Sprint - Nextel 2007 Annual Report Download - page 130

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SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 12. Segments
We have two reportable segments: Wireless and Wireline. These segments are organized by products and
services. Until May 2006, we operated a third reportable segment, our local communications business, that
provided local and long distance voice and data services and is classified as discontinued operations. See note 15
for more information.
Our executives use segment earnings as the primary measure to evaluate segment performance and make
resource allocation decisions. Segment earnings is defined as wireless or wireline operating income before other
segment expenses, such as depreciation, amortization, severance, exit costs, asset impairments and other, and
merger and integration expenses solely and directly attributable to the segment. Expenses and income items
excluded from segment earnings are managed at the corporate level. In the second quarter 2007, we modified our
segment earnings to exclude merger and integration costs solely and directly attributable to a segment. Such
change was not material to segment earnings in 2007.
Our Wireless segment includes revenue from a wide array of wireless mobile telephone and wireless data
transmission services and the sale of wireless equipment. Through our Wireless segment, we, together with the
third-party PCS Affiliates, offer digital wireless service in all 50 states, Puerto Rico and the U.S. Virgin Islands.
Our Wireline segment includes revenue from domestic and international wireline voice and data
communication services and services to the cable multiple systems operators that resell our long distance service
and/or use our back office systems and network assets in support of their local and long distance telephone
services provided over cable facilities.
We generally account for transactions between segments based on fully distributed costs, which we believe
approximate fair value. In certain transactions, pricing is set using market rates. Segment financial information is
as follows:
Statement of Operations Information Wireless Wireline
Corporate,
Other and
Eliminations Consolidated
(in millions)
2007
Net operating revenues ................................. $34,698 $ 5,479 $ (31) $ 40,146
Inter-segment revenues(1) ............................... 2 984 (986) —
Total segment operating expenses(2) ....................... (24,786) (5,389) 829 (29,346)
Segment earnings ..................................... $ 9,914 $ 1,074 $(188) 10,800
Less:
Depreciation ..................................... (5,711)
Amortization ..................................... (3,312)
Severance, exit costs and asset impairments(3) ........... (440)
Goodwill impairment .............................. (29,729)
Merger and integration expenses(4) .................... (516)
Other, net ........................................ (2)
Operating loss ........................................ (28,910)
Interest expense ....................................... (1,433)
Interest income ....................................... 151
Other, net ............................................ 247
Loss from continuing operations before income taxes ......... $(29,945)
F-45