Sprint - Nextel 2006 Annual Report Download - page 55

Consolidated Information
2006 2005 2004 2006 vs 2005 2005 vs 2004
Year Ended December 31, Change from Previous Year
(in millions)
Selling, general and administrative expense .... $(12,178) $(8,916) $(6,459) 37% 38%
Severance, lease exit costs and asset
impairments ......................... (207) (43) (3,691) NM (99)%
Depreciation ........................... (5,738) (3,864) (3,651) 48% 6%
Amortization ........................... (3,854) (1,336) (7) NM NM
Interest expense ........................ (1,533) (1,294) (1,218) 18% 6%
Interest income ......................... 301 236 60 28% NM
Equity in (losses) earnings of unconsolidated
investees, net ......................... (6) 107 (41) (106)% NM
Realized gain on sale or exchange of
investments .......................... 205 62 15 NM NM
Other, net ............................. 32 39 (61) (18)% 164%
Income tax (expense) benefit ............... (488) (470) 1,238 4% 138%
Discontinued operations, net ............... 334 980 994 (66)% (1)%
Income (loss) available to common
shareholders ......................... 1,327 1,778 (1,028) (25)% NM
NM — Not Meaningful
Selling, General and Administrative Expense
Selling, general and administrative expenses are primarily allocated at the segment level and are discussed in
the segment earnings discussions above. The selling, general and administrative expenses related to Wireless
were $10.6 billion in 2006, $6.7 billion in 2005 and $4.4 billion in 2004. The selling, general and
administrative expenses related to Long Distance were $1.2 billion in 2006, $1.4 billion in 2005 and
$2.0 billion in 2004.
In addition to the selling, general and administrative expenses discussed in the segment earnings discussions,
we incurred corporate selling, general and administrative expenses, including merger and integration costs of
$413 million in 2006 and $580 million in 2005. 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. These merger and integration costs
primarily relate to the Sprint-Nextel merger and have been included with unallocated corporate selling, general
and administrative expenses, and thus excluded from segment results.
Severance, Lease Exit Costs and Asset Impairments
We recorded $128 million in 2006 related to the separation of employees and lease exit costs as part of the
Sprint-Nextel merger and integration initiatives, and in 2004 we recorded $151 million in severance and lease
exit costs related to organizational realignment and other activities. We recorded asset impairment charges of
$69 million in 2006 and $44 million in 2005 primarily related to the write-off of various software applications
and $3.5 billion in 2004 related to the impairment of our Long Distance property, plant and equipment. 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.
Depreciation and Amortization Expense
Depreciation expense increased 48% in 2006 from 2005 and increased 6% in 2005 from 2004, primarily due
to the Sprint-Nextel merger and the PCS Affiliate and Nextel Partners acquisitions. Excluding the impact of
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