Sprint Filings

Previous Post: The 10-Q, Part I - The Overview
Previous Post: The 10-Q, Part II - The Balance Sheet

In my last post, I promised to look at the Sprint's income statement. And, if To Catch a Predator has taught us anything, it is this: if you can't trust an anonymous guy on the internet, who can you trust? So, let's look at the income statement...

We all pretty much need income for the basic necessities of today's modern world - things such as food, shelter, and call girls. Companies are really no different. No, they don't need call girls (although that would be a morale booster and make for interesting "casual" Fridays) but they do need a steady stream of income to survive. Well, unless, you are politically connected enough to where you can run your company into the ground yet have the government bailout you out with unsuspecting taxpayer money under the guise of protecting American jobs and averting financial catastrophe for the nation. Not that that happens today.

An income statement is a report that shows how much revenue a company earned over a period of time. For the 10-Q, that is one quarter. An income statement also shows the costs and expenses associated with earning that revenue. The literal “bottom line” of the statement usually shows the company’s net earnings or losses over the defined period. Pretty simple stuff. In fact, it's so simple that most women can even understand it. ("Income Statement: So Easy a Woman Can Understand It." Sorry, ladies.)

Much like my illuminating post on the balance sheet, I'm going to do year-over-year ("seasonally adjusted") and quarter-over-quarter comparisons for the income statement. Again, I'll take the data from google (which comes from filings). Let's go to the grossly simplified scorecard:

1st Qtr '09 (in Billions)	% Chg vs 4th Qtr '08	% Chg vs 1st Qtr '08
Revenue : $8.2B	- 2.62%	- 12.05%
Op Expense : $8.7B	-14.40%	-11.55%
Net Income : -$.59B	-63.36%	17.62%

Like last time, you can view the detailed spreadsheet here. Let's take these one at a time:

Revenue - the amount of money Sprint brought in during the quarter. In this case, $8.209 billion. Ideally, you want this number to be getting larger as it means sales (or the amount of money from sales) are increasing. You can see Sprint had a 12.05% decline versus a year ago and a 2.62% decline versus last quarter. That is not an encouraging sign. At all.

Operating Expense - the amount of money spent supporting the company's "day to day" operations. In Sprint's case, the number is $8.7 billion. That is an improvement over the other two quarters as operating expense fell by 14.40% and 11.55% respectively. Obviously, a significant portion of this is due to the "right-sizing" of the company and its operations to align it better with the revenue being produced.

Net Income - the "bottom line" or net profits or loses after factoring in income expenses (the interest paid on the money that was borrowed) and taxes. Really, the most important one on the income statement. And this is where Sprint is still falling short. In 1st Qtr '09, Sprint's Net Income was -$.594 billion. In other words, they lost almost $600 million dollars. Yet, bad as that is, that is a 63% improvement over the 4th Qtr '08 when they lost $1.621 billion dollars. On the flip side, it is 17.62% worse than 1st Qtr '08 when they "only" lost $505 million.

So, where does that leave Sprint? First, after looking at the balance sheet and income statements, I'm awed by how horrible the 4th Qtr of '08 truly was. Scary, even. Like standing in between a herd (yes, they travel in herds) of fat girls and the last pint of Haagen-Dazs scary. As such, Sprint does show significant improvement from 4th Qtr '08. They lost a lot less money and revenue "only" shrank by 2.6%.

But, when compared to 1st Qtr '08, things look worse. Not only has revenue shrunk by 12% but Sprint actually lost 17.62% more money. So, even with them slashing operating expenses the bottom line actually was worse as compared to one year ago. Not a good combination.

So which is the "real" Sprint? The Sprint that improved significantly versus 4th Qtr or the Sprint that is worse as compared to year ago? At this point, I don't know if we can tell. However, even if they continue to cut operating expenses they are still losing hundreds of millions of dollars each quarter. They must find a way to stop losing revenue. It's that simple. How they do that, however, is not that simple. Not in a recession. Not when they continue to lose millions of post-paid subscribers. Not when they're banking on pre-paid subscribers for revenue and growth opportunities. Not when churn is much higher than competitors like Verizon. Good luck, Mr. Hesse - you're going to need it.

I'll be back soon with a post on Sprint's cash flows.