Sprint - Nextel 2015 Annual Report Download - page 53

Table of Contents
Working Capital
We had negative working capital of $5.1 billion and $1.2 billion as of March 31, 2016 and 2015 , respectively. The decline in working capital is due to
decreased cash of $1.4 billion primarily due to cash paid for total capital expenditures which was partially offset by net cash provided by operating activities,
proceeds from MLS under the Handset Sale-Leaseback Tranche 1 transaction and proceeds from the sale of future lease receivables as part of our Receivables
Facility described below. In addition, accounts and notes receivable, net decreased $1.2 billion primarily due to the sale of installment receivables as part of our
Receivables Facility described below and device and accessory inventory decreased $186 million. Also contributing to the decline was an increase of $3.4 billion
in the current portion of long-term debt, financing and capital lease obligations primarily due to $2.0 billion of Sprint Communications, Inc. 6% Senior notes, $1.0
billion of Sprint Communications, Inc. 9.125% Senior notes and $330 million of proceeds from the sale of future lease receivables all coming due within the next
twelve months. These decreases were offset by decreases in accounts payable of $1.4 billion primarily as a result of invoices with extended payment terms with
certain network equipment suppliers coming due and timing of purchases and payments associated with device launches. Additionally, accrued expenses and other
current liabilities decreased $919 million primarily due to decreased employee accruals and decreased accrued capital expenditures for unbilled services. The
remaining balance was due to changes to other working capital items.
Long-Term Debt, Other Funding Sources and Scheduled Maturities
Accounts Receivables Facility
Transactionoverview
Our accounts receivable facility (Receivables Facility), which provides us the opportunity to sell certain wireless service and installment receivables (as
defined in the agreements) to unaffiliated third parties (Purchasers), was amended in November 2015 to include future amounts due from customers who lease
certain devices from us. The amendment increased the maximum funding limit under the Receivables Facility to $4.3 billion and extended the expiration to
November 2017. The amount available under the Receivables Facility fluctuates over time based on the total amount of eligible receivables generated during the
normal course of our business. As of March 31, 2016 , the total availability under the facility was approximately $2.0 billion . However, as a result of sales we
have completed to date, the total amount available to be drawn as of March 31, 2016 was $94 million . The proceeds from the sale of these receivables are
comprised of a combination of cash and a DPP. While it's at Sprint's election to decide how much cash it chooses to receive from each sale, the maximum amount
of proceeds varies based on a number of factors and currently represents approximately 50% of the total amount of the receivables sold to the Purchasers. The DPP
is realized by us upon either the ultimate collection of the underlying receivables sold to the Purchasers or upon Sprint's election to receive additional advances in
cash from the Purchasers subject to the total availability under the Receivables Facility.
Wireless service and installment receivables sold are treated as a sale of financial assets and Sprint derecognizes these receivables, as well as the related
allowances, and recognizes the net proceeds received in cash provided by operating activities on the consolidated statements of cash flows. The fees associated
with these sales are recognized in "Selling, general and administrative" on the consolidated statements of operations. The sale of future lease receivables are treated
as financing transactions. Accordingly, the proceeds received are reflected as cash provided by financing activities on the consolidated statements of cash flows
and the fees are recognized as "Interest expense" on the consolidated statements of operations.
TransactionStructure
Sprint contributes certain wireless service, installment and future lease receivables as well as the associated leased devices to Sprint's wholly-owned
consolidated bankruptcy-remote special purpose entities (SPEs). At Sprint's direction, the SPEs have sold, and will continue to sell, wireless service, future lease
and installment receivables to Purchasers or to a bank agent on behalf of the Purchasers. Leased devices will remain with the SPEs, once sales are initiated, and
continue to be depreciated over their estimated useful life.
Each SPE is a separate legal entity with its own separate creditors who will be entitled, prior to and upon the liquidation of the SPE, to be satisfied out
of the SPE’s assets prior to any assets in the SPE becoming available to Sprint. Accordingly, the assets of the SPE are not available to pay creditors of Sprint or any
of its affiliates (other than any other SPE), although collections from these receivables in excess of amounts required to repay the advances, yield and fees of the
Purchasers and other creditors of the SPEs may be remitted to Sprint during and after the term of the Receivables Facility.
Sprint has no retained interest in the receivables sold, other than collection and administrative responsibilities and its right to the DPP. Sales of eligible
receivables by the SPEs generally occur daily and are settled on a monthly basis. Sprint
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