues were $17.13 billion, a 13.2 percent increase from $15.13 billion in 1997. "Hitting on all cylinders" "We produced excellent results in 1998," said William T. Esrey, Sprint's chairman and chief executive officer. "Our long distance and local telephone operations executed well and generated strong revenue and operating income increases. Sprint PCS has emerged as the nation's leading PCS provider, with its national footprint resulting in industry-record customer growth. "Sprint is hitting on all cylinders virtually across the board, and we enter 1999 stronger and better positioned than at any time in company history. We believe we have the pieces in place, along with the size and scope, necessary to offer complete integrated communications packages of services for businesses and consumers. "We possess the most advanced wireline network operating today, with the technology in place to offer Sprint ION, the industry's most innovative new service. Backed by award-winning customer service, superior marketing and unrivaled distribution channels, Sprint ION is already being sold in the high-end business market today. Later this year, we will expand Sprint ION on a selected-market basis to small businesses and consumers, a timetable well ahead of our competitors' proposed integrated service offerings. "On the wireless side, Sprint PCS has surpassed all expectations. The ability to offer an all-digital, 100 percent PCS nationwide wireless network has proven to be a hit with consumers. We will maintain an aggressive buildout schedule to meet the increasing demand for Sprint PCS services, and we will continue to be the leader in introducing cutting-edge wireless products and services to the marketplace. "With this unsurpassed portfolio of assets we are creating a new paradigm: One where a communications company not only provides a set of traditionally defined wireline and wireless services, but becomes a true ally for customers, with integrated offerings available on demand and controlled by the customer." Sprint FON Group - -- Revenues increased 7.6 percent to $4.14 billion in the fourth quarter 1998 from $3.85 billion in the fourth quarter a year ago. For the year, revenues were up 7.7 percent to $16.02 billion from $14.87 billion in 1997. - -- Operating income was $672 million in the quarter, a 7.8 percent gain from $623 million a year ago. 1998 operating income was $2.76 billion, an increase of 10.8 percent from $2.49 billion in 1997. -more- -3- - -- Earnings per share in the quarter from core long distance, local telephone and product distribution and publishing operations were $1.02 per share, up 13.3 percent from 90 cents per share in the fourth quarter 1997. For the year, core earnings per share were $4.06, a gain of 14.4 percent from $3.55 in 1997. - -- Earnings from continuing operations in the quarter were 79 cents per share, which included losses of 23 cents per share related to the development of Sprint ION and other ventures, including Global One. These results compare to 72 cents per share in the year-ago quarter, which included an 18 cents per share loss related to Global One and other ventures. - -- 1998 earnings per share from continuing operations were $3.41, which included a loss of 20 cents per share related to Sprint ION and 45 cents related to Global One and other ventures. These results compare to 1997 earnings of $3.07 per share, which included losses of one cent per share related to Sprint ION and 47 cents per share for other ventures. Long Distance Results Long distance fourth quarter operating income increased 31.8 percent to $382 million from $290 million a year ago. Operating margins rose to 14.8 percent. Operating cash flow rose 21.8 percent. Revenues increased 9.9 percent to $2.58 billion from $2.35 billion in the fourth quarter 1997. Minutes of use were up 19 percent compared to the year-ago quarter and increased more than 3 percent from the third quarter 1998. For the full year, long distance operating income grew 30.8 percent to $1.37 billion from $1.05 billion. Operating margins rose to 13.8 percent. Operating cash flow jumped 26.9 percent. Revenues increased 10.2 percent to $9.91 billion from $8.99 billion in 1997. Calling volumes increased 15 percent. "It was a very strong quarter and year for our long distance operation, with all market segments -- residential, business and wholesale - contributing to the performance," said Esrey. "In the residential marketplace, the fourth quarter capped a year of innovation and growth. The introduction of two flagship products - Sprint Sense Anytime and Sprint Sense Unlimited - powered sales and improved customer retention. Creative marketing programs and effective distribution through the Sprint Stores at RadioShack also contributed to Sprint's success in the consumer marketplace. "In the fourth quarter, Sprint secured a powerful airline mileage partnership with Northwest Airlines and its base of 4.4 million active frequent fliers. The key to winning this contract from the incumbent carrier was our ability to package long distance, Internet, paging, local and wireless into a successful offering. "We also had success in the small business market. Business Flex was successfully launched in the quarter. With its easy-to- understand pricing plan and monthly bonuses, Business Flex allows small business customers the flexibility to create their own customized bundle of communications services. By undertaking a more consultative approach with small business customers through the Business Solutions Center and Callers' Plus, churn hit an historic low in the quarter. "In the high-end segment, we enjoyed significant new contract wins, including contracts with Dow Jones & Co., Inc., Unilever, Nortel Networks and Sysco Corporation. -more- -4- "Sprint's wholesale operation had strong quarterly results driven by improved customer acquisition and strong growth in in- bound and out-bound toll-free and international calling volumes. "Based on the strength of our leading-edge network, Sprint is a leader in the delivery of data communications services. We have one of the larger revenue market shares in the packet-data segment, which is one of the fastest growing areas of the telecommunications industry. Sales of data services, which include Frame Relay, ATM and Internet backbone, grew more than 55 percent in 1998," said Esrey. Local Telephone Results Local telephone revenues grew 6.3 percent to $1.38 billion in the fourth quarter from $1.30 billion a year earlier. Operating income was $325 million, up 8.1 percent from $300 million. Access lines totaled more than 7.6 million at the end of 1998, up 5.1 percent from a year ago, which is among the fastest rates of growth in the industry. For the year, revenues increased 4.8 percent to $5.33 billion from $5.09 billion in 1997. Operating income was up 8.8 percent to $1.38 billion from $1.27 billion. "We continue to maintain our strong access line growth due in part to our presence in markets such as Las Vegas, Nev., the fastest-growing city in the United States, and in cities throughout Florida. Sales of network-based services, such as Caller ID, grew 18 percent in the quarter," said Esrey. "We positioned our local operations in 1998 to be effective competitors, improving our networks, customer service and product mix, and we have aligned the operations to better reflect the markets they serve - consumer, business and carrier. We believe this will result in long-term cost savings and will allow the local operations to more effectively market the complete portfolio of Sprint products and services in our local service territories." Product Distribution and Directory Publishing Results Revenues increased 9.1 percent to $411 million in the fourth quarter from $377 million in the fourth quarter 1997. Operating income declined 6.5 percent to $55 million from $59 million. The decline was the result of lower affiliate pricing and costs associated with the acquisition of a directory sales business. For the year, revenues grew 16.5 percent to $1.68 billion and operating income was up 1.4 percent to $231 million. Sprint ION and Other Ventures Fourth quarter results include after-tax losses of nine cents per share for Sprint ION, and for the year, Sprint ION losses were 20 cents per share, compared to one cent per share in 1997. Fourth quarter results include losses of 14 cents per share associated with Sprint's joint ventures, which are primarily Global One results, compared to 18 cents per share a year ago. For the year, losses for these ventures were 45 cents per share compared to 47 cents per share in 1997. "By the end of 1998, Global One had completed a large component of its major infrastructure project by deploying, together with Sprint, France Telecom and Deutsche -more- -5- Telekom, a state-of-the-art ATM-based network with switching centers in over 200 cities in 46 countries," said Esrey. "In addition, Global One also has had several major multi-national contract wins including Apple Computers and Renault Group." "Our strategic alliance with EarthLink has proven to be very valuable," said Esrey. "Sprint EarthLink is one of the fastest growing, most highly rated Internet services in the industry and today has more than 1 million customers." Sprint PCS Group - -- Sprint PCS added 836,000 new subscribers in the fourth quarter for a total of 1.7 million new subscribers in 1998. The fourth quarter sales figure exceeds the previous high quarter ever recorded by a United States wireless carrier. - -- Sprint PCS is the nation's largest PCS provider with 2.59 million subscribers nationwide at year-end 1998 and service in 225 metropolitan markets, including more than 4,000 cities and communities. - -- The Sprint PCS nationwide network continued aggressive growth, adding 91 metropolitan markets in the year. The Sprint PCS network covered nearly 150 million people nationwide at the end of 1998. - -- Total revenues were $437 million in the fourth quarter and $1.23 billion for the year. - -- Operating losses were $849 million for the quarter and $2.39 billion for the year, excluding a nonrecurring charge of $179 million for acquired in-process research and development related to Sprint's acquisition of the remaining interests in Sprint PCS. - -- Recurring losses per share for the quarter were $1.51 per share and $4.50 for the year. The losses include an 8 cents per share extraordinary charge related to the early extinguishment of debt. - -- Recurring operating cash flow losses were $596 million for the quarter and $1.6 billion for the year. - -- Average revenue per user was $55 in the 1998 fourth quarter. - -- Capital expenditures were $2.9 billion for 1998 reflecting the continued aggressive buildout and expansion of the company's nationwide network. "This was absolutely a breakthrough year for Sprint PCS," said Esrey. "The record subscriber growth and the tremendous expansion of our nationwide network demonstrated that our proposition of clarity, nationwide coverage and value is a winner with consumers and businesses across the country." It was also a year of important change for Sprint PCS. In November, Sprint Corporation assumed ownership and management control of Sprint PCS. "Customers and investors are already beginning to see the many benefits of this agreement," said Esrey. "Sprint is now the only carrier with nationwide PCS and long distance wireline services." With the launch of the company's D and E licensed markets, and the continued expansion of its existing markets, Sprint PCS now offers 100-percent digital, 100-percent PCS service in all of the nation's major metropolitan markets. The past year also saw the launch of the company's affiliate program, which is designed to bring Sprint PCS service to key secondary markets and extend service to major highways and -more- -6- connecting roads between affiliate markets and current and future Sprint PCS markets. Sprint PCS continued to break new ground in wireless pricing with the introduction of its all-inclusive value-packed nationwide service plans. The company's new plans feature more included minutes that can be used in every Sprint PCS market and long distance calling at no additional charge. Sprint PCS also unveiled several new phones -- the Samsung SCH-2000, featuring voice-activated dialing, and the Sprint PCS Touchpoint, a simple, easy-to-use PCS phone featuring a breakthrough, built-in mouse-like user interface and an extra- large display screen. [Editor's Note] - -- In 1998, Sprint adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Disclosures," which requires companies to disclose segment data based on how management views the business. As a result, Sprint created new reporting segments within the FON Group reflecting the activities to develop and deploy Sprint ION and other strategic ventures. Other ventures mainly include Sprint's investments in Global One, EarthLink Network, Inc. and Call-Net. In addition, long distance division results now include the operating results of Paranet. Prior periods have been restated to reflect this new reporting presentation. - -- In November 1998, after shareholder approval, Sprint formed the FON and PCS Groups and created FON and PCS tracking stock. At the same time, Sprint purchased the remaining ownership interests in Sprint PCS from Tele-Communications, Inc., Cox Communications, Inc. and Comcast Corporation in exchange for special low-vote PCS shares and warrants for additional PCS shares (the PCS Restructuring). For comparative purposes, our discussion of consolidated revenues and PCS Group results reflects pro forma recurring results assuming: a) the PCS Restructuring and the $179 million nonrecurring charge for acquired in-process research and development occurred at the beginning of 1997 and b) the PCS and FON common shares existed for all periods presented. - -- The FON Group recorded fourth quarter nonrecurring net gains of $104 million in 1998 and $71 million in 1997. These gains, which mainly consisted of sales of local exchanges and certain other equity investments, increased FON Group income from continuing operations by $62 million, or 14 cents per diluted share, in 1998 and $44 million, or 10 cents per diluted share, in 1997. For comparative purposes, our discussions exclude these nonrecurring items and assume the sales of local exchanges occurred at the beginning of 1997. In addition, beginning in July 1997, the FON Group changed its transfer pricing for certain affiliate transactions to more accurately reflect market pricing. The changes mainly affected the FON Group's local division and product distribution and directory publishing businesses; consolidated results were not affected. For comparative purposes, our discussions assume these events occurred at the beginning of 1997. -more- -7- - -- The long distance division 1997 year-to-date results include a pretax $20 million nonrecurring charge related to litigation, which reduced income from continuing operations by $13 million, or 3 cents per diluted share. For comparative purposes, the long distance division and core operations discussions exclude the impact of this nonrecurring item. Sprint Corporation FON GROUP COMBINED STATEMENTS OF INCOME (in millions, except per share data)
Quarters Ended Years Ended December 31, December 31, ------------------------------ --------------------------------- 1998(1) 1997 1998(1) 1997 ----------------------------- --------------------------------- (unaudited) Net operating revenues $ 4,141.1 $ 3,849.0 $ 16,016.9 $ 14,873.9 - -------------------------------------------------------------------------------------------------------------------- Operating expenses Costs of services and products 1,956.8 1,927.3 7,601.0 7,451.0 Selling, general and administrative 1,022.2 837.4 3,741.0 3,226.7 Depreciation and amortization 490.3 461.1 1,915.1 1,726.3 - -------------------------------------------------------------------------------------------------------------------- Total operating expenses 3,469.3 3,225.8 13,257.1 12,404.0 - -------------------------------------------------------------------------------------------------------------------- Operating income 671.8 623.2 2,759.8 2,469.9 Interest expense (90.9) (62.8) (317.8) (210.8) Equity in loss of Global One (66.0) (73.8) (186.0) (162.1) Other income, net 129.0 96.0 218.1 164.1 - -------------------------------------------------------------------------------------------------------------------- Income before income taxes 643.9 582.6 2,474.1 2,261.1 Income taxes (238.9) (225.9) (934.0) (889.5) - -------------------------------------------------------------------------------------------------------------------- Income before extraordinary items 405.0 356.7 1,540.1 1,371.6 Extraordinary items, net (0.4) - (4.8) - - -------------------------------------------------------------------------------------------------------------------- Net income 404.6 356.7 1,535.3 1,371.6 Preferred stock dividends received (declared) 0.6 (0.2) (0.2) (1.0) - -------------------------------------------------------------------------------------------------------------------- Earnings applicable to common stock $ 405.2 $ 356.5 $ 1,535.1 $ 1,370.6 ----------------------------- --------------------------------- (1) In November 1998, Sprint completed the restructuring of Sprint PCS and recapitalized Sprint common shares into two separate classes -- FON stock and PCS stock. FON stock reflects the performance of Sprint's long distance division, local division and product distribution and directory publishing businesses. It also includes activities to develop and deploy Sprint ION(sm), Integrated On-demand Network, and other strategic ventures (mainly Sprint's investment in Global One). The following information assumes the PCS restructuring occurred at the beginning of 1997 and the FON stock existed for all periods presented. PRO FORMA INFORMATION -- For comparative purposes only Diluted earnings per common share Core businesses $ 1.02 $ 0.90 $ 4.06 $ 3.55 Sprint ION (0.09) - (0.20) (0.01) Other ventures (0.14) (0.18) (0.45) (0.47) ---------------------------------------------------------------- Continuing operations 0.79 0.72 3.41 3.07 Extraordinary item - - (0.01) - Nonrecurring items (a) 0.14 0.10 0.14 0.07 ---------------------------------------------------------------- Total $ 0.93 $ 0.82 $ 3.54 $ 3.14 ---------------------------------------------------------------- Basic earnings per common share $ 0.95 $ 0.83 $ 3.60 $ 3.19 ---------------------------------------------------------------- Diluted weighted average shares outstanding 435.5 437.5 434.4 436.5 ---------------------------------------------------------------- (a) Represents fourth quarter nonrecurring net gains of $104 million in 1998 and $51 million in 1997. These gains increased FON Group income from continuing operations by $62 million ($0.14 per diluted share) in 1998 and $32 million ($0.07 per diluted share) in 1997. These gains mainly consist of sales of local exchanges and certain other equity investments.
Sprint Corporation FON GROUP SELECTED OPERATING RESULTS (in millions)
Quarters Ended Years Ended December 31, December 31, ------------------------------ --------------------------------- 1998 1997 1998 1997 ----------------------------- --------------------------------- (unaudited) Long Distance Division (1) Net operating revenues $ 2,582.1 $ 2,349.1 $ 9,910.9 $ 8,994.0 - -------------------------------------------------------------------------------------------------------------------- Operating expenses Interconnection 971.4 979.2 3,860.1 3,949.3 Operations 381.8 347.9 1,453.2 1,257.1 Selling, general and administrative 625.1 526.1 2,348.6 2,035.3 Depreciation and amortization 221.9 206.1 882.2 727.0 - -------------------------------------------------------------------------------------------------------------------- Total operating expenses 2,200.2 2,059.3 8,544.1 7,968.7 - -------------------------------------------------------------------------------------------------------------------- Operating income $ 381.9 $ 289.8 $ 1,366.8 $ 1,025.3 ----------------------------- --------------------------------- Local Division(1),(2) Net operating revenues Local service $ 619.9 $ 575.8 $ 2,423.0 $ 2,283.4 Network access 500.9 481.9 1,948.7 1,912.2 Toll service 57.7 74.3 249.9 341.2 Other 205.8 189.9 749.8 757.1 - -------------------------------------------------------------------------------------------------------------------- Net operating revenues 1,384.3 1,321.9 5,371.4 5,293.9 - -------------------------------------------------------------------------------------------------------------------- Operating expenses Costs of services and products 507.3 497.6 1,855.1 1,892.1 Selling, general and administrative 300.2 279.5 1,150.6 1,075.6 Depreciation and amortization 250.9 236.9 958.7 935.5 - -------------------------------------------------------------------------------------------------------------------- Total operating expenses 1,058.4 1,014.0 3,964.4 3,903.2 - -------------------------------------------------------------------------------------------------------------------- Operating income $ 325.9 $ 307.9 $ 1,407.0 $ 1,390.7 ----------------------------- --------------------------------- Product Distribution and Directory Publishing (1),(2) Net operating revenues $ 410.6 $ 376.5 $ 1,683.1 $ 1,454.3 ----------------------------- --------------------------------- Operating income $ 54.8 $ 58.6 $ 230.9 $ 179.9 ----------------------------- --------------------------------- Sprint ION(1) Operating expenses $ (64.7) $ (2.2) $ (143.1) $ (5.2) ----------------------------- --------------------------------- Other Ventures(1) Operating expenses $ (5.1) $ (21.7) $ (39.9) $ (83.8) ----------------------------- --------------------------------- Unallocated Corporate Costs and Intercompany Eliminations, Net Net operating revenues $ (235.9) $ (198.5) $ (948.5) $ (868.3) ----------------------------- --------------------------------- Operating income $ (21.0) $ (9.2) $ (61.9) $ (37.0) ----------------------------- --------------------------------- (1) In 1998, Sprint adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Disclosures," which requires companies to disclose segment data based on how management views the business. As a result, Sprint's new reporting segments reflect the operating results of its long distance division, local division, and product distribution and directory publishing businesses. They also include activities to develop and deploy Sprint ION(sm), Integrated On-demand Network, and other strategic ventures. Prior periods have been restated to reflect this new presentation. (2) Beginning in July 1997, the FON Group changed its transfer pricing for certain transactions between affiliates. Had these changes occurred at the beginning of 1997, local division pro forma operating income would have been $1,339.1 million on pro forma net operating revenues of $5,231.7 million. Product Distribution and Directory Publishing operating income would have been $227.7 million on net operating revenues of $1,445.1 million.
Sprint Corporation FON GROUP CONDENSED COMBINED BALANCE SHEETS (in millions)
December 31, December 31, 1998 1997 ------------------------------------------ Assets Current assets Cash and equivalents $ 432.5 $ 101.7 Accounts receivable, net 2,384.3 2,495.6 Other 1,225.3 1,182.4 - ------------------------------------------------------------------------------------------------------------------ Total current assets 4,042.1 3,779.7 - ------------------------------------------------------------------------------------------------------------------ Property, plant and equipment Long distance division 9,241.3 8,249.1 Local division 14,858.5 14,034.5 Other 1,056.2 740.0 - ------------------------------------------------------------------------------------------------------------------ Total property, plant and equipment 25,156.0 23,023.6 Accumulated depreciation (12,692.0) (11,716.8) - ------------------------------------------------------------------------------------------------------------------ Net property, plant and equipment 12,464.0 11,306.8 - ------------------------------------------------------------------------------------------------------------------ Other 3,397.7 1,405.2 - ------------------------------------------------------------------------------------------------------------------ Total $ 19,903.8 $ 16,491.7 ------------------------------------------ Liabilities and group equity Current liabilities Accounts payable and accrued interconnection costs $ 1,876.1 $ 1,755.0 Other 1,417.3 1,264.3 - ------------------------------------------------------------------------------------------------------------------ Total current liabilities 3,293.4 3,019.3 Long-term debt 5,276.8 3,748.6 Deferred income taxes and investment tax credits 828.3 767.2 Other 1,436.3 1,305.8 Group equity 9,069.0 7,650.8 - ------------------------------------------------------------------------------------------------------------------ Total $ 19,903.8 $ 16,491.7 ------------------------------------------
Sprint Corporation FON GROUP COMBINED CASH FLOW INFORMATION (in millions)
Years Ended December 31 ------------------------------- 1998 1997 ------------------------------- Operating Activities Net income $ 1,535.3 $ 1,371.6 Equity in net losses of affiliates 237.5 184.1 Depreciation and amortization 1,915.1 1,726.3 Other, net 248.4 (375.2) - ------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 3,936.3 2,906.8 - ------------------------------------------------------------------------------------------------------------------ Investing Activities Capital expenditures Long distance division (1,363.8) (1,236.5) Local division (1,374.4) (1,270.0) Sprint ION (154.3) (45.8) Other (266.7) (156.6) Investments in and advances to affiliates, net (1,305.0) (1,233.4) Other, net 192.1 (85.0) - ------------------------------------------------------------------------------------------------------------------ Net cash used by investing activities (4,272.1) (4,027.3) - ------------------------------------------------------------------------------------------------------------------ Financing Activities Increase in debt, net 1,265.4 531.5 Dividends paid (430.3) (430.0) Treasury stock purchases (276.8) (144.5) Other, net 108.3 114.6 - ------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 666.6 71.6 - ------------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and equivalents 330.8 (1,048.9) Cash and equivalents at beginning of year 101.7 1,150.6 - ------------------------------------------------------------------------------------------------------------------ Cash and equivalents at end of year $ 432.5 $ 101.7 -------------------------------
Sprint Corporation PCS GROUP COMBINED STATEMENTS OF OPERATIONS (in millions, except per share data)
Quarters Ended Years Ended December 31, December 31, ----------------------------- ----------------------------- 1998(1) 1997 1998(1) 1997 ----------------------------- ----------------------------- (unaudited) Net operating revenues $ 437.4 $ - $ 1,225.4 $ - - ------------------------------------------------------------------------------------------------------------------ Operating expenses Costs of services and products 511.3 - 1,294.2 - Selling, general and administrative 522.0 12.7 1,531.8 18.5 Depreciation and amortization 253.4 - 789.7 - In-process research and development 179.1 - 179.1 - - ------------------------------------------------------------------------------------- ---------------------------- Total operating expenses 1,465.8 12.7 3,794.8 18.5 - ------------------------------------------------------------------------------------- ---------------------------- Operating loss (1,028.4) (12.7) (2,569.4) (18.5) Interest expense (133.3) - (491.6) - Equity in loss of Sprint PCS - (249.0) - (659.6) Other partners' loss in Sprint PCS 242.7 - 1,250.9 - Other income, net 56.3 1.6 178.4 - - ------------------------------------------------------------------------------------- ---------------------------- Loss before income taxes (862.7) (260.1) (1,631.7) (678.1) Income taxes 247.4 98.3 542.1 259.0 - ------------------------------------------------------------------------------------- ---------------------------- Net loss before extraordinary item (615.3) (161.8) (1,089.6) (419.1) Extraordinary item, net (31.2) - (31.2) - - ------------------------------------------------------------------------------------------------------------------- Net loss (646.5) (161.8) (1,120.8) (419.1) Preferred stock dividends (1.5) - (1.5) - - ------------------------------------------------------------------------------------------------------------------- Loss applicable to common stock(2) $ (648.0) $ (161.8) $ (1,122.3) $ (419.1) ----------------------------- ---------------------------- (1) In November 1998, Sprint completed the restructuring of Sprint PCS and purchased the remaining ownership interests in the PCS Group from Tele-Communications, Inc., Comcast Corporation and Cox Communications, Inc. (the Cable Partners). The PCS Group includes the domestic wireless personal communication services operations of Sprint Spectrum Holding Company and PhillieCo (together, Sprint PCS) and SprintCom. The results for Sprint PCS have been consolidated in 1998, with the Cable Partners' share of losses through the restructuring date reflected as "Other partners' loss in Sprint PCS." In 1997, Sprint's investment in Sprint PCS was accounted for using the equity method. (2) In November 1998, Sprint recapitalized Sprint common shares into two separate classes -- FON stock and PCS stock. The following pro forma information assumes the PCS restructuring occurred at the beginning of 1997 and the PCS stock existed for all periods presented. PRO FORMA INFORMATION -- For comparative purposes only Net operating revenues $ 437.4 $ 147.5 $ 1,225.4 $ 258.0 ----------------------------- ---------------------------- Operating loss (a) $ (874.7) $ (651.4) $ (2,640.0) $(2,102.7) ----------------------------- ---------------------------- Loss before extraordinary item(a) $ (603.1) $ (465.5) $ (1,846.7) $(1,466.2) ----------------------------- ---------------------------- Diluted loss per share before extraordinary item(a) $ (1.43) $ (1.12) $ (4.42) $ (3.52) ----------------------------- ---------------------------- Weighted average shares outstanding 415.8 415.3 415.8 415.4 ----------------------------- ---------------------------- (a) These amounts exclude a $179 million ($0.43 per share) charge for in-process research and development acquired in the PCS restructuring.
Sprint Corporation PCS GROUP CONDENSED COMBINED BALANCE SHEETS (in millions)
December 31, December 31, 1998 (1) 1997 ---------------------------------------- Assets Current assets Cash and equivalents $ 172.7 $ - Accounts receivable, net 306.3 - Other 415.3 2.9 - -------------------------------------------------------------------------------------------------------------- Total current assets 894.3 2.9 Property, plant and equipment, net 6,534.9 187.3 Goodwill and other intangibles, net 7,337.8 544.5 Other 409.9 968.4 - -------------------------------------------------------------------------------------------------------------- Total $ 15,176.9 $ 1,703.1 ---------------------------------------- Liabilities and group equity Current liabilities Current maturities of long-term debt $ 348.3 $ - Accounts payable 371.1 17.8 Construction obligations 978.9 - Other 1,013.9 49.8 - -------------------------------------------------------------------------------------------------------------- Total current liabilities 2,712.2 67.6 Long-term debt 7,572.7 - Deferred income taxes and investment tax credits 1,013.4 249.6 Other 123.1 - Group equity 3,755.5 1,385.9 - -------------------------------------------------------------------------------------------------------------- Total $ 15,176.9 $ 1,703.1 ---------------------------------------- (1) In November 1998, Sprint completed the restructuring of Sprint PCS and purchased the remaining ownership interests in the PCS Group from Tele-Communications, Inc., Comcast Corporation and Cox Communications, Inc. The PCS Group includes the domestic wireless personal communication services operations of Sprint Spectrum Holding Company and PhillieCo (together, Sprint PCS) and SprintCom. In 1997, Sprint's investment in Sprint PCS was accounted for using the equity method.
Sprint Corporation PCS GROUP COMBINED CASH FLOW INFORMATION (in millions)
Years Ended December 31, ------------------------------- 1998 1997 ------------------------------- Operating Activities Net loss $ (1,120.8) $ (419.1) Equity in net losses of affiliates 840.2 659.6 Depreciation and amortization 120.9 - Deferred income taxes 67.5 175.7 Current tax benefit used by FON Group (460.4) (434.7) In-process research and development 179.1 - Other, net 223.4 56.0 - ------------------------------------------------------------------------------------------------------------------ Net cash provided (used) by operating activities (150.1) 37.5 - ------------------------------------------------------------------------------------------------------------------ Investing Activities Capital expenditures (1,071.9) (153.7) Investments in and loans to affiliates (93.5) (866.0) Other, net 244.3 - - ------------------------------------------------------------------------------------------------------------------ Net cash used by investing activities (921.1) (1,019.7) - ------------------------------------------------------------------------------------------------------------------ Financing Activities Increase in debt, net 125.8 - Contributions and advances from FON Group 1,052.5 982.2 Other, net 65.6 - - ------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 1,243.9 982.2 - ------------------------------------------------------------------------------------------------------------------ Increase in cash and equivalents 172.7 - Cash and equivalents at beginning of year - - - ------------------------------------------------------------------------------------------------------------------ Cash and equivalents at end of year $ 172.7 $ - -------------------------------
Sprint Corporation CONDENSED CONSOLIDATED BALANCE SHEETS (in millions)
December 31, December 31, 1998 1997 ------------------------------------------ Assets Current assets Cash and equivalents $ 605.2 $ 101.7 Accounts receivable, net 2,690.7 2,495.6 Other 1,092.0 1,175.3 - ------------------------------------------------------------------------------------------------------------------- Total current assets 4,387.9 3,772.6 Property, plant and equipment, net 18,983.0 11,494.1 Goodwill and other intangibles, net 7,693.0 938.7 Other 2,202.2 1,979.4 - ------------------------------------------------------------------------------------------------------------------- Total $ 33,266.1 $ 18,184.8 ------------------------------------------ Liabilities and shareholders' equity Current liabilities Current maturities of long-term debt $ 246.9 131.0 Accounts payable and accrued interconnection costs 2,247.3 1,772.8 Construction obligations 978.9 - Other 1,968.0 1,173.0 - ------------------------------------------------------------------------------------------------------------------- Total current liabilities 5,441.1 3,076.8 - ------------------------------------------------------------------------------------------------------------------- Long-term debt 11,942.4 3,748.6 - ------------------------------------------------------------------------------------------------------------------- Deferred income taxes and investment tax credits 1,830.3 1,016.5 - ------------------------------------------------------------------------------------------------------------------- Other 1,559.5 1,306.2 - ------------------------------------------------------------------------------------------------------------------- Common stock and other shareholders' equity Common stock Sprint Corporation - 875.7 FON stock 700.5 - PCS stock 375.4 - Class A common stock 215.6 215.6 Preferred stock 246.8 - Other shareholders' equity 10,954.5 7,945.4 - ------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 12,492.8 9,036.7 - ------------------------------------------------------------------------------------------------------------------- Total $ 33,266.1 $ 18,184.8 ------------------------------------------
Sprint Corporation CONDENSED CONSOLIDATED CASH FLOW INFORMATION (in millions)
Years Ended December 31, ------------------------------- 1998 1997 ------------------------------- Operating Activities Net income $ 414.5 $ 952.5 Equity in net losses of affiliates 1,077.7 843.7 Depreciation and amortization 2,036.0 1,726.3 In-process research and development 179.1 - Other, net 521.9 (143.5) - ------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 4,229.2 3,379.0 - ------------------------------------------------------------------------------------------------------------------ Investing Activities Capital expenditures FON Group (3,159.2) (2,708.9) PCS Group (1,071.9) (153.7) Investments in and loans to affiliates, net (750.7) (1,091.8) Other, net 436.4 (545.1) - ------------------------------------------------------------------------------------------------------------------ Net cash used by investing activities (4,545.4) (4,499.5) - ------------------------------------------------------------------------------------------------------------------ Financing Activities Increase in debt, net 1,391.2 531.5 Treasury stock purchases (315.2) (144.5) Dividends paid (430.3) (430.0) Other, net 174.0 114.6 - ------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 819.7 71.6 - ------------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and equivalents 503.5 (1,048.9) Cash and equivalents at beginning of year 101.7 1,150.6 - ------------------------------------------------------------------------------------------------------------------ Cash and equivalents at end of year $ 605.2 $ 101.7 -------------------------------
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