Sprint - Nextel 2011 Annual Report Download - page 133

Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Spectrum lease obligations - Certain of the leases provide for minimum lease payments, additional charges and escalation clauses. Leased spectrum agreements have
terms of up to 30 years.
Expense recorded related to spectrum and operating leases was as follows (in thousands):
Spectrum service credits - We have commitments to provide Clearwire services to certain lessors in launched markets, and to reimburse lessors for certain capital
equipment and third-
p
arty service expenditures, over the term of the lease. We accrue a monthly obligation for the services and equipment based on the total estimate
d
available service credits divided by the term of the lease. The obligation is reduced as actual invoices are presented and paid to the lessors. During the years ende
d
December 31, 2011, 2010 and 2009 we satisfied $4.5 million, $987,000 and $779,000, respectively, related to these commitments. The maximum remaining commitmen
t
at December 31, 2011 is $105.0 million and is expected to be incurred over the term of the related lease agreements, which generally range from 15-30 years.
Purchase agreements - We have purchase commitments with take-or-pay obligations and/or volume commitments for equipment that are non-cancelable. In addition,
we have other obligations that include minimum purchase commitments with certain suppliers over time for goods and services regardless of whether suppliers fully
deliver them. They include, among other things, agreements for backhaul, subscriber devices and IT related and other services.
In addition, we are party to various arrangements that are conditional in nature and create an obligation to make payments only upon the occurrence of certain
events, such as the actual delivery and acceptance of products or services. Because it is not possible to predict the timing or amounts that may be due under these
conditional arrangements, no such amounts have been included in the table above. The table above also excludes blanket purchase order amounts where the orders are
subject to cancellation or termination at our discretion or where the quantity of goods or services to be purchased or the payment terms are unknown because such
purchase orders are not firm commitments.
Legal proceedings - As more fully described below, we are involved in a variety of lawsuits, claims, investigations and proceedings concerning intellectual property,
b
usiness practices, commercial and other matters. We determine whether we should accrue an estimated loss for a contingency in a particular legal proceeding by
assessing whether a loss is deemed probable and can be reasonably estimated. We reassess our views on estimated losses on a quarterly basis to reflect the impact of any
developments in the matters in which we are involved. Legal proceedings are inherently unpredictable, and the matters in which we are involved often present complex
legal and factual issues. We vigorously pursue defenses in legal proceedings and engage in discussions where possible to resolve these matters on terms favorable to us,
including pursuing settlements where we believe it may be the most cost effective result for the Company. It is possible, however, that our business, financial condition
and results of operations in future periods could be materially and adversely affected by increased litigation expense, significant settlement costs and/or unfavorable
damage awards.
In April 2009, a purported class action lawsuit was filed against Clearwire U.S. LLC in Superior Court in King County, Washington by a group of five plaintiffs
(Chad Minnick, et al.). The lawsuit generally alleges that we disseminated false advertising about the quality and reliability of our services; imposed an unlawful early
termination fee, which we refer to as ETF; and invoked allegedly unconscionable provisions of our Terms of Service to the detriment of subscribers. Among other things,
the lawsuit seeks a determination that the alleged claims may be asserted on a class-wide basis; an order declaring certain provisions of our Terms of Service, including
the ETF provision, void and unenforceable; an injunction prohibiting us from collecting ETFs and further false advertising; restitution of any early termination fees paid
by our subscribers; equitable relief; and an award of unspecified damages and attorneys’ fees. Plaintiffs subsequently amended their complaint adding seven additional
plaintiffs. We removed the case to the United States District Court for the Western District of Washington. On July 23, 2009, we filed a motion to dismiss the amended
complaint. The Court stayed discovery pending its ruling on the motion,
F-66
Year Ended December 31,
2011 2010 2009
Spectrum lease payments $ 169,353 $ 179,741 $ 170,634
Non-cash spectrum lease expense 85,666 42,819 30,827
Amortization of spectrum leases 53,674 57,433 57,898
Total spectrum lease expense $ 308,693 $ 279,993 $ 259,359
Operating lease expense $ 637,688 $ 473,410 $ 235,079