Sprint - Nextel 2007 Annual Report Download - page 127

SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
certain award recipients. In January 2005, we adopted a retention program designed to retain our senior
executives and other key personnel through completion of the Sprint-Nextel merger and for the one-year period
following the merger. Under this program, if we terminated the employment of a program participant other than
for cause within one year of the Sprint-Nextel merger, certain unvested equity-based awards held by that
participant vested automatically. Under the Nextel Plan, if, within one year of the Sprint-Nextel merger, we
terminated other than for cause the employment of a holder of an equity-based award granted under the plan, or
in the case of specified executives, the holder terminated his or her employment with good reason, as defined in
the plan, then that holder’s unvested equity-based awards vested automatically.
Under our ESPP, eligible employees may subscribe quarterly to purchase shares of our Series 1 common
stock through payroll deductions of up to 20% of eligible compensation. The purchase price is equal to 90% of
the market value on the last trading day of each quarterly offering period. The aggregate number of shares
purchased by an employee may not exceed 9,000 shares or $25,000 of fair market value in any calendar year,
subject to limitations imposed by Section 423 of the Internal Revenue Code. As of December 31, 2007, this plan
authorized for purchase about 19 million shares, net of elections made in 2007 by employees participating in the
fourth quarter 2007 offering period under the ESPP to purchase about 992,000 of our common shares, which
were issued in the first quarter 2008. Employees purchased these shares for $11.78 per share.
Currently, we use treasury shares to satisfy share-based awards or new shares if no treasury shares are
available.
Adoption of SFAS No. 123R
Effective January 1, 2006, we adopted SFAS No. 123R, which supersedes SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 123R requires us to measure the cost of employee services received in
exchange for an award of equity-based securities using the fair value of the award on the date of grant, and we
recognize that cost over the period that the award recipient is required to provide service to us in exchange for the
award. Any awards of liability instruments to employees would be remeasured at fair value at each reporting date
through settlement.
Pre-tax share-based compensation cost charged against net income (loss) for our share-based award plans
was $265 million for 2007, $361 million for 2006 and $303 million for 2005. Pre-tax share-based compensation
cost charged against income from continuing operations for our share-based award plans was $265 million for
2007, $338 million for 2006 and $254 million for 2005. Of the total share-based compensation in 2005,
$234 million related to stock-based grants issued after December 31, 2002; $37 million related to the
recombination of our two tracking stocks; and $32 million related to the separation of certain of our employees
employed with us prior to the Sprint-Nextel merger.
The total income tax benefit recognized in the consolidated financial statements for share-based award
compensation was $96 million for 2007, $138 million for 2006 and $111 million for 2005. The total income tax
benefit recognized in the statement of operations related to continuing operations for share-based award
compensation was $96 million in 2007, $129 million for 2006 and $93 million for 2005.
As of December 31, 2007, there was $211 million of total unrecognized compensation cost related to our
share-based award plans that is expected to be recognized over a weighted average period of 1.61 years. Cash
received from exercise under all share-based payment arrangements was $344 million for 2007, $405 million for
2006 and $432 million for 2005. The actual tax benefit realized for the tax deductions from exercise of the share-
based payment arrangements totaled $4 million for 2007, $6 million for 2006 and $6 million for 2005.
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