Sprint - Nextel 2014 Annual Report Download

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
—————————————————————
FORM 10-K
—————————————————————
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2015
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File number 1-04721
—————————————————————
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
—————————————————————
Delaware 46-1170005
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6200 Sprint Parkway, Overland Park, Kansas 66251
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (855) 848-3280
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common stock, $0.01 par value New York Stock Exchange
—————————————————————
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendments to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act
Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if smaller reporting company) Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes No
Aggregate market value of voting and non-voting common stock equity held by non-affiliates of Sprint Corporation at September 30, 2014
was $4,747,107,524
COMMON STOCK OUTSTANDING AT MAY 18, 2015: 3,967,215,647 shares

Table of contents

  • Page 1
    ...Sprint Parkway, Overland Park, Kansas (Address of principal executive offices) 66251 (Zip Code) Registrant's telephone number, including area code: (855) 848-3280 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common stock...

  • Page 2
    ... Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 3
    ...interest in Sprint Corporation, and subsequent open market stock purchases, SoftBank owned approximately 79% of the outstanding common stock of Sprint Corporation as of March 31, 2015. Successor and Predecessor Periods and Reporting Obligations In connection with the close of the SoftBank Merger (as...

  • Page 4
    ... Lifeline program. Services and Products Data & Voice Services Wireless data communications services include mobile productivity applications, such as Internet access, messaging and email services; wireless photo and video offerings; location-based capabilities, including asset and fleet management...

  • Page 5
    ...other providers' networks. Sales, Marketing and Customer Care We focus the marketing and sales of wireless services on targeted groups of retail subscribers: individual consumers, businesses and government. We use a variety of sales channels to attract new subscribers of wireless services, including...

  • Page 6
    ...service fees, early upgrade options, or both. AT&T, Verizon Wireless and T-Mobile also offer programs that include an option to purchase a handset using an installment billing program. Under installment billing programs, many carriers, including Sprint, recognize a majority of the revenue associated...

  • Page 7
    ... on IP-based services and de-emphasizing stand-alone voice services and non-IP-based data services. Our Wireline segment markets and sells its services primarily through direct sales representatives. Competition Our Wireline segment competes with AT&T, Verizon Communications, CenturyLink, Level...

  • Page 8
    ... complied with applicable FCC rules and policies and the Communications Act. The licenses for the 10 MHz of spectrum in the 1.9 GHz band that we received as part of the FCC's Report and Order, described below, have ten-year terms and are not subject to specific build-out conditions, but are...

  • Page 9
    ... of the requesting public safety answering point (PSAP), the location of the cell site from which the call is being made or the location of the subscriber's handset using latitude and longitude. CMRS providers are also now required to provide text-to-911 services upon request by a capable...

  • Page 10
    ... of, or the rates charged by, wireless carriers, certain state PUCs and local governments regulate customer billing, termination of service arrangements, advertising, certification of operation, use of handsets when driving, service quality, sales practices, management of customer call records and...

  • Page 11
    ... of free notifications regarding voice, data, messaging and international roaming usage. If these FCC proceedings or individual state proceedings create changes in the Truth in Billing rules, our billing and customer service costs could increase. Access Charges ILECs and competitive local exchange...

  • Page 12
    ...-3B424, Overland Park, Kansas 66251 or by email at [email protected]. If a provision of the Code of Conduct required under the NYSE corporate governance standards is materially modified, or if a waiver of the Code of Conduct is granted to a director or executive officer, a notice...

  • Page 13
    ... a small Miami-based distributor into a global business with more than $10 billion in gross revenue for the year ended 2013. Marcelo serves on the board of directors of CTIA-The Wireless Association and is a member of its 2015 Executive Committee. He also is a member of the board of directors of My...

  • Page 14
    ... Wireless as well as Sprint's overall Wholesale business. Previously, he was Senior Vice President and General Manager of Retail for CLEAR, the retail brand of Clearwire, where he oversaw the brand's sales, marketing, customer care and product development. He served in various executive positions...

  • Page 15
    ... various competitive factors, including our successful execution of marketing and sales strategies; the acceptance of our value proposition; service delivery and customer care activities, including new account set up and billing; and execution under credit and collection policies; • our successful...

  • Page 16
    ... penetration levels that we anticipate with this business model. Subscribers who have financed their devices through these plans have the option to pay for their devices in installments over a period of up to 24 months. This program subjects us to increased risks relating to consumer credit issues...

  • Page 17
    .... In addition, subscribers who lease a device are no longer required to sign a fixed-term service contract, which could result in higher churn and higher bad debt expense. Adverse economic conditions may negatively impact our business and financial performance, as well as our access to financing on...

  • Page 18
    ... for commercial wireless services, and we expect an increased customer demand for data usage on our network. Competition in pricing, service, and product offerings may adversely impact subscriber retention and our ability to attract new subscribers. A decline in the average revenue per subscriber...

  • Page 19
    ... shares or speculation about the possibility of future actions SoftBank may take in connection with us; disruption to our operations or those of other companies critical to our network operations; our ability to develop and market new and enhanced technologies, products and services on a timely...

  • Page 20
    ...and/or non-cash charges that could be material to our consolidated financial statements would be recognized. Any acquisitions, strategic investments, or mergers may subject us to significant risks, any of which may harm our business. As part of our long term strategy, we regularly evaluate potential...

  • Page 21
    ... may take in connection with us may adversely affect our share price or the trading price of our debt securities. Subject to limitations in our certificate of incorporation that limit SoftBank's ability to engage in certain competing businesses in the U.S. or take advantage of certain corporate...

  • Page 22
    ...the holders of our common stock at a stockholders' meeting, SoftBank will be able to elect all of the members of our board of directors commencing in July 2016, which is three years following the effective time of the SoftBank Merger. Further, the interests of SoftBank and our other stockholders may...

  • Page 23
    ....1 Properties utilized by our Wireless segment generally consist of either leased or owned assets in the following categories: switching equipment, radio frequency equipment, cell site towers and related leasehold improvements, site development costs, network software, leased devices, internal-use...

  • Page 24
    ... class actions typical for a large business enterprise and intellectual property matters, are possible or pending against us. If our interpretation of certain laws or regulations, including those related to various federal or state matters such as sales, use or property taxes, or other charges...

  • Page 25
    ...SoftBank Merger closed, and after that date, the stock that trades on the NYSE is the common stock of Sprint Corporation. We currently have no non-voting common stock outstanding. The high and low common stock prices, as reported on the NYSE composite, were as follows: Year Ended March 31, 2015 High...

  • Page 26
    ... period ended March 31, 2014 and the fiscal year ended March 31, 2015. Because Sprint Corporation common stock did not commence trading until after the SoftBank Merger, the graph below reflects the cumulative total shareholder return on the Series 1 common stock of Sprint Communications, Inc...

  • Page 27
    ...Bond) Sprint Communications, Inc. issued to Starburst II. The Predecessor financial information represents the historical basis of presentation for Sprint Communications for all periods prior to the SoftBank Merger. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results...

  • Page 28
    ... tower resources for use in improving the quality of our network. The allocation of consideration paid to assets acquired and liabilities assumed was based on management's judgment of estimated fair values after evaluating several factors, including a valuation assessment. On July 10, 2013, SoftBank...

  • Page 29
    ... by the end of calendar year 2015. Device Financing Programs During 2013, wireless carriers introduced new plans that allow subscribers to forgo traditional service contracts and handset subsidies in exchange for lower monthly service fees, early upgrade options, or both. In 2013, AT&T, Verizon...

  • Page 30
    ...were incurred in connection with the SoftBank Merger (recognized in selling, general and administrative expense) and interest related to the $3.1 billion Bond Sprint Communications, Inc. issued to Starburst II. The Predecessor financial information represents the historical basis of presentation for...

  • Page 31
    .... Acquisition Method of Accounting Effects to the Successor Periods Ending March 31, 2014 (Transition Period) and December 31, 2013 The allocation of the consideration transferred to assets acquired and liabilities assumed were based on estimated fair values as of the date of the SoftBank Merger...

  • Page 32
    ...accounts of Starburst II prior to the close of the SoftBank Merger on July 10, 2013 and Sprint Communications, inclusive of Clearwire prospectively from the date of the SoftBank Merger on July 10, 2013 through March 31, 2015. Successor Year Ended March 31, 2015 Three Months Ended March 31, 2014 2013...

  • Page 33
    ..., 2013 and asset revaluations as a result of the SoftBank Merger. These decreases were partially offset by increased depreciation expense on assets acquired as a result of the Clearwire Acquisition and asset additions primarily related to network initiatives. Successor Year Ended March 31, 2015 and...

  • Page 34
    ... of the SoftBank Merger. Customer relationship intangible assets are amortized using the sum-of-the-months'-digits method, which results in higher amortization rates in early periods that will decline over time. Successor Year Ended December 31, 2013 and Predecessor Year Ended December 31, 2012...

  • Page 35
    ...2012 included lease exit costs of $196 million associated with taking certain Nextel platform sites off-air in the quarters ending June 30, 2012 and September 30, 2012. Gains from asset dispositions and exchanges were primarily related to spectrum exchange transactions. The spectrum hosting contract...

  • Page 36
    ... the Clearwire Acquisition and new debt issuances of $9.0 billion in September and December 2013. See "Liquidity and Capital Resources" for more information on the Company's financing activities. Taking into account the Clearwire and SoftBank transactions, the Company's consolidated debt balance was...

  • Page 37
    ... year ended December 31, 2012 also included a $69 million tax benefit resulting from the resolution of various federal and state income tax uncertainties. Additional information related to items impacting the effective tax rates can be found in the Notes to the Consolidated Financial Statements. 35

  • Page 38
    ... our customer care organization and administrative support. Wireless service revenue, costs to acquire subscribers, and variable network and interconnection costs fluctuate with the changes in our subscriber base and their related usage, but some cost elements do not fluctuate in the short term with...

  • Page 39
    ... Days Ended July 10, 2013 Predecessor Three Months Ended March 31, 2013 Years Ended December 31, 2012 Wireless Segment Earnings Sprint platform Nextel platform Total postpaid Sprint platform Nextel platform Total prepaid Other(1) Retail service revenue Wholesale, affiliate and other Total service...

  • Page 40
    ...-merger period. In addition, wholesale, affiliate and other revenues increased as a result of interest revenue associated with installment billing on handsets and an increase in revenues resulting from acquisitions in 2013. Approximately 53% of our total wholesale and affiliate subscribers represent...

  • Page 41
    ... ended March 31, 2015 decreased compared to the year ended December 31, 2013 primarily due to growth in sales of tablets, which carry a lower revenue per subscriber combined with the impact of subscriber migration to many of our new service plans, resulting in lower service fees. We expect Sprint...

  • Page 42
    ... impact of purchase price accounting to eliminate deferred revenues, partially offset by the impact of a higher revenue per subscriber carried by subscribers acquired in the Clearwire Acquisition. Combined Year Ended December 31, 2013 and Predecessor Year Ended December 31, 2012 In addition to the...

  • Page 43
    ...June 30, 2012 Sept 30, 2012 Dec 31, 2012 March 31, 2013 June 30, 2013 Sept 30, 2013 Dec 31, 2013 March 31, 2014 June 30, 2014 Sept 30, 2014 Dec 31, 2014 March 31, 2015 Net additions (losses) (in thousands)(1) Sprint platform: Postpaid Prepaid Wholesale and affiliates(2) Total Sprint platform Nextel...

  • Page 44
    ... the subscriber's service is terminated due to a lack of payment or other reasons. Subscriber churn related to the acquisition of assets from U.S. Cellular and the Clearwire Acquisition. Represents the recapture rate defined as the Nextel platform postpaid or prepaid subscribers, as applicable, that...

  • Page 45
    ... 56.72 27.95 _____ Subscriber ARPU related to the acquisition of assets from U.S. Cellular and the Clearwire Acquisition. Combined ARPU for the quarterly period ending September 30, 2013 aggregates service revenue from the Predecessor 10-day period ended July 10, 2013 and the Successor three-month...

  • Page 46
    ...March 31, 2014 and the Combined year ended December 31, 2013 was an increase in churn, primarily due to increased competition and network-related churn impacted by our network modernization program. Other wireless carriers continue various aggressive marketing efforts, including price reductions, to...

  • Page 47
    ... and repair devices; • regulatory fees; • roaming fees paid to other carriers; and • fixed and variable costs relating to payments to third parties for the use of their proprietary data applications, such as messaging, music, TV, and navigation services by our subscribers. Successor Year Ended...

  • Page 48
    ... we offer certain incentives to retain and acquire subscribers such as new devices at discounted prices. The cost of these incentives is recorded as a reduction to equipment revenue upon activation of the device with a service contract. Under the installment billing program, the device is sold at or...

  • Page 49
    ... for billing, customer care and information technology operations, bad debt expense and administrative support activities, including collections, legal, finance, human resources, corporate communications, strategic planning, and technology and product development. Successor Year Ended March 31, 2015...

  • Page 50
    ... in our customer base and their related usage, but some cost elements do not fluctuate in the short term with the changes in our customer usage. Our wireline services provided to our Wireless segment are generally accounted for based on market rates, which we believe approximate fair value. The...

  • Page 51
    ...our Wireless segment represented 31% of total voice revenues for the Successor year ended March 31, 2015 compared to 33% in the year ended December 31, 2013. Data Revenues Data revenues reflect sales of data services, primarily Private Line and managed network services bundled with non-IP-based data...

  • Page 52
    ... Line and managed network services bundled with non-IP-based data access. Data revenues decreased $32 million, or 34%, for the Successor three-month transition period ended March 31, 2014 compared to the same Predecessor period in 2013 as a result of customer churn, primarily related to Private...

  • Page 53
    ...31, 2013 compared to the Predecessor year ended December 31, 2012 decreased as a result of overall volume and price declines, of which $53 million was related to the decline in prices for the sale of services to our Wireless segment, as well as volume declines due to customer churn. Data Revenues In...

  • Page 54
    ...31, 2012 decreased primarily due to a reduction in shared administrative and employee related costs required to support the Wireline segment as a result of the decline in revenue. LIQUIDITY AND CAPITAL RESOURCES Cash Flow Successor Year Ended March 31, 2015 Three Months Ended March 31, 2014 Combined...

  • Page 55
    ... ended December 31, 2013 increased by approximately $11.7 billion as compared to the related Predecessor period in 2012, primarily due to increased cash paid related to the SoftBank Merger of $14.1 billion, net of cash acquired. This increase was partially offset by decreased purchases of short-term...

  • Page 56
    ... the secured equipment credit facility totaling, in the aggregate, approximately $9.2 billion and redeemed the remaining $4.8 billion of Nextel Communications, Inc. senior notes. In addition, we incurred $134 million of debt financing costs in 2012. Working Capital As of March 31, 2015 and 2014, we...

  • Page 57
    ... payments of $282 million on our secured equipment credit facilities during the year ended March 31, 2015. As part of the amendment to the EDC agreement in December 2014, we borrowed an additional tranche totaling $300 million, as described below. On February 24, 2015, we issued $1.5 billion...

  • Page 58
    ... and short-term investments totaled $4.2 billion as of March 31, 2015 compared to $6.2 billion as of March 31, 2014. As of March 31, 2015, approximately $470 million in letters of credit were outstanding under our $3.3 billion revolving bank credit facility. During the year ended March 31, 2015, the...

  • Page 59
    ...these markets, we continue to monitor them closely and to take steps to maintain financial flexibility at a reasonable cost of capital. The outlooks and credit ratings from Moody's Investor Service, Standard & Poor's Ratings Services, and Fitch Ratings for certain of Sprint Corporation's outstanding...

  • Page 60
    ... payments are based on management's expectations for future interest rates in the case of any variable rate debt. Represents capital lease payments including interest and financing obligation related to the sale and subsequent leaseback of multiple tower sites. Includes future lease payments related...

  • Page 61
    ... and estimates made by management. Management regularly updates its estimates used in the preparation of the financial statements based on its latest assessment of the current and projected business and general economic environment. Sprint's significant accounting policies and estimates are...

  • Page 62
    ... fair values were determined based on numerous assumptions and estimates, such as Company forecasts, discount rates, growth rates, among others, as well as our then-current stock price. All of the indefinite-lived assets, including goodwill, were entirely allocated to our Wireless segment. Sprint...

  • Page 63
    ...the forecasts used to allocate the purchase price to the assets acquired and liabilities assumed. During the quarter ended December 31, 2014, the stock price and our related market capitalization decreased significantly and our credit rating was downgraded by one of the ratings service providers. We...

  • Page 64
    ... 1, 2015 and will be applied to relevant future transactions. In May 2014, the FASB issued new authoritative literature, Revenue from Contracts with Customers. The issuance is part of a joint effort by the FASB and the International Accounting Standards Board (IASB) to enhance financial reporting by...

  • Page 65
    ....sprint.com/investors. Information contained on or accessible through our website is not part of this annual report. FORWARD-LOOKING STATEMENTS We include certain estimates, projections and other forward-looking statements in our annual, quarterly and current reports, and in other publicly available...

  • Page 66
    ... of our network, including timing, execution, technologies, costs, and performance of our network; • potential increases in subscriber churn, bad debt expense, increased costs and write-offs related to any of our service plans, including installment billing and leasing programs; • the ability...

  • Page 67
    ... billion increase in the fair market value of our debt to $35.1 billion. Foreign Currency Risk We may enter into forward contracts and options in foreign currencies to reduce the impact of changes in foreign exchange rates. Our foreign exchange risk management program focuses on reducing transaction...

  • Page 68
    ... 31, 2015 in providing reasonable assurance that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions...

  • Page 69
    ... "Security Ownership-Security Ownership of Certain Beneficial Owners" and "Security Ownership-Security Ownership of Directors and Executive Officers" in our proxy statement relating to our 2015 annual meeting of stockholders, which will be filed with the SEC. Compensation Plan Information Currently...

  • Page 70
    ...and Other Transactions" and "Board Operations-Independence of Directors" in our proxy statement relating to our 2015 annual meeting of stockholders, which will be filed with the SEC. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to...

  • Page 71
    ... The consolidated financial statements of Sprint Corporation filed as part of this annual report are listed in the Index to Consolidated Financial Statements. The consolidated financial statements of Clearwire Corporation through the date of acquisition filed as part of this annual report are listed...

  • Page 72
    ... the undersigned, thereunto duly authorized. SPRINT CORPORATION (Registrant) By /s/ MARCELO CLAURE Marcelo Claure Chief Executive Officer and President Date: May 26, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 73
    Table of Contents SIGNATURES SPRINT CORPORATION (Registrant) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 26th day of May, 2015. /s/ MASAYOSHI SON...

  • Page 74
    ... Description Form SEC File No. Exhibit Filing Date Filed/ Furnished Herewith (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession 2.1** Agreement and Plan of Merger, dated as of October 15, 2012, by and among Sprint Nextel Corporation, SoftBank Corp., Starburst I, Inc...

  • Page 75
    ... as of September 11, 2013, by and among Sprint Corporation, Sprint Capital Corporation, Sprint Communications, Inc. and The Bank of New York Mellon Trust Company, N.A. (as successor to Bank One, N.A.) Indenture, dated as of November 20, 2006, by and between Sprint Nextel Corporation and The Bank of...

  • Page 76
    ... 4.17 8-K 001-04721 4.3 9/11/2013 4.18 8-K 001-04721 4.1 12/12/2013 4.19 8-K 001-04721 4.1 4/24/2015 (10) Material Contracts 10.1 Bond Purchase Agreement, dated as of October 15, 2012, by and between Sprint Nextel Corporation and Sprint Corporation (then known as "Starburst II, Inc...

  • Page 77
    ...001-04721 10.3 7/11/2013 (10) Executive Compensation Plans and Arrangements 10.14 Form of Nonqualified Stock Option Agreement (NonAffiliate Director Form) under the Nextel Amended and Restated Incentive Equity Plan Summary of 2012 Short-Term Incentive Plan and 2012 Long-Term Incentive Plan 75 10...

  • Page 78
    ... of 2014 Short-Term Incentive Compensation Plan Amended Summary of 2014 Short-Term Incentive Compensation Plan Summary of 2014 Long-Term Incentive Plan Form of Award Agreement (awarding stock options) under the 2012 Long-Term Incentive Plan for executives officers with Nextel employment agreements...

  • Page 79
    ...awarding stock options) under the 2014 Long-Term Incentive Plan to executive officers other than those with Sprint employment agreements and Robert L. Johnson Form of Stock Option Agreement under the Stock Option Exchange Program (for certain Nextel Communication Inc. employees) Form of Stock Option...

  • Page 80
    ...Bye First Amendment to Employment Agreement, dated December 20, 2012 by and between Sprint Nextel Corporation and Stephen Bye Employment Agreement, effective September 6, 2013 by and between Sprint Corporation and Brandon Dow Draper Brandon Dow Draper Sign-On Award of Restricted Stock Units 10-Q 10...

  • Page 81
    ... Form SEC File No. Exhibit Filing Date Filed/ Furnished Herewith 10.62 First Amendment to Employment Agreement, dated February 21, 2014, by and between Sprint Corporation and Brandon Dow Draper Employment Agreement, effective October 2, 2012, by and between Sprint Nextel Corporation and...

  • Page 82
    ...awarding restricted stock units) under the 2007 Omnibus Incentive Plan for nonemployee directors Form of Election to Defer Delivery of Shares subject to RSUs (Outside Directors) Form of Indemnification Agreement between Sprint Nextel and its Directors and Officers Nextel Communications, Inc. Amended...

  • Page 83
    ... Form SEC File No. Exhibit Filing Date Filed/ Furnished Herewith (31) and (32) Officer Certifications 31.1 31.2 32.1 Certification of Chief Executive Officer Pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) Certification of Chief Financial Officer Pursuant to Securities Exchange Act...

  • Page 84
    ...' Equity for the 191 days ended July 10, 2013 and year ended December 31, 2012 Notes to the Consolidated Financial Statements Clearwire Consolidated Financial Statements Independent Auditor's Report Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of July...

  • Page 85
    ... financial statements, on July 10, 2013, SoftBank Corp. completed a merger with Sprint Communications, Inc. (formerly Sprint Nextel Corporation) by which Sprint Corporation was the acquiring company of Sprint Communications, Inc. and applied the acquisition method of accounting as of the merger date...

  • Page 86
    ...of Sprint Communications, Inc. (formerly Sprint Nextel Corporation) and subsidiaries (the Predecessor Company) for the 191 day period ended July 10, 2013, and the year ended December 31, 2012. These consolidated financial statements are the responsibility of the Predecessor Company's management. Our...

  • Page 87
    Table of Contents Index to Consolidated Financial Statements SPRINT CORPORATION CONSOLIDATED BALANCE SHEETS March 31, 2015 2014 (in millions, except share and per share data) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts and notes receivable, net Device and ...

  • Page 88
    ... Ended March 31, 2014 2013 (Unaudited) Year Ended December 31, 2013 87 Days Ended December 31, 2012 191 Days Ended July 10, 2013 Predecessor Three Months Ended March 31, 2013 (Unaudited) Year Ended December 31, 2012 (in millions, except per share amounts) Net operating revenues: Service Equipment...

  • Page 89
    ... to Consolidated Financial Statements SPRINT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Successor Year Ended March 31, 2015 Three Months Ended March 31, 2014 2013 (Unaudited) Year Ended December 31, 2013 87 Days Ended December 31, 2012 191 Days Ended July 10, 2013 Predecessor Three...

  • Page 90
    ... relating to FCC licenses Acquisitions, net of cash acquired Investment in Clearwire (including debt securities) Investment and derivative in Sprint Communications, Inc. Proceeds from sales and maturities of short-term investments Purchases of short-term investments Proceeds from sales of assets...

  • Page 91
    ... Index to Consolidated Financial Statements SPRINT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Successor Year Ended March 31, 2015 Three Months Ended March 31, 2014 2013 (Unaudited) Year Ended December 31, 2013 87 Days Ended December 31, 2012 (in millions) 191 Days Ended July 10...

  • Page 92
    ... 5, 2012 and ending December 31, 2012, there were approximately 3 million shares of Class B common stock of Starburst II, Inc. issued and outstanding with an immaterial value. These shares were exchanged in connection with the issuance of common stock to SoftBank upon completion of the Merger. See...

  • Page 93
    ...Instruments Property, Plant and Equipment Intangible Assets Long-Term Debt, Financing and Capital Lease Obligations Severance and Exit Costs Supplemental Financial Information Income Taxes Commitments and Contingencies Stockholders' Equity and Per Share Data Segments Quarterly Financial Data Related...

  • Page 94
    ... equipment revenue from the sale or lease of wireless devices and the sale of accessories in the U.S., Puerto Rico and the U.S. Virgin Islands. The Wireline segment includes revenue from domestic and international wireline voice and data communication services. On July 9, 2013 (Clearwire Acquisition...

  • Page 95
    ... policies. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP). This requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues...

  • Page 96
    ... assets and over the remaining lease term for devices leased to our customers. Repair and maintenance costs and research and development costs are expensed as incurred. We capitalize costs for network and non-network software developed or obtained for internal use during the application development...

  • Page 97
    ...Note 7. Intangible Assets for additional information on indefinite-lived intangible asset impairments. Guarantee Liabilities Under certain of our wireless service plans, we offer an option to our subscribers to purchase, on a monthly basis, an annual trade-in right (the option). At the trade-in date...

  • Page 98
    Table of Contents Index to Consolidated Financial Statements SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS liability (i.e., the estimated unpaid balance of the subscribers' installment contracts) would be approximately $248 million as of March 31, 2015. This amount is not an ...

  • Page 99
    ..., data and Internet revenues. Service revenues consist of fixed monthly recurring charges, variable usage charges and miscellaneous fees such as activation fees, directory assistance, roaming, equipment protection, late payment and early termination charges, interest, and certain regulatory related...

  • Page 100
    ... term of ten years. As of March 31, 2015, 40 million options were outstanding, of which 19 million options were exercisable. The fair value of each restricted stock unit award is calculated using the share price at the date of grant. Restricted stock units generally have performance and service...

  • Page 101
    ... 1, 2015 and will be applied to relevant future transactions. In May 2014, the FASB issued new authoritative literature, Revenue from Contracts with Customers. The issuance is part of a joint effort by the FASB and the International Accounting Standards Board (IASB) to enhance financial reporting by...

  • Page 102
    ... annual reporting period beginning April 1, 2016, including interim periods within that reporting period, although early adoption is permitted. The Company is currently evaluating the newly issued guidance and assessing the impact it will have on our consolidated financial statements. In April 2015...

  • Page 103
    ...59 million of share-based payment awards (replacement awards) exchanged for awards held by Clearwire employees. Purchase Price Allocation The consideration transferred was allocated to assets acquired and liabilities assumed based on their estimated fair values at the Clearwire Acquisition Date. The...

  • Page 104
    ... Financial Statements SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS issued to Sprint Communications, Inc. stockholders and (c) approximately $193 million of share-based payment awards (replacement awards) exchanged for awards held by Sprint employees. Additionally, SoftBank...

  • Page 105
    ... and other current assets" on the consolidated balance sheet. The fair value of the receivable due to Sprint was estimated using a discounted cash flow model, which relied principally on unobservable inputs such as the nature of the sold Receivables and subscriber payment history. Changes in the...

  • Page 106
    ... from subscriber non-payment. Sprint recognizes assets and liabilities, as applicable, with respect to its continuing involvement at fair value. Sprint's continuing involvement did not have a material impact on its financial statements as of Mach 31, 2015. Variable Interest Entity Sprint determined...

  • Page 107
    ... marketable equity securities totaling $40 million and $50 million as of the periods ended March 31, 2015 and 2014, respectively, are measured on a recurring basis using quoted prices in active markets. The estimated fair value of the majority of our current and long-term debt, excluding our credit...

  • Page 108
    ...: March 31, 2015 (in millions) 2014 Land Network equipment, site costs and related software Buildings and improvements Non-network internal use software, office equipment, leased devices and other Construction in progress Less: accumulated depreciation Property, plant and equipment, net $ $ 266...

  • Page 109
    ... period ended March 31, 2014, asset impairments were recorded primarily due to network equipment assets that were no longer necessary as a result of changes in management's strategic plans. Asset impairments in the year ended December 31, 2012 consisted of $18 million of assets associated with...

  • Page 110
    ...the forecasts used to allocate the purchase price to the assets acquired and liabilities assumed. During the quarter ended December 31, 2014, the stock price and our related market capitalization decreased significantly and our credit rating was downgraded by one of the ratings service providers. We...

  • Page 111
    ... estimated useful lives of the respective assets. We reduce the gross carrying value and associated accumulated amortization when specified intangible assets become fully amortized. Amortization expense related to favorable spectrum and tower leases is recognized in cost of services. March 31, 2015...

  • Page 112
    .... Clearwire Communications LLC (1) Exchangeable notes Clearwire Communications LLC (1) Credit facilities Bank credit facility Export Development Canada (EDC) Secured equipment credit facilities Financing obligation Capital lease obligations and other Net premiums Less current portion Long-term debt...

  • Page 113
    ... 31, 2013 and year ended December 31, 2012, respectively. Notes As of March 31, 2015, our outstanding notes consisted of senior notes, guaranteed notes, and exchangeable notes, all of which are unsecured, as well as secured notes of Clearwire Communications LLC, which are secured solely by assets of...

  • Page 114
    ... repayments totaling $254 million during the year ended March 31, 2015 and the balance outstanding at March 31, 2015 was $508 million. Under the terms of the EKN secured equipment credit facility, repayments of outstanding amounts cannot be re-drawn. Finnvera plc (Finnvera) In December 2014, we...

  • Page 115
    ... payments that will continue to be made under our backhaul access contracts for which we will no longer be receiving any economic benefit. As a result of the United States Cellular (U.S. Cellular) asset acquisition, which closed in May 2013, we recorded a liability related to network shut-down costs...

  • Page 116
    ... July 11, 2013 opening balance takes into account purchase price adjustments as it relates to the SoftBank Merger. For the year ended December 31, 2013, we recognized costs of $56 million ($54 million Wireless, $2 million Wireline). For the year ended December 31, 2013, we recognized costs of $219...

  • Page 117
    ... lease liabilities Post-retirement benefits and other non-current employee related liabilities Other _____ $ $ $ $ $ $ $ $ $ $ $ $ (1) $ Includes liabilities in the amounts of $90 million and $91 million as of March 31, 2015 and 2014, respectively, for checks issued in excess of associated...

  • Page 118
    ..., 2015 Three Months Ended March 31, 2014 2013 (Unaudited) Year Ended December 31, 2013 87 Days Ended December 31, 2012 (in millions) 191 Days Ended July 10, 2013 Predecessor Three Months Ended March 31, 2013 (Unaudited) Year Ended December 31, 2012 Current income tax (expense) benefit Federal State...

  • Page 119
    ... and liabilities for financial statement purposes and their tax bases. Deferred tax assets are also recorded for operating loss, capital loss and tax credit carryforwards. The sources of the differences that give rise to the deferred income tax assets and liabilities as of March 31, 2015 and 2014...

  • Page 120
    ... 31, 2013 is primarily related to the net impact of acquisition accounting for the SoftBank Merger and Clearwire Acquisition. For the Predecessor year ended December 31, 2012 the remaining increase in the carrying amount of the valuation allowance is primarily associated with the tax effect of items...

  • Page 121
    ... reached with the Appeals or Exam division of the Internal Revenue Service (IRS) for examination issues in dispute for years prior to 2010. The issues were immaterial to our consolidated financial statements. As of March 31, 2015, there are no federal income tax examinations being handled by the IRS...

  • Page 122
    ... our financial position or results of operations. On April 19, 2012, the New York Attorney General filed a complaint alleging that Sprint Communications has fraudulently failed to collect and pay more than $100 million in New York sales taxes on receipts from its sale of wireless telephone services...

  • Page 123
    ...results of operations or financial position. Beginning in early 2012, a group of state attorneys general began an investigation into the practice of wireless carriers including on their bills charges for certain content from third-party providers, particularly premium short message services, and the...

  • Page 124
    ... the services and equipment based on the total estimated available service credits divided by the term of the lease. The obligation is reduced by services provided and as actual invoices are presented and paid to the lessors. During the period ended March 31, 2015, we satisfied $9 million related to...

  • Page 125
    ... SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Purchase Orders and Other Commitments We are a party to other commitments, which includes, among other things, service, spectrum, network equipment, devices, asset retirement obligations and other executory contracts in connection...

  • Page 126
    ...25 per share at the option of Softbank, in whole or in part, at any time within the five-year term. Note 14. Segments Sprint operates two reportable segments: Wireless and Wireline. • Wireless primarily includes retail, wholesale, and affiliate revenue from a wide array of wireless voice and data...

  • Page 127
    ... STATEMENTS Segment financial information is as follows: Successor Statement of Operations Information Wireless Wireline Corporate, Other and Eliminations (in millions) Consolidated Year Ended March 31, 2015 Net operating revenues Inter-segment revenues(1) Total segment operating expenses Segment...

  • Page 128
    ... Financial Statements SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Successor Statement of Operations Information Wireless Wireline Corporate, Other and Eliminations (in millions) Consolidated Year Ended December 31, 2013 Net operating revenues Inter-segment revenues(1) Total...

  • Page 129
    ...Financial Statements SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Predecessor Statement of Operations Information Wireless Wireline Corporate, Other and Eliminations (in millions) Consolidated 191 Days Ended July 10, 2013 Net operating revenues Inter-segment revenues(1) Total...

  • Page 130
    ... developments in connection with an E911 regulatory tax-related contingency. Other, net for the Predecessor 191-day period ended July 10, 2013 also includes $53 million of business combination fees paid to unrelated parties in connection with the transactions with SoftBank and Clearwire (included...

  • Page 131
    ... SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Successor Operating Revenues by Service and Products Wireless Wireline Corporate, Other and Eliminations(1) Consolidated (in millions) Year Ended March 31, 2015 Wireless services Wireless equipment Voice Data Internet Other Total...

  • Page 132
    ... TO THE CONSOLIDATED FINANCIAL STATEMENTS Predecessor Operating Revenues by Service and Products Wireless Wireline Corporate, Other and Eliminations(1) (in millions) Consolidated 191 Days Ended July 10, 2013 Wireless services Wireless equipment Voice Data Internet Other Total net operating revenues...

  • Page 133
    ...in exchangeable notes between Clearwire and Sprint, and other items recognized by Clearwire Corporation that did not affect our economic interest. Sprint's equity in losses for the Predecessor 190-day period ended July 9, 2013, include a $65 million derivative loss associated with the change in fair...

  • Page 134
    ...-held equity interests. Cost of services included in our consolidated statements of operations related to our agreement to purchase 4G services from Clearwire totaled $207 million, $101 million and $417 million for the Predecessor 190-day period ended July 9, 2013, Predecessor unaudited three...

  • Page 135
    ... in our consolidated financial statements associated with our arrangements with Brightstar were as follows: Consolidated balance sheets: Accounts receivable Accounts payable Consolidated statements of operations: Net operating revenues (1) Cost of products (1) _____ March 31, March 31, 2015 2014 (in...

  • Page 136
    ...Parent/ Issuer column represents the activities of Sprint Corporation (formerly Starburst II), no Parent/Issuer financial information exists for the Predecessor periods, which are prior to the SoftBank Merger. We have accounted for investments in subsidiaries using the equity method. Presented below...

  • Page 137
    ... SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET As of March 31, 2015 Parent/ Issuer Subsidiary Guarantor NonGuarantor Subsidiaries (in millions) Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents Short-term...

  • Page 138
    ... SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET As of March 31, 2014 Parent/ Issuer Subsidiary Guarantor NonGuarantor Subsidiaries (in millions) Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents Short-term...

  • Page 139
    ... SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS Successor Year Ended March 31, 2015 Parent/ Issuer Subsidiary Guarantor NonGuarantor Subsidiaries (in millions) Eliminations Consolidated Net operating revenues: Service...

  • Page 140
    ... STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS Successor Three Months Ended March 31, 2014 Parent/ Issuer Subsidiary Guarantor NonGuarantor Subsidiaries (in millions) Eliminations Consolidated Net operating revenues: Service Equipment Net operating expenses: Cost of services...

  • Page 141
    ... SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS Successor Year Ended December 31, 2013 Parent/ Issuer Subsidiary Guarantor NonGuarantor Subsidiaries (in millions) Eliminations Consolidated Net operating revenues: Service...

  • Page 142
    ... FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS Predecessor For the 191 Days Ended July 10, 2013 Subsidiary Guarantor Non-Guarantor Subsidiaries (in millions) Eliminations Consolidated Net operating revenues: Service Equipment Net operating expenses: Cost of services...

  • Page 143
    ... STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS Predecessor Three Months Ended March 31, 2013 (Unaudited) Subsidiary Guarantor Non-Guarantor Subsidiaries (in millions) Eliminations Consolidated Net operating revenues: Service Equipment Net operating expenses: Cost of services...

  • Page 144
    ... Statements SPRINT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE LOSS Predecessor Year Ended December 31, 2012 Subsidiary Guarantor Non-Guarantor Subsidiaries (in millions) Eliminations Consolidated Net operating revenues: Service...

  • Page 145
    ... investing activities: Capital expenditures - network and other Capital expenditures - leased devices Expenditures relating to FCC licenses Reimbursements relating to FCC licenses Proceeds from sales and maturities of short-term investments Purchases of short-term investments Change in amounts due...

  • Page 146
    ... activities: Net cash provided by (used in) operating activities Cash flows from investing activities: Capital expenditures Expenditures relating to FCC licenses Proceeds from sales and maturities of short-term investments Purchases of short-term investments Change in amounts due from/due to...

  • Page 147
    ... cash provided by (used in) operating activities Cash flows from investing activities: Capital expenditures Expenditures relating to FCC licenses Acquisitions, net of cash acquired Proceeds from sales and maturities of short-term investments Purchases of short-term investments Change in amounts due...

  • Page 148
    ... from investing activities: Capital expenditures Expenditures relating to FCC licenses Acquisitions, net of cash acquired Investment in Clearwire (including debt securities) Proceeds from sales and maturities of short-term investments Purchases of short-term investments Change in amounts due from...

  • Page 149
    ... (used in) provided by operating activities Cash flows from investing activities: Capital expenditures Expenditures relating to FCC licenses Investment in Clearwire (including debt securities) Proceeds from sales and maturities of short-term investments Purchases of short-term investments Change in...

  • Page 150
    ... (used in) provided by operating activities Cash flows from investing activities: Capital expenditures Expenditures relating to FCC licenses Investment in Clearwire (including debt securities) Proceeds from sales and maturities of short-term investments Purchases of short-term investments Change in...

  • Page 151
    ... 190 days ended July 9, 2013 in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the consolidated financial statements, effective July 9, 2013, Sprint Communications, Inc. acquired all of the outstanding stock of...

  • Page 152
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Clearwire Corporation Bellevue, Washington We have audited the accompanying consolidated balance sheet of Clearwire Corporation and subsidiaries (the "Company") as of December 31, 2012 and the related consolidated statements...

  • Page 153
    ... Index to Consolidated Financial Statements CLEARWIRE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS July 9, 2013 December 31, 2012 (In thousands, except par value) ASSETS Current assets: Cash and cash equivalents Short-term investments Restricted cash Accounts receivable, net of...

  • Page 154
    ... Index to Consolidated Financial Statements CLEARWIRE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS 190 Days Ended July 9, 2013 Year ended December 31, 2012 (In thousands) 2011 Revenues Operating expenses: Cost of goods and services and network costs (exclusive of items shown...

  • Page 155
    Table of Contents Index to Consolidated Financial Statements CLEARWIRE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 190 Days Ended July 9, 2013 Year ended December 31, 2012 (In thousands) 2011 Net loss: Net loss from continuing operations Less: non-controlling ...

  • Page 156
    ... spectrum leases Non-cash rent expense Loss on property, plant and equipment (Note 4) Other operating activities Changes in assets and liabilities: Inventory Accounts receivable Prepaids and other assets Prepaid spectrum licenses Deferred revenue Accounts payable and other liabilities Net cash used...

  • Page 157
    ...Consolidated Financial Statements CLEARWIRE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the 190 Days Ended July 9, 2013 and the Years Ended December 31, 2012 and 2011 Class A Common Stock Class B Common Stock Accumulated Other Comprehensive Income (Loss) Shares...

  • Page 158
    ... method of accounting will be applied by Sprint, pushed-down to us and included in our consolidated financial statements for all periods presented subsequent to the Acquisition Date. This will result in a new basis of presentation based on the estimated fair values of our assets and liabilities...

  • Page 159
    ... long-lived assets, which include property, plant and equipment and other intangible assets, tax valuation allowances and valuation of derivatives. Cash and Cash Equivalents - Cash equivalents consist of money market mutual funds and highly liquid short-term investments, with original maturities of...

  • Page 160
    ... basis over fair value is recorded in the consolidated statements of operations, and a new cost basis in the investment is established. Fair Value Measurements - Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market...

  • Page 161
    ... by market data. Level 3: If listed prices or quotes are not available, fair value is based upon internally developed or other available models that primarily use, as inputs, market-based or independently sourced market parameters, including but not limited to interest rate curves, volatilities...

  • Page 162
    .... Internally Developed Software - We capitalize costs related to computer software developed or obtained for internal use, and interest costs incurred during the period of development. Software obtained for internal use has generally been enterprise-level business and finance software customized to...

  • Page 163
    ... in progress and software under development. Interest capitalization is based on rates applicable to borrowings outstanding during the period and the balance of qualified assets under construction during the period. Capitalized interest is reported as a cost of the network assets or software assets...

  • Page 164
    ... to usage based pricing for WiMAX services after 2013 and for LTE service beginning in 2012. In 2011, revenues from wholesale subscribers were billed one month in arrears and were generally recognized as they are earned, based on terms defined in our commercial agreements with our wholesale partners...

  • Page 165
    ... attributable to Clearwire Corporation New Accounting Pronouncements In December 2011, the Financial Accounting Standards Board (FASB) issued authoritative guidance regarding Disclosures about Offsetting Assets and Liabilities, which requires common disclosure requirements to allow investors to...

  • Page 166
    ... lease assets with an original cost of $151.8 million and $112.8 million, respectively, within network and base station equipment. Construction in progress is primarily composed of costs incurred during the process of completing network projects not yet placed in service. The balance at July 9, 2013...

  • Page 167
    ... Statements CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) Charges associated with Property, plant and equipment We periodically assess assets that have not yet been deployed in our networks, including equipment and cell site development costs...

  • Page 168
    ... expected renewal terms, as applicable. Favorable spectrum leases of $1.0 billion were recorded as an asset as a result of purchase accounting in November 2008 and are amortized over the lease term. 190 Days Ended July 9, 2013 Year Ended December 31, 2012 2011 Supplemental Information (in thousands...

  • Page 169
    ...Index to Consolidated Financial Statements CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) Remainder of 2013 2014 2015 2016 2017 Thereafter Total 190 Days Ended July 9, 2013 $ $ 5,822 7,740 3,874 329 329 110 18,204 Year Ended December 31, 2012 2011...

  • Page 170
    ... TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) Other long-term liabilities Other long-term liabilities consisted of the following (in thousands): July 9, 2013 December 31, 2012 Deferred rents associated with tower and spectrum leases Cease-to-use liability(1) Deferred revenue(1) Other(1) Total...

  • Page 171
    ...Clearwire Communications Class B common interests, which we refer to as Class B Common Interests, and a corresponding number of shares of Class B Common Stock, for an equal number of shares of Class A Common Stock, and which we refer to as the Sprint Exchange, on July 5, 2013. Intel Capital Wireless...

  • Page 172
    ... number of shares of Class A Common Stock, and which we refer to as the Intel Exchange, on July 9, 2013. The Sprint Exchange and the Intel Exchange resulted in significant changes to the financial statement and tax basis, respectively, that Clearwire has in its interest in Clearwire Communications...

  • Page 173
    ...138.0 million is secured by assets classified as Network and base station equipment. The remaining par amount is unsecured. Included in Other current liabilities on the consolidated balance sheet. The discount on the Sprint Notes is accreted as interest expense on a straight-line basis over the life...

  • Page 174
    ... of approximately $118.8 million is secured by assets classified as Network and base station equipment. Included in Other current liabilities on the consolidated balance sheet. Notes 2015 Senior Secured Notes - During the fourth quarter of 2009, Clearwire Communications completed offerings of $2.52...

  • Page 175
    ... Statements CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) substantially all of our assets; entering transactions with affiliates; creating liens; issuing certain preferred stock or similar equity securities and making investments and acquiring assets...

  • Page 176
    ... exchange rate at any time prior to the maturity date after July 9, 2013. The applicable exchange rate is 666.67 shares of Clearwire Class A common stock (or Clearwire Class B common stock and Clearwire Communications Class B common units) per $1,000 principal, equivalent to an exchange price...

  • Page 177
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) date of each draw of the Sprint Notes, the BCF will be calculated based on the closing price on settlement date less the exchange price of $1.50 per share multiplied by the number of shares of Clearwire Class A common stock issued. The amount...

  • Page 178
    ... statements of operations. At July 9, 2013, the Exchange Options' estimated fair value was $0. At December 31, 2012, the Exchange Options' estimated fair value of $5.3 million was reported in Other current liabilities on our consolidated balance sheets. For the 190 days ended July 9, 2013...

  • Page 179
    ... 2012 (in thousands): Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Financial assets: Cash and cash equivalents Short-term investments Other assets - derivative warrant assets Financial liabilities...

  • Page 180
    ... to Consolidated Financial Statements CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) The following table presents the change in Level 3 financial assets and liabilities measured on a recurring basis for the year ended December 31, 2012 (in thousands...

  • Page 181
    ... all renewal periods Total 2013 2014 2015 2016 2017 Long-term debt obligations(1) Interest payments on long-term debt obligations(1) Operating lease obligations Spectrum lease obligations Spectrum service credits and signed spectrum agreements Capital lease obligations(2) Purchase agreements...

  • Page 182
    ... of our Terms of Service to the detriment of subscribers. In November 2010, a purported class action lawsuit was filed against Clearwire by Angelo Dennings in the U.S. District Court for the Western District of Washington. The complaint generally alleges we slow network speeds when network demand is...

  • Page 183
    ... not review the Terms of Service prior to subscribing, and when subscribers cancel service due to network management, we charge an ETF or restocking fee that they claim is unconscionable under the circumstances. In March 2011, a purported class action was filed against Clearwire in the U.S. District...

  • Page 184
    ... in January, 2014. On October 23, 2013, the plaintiffs in the ACP Action filed a new lawsuit in the Delaware Court of Chancery against the Company. The complaint asks the court for an appraisal of the "fair value" of plaintiffs' stock in Clearwire, and an order that Clearwire pay plaintiffs the...

  • Page 185
    ... Financial Statements CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) A summary of the RSU activity for the 190 day period ended July 9, 2013, and the years ended 2012 and 2011 is presented below: Restricted Stock Units Future Performance and Service...

  • Page 186
    ... Statements CLEARWIRE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED) A summary of option activity from January 1, 2011 through July 9, 2013 is presented below: WeightedAverage Remaining Contractual Term (Years) Number of Options WeightedAverage Exercise Price...

  • Page 187
    .... The total fair value of options vested during the 190 days ended July 9, 2013 and the years ended December 31, 2012 and 2011 was $0.5 million, $0.7 million and $6.6 million, respectively. The total unrecognized share based compensation costs related to non-vested stock options outstanding at July...

  • Page 188
    ... Agreement dated as of November 28, 2008 governing Clearwire Communications. On July 9, 2013, Intel completed the exchange of 65.6 million shares of Class B Common Interests and a corresponding number of shares of Class B Common Stock for an equal number of shares of Class A Common Stock pursuant...

  • Page 189
    ... the changes in Clearwire's ownership interests in Clearwire Communications (in thousands): 190 Days ended July 9, 2013 Year ended December 31, 2012 2011 Clearwire's loss from equity investees Increase/(decrease) in Clearwire's additional paid-in capital for issuance or conversion of Class B Common...

  • Page 190
    ... end user subscribers. We sell these services at terms defined in our contractual agreements. The following amounts for related party transactions are included in our consolidated financial statements (in thousands): July 9, 2013 December 31, 2012 Accounts receivable Prepaid assets and other assets...

  • Page 191
    ... end user subscribers. The wireless broadband services to be provided under the 4G MVNO Agreement include standard network services, and, at the request of any of the parties, certain non-standard network services. We sell these services at prices defined in the 4G MVNO Agreement. Sprint Wholesale...

  • Page 192
    ... usage based pricing for WiMAX services after 2013 and for LTE service beginning in 2012. We also agreed that Sprint may re-wholesale wireless broadband services, subject to certain conditions and we agreed to operate our WiMAX network through calendar year 2015. For the 190 days ended July 9, 2013...

  • Page 193
    ... acquisition method of accounting was applied by Sprint, pushed-down to us and included in our consolidated financial statements for all periods presented subsequent to the Acquisition Date. This resulted in a new basis of presentation based on the estimated fair values of our assets and liabilities...

  • Page 194
    ...the terms defined in the agreement. Users shall pay Licensees an annual spectrum use fee as set forth in the agreement, beginning in 2014. On January 2, 2014, we offset against payments due under the November 2011 4G MVNO Amendment, treated as deferred revenue, $83.6 million of principal and related...