Sprint - Nextel 2006 Annual Report Download - page 111

Severance and Lease Exit Costs Activity
In connection with the ongoing merger and integration cost rationalization projects, which began in the second
half of 2005, we continue to align our internal resources to achieve synergies from the Sprint-Nextel merger
and the PCS Affiliates and Nextel Partners acquisitions. These projects affect many areas of our business and
operations, including network, information technology, customer care and general and administrative functions.
We expect to continue to incur costs over the next several quarters associated with such realignment and other
activities, including costs associated with the separations of some employees. These activities have resulted in
$128 million in severance and lease exit costs associated with work force reductions across both of our
segments, which has been reported in the consolidated statement of operations for the year ended December 31,
2006.
In 2003, we announced the wind-down of web hosting services offered by the Long Distance segment, which
resulted in asset impairment charges, severance expense and facility lease termination costs. As of Decem-
ber 31, 2005, substantially all activities associated with this wind-down had been completed; however, we
continue to be obligated under facility leases that expire from 2007 through 2014. We incurred $10 million in
facility lease termination costs due to subtenant lease terminations in 2006, $9 million in 2005 and $65 million
in 2004.
The following tables provide an analysis of our severance and lease exit costs liability, exclusive of exit costs
associated with business combinations, in accordance with SFAS Nos. 112 and 146.
December 31, 2005
Liability Balance Expense
(1)
Cash
Payments
December 31, 2006
Liability Balance
2006 Activity
(in millions)
Lease terminations ...................... $78 $ 43 $ (41) $ 80
Severance ............................. — 95 (61) 34
Total costs ............................ $78 $138 $(102) $114
December 31, 2004
Liability Balance Expense
(1)
Cash
Payments
December 31, 2005
Liability Balance
2005 Activity
(in millions)
Lease terminations ...................... $ 93 $9 $(24) $78
Severance ............................. 55 (8) (47) —
Other ................................ 7 (2) (5) —
Total costs ............................ $155 $(1) $(76) $78
January 1, 2004
Liability Balance Expense
(1)
Cash
Payments
December 31, 2004
Liability Balance
2004 Activity
(in millions)
Lease terminations ........................ $ 45 $ 65 $(17) $ 93
Severance .............................. 43 81 (69) 55
Other.................................. 12 5 (10) 7
Total costs .............................. $100 $151 $(96) $155
(1) Excluded from the tables above are severance and lease exit costs of $27 million in 2006, a credit of
$1 million in 2005 and an expense of $23 million in 2004 that were allocated to our Local segment prior
to the spin-off of Embarq and are included in discontinued operations in the consolidated statements of
operations.
F-34
SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)