Sprint - Nextel 2006 Annual Report Download - page 107

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Note 6. Fair Value of Financial Instruments
We have determined the estimated fair values of financial instruments using available market information and
appropriate valuation methodologies. However, considerable judgment is required in interpreting market data
to develop fair value estimates. As a result, the estimates presented below are not necessarily indicative of the
amounts that we could realize or be required to pay in a current market exchange. The use of different market
assumptions, as well as estimation methodologies, may have a material effect on the estimated fair value
amounts.
The carrying amounts and estimated fair values of our financial instruments at year-end were as follows:
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
2006
(1)
2005
(1)
December 31,
(in millions)
Marketable securities and other investments ............... $ 106 $ 106 $ 1,906 $ 1,906
Derivative instruments ............................... (20) (20) (41) (41)
Debt, including current portion ......................... 22,154 23,315 25,014 27,214
Redeemable preferred stock ........................... — — 247 261
(1) Cash and cash equivalents, accounts receivable, deposits, accounts payable and accrued expenses and
other items have been excluded from the table above, as the carrying amount on the consolidated balance
sheets approximate their carrying amounts due to their short term nature.
Financial Instruments Valuation Method
Marketable securities and other investments Primarily quoted market prices
Derivative instruments Estimates using available market information and
appropriate valuation methodologies
Debt Available market prices and estimates using available
market data information and valuation methodologies
Redeemable preferred stock Available market prices and estimates using market
data to value a debt instrument with embedded
optionality
Letters of Credit
Outstanding letters of credit totaled $2.6 billion as of December 31, 2006 and 2005. Pursuant to the terms of
the Report and Order described in note 7 below, we were required to establish a letter of credit in the amount
of $2.5 billion to provide assurance that funds will be available to pay the relocation costs of the incumbent
users of the 800 MHz spectrum in connection with the band reconfiguration process. This letter of credit is
outstanding under our $6.0 billion revolving credit facility. The letter of credit is subject to fees competitively
determined in the market place. We also use letters of credit to provide credit support for various financial
obligations.
F-30
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)