Sprint - Nextel 2008 Annual Report Download - page 34

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Depreciation and Amortization Expense
Depreciation expense decreased $137 million, or 2%, in 2009 compared to 2008 primarily due to
reduced capital expenditures in 2009 as compared to 2008 and increased $343 million, or 6%, in 2008 compared
to 2007 primarily due to increases of in-service network assets. Amortization expense declined $854 million, or
35%, in 2009 compared to 2008 and $869 million, or 26%, in 2008 as compared to 2007, primarily due to the
amortization of the customer relationships acquired as part of the Sprint-Nextel merger, which are amortized
using the sum of the years’ digits method, resulting in higher amortization rates in early periods that decline over
time.
Goodwill Impairment
The Company recognized non-cash goodwill impairments of $963 million and $29.649 billion during
2008 and 2007, respectively. The impaired goodwill was primarily attributable to the Company’s acquisition of
Nextel in 2005 and reflects the reduction in estimated fair value of Sprint’s wireless reporting unit subsequent to
the acquisition resulting from, among other factors, net losses of post-paid subscribers.
Merger and Integration Expenses
Merger and integration expenses related to business combinations prior to 2008 were generally
classified as selling, general and administrative and cost of products as appropriate on the consolidated statement
of operations. Those not solely and directly attributable to the Wireless segment were included in Corporate,
other and eliminations and were classified as selling, general and administrative expenses. Merger and
integration expenses decreased $130 million, or 100%, in 2009 compared to 2008 and $386 million, or 75%, in
2008 as compared to 2007 as we did not incur these costs in the second half of 2008.
Other, net
The following table provides additional information of items included in “Other, net” for the years
ended December 31, 2009, 2008 and 2007.
Year Ended December 31,
2009 2008 2007
(in millions)
Severance and exit costs ..................................... $(400) $(355) $(277)
Asset impairments ......................................... (47) (480) (163)
Gains from asset dispositions and exchanges ..................... 68 29 —
Other .................................................... (10) — (2)
Total .................................................. $(389) $(806) $(442)
Other, net expenses decreased $417 million, or 52%, in 2009 compared to 2008 and increased $364
million, or 82%, in 2008 compared to 2007. Severance and exit costs increased by $45 million, or 13%, in 2009
compared to 2008 and $78 million, or 28%, in 2008 compared to 2007 due to separation of employees and
continued organizational realignment initiatives aimed at reducing our cost structure to align with reduced
revenues from net subscriber losses. Asset impairments decreased by $433 million, or 90%, in 2009 compared to
2008 and increased $317 million, or 194%, in 2008 compared to 2007. Asset impairments in 2009 primarily
related to network asset equipment no longer necessary for management’s strategic plans and, in addition, in
2008 also related to cell site development costs no longer necessary for management’s strategic plans. During
2007, asset impairments related to the write-off of network assets, including site development costs, the loss on
the sale of Velocita Wireless, and the closing of retail stores due to integration activities. Gains from asset
dispositions and exchanges increased by $39 million, or 134%, in 2009 compared to 2008, primarily due to
spectrum exchange transactions.
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