Sprint - Nextel 2011 Annual Report Download - page 118

Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
comprehensive income which deferred the effective date for the provisions pertaining to reclassification adjustments. As the new accounting guidance will only amend the
presentation requirements of other comprehensive income, we do not expect the adoption to have any impact on our financial condition or results of operations.
In connection with our cost savings initiatives, during the year ended December 31, 2011, a total of approximately 5,800 unutilized tower leases have either been
terminated or when early termination was not available under the terms of the lease, we advised our landlords of our intention not to renew. In connection with this lease
termination initiative, we incurred lease termination costs and recognized a cease-to-use tower lease liability based on the remaining lease rentals for leases subject to
termination actions, reduced by estimated sublease rentals that could be reasonably obtained. The charge for lease termination activities is net of previously recorded
deferred rent liabilities associated with these leases and includes cancellation fees. In addition, where our current contract requires us to continue payments for certain
executory costs for the remaining terms of these leases, we have accrued a liability for such costs. See Note 5, Property, Plant and Equipment for a description of the write
down of costs for projects classified as construction in progress related to the above leases.
Other cost savings initiatives undertaken during 2010 and 2011 include workforce reductions for which we have recorded employee termination costs, the transfer o
f
day-to-day customer care service management for our customers to TeleTech Holdings Inc., and the outsourcing of the operation, maintenance, and support of our mobile
WiMAX network to Ericsson, Inc., which we refer to as Ericsson, for which we have recorded related employee termination and other exit costs. See Note 14, Share-
Based Payments, for a description of the continued vesting of Clearwire Corporation, which we refer to as Clearwire, equity grants for certain former employees.
Charges by type of cost and reconciliation of the associated accrued liability were as follows (in thousands):
For the year ended December 31, 2011, $145.9 million was recorded as Cost of goods and services and network costs and $19.6 million was recorded as Selling,
general and administrative expenses. For the year ended December 31, 2010, the entire expense of $11.7 million was recorded as Selling, general and administrative
expenses. None of the above costs were incurred during the year ended December 31, 2009.
F-51
3. Charges Resulting from Cost Savings Initiatives
Lease and Other Contract
Termination Costs(1) Employee Termination Costs Other Exit Costs Total
Costs incurred and charged to expense during:
Year ended December 31, 2010 $ 1,209 $ 10,494 $
—
$ 11,703
Year ended December 31, 2011 155,643 9,404 420 165,467
Cumulative cost incurred to date(2) $ 156,852 $ 19,898 $ 420 $ 177,170
Accrued liability as of December 31, 2010 $
—
$ 4,647 $
—
$ 4,647
Costs incurred, excluding non-cash credits 198,838 9,514 420 208,772
Cash and share payments (34,435) (12,564) (420) (47,419)
Accrued liability as of December 31, 2011(3)(4) $ 164,403 $ 1,597 $
—
$ 166,000
(1) Lease and other contract termination costs for the year ended December 31, 2011 include non-cash credits of $43.2 million representing the reversal of deferred rent balances at the cease-use date and $37.8
million of accrued executory costs relating to unused tower sites where our current contract requires us to continue payments for the remaining term.
(2) Based on current estimates, total costs for these activities are not expected to be significantly different from those incurred to date.
(3) $3.4 million is recorded within Accounts payable and accrued expenses, $45.6 million is recorded as Other current liabilities and $117.0 million is recorded as Other long-term liabilities on the consolidated
balance sheets. There were no significant adjustments to the liability during the year.
(4) Accrual for Lease and other termination costs includes $17.6 million accrual for costs related to certain unused backhaul circuits where our current contract requires us to continue payments for the remaining
term.