EQ » Topics » Our future financial performance may be worse than the performance reflected in our historical financial information.

These excerpts taken from the EQ 10-K filed Feb 13, 2009.

Our future financial performance may be worse than the performance reflected in our historical financial information.

For the periods prior to spin-off, the historical financial information included in this annual report does not reflect what our results of operations and cash flows would have been had we been an independent company during the entire periods presented. This is primarily a result of the following:

 

   

Our historical financial information for the periods prior to spin-off reflects allocations for services historically provided by Sprint Nextel. These allocations are different from the costs and do not reflect the increased costs associated with being an independent company, including changes in our cost structure, personnel needs, financing and operations of the business and from reduced economies of scale; and

 

   

Our historical financial information for periods prior to spin-off does not reflect the debt and related interest expense that was incurred as part of the spin-off. See Note 4, Long-Term Debt and Financial Instruments, of the Notes to Consolidated Financial Statements, for additional information.

For additional information about the past financial performance of our business and the basis of presentation of the historical consolidated financial statements see Item 6, “Selected Financial Data,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Result of Operation” and the “Consolidated Financial Statements,” included elsewhere in this annual report on Form 10-K.

Before our spin-off from Sprint Nextel, our business was principally operated as one of Sprint Nextel’s business units, and therefore we have only a brief operating history as an independent public company. Accordingly, there can be no assurance that our business strategy and operations will be successful on a stand-alone basis.

Our future financial performance may be worse than the performance reflected in our historical financial information.

For the periods prior to spin-off, the historical financial information included in this annual report does not reflect what our results of operations and cash flows would have been had we been an independent company during the entire periods presented. This is primarily a result of the following:

 

   

Our historical financial information for the periods prior to spin-off reflects allocations for services historically provided by Sprint Nextel. These allocations are different from the costs and do not reflect the increased costs associated with being an independent company, including changes in our cost structure, personnel needs, financing and operations of the business and from reduced economies of scale; and

 

   

Our historical financial information for periods prior to spin-off does not reflect the debt and related interest expense that was incurred as part of the spin-off. See Note 4, Long-Term Debt and Financial Instruments, of the Notes to Consolidated Financial Statements, for additional information.

For additional information about the past financial performance of our business and the basis of presentation of the historical consolidated financial statements see Item 6, “Selected Financial Data,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Result of Operation” and the “Consolidated Financial Statements,” included elsewhere in this annual report on Form 10-K.

Before our spin-off from Sprint Nextel, our business was principally operated as one of Sprint Nextel’s business units, and therefore we have only a brief operating history as an independent public company. Accordingly, there can be no assurance that our business strategy and operations will be successful on a stand-alone basis.

Our future
financial performance may be worse than the performance reflected in our historical financial information.

For the periods prior to
spin-off, the historical financial information included in this annual report does not reflect what our results of operations and cash flows would have been had we been an independent company during the entire periods presented. This is primarily a
result of the following:

 







  

Our historical financial information for the periods prior to spin-off reflects allocations for services historically provided by Sprint Nextel. These allocations
are different from the costs and do not reflect the increased costs associated with being an independent company, including changes in our cost structure, personnel needs, financing and operations of the business and from reduced economies of scale;
and

 







  

Our historical financial information for periods prior to spin-off does not reflect the debt and related interest expense that was incurred as part of the spin-off.
See Note 4, Long-Term Debt and Financial Instruments, of the Notes to Consolidated Financial Statements, for additional information.

FACE="Times New Roman" SIZE="2">For additional information about the past financial performance of our business and the basis of presentation of the historical consolidated financial statements see Item 6, “Selected Financial Data,”
Item 7, “Management’s Discussion and Analysis of Financial Condition and Result of Operation” and the “Consolidated Financial Statements,” included elsewhere in this annual report on Form 10-K.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Before our spin-off from Sprint Nextel, our business was principally operated as one of Sprint Nextel’s business units, and therefore we have only a
brief operating history as an independent public company. Accordingly, there can be no assurance that our business strategy and operations will be successful on a stand-alone basis.

FACE="Times New Roman" SIZE="2">We could incur a significant liability if the distribution of Embarq common stock in the spin-off is determined to be a taxable transaction. If the distribution does not qualify as a tax-free transaction, tax
could be imposed on Sprint Nextel and we may be required to indemnify Sprint Nextel for such tax.

On July 20, 2005, Sprint
Nextel received a private letter ruling from the IRS that the spin-off qualifies for tax-free treatment under Code Sections 355 and 361. In addition, Sprint Nextel obtained an opinion of counsel from each of Cravath, Swaine & Moore LLP and
Paul, Weiss, Rifkind, Wharton & Garrison LLP that the spin-off so qualified. Such opinions primarily addressed those tax matters upon which the IRS customarily declines to rule. Notwithstanding the IRS private letter ruling and the
opinions, the IRS could determine that the distribution should be treated as a taxable transaction if it determines that any of the representations, assumptions or undertakings that were included in the request for the private letter ruling are
false or have been violated and/or if it disagrees with the conclusions in the opinions that are not covered by the IRS ruling.

 


17








If the spin-off failed to qualify for tax-free treatment, it will be treated as a taxable dividend to
Sprint Nextel stockholders in an amount equal to the fair market value of our common stock issued to Sprint Nextel holders and Sprint Nextel would be required to recognize taxable gain in an amount up to the fair market value of our common stock
that Sprint Nextel distributed to its stockholders in the spin-off plus the fair market value of the senior notes that Sprint Nextel received from us. Furthermore, events after the spin-off could cause Sprint Nextel to recognize such gain even if
the spin-off otherwise would have qualified for tax-free treatment. For example, under Code Section 355(e), relatively small acquisitions of either our equity securities or Sprint Nextel’s equity securities that are deemed to be part of a
plan or a series of related transactions that include the spin-off could cause Sprint Nextel to recognize gain on the spin-off. Under the tax sharing agreement between Sprint Nextel and us, we are generally required to indemnify Sprint Nextel
against any tax resulting from the spin-off if such tax results from (1) an issuance of our equity securities, a redemption of our equity securities or our involvement in other acquisitions of our equity securities, (2) other actions or
failures to act by us or (3) any of our representations or undertakings being incorrect or violated. We estimate that if any of these conditions occur the indemnification obligation to Sprint Nextel for taxes would be significant and we are
unlikely to have the ability to pay that obligation.

Our future
financial performance may be worse than the performance reflected in our historical financial information.

For the periods prior to
spin-off, the historical financial information included in this annual report does not reflect what our results of operations and cash flows would have been had we been an independent company during the entire periods presented. This is primarily a
result of the following:

 







  

Our historical financial information for the periods prior to spin-off reflects allocations for services historically provided by Sprint Nextel. These allocations
are different from the costs and do not reflect the increased costs associated with being an independent company, including changes in our cost structure, personnel needs, financing and operations of the business and from reduced economies of scale;
and

 







  

Our historical financial information for periods prior to spin-off does not reflect the debt and related interest expense that was incurred as part of the spin-off.
See Note 4, Long-Term Debt and Financial Instruments, of the Notes to Consolidated Financial Statements, for additional information.

FACE="Times New Roman" SIZE="2">For additional information about the past financial performance of our business and the basis of presentation of the historical consolidated financial statements see Item 6, “Selected Financial Data,”
Item 7, “Management’s Discussion and Analysis of Financial Condition and Result of Operation” and the “Consolidated Financial Statements,” included elsewhere in this annual report on Form 10-K.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">Before our spin-off from Sprint Nextel, our business was principally operated as one of Sprint Nextel’s business units, and therefore we have only a
brief operating history as an independent public company. Accordingly, there can be no assurance that our business strategy and operations will be successful on a stand-alone basis.

FACE="Times New Roman" SIZE="2">We could incur a significant liability if the distribution of Embarq common stock in the spin-off is determined to be a taxable transaction. If the distribution does not qualify as a tax-free transaction, tax
could be imposed on Sprint Nextel and we may be required to indemnify Sprint Nextel for such tax.

On July 20, 2005, Sprint
Nextel received a private letter ruling from the IRS that the spin-off qualifies for tax-free treatment under Code Sections 355 and 361. In addition, Sprint Nextel obtained an opinion of counsel from each of Cravath, Swaine & Moore LLP and
Paul, Weiss, Rifkind, Wharton & Garrison LLP that the spin-off so qualified. Such opinions primarily addressed those tax matters upon which the IRS customarily declines to rule. Notwithstanding the IRS private letter ruling and the
opinions, the IRS could determine that the distribution should be treated as a taxable transaction if it determines that any of the representations, assumptions or undertakings that were included in the request for the private letter ruling are
false or have been violated and/or if it disagrees with the conclusions in the opinions that are not covered by the IRS ruling.

 


17








If the spin-off failed to qualify for tax-free treatment, it will be treated as a taxable dividend to
Sprint Nextel stockholders in an amount equal to the fair market value of our common stock issued to Sprint Nextel holders and Sprint Nextel would be required to recognize taxable gain in an amount up to the fair market value of our common stock
that Sprint Nextel distributed to its stockholders in the spin-off plus the fair market value of the senior notes that Sprint Nextel received from us. Furthermore, events after the spin-off could cause Sprint Nextel to recognize such gain even if
the spin-off otherwise would have qualified for tax-free treatment. For example, under Code Section 355(e), relatively small acquisitions of either our equity securities or Sprint Nextel’s equity securities that are deemed to be part of a
plan or a series of related transactions that include the spin-off could cause Sprint Nextel to recognize gain on the spin-off. Under the tax sharing agreement between Sprint Nextel and us, we are generally required to indemnify Sprint Nextel
against any tax resulting from the spin-off if such tax results from (1) an issuance of our equity securities, a redemption of our equity securities or our involvement in other acquisitions of our equity securities, (2) other actions or
failures to act by us or (3) any of our representations or undertakings being incorrect or violated. We estimate that if any of these conditions occur the indemnification obligation to Sprint Nextel for taxes would be significant and we are
unlikely to have the ability to pay that obligation.

This excerpt taken from the EQ 10-K filed Feb 29, 2008.

Our future financial performance may be worse than the performance reflected in our historical financial information.

For the periods prior to spin-off, the historical financial information included in this annual report does not reflect what our results of operations and cash flows would have been had we been an independent company during the entire periods presented. This is primarily a result of the following:

 

   

Our historical financial information for the periods prior to spin-off reflects allocations for services historically provided by Sprint Nextel. These allocations are different from the costs and do not reflect

 

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the increased costs associated with being an independent company, including changes in our cost structure, personnel needs, financing and operations of the business and from reduced economies of scale; and

 

   

Our historical financial information for periods prior to spin-off does not reflect the debt and related interest expense that was incurred as part of the spin-off. See Note 4, Long-Term Debt and Financial Instruments, of the Notes to Consolidated Financial Statements, for additional information.

For additional information about the past financial performance of our business and the basis of presentation of the historical consolidated financial statements see Item 6, “Selected Financial Data,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Result of Operation” and the “Consolidated Financial Statements,” included elsewhere in this annual report on Form 10-K.

Before our spin-off from Sprint Nextel, our business was principally operated as one of Sprint Nextel’s business units, and therefore we have only a brief operating history as an independent public company. Accordingly, there can be no assurance that our business strategy and operations will be successful on a stand-alone basis.

This excerpt taken from the EQ 10-K filed Mar 9, 2007.

Our future financial performance may be worse than the performance reflected in our historical financial information.

The historical financial information included in this annual report does not reflect what our results of operations, financial position and cash flows would have been had we been an independent company during the entire periods presented or be indicative of what our results of operations, financial position and cash flows may be in the future. This is primarily a result of the following three factors:

 

   

For all periods before the spin–off, our historical financial information reflects allocations for services historically provided by Sprint Nextel. These allocations are different from the costs and do not reflect the increased costs associated with being an independent company, including changes in our cost structure, personnel needs, financing and operations of the business and from reduced economies of scale.

 

   

Our historical financial information does not reflect the debt and related interest expense as described in the “Financial Statements and Supplementary Data—Debt and Financial Instruments” that was incurred as part of the spin-off; and

 

   

For additional information about the past financial performance of our business and the basis of presentation of the historical consolidated financial statements see Item 6, “Selected Financial Data”, Item 7, “Management’s Discussion and Analysis of Financial Condition and Result of Operation” and the “Consolidated Financial Statements”, included elsewhere in this annual report on Form 10-K.

 

24


Before our spin-off from Sprint Nextel, our business was principally operated as one of Sprint Nextel’s business units, and therefore we have only a brief operating history as an independent public company. Accordingly, there can be no assurance that our business strategy and operations will be successful on a stand-alone basis.

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