Sprint - Nextel 2005 Annual Report Download - page 158

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SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Quarter
1st 2nd 3rd 4th
(in millions, except per share data)
2004
Net operating revenues .................................. $ 6,707 $ 6,869 $ 6,922 $ 6,930
Operating income (loss) ................................. 724 718 (2,715) 970
Income (loss) from continuing operations ................... 225 236 (1,910) 437
Net income (loss) ...................................... 225 236 (1,910) 437
Basic earnings (loss) per common share from continuing
operations (1) ........................................ 0.16 0.16 (1.32) 0.30
Diluted earnings (loss) per common share from continuing
operations (1)(2) ....................................... 0.16 0.16 (1.32) 0.29
(1) On April 23, 2004, we recombined our two tracking stocks. Each share of PCS common stock automatically
converted into 0.5 shares of FON common stock. All per share amounts had been restated to reflect the
recombination of the FON common stock and the PCS common stock as of the earliest period presented at
an identical conversion ratio (0.5). The conversion ratio was also applied to dilutive PCS securities (mainly
stock options, employee stock purchase plan shares, convertible preferred stock and restricted stock units)
to determine diluted weighted average shares on a consolidated basis.
(2) As the effects of including the incremental shares associated with options, restricted stock units and ESPP
shares are antidilutive, both basic earnings per common share and diluted earnings per common share
reflect the same calculation for the third quarter 2004.
Note 23. Restatements of Previously Issued Financial Statements
In November 2004, we restated previously issued financial statements to correct an error related to the
calculation of interest capitalized during construction. The financial statements were also restated to apply an
adjustment previously recorded and disclosed in the 2003 fourth quarter related to the liability for medical
coverage for participants in our long-term disability plan to the appropriate pre-2003 periods.
Note 24. Subsequent Event
In February 2006, our board of directors declared dividends of 2.5 cents on our common stock to shareholders of
record at the close of business on March 10, 2006. The dividends are payable March 31, 2006.
Note 25. Pending Transaction
Spin-off of Local Telecommunications Business
We have decided to spin-off our local communications business to our shareholders as Embarq Corporation. On
the date of the spin-off, the assets, liabilities and historical financial results which we have reported as our local
segment in our financial statements will be removed from our financial statements and reported in Embarq’s
separate company financial statements. We are currently in the process of identifying the assets and liabilities
that will be transferred to the new company, for which we expect to receive approximately $6.6 billion in the
form of cash and senior notes. We will present Embarq’s results of operations for the periods in which it was a
wholly owned subsidiary as a discontinued operation when the spin-off occurs. We anticipate that the spin-off
will be completed in the second quarter 2006.
F-63