Nextel Reports Record First Quarter Results.RESTON Reston, uninc. city (1990 pop. 48,556), Fairfax co., N Va., a planned community established in 1961. A suburb of Washington, D.C., Reston is organized in a series of residential villages and commercial areas. , Va. -- Nextel Communications Nextel Communications, styled NEXTEL, (Former NASDAQ: NXTL) which is now known as the Sprint Nextel Corporation was a telecommunications firm based in the United States. Known for providing a nation-wide mobile communications system. Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :NXTL) --Revenue of $3.6 Billion, up 16% --Operating Income before Depreciation and Amortization of $1.3 Billion, up 10% --Income of $589 Million, Reported EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.53, Adjusted EPS of $0.40 --Free Cash Flow After Rebanding of $562 Million, up 11% --Total Subscribers of 17 million, First-Quarter Total Additions of 810,000, up 34% --Affirms Full-Year Guidance Nextel Communications Inc. (NASDAQ:NXTL) today announced record first-quarter results including a 16% increase in revenue to $3.6 billion, a 10% increase in operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before depreciation and amortization (OIBDA OIBDA Operating Income Before Depreciation & Amortization ) to $1.3 billion and a 11% increase in free cash flow to $562 million compared to first-quarter 2004. First-quarter total subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. net additions of 810,000 were up 34% over last year and were fueled by a 138% increase in subscriber net additions for Boost Mobile(TM) service compared to last year's first quarter. "This year is off to an even stronger start for Nextel (Nextel Communications, Inc., Reston, VA, www.nextel.com) A wireless communications carrier founded in New Jersey in 1987 as Fleet Call, a two-way radio service. Throughout the late 1980s and 1990s, the company acquired a large number of SMR (Specialized Mobile Radio) operators and turned than last year's record setting pace," said Tim Donahue Donahue is a surname of Irish origin. It is a variant of O'Donoghue and therefore associated with the O'Donoghue Clan. The name Donahue may refer to one of several people:
blackberry (R) sales to corporate customers and strong sales to NASCAR NASCAR (National Association for Stock Car Auto Racing), organization that sanctions American stock-car races, est. 1948. It held its first race in Daytona Beach, Fla. (R) fans continue to drive balanced growth, and based on these results, we are affirming our full-year financial guidance. As our merger planning progresses, I am excited for our customers, employees and stockholders, and we look forward to a bright future for the growth-oriented Sprint Nextel Sprint Nextel Corporation (NYSE: S) is one of the largest telecommunications companies in the world. With 55 million subscribers, Sprint Nextel operates the third largest wireless telecommunications network in the United States (based on total wireless customers), behind combination." First-quarter 2005 subscriber additions consisted of 496,000 subscribers of Nextel branded service and 314,000 subscribers of Boost Mobile branded prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. service. Nextel ended first-quarter 2005 with
more than 17 million total subscribers - 15.5 million Nextel subscribers
and 1.5 million Boost Mobile subscribers - up 22% from 13.9 million
total subscribers at the end of first-quarter 2004."Nextel's results continue to meet our high expectations for the marketing, branding and profitability of our differentiated dif·fer·en·ti·ate v. dif·fer·en·ti·at·ed, dif·fer·en·ti·at·ing, dif·fer·en·ti·ates v.tr. 1. To constitute the distinction between: wireless services," said Tom Kelly People named Tom Kelly include:
Total revenue for the quarter was $3.6 billion, up 16% over last year's first-quarter revenue of $3.1 billion. Average revenue per unit (ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. ) for Nextel branded service subscribers was $67 in the first-quarter 2005 and the monthly customer churn rate (1) The percentage of customers who cancel their online, cellphone or other subscription service during a certain time period. (2) The percentage of employees who leave the company during a certain time period. See churning. was 1.5%. Income available to common stockholders for the first quarter was $589 million, or $0.53 per share, and was impacted by a number of items totaling $145 million, or $0.13 per share. Adjusted earnings per share for the first quarter was $0.40 per share, see Table 3 for additional details. OIBDA was $1.3 billion, up 10% from last year. Free cash flow after rebanding was $562 million, up 11% from last year's free cash flow of $507 million. "Nextel is on track to accomplish its financial, operating and strategic goals for 2005," said Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Saleh
For the current President of Yemen, see . Saleh (Arabic: صالح) in Arabic means a Righteous person. , Nextel's executive vice president and CFO See Chief Financial Officer. . "Our smart growth initiatives are driving strong growth in customers, revenue and free cash flow. We are investing to attract and retain the most valuable customers in the industry, and we have seen the result as evidenced by our best ever first-quarter churn rate of 1.5%. We are affirming our guidance for the full year." Capital expenditures were $693 million in the first quarter and spending in preparation for meeting the requirements of the FCC's rebanding order was $86 million. Total system minutes of use in the first quarter on the Nextel National Network increased 30% over last year to 39.4 billion. During the first quarter, Nextel completed a series of financing actions including refinancing Refinancing An extension and/or increase in amount of existing debt. our existing secured term loan "E," conducting a consent solicitation Consent Solicitation A solicitation by one party to the stakeholders of a particular security for the consent of a material change. Notes: Should the majority of stakeholders provide valid consent prior to the consent expiry date, the issuer may then follow through with and exchange offer for all the outstanding shares of its Zero Coupon A certificate evidencing the obligation to pay an installment of interest or a dividend that must be cut and presented to its issuer for payment when it is due. Coupons are usually attached to a document, such as a promissory note, bond, share of stock, or a bearer Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". , and exchanging $122 million of its 9.5% notes for $133 million of lower interest rate notes. These transactions reduce our annual interest expense and strengthen our financial position. In addition to the results prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) provided throughout this press release, Nextel has presented non-GAAP financial measures, such as adjusted net income, adjusted earnings per share, OIBDA, free cash flow, and ARPU. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Reconciliations from GAAP results to these non-GAAP financial measures are provided in the notes to the attached financial tables. To view these and other reconciliations and information about how to access the conference call discussing Nextel's first-quarter results visit the 'Investor Relations' link under the 'About Nextel' tab at www.nextel.com. First-quarter 2005 results do not reflect accounting treatment for the exchange of certain of our FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. licenses for other FCC licenses and other obligations under the FCC's Report and Order relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. of the 800 MHz (MegaHertZ) One million cycles per second. It is used to measure the transmission speed of electronic devices, including channels, buses and the computer's internal clock. A one-megahertz clock (1 MHz) means some number of bits (16, 32, 64, etc. spectrum band. Please see Footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." 1 for further details. About Nextel Nextel Communications, a FORTUNE 200 company based in Reston, Va., is a leading provider of fully integrated wireless communications wireless communications System using radio-frequency, infrared, microwave, or other types of electromagnetic or acoustic waves in place of wires, cables, or fibre optics to transmit signals or data. services and has built the largest guaranteed all-digital wireless network in the country covering thousands of communities across the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Today 95 percent of FORTUNE 500(R) companies are Nextel customers. Nextel and Nextel Partners, Inc. currently serve 297 of the top 300 U.S. markets where approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 262 million people live or work. Nextel and the Nextel logo are trademarks and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. service marks of Nextel Communications, Inc., Boost Mobile, Boost and Re-Boost are trademarks and/or service marks of Boost Worldwide, Inc. All other marks are the property of their respective owners. "SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and OF 1995 A number of the matters discussed in this press release are not historical or current facts deal with potential future circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or and developments, in particular, Nextel's guidance for 2005 and information regarding the merger of Sprint and Nextel. The discussion of such matters is qualified by the inherent risks and uncertainties surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. future expectations generally, and also may materially differ from actual future experience involving any one or more of such matters. Such risks and uncertainties include: competitive conditions and market acceptance of Nextel's services, economic conditions in our targeted markets, performance of our technologies, timely development and delivery of new technologies, access to sufficient capital to meet financing needs, actions by regulatory agencies regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. , risks and conditions in connection with consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the proposed merger with Sprint Corporation; and the risks that are described from time to time in Sprint's and Nextel's respective reports filed with the SEC, including each company's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2004. This document speaks only as of its date, and Sprint and Nextel each disclaims any duty to update the information herein. ADDITIONAL INFORMATION AND WHERE TO FIND IT In connection with the proposed transaction, a registration statement on Form S-4 (Reg REG, n.pr See random event generator. . No. 333-123333) that contains a preliminary joint proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. statement/prospectus regarding the proposed transaction was filed by Sprint with the SEC on March 15, 2005. SHAREHOLDERS OF SPRINT AND SHAREHOLDERS OF NEXTEL ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/ PROSPECTUS A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. THAT IS PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMBINATION. The final joint proxy statement/prospectus will be mailed to shareholders of Sprint and shareholders of Nextel. Investors and security holders will be able to obtain the documents free of charge at the SEC's web site, www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. , from Sprint Investor Relations Investor relations The process by which the corporation communicates with its investors. at Sprint Corporation, 6200 Sprint Parkway, Overland Park, Kansas Overland Park is the second most populous city in the U.S. state of Kansas. It is located in Johnson County, a satellite city of Kansas City, and is near Olathe, Lenexa, Prairie Village and Leawood. In 2006, the estimated population is 167,500. 66251, 800-259-3755, Option 1 or from Nextel Investor Relations at 2001 Edmund Edmund, 921–46, king of Wessex (939–46), half brother and successor of Athelstan. Immediately after his accession he had to face an invasion of Irish vikings led by Olaf Guthfrithson. Halley Drive, Reston, Virginia Reston is an internationally known planned community whose goal was to revolutionize post-World War II concepts of land use and residential/corporate development in American suburbia. 20191 or call 703-433-4300. PARTICIPANTS IN SOLICITATION solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual Sprint, Nextel and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the combination. Information concerning Sprint's and Nextel's participants, as well as the interests of participants of Sprint and Nextel in the solicitation of proxies in respect of the combination, is set forth in the joint proxy statement/prospectus that is a part of the registration statement on Form S-4 filed by Sprint with the SEC on March 15, 2005.
----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
----------------------------------------------------------------------
Consolidated Statements of Operations (1)
(in millions, except per share amounts)
----------------------------------------------------------------------
TABLE 1
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
Operating revenues
Service revenues $3,256 $2,776
Handset and accessory revenues 352 327
---------- ----------
3,608 3,103
---------- ----------
Operating expenses
Cost of service (exclusive of
depreciation included below) 552 436
Cost of handset and accessory revenues 532 489
Selling and marketing 595 495
General and administrative 605 476
Depreciation and amortization 507 443
---------- ----------
Operating income 817 764
Interest expense (128) (154)
Interest income 13 8
Loss on retirement of debt (37) (17)
Realized gain on sale of investment - 26
Equity in earnings of unconsolidated
affiliates and other 19 1
---------- ----------
Income before income tax provision 684 628
Income tax provision (2) (89) (33)
---------- ----------
Net income 595 595
Mandatorily redeemable preferred
stock dividends and accretion (6) (2)
---------- ----------
Income available to common stockholders $589 $593
========== ==========
Earnings per common share
Basic $0.53 $0.54
========== ==========
Diluted $0.52 $0.52
========== ==========
Weighted average number of common
shares outstanding
Basic 1,121 1,106
========== ==========
Diluted 1,139 1,172
========== ==========
----------------------------------------------------------------------
Selected Balance Sheet Data (1)
(in millions)
----------------------------------------------------------------------
TABLE 2
March 31, December 31,
2005 2004
--------- ------------
Cash, cash equivalents and
short-term investments $2,461 $1,814
Accounts and notes receivable, net of
allowance for doubtful accounts
of $61 and $64 1,444 1,452
Property, plant and equipment, net 9,886 9,613
Intangible assets, net 7,240 7,223
Total assets 23,894 22,744
Long-term debt, including current portion 8,574 8,549
Total liabilities 13,620 13,228
Zero coupon mandatorily redeemable
preferred stock 110 108
Stockholders' equity 10,164 9,408
----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
----------------------------------------------------------------------
Adjusted Income Available to Common Stockholders Data
(in millions, except per share amounts)
----------------------------------------------------------------------
TABLE 3
For the three months For the three months
ended ended
March 31, 2005 March 31, 2004
---------------------- ---------------------
Basic EPS Basic EPS
--------- ---------
Income available to common
stockholders $589 $0.53 $593 $0.54
Merger-related costs,
net of income tax 6 0.01 - -
Loss on retirement of
debt, net of income tax 23 0.02 17 0.01
Realized gain on sale of
investment - - (26) (0.02)
Net tax benefit from the
release of valuation
allowance (2) (178) (0.16) - -
Fees paid to mandatorily
redeemable preferred
stockholders 4 - - -
---------- ----------- ---------- --------
Adjusted income available
to common stockholders
(3) $444 $0.40 $584 $0.53
========== =========== ========== ========
----------------------------------------------------------------------
Other Data
----------------------------------------------------------------------
TABLE 4
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
Nextel branded service
Handsets in service, end
of period (in thousands) 15,543 13,356
Net handset additions
(in thousands) (4) 496 474
Average monthly minutes
of use per handset 820 750
Customer churn rate (5) 1.5% 1.7%
Average monthly revenue per
handset/unit (ARPU) (6) $67 $69
Boost Mobile branded prepaid service
Handsets in service, end
of period (in thousands) 1,474 537
Net handset additions
(in thousands) (4) 314 132
Customer churn rate (5) 5.0% NM
Average monthly revenue per
handset/unit (ARPU) (6) $41 NM
System minutes of use (in millions) 39,354 30,387
Cash cost per handset/unit (CCPU) (7) $25 $23
Operating income before depreciation and
amortization (OIBDA) (in millions) (8) $1,324 $1,207
Bad debt expense included in general
and administrative (in millions) $35 $34
Bad debt expense as a percentage of
operating revenues 1.0% 1.1%
NM - Not meaningful
----------------------------------------------------------------------
Capital Expenditures
(in millions)
----------------------------------------------------------------------
TABLE 5
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
Cash paid for capital expenditures,
excluding capitalized interest and
rebanding costs $557 $681
Changes in capital expenditures accrued
or unpaid 136 (144)
---------- ----------
Capital expenditures, excluding
capitalized interest and
rebanding costs 693 537
Rebanding-related costs subject to
Transition Administrator approval ($21
million accrued or unpaid) 81 -
Capitalized interest 2 3
---------- ----------
$776 $540
========== ==========
----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
----------------------------------------------------------------------
Condensed Consolidated Statements of Cash Flows (1)
(in millions)
----------------------------------------------------------------------
TABLE 6
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
Cash flows from operating activities
Net income $595 $595
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 507 443
Change in accrued interest on
short-term investments - (3)
Net tax benefit from the release of
valuation allowance (178) -
Other 281 209
---------- ----------
Net cash provided by operating
activities 1,205 1,244
---------- ----------
Cash flows from investing activities
Cash paid for capital expenditures,
including capitalized interest and
rebanding costs (619) (684)
Payments for licenses, acquisitions,
investments and other, net of cash
acquired (24) (56)
Proceeds from sale of investments - 77
Net changes in short- term investments 69 142
---------- ----------
Net cash used in investing
activities (574) (521)
---------- ----------
Cash flows from financing activities
Repayments under long-term
credit facility (2,178) (48)
Borrowings under long-term
credit facility 2,200 -
Purchase and retirement of debt
securities - (191)
Proceeds from issuance of debt
securities - 494
Proceeds from issuance of stock 68 68
Repayments under capital lease
obligation - (9)
Payment for capital lease buy-out - (156)
Debt issue costs and other (5) -
---------- ----------
Net cash provided by financing
activities 85 158
---------- ----------
Net increase in cash and cash equivalents 716 881
Cash and cash equivalents,
beginning of period 1,479 806
---------- ----------
Cash and cash equivalents, end of period $2,195 $1,687
========== ==========
----------------------------------------------------------------------
Free Cash Flow Schedule
(in millions)
----------------------------------------------------------------------
TABLE 7
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
OIBDA (8) $1,324 $1,207
Capital expenditures, excluding
capitalized interest and rebanding costs (693) (537)
Payments for licenses, acquisitions
and other, excluding rebanding costs (19) (56)
Changes in working capital and other 182 56
Net interest paid, including capitalized
interest (146) (163)
---------- ----------
Free cash flow before rebanding (9) 648 507
Rebanding costs (86) -
---------- ----------
Free cash flow after rebanding 562 507
Financing activities 85 158
Proceeds from sale of investments - 77
Change in short-term investments 69 139
---------- ----------
Net increase in cash and cash
equivalents $716 $881
========== ==========
----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
----------------------------------------------------------------------
Long-Term Debt and Mandatorily Redeemable Preferred Stock Data
(dollars in millions)
----------------------------------------------------------------------
TABLE 8
Retirements Debt for
and debt
December repayments exchange March
31, 2004 of principal and other 31, 2005
---------- ----------- ---------- --------
5.25% convertible senior
notes due 2010 $607 $- $- $607
9.5% senior serial
redeemable notes due
2011, including a
deferred premium of
$7 and $3 214 - (126)(a) 88
6.875% senior serial
redeemable notes due
2013, including a
deferred premium of $5
and $7 and net of
unamortized discount
of $58 and $61 1,364 - 55(a) 1,419
5.95% senior serial
redeemable notes due
2014, including a
deferred premium of
$12 and $14 and net
of unamortized discount
of $59 and $64 1,046 - 74(a) 1,120
7.375% senior serial
redeemable notes due
2015, net of unamortized
discount of $3 and $3 2,134 - - 2,134
Bank credit facility 3,178 (2,178) 2,200 3,200
Other 6 - - 6
---------- ----------- ---------- --------
Total long-term debt,
including current
portion $8,549 $(2,178) $2,203 $8,574
========== =========== ========== ========
Zero coupon convertible
preferred stock
mandatorily
redeemable 2013 (b) $108 $- $2 $110
========== =========== ========== ========
(a) During the first quarter 2005, we issued $77 million in principal
amount of new 5.95% senior notes issued at a $7 million discount
to their principal amount and $56 million in principal amount of
new 6.875% senior notes issued at a $4 million discount to their
principal amount in exchange for $122 million in principal amount
of our 9.5% senior notes. As a result, the $4 million of the
deferred premium associated with the 9.5% senior notes is now
associated with the 5.95% and 6.875% senior notes and will be
recognized as an adjustment to interest expense over the remaining
life of the 5.95% and 6.875% senior notes.
(b) During the first quarter 2005, we made an offer to exchange our
zero coupon convertible preferred stock for an equal number of our
newly issued series B zero coupon convertible preferred stock, the
terms of which are substantially identical after giving effect to
the proposed amendments, including the right to receive a special
dividend of $30.00 per share payable upon conversion.
Substantially all of the outstanding preferred stock was properly
tendered and will be exchanged in the second quarter 2005.
----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
----------------------------------------------------------------------
Notes to Financial Data
----------------------------------------------------------------------
1) On February 7, 2005, we accepted the Federal Communications
Commission's plan to eliminate interference with the public safety
operators in the 800 MHz band (the "Report and Order"). By
accepting the terms of the Report and Order, we agreed to exchange
certain of our FCC licenses for other FCC licenses, and to assume
certain obligations to reconfigure the 800 MHz spectrum band
through a 36-month phased transition approach. Due to the
complexity of this transaction, we consulted with the staff of the
Office of the Chief Accountant ("OCA") of the Securities and
Exchange Commission regarding the appropriate accounting treatment
for this transaction, and our discussions with the OCA and our
independent registered public accounting firm on the topic are
ongoing. The final determination of the accounting treatment for
this transaction will affect both our current and future results
of operations and our assets, liabilities and stockholders'
equity. Accordingly, the attached financial statements including
the statement of operations and statement of cash flows for the
quarter ended March 31, 2005 and the balance sheet as of March 31,
2005 do not reflect the accounting treatment for the transaction
contemplated by the Report and Order, except for the tax treatment
as discussed in note 2 below. We expect to conclude these
discussions and reflect the final accounting treatment for the
transaction in our Quarterly Report on Form 10-Q to be filed for
the quarter ended March 31, 2005.
2) For the three months ended March 31, 2005, our income tax provision
was $89 million consisting of an income tax provision of $267
million and a net benefit of $178 million. The net benefit is
derived from the release of the portion of the tax valuation
allowance attributable to the tax impact of recognized capital
gains on completed transactions, including with respect to the
Report and Order, and capital gains that are more likely than not
to be recognized on anticipated transactions. The benefit was
partially offset by an increase in our tax reserves.
3) Adjusted income available to common stockholders represents our
income available to common stockholders excluding certain gains,
losses and other charges that do not relate to the ongoing
operations of our wireless business. Adjusted income available to
common stockholders as defined above may not be similar to
adjusted income available to common stockholders measures of other
companies, is not a measurement under accounting principles
generally accepted in the United States and should be considered
in addition to, but not as a substitute for, the information
contained in our statement of operations. We believe that adjusted
income available to common stockholders is useful because it
allows investors to evaluate our operating results and related
financial performance for different periods on a more comparable
basis by excluding items that do not relate to the ongoing
operations of our wireless business.
4) Net handset additions represents gross handsets activated during
the period less handsets disconnected from commercial service, in
the case of Nextel branded service, or handsets with a zero
balance for more than 60 days, in the case of Boost Mobile branded
prepaid service.
5) The customer churn rate is an indicator of customer retention and
represents the monthly percentage of handsets that cease to be in
service. Customer churn is calculated by dividing the number of
handsets disconnected from commercial service during the period,
in the case of Nextel branded service, or handsets with a zero
balance for more than 60 days, in the case of Boost Mobile branded
prepaid service, by the average number of handsets in commercial
service during the period.
6) Average monthly revenue per handset/unit in service, or ARPU, is an
industry metric that measures service revenues per period divided
by the weighted average number of handsets in commercial service
during that period. ARPU as defined above may not be similar to
ARPU measures of other companies, is not a measurement under
accounting principles generally accepted in the United States and
should be considered in addition to, but not as a substitute for,
the information contained in our statement of operations. We
believe that ARPU provides useful information concerning the
appeal of our rate plans and service offerings and our performance
in attracting and retaining high value customers. Other revenue
includes revenues from Boost Mobile, roaming, analog and other.
ARPU can be calculated and reconciled to our consolidated
statements of operations as follows:
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
(in millions, except
for ARPU)
Nextel branded service
Service revenues $3,256 $2,776
Less: Other revenue 192 74
---------- ----------
Subscriber revenues $3,064 $2,702
========== ==========
ARPU calculated with
Service revenues $71 $71
========== ==========
ARPU calculated with
Subscriber revenues $67 $69
========== ==========
Boost Mobile branded
prepaid service
Service revenues $161 NM
==========
ARPU calculated with
Service revenues $41 NM
==========
NM - Not meaningful
7) Cash cost per handset/unit, or CCPU, is calculated by dividing the
sum of our cost of service and general and administrative expenses
by the weighted average number of handsets in commercial service
during the period. CCPU as defined above may not be similar to
CCPU measures of other companies, is not a measurement under
accounting principles generally accepted in the United States and
should be considered in addition to, but not as a substitute for,
the information contained in our statement of operations. CCPU is
commonly used within our industry as an indicator of the cash
expenses associated with ongoing business operations on a per
handset basis. Our management uses CCPU as an integral part of
internal reporting and believes CCPU is also useful to investors
to evaluate our ability to scale costs associated with providing
services to customers and managing our core business operations.
CCPU can be reconciled to our consolidated statements of
operations as follows:
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
(in millions, except
for CCPU)
Cost of service $552 $436
General and administrative 605 476
---------- ----------
$1,157 $912
========== ==========
CCPU $25 $23
========== ==========
----------------------------------------------------------------------
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited
----------------------------------------------------------------------
Notes to Financial Data
----------------------------------------------------------------------
8) OIBDA represents operating income before depreciation and
amortization. OIBDA margin, or operating margin on service revenue
("OIBDA margin"), represents OIBDA divided by service revenues.
Our 2005 OIBDA guidance excludes operating expenses related to the
Report and Order and the completion of and planning for the
proposed Sprint Nextel merger. OIBDA and OIBDA margin as defined
above may not be similar to OIBDA and OIBDA margin measures of
other companies, are not measurements under accounting principles
generally accepted in the United States and should be considered
in addition to, but not as a substitute for, the information
contained in our statement of operations. We believe that OIBDA
and OIBDA margin provide useful information to investors because
they are indicators of the strength and performance of our ongoing
business operations, including our ability to fund discretionary
spending such as capital expenditures, spectrum acquisitions and
other investments and our ability to incur and service deb
accepted accounting principles, these expenses primarily represent
the non-cash current period allocation of costs associated with
long-lived assets acquired or constructed in prior periods. Our
OIBDA and OIBDA margin calculations are commonly used as some of
the bases for investors, analysts and credit rating agencies to
evaluate and compare the periodic and future operating performance
and value of companies within the wireless telecommunications
industry. OIBDA can be reconciled to our consolidated statements
of operations as follows:
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
(dollars in millions)
Operating income $817 $764
Depreciation and amortization 507 443
---------- ----------
OIBDA $1,324 $1,207
========== ==========
OIBDA margin 41% 43%
========== ==========
Operating income margin 25% 28%
========== ==========
Guidance
------------------
For the year ended
December 31, 2005
------------------
(in millions)
Operating income $ 3,650 or more
Depreciation and
amortization 2,100 or less
------------------
OIBDA $ 5,750 or more
==================
9) Free cash flow represents OIBDA less capital expenditures,
payments for licenses, acquisitions and other, net interest paid,
preferred stock dividends, adjusted for increases or decreases in
working capital and other. Our 2005 free cash flow guidance
excludes the operating expenses related to the Report and Order
and the completion of and planning for the proposed Sprint Nextel
merger. Free cash flow as defined above may not be similar to free
cash flow measures of other companies, is not a measurement under
accounting principles generally accepted in the United States and
should be considered in addition to, but not as a substitute for,
the information contained in our statement of cash flows. We
believe that free cash flow provides useful information to
investors, analysts and our management about the cash generated by
our core operations after interest and dividends and our ability
to fund scheduled debt maturities and other financing activities,
including discretionary refinancing and retirement of debt and the
purchase or sale of investments. Free cash flow can be reconciled
to our condensed consolidated statements of cash flows as follows:
For the three months ended
March 31,
--------------------------
2005 2004
---------- ----------
(in millions)
Net cash provided by operating
activities $1,205 $1,244
Change in accrued interest on
short-term investments - 3
Rebanding 86 -
Net cash used in investing activities (574) (521)
Proceeds from sales of investments - (77)
Net changes in short-term investments
and other (69) (142)
---------- ----------
Free cash flow before rebanding $648 $507
========== ==========
Guidance
------------------
For the year ended
December 31, 2005
------------------
(in millions)
Net cash provided by $ 4,600 or more
operating activities
Change in accrued
interest on short-
term investments (a)
Net cash used in Approx (2,600)
investing activities
Net changes in short-
term investments and
other (a)
------------------
Free cash flow
before rebanding $ 2,000 or more
==================
(a)For guidance purposes, we do not distinguish between short-term
investments and cash and cash equivalents.
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