Management’s Discussion and Analysis of Financial Condition and Results of Operations continued Contractual Obligations The following table provides a summary of our contractual obligations and commercial commitments at December 31, 2017. 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) $ 116,459 $ 2,926 $ 12,482 $ 15,805 $ 85,246 Capital lease obligations(2) 1,020 382 411 118 109 Total long-term debt, including current maturities 117,479 3,308 12,893 15,923 85,355 Interest on long-term debt(1) 89,691 5,021 9,765 9,032 65,873 Operating leases(2) 20,734 3,290 5,729 4,253 7,462 Purchase obligations(3) 20,984 7,558 8,960 2,128 2,338 Other long-term liabilities(4) 1,366 1,075 291 Finance obligations(5) 2,093 271 559 582 681 Total contractual obligations $ 252,347 $ 20,523 $ 38,197 $ 31,918 $ 161,709 (1) Items included in long-term debt with variable coupon rates exclude unamortized debt issuance costs, and are described in Note 6 to the consolidated financial statements. (2) See Note 5 to the consolidated financial statements for additional information. (3) Items included in purchase obligations are primarily commitments to purchase content and network services, equipment, software and marketing services, 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 15 to the consolidated financial statements for additional information. (4) Other long-term liabilities include estimated postretirement benefit and qualified pension plan contributions. See Note 10 to the consolidated financial statements for additional information. (5) Represents future minimum payments under the sublease arrangement for our tower transaction. See Note 5 to the consolidated financial statements for additional information. We are not able to make a reasonable estimate of when the unrecognized tax benefits balance of $2.4 billion and related interest and penalties will be settled with the respective taxing authorities until issues or examinations are further developed. See Note 11 to the consolidated financial statements for additional information. Guarantees We guarantee the debentures of our operating telephone company subsidiaries as well as the debt obligations of GTE LLC, as successor in interest to GTE Corporation, that were issued and outstanding prior to July 1, 2003. See Note 6 to the consolidated financial statements for additional information. As a result of the closing of the Access Line Sale on April 1, 2016, GTE Southwest Inc., Verizon California Inc. and Verizon Florida LLC are no longer wholly-owned subsidiaries of Verizon, and the guarantees of $0.6 billion aggregate principal amount of debentures and first mortgage bonds of those entities have terminated pursuant to their terms. In connection with the execution of agreements for the sale of businesses and investments, Verizon ordinarily provides representations and warranties 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 15 to the consolidated financial statements for additional information. As of December 31, 2017, letters of credit totaling approximately $0.6 billion, which were executed in the normal course of business and support several financing arrangements and payment obligations to third parties, were outstanding. See Note 15 to the consolidated financial statements for additional information. 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 currency exchange rate fluctuations, 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, forward interest rate swaps, interest rate swaps and interest rate caps. We do not hold derivatives for trading purposes. 36 verizon.com/2017AnnualReport
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