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Sprint Corporation Message Board

  • joe_daye joe_daye Feb 10, 2010 10:29 PM Flag

    SUBTRACTING THE DEPRECIATION & AMORTIZATION, S WOULD MADE .22/SHARE pos net income..

     

    Depreciation 1,481
    Amortization 321

    suntracting that $1,802 billion, your total net operating expenses would be $6,610 billion instead of $8,412 billion.


    Now taking the Net Operating Revenues $7,868b and subtraction the net operating expenses of $6,610b, we get a profit of $1,258 billion.

    From that we subtract the interest expense of $359m, and the 'other net loss' of $93m, we have a net income of
    $806 million for the quarter.

    Now as far as income taxes go, I am not too sure on that since the sprint has a hugh caryforward loss. But assuming that doesn't apply, we add back the income tax benefit of $16m, we then get $790m net income.

    Then again assuming $150m in income taxes (without any carryforward loss, we get $640 million after taxes.

    $640 million divided by the weighted average common shares outstanding 2.9 billion = .22/share positive net income. Which is pretty close to that positive cash flow of $666 million. So, I must be a little off on that income taxes.

    joey

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    • You are describing cash flow rather than profit. Many savvy investors base their decisions on Free Cash Flow rather than Net Income - particularly if the entity (like a telecom) is depreciating a lot of fixed assets. However, there are other measures of a telecom's health, and the Street clearly is not happy with Sprint's customer losses and reliance on cheaper prepaid plans. The range of 12-month target prices that I have seen (from $3 to $9) shows how difficult it is to value a company like S. A merger with GOOG certainly would settle the debate!

    • I'll tell you something: I have never understood why the heck depreciation is on the cash-flow statement. I don't honestly believe it belongs there.

      Think about this: if I put a new roof on my house, and it lasts 20 years, it depreciates at a rate of 5% per year. But do I actually see any cash going out the door every year? No, of course not. The cash went out the door when I first spent the money -- that's CapEx for a corporation. Once the cash gets spent in the form of CapEx, the cash went out the door THEN, and the idea of counting depreciation as cash moving around (on the cash-flow) statement (again, after you already counted it as a cash event) is plain nonsense.

      I always add the depreciation back to free cash flow from continuing operations -- I personally believe that Buffett does, too.

      Depreciation is not a cash event.

      The cash event was CapEx -- when the money first got spent.

      To count it again is plain nonsense.

      • 2 Replies to godsgifttotheplanet
      • Depreciation already is added back to net income on the Statement of Cash Flows. It is expensed on the Income Statement and then added back on the Statement of Cash Flows since it is a non-cash charge.

      • Me again:

        This is partly why I end-up in stocks like Sprint -- here you have a company which has $3 Billion in free cash flow the past 4 quarters and just did $666 Million in free cash flow for the past Q and yet somehow, we're supposed to believe they're making no money?

        The fact is they ARE making money, and it's stupid accounting rules -- like counting depreciation as a cash event -- that only make it appear as if they're not.

        My personal accounting rules have Sprint at a P/E of about 5 -- and there are only 2 companies, according to my personal measures, in the entire S&P500, which have a lower P/E (by my accounting rules).

        Anyhow, depreciation is not a cash-event -- that's the beginning.

 
S
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