Sprint - Nextel 2005 Annual Report Download - page 73

Nonoperating Items
Year Ended December 31, Change from Previous Year
2005 2004 Dollars Percent
(dollars in millions)
Interest expense .................................... $ (1,351) $ (1,282) $ (69) (5)%
Interest income ..................................... 238 61 177 NM
Equity in earnings (losses) of unconsolidated subsidiaries . . . 110 (39) 149 NM
Loss on retirement of debt ............................ — (60) 60 100%
Other, net ......................................... 83 20 63 NM
Income tax (provision) benefit ......................... (1,105) 591 (1,696) NM
Cumulative effect of change in accounting principles, net . . . (16) — (16) (100)%
Income (loss) available to common shareholders ........... $ 1,778 $ (1,028) $ 2,806 NM
NM: Not Meaningful
Year Ended December 31, Change from Previous Year
2004 2003 Dollars Percent
(dollars in millions)
Interest expense ..................................... $ (1,282) $ (1,437) $ 155 11%
Interest income ..................................... 61 51 10 20%
Equity in losses of unconsolidated subsidiaries ............ (39) (77) 38 49%
Loss on retirement of debt ............................ (60) (21) (39) NM
Other, net .......................................... 20 (27) 47 NM
Income tax benefit ................................... 591 212 379 NM
Discontinued operations, net ........................... — 1,324 (1,324) (100)%
Cumulative effect of change in accounting principles, net .... — 258 (258) (100)%
(Loss) income available to common shareholders .......... $ (1,028) $ 1,283 $ (2,311) NM
NM: Not Meaningful
Interest Expense
The effective interest rates in the following table reflect interest expense on long-term debt only. Interest costs on
short-term borrowings, deferred compensation plans and amortization of debt costs have been excluded so as not
to distort the effective interest rates on long-term debt. See “—Liquidity and Capital Resources” for more
information on our financing activities.
Year Ended December 31,
2005 2004 2003
Effective interest rate on long-term debt ................................. 6.8% 6.9% 7.0%
The effective interest rate includes the effect of interest rate swap agreements. Additional information regarding
our interest rate swaps can be found in note 12 of the Notes to the Consolidated Financial Statements appearing
at the end of this annual report on Form 10-K. Although interest expense increased $69 million in 2005 compared
to 2004 due to the additional indebtedness assumed in connection with the Nextel merger and the PCS Affiliate
acquisitions, the effective interest rate on long-term debt decreased in 2005 from 6.9% to 6.8%. This decrease is
primarily due to lower effective interest rates on the assumed Nextel long-term debt. As of December 31, 2005,
the average floating rate of interest on the swapped debt was 7.0%, while the weighted average coupon on the
underlying debt was 7.2%. Our effective interest rate on long-term debt decreased in 2004 as compared to 2003,
primarily due to fair value interest rate swaps on $1 billion of long-term debt that were entered into during 2003.
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