Sprint - Nextel 2014 Annual Report Download - page 31

Table of Contents
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U.S. GAAP Discussion and Analysis
The following discussion covers results for the Successor year ended March 31, 2015 as compared to the
Successor year ended December 31, 2013, the Successor three-month transition period ended March 31, 2014 as compared to
the unaudited three-month Predecessor period ended March 31, 2013 and the Successor year ended December 31, 2013 as
compared to the Predecessor year ended December 31, 2012.
The results for the Successor 87-day period ended December 31, 2012 and three-month period ended March 31,
2013 were considered insignificant and are not comparable to the Successor year ended December 31, 2013 or three-month
transition period ended March 31, 2014 as the Successor entity was established on October 5, 2012 for the sole purpose of
completing the SoftBank Merger. Results for the Successor 87-day period ended December 31, 2012 and three-month period
ended March 31, 2013 primarily reflected merger expenses that were incurred (recognized in selling, general and
administrative expense) and interest income related to the $3.1 billion Bond issued in connection with the SoftBank Merger.
We have provided information regarding certain of the elements of the acquisition method of accounting affecting the
Successor period ended December 31, 2013 and transition period ended March 31, 2014 results to enable further
comparability.
Supplemental Discussion and Analysis
Results for the Successor year ended March 31, 2015 as compared to the unaudited Combined year ended
December 31, 2013 in addition to the unaudited Combined year ended December 31, 2013 as compared to the Predecessor
year ended December 31, 2012 are also discussed, to the extent necessary, to provide an analysis of results on comparable
periods although the basis of presentation may not be comparable due to the application of the acquisition method of
accounting. Additionally, in certain sections we discuss the activity of the Predecessor 191-day period ended July 10, 2013 to
the extent it provides useful information for the activity during that period.
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, as described further in the Notes to the Consolidated Financial Statements.
As a result, the following estimated impacts of purchase price accounting are included in our results of operations for the
Successor three-month transition period ended March 31, 2014 and year ended December 31, 2013:
• Reduced postpaid wireless revenue and wireless cost of service of approximately $29 million and $59 million
each for the Successor three-month transition period ended March 31, 2014 and for the year ended December
31, 2013, respectively, as a result of purchase accounting adjustments to deferred revenue and deferred costs;
• Reduced prepaid wireless revenue of approximately $96 million for the Successor year ended December 31,
2013 as a result of purchase accounting adjustments to eliminate deferred revenue;
• Increased rent expense of $29 million and $55 million for the Successor three-month transition period ended
March 31, 2014 and year ended December 31, 2013, respectively, which was included in cost of service,
primarily attributable to the write-off of deferred rents associated with our operating leases, offset by the
amortization of our net unfavorable leases recorded in purchase accounting;
• Increased cost of products sold of approximately $31 million for the Successor year ended December 31,
2013 as a result of purchase accounting adjustments to accessory inventory;
• Reduced depreciation expense of approximately $60 million and $400 million for the Successor three-month
transition period ended March 31, 2014 and year ended December 31, 2013, respectively, as a result of
purchase accounting adjustments reflecting a net decrease to property, plant and equipment;
• Incremental amortization expense of approximately $359 million and $772 million for the Successor three-
month transition period ended March 31, 2014 and year ended December 31, 2013, respectively, which was
primarily attributable to the recognition of customer relationships of approximately $6.9 billion; and
• Decrease in pension expense of approximately $22 million and $46 million for the Successor three-month
transition period ended March 31, 2014 and year ended December 31, 2013, respectively, which was
primarily reflected in selling, general and administrative expense, due to the purchase accounting adjustment
to unrecognized net periodic pension and other post-retirement benefits.