Verizon Wireless 2011 Annual Report Download - page 45

43
Leasing Arrangements
We are the lessor in leveraged and direct financing lease agreements
for commercial aircraft and power generating facilities, which comprise
the majority of our leasing portfolio along with telecommunications
equipment, real estate property and other equipment. These leases have
remaining terms of up to 39 years as of December 31, 2011. In addition,
we lease space on certain of our cell towers to other wireless carriers.
Minimumleasepaymentsreceivablerepresentunpaidrentals,lessprin-
cipal and interest on third-party nonrecourse debt relating to leveraged
lease transactions. Since we have no general liability for this debt, which is
secured by a senior security interest in the leased equipment and rentals,
the related principal and interest have been offset against the minimum
lease payments receivable in accordance with GAAP. All recourse debt is
reflected in our consolidated balance sheets.
reduce the likelihood that assets will decline at a time when liabilities
increase (referred to as liability hedging), with the goal to reduce the risk
of underfunding to the plan and its participants and beneficiaries. Based
on the revised strategy and the funded status of the plans at December
31, 2011, we expect to make a minimum required qualified pension plan
contribution of $1.3 billion in 2012. Nonqualified pension contributions
are estimated to be approximately $0.2 billion in 2012.
Contributions to our other postretirement benefit plans generally relate
to payments for benefits on an as-incurred basis since the other post-
retirement benefit plans do not have funding requirements similar to
the pension plans. We contributed $1.4 billion, $1.2 billion and $1.6 bil-
lion to our other postretirement benefit plans in 2011, 2010 and 2009,
respectively. Contributions to our other postretirement benefit plans are
estimated to be approximately $1.5 billion in 2012.
ManagEMEnt’s discussiOn and analYsis
OF Financial cOnditiOn and REsults OF OPERatiOns 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, 2011. Additional detail about
these items is included in the notes to the consolidated financial statements.
(dollars in millions)
Payments Due By Period
Contractual Obligations Total
Less than
1 year 1–3 years 3–5 years
Morethan
5 years
Long-term debt(1) $ 52,866 $ 2,848 $ 12,320 $ 5,252 $ 32,446
Capital lease obligations(2) 352 67 117 75 93
Total long-term debt, including current maturities 53,218 2,915 12,437 5,327 32,539
Interest on long-term debt(1) 36,353 2,993 5,327 4,667 23,366
Operating leases(2) 12,389 2,004 3,337 2,302 4,746
Purchase obligations(3) 51,120 22,829 24,560 3,124 607
Income tax audit settlements(4) 163 163 – – –
Other long-term liabilities(5) 3,219 3,219 – – –
Total contractual obligations $ 156,462 $ 34,123 $ 45,661 $ 15,420 $ 61,258
(1) Items included in long-term debt with variable coupon rates are described in Note 8 to the consolidated financial statements.
(2) See Note 7 to the consolidated financial statements.
(3) The purchase obligations reflected above are primarily commitments to purchase handsets and peripherals, equipment, software, programming and network services, and marketing activities,
which will be used or sold in the ordinary course of business. These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we are
contractuallycommitted.Wealsopurchaseproductsandservicesasneededwithnofirmcommitment.Forthisreason,theamountspresentedinthistablealonedonotprovideareliable
indicator of our expected future cash outflows or changes in our expected cash position (see Note 16 to the consolidated financial statements).
(4) Income tax audit settlements include gross unrecognized tax benefits of $0.1 billion and related gross interest and penalties of $0.1 billion as determined under the accounting standard relating
to the uncertainty in income taxes. We are not able to make a reliable estimate of when the unrecognized tax benefits balance of $3.0 billion and related interest and penalties will be settled
with the respective taxing authorities until issues or examinations are further developed (see Note 12 to the consolidated financial statements).
(5) Other long-term liabilities include estimated postretirement benefit and qualified pension plan contributions (see Note 11 to the consolidated financial statements).
Guarantees
In connection with the execution of agreements for the sale of businesses
and investments, Verizon ordinarily provides representations and warran-
ties to the purchasers pertaining to a variety of nonfinancial matters, such
as ownership of the securities being sold, as well as financial losses (see
Note 16 to the consolidated financial statements).
During 2011, we guaranteed the debentures and first mortgage bonds of
our operating telephone company subsidiaries. As of December 31, 2011,
$6.4 billion principal amount of these obligations remain outstanding.
Each guarantee will remain in place for the life of the obligation unless
terminated pursuant to its terms, including the operating telephone
company no longer being a wholly-owned subsidiary of Verizon. We also
guarantee the debt obligations of GTE Corporation that were issued and
outstanding prior to July 1, 2003. As of December 31, 2011, $1.7 billion
principal amount of these obligations remain outstanding (see Note 8 to
the consolidated financial statements).
As of December 31, 2011 letters of credit totaling approximately $0.1 bil-
lion, which were executed in the normal course of business and support
several financing arrangements and payment obligations to third parties,
were outstanding (see Note 16 to the consolidated financial statements).