Sprint - Nextel 2010 Annual Report Download - page 76

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Covenants
As of December 31, 2010, the Company is in compliance with all restrictive and financial covenants associated with
its borrowings. A default under any of our borrowings could trigger defaults under our other debt obligations, which in turn
could result in the maturities being accelerated. Certain indentures that govern our outstanding notes also require compliance
with various covenants, including limitations on the incurrence of indebtedness and liens by the Company and its subsidiaries,
as defined by the terms of the indentures. As of December 31, 2010, we own a 54% economic interest in Clearwire. As a result,
Clearwire could be considered a subsidiary under certain agreements relating to our indebtedness. Whether Clearwire could be
considered a subsidiary under our debt agreements is subject to interpretation. In December 2010, as a result of an amendment
to the Clearwire equityholders' agreement, Sprint obtained the right to unilaterally surrender voting securities to reduce its
voting security percentage below 50%, which could eliminate the potential for Clearwire to be considered a subsidiary of
Sprint. Certain actions or defaults by Clearwire would, if viewed as a subsidiary, result in a breach of covenants, including
potential cross-default provisions, under certain agreements relating to our indebtedness. However, we believe the unilateral
rights obtained in December significantly mitigate the possibility of an event that would cross-default against Sprint's debt
obligations.
We are currently restricted from paying cash dividends because our ratio of total indebtedness to trailing four
quarters earnings before interest, taxes, depreciation and amortization and certain other non-recurring items, as defined in the
credit facility (adjusted EBITDA), exceeds 2.5 to 1.0. The Company is also obligated to repay the credit facilities if certain
change-of-control events occur.
Future Maturities of Long-Term Debt, Financing Obligation and Capital Lease Obligations
Scheduled annual principal payments of long-term debt, financing obligation and capital lease obligations
outstanding as of December 31, 2010, are as follows:
2011
2012
2013
2014
2015
2016 and thereafter
Add: premiums, discounts and adjustments, net
(in millions)
$ 1,655
2,758
1,783
1,364
2,152
10,427
20,139
52
$ 20,191
Note 8. Severance, Exit Costs and Asset Impairments
Liabilities for severance and exit costs are recognized based upon the nature of the cost to be incurred. For
involuntary separation plans that are completed within the guidelines of our written involuntary separation plan, a liability is
recognized when it is probable and reasonably estimable. For voluntary separation plans (VSP) a liability is recognized when
the VSP is irrevocably accepted by the employee. For one-time termination benefits, such as additional severance pay or
benefit payouts, and other exit costs, such as lease termination costs, the liability is measured and recognized initially at fair
value in the period in which the liability is incurred, with subsequent changes to the liability recognized as adjustments in the
period of change. Severance and exit costs associated with business combinations are recorded in the results of operations when
incurred.
Table of Contents SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-19