Verizon Wireless 2014 Annual Report Download - page 32

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued
Guarantees
We guarantee the debentures and rst mortgage bonds of our operating
telephone company subsidiaries as well as the debt obligations of GTE
Corporation that were issued and outstanding prior to July 1, 2003 (see
Note 8 to the consolidated nancial statements).
In connection with the execution of agreements for the sale of busi-
nesses and investments, Verizon ordinarily provides representations and
warranties to the purchasers pertaining to a variety of nonnancial mat-
ters, such as ownership of the securities being sold, as well as nancial
losses (see Note 17 to the consolidated nancial statements).
As of December 31, 2014, letters of credit totaling approximately $0.1 bil-
lion, which were executed in the normal course of business and support
several nancing arrangements and payment obligations to third parties,
were outstanding (see Note 17 to the consolidated nancial statements).
MARKET RISK
We are exposed to various types of market risk in the normal course
of business, including the impact of interest rate changes, foreign cur-
rency exchange rate uctuations, changes in investment, equity and
commodity prices and changes in corporate tax rates. We employ
risk management strategies, which may include the use of a variety of
derivatives including cross currency swaps, foreign currency and prepaid
forwards and collars, interest rate swap agreements, commodity swap
and forward agreements and interest rate locks. We do not hold deriva-
tives for trading purposes.
It is our general policy to enter into interest rate, foreign currency and
other derivative transactions only to the extent necessary to achieve our
desired objectives in limiting our exposure to various market risks. Our
objectives include maintaining a mix of xed and variable rate debt to
lower borrowing costs within reasonable risk parameters and to pro-
tect against earnings and cash ow volatility resulting from changes
in market conditions. We do not hedge our market risk exposure in a
manner that would completely eliminate the eect of changes in interest
rates and foreign exchange rates on our earnings. At December 31, 2014,
we posted collateral of approximately $0.6 billion related to derivative
contracts under collateral exchange arrangements. While we may be
exposed to credit losses due to the nonperformance of our counterpar-
ties, we consider the risk remote. As such, we do not expect that our
results of operations or nancial condition will be materially aected by
these risk management strategies.
O 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, 2014. Additional detail about
these items is included in the notes to the consolidated nancial 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) $ 112,417 $ 2,239 $ 9,807 $ 12,524 $ 87,847
Capital lease obligations(2) 516 158 218 93 47
Total long-term debt, including current maturities 112,933 2,397 10,025 12,617 87,894
Interest on long-term debt(1) 87,501 5,178 10,081 9,504 62,738
Operating leases(2) 14,403 2,499 4,205 3,029 4,670
Purchase obligations(3) 20,991 8,421 8,503 2,544 1,523
Other long-term liabilities(4) 2,084 1,425 659 - -
Total contractual obligations $ 237,912 $ 19,920 $ 33,473 $ 27,694 $ 156,825
(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 programming and network services, equipment, software, handsets and peripherals, 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 that are the subject
ofcontractualobligations.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 17 to the consolidated financial statements).
(4) Other long-term liabilities include estimated postretirement benefit and qualified pension plan contributions (see Note 12 to the consolidated financial statements).
We are not able to make a reliable estimate of when the unrecognized tax benefits balance of $1.8 billion and related interest and penalties will be settled with the respective taxing authorities
until issues or examinations are further developed (see Note 13 to the consolidated financial statements).