Slide 1: Investor Quarterly Update Fourth Quarter 2006 Results
• • •
Net operating revenues increase 7% year-over-year Continued strong demand for data services Wireless customer additions of 742,000 raises year-end total to 53.1 million; wireless service revenues and profits increase at double-digit rate Long Distance reports strong IP growth and solid profit contribution Significant investment in network and business operations
• •
Inquiries should be directed to: Media Relations James Fisher 703-433-8677 james.w.fisher@sprint.com Investor Relations Kurt Fawkes 800-259-3755 Investorrelations@sprint.com
INDEX
Earnings Release Consolidated Statements of Operations Condensed Consolidated Balance Sheets Condensed Consolidated Cash Flow Information Reconciliations Operating Statistics Notes to Financial Data
1-10 11-12 16 14 15 13 17-21 22 23
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Slide 2: Sprint Nextel Reports Fourth Quarter 2006 Results
Fourth Quarter Highlights
Wireless ▪ Total revenues of $9.0 billion increased 9% from the fourth quarter of 2005. Adjusted Operating Income* of $651 million increased 28% from $508 million reported in the year-ago period Adjusted OIBDA* of $2.9 billion increased 14% from the same period a year ago Long Distance ▪ Revenues were $1.6 billion, a decline of 2%, compared to the fourth quarter of 2005 Adjusted Operating Income* was $112 million, a 35% gain from the year-ago period Adjusted OIBDA* was $259 million, a 17% increase compared to the fourth quarter of 2005 RESTON, Va., Feb. 28, 2007 -- Sprint Nextel Corp. (NYSE: S) today reported fourth quarter and full-year 2006 financial results. In the quarter, the company enhanced its product portfolio, aggressively expanded network coverage and capabilities, reported continued strong growth in wireless data and wireline IP revenue, and significantly increased investment in business operations to enhance future growth and profitability. The company also made significant strides on its planned fourth generation mobile broadband network. For the quarter, diluted earnings per share (EPS) from continuing operations were 9 cents, compared to break-even in the fourth quarter of 2005. Adjusted EPS before Amortization* was 29 cents in the most recent quarter, compared to 23 cents in the fourth quarter of 2005, an increase of 26%. The growth in earnings is due to higher contributions in both the Wireless and Long Distance segments. For the full year, EPS from continuing operations was 34 cents compared to 40 cents for 2005. Full-year 2006 Adjusted EPS before Amortization* was $1.18, compared to pro forma Adjusted EPS before Amortization* of $1.05 for the full year 2005, a 12% increase. Consolidated net operating revenues in the fourth quarter of 2006 were $10.4 billion, an increase of 7% compared to $9.8 billion in the fourth quarter of 2005. For the full year, total consolidated revenue of $41.0 billion increased 43% on a reported basis and 7% compared to pro forma 2005. Consolidated adjusted OIBDA* in the most recent quarter was $3.2 billion, an increase of 13% compared to the year-ago period. Full-year consolidated adjusted OIBDA* was $12.7 billion, an increase of 12% compared to pro forma 2005 full year adjusted OIBDA* of $11.3 billion. Consolidated adjusted OIBDA margin* was 32.9% in the fourth quarter of 2006 versus 31.2% in the year-ago period and 33.6% for the full year, compared to 32.2% for pro forma 2005. “In the fourth quarter, we increased funding of business operations and network investments. We are seeing early returns from these investments as we widen our lead in wireless data services on the CDMA platform and with the iDEN network now delivering substantially improved call quality metrics,” said Gary Forsee, Sprint Nextel Chairman and CEO. “The introduction of our PowerSourceTM phones to bridge the two networks brings customers the industry’s best push-to-talk, voice and data services.
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Slide 3: “Although we achieved these improvements, we experienced uneven financial performance between our network platforms and within some of our key wireless metrics. We saw these trends in the 4th quarter: • • • • • • • • • Data service revenues increased 66% compared to the year-ago period. Net subscriber growth on the CDMA platform was solid, with a total of more than 1.3 million net additions from post-paid, wholesale and affiliate subscribers. We reported a decline in iDEN post-paid subscribers. Boost Mobile reported a subscriber gain in the quarter. Customer retention rates improved sequentially. The credit mix of new subscribers was enhanced, but gross post-paid customer acquisitions declined. The postpaid Average Revenue Per User (ARPU) rate of decline again moderated. We added several devices to our product line-up, and initiated efforts for aggressive 2007 marketing of PowerSource phones. We made significant investments in branding, distribution and customer care.
“Additionally, we had solid performance in our Long Distance business, with a year-over-year increase in wireline Internet Protocol (IP) revenues of 32%. ‘‘We have established a framework to bolster our business operations and drive future growth and profitability,” noted Forsee. “Our efforts in 2007 will be centered on improving subscriber acquisition and retention, extending our lead in data services, fully capturing cost efficiencies and developing an innovative high-speed data network that will provide significant differentiation and cost advantages.” Editor’s Note: In accordance with purchase accounting rules, Sprint Nextel’s reported results for the year ended December 31, 2005, are comprised of Sprint’s stand-alone results prior to the August 12, 2005, merger with Nextel Communications Inc., plus combined Sprint and Nextel results for the remainder of the year. Results from acquired Sprint PCS affiliates and Nextel Partners are included from either the date the applicable acquisition was completed or the start of the month closest to the acquisition date. To provide comparability with the full-year 2005 period, Sprint Nextel also is providing pro forma Consolidated and Wireless results and certain other financial measures* for 2005. The pro forma results assume the merger of Sprint and Nextel occurred on January 1, 2005, and include the impact of conforming the accounting policies and both financial and non-financial measures of the two companies. The pro forma Consolidated and Wireless information excludes results of acquired affiliates prior to their respective dates of acquisition.
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Slide 4: Consolidated
TABLE No. 1 Selected Unaudited Financial Data (in millions, except per share amounts) Diluted EPS below is from continuing operations. Quarter Ended December 31, 2006 2005 $ 10,444 $ 9,792 765 3,169 261 $ $ $ 0.09 2,612 421 $ 612 2,796 5 -% ∆ 7% 25% 13% NM NM 42% (72)% 7% 25% 13% NM 26% 42% $ Year-to-Date December 31, 2006 2005 $41,028 $ 28,789 3,104 12,696 995 0.34 $ 2,864 8,064 821 0.40 % ∆ 43% 8% 57% 21% (15)% 68% (48)% 7% 4% 12% 62% 12% 13%
As Reported Financial Data Net operating revenues Adjusted operating income* Adjusted OIBDA* Income from Continuing Operations Diluted earnings per share Capex Free cash flow* Pro Forma Financial Data Net operating revenues Adjusted operating income* Adjusted OIBDA* Diluted earnings per share Adjusted earnings per share before amortization* Pro Forma Capex
$ 1,836 $ 1,506 9,792 612 2,796 $ $ -0.23
$ 7,057 $ 2,759 $ 41,028 3,104 12,696 $ $ 0.34 1.18
$ 4,201 $ 5,330 $38,177 2,979 11,312 $ $ 0.21 1.05
$ 10,444 765 3,169 $ $ $ 0.09 0.29 2,612
$ 1,836
$ 7,057
$ 6,231
The following is a discussion of Consolidated results.
• The growth in revenue in the fourth quarter was due to higher Wireless revenues which benefited • Adjusted operating income* increased due to growth in the Wireless and Long Distance segments. • The annual growth in adjusted OIBDA* was due to higher contributions from both the Wireless
and Long Distance segments. from acquisitions and a larger subscriber base.
• Interest expense, net of interest income, was $333 million compared to $304 million in the fourth • The effective income tax rate in the fourth quarter was 31%. • Non-cash compensation expense was $80 million in the fourth quarter of 2006, versus $110 • Net debt* was $20.1 billion at the end of 2006.
million in the fourth quarter of 2005. quarter of 2005 due to lower interest expense offset by lower interest income.
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Slide 5: Wireless
TABLE No. 2
Selected Unaudited Financial Data (dollars in millions) Quarter Ended December 31, As Reported Financial Data 2006 2005 Net operating revenues $ 9,004 $ 8,230 Adjusted operating income* Adjusted OIBDA* Capex1 Pro Forma Financial Data Net operating revenues Adjusted operating income* Adjusted OIBDA* Adjusted OIBDA margin* Pro Forma Capex1
1
% ∆ 9% 28% 14% 46% 9% 28% 14% 46%
Year-to-Date 2006 2005 $35,115 $ 22,328 2,603 11,689 $ 5,846 $ 35,115 2,603 11,689 36.6% $ 5,846 2,245 6,944 $ 3,545 $ 31,726 2,360 10,192 35.6% $ 5,575
D
% ∆ 57% 16% 68% 65% 11% 10% 15% 5%
651 2,908 $ 2,238
508 2,553 $ 1,535 $ 8,230 508 2,553 34.6% $ 1,535
$ 9,004 651 2,908 35.4% $ 2,238
Capex includes re-banding capital, but excludes non-network rebanding costs
The following is a discussion of our Wireless results. Subscribers
• In the quarter, Wireless added a total of 742,000 subscribers.
o o o o
Postpaid subscribers declined by 306,000 in the quarter, reflecting a gain in CDMA subscribers, offset by a decline of iDEN subscribers; Boost pre-paid subscribers increased 171,000; Wholesale channels added 830,000 subscribers; and, Affiliates added 46,000 subscribers.
end of 2005. The detailed breakdown of the year-end subscriber count includes: o Approximately 41.8 million post-paid subscribers, consisting of 24.2 million on the CDMA platform and 17.6 million on the iDEN platform; o 4.0 million Boost pre-paid subscribers; o 6.4 million wholesale subscribers; and o 900,000 affiliate subscribers. Churn
• Sprint Nextel ended 2006 with a total of 53.1 million subscribers, compared to 47.6 million at the
• Post-paid churn in the quarter was 2.3% compared to 2.4% in the third quarter, and 2.1% in the
fourth quarter a year-ago. The increase from the year-ago period is due to higher churn among iDEN subscribers. The sequential improvement is due to lower churn within the CDMA base offset by higher churn in former Nextel Partners markets. • Pre-paid churn in the quarter was 6.5% compared to 6.8% in the third quarter, and 4.8% a year ago. Revenues/ARPU
• Total operating revenues increased 9%, compared to the fourth quarter of 2005. Service revenues
increased 11% due to acquisitions and a larger direct customer base, offset by a decline in post-
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Slide 6: paid and pre-paid ARPU. Wireless had strong wholesale growth due to a larger MVNO customer base. Equipment revenues declined 5% compared to the year-ago period due to lower post-paid gross additions partially offset by higher customer upgrades. • Post-paid ARPU in the quarter was a little over $60, reflecting a 1% sequential decline and a less than 5% decline from the year-ago period. Post-paid ARPU continues to be impacted by lower voice revenues, which are being partially offset by growth in data revenues. Sequentially, CDMA ARPU was flat at $59, while iDEN ARPU declined 2% to $62. Compared to the year-ago period, CDMA ARPU was down 1%, while iDEN ARPU declined 8%. • Boost ARPU was a little under $32 in the quarter, a 3% sequential decline and a 14% decline yearover-year. • In the fourth quarter, data service revenues increased 66%, compared to the year-ago period and 14% sequentially. The growth is being driven by strong take rates for Power Vision SM data services on handsets, demand for text messaging and increasing laptop aircard usage supported by EVDO expansion on the CDMA network. Data contributed $8.75 to overall post-paid ARPU in the quarter and reached nearly $12 of contribution, or 20% of CDMA postpaid ARPU. Operating Expenses/Margin
• In the quarter, costs of services increased 13% compared to the year-ago period due to a larger
customer base, growth in the network and higher service and repair costs. Cost of products declined 5% in the quarter due to lower volume, partially offset by higher handset upgrade costs. SG+A expense increased 9% compared to the fourth quarter of 2005, due to increases in sales, marketing, customer care and bad debt expense offset by lower IT, employee incentive compensation and billing costs. Depreciation expense increased 13% due to a larger asset base. • Adjusted OIBDA Margin* was 35.4% in the quarter, compared to 34.6% in the year-ago period due to increasing scale and merger expense synergies. For the full year, the margin improved 100 basis points to 36.6% from the 2005 pro forma margin. Capital Spending
• In the quarter, Adjusted OIBDA* exceeded capital investment by $670 million, bringing the full • In the fourth quarter capital spending of $2.2 billion reflects the addition of more than 1,800 cell
year measure to $5.8 billion compared to pro forma $4.6 billion in 2005. sites to improve capacity and coverage, the extension of EVDO coverage, which today reaches 209 million people and the deployment of Revision A technology, which currently covers a population of 110 million.
Long Distance
TABLE No. 3 Selected Unaudited Financial Data (dollars in millions) Quarter Ended December 31, 2006 2005 $ 1,635 $ 1,662 112 83 259 221 15.8% $ 13.3% $ 274 $ 166 % ∆ (2)% 35% 17% 65% Year-to-Date December 31, 2006 2005 $ 6,571 $6,834 470 523 976 1,022 14.9% 15.0% $ 821 $ 384 % ∆ (4)% (10)% (5)% NM
Net operating revenues Adjusted operating income* Adjusted OIBDA* Adjusted OIBDA margin* Capex
The following is a discussion of our Long Distance results.
• Total revenues declined 2% year-over-year, but increased modestly sequentially. • In the quarter, Internet Protocol (IP) revenues increased 32% year-over-year and 7% sequentially
due to good demand for enterprise MPLS services.
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Slide 7: • Total voice revenues declined 3% year-over-year and 1% sequentially. Compared to the year-ago • • • •
period, growth in wholesale services largely offset declines in retail business and consumer voice services. At the end of the quarter, Sprint Nextel was serving cable companies with about 1.5 million cable telephony customers, an increase of more than 80% from year-end 2005. In the quarter, the adjusted OIBDA margin* improved 250 basis points compared to the fourth quarter of 2005 while the full year margin was flat. The fourth quarter operating expenses declined 2% compared to the year-ago period mainly due to lower SG+A costs. For the full year, adjusted OIBDA* exceeded capital investment by a little over $150 million following elevated capital investment in 2006 to meet significant growth in the cable business and to support demand for IP services.
Forward-Looking Guidance
Sprint Nextel is reiterating 2007 guidance it initially provided on January 8 for the following items: • Full year consolidated operating revenues of $41 billion to $42 billion. • Adjusted OIBDA* of $11.0 billion to $11.5 billion. • The company expects to continue with its previously announced share buy-back program. The company will vary the amount and timing of its common stock purchases from time to time as the program proceeds. Reflecting accelerated fourth quarter Wireless network deployments, the company is revising its target capital expenditures for 2007 to approximately $8.0 billion from previous guidance of $8.5 billion. In 2007, the company expects to invest approximately $600 million in Long Distance and up to $800 million on its WiMAX initiative. Sprint Nextel expects to invest approximately $5.8 billion on Wireless capital in 2007, inclusive of network investments associated with re-banding. In addition, the company estimates that it could spend up to $800 million on intangible costs associated with re-banding which will largely be dependent upon the timing of user relocations.
*Financial Measures
Sprint Nextel provides financial measures generated using generally accepted accounting principles (GAAP) and using adjustments to GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These non-GAAP measures are not measurements under accounting principles generally accepted in the United States. These measurements should be considered in addition to, but not as a substitute for, the information contained in our financial statements prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other companies. Sprint Nextel provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint Nextel does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint Nextel does not provide reconciliations to GAAP of its forward-looking financial measures. The measures used in this release include the following: Adjusted Earnings per Share (EPS) is defined as income from continuing operations, before special items, net of tax and the diluted EPS calculated thereon. Adjusted EPS before Amortization is
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Slide 8: defined as income from continuing operations, before special items and amortization, net of tax, and the diluted EPS calculated thereon. These non-GAAP measures should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe that these measures are useful because they allow investors to evaluate our performance for different periods on a more comparable basis by excluding items that relate to acquired amortizable intangible assets and not to the ongoing operations of our businesses. Adjusted Net Income is defined as income (loss) from continuing operations before special items. Adjusted Net Income before Amortization is defined as income (loss) from continuing operations before special items and amortization, net of tax. These non-GAAP measures should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe that these measures are useful because they allow investors to evaluate our performance for different periods on a more comparable basis by excluding items that do not relate to the ongoing operations of our businesses. Adjusted Operating Income is defined as operating income before special items. This nonGAAP measure should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe this measure is useful because it allows investors to evaluate our operating results for different periods on a more comparable basis by excluding special items. Adjusted OIBDA is defined as operating income before depreciation, amortization, restructuring and asset impairments, and special items. Adjusted OIBDA Margin represents Adjusted OIBDA divided by non-equipment net operating revenues for Wireless and Adjusted OIBDA divided by net operating revenues for Long Distance. Although we have used substantially similar measures in the past, which we called “Adjusted EBITDA,” we now use the term Adjusted OIBDA and Adjusted OIBDA Margin to describe the measure we use as it more clearly reflects the elements of the measure. These non-GAAP measures should be used in addition to, but not as a substitute for, the analysis provided in the statement of operations. We believe that Adjusted OIBDA and Adjusted OIBDA Margin provide useful information to investors because they are an indicator 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 debt. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Adjusted OIBDA and Adjusted OIBDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry. Free Cash Flow is defined as the change in cash and cash equivalents less the change in debt, investment in certain securities, proceeds from common stock and other financing activities, net, from continuing operations. This non-GAAP measure should be used in addition to, but not as a substitute for, the analysis provided in the 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 purchase or sale of investments. Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, current marketable securities and restricted cash. This non-GAAP measure should be used in addition to, but not as a substitute for, the analysis provided in the balance sheet and statement of cash flows. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.
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Slide 9: Safe Harbor
This news release includes “forward-looking statements” within the meaning of the securities laws. The statements in this news release regarding the business outlook, expected performance, forward looking guidance, continuation of our previously announced share buy-back program, as well as other statements that are not historical facts, are forward-looking statements. The words "estimate," "project," ”forecast,” "intend," "expect," "believe," "target," “providing guidance” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are estimates and projections reflecting management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, customer and network usage, customer growth and retention, pricing, operating costs, the timing of various events and the economic environment.
Future performance cannot be assured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ include: • the effects of vigorous competition, including the impact of competition on the price we are able to charge customers for services we provide and our ability to attract new customers and retain existing customers; the overall demand for our service offerings, including the impact of decisions of new subscribers between our post-paid and prepaid services offerings and between our two network platforms; and the impact of new, emerging and competing technologies on our business; the impact of overall wireless market penetration on our ability to attract and retain customers with good credit standing and the intensified competition among wireless carriers for those customers; the potential impact of difficulties we may encounter in connection with the integration of the pre-merger Sprint and Nextel businesses, and the integration of the businesses and assets of certain of the third party affiliates, or PCS Affiliates, that provide wireless personal communications services, or PCS, under the Sprint® brand that we have acquired, and Nextel Partners, Inc., including the risk that these difficulties could prevent or delay our realization of the cost savings and other benefits we expect to achieve as a result of these integration efforts and the risk that we will be unable to continue to retain key employees; the uncertainties related to the implementation of our business strategies, investments in our networks, our systems, and other businesses, including investments required in connection with our planned deployment of a next generation broadband wireless network; the costs and business risks associated with providing new services and entering new geographic markets, including with respect to our development of new services expected to be provided using the next generation broadband wireless network that we plan to deploy; the impact of potential adverse changes in the ratings afforded our debt securities by ratings agencies;
•
•
•
•
•
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Slide 10: •
the effects of mergers and consolidations and new entrants in the communications industry and unexpected announcements or developments from others in the communications industry; unexpected results of litigation filed against us; the inability of third parties to perform to our requirements under agreements related to our business operations, including a significant adverse change in Motorola, Inc.’s ability or willingness to provide handsets and related equipment and software applications, or to develop new technologies or features for our integrated Digital Enhanced Network, or iDEN®, network; the impact of adverse network performance; the costs of compliance with regulatory mandates, particularly requirements related to the Federal Communication Commission’s Report and Order; equipment failure, natural disasters, terrorist acts, or other breaches of network or information technology security; one or more of the markets in which we compete being impacted by changes in political or other factors such as monetary policy, legal and regulatory changes or other external factors over which we have no control; and
other risks referenced from time to time in our filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2005, as amended, in Part I, Item 1A, “Risk Factors,” and, when filed, our Form 10-K for the year ended December 31, 2006.
• •
• • • •
•
Sprint Nextel believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date of this release. Sprint Nextel is not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this release.
About Sprint Nextel
Sprint Nextel offers a comprehensive range of wireless and wireline communications services bringing the freedom of mobility to consumers, businesses and government users. Sprint Nextel is widely recognized for developing, engineering and deploying innovative technologies, including two robust wireless networks serving 53.1 million customers at the end of 2006; industry-leading mobile data services; instant national and international walkie-talkie capabilities; and an award-winning and global Tier 1 Internet backbone. For more information, visit www.sprint.com.
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Slide 11: Sprint Nextel Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (a)
(millions, except per share data)
TABLE No. 4
Quarter Ended December 31, December 31, 2006 2005 $ 10,444 $ 9,792
Year-to-Date December 31, December 31, 2006 2005 $ 41,028 $ 28,789
Net Operating Revenues Operating Expenses Costs of services Costs of products Selling, general and administrative (1) (includes $117, $319, $413 & $580 of merger and integration) Severance, lease exit costs and asset impairments Depreciation Amortization Total operating expenses Operating Income Interest expense Interest income Gain on early retirement of debt Equity in gain (losses) earnings of unconsolidated investees, net Other, net Income from continuing operations before income taxes Income tax expense Income from Continuing Operations Discontinued operations, net (3) Cumulative effect of change in accounting principle, net Net Income Preferred stock dividends paid Income Available to Common Shareholders Diluted Earnings Per Common Share Discontinued Operations Cumulative effect of change in accounting principle, net Diluted Earnings Per Common Share from Continuing Operations
(2)
2,979 1,273 3,140 79 1,474 930 9,875 569 (359) 26 1 (5) 145 377 (116) 261 261 $ $ 261 0.09 $ 0.09 $ $ $
2,790 1,333 3,213 (25) 1,315 869 9,495 297 (398) 94 (7) 34 20 (15) 5 208 (16) 197 (2) 195 0.07 (0.08) 0.01 $ $ $
11,646 4,921 12,178 207 5,738 3,854 38,544 2,484 (1,533) 301 15 (6) 222 1,483 (488) 995 334 1,329 (2) 1,327 0.45 (0.11) 0.34 $ $ $
9,217 3,272 8,916 43 3,864 1,336 26,648 2,141 (1,294) 236 107 101 1,291 (470) 821 980 (16) 1,785 (7) 1,778 0.87 (0.48) 0.01 0.40
Diluted weighted average common shares Basic Earnings Per Common Share $
2,916.2 0.09 $
2,979.4 0.07 $
2,971.7 0.45 $
2,053.6 0.87
(a) Results for each of the periods reflected include the results of Nextel from the date of Sprint-Nextel merger and of each of the acquired PCS Affiliates as well as Nextel Partners from either the date of the acquisition or the start of the month closest to the acquistion date. (1), (2), (3) See accompanying Notes to Financial Data.
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Slide 12: Sprint Nextel Corporation
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(millions, except per share data)
TABLE No. 5
Quarter Ended December 31, December 31, 2006 2005 $ 10,444 2,979 1,273
(1) (2)
Year-to-Date December 31, December 31, 2006 2005 $ 41,028 11,646 4,921 12,178 207 5,738 3,854 38,544 2,484 (1,533) 301 15 (6) 222 1,483 (488) 995 334 1,329 (2) $ 1,327 $ $ 38,177 10,854 4,670 12,150 43 4,982 3,351 36,050 2,127 (1,599) 261 (37) 158 57 967 (338) 629 980 (16) 1,593 (7) 1,586
Net Operating Revenues Operating Expenses Costs of services Costs of products Selling, general and administrative
(includes $117, $319, $413 & $709 of merger and integration)
$
9,792 2,790 1,333 3,213 (25) 1,315 869 9,495 297 (398) 94 (7) 34 20 (15) 5 208 (16) 197 (2)
3,140 79 1,474 930 9,875 569 (359) 26 1 (5) 145 377 (116) 261 261 $ 261 $
Severance, lease exit costs and asset impairments Depreciation Amortization Total operating expenses Operating Income Interest expense Interest income Gain (loss) on early retirement of debt
Equity in (losses) earnings of unconsolidated investees, net Other, net Income from continuing operations before income taxes Income tax expense Income from Continuing Operations Discontinued Operations, net (3) Cumulative effect of change in accounting principle, net Net Income Preferred stock dividends paid Income Available to Common Shareholders
195
Diluted Earnings Per Common Share (a) Discontinued Operations Cumulative effect of change in accounting principle, net Special items (a) Adjusted EPS *
$
0.09 -
$
0.07 (0.08) 0.01 0.05
$
0.45 (0.11) 0.06
$
0.54 (0.33) 0.17
$
0.09
$
0.05
$
0.40
$
0.38
Diluted weighted average common shares
(a) Earnings per share data may not add due to rounding.
2,916.2
2,979.4
2,971.7
2,961.1
(1),(2), (3) See accompanying Notes to Financial Data.
Pro forma consolidated statements of operations have been presented as if the Sprint-Nextel merger occurred at the beginning of 2005. Because the merger occurred in the third quarter 2005, the fourth quarter 2005 and the fourth quarter and year-to-date 2006 results reflect actual combined results. The pro forma results do not include the results of any acquired PCS Affiliate, Velocita or Nextel Partners prior to the dates of their respective acquisitions because they do not significantly affect reported results.
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Slide 13: Sprint Nextel Corporation
RECONCILIATIONS OF EARNINGS PER SHARE (Unaudited)
(millions, except per share data)
TABLE No. 6
As Reported Quarter Ended December 31, December 31, 2006 2005
Pro Forma (c) Year-to-Date December 31, December 31, 2006 2005 $ 1,327 2 1,329 (334) 995 129 252 (132) (9) (58) 1,177 2,320 $ $ 3,497 0.45 (0.11) 0.34 0.06 $ 0.40 0.78 $ 1.18 $ $ $ $ $ 1,586 7 1,593 (980) 16 629 28 438 61 (117) 22 50 1,111 2,014 3,125 0.54 (0.33) 0.21 0.17 0.38 0.67 1.05
Year-to-Date Quarter Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 $ 1,327 2 1,329 (334) 995 129 252 (132) (9) (58) 1,177 2,320 $ $ 3,497 0.45 (0.11) 0.34 0.06 $ 0.40 0.78 $ 1.18 $ $ $ $ $ 1,778 7 1,785 (980) 16 821 28 356 61 (117) 1,149 803 1,952 0.87 (0.48) 0.01 0.40 0.16 0.56 0.39 0.95 $ $ $ $ $ 261 261 261 52 71 (92) (16) 276 560 836 0.09 0.09 0.09 0.20 0.29 $ $ $ $ $ 195 2 197 (208) 16 5 (15) 190 12 (27) 165 522 687 0.07 (0.08) 0.01 0.05 0.05 0.18 0.23
Income Available to Common Shareholders Preferred stock dividends paid Net Income (Loss) Discontinued operations, net Cumulative effect of change in accounting principle Income from Continuing Operations Special items (net of taxes) (a) Severance, lease exit costs and asset impairments Merger and integration expense Hurricane charges (excluding asset impairments) Net gains on investment activities and equity in earnings (Gain) Loss on early retirement of debt Tax audit settlement Motorola consent fee Adjusted Net Income* Amortization (net of taxes) Adjusted Net Income before Amortization* Diluted Earnings Per Share Discontinued operations Cumulative effect of change in accounting principle Earnings Per Share from Continuing Operations Special items Adjusted Earnings Per Share* (b) Amortization (net of taxes) (d) Adjusted Earnings Per Share before Amortization*
(a) (b) (c) (d)
$
261 261 261 52 71 (92) (16) 276 560
$
195 2 197 (208) 16 5 (15) 190 12 (27) 165 522
$
$
$
$
$
$
$
$
$ $
836 0.09 0.09 -
$ $
687 0.07 (0.08) 0.01 0.05
$
0.09 0.20
$
0.05 0.18
(b)
$
0.29
$
0.23
See accompanying Notes to Financial Data for more information on special items. Earnings per share data may not add due to rounding. Pro forma consolidated information has been presented as if the Sprint Nextel merger occurred at the beginning of 2005. The fourth quarter 2005 and all 2006 periods reflect actual results. Rounding difference is pushed to this line.
13
Slide 14: Sprint Nextel Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(millions)
TABLE No. 7
December 31, 2006 Assets Current assets Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Deferred tax assets Prepaid expenses and other current assets Current assets of discontinued operations Total current assets Investments Property, plant and equipment, net Goodwill FCC licenses Customer relationships, net Other intangible assets, net Other assets Non-current assets of discontinued operations Total Liabilities and Shareholders' Equity Current liabilities Accounts payable Accrued expenses and other liabilities Current portion of long-term debt and capital lease obligations Current liabilities of discontinued operations Total current liabilities Long-term debt and capital lease obligations Deferred income taxes Postretirement and other benefit obligations Other liabilities Non-current liabilities of discontinued operations Total liabilities $ December 31, 2005
$
2,046 15 4,595 1,176 923 1,549 10,304 253 25,868 30,904 19,519 7,256 2,378 679 97,161
$
8,903 1,763 4,166 776 1,789 779 916 19,092 2,543 23,329 21,288 18,023 8,651 1,345 632 7,857
$
102,760
$
3,463 5,192 1,143 9,798 21,011 10,095 244 2,882 44,030
$
3,562 4,622 5,045 822 14,051 19,969 10,405 1,385 2,753 2,013 50,576
Redeemable preferred shares Shareholders' equity Common shares Treasury shares, at cost Other shareholders' equity Total shareholders' equity Total $
-
247
5,902 (925) 48,154 53,131 97,161 $
5,846 46,091 51,937 102,760
14
Slide 15: Sprint Nextel Corporation
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited) (a)
(millions)
TABLE No. 8
For the Year-to-Date Period Ended Cash flows from operating activities Net income Income from discontinued operations Depreciation and amortization Deferred income taxes Proceeds from communication towers lease transactions Other, net Net cash provided by continuing operations Net cash provided by discontinued operations Net cash provided by operating activities Cash flows from investing activities Capital expenditures Expenditures relating to FCC licenses and other intangibles Proceeds from spin-off of local communications business, net Proceeds from sale of Embarq notes Cash acquired in Nextel merger, net of cash paid Acquisitions, net of cash acquired Proceeds from maturities and sales of marketable securities Cash collateral for borrowings Proceeds from sales of assets and investments Distributions from unconsolidated investees, net Other, net Net cash used in investing activities Cash flows from financing activities Purchase and retirements of debt Proceeds from issuance of debt securities Proceeds from collateralized borrowings Net issuances and maturities of commercial paper Retirement of redeemable preferred shares Purchase of common shares Proceeds from issuance of common shares Dividends paid Other, net Net cash used in financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period $ December 31, 2006 December 31, 2005
$
1,329 (334) 9,592 468 (1,000) 10,055 903 10,958
$
1,785 (980) 5,200 798 1,195 657 8,655 2,024 10,679
(7,556) (822) 1,821 4,447 (10,481) 1,130 (866) 842 93 (11,392)
(5,057) (150) 1,183 (1,371) (13) (93) 648 167 (38) (4,724)
(8,042) 1,992 866 514 (247) (1,643) 405 (296) 28 (6,423) (6,857) 8,903 2,046 $
(1,170) 432 (525) 35 (1,228) 4,727 4,176 8,903
(a) The 2005 statement is comprised of Sprint's stand-alone results, prior to the merger with Nextel Communications, Inc., plus combined Sprint and Nextel results for the remainder of the year. Results from PCS Affiliates and Nextel Partners acquired in 2006 are included beginning from either the date of acquisition or the start of the month closest to the acquisition date.
15
Slide 16: Sprint Nextel Corporation
PRO FORMA WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(millions)
TABLE No. 9
Quarter Ended December 31, December 31, 2006 2005 $ 7,959 800 245 9,004 $ 7,173 842 215 8,230
Year-to-Date December 31, December 31, 2006 2005 $ 31,059 3,197 859 35,115 $ 27,739 3,095 892 31,726
Net Operating Revenues Service Equipment Wholesale, affiliate and other Total Operating Expenses Cost of services Cost of products Selling, general and administrative Severance, lease exit costs and asset impairments Depreciation Amortization Total operating expenses Operating Income
2,074 1,273 2,749 73 1,327 930 8,426 $ 578 $
1,833 1,333 2,531 (17) 1,176 869 7,725 505 $
7,933 4,921 10,572 175 5,232 3,854 32,687 2,428 $
7,026 4,670 9,923 20 4,482 3,350 29,471 2,255
NON-GAAP MEASURES AND RECONCILIATIONS Operating Income Special items: Severance, lease exit costs and asset impairments Hurricane charges (excluding asset impairments) Adjusted Operating Income * Depreciation and amortization Adjusted OIBDA * Operating Income Margin (1) Adjusted OIBDA Margin *
(1)
$
578 73 651 2,257 2,908 7.0% 35.4%
$
505 (17) 20 508 2,045 2,553 6.8% 34.6%
$
2,428 175 2,603 9,086 11,689 7.6% 36.6%
$
$ $
$ $
$ $
$ $
2,255 20 85 2,360 7,832 10,192 7.9% 35.6%
Operating Income Margin percentage excludes wireless equipment revenue.
Pro forma consolidated statements of operations have been presented as if the Sprint-Nextel merger occurred at the beginning of 2005. Because the merger occurred in the third quarter of 2005, the fourth quarter 2005 and the fourth quarter and year-to-date 2006 reflect actual results. The pro forma results do not include the results of any acquired PCS Affiliate, Velocita or Nextel Partners prior to the dates of their respective acquisitions because they do not significantly affect reported results.
16
Slide 17: Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS (Unaudited)
(millions)
TABLE No. 10
Long Corporate & Eliminations
For the Quarter Ended December 31, 2006 Operating Income (Loss) $ (a) Special items Severance, lease exit costs and asset impairments Merger and integration expense Adjusted Operating Income* Depreciation and amortization Adjusted OIBDA* Capital expenditures $ Adjusted OIBDA* less Capex
Consolidated
Wireless
Distance
569 79 117 765 2,404 3,169 2,612 557
$
578 73 651 2,257 2,908 2,238 670
$
107
$
(116) 1 117 2 2 100 (98)
$
$
5 112 147 259 274 (15) $
Long
Corporate & Eliminations
For the Quarter Ended December 31, 2005 Operating Income (Loss) $ Special items Severance, lease exit costs and asset impairments Merger and integration expense Hurricane charges Adjusted Operating Income* Depreciation and amortization Adjusted OIBDA* Capital expenditures $ Adjusted OIBDA* less Capex
Consolidated
Wireless
Distance
297
$
505
$
98
$
(306) 8 319 21 1 22 135 (113)
(25) 319 21 612 2,184 2,796 1,836 960 $
(17) 20 508 2,045 2,553 1,535 1,018 $
(16) 1 83 138 221 166 55 $
Long
Corporate & Eliminations
For the Quarter Ended September 30, 2006 Operating Income (Loss) $ Special items Severance, lease exit costs and asset impairments Merger and integration expense Adjusted Operating Income* (b) Depreciation and amortization Adjusted OIBDA* Capital expenditures Adjusted OIBDA* less Capex $
Consolidated
Wireless
Distance
719 50 107 876 2,488 3,364 1,843 1,521
$
754 41 795 2,364 3,159 1,473 1,686
$
73
$
(108) 107 (1) (1) 115 (116)
$
$
9 82 124 206 255 (49) $
(a) (b)
See accompanying Notes to Financial Data for more information on special items.
Amortization expense for the third quarter 2006 includes an adjustment of $52 million, which reverses amortization expense that was previously recorded in our Form 10-Q for the period ended September 30, 2006.
17
Slide 18: Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS (Unaudited)
(millions)
TABLE No. 10
Long Corporate & Eliminations
For the Quarter Ended June 30, 2006 Operating Income (Loss) Special items Severance, lease exit costs and asset impairments Merger and integration expense Adjusted Operating Income* Depreciation and amortization Adjusted OIBDA* Capital expenditures Adjusted OIBDA* less Capex $
Consolidated
Wireless
Distance
712 40 113 865 2,354 3,219 1,359 1,860
$
660 33 693 2,242 2,935 1,064 1,871
$
155 7 162 113 275 200 75
$
(103) 113 10 (1) 9 95 (86)
$
$
$
$
Long
Corporate & Eliminations
For the Quarter Ended March 31, 2006 Operating Income (Loss) Special items Severance, lease exit costs and asset impairments Merger and integration expense Adjusted Operating Income* Depreciation and amortization Adjusted OIBDA* Capital expenditures Adjusted OIBDA* less Capex $
Consolidated
Wireless
Distance
484 38 76 598 2,346 2,944 1,243 1,701
$
436 28 464 2,223 2,687 1,071 1,616
$
104 10 114 122 236 92 144
$
(56) 76 20 1 21 80 (59)
$
$
$
$
18
Slide 19: Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS (Unaudited)
(millions)
TABLE No. 11
Long Corporate & Eliminations
For the Year Ended December 31, 2006 Operating income (Loss) Special items (a) Adjusted operating income* Depreciation and amortization Adjusted OIBDA* Capital expenditures Adjusted OIBDA* less Capex $
Consolidated
Wireless
Distance
$
2,484 620 3,104 9,592 12,696 7,057 5,639
$
$
2,428 175 2,603 9,086 11,689 5,846 5,843
$
$
439 31 470 506 976 821 155
$
$ $
(383) 414 31 31 390 (359)
Long
Corporate & Eliminations
For the Year Ended December 31, 2005 Operating income (Loss) Special items Adjusted operating income (loss)* Depreciation and amortization Adjusted OIBDA* Capital expenditures Adjusted OIBDA* less Capex $
Consolidated
Wireless
Distance
$ $
2,141 723 2,864 5,200 8,064 4,201 3,863
$
$ $
2,140 105 2,245 4,699 6,944 3,545 3,399
$
$ $
493 30 523 499 1,022 384 638
$
$ $
(492) 588 96 2 98 272 (174)
Pro forma
Pro forma Wireless
Long Distance
Corporate & Eliminations
For the Year Ended December 31, 2005 Operating income (Loss) Special items Adjusted Operating Income* Depreciation and amortization Adjusted OIBDA* Capital expenditures Adjusted OIBDA* less Capex $
Consolidated
$
2,127 852 2,979 8,333 11,312 6,231 5,081
$
$
2,255 105 2,360 7,832 10,192 5,575 4,617
$
$
493 30 523 499 1,022 384 638
$
$
(621) 717 96 2 98 272 (174)
(a)
See accompanying Notes to Financial Data for more information on special items.
19
Slide 20: Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS (Unaudited)
(millions)
TABLE No.12
Quarter Ended December 31, December 31, 2006 2005 Year-to-date December 31, December 31, 2006 2005 $ 11,689 31,918 36.6% $ 2,428 7.6% $ $ 10,192 28,631 35.6% 2,255 7.9%
Wireless Pro Forma
Adjusted OIBDA* Service, wholesale, affiliate and other net operating revenues Adjusted OIBDA margin* Operating income Operating income margin $ 2,908 8,204 35.4% $ 578 7.0% $ $ 2,553 7,388 34.6% 505 6.8%
Long Distance
Adjusted OIBDA* Total net operating revenues Adjusted OIBDA margin* Operating income Operating income margin $ 259 1,635 15.8% 107 6.5% $ 221 1,662 13.3% 98 5.9% $ 976 6,571 14.9% 439 6.7% $ 1,022 6,834 15.0% 493 7.2%
$
$
$
$
Consolidated Pro Forma
Adjusted OIBDA* Service, wholesale, affiliate and other net operating revenues Adjusted OIBDA margin* Operating income Operating income margin $ 3,169 9,644 32.9% $ 569 5.9% $ $ 2,796 8,950 31.2% 297 3.3% $ $ 12,696 37,831 33.6% 2,484 6.6% $ $ 11,312 35,082 32.2% 2,127 6.1%
20
Slide 21: Sprint Nextel Corporation
NON-GAAP MEASURES AND RECONCILIATIONS
(millions)
TABLE No. 13
Quarter Ended December 31, December 31, 2006 2005 Adjusted OIBDA* Adjust for special items Proceeds from communications towers lease transactions Other operating activities, net (a) Capital expenditures Dividends paid Proceeds from sales of assets Other investing activities, net Free Cash Flow* Decrease in debt, net Retirement of redeemable preferred shares Purchase of treasury shares
Cash transferred to Embarq, net of cash received and proceeds from the sale of Embarq notes
Year-to-Date December 31, December 31, 2006 2005 $ 12,696 $ (620) (2,021) (7,209) (296) 837 (628) 2,759 (5,536) (247) (1,643) 6,268 367 (10,481) 93 1,130 405 28 (6,857) $ 8,064 (723) 1,195 116 (4,226) (525) 636 793 5,330 (1,055) 96 1,183 (1,371) (93) 167 (13) 432 51 4,727
$
3,169 $ (196) (510) (2,411) (72) 626 (185) 421 210 (120) 2 2 33 16 564
2,796 (315) 955 (1,861) (78) 47 (38) 1,506 (31) 13 (422) (93) (14) (62) 139 39 1,075
Discontinued operations activity, net Cash acquired in Nextel merger, net of cash paid
Purchase of PCS Affiliates, Nextel Partners and Velocita, net of cash acquired
Change in restricted cash Distributions from unconsolidated investees, net Investments in debt securities, net Proceeds from common shares issued Other financing activities, net Change in cash and cash equivalents - GAAP
$
$
$
TABLE No.14
Total Debt Less: Cash on hand Less: Current marketable securities Net Debt* December 31, 2006 $ 22,154 (2,046) (15) $ 20,093
(a)
Other operating activities, net includes the change in working capital, change in deferred income taxes, miscellaneous operating activities and non-operating items in net income (loss).
21
Slide 22: Sprint Nextel Corporation
OPERATING STATISTICS
TABLE No. 15
1Q06 2Q06 3Q06 4Q06 YTD 2006
Wireless
Financial and Other Statistics Direct Post-Paid Subscribers Service revenue (in millions) ARPU Churn Additions (in thousands) (1) End of period subscribers (in thousands) (2) Hours per subscriber Direct Pre-Paid Subscribers Service revenue (in millions) ARPU Churn (4) Additions (in thousands) End of period subscribers (in thousands) (3) Wholesale Subscribers Additions (in thousands) End of period subscribers (in thousands) Affiliate Subscribers Additions (in thousands) (1) End of period subscribers (in thousands) Total Subscribers Additions (in thousands) (1) End of period subscribers (in thousands) Number of cell sites on air (in thousands) Adjusted OIBDA* (in millions) (5) Service, wholesale, affiliate and other net operating revenues (in millions) Adjusted OIBDA margin* Capital expenditures Pro forma Adjusted OIBDA* less capital expenditures
(1)
$ $
7,175 62 2.1% 563 39,103 17
$ $
7,259 62 2.1% 210 41,405 17
$ $
7,653 61 2.4% (188) 41,675 17
$ $
7,588 60 2.3% (306) 41,805 16
$ $
29,675 61 2.3% 279 41,805 17
$ $
312 36 5.4% 502 3,127
$ $
337 34 6.0% 498 3,625
$ $
364 33 6.8% 216 3,841
$ $
371 32 6.5% 171 4,012
$ $
1,384 33 6.2% 1,387 4,012
228 5,382
(31) 5,351
177 5,528
830 6,358
1,204 6,358
45 1,256
27 1,283
28 853
46 899
146 899
1,338 48,868 55 $ $ 2,687 7,685 35.0% 1,071 1,616 $ $
704 51,664 57 2,935 7,800 37.6% 1,064 1,871 $ $
233 51,897 59 3,159 8,229 38.4% 1,473 1,686 $ $
741 53,074 61 2,908 8,204 35.4% 2,238 670 $ $
3,016 53,074 61 11,689 31,918 36.6% 5,846 5,843
$ $
$ $
$ $
$ $
$ $
Direct post-paid and affiliate net subscriber additions for the first quarter 2006 have been reported before transfers from the affiliate subscriber base totaling 1,605,000. Direct post-paid additions for the second quarter 2006 have been reported before acquisitions of subscribers from Nextel Partners totaling 2,092,000. Direct post-paid additions for the third quarter 2006 have been reported before transfers from the affiliate subscriber base totalling 458,000. Direct post-paid end of period subscribers reflect a decrease in the first quarter and year-to-date 2006 due to a reclassification of 42,000 employee phone rate plans from revenue-generating to non-revenuegenerating. In the quarter ended December 31, 2006, the Company changed its subscriber deactivation process for post paid subscribers. To effect this change, the customer subscriber base as of October 1, 2006 was increased by 436,000 subscribers. This adjustment did not impact reported net adds or reported churn in the quarter ended December 31, 2006. Direct prepaid end of period subscribers for the first quarter 2006 and year-to-date 2006 reflect a beginning balance adjustment of 59,000 subscribers to exclude prepaid subscribers acquired from affiliates in the third and fourth quarters 2005. Represents prepaid churn normalized for a change in the first quarter 2006 in the treatment of low-balance customers. See Tables 10 and 11 for Adjusted OIBDA* reconciliation.
(2)
(3) (4) (5)
Long Distance
Financial and Other Statistics (dollars in millions, except where stated) Total Long Distance Net Operating Revenues Voice net operating revenue Data net operating revenue Internet net operating revenue Other net operating revenue Total Operating Expenses Costs of services and products Selling, general and administrative Depreciation Severance, lease exit costs and asset impairments Operating income Operating income margin Adjusted OIBDA* Adjusted OIBDA margin* Capital expenditures Adjusted OIBDA* less capital expenditures YOY voice volume growth $ $ $ $ $ $ $ $ $ $ $ 1,669 1,009 375 225 60 1,565 1,098 335 122 10 104 6.2% 236 14.1% 92 144 10% $ $ $ $ $ $ $ $ $ $ $ 1,641 1,003 366 217 55 1,486 1,085 281 113 7 155 9.4% 275 16.8% 200 75 5% $ $ $ $ $ $ $ $ $ $ $ 1,626 989 346 237 54 1,553 1,141 279 124 9 73 4.5% 206 12.7% 255 (49) 5% $ $ $ $ $ $ $ $ $ $ $ 1,635 978 353 254 50 1,528 1,102 274 147 5 107 6.5% 259 15.8% 274 (15) 1% $ $ $ $ $ $ $ $ $ $ $ 6,571 3,979 1,440 933 219 6,132 4,426 1,169 506 31 439 6.7% 976 14.9% 821 155 5%
$
$
$
$
$
$ $
$ $
$ $
$ $
$ $
22
Slide 23: Sprint Nextel Corporation
NOTES TO FINANCIAL DATA (Unaudited)
(1) In the fourth quarter 2006, we recorded merger and integration costs of $117 million (pre-tax). All merger costs were related to the Sprint-Nextel
merger and the acquisition of PCS Affiliates. Merger and integration costs are considered to be non-recurring in nature, and have been reflected as unallocated corporate costs and therefore excluded from segment results.
(2) In the fourth quarter 2006, we recorded severance, lease exit costs and asset impairment charges of $79 million (pre-tax), which consists of about
$71 million related to work force reductions and lease termination charges, and $8 million of asset impairments primarily related to the abandonment of various assets including certain cell sites under construction. Severance, lease exit costs and asset impairment charges are allocated to the appropriate segment results.
(3) In May 2006 we entered into a separation and distribution agreement with Embarq Corporation, which consists primarily of the business that we had
reported as the Local segment in our consolidated financial statements in prior periods, and, at the time, was a wholly owned subsidiary, and on May 17, 2006, we completed the spin off of Embarq. The results of the discontinued operations (net of tax), have been reclassified out of the operating results as of the first day of each period presented.
23
