Sprint - Nextel 2006 Annual Report Download - page 100

In 2006, a net decrease was made to goodwill in the amount of $214 million, primarily due to adjustments to
the fair value of reacquired rights, customer relationships and property, plant and equipment, as well as
adjustments to liabilities in connection with the PCS Affiliate acquisitions, which include costs associated with
the termination of contracts and exit activities. There will be no further purchase accounting adjustments
related to these acquisitions, except when required by certain accounting rules.
Pro Forma Financial Information
The following pro forma consolidated results of operations assume that the Sprint-Nextel merger was
completed as of January 1, 2005 and 2004 for the years ended December 31, 2005 and 2004, respectively.
2005 2004
Year Ended December 31,
(In millions, except
per share data)
Net operating revenues ....................................... $38,177 $35,120
Income (loss) from continuing operations .......................... $ 629 $(2,398)
Diluted earnings (loss) per common share from continuing operations ..... $ 0.21 $ (0.84)
The pro forma amounts represent the historical operating results of Sprint and Nextel with adjustments for
purchase accounting and to conform accounting policies that affect net operating revenues, costs of services
and products, selling, general and administrative expenses, depreciation and amortization, interest expense,
other income (expense), income taxes, and the elimination of intercompany activity. Pro forma information has
not been provided for any of the acquired PCS Affiliates, Nextel Partners or Velocita Wireless as the impact is
immaterial, both individually and in the aggregate.
Note 4. Share-Based Compensation
Share-Based Payment Plans
Under the 1997 Long-Term Stock Incentive Program, or the 1997 Program, we can grant options, restricted
shares and restricted stock units and other equity-based awards to directors and employees for up to about
180 million common shares, of which about 97 million common shares remained available at December 31,
2006. In the 1997 Program, the number of shares available for grant increases each year until 2007. On
January 1, 2007, the number of shares authorized by the 1997 Program increased by about 43 million shares.
No awards may be granted under the 1997 Program after April 2007.
Under the 1997 Program, options generally are granted with an exercise price equal to the market value of the
underlying shares on the grant date; however, the 2005 option awards for certain senior level executives have
an exercise price equal to 110% of the market value of the underlying shares on the grant date. Options
granted in 2006 generally vest on an annual basis over three years and have a contractual term of ten years.
Options granted before 2006 generally vest on an annual basis over four years, and also have a contractual
term of ten years. Employees and directors who are granted restricted stock units are not required to pay for
the shares but must remain employed with us, or continue to serve as a member of our board of directors,
until the restrictions on the shares lapse, which is typically three years for employees and one year for
directors. In addition, restricted stock units awarded to certain senior level executives in 2005 and many of the
restricted stock units granted in 2006 contain performance provisions such as the achievement of defined
levels of wireless subscriber additions, adjusted operating income before depreciation and amortization, post-
paid wireless subscriber retention and/or other qualitative and quantitative factors. Performance provision
achievement is typically evaluated one year after grant, at which point we may increase or decrease the
number of awards an employee is eligible to receive. To the extent the performance provisions are achieved,
the vesting of any awards that remain outstanding is subject only to the remaining term of employment or
service discussed above. Prior to 2005, restricted shares, or nonvested shares, were granted to officers and key
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SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)