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Table of Contents
Index to Consolidated Financial Statements
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 and the weighted average remaining lease term at July 9, 2013 was approximately 23 years, including renewal terms. We expect that
all renewal periods in our spectrum leases will be renewed by us.
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-party service expenditures, over the term of the lease. We accrue a monthly obligation for the services and equipment based on the
total estimated 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 190 days ended July 9, 2013 , and the years ended December 31, 2012 and 2011 we satisfied $1.2 million , $3.3 million and $4.5 million , respectively, related
to these commitments. The maximum remaining commitment at July 9, 2013 is $101.7 million and is expected to be incurred over the term of the related lease
agreements, which generally range from 15-30 years.
Purchase agreements - Included in the table above are purchase commitments with take-or-pay obligations and/or volume commitments for equipment that are
non-cancelable. The table above also includes other obligations we have 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, business 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.
Throughout the legal proceedings disclosure, we use the terms Clearwire and the Company to refer to Clearwire Corporation, Clearwire Communications
LLC, Clear Wireless LLC and its subsidiaries.
Consumer and Employment Purported Class Actions and Investigation(s)
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.
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 highest and that such network management violates our
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