Verizon Wireless 2006 Annual Report Download - page 33

sheets. The changes in the assets and liabilities were recorded in
Accumulated Other Comprehensive Loss, net of a tax benefit, in
shareowners’ investment in the consolidated balance sheets.
We operate numerous qualified and nonqualified pension plans and
other postretirement benefit plans. These plans primarily relate to
our domestic business units. The majority of Verizon’s pension plans
are adequately funded. We contributed $451 million, $593 million
and $145 million in 2006, 2005 and 2004, respectively, to our quali-
fied pension trusts. We also contributed $117 million, $105 million
and $114 million to our nonqualified pension plans in 2006, 2005
and 2004, respectively.
Based on the funded status of the plans at December 31, 2006, we
anticipate qualified pension trust contributions of $510 million in
2007. Our estimate of required qualified pension trust contributions
for 2008 is approximately $300 million. Nonqualified pension contri-
butions are estimated to be approximately $120 million and $180
million for 2007 and 2008, respectively.
Contributions to our other postretirement benefit plans generally
relate to payments for benefits primarily on an as-incurred basis
since the other postretirement benefit plans do not have funding
requirements similar to the pension plans. We contributed $1,099 mil-
lion, $1,040 million and $1,099 million to our other postretirement
benefit plans in 2006, 2005 and 2004, respectively. Contributions to
our other postretirement benefit plans are estimated to be approxi-
mately $1,210 million in 2007 and $1,580 million in 2008, prior to
anticipated receipts related to Medicare subsidies.
Leasing Arrangements
We are the lessor in leveraged and direct financing lease agreements
under which commercial aircraft and power generating facilities,
which comprise the majority of the portfolio, along with industrial
equipment, real estate, telecommunications and other equipment
are leased for remaining terms of less than 1 year to 49 years as of
December 31, 2006. Minimum lease payments receivable represent
unpaid rentals, less principal and interest on third-party nonrecourse
debt relating to leveraged lease transactions. Since we have no gen-
eral liability for this debt, which holds a senior security interest in the
leased assets and rentals, the related principal and interest have
been offset against the minimum lease payments receivable in
accordance with generally accepted accounting principles. All
recourse debt is reflected in our consolidated balance sheets. See
“Special Items” for a discussion of lease impairment charges.
Increase (Decrease) In Cash and Cash Equivalents
Our cash and cash equivalents at December 31, 2006 totaled $3,219
million, a $2,459 increase compared to cash and cash equivalents at
December 31, 2005 of $760 million. The increase in cash and cash
equivalents in 2006 was primarily driven by proceeds from the dis-
position of Verizon Dominicana and the spin-off of Idearc, cash
acquired in connection with the merger of MCI and higher debt bor-
rowings, partially offset by increased capital expenditures and higher
repayments of borrowings. Our cash and cash equivalents at
December 31, 2005 totaled $760 million, a $1,501 million decrease
compared to cash and cash equivalents at December 31, 2004 of
$2,261 million. The decrease in cash and cash equivalents in 2005
was primarily driven by increased capital expenditures and higher
acquisitions and investments, partially offset by proceeds from the
sale of businesses and lower repayments of borrowings.
Employee Benefit Plan Funded Status and Contributions
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans—an amendment of
FASB Statements No. 87, 88, 106, and 132(R) (SFAS No. 158). SFAS
No. 158 requires the recognition of a defined benefit postretirement
plan’s funded status as either an asset or liability on the balance
sheet. SFAS No. 158 also requires the immediate recognition of the
unrecognized actuarial gains and losses and prior service costs and
credits that arise during the period as a component of Other
Accumulated Comprehensive Income, net of applicable income taxes.
Additionally, the fair value of plan assets must be determined as of the
company’s year-end. We adopted SFAS No. 158 effective December
31, 2006 which resulted in a net decrease to shareowners’ investment
of $6,883 million. This included a net increase in pension obligations
of $2,403 million, an increase in Other Postretirement Benefits
Obligations of $10,828 million and an increase in Other Employee
Benefit Obligations of $31 million, partially offset by a net decrease of
$1,205 million to reverse the Additional Minimum Pension Liability and
an increase in deferred taxes of $5,174 million.
Prior to the adoption of SFAS No. 158 we evaluated each pension
plan to determine whether an additional minimum pension liability
was required or whether any adjustment was necessary as deter-
mined by the provisions of SFAS No. 87, Employers’ Accounting for
Pensions. In 2005, we recorded a benefit of $51 million, net of tax,
primarily in Employee Benefit Obligations in the consolidated balance
31
Management’s Discussion and Analysis
of Results of Operations and Financial Condition continued
Off Balance Sheet Arrangements and Contractual Obligations
Contractual Obligations and Commercial Commitments
The following table provides a summary of our contractual obligations and commercial commitments at December 31, 2006. Additional detail
about these items is included in the notes to the consolidated financial statements.
(dollars in millions)
Payments Due By Period
Less than More than
Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years
Long-term debt (see Note 11) $ 32,425 $ 4,084 $ 3,784 $ 5,316 $ 19,241
Capital lease obligations (see Note 10) 360 55 101 81 123
Total long-term debt 32,785 4,139 3,885 5,397 19,364
Interest on long-term debt (see Note 11) 23,300 1,915 3,449 2,965 14,971
Operating leases (see Note 10) 6,843 1,739 2,192 1,183 1,729
Purchase obligations (see Note 21) 812 566 217 16 13
Other long-term liabilities (see Note 15) 3,600 1,720 1,880 – –
Total contractual obligations $ 67,340 $ 10,079 $ 11,623 $ 9,561 $ 36,077