AT&T Wireless 2014 Annual Report Download - page 36

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Dollars in millions except per share amounts
34 | AT&T INC.
the year of payment is unknown and could not be reliably
estimated since past trends were not deemed to be an
indicator of future payment.
Substantially all of our purchase obligations are in our
Wireline and Wireless segments. The table does not include
the fair value of our interest rate swaps. Our capital lease
obligations and bank borrowings have been excluded
from the table due to the insignificant amounts of such
obligations at December 31, 2014. Many of our other
noncurrent liabilities have been excluded from the following
table due to the uncertainty of the timing of payments,
combined with the absence of historical trending to be used
as a predictor of such payments. Additionally, certain other
long-term liabilities have been excluded since settlement of
such liabilities will not require the use of cash. However, we
have included, in the following table, obligations that
primarily relate to benefit funding due to the certainty of
the timing of these future payments. Our other long-term
liabilities are: deferred income taxes (see Note 11) of
$37,544; postemployment benefit obligations of $37,079;
and other noncurrent liabilities of $17,989.
interest, or expected pension and postretirement payments
(we maintain pension funds and Voluntary Employee
Beneficiary Association trusts to fully or partially fund these
benefits) (see Note 12). In the ordinary course of business,
we routinely enter into commercial commitments for
various aspects of our operations, such as plant additions,
inventory and office supplies. However, we do not believe
that the commitments will have a material effect on our
financial condition, results of operations or cash flows.
Our contractual obligations as of December 31, 2014, are
in the following table. The purchase obligations that follow
are those for which we have guaranteed funds and will be
funded with cash provided by operations or through
incremental borrowings. The minimum commitment for
certain obligations is based on termination penalties that
could be paid to exit the contract. Other long-term liabilities
are included in the table based on the year of required
payment or an estimate of the year of payment. Such
estimate of payment is based on a review of past trends
for these items, as well as a forecast of future activities.
Certain items were excluded from the following table, as
Contractual Obligations
Payments Due By Period
Less than 1-3 3-5 More than
Total 1 Year Years Years 5 Years
Long-term debt obligations1 $ 84,866 $ 6,482 $ 12,031 $ 12,148 $ 54,205
Interest payments on long-term debt 58,434 3,539 6,734 5,922 42,239
Finance obligations2 3,724 225 464 482 2,553
Operating lease obligations 31,047 3,879 6,931 5,694 14,543
Unrecognized tax benefits3 3,119 260 — — 2,859
Purchase obligations4 43,724 19,129 21,386 2,518 691
Total Contractual Obligations $224,914 $ 33,514 $ 47,546 $ 26,764 $117,090
1 Represents principal or payoff amounts of notes and debentures at maturity or, for putable debt, the next put opportunity.
2 Represents future minimum payments under the sublease arrangement for our tower transactions (see Note 17).
3 The noncurrent portion of the UTBs is included in the “More than 5 Years” column, as we cannot reasonably estimate the timing or amounts of additional cash payments, if
any, at this time. See Note 11 for additional information.
4 We calculated the minimum obligation for certain agreements to purchase goods or services based on termination fees that can be paid to exit the contract. If we elect to
exit these contracts, termination fees for all such contracts in the year of termination could be approximately $530 in 2015, $500 in the aggregate for 2016 and 2017, $82 in
the aggregate for 2018 and 2019, and $0 in the aggregate thereafter. Certain termination fees are excluded from the above table, as the fees would not be paid every year
and the timing of such payments, if any, is uncertain.
In managing market risks, we employ derivatives according
to documented policies and procedures, including interest
rate swaps, interest rate locks, foreign currency exchange
contracts and combined interest rate foreign currency
contracts (cross-currency swaps). We do not use derivatives
for trading or speculative purposes. We do not foresee
significant changes in the strategies we use to manage
market risk in the near future.
MARKET RISK
We are exposed to market risks primarily from changes
in interest rates and foreign currency exchange rates.
These risks, along with other business risks, impact
our cost of capital. It is our policy to manage our
debt structure and foreign exchange exposure in order
to manage capital costs, control financial risks and
maintain financial flexibility over the long term.