sprint nextel Quarterly Presentations 2005 2nd
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sprint nextel Quarterly Presentations 2005 2nd sprint nextel Quarterly Presentations 2005 2nd Presentation Transcript

  • Investor Update Second Quarter 2005 27 July 2005 © 2005 Sprint. All Rights Reserved. Sprint and the diamond logo design are trademarks of Sprint Communications Company L.P. All other trademarks are the property of their respective owners.
  • Cautionary Statement Regarding Forward-Looking Information The information highlighted in this presentation includes selected financial information and should be read in conjunction with our consolidated financial statements and notes and the Cautionary Statements Regarding Forward-Looking Information included in our press release dated July 27, 2005, which is posted on Sprint’s website at <<http://www.sprint.com/sprint/ir/fn/>>, as well as our financial statements and notes, the trends and risk factors affecting us and other information provided in our annual, quarterly and current reports, proxy statement, and other filings made with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. This presentation includes quot;forward-looking statementsquot; within the meaning of securities laws. The statements in this presentation regarding the business outlook and expected performance as well as other statements that are not historical facts are forward-looking statements. The words quot;estimate,quot; quot;project,quot; quot;forecast,quot; quot;intend,quot; quot;expect,quot; quot;believe,quot; quot;target,quot; quot;providing guidancequot; and similar expressions identify forward-looking statements, which are estimates and projections reflecting management' s judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. In addition, forward-looking statements include statements related to information about the combined company, including expected synergies resulting from the merger of Sprint and Nextel, combined operating and financial data, future technology plans and whether and when the transactions contemplated by the merger agreement will be consummated. Forward-looking statements speak only as of the date indicated. Sprint is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of any news release or unforeseen events. With respect to these forward-looking statements, Sprint has made assumptions regarding, among other things, customer and network usage, customer growth and retention, pricing, costs to acquire customers and to provide services, the timing of various events and the economic environment. This presentation contains certain non-GAAP financial measures as well as reconciliations to the most directly comparable GAAP financial measures. Because Sprint does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint does not provide reconciliations to its forward-looking measures. Definitions of these non-GAAP financial measures are available in the July 27, 2005, Second Quarter 2005 Investor Update located at <http://www.sprint.com/sprint/ir/>. Second Quarter 2005 Investor Update 2
  • Reconciliation of Non-GAAP Liquidity Measures Quarter-to-date June 30, 2005 Long Other & Consolidated Wireless Local Distance Elim inations $ 1,196 $ 625 $ 469 $ 136 $ (34) Operating income (loss) Special items (1) 60 19 1 13 27 1,256 644 470 149 (7) Adjusted operating income (loss)* Depreciation and amortization 1,036 645 278 114 (1) 2,292 $ 1,289 $ 748 $ 263 $ (8) Adjusted EBITDA* Adjust for special items (60) Other operating activities, net (2) 1,280 3,512 Cash provided by operating activities-GAAP Capital expenditures (997) Dividends paid (186) Proceeds from sales of assets 208 Other investing activities, net (3) 2,534 Free Cash Flow* Decrease in debt, net (40) Investments in debt securities, net (5) Proceeds from common stock issued 48 Other financing activities, net 11 $ 2,548 Change in cash and equivalents - GAAP Quarter-to-date June 30, 2004 Long Other & Consolidated Wireless Local Distance Elim inations $ 718 $ 418 $ 445 $ (139) $ (6) Operating income (loss) Special items (1) 82 7 2 73 - 800 425 447 (66) (6) Adjusted operating income (loss)* Depreciation and amortization 1,232 640 271 321 - 2,032 $ 1,065 $ 718 $ 255 $ (6) Adjusted EBITDA* Adjust for special items (82) Other operating activities, net (2) (54) 1,896 Cash provided by operating activities-GAAP Capital expenditures (993) Dividends paid (180) Other investing activities, net (32) 691 Free Cash Flow* Decrease in debt, net (1,090) Proceeds from common stock issued 12 Investments in debt securities, net 25 Other financing activities, net (8) $ (370) Change in cash and equivalents - GAAP See accompanying Notes to Consolidated Financial Statements. (1) Other operating activities, net includes the change in w orking capital, change in deferred income taxes, miscellaneous operating activities and non-operating (2) items in net income. Second Quarter 2005 Investor Update 3
  • Adjusted Earnings Per Share Reconciliation Quarter-to-Date Year-to-Date Periods Ended June 30, 2005 2004 2005 2004 $ 599 $ 229 $ 1,069 $ 452 Earnings Applicable to Common Stock Earnings allocated to participating securities - 6 - 6 Preferred stock dividends paid 1 1 3 3 600 236 1,072 461 GAAP Net income Special items (net of taxes) (1) Restructuring and asset impairments 20 58 20 77 Merger and integration expense 17 - 17 - MCI settlement - (9) - (9) Premium on early retirement of debt - 18 - 18 $ 637 $ 303 $ 1,109 $ 547 Adjusted Net Income $ 0.40 $ 0.16 $ 0.71 $ 0.31 GAAP diluted earnings per share Special items 0.02 0.05 0.02 0.06 (2) Adjusted Earnings Per Share $ 0.42 $ 0.21 $ 0.74 $ 0.37 See accompanying Notes to Consolidated Financial Statements. (1) (2) Earnings per share data may not add due to rounding. Second Quarter 2005 Investor Update 4
  • Record Consolidated Financial Results 2Q05 1Q05 2Q04 $7.11B $6.94B 3% $6.87B 4% Net Operating Revenues $1.26B $1.04B 21% $800M 57% Adjusted Operating Income $2.29B $2.07B 11% $2.03B 13% Adjusted EBITDA $0.42 $0.31 35% $0.21 100% Adjusted EPS $997M $659M 51% $993M - Capital Expenditures $2.53B $532M NM $691M NM Free Cash Flow Second Quarter 2005 Investor Update 5
  • Substantial Improvements in Financial Strength Year-to-date Free Cash Sprint Corp Flow of $3.1 billion $20 Net Debt reduced by $15 38% since 2Q04 (Billions) $10 Interest expense down 11% y-o-y $5 Net Debt below 1.2x $0 2Q04 4Q04 2Q05 trailing 12-mos Debt Cash on Hand Net Debt Adjusted EBITDA Second Quarter 2005 Investor Update 6
  • Improving Business Mix Revenue Contribution Adjusted EBITDA Contribution 100% 100% 20% 21% 22% 33% 35% 35% 75% 75% 24% 24% 27% 11% 12% 13% 50% 50% 56% 55% 56% 52% 25% 53% 52% 25% 0% 0% 2Q04 1Q05 2Q05 2Q04 1Q05 2Q05 Wireless LD Local Wireless LD Local Results exclude North Supply & before eliminations Expanding wireless contribution Strong growth in wireline data products Second Quarter 2005 Investor Update 7
  • Progress on Financial Priorities Focus on day-to-day operations Execute 2005 Plan Deliver the numbers Seamless merger / spin Key partnerships Profitable Growth Strategic products and investments Drive productivity Improve Margins Leverage expense initiatives Detailed synergy plans Second Quarter 2005 Investor Update 8
  • Updated 2005 Guidance Previous Guidance New Guidance Revenue Consolidated Up Low Single Digits Up 3% to 4% Wireless Up Low Double Digit Up Low Double Digit Local Down Very Low Single Digit Down Very Low Single Digit Long Distance Down Low Double Digit Down High Single Digit Adjusted EBITDA Consolidated $8.5B to $8.7B $8.7B to $8.9B Wireless $4.8B to $5.0B $4.8B to $5.0B Local $2.85B Approximately $2.9B Long Distance Upper Half of $800M to $950M Approximately $1B Sprint Capex $4.0 - $4.2B $4.0 - $4.2B Guidance excludes merger costs, US Unwired Merger costs expected to be significant in 2H05 Second Quarter 2005 Investor Update 9
  • Wireless 2Q05 Highlights Strong financial and operational results Margin expansion driven by increased revenues and solid cost management Improved customer retention Industry leading wireless data results and launch of EV-DO HSD network Second Quarter 2005 Investor Update 10
  • Wireless Financial Results 2Q05 1Q05 2Q04 $4.04B $3.87B 4% $3.61B 12% Net Operating Revenues $644M $457M 41% $425M 52% Adjusted Operating Income $1.29B $1.10B 17% $1.07B 21% Adjusted EBITDA Adjusted EBITDA as a percent 35.2% 31.1% +410 bps 33.0% +220 bps of Service Revenue* $611M $683M -11% $404M 51% Adjusted EBITDA less CAPEX * Service revenue includes direct, wholesale, affiliate and other Second Quarter 2005 Investor Update 11
  • Wireless Operating Performance 2Q05 1Q05 2Q04 26.6M 26.0M 2% 22.2M 20% Total Subscribers on Network 588K 1.31M -55% 897K -34% Total Net Subscriber Additions 2.2% 2.5% -30 bps 2.3% -10 bps Churn $62 $61 2% $62 - ARPU $1.84B $1.83B 1% $1.73B 6% Costs of Services and Products $910M $935M -3% $811M 12% Selling, General & Admin Second Quarter 2005 Investor Update 12
  • Wireless Data Leadership Wireless Data ARPU Data % of Reported ARPU nearly $6.50 10% Highest data contribution in industry 8% EV-DO being aggressively deployed 6% 2Q04 4Q04 2Q05 Second Quarter 2005 Investor Update 13
  • Long Distance 2Q05 Highlights Good performance driven by solid execution Progress on solution selling Revenue stability due to volume increases and more stable pricing Adjusted EBITDA Revenue $2,000 $300 Flat $1,750 +1 % $275 (Millions) $1,500 (Millions) $250 $1,250 $225 $1,000 $200 $750 1Q05 2Q05 1Q05 2Q05 Second Quarter 2005 Investor Update 14
  • Long Distance Financial Results 2Q05 1Q05 2Q04 $1.72B $1.72B - $1.87B -8% Net Operating Revenues $892M $882M 1% $947M -6% Business Voice $162M $183M -12% $217M -25% Consumer Voice $420M $412M 2% $438M -4% Data $178M $178M - $214M -17% Internet $149M $143M 4% ($66M) NA Adjusted Operating Income (Loss) $263M $260M 1% $255M 3% Adjusted EBITDA $193M $195M -1% $191M 1% Adjusted EBITDA less Capex Second Quarter 2005 Investor Update 15
  • Cost Management Yielding Results 1H05 benefited from aggressive cost actions CSP impacted by volume increases Access initiatives paying dividends SGA down 9% sequentially and 35% y-o-y Sales rep employee productivity increases Second Quarter 2005 Investor Update 16
  • Local 2Q05 Highlights Revenue $1,600 Strong 2nd quarter $1,400 ($Millions $1,200 Solid revenue, profit $1,000 and cash results $800 2Q04 1Q05 2Q05 Adjusted EBITDA Adjusted EBITDA $760 60% margin of 51% $735 55% Executed while (Millions) $710 50% planning local spin-off $685 45% $660 40% 2Q04 1Q05 2Q05 Adjusted EBITDA Adjusted EBITDA Margin Second Quarter 2005 Investor Update 17
  • Local Financial Results 2Q05 1Q05 2Q04 $1.48B $1.50B -1% $1.51B -2% Net Operating Revenue $470M $446M 5% $447M 5% Adjusted Operating Income $748M $723M 3% $718M 4% Adjusted EBITDA $547M $567M -4% $471M 16% Adj EBITDA less CAPEX 7.53M 7.64M -1.4% 7.78M -3.2% Access Lines 7.00B 7.55B -7% 7.85B -11% Access M OU 1.28B 1.33B -3% 1.10B 16% LD M OU Second Quarter 2005 Investor Update 18
  • Strong Data Revenue Growth DSL Special Access 590K lines in service Increased sales to wireless carriers DSL penetration increased to 11% of 2% sequential increase capable lines 10% y-o-y increase ARPU of $43 $450M annualized $300M annualized revenue stream revenue stream 16% of total revenues, up 260 bps y-o-y Second Quarter 2005 Investor Update 19
  • Bundle Strategy Gaining Traction 62% Penetration of one or more 60% strategic products increased 58% to 71% 56% 54% Strong increases in LD and 52% 2Q04 2Q05 DSL penetration 12% Strength in wireline / 8% wireless bundles, video 4% 0% 2Q04 2Q05 Second Quarter 2005 Investor Update 20
  • Local Spin-Off Update Transition teams making significant progress Finalized business model Commercial arrangements for LD & wireless near final Significant work on the new brand Preparing state regulatory applications Management announcements underway Second Quarter 2005 Investor Update 21
  • Sprint Nextel Merger Process In Final Stages Pending Accomplishments Regulatory approval Brand announced Shareholder approvals Set expectations Management team Execute the plan Significant work on Communicate our expected synergies progress Planning for launch Deliver the results IRS ruling on spin Second Quarter 2005 Investor Update 22
  • Q&A Gary Forsee, Chairman and CEO Len Lauer, President and COO Bob Dellinger, Executive Vice President and CFO Mike Fuller, President Local Kurt Fawkes, Vice President Investor Relations Second Quarter 2005 Investor Update 23