Sprint - Nextel 2007 Annual Report Download - page 64

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Discontinued Operations
On May 17, 2006, we completed the spin-off of Embarq. In connection with the spin-off, Embarq
transferred to our parent company $2.1 billion in cash and about $4.5 billion of Embarq senior notes in partial
consideration for, and as a condition to, our transfer to Embarq of the local communications business. Embarq
also retained about $665 million in debt obligations of its subsidiaries. The cash and senior notes were transferred
by our parent company to our finance subsidiary, Sprint Capital Corporation, in satisfaction of indebtedness
owed by our parent company to Sprint Capital. On May 19, 2006, Sprint Capital sold the Embarq senior notes to
the public, and received about $4.4 billion in net proceeds. Embarq provided $903 million of net cash to us in
2006 excluding cash received from Embarq in connection with the spin-off.
Cash Flow
Year Ended December 31, Change
2007 2006 2005 2007 Vs 2006 2006 Vs 2005
(in millions)
Cash provided by operating activities ............. $9,245 $ 10,958 $10,679 (16)% 3%
Cash used in investing activities ................. (6,377) (11,392) (4,724) (44)% 141%
Cash used in financing activities ................. (2,668) (6,423) (1,228) (58)% NM
At December 31, 2007, cash and cash equivalents were $2.2 billion as compared to $2.0 billion as of
December 31, 2006.
Operating Activities
Net cash provided by operating activities of $9.2 billion in 2007 decreased $1.7 billion from 2006 reflecting
a decline in our earnings, primarily due to:
• a decrease in cash flows from discontinued operations of $903 million;
• a decrease in cash received from customers of $779 million primarily due to a decrease in service
revenues as a result of increased customer churn;
• an increase in cash paid to our suppliers and employees of $285 million; and
• a decrease in interest received of $151 million due to a decrease in average commercial paper and
temporary cash balances held during the year;
offset by
• a decrease of $311 million in cash paid for interest on debt due to the retirement of debt and cash paid
for taxes.
Net cash provided by operating activities increased $279 million in 2006 from 2005 primarily due to a
$12.0 billion increase in cash received from our customers as a result of the Sprint-Nextel merger in the third quarter
2005, the PCS Affiliate acquisitions in 2005 and 2006 and the Nextel Partners acquisition in the second quarter 2006,
as well as continued growth in the Wireless customer base. This increase was partially offset by an $8.5 billion
increase in cash paid to suppliers and employees, $1.2 billion of proceeds received in 2005 from the communications
towers lease transaction and a decrease in cash provided from discontinued operations of $1.1 billion.
Investing Activities
Net cash used in investing activities of $6.4 billion decreased $5.0 billion from 2006 primarily due to:
• a $10.2 billion decrease in cash paid for acquisitions in 2007 as compared to 2006 when we acquired
Alamosa Holdings, UbiquiTel, Velocita Wireless, Enterprise Communications and Nextel Partners for
$10.5 billion compared to $287 million that we paid for the acquisition of Northern PCS in 2007;
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