UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
----------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(913) 624-3000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
COMMON SHARES OUTSTANDING AT MARCH 31, 1998:
COMMON STOCK 344,303,011
CLASS A COMMON STOCK 86,236,036
<PAGE>
SPRINT CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
Page
Number
-------------------------
Part I - Financial Information
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Comprehensive Income 3
Consolidated Statements of Cash Flows 4
Consolidated Statement of Common Stock and Other Shareholders'
Equity 5
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
Exhibits
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
CONSOLIDATED BALANCE SHEETS SPRINT CORPORATION
(in millions, except per share data)
- -------------------------------------------------------------------------- -------------------- --- ----------------
March 31, December 31,
1998 1997
- -------------------------------------------------------------------------- -------------------- --- ----------------
(unaudited)
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 158.2 $ 101.7
Accounts receivable, net of allowance for doubtful accounts
of $165.6 and $146.7 2,519.1 2,495.6
Inventories 378.5 352.0
Notes and other receivables 555.2 464.6
Other 406.7 358.7
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Total current assets 4,017.7 3,772.6
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Investments in equity securities 397.7 303.0
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Property, plant and equipment
Long distance communications services 8,403.7 8,245.5
Local communications services 14,241.7 14,011.5
Other 1,157.8 953.9
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Total property, plant and equipment 23,803.2 23,210.9
Less accumulated depreciation 12,024.0 11,716.8
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Net property, plant and equipment 11,779.2 11,494.1
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Investments in and advances to affiliates 1,291.8 1,427.5
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Other assets 1,270.4 1,187.6
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Total $ 18,756.8 $ 18,184.8
---- --------------- ---- ---------------
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 127.8 $ 131.0
Accounts payable 1,040.1 1,100.1
Accrued interconnection costs 711.9 672.7
Accrued taxes 302.2 270.7
Advance billings 204.9 202.9
Other 801.0 699.4
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Total current liabilities 3,187.9 3,076.8
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Long-term debt 4,075.7 3,748.6
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Deferred credits and other liabilities
Deferred income taxes and investment tax credits 925.0 1,016.5
Postretirement and other benefit obligations 1,061.2 947.4
Other 341.3 358.8
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Total deferred credits and other liabilities 2,327.5 2,322.7
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Redeemable preferred stock 9.5 11.5
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Common stock and other shareholders' equity
Common stock, par value $2.50 per share, 1,000.0 shares authorized,
350.3 shares issued, and 344.3 and 343.8 shares outstanding 875.7 875.7
Class A common stock, par value $2.50 per share, 500.0 shares
authorized, 86.2 shares issued and outstanding 215.6 215.6
Capital in excess of par or stated value 4,469.8 4,457.7
Retained earnings 3,796.0 3,693.1
Treasury stock, at cost, 6.0 and 6.5 shares (296.9) (292.9)
Accumulated other comprehensive income 120.2 107.9
Other (24.2) (31.9)
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Total common stock and other shareholders' equity 9,156.2 9,025.2
- -------------------------------------------------------------------------- ---- --------------- ---- ---------------
Total $ 18,756.8 $ 18,184.8
---- --------------- ---- ---------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) SPRINT CORPORATION
(in millions, except per share data)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Three Months Ended March 31, 1998 1997
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
<S> <C> <C>
Net Operating Revenues $ 3,910.9 $ 3,578.5
Operating Expenses
Costs of services and products 1,884.3 1,794.9
Selling, general and administrative 891.1 768.0
Depreciation and amortization 467.3 410.9
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total operating expenses 3,242.7 2,973.8
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Operating Income 668.2 604.7
Interest expense (66.7) (44.8)
Equity in loss of Global One (45.2) (23.7)
Equity in loss of Sprint PCS and its affiliates (209.7) (85.9)
Other income, net 21.2 34.9
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Income before income taxes and
extraordinary item 367.8 485.2
Income taxes (151.3) (195.2)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Income before extraordinary item 216.5 290.0
Extraordinary item, net (4.4) -
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Net Income 212.1 290.0
Preferred stock dividends (0.3) (0.3)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Earnings applicable to common stock $ 211.8 $ 289.7
--- ------------- -- -------------
Basic Earnings per Common Share
Income before extraordinary item $ 0.50 $ 0.67
Extraordinary item (0.01) -
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total $ 0.49 $ 0.67
--- ------------- -- -------------
Basic weighted average common shares 430.1 430.5
--- ------------- -- -------------
Diluted Earnings per Common Share
Income before extraordinary item $ 0.49 $ 0.67
Extraordinary item (0.01) -
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total $ 0.48 $ 0.67
--- ------------- -- -------------
Diluted weighted average common shares 438.7 435.8
--- ------------- -- -------------
Dividends per Common Share $ 0.25 $ 0.25
--- ------------- -- -------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) SPRINT CORPORATION
(in millions)
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Three Months Ended March 31, 1998 1997
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
<S> <C> <C>
Net Income $ 212.1 $ 290.0
--- ------------- -- -------------
Other Comprehensive Income
Unrealized holding gains (losses) on securities 18.5 (9.9)
Tax (expense) benefit (6.7) 3.6
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Net unrealized holding gains (losses) on securities 11.8 (6.3)
Foreign currency translation adjustments 0.5 6.3
- ------------------------------------------------ ------------- -- ------------- --- ------------- -- -------------
Total other comprehensive income 12.3 -
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Comprehensive Income $ 224.4 $ 290.0
--- ------------- -- -------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SPRINT CORPORATION
(in millions)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Three Months Ended March 31, 1998 1997
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Operating Activities
<S> <C> <C>
Net income $ 212.1 $ 290.0
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in net losses of affiliates 255.5 107.0
Depreciation and amortization 467.3 410.9
Deferred income taxes and investment tax credits (101.9) 41.8
Changes in assets and liabilities:
Accounts receivable, net (23.5) (92.6)
Inventories and other current assets (60.1) 26.0
Accounts payable and other current liabilities 114.5 (75.8)
Noncurrent assets and liabilities, net (11.3) (6.3)
Other, net 0.8 (0.9)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash provided by operating activities 853.4 700.1
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Investing Activities
Capital expenditures (652.9) (574.4)
Purchase of PCS licenses - (25.2)
Investments in and advances to affiliates, net (212.6) 15.7
Other, net 4.3 4.4
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash used by investing activities (861.2) (579.5)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Financing Activities
Payments on long-term debt (130.3) (37.5)
Proceeds from long-term debt 289.5 -
Change in short-term borrowings - (100.0)
Dividends paid (97.7) (99.8)
Treasury stock purchased (48.8) (22.7)
Other, net 51.6 49.0
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Net cash provided (used) by financing activities 64.3 (211.0)
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Increase (Decrease) in Cash and Equivalents 56.5 (90.4)
Cash and Equivalents at Beginning of Period 101.7 1,150.6
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Cash and Equivalents at End of Period $ 158.2 $ 1,060.2
--- ------------- -- -------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I.
Item 1.
CONSOLIDATED STATEMENT OF COMMMON STOCK AND OTHER SHAREHOLDERS' EQUITY SPRINT CORPORATION
(Unaudited)
(in millions)
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31, 1998
- -------------------------------------------------------------------------------------------------------------------
Capital
in
Excess Accumulated
Class A of Par Other
Common Common or Retained Treasury Comprehensive
Stock Stock Stated Earnings Stock Income Other Total
Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning 1998 Balance $ 875.7 $ 215.6 $ 4,457.7 $3,693.1 $ (292.9)$ 107.9 $ (31.9)$ 9,025.2
Net income - - - 212.1 - - - 212.1
Other comprehensive
income - - - - - 12.3 - 12.3
Common stock dividends - - - (86.3) - - - (86.3)
Class A common stock
dividends - - - (21.6) - - - (21.6)
Treasury stock
purchased - - - - (48.8) - - (48.8)
Treasury stock issued - - 0.5 (3.3) 39.5 - - 36.7
Other, net - - 11.6 2.0 5.3 - 7.7 26.6
- -------------------------------------------------------------------------------------------------------------------
March 1998 Balance $ 875.7 $ 215.6 $ 4,469.8 $3,796.0 $ (296.9)$ 120.2 $ (24.2) $ 9,156.2
-------------------------------------------------------------------------------------------
See accompanying Condensed Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
PART I.
Item 1.
CONDENSED NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) SPRINT CORPORATION
The information in this Form 10-Q has been prepared according to the rules and
regulations of the Securities and Exchange Commission. In management's opinion,
these consolidated interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) necessary to present fairly
Sprint Corporation's consolidated financial position, results of operations and
cash flows.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared according to generally accepted accounting
principles (GAAP) have been condensed or omitted. These consolidated financial
statements should be read in connection with Sprint Corporation's 1997 annual
report on Form 10-K. Operating results for first quarter 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
1. Basis of Consolidation
The consolidated financial statements include the accounts of Sprint Corporation
and its wholly owned and majority-owned subsidiaries (Sprint). Investments in
entities in which Sprint exercises significant influence, but does not control,
are accounted for using the equity method (see Note 2).
The consolidated financial statements are prepared according to GAAP. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
Certain prior-year amounts have been reclassified to conform to the
current-period presentation. These reclassifications had no effect on the
results of operations or shareholders' equity as previously reported.
2. Investments
Investments accounted for using the equity method mainly consist of Sprint's
investments in Sprint Spectrum Holding Company, L.P. (Sprint PCS) and Global
One.
Sprint is a 40% partner in Sprint PCS, a partnership with Tele-Communications,
Inc., Comcast Corporation and Cox Communications, Inc. Sprint PCS is building
the nation's first single-technology, state-of-the-art wireless network to
provide personal communication services (PCS) across the United States.
Sprint is also a partner in Global One, a joint venture with Deutsche Telekom AG
(DT) and France Telecom (FT) formed to provide seamless global
telecommunications services to business, residential and carrier markets
worldwide. Sprint is a one-third partner in Global One's operating group serving
Europe (excluding France and Germany) and a 50% partner in Global One's
operating group for the worldwide activities outside the United States and
Europe.
<PAGE>
Combined, summarized financial information (100% basis) of all entities
accounted for using the equity method was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
(in millions)
Results of operations
<S> <C> <C>
Net operating revenues $ 680.7 $ 432.2
--- ------------- -- -------------
Operating loss $ (576.9) $ (318.4)
--- ------------- -- -------------
Net loss $ (739.7) $ (341.2)
--- ------------- -- -------------
Sprint's net losses in affiliates $ (255.5) $ (106.4)
--- ------------- -- -------------
</TABLE>
3. Income Taxes
The differences that caused the effective income tax rate to vary from the
statutory federal rate of 35% were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
- ------------------------------------------------------------------------------- --- ------------- -- -------------
(in millions)
<S> <C> <C>
Income tax expense at the statutory rate $ 128.7 $ 169.8
Less: Investment tax credits included in income (0.6) (1.1)
--- ------------- -- -------------
Expected federal income taxes after investment tax credits 128.1 168.7
Effect of:
State income taxes, net of federal income tax effect 11.5 18.1
Equity in losses of foreign joint ventures 9.7 5.3
Other, net 2.0 3.1
- ------------------------------------------------------------------------------- --- ------------- -- -------------
Income tax expense, including investment tax credits $ 151.3 $ 195.2
--- ------------- -- -------------
Effective income tax rate 41.1% 40.2%
--- ------------- -- -------------
</TABLE>
4. Litigation, Claims and Assessments
In December 1996, an arbitration panel entered a $61 million award in favor of
Network 2000 Communications Corporation (Network 2000) on its breach of contract
claim against Sprint. The arbitrators directed Sprint to pay one-half of this
award to Network 2000. The remainder was directed to be paid to the Missouri
state court in which a proposed class action by Network 2000's independent
marketing representatives against Network 2000 and Sprint is pending.
In June 1997, Sprint recorded an additional $20 million charge related to the
settlement of both the class action lawsuit against Sprint and Network 2000 and
the related claims of Network 2000 against Sprint. The court has preliminarily
approved the class action settlement and final approval is expected; however, a
number of potential class members have decided not to participate in the
settlement.
Various other suits arising in the ordinary course of business are pending
against Sprint. Management cannot predict the final outcome of these actions but
believes they will not result in a material effect on Sprint's consolidated
financial statements.
<PAGE>
5. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--- ------------------------------
1998 1997
- ------------------------------------------------------------------------------- --- ------------- -- -------------
(in millions)
Cash paid for:
<S> <C> <C>
Interest (net of amounts capitalized) $ 57.4 $ 40.6
--- ------------- -- -------------
Income taxes $ 200.3 $ 8.2
--- ------------- -- -------------
Noncash activity:
Capital lease obligation $ 80.9 $ -
--- ------------- -- -------------
</TABLE>
6. Earnings per Share
Dilutive securities, such as options, included in the calculation of diluted
weighted average common shares were 8.6 and 5.3 million shares in first quarter
1998 and 1997, respectively.
7. Comprehensive Income
In 1998, Sprint adopted SFAS 130, "Reporting Comprehensive Income." SFAS 130
establishes standards for the reporting and display of comprehensive income and
its components. Comprehensive income includes all changes in equity during a
period except those due to owner investments and distributions. It includes
items such as foreign currency translation adjustments, and unrealized gains and
losses on available-for-sale securities. This standard does not change the
display or components of present-day net income; rather, comprehensive income is
displayed as an additional component in the Consolidated Balance Sheets,
Consolidated Statements of Income, and Consolidated Statement of Common Stock
and Other Shareholders' Equity.
8. Subsequent Events
In April 1998, Sprint's Board of Directors declared common and Class A common
stock dividends of $0.25 per share payable June 30, 1998.
In April 1998, Sprint signed an agreement to sell approximately 79,000
residential and business access lines in rural Illinois. Sprint expects to
complete the sale of these properties, which is subject to regulatory approval,
in late 1998.
<PAGE>
PART I.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF SPRINT CORPORATION
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Sprint Corporation, with its subsidiaries, (Sprint) includes certain estimates,
projections and other forward-looking statements in its reports, in
presentations to analysts and others, and in other publicly available material.
Future performance cannot be ensured. Actual results may differ materially from
those in the forward-looking statements. Factors that could cause actual results
to differ materially from estimates or projections contained in the
forward-looking statements include:
- the effects of vigorous competition in the markets in which Sprint
operates;
- the cost of entering new markets necessary to provide seamless
services;
- the risks related to Sprint's investments in Global One and Sprint
Spectrum Holding Company, L.P.(Sprint PCS) and other joint ventures;
- the impact of any unusual items resulting from ongoing evaluations of
Sprint's business strategies;
- requirements imposed on Sprint or latitude allowed its competitors
by the Federal Communications Commission (FCC) or state regulatory
commissions under the Telecommunications Act of 1996;
- unexpected results of litigation filed against Sprint; and
- the possibility of one or more of the markets in which Sprint competes
being impacted by changes in political, economic or other factors such
as monetary policy, legal and regulatory changes or other external
factors over which Sprint has no control.
Core Businesses
Long Distance Division
The long distance division is the nation's third-largest long distance telephone
company. It operates a nationwide, all-digital long distance communications
network using state-of-the-art fiber-optic and electronic technology. The
division provides domestic and international voice, video and data
communications services. It offers its services to the public subject to varying
levels of state and federal regulation.
Local Division
The local division consists of regulated local exchange carriers (LECs) serving
more than 7 million access lines in 19 states. It provides local exchange
services, access by telephone customers and other carriers to Sprint's local
exchange facilities, sales of telecommunications equipment, and long distance
services within specified regional calling areas, or local access transport
areas (LATAs).
Product Distribution and Directory Publishing Division
The product distribution and directory publishing businesses provide wholesale
distribution services of telecommunications products, and publish and market
white and yellow page telephone directories.
Emerging Businesses
Emerging businesses consists of consumer Internet access services mainly through
Sprint Internet Passport (sm); competitive local exchange carrier (CLEC)
services; international development activities outside the scope of Global One
(Sprint International); personal communication services (PCS) controlled by
Sprint (SprintCom); and integration, management and support services for
computer networks (Sprint Paranet).
<PAGE>
Strategic Alliances
Global One
Sprint is a partner in Global One, a joint venture with Deutsche Telekom AG (DT)
and France Telecom (FT) to provide seamless global telecommunications services
to business, residential and carrier markets worldwide. Sprint is a one-third
partner in Global One's operating group serving Europe (excluding France and
Germany) and a 50% partner in Global One's operating group for the worldwide
activities outside the United States and Europe.
DT and FT each own 10% of Sprint's voting equity through Sprint's Class A common
stock. As Class A common shareholders, they have the right in most cases to
proportionate representation on Sprint's Board of Directors. They may also
purchase additional Class A common shares from Sprint to keep their ownership
level at 10% each.
Sprint PCS
Sprint is a 40% partner in Sprint PCS, a partnership with Tele-Communications,
Inc., Comcast Corporation and Cox Communications, Inc. Sprint PCS is building
the nation's first single-technology, all-digital, state-of-the-art wireless
network to provide PCS across the United States. PCS uses digital technology,
which has sound quality superior to existing cellular technology and is less
susceptible to interference and eavesdropping. PCS also offers features such as
voice mail and Caller ID. Sprint PCS offers service in more than 149
metropolitan markets, which include more than 800 cities.
As part of an overall strategy to increase PCS coverage, Sprint directly
acquired the rights to PCS licenses covering 139 markets across the United
States. These licenses reach a total population of 70 million people. Sprint
PCS, together with its affiliates and Sprint, has licensed PCS coverage of
nearly 260 million people across the United States, Puerto Rico and the U.S.
Virgin Islands.
In January 1998, a "Deadlock Event" occurred when the partnership board failed
to approve the proposed Sprint PCS budget and business plan. If a partner refers
the issue for resolution using certain procedures and it remains unresolved,
buy/sell provisions can be triggered. This could result in Sprint either
increasing or selling its partnership interest. Discussions among the partners
about restructuring their interests in Sprint PCS are ongoing. However, there is
no certainty the discussions will result in a change to the partnership
structure.
Results Of Operations
Consolidated
Total net operating revenues for the 1998 first quarter increased 9% to $3.9
billion from $3.6 billion for the same period a year ago. Income before the
extraordinary item was $217 million ($0.50 per share) versus $290 million ($0.67
per share) for the 1997 first quarter.
Core Businesses
Sprint's core businesses generated improved 1998 first quarter net operating
revenues and operating income compared with the same 1997 period. Core results
exclude the impact from joint ventures and emerging businesses. First quarter
1998 long distance calling volumes increased 11% from the same 1997 period.
Access lines served by the local division increased 3.6% during the past 12
months. Excluding sales of exchanges in the 1997 fourth quarter, access line
growth was 5.6%.
<PAGE>
Segmental Results of Operations
Long Distance Division
<TABLE>
<CAPTION>
Selected Operating Results
----------------------------------------------------------------------
Three Months Ended
March 31, Variance
---------------------------------- -------------------------------
1998 1997 Dollar %
- -------------------------------------------- ----------------- ---------------- --- ------------- -----------------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 2,367.6 $ 2,172.4 $ 195.2 9.0%
Operating expenses
Interconnection 970.6 1,007.4 (36.8) (3.7)%
Operations 322.6 275.8 46.8 17.0%
Selling, general and administrative 544.6 471.1 73.5 15.6%
Depreciation and amortization 202.0 166.6 35.4 21.2%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 2,039.8 1,920.9 118.9 6.2%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating income $ 327.8 $ 251.5 $ 76.3 30.3%
--- ------------- -- ------------- --- -------------
Operating margin 13.8% 11.6%
--- ------------- -- -------------
</TABLE>
Net Operating Revenues
First quarter 1998 net operating revenues increased 9% from the same 1997
period. All major market segments residential, business and wholesale -
contributed to this increase. The increase mainly reflects strong minute growth
and increased data services revenue, partly offset by a more competitive pricing
environment and a change in the mix of products sold.
Residential Market - Residential market revenues reflect growth in 1998 mainly
from prepaid phone cards and long distance calling card calls made by LEC
customers. Through various agreements Sprint has with LECs, their customers use
the Sprint network when making long distance calls.
Business Market -- Business market revenues reflect increased calling volumes
for toll-free and direct-distance-dialing toll (WATS) calls made within the
United States. Growth in the small and medium business market was due to the
continuing success of the division's small business product, Fridays Free. Data
services, which includes sales of capacity on Sprint's network to Internet
service providers, showed strong growth because of continued demand and expanded
service offerings.
Wholesale Market -- The wholesale market showed strong growth in the domestic
market. This increase mainly reflects increased WATS calling volumes, partly
offset by a decline in rates due to increased competition.
Interconnection Costs
Interconnection costs consist of amounts paid to LECs, other domestic service
providers, and foreign telephone companies to complete calls made by the
division's domestic customers. These costs decreased 4% from the same 1997
period reflecting lower unit costs for both domestic and international access,
partly offset by strong minute growth. The lower domestic costs are generally
due to FCC-mandated access rate reductions while lower international costs
reflect competition in the market. Interconnection costs were 41.0% of net
operating revenues in the 1998 first quarter versus 46.4% for the same period a
year ago.
<PAGE>
Operations Expense
Operations expense mainly consists of costs related to operating and maintaining
the long distance network and costs of equipment sales. It also includes costs
of providing operator, public payphone and video teleconferencing services, as
well as telecommunications services for the hearing impaired. First quarter 1998
operations expense increased 17% from the same 1997 period. As a percentage of
net operating revenues, operations expense was 13.6% in the 1998 first quarter
and 12.7% for the same period a year ago. These increases were mostly due to
increased costs related to data services growth as well as increases in the
volume of operating leases for network equipment. In addition, costs increased
due to FCC-mandated payments to public payphone providers.
Selling, General and Administrative Expense
First quarter selling, general and administrative (SG&A) expense increased 16%
from the same 1997 period. This increase was mainly due to increased advertising
costs in 1998 to market and promote products and services. SG&A expense was
23.0% of net operating revenues in the 1998 first quarter and 21.7% for the same
period a year ago.
Depreciation and Amortization Expense
First quarter 1998 depreciation and amortization expense increased 21% from the
same 1997 period generally due to an increased asset base. Capital expenditures
were incurred mainly to enhance network reliability, meet increased demand for
data-related services and upgrade capabilities for providing new products and
services. Depreciation and amortization expense was 8.6% of net operating
revenues in the 1998 first quarter and 7.6% for the same period a year ago.
Local Division
<TABLE>
<CAPTION>
Selected Operating Results
----------------------------------------------------------------------
Three Months Ended
March 31, Variance
---------------------------------- ------------------------------
1998 1997 Dollar %
- -------------------------------------------- ----------------- ---------------- --- ------------- ----------------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 1,322.2 $ 1,304.3 $ 17.9 1.4%
Operating expenses
Costs of services and products 459.9 446.4 13.5 3.0%
Selling, general and administrative 277.9 258.2 19.7 7.6%
Depreciation and amortization 233.2 231.4 1.8 0.8%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 971.0 936.0 35.0 3.7%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating income $ 351.2 $ 368.3 $ (17.1) (4.6)%
--- ------------- -- ------------- --- -------------
Operating margin 26.6% 28.2%
--- ------------- -- -------------
</TABLE>
Beginning in July 1997, Sprint changed its transfer pricing for certain
transactions between affiliates to more accurately reflect market pricing. The
main effect of the pricing change was to reduce "Net Operating Revenues Other
Revenues." For comparative purposes, the following discussion of local division
operating results assumes these pricing changes occurred at the beginning of
1997. The first quarter 1997 operating margin would have been 26.7%.
Net Operating Revenues
Net operating revenues increased 4% in first quarter 1998 from the same 1997
period. This increase mainly reflects customer access line growth, and increased
sales of equipment and network-based services. Excluding sales of local
exchanges in fourth quarter 1997, net operating revenues increased 6% and access
line growth was 5.6%.
<PAGE>
Local Service Revenues
Local service revenues, derived from local exchange services, increased 6% (9%
excluding sales of exchanges) in the first quarter 1998 from the same 1997
period. This increase reflects strong economic growth in the division's service
areas and increases in second-line service for residential customers to meet
their lifestyle and data access needs. Local service revenues also increased
because of continued demand for network-based services such as Caller ID and
Call Waiting.
Network Access Revenues
Network access revenues, derived from interexchange long distance carriers' use
of the local network to complete calls, increased 1% (3% excluding sales of
exchanges) compared with the same 1997 period. The 1998 first quarter revenues
reflect a 6% growth (8% excluding sales of exchanges) in access minutes of use,
partly offset by FCC-mandated access rate reductions.
Toll Service Revenues
Toll service revenues are mainly derived from providing long distance services
within specified regional calling areas or LATAs. First quarter toll service
revenues declined 27% compared with the same 1997 period. The decrease reflects
extended local calling areas and increased competition in the intrastate long
distance market. The decline in toll service revenues was partly offset by
increases in the division's local and network access revenues.
Other Revenues
Other revenues are mainly derived from telecommunications equipment sales,
directory sales and listing services and billing and collection services. During
the 1998 first quarter these revenues increased 22% compared with the same 1997
period mainly due to increased equipment sales of business systems and data
networks, growth in pay phone revenues, and increased sales of Sprint's long
distance services.
Costs of Services and Products
Costs of services and products consists of costs related to operating and
maintaining the local network and costs of equipment sales. These expenses
increased 3% (5% excluding sales of exchanges) in first quarter 1998 compared
with the same period a year ago reflecting customer access line growth and
increased equipment sales. Costs of services and products was 34.8% of net
operating revenues in the 1998 first quarter and 34.9% for the same period a
year ago.
Selling, General and Administrative Expense
SG&A expense increased 8% (10% excluding sales of exchanges) in first quarter
1998. This increase was mainly due to increased customer service costs related
to access line growth and marketing costs to promote new products and services.
SG&A expense was 21.0% of net operating revenues in the first quarter 1998 and
20.3% for the same period a year ago.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 1% (3% excluding sales of
exchanges) in first quarter 1998. This increase was mainly due to plant
additions. Depreciation and amortization expense was 17.6% of net operating
revenues in the first quarter 1998 and 18.1% for the same period a year ago.
<PAGE>
Product Distribution and Directory Publishing Division
<TABLE>
<CAPTION>
Selected Operating Results
----------------------------------------------------------------------
Three Months Ended
March 31, Variance
---------------------------------- ------------------------------
1998 1997 Dollar %
- -------------------------------------------- ----------------- ---------------- --- ------------- ----------------
(in millions)
<S> <C> <C> <C> <C>
Net operating revenues $ 391.2 $ 309.7 $ 81.5 26.3%
Operating expenses
Costs of services and products 303.9 259.3 44.6 17.2%
Selling, general and administrative 25.9 21.6 4.3 19.9%
Depreciation and amortization 2.2 1.8 0.4 22.2%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Total operating expenses 332.0 282.7 49.3 17.4%
- -------------------------------------------- --- ------------- -- ------------- --- -------------
Operating income $ 59.2 $ 27.0 $ 32.2 119.3%
--- ------------- -- ------------- --- -------------
Operating margin 15.1% 8.7%
--- ------------- -- -------------
</TABLE>
Beginning in July 1997, Sprint changed its transfer pricing for certain
transactions between affiliates to more accurately reflect market pricing. Had
these pricing changes occurred at the beginning of 1997, net operating revenues
would have increased 28% to $391 million in first quarter 1998 from $306 million
in first quarter 1997. Costs of services and products would have increased 32%
to $304 million in first quarter 1998 from $231 million in first quarter 1997.
The first quarter 1997 operating margins would have been 16.8%. The growth in
revenues and costs of services and products reflects increased sales of
telecommunications equipment and distribution services to the local division.
Emerging Businesses
<TABLE>
<CAPTION>
Selected Operating Results
----------------------------------
Three Months Ended
March 31,
----------------------------------
1998 1997
- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
(in millions)
<S> <C> <C>
Net operating revenues $ 47.4 $ 2.8
--- ------------- -- -------------
Operating loss $ (60.9) $ (32.8)
--- ------------- -- -------------
</TABLE>
Revenues in 1998 increased mainly because of Sprint's September 1997 acquisition
of Paranet, Inc. Operating losses for both years largely reflect activities to
develop or enter newly competitive domestic and international markets, such as
Internet access and competitive local exchange services, and the buildout of the
SprintCom PCS markets.
Sprint acquired Houston-based Paranet, Inc., to allow Sprint to capitalize on
the accelerating demand for network management services. Sprint Paranet's
design, implementation and consultation expertise should also enable Sprint to
maintain and add to its traditional long distance revenues.
In February 1998, Sprint announced it was forming a broad business relationship
with EarthLink Network Inc. (EarthLink), an Internet service provider. EarthLink
will obtain Sprint's Internet Passport customers and will take over the
day-to-day operations of those services. This will create a combined base of
more than 600,000 Internet access customers, and enable Sprint to build its
brand equity and market share. This relationship requires regulatory approval
and is expected to close in the 1998 second quarter.
<PAGE>
Costs incurred during first quarter 1998 relating to CLEC were mainly due to the
development of a distinct service approach. While Sprint's measured course on
entering the CLEC market has enabled it to avoid significant losses, Sprint
continues to devote significant resources toward developing its approach.
As part of an overall strategy to achieve nationwide PCS coverage, Sprint
directly acquired PCS licenses in 1997. The licenses cover 139 markets across
the United States, reaching a total population of 70 million. Sprint began
construction in some markets in 1997 and hopes to achieve coverage in areas that
could reach 38 million people by the end of first quarter 1999. Sprint expects
SprintCom capital expenditures to total $1.8 billion in 1998 for network
buildout.
Non Operating Items
Interest Expense
Interest costs on borrowings consist of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
(in millions)
<S> <C> <C>
Interest expense on outstanding debt $ 54.5 $ 35.7
Capitalized interest costs 18.6 29.0
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total interest costs on outstanding debt $ 73.1 $ 64.7
--- ------------- -- -------------
Average debt outstanding $ 3,977.7 $ 3,226.4
--- ------------- -- -------------
Effective interest rate 7.4% 8.0%
--- ------------- -- -------------
</TABLE>
Through June 1997, Sprint capitalized interest costs on borrowings related to
its investment in Sprint PCS. Sprint stopped capitalizing these costs because
Sprint PCS no longer qualified as a development-stage company. Sprint continues
to capitalize interest costs related to the buildout of SprintCom markets.
Sprint's effective interest rate decreased to 7.4% from 8.0% mainly because of
an increase in short-term borrowings as a percentage of total borrowings.
Short-term borrowings have been classified as long-term debt because of Sprint's
intent and ability, through unused credit facilities, to refinance these
borrowings.
Global One
Global One's revenues totaled $265 million in first quarter 1998 compared with
$243 million in the same period a year ago. Sprint's share of operating losses
from Global One totaled $45 million in first quarter 1998 compared with $24
million a year ago. The increased losses in 1998 were due to lower operating
margins primarily as a result of higher operating costs. Global One is
continuing to review its operations, is implementing expense controls, and is
focusing on improving the network infrastructure all in an effort to improve
efficiencies and reduce operating costs.
Sprint PCS
Sprint PCS' revenues totaled $150 million in first quarter 1998 versus $10
million a year ago. Sprint's share of operating losses from Sprint PCS and its
affiliates was $210 million in first quarter 1998 compared with $86 million a
year ago. The 1998 losses reflect marketing and promotional costs to support a
growing customer base. By early 1998, Sprint PCS' customer base exceeded 1
million customers. The venture plans to continue to aggressively obtain new
customers, which will likely result in higher losses in 1998 compared with 1997.
Average monthly revenue per customer through first quarter 1998 was $64, which
is higher than wireless industry averages. This higher average is being driven
by marketing plans that both target and encourage higher usage. Sprint PCS
customer churn rates and customer marketing costs have been as expected at this
stage of development. As the PCS markets mature and Sprint PCS gains additional
scale, both of these measures are expected to trend toward cellular industry
levels.
<PAGE>
Other Income, Net
Other income consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
(in millions)
<S> <C> <C>
Dividend and interest income $ 15.6 $ 27.1
Other, net 5.6 7.8
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total other income, net $ 21.2 $ 34.9
--- ------------- -- -------------
</TABLE>
First quarter 1997 dividend and interest income reflects income earned on the
cash received from DT and FT for their 1996 equity investment in Sprint as well
as the repayment of intercompany debt in connection with the 1996 spinoff of
Sprint's cellular division. Sprint has since invested these funds in strategic
initiatives and has decreased certain borrowings, reducing the balance held in
temporary investments. Dividend and interest income for 1998 also reflects
interest earned on loans to affiliates.
Income Taxes
See Note 3 of Condensed Notes to Consolidated Financial Statements for the
differences that caused the effective income tax rate to vary from the statutory
federal rate.
Extraordinary Item
In 1998, Sprint redeemed, prior to maturity, $115 million of debt with a 9.25%
interest rate. This resulted in a $4 million ($0.01 per share) after-tax loss.
Financial Condition
Sprint's consolidated assets totaled $18.8 billion at March 31, 1998 and $18.2
billion at year-end 1997. Net property, plant and equipment increased $285
million since year-end 1997 mainly because of capital expenditures to support
the core long distance and local networks and expanded product and service
offerings. In addition, this growth reflects an increase in capital expenditures
and new capital leases related to the buildout of the SprintCom markets.
Sprint's debt-to-capital ratio was 31.4% at March 31, 1998 versus 30.0% at
year-end 1997. See "Liquidity and Capital Resources" for additional discussions
of changes in Sprint's Consolidated Balance Sheets.
Liquidity and Capital Resources
Operating Activities
Sprint's operating activities provided cash of $853 million in first quarter
1998 versus $700 million in first quarter 1997. Operating cash flows for 1998
mainly reflect improved operating results in Sprint's core businesses.
Investing Activities
Sprint's investing activities used cash of $861 million in first quarter 1998
and $580 million in first quarter 1997. Capital expenditures, which are Sprint's
largest investing activity, totaled $653 million in first quarter 1998 and $574
million in first quarter 1997. This increase is mainly due to the buildout of
the SprintCom PCS network. Long distance division capital expenditures totaled
$205 million for the 1998 first quarter versus $223 million for the same period
a year ago. Expenditures in both years were incurred mainly to enhance network
reliability, meet increased demand for data-related services, and upgrade
capabilities for providing new products and services. Local division capital
expenditures totaled $320 million for both the 1998 and 1997 first quarters.
Expenditures in both years were made to accommodate access line growth and
expand capabilities for providing enhanced services.
<PAGE>
During the 1997 first quarter, Sprint paid $25 million as part of the purchase
price for the SprintCom PCS licenses.
"Investments in and advances to affiliates, net" consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
(in millions)
Sprint PCS and its affiliates
<S> <C> <C>
Capital contributions $ 33.5 $ 16.5
Advances, net 90.0 (67.1)
Capitalized interest - 25.0
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
123.5 (25.6)
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Global One
Capital contributions 283.5 -
Advances, net (199.7) -
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
83.8 -
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Other, net 5.3 9.9
- -------------------------------------------------------------- -- ------------- --- ------------- -- -------------
Total $ 212.6 $ (15.7)
--- ------------- -- -------------
</TABLE>
Capital contributions and advances to Sprint PCS and its affiliates in both
years were used to fund capital and operating requirements. Net contributions to
Global One in first quarter 1998 were used mainly to fund operations.
Financing Activities
Sprint's financing activities provided cash of $64 million in the first quarter
1998, while first quarter 1997 activities used cash of $211 million. Financing
activities during 1998 reflect long-term borrowings of $290 million, partly
offset by payments on long-term debt of $130 million. Financing activities in
the first quarter of 1997 reflect payments of $100 million on short-term
borrowings and $38 million on long-term debt.
Capital Requirements
Sprint's 1998 investing activities, consisting of capital expenditures and
investments in affiliates, are expected to require cash of $5.5 to $6.2 billion.
Dividend payments are expected to total $430 million in 1998. These requirements
will be funded with cash from operating activities and external sources.
External borrowings are expected to total $2.0 to $2.5 billion in 1998.
Sprint expects to spend $5.0 to $5.5 billion on capital expenditures in 1998. Of
this total, the long distance and local divisions will require an estimated $2.7
to $3.0 billion. The remainder will mainly be used to build out the SprintCom
network.
Sprint PCS and its affiliates are expected to require $200 to $300 million from
Sprint in 1998 to help fund operating cash requirements and continue their
network buildout. Global One is also expected to require $300 to $400 million
from Sprint in 1998 to help fund operations and ongoing development activities.
<PAGE>
Liquidity
At March 31, 1998, Sprint had the ability to borrow $744 million under a
revolving credit agreement with a syndicate of domestic and international banks.
In addition, in 1997, Sprint negotiated a separate five-year revolving credit
facility with a bank. At March 31, 1998, Sprint's unused capacity under the
committed portion of this facility was $100 million. Sprint may also offer for
sale $1.1 billion of debt securities under shelf registration statements filed
with the Securities and Exchange Commission.
Any borrowings Sprint may incur are ultimately limited by certain debt
covenants. At March 31, 1998, Sprint could borrow up to $13.5 billion under the
most restrictive of its debt covenants.
The most restrictive covenant related to dividends results from Sprint's
revolving credit agreement. Among other restrictions, Sprint must maintain
specified levels of consolidated net worth. As a result, $2.8 billion of
Sprint's $3.8 billion retained earnings was restricted from the payment of
dividends at the end of first quarter 1998.
Financial Strategies
General Hedging Policies
Sprint selectively enters into interest rate swap and cap agreements to manage
its exposure to interest rate changes on its debt. Sprint also enters into
forward contracts and options in foreign currencies to reduce the impact of
changes in foreign exchange rates. Sprint seeks to minimize counterparty credit
risk through stringent credit approval and review processes, the selection of
only the most creditworthy counterparties, continual review and monitoring of
all counterparties, and thorough legal review of contracts. Sprint also controls
exposure to market risk through regular monitoring of changes in foreign
exchange and interest rate positions under normal and stress conditions to
ensure they do not exceed established limits.
Sprint's derivative transactions are used for hedging purposes only and comply
with Board-approved policies. Senior management receives monthly status updates
of all outstanding derivative positions.
Interest Rate Risk Management
Sprint's interest rate risk management program focuses on minimizing exposure to
interest rate movements, setting an optimal mixture of floating- and fixed-rate
debt and minimizing liquidity risk. Sprint uses simulation analysis to assess
its interest rate exposure and to establish the desired ratio of floating- and
fixed-rate debt. To the extent possible, Sprint manages interest rate exposure
and the floating-to-fixed ratio through its borrowings, but sometimes uses
interest rate swaps and caps to adjust its risk profile.
Foreign Exchange Risk Management
Sprint's foreign exchange risk management program focuses on hedging transaction
exposure to optimize consolidated cash flow. Sprint's main transaction exposure
results from net payments made to overseas telecommunications companies for
completing international calls made by Sprint's domestic customers.
<PAGE>
Year 2000 Issue
The "Year 2000" issue affects Sprint's installed computer systems, network
elements, software applications, and other business systems that have
time-sensitive programs that may not properly reflect or recognize the year
2000. Because many computers and computer applications define dates by the last
two digits of the year, "00" may not be properly identified as the year 2000.
This error could result in miscalculations or system failures.
Sprint started a program in 1996 to identify and address the Year 2000 issue. It
is taking an inventory of its network and computer systems and is creating and
implementing plans to make them Year 2000 compliant. Sprint is using both
internal and external sources to identify, correct or reprogram, and test its
systems for Year 2000 compliance. The total cost of modifications and
conversions is not known at this time; however, it is not expected to be
material to Sprint's financial position, results of operations or cash flows and
is being expensed as incurred.
The Year 2000 issue may also affect the systems and applications of Sprint's
customers, vendors or resellers. Sprint is also contacting others with whom it
conducts business to receive the appropriate warranties and assurances that
those third parties are, or will be, Year 2000 compliant.
If compliance is not achieved in a timely manner, the Year 2000 issue could have
a material effect on Sprint's operations. However, Sprint is focusing on
identifying and addressing all aspects of its operations that may be affected by
the Year 2000 issue and is addressing the most critical applications first. As a
result, Sprint management does not believe its operations will be materially
adversely affected.
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
There were no reportable events during the quarter ended March 31,
1998.
Item 2. Changes in Securities
There were no reportable events during the quarter ended March 31,
1998.
Item 3. Defaults Upon Senior Securities
There were no reportable events during the quarter ended March 31,
1998.
Item 4. Submission of Matters to a Vote of Security Holders
Annual Meeting
On April 21, 1998, Sprint held its Annual Meeting of Shareholders. In
addition to the election of three Class III Directors to serve for a
term of three years, the shareholders (i) approved amendments to the
1988 Employees Stock Purchase Plan and (ii) approved the appointment of
Ernst & Young LLP as independent auditors for Sprint. The shareholders
did not approve three shareholder proposals.
The following votes were cast for each of the following nominees for
Director or were withheld with respect to such nominees:
<TABLE>
<CAPTION>
For Withheld
---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
William T. Esrey 258,927,982 19,008,680
Linda Koch Lorimer 259,192,554 18,744,108
Stewart Turley 259,176,273 18,760,389
</TABLE>
The following votes were cast with respect to the proposal to approve
amendments to the 1988 Employees Stock Purchase Plan:
For 357,249,963
Against 5,440,126
Abstain 1,482,609
The following votes were cast with respect to the proposal to approve
the appointment of Ernst & Young LLP as independent auditors of Sprint
for 1998:
For 362,188,686
Against 1,180,178
Abstain 803,834
The following votes were cast with respect to a shareholder proposal
requesting that the Board of Directors of Sprint refrain from providing
pension or other retirement benefits to non-employee directors unless
such benefits are submitted to the shareholders for approval:
For 92,590,049
Against 239,132,914
Abstain 3,455,850
Broker non-votes 28,993,885
<PAGE>
The following votes were cast with respect to a shareholder proposal
urging that no option plans be adopted or amended to allow options to
be issued for exercise prices below those of any options outstanding at
any time during the year preceding the grants of the new options:
For 29,645,871
Against 301,943,238
Abstain 3,589,701
Broker non-votes 28,993,888
The following votes were cast with respect to a shareholder proposal
urging the Board of Directors of Sprint to adopt a policy against
making compensation awards to officers and directors which are
contingent on a change of control of Sprint unless such awards are
submitted to a vote of shareholders and approved by a majority of the
votes cast:
For 95,430,963
Against 236,104,875
Abstain 3,642,971
Broker non-votes 28,993,889
Item 5. Other Information
For the 1998 first quarter, Sprint's ratio of earnings to fixed charges
was 5.72 versus 6.34 for the same 1997 quarter. The ratios were
computed by dividing fixed charges into the sum of earnings (after
certain adjustments) and fixed charges. Earnings include income from
continuing operations before taxes, plus equity in the net losses of
less-than-50%-owned entities, less capitalized interest. Fixed charges
include (a) interest on all debt of continuing operations (including
amortization of debt issuance costs), (b) the interest component of
operating rents, and (c) the pre-tax cost of subsidiary preferred stock
dividends.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedules
(a) March 31, 1998
(b) September 30, 1997 Restated
(c) June 30, 1997 Restated
(d) March 31, 1997 Restated
(e) September 30, 1996 Restated
(f) June 30, 1996 Restated
(g) March 31, 1996 Restated
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1998.
<PAGE>
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 thereunto duly authorized.
SPRINT CORPORATION
(Registrant)
By /s/ John P. Meyer
John P. Meyer
Senior Vice President -- Controller
Principal Accounting Officer
Dated: May 6, 1998
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedules
<TABLE>
<CAPTION>
EXHIBIT (12)
SPRINT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited)
- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
Three Months Ended March 31, 1998 1997
- -------------------------------------------- ----------------- ---------------- ----------------- ----------------
(in millions)
Earnings
<S> <C> <C>
Income from continuing operations
before taxes $ 367.8 $ 485.2
Capitalized interest (18.6) (29.0)
Equity in losses of less than 50
percent owned entities 230.7 100.9
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Subtotal 579.9 557.1
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Fixed charges
Interest charges 85.3 73.8
Interest factor of operating rents 37.5 30.5
Pre-tax cost of preferred stock
dividends of subsidiaries 0.1 0.1
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Total fixed charges 122.9 104.4
- -------------------------------------------- --- ------------- -- ------------- --- ------------- -- -------------
Earnings, as adjusted $ 702.8 $ 661.5
--- ------------- -- -------------
Ratio of earnings to fixed charges 5.72 6.34
--- ------------- -- -------------
</TABLE>
Note: The ratios were computed by dividing fixed charges into the sum of
earnings (after certain adjustments) and fixed charges. Earnings
include income from continuing operations before taxes, plus equity in
the net losses of less-than-50%-owned entities, less capitalized
interest. Fixed charges include (a) interest on all debt of continuing
operations (including amortization of debt issuance costs), (b) the
interest component of operating rents, and (c) the pre-tax cost of
subsidiary preferred stock dividends.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 158,200
<SECURITIES> 0
<RECEIVABLES> 2,684,700
<ALLOWANCES> 165,600
<INVENTORY> 378,500
<CURRENT-ASSETS> 4,017,700
<PP&E> 23,803,200
<DEPRECIATION> 12,024,000
<TOTAL-ASSETS> 18,756,800
<CURRENT-LIABILITIES> 3,187,900
<BONDS> 4,075,700
9,500
0
<COMMON> 1,091,300
<OTHER-SE> 8,064,900
<TOTAL-LIABILITY-AND-EQUITY> 18,756,800
<SALES> 0
<TOTAL-REVENUES> 3,910,900
<CGS> 0
<TOTAL-COSTS> 2,351,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,700
<INCOME-PRETAX> 367,800
<INCOME-TAX> 151,300
<INCOME-CONTINUING> 216,500
<DISCONTINUED> 0
<EXTRAORDINARY> 4,400
<CHANGES> 0
<NET-INCOME> 212,100
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 109,400
<SECURITIES> 0
<RECEIVABLES> 2,629,100
<ALLOWANCES> 167,100
<INVENTORY> 345,400
<CURRENT-ASSETS> 3,536,700
<PP&E> 22,962,400
<DEPRECIATION> 11,851,600
<TOTAL-ASSETS> 17,471,700
<CURRENT-LIABILITIES> 3,326,500
<BONDS> 2,851,200
11,400
0
<COMMON> 1,091,300
<OTHER-SE> 7,824,000
<TOTAL-LIABILITY-AND-EQUITY> 17,471,700
<SALES> 0
<TOTAL-REVENUES> 11,024,900
<CGS> 0
<TOTAL-COSTS> 6,788,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,100
<INCOME-PRETAX> 1,260,500
<INCOME-TAX> 502,900
<INCOME-CONTINUING> 757,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 757,600
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.74
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<CASH> 391,700
<SECURITIES> 0
<RECEIVABLES> 2,516,700
<ALLOWANCES> 130,300
<INVENTORY> 329,200
<CURRENT-ASSETS> 3,533,300
<PP&E> 22,445,000
<DEPRECIATION> 11,533,900
<TOTAL-ASSETS> 16,885,500
<CURRENT-LIABILITIES> 2,885,300
<BONDS> 2,918,800
11,800
0
<COMMON> 1,091,300
<OTHER-SE> 7,751,900
<TOTAL-LIABILITY-AND-EQUITY> 16,885,500
<SALES> 0
<TOTAL-REVENUES> 7,246,000
<CGS> 0
<TOTAL-COSTS> 4,474,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,500
<INCOME-PRETAX> 900,200
<INCOME-TAX> 354,300
<INCOME-CONTINUING> 545,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545,900
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.25
</TABLE>
<TABLE> <S> <C>
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