Sprint - Nextel 2005 Annual Report Download - page 117

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
may result. The following table summarizes the preliminary estimated fair values of the assets acquired and
liabilities assumed and related deferred income taxes as of the acquisition date. The amounts reported as of
September 30, 2005 reflect the estimated fair values as of the acquisition date of August 12, 2005, plus
adjustments made during the third quarter of 2005. The adjustments listed in the table below include purchase
price allocation adjustments made during the fourth quarter of 2005.
Preliminary Purchase Price Allocation
As of
September 30, 2005 Adjustments
As of
December 31, 2005
(in millions)
Current assets, including cash and cash equivalents of
$2,152 .......................................... $ 5,501 $ 4 $ 5,505
Property, plant and equipment ......................... 8,454 (80) 8,374
Goodwill .......................................... 15,549 24 15,573
Spectrum licenses ................................... 14,240 — 14,240
Other indefinite life intangibles ........................ 400 — 400
Customer relationships and other definite life intangibles .... 10,448 — 10,448
Investments ........................................ 2,680 (2) 2,678
Other assets ........................................ 111 — 111
Current liabilities .................................... (2,910) (10) (2,920)
Long-term debt ..................................... (8,984) — (8,984)
Deferred income taxes, net ............................ (7,865) (70) (7,935)
Other long-term liabilities ............................. (334) 175 (159)
Deferred compensation included in shareholders’ equity ..... 518 (33) 485
Net assets acquired ................................ $ 37,808 $ 8 $ 37,816
In the fourth quarter 2005, a net increase was made to goodwill in the amount of $24 million primarily due to
adjustments to liabilities in connection with the merger, which includes the recognition of involuntary
termination benefits, costs associated with the termination of contracts and exit activities, the rationalization of
property plant and equipment, and identification of loss contingencies that were in existence prior to
consummation of the merger. Prior to the end of the purchase price allocation period, if information becomes
available with respect to any material pre-merger contingencies where the related asset, liability or impairment is
probable and the amount can be reasonably estimated, such items will be included in the purchase price
allocation.
Management continues to finalize its plans for rationalizing certain redundant assets and activities, such as
facilities, software and infrastructure assets, and to integrate the combined companies. These plans affect many
areas of the combined company, including sales and marketing, network, information technology, customer care
and general and administrative functions. In connection with these activities, we expect to incur significant costs
over the next several years associated with dispositions and integration activities. Management is in the process
of finalizing these plans and expects to execute these plans over the next few years. We expect that the
finalization of certain integration plans will result in adjustments to the purchase price allocation for the acquired
assets and assumed liabilities of Nextel and may also result in the need to adjust the useful lives of certain
network and other property, plant and equipment.
In 2005, we recorded $197 million of costs recognized under EITF Issue No. 95-3, Recognition of Liabilities in
Connection with a Purchase Business Combination, as well as other purchase accounting guidance, as liabilities
assumed in the purchase business combination. These costs are primarily associated with Nextel employee
retention bonuses earned on the date of the merger and severance benefits for involuntary separations of Nextel
employees. Additional liabilities for termination benefits to be provided to involuntarily separated Nextel
employees are expected to be recognized as liabilities assumed in the purchase business combination.
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