Sprint - Nextel 2005 Annual Report Download - page 60

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In 2005, we recorded merger and integration costs of $608 million. Merger and integration costs are generally
non-recurring in nature and primarily include charges for costs to adopt and launch a new branding strategy and
logos, including costs to re-brand company-owned stores and facilities, costs to train customer-facing employees
and prepare systems for the launch of the common customer interfacing systems, processes and other integration
planning and execution costs, and costs related to employee retention and involuntary separations of employees.
These merger and integration costs were primarily related to our merger with Nextel and the planned spin-off of
Embarq. Merger and integration costs have primarily been reflected as unallocated corporate selling, general and
administrative expenses and, therefore, are excluded from segment results.
In 2005, we recorded net restructuring and asset impairment charges of $125 million. Asset impairment charges
primarily related to the write-down of various software applications, including a $77 million impairment charge
related to the write-off and removal from service of certain internal-use software systems that are no longer
utilized by our Local segment. We also incurred asset impairments arising from the hurricanes in the Gulf Coast
region, but these asset impairments were substantially offset by insurance recoveries.
In 2005, we also recorded hurricane-related charges of $111 million exclusive of the asset impairment charges.
Approximately $85 million, $15 million and $11 million of these charges were reflected on the Wireless, Long
Distance and Local segments, respectively.
In 2005, we recorded income of $154 million related to activities associated with various equity method
investments and marketable securities transactions. This income is primarily the result of our recording $137
million of equity in earnings associated with our ownership interest in Nextel Partners, the majority of which
related to a release by Nextel Partners of a significant portion of its deferred tax valuation allowance in the third
quarter 2005.
In 2004, we recorded net restructuring and asset impairment charges of $3.7 billion primarily related to the
impairment of our Long Distance property, plant and equipment and severance costs associated with our
organizational realignment initiatives and the termination of the web hosting service.
In 2003, we recorded net restructuring charges and asset impairments of $2.0 billion, which consisted of:
impairment charges associated with the decline in our estimates of fair value of certain of our BRS spectrum;
other asset impairments, facilities and severance charges associated with the termination of our web hosting
service; impairment charges associated with the termination of development of a new billing platform;
impairment charges associated with the termination of software development projects; and severance costs
associated with our transformation to a customer-focused organizational design; partially offset by the
finalization of all 2001 and 2002 restructuring liabilities.
Segmental Results of Operations
Certain prior-period amounts have been reclassified to conform to the current period presentation. In 2005, we
determined that recategorization of certain costs from costs of services and products to selling, general and
administrative would be more consistent with current industry practices, and accordingly reclassified $1.1 billion
of expenses in each of the years ended December 31, 2004 and 2003. These costs primarily consist of certain
customer care and information technology costs for the Wireless and Long Distance segments.
Wireless
Through our Wireless segment, we, together with the remaining PCS Affiliates and Nextel Partners, offer digital
wireless service in all 50 states, Puerto Rico and the U.S. Virgin Islands and provide wireless coverage in over
300 metropolitan markets, including the 125 largest U.S. metropolitan areas, to more than 277 million people.
Combined with the PCS Affiliates, Nextel Partners and our MVNO wholesale resellers, we served more than
49.6 million subscribers at the end of 2005.
We provide a comprehensive suite of advanced wireless services, including digital wireless mobile telephone
service, instant national and international walkie-talkie capabilities and wireless data transmission services.
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