Sprint - Nextel 2007 Annual Report Download - page 116

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SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 6. Severance, Exit Costs and Asset Impairments
In 2007, total severance, exit costs and asset impairment costs aggregated $440 million compared to
$207 million in 2006 and $43 million in 2005. For 2007, this included a $44 million loss on the sale of the
operations of Velocita Wireless.
Asset Impairment
In 2007, we had asset impairments of $163 million, primarily attributable to our Wireless segment, which
included the write-off of cell site development costs that we abandoned as the sites would not be used based on
management’s strategic network plans, the sale of Velocita Wireless, and the closing of retail stores due to
integration efforts. In 2006, we had asset impairments of $69 million related to software applications and
abandonment of various assets, including certain cell sites under construction in our Wireless segment. In 2005,
we had asset impairments of $44 million related to various software applications.
Severance and Exit Costs Activity
Beginning in the first quarter 2007, in order to improve our cost structure we reduced our full-time
headcount and as a result of these and other terminations, we recorded $194 million across our Wireless and
Wireline segments related to severance liability with a corresponding charge to severance expense. We
completed the majority of our headcount reductions by March 31, 2007 and finalized our reductions by the end of
the year. In addition, we recorded lease exit costs of $83 million in 2007.
Beginning in the second half of 2005, we rationalized our cost structure resulting from the Sprint-Nextel
merger and the PCS Affiliates and Nextel Partners acquisitions. Our merger and integration efforts affected many
areas of our business and operations, including network, information technology, customer care and general and
administrative functions. These activities resulted in $138 million in severance and lease exit costs associated
with work force reductions across both of our segments, which has been reported in the consolidated statements
of operations for the year ended December 31, 2006.
The following tables provide a summary of our severance and exit costs liability, exclusive of exit costs that
are expected to be associated with business combinations, in accordance with SFAS Nos. 88, 112 and 146.
2007 Activity
Balance
December 31,
2006 Expense
Cash
Payments
and Other
Balance
December 31,
2007
(in millions)
Lease terminations ................................... $ 80 $ 83 $ (68) $ 95
Severance .......................................... 34 194 (198) 30
Total costs .......................................... $114 $277 $(266) $125
2006 Activity
Balance
December 31,
2005 Expense(1)
Cash
Payments
and Other
Balance
December 31,
2006
(in millions)
Lease terminations ................................... $ 78 $ 43 $ (41) $ 80
Severance .......................................... — 95 (61) 34
Total costs .......................................... $ 78 $138 $(102) $114
F-31