and federal regulatory proceedings may require our telephone
operations to pay penalties or to refund to customers a portion
of the revenues collected in the current and prior periods.
There are also various legal actions pending to which we are
a party and claims which, if asserted, may lead to other legal
actions. We have established reserves for specific liabilities
in connection with regulatory and legal actions, including
environmental matters, that we currently deem to be probable
and estimable. We do not expect that the ultimate resolution
of pending regulatory and legal matters in future periods,
including the Hicksville matters described below, will have
a material effect on our financial condition, but it could
have a material effect on our results of operations.
During 2003, under a government-approved plan, remediation
commenced at the site of a former Sylvania facility in Hicksville,
New York that processed nuclear fuel rods in the 1950s and
1960s. Remediation beyond original expectations proved to
be necessary and a reassessment of the anticipated remediation
costs was conducted. A reassessment of costs related to remediation
efforts at several other former facilities was also undertaken.
As a result, an additional environmental remediation expense
of $240 million was recorded in Selling, General and Administrative
Expense in the consolidated statements of income in 2003,
for remedial activities likely to take place over the next
several years. In September 2005, the Army Corps of Engineers
(ACE) accepted the Hicksville site into the Formerly Utilized
Sites Remedial Action Program. This may result in the ACE
performing some or all of the remediation effort for the Hicksville
site with a corresponding decrease in costs to Verizon. To
the extent that the ACE assumes responsibility for remedial
work at the Hicksville site, an adjustment to this reserve
may be made. Adjustments may also be made based upon actual
conditions discovered during the remediation at any of the
sites requiring remediation.
There are also litigation matters associated with the Hicksville
site primarily involving personal injury claims in connection
with alleged emissions arising from operations in the 1950s
and 1960s at the Hicksville site. These matters are in various
stages, and no trial date has been set.
In connection with the execution of agreements for the sales
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.
Subsequent to the sale of Verizon Information Services Canada
(see Note 3), our Information Services segment continues to
provide a guarantee to publish directories, which was issued
when the directory business was purchased in 2001 and had
a 30-year term (before extensions). The preexisting guarantee
continues, without modification, following the sale of Verizon
Information Services Canada. The possible financial impact
of the guarantee, which is not expected to be adverse, cannot
be reasonably estimated since a variety of the potential outcomes
available under the guarantee result in costs and revenues
or benefits that may offset. In addition, performance under
the guarantee is not likely.
As of December 31, 2005, letters of credit totaling $140
million had been executed in the normal course of business,
which support several financing arrangements and payment obligations
to third parties.
We have several commitments primarily to purchase network
services, equipment and software from a variety of suppliers
totaling $669 million. Of this total amount, $486 million,
$110 million, $41 million, $18 million, $4 million and $10
million are expected to be purchased in 2006, 2007, 2008,
2009, 2010 and thereafter, respectively.