Sprint - Nextel 2014 Annual Report Download - page 67

Table of Contents
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• the impact of being a "controlled company" exempt from many corporate governance requirements of the
NYSE; and
• other risks referenced from time to time in this report and other filings of ours with the SEC.
The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe,"
"target," "plan," "providing guidance" and similar expressions are intended to identify forward-looking statements. Forward-
looking statements are found throughout this Management's Discussion and Analysis of Financial Condition and Results of
Operations, and elsewhere in this report. Readers are cautioned that other factors, although not listed above, could also
materially affect our future performance and operating results. The reader should not place undue reliance on forward-
looking statements, which speak only as of the date of this report. We are not obligated to publicly release any revisions to
forward-looking statements to reflect events after the date of this report, including unforeseen events.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign
currencies, and equity prices. The risk inherent in our market risk sensitive instruments and positions is the potential loss
arising from adverse changes in those factors.
Interest Rate Risk
The communications industry is a capital-intensive, technology-driven business. We are subject to interest rate
risk primarily associated with our borrowings. Interest rate risk is the risk that changes in interest rates could adversely affect
earnings and cash flows. Specific interest rate risk includes: the risk of increasing interest rates on variable rate debt and the
risk of increasing interest rates for planned new fixed rate long-term financings or refinancings.
Approximately 95% of our debt as of March 31, 2015 was fixed-rate debt. While changes in interest rates impact
the fair value of this debt, there is no impact to earnings and cash flows because we intend to hold these obligations to
maturity unless market and other conditions are favorable.
We perform interest rate sensitivity analyses on our variable rate debt. These analyses indicate that a one
percentage point change in interest rates would have had an annual pre-tax impact of $13 million on our consolidated
statements of operations and cash flows for the Successor year ended March 31, 2015. We also perform a sensitivity analysis
on the fair market value of our outstanding debt. A 10% decline in market interest rates is estimated to result in a $1.2 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 exposure to optimize
consolidated cash flow. We use foreign currency derivatives to hedge our foreign currency exposure related to settlement of
international telecommunications access charges and the operation of our international subsidiaries. The dollar equivalent of
our net foreign currency receivables from international settlements was approximately $1 million and the net foreign
currency payables from international operations was less than $1 million as of March 31, 2015. The potential immediate pre-
tax loss to us that would result from a hypothetical 10% change in foreign currency exchange rates based on these positions
would be less than $1 million.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements required by this item begin on page F-1 of this annual report on Form 10-K
and are incorporated herein by reference. The financial statements of Clearwire up through the date of acquisition, as required
under Regulation S-X, are included in Item 15 of this annual report on Form 10-K and incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.