Time Magazine 2009 Annual Report Download - page 64

• Operating lease obligations — represents the minimum lease payments under noncancelable operating leases,
primarily for the Company’s real estate and operating equipment in various locations around the world.
• Purchase obligations — represents an agreement to purchase goods or services that is enforceable and legally
binding on the Company and that specifies all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The
Company expects to receive consideration (i.e., products or services) for these purchase obligations. The
purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only
those items for which the Company is contractually obligated. Additionally, the Company also purchases
products and services as needed, with no firm commitment. For this reason, the amounts presented in the table
alone do not provide a reliable indicator of the Company’s expected future cash outflows. For purposes of
identifying and accumulating purchase obligations, the Company has included all material contracts meeting the
definition of a purchase obligation (i.e., legally binding for a fixed or minimum amount or quantity). For those
contracts involving a fixed or minimum quantity, but with variable pricing terms, the Company has estimated the
contractual obligation based on its best estimate of the pricing that will be in effect at the time the obligation is
incurred. Additionally, the Company has included only the obligations represented by those contracts as they
existed at December 31, 2009, and did not assume renewal or replacement of the contracts at the end of their
respective terms. If a contract includes a penalty for non-renewal, the Company has included that penalty,
assuming it will be paid in the period after the contract term expires. If Time Warner can unilaterally terminate an
agreement simply by providing a certain number of days notice or by paying a termination fee, the Company has
included the amount of the termination fee or the amount that would be paid over the “notice period.” Contracts
that can be unilaterally terminated without incurring a penalty have not been included.
The following table summarizes the Company’s purchase obligations at December 31, 2009 (millions):
Purchase Obligations Total 2010 2011-2012 2013-2014 Thereafter
Network programming obligations
(a)
....... $ 7,569 $1,995 $2,418 $1,907 $1,249
Creative talent and employment
agreements
(b)
...................... 1,727 1,000 623 101 3
Obligations to use certain printing facilities
for the production of magazines ........ 774 190 365 208 11
Advertising, marketing and sponsorship
obligations
(c)
...................... 690 281 186 149 74
Obligations to purchase information
technology licenses and services ........ 27 13 11 3 —
Other, primarily general and administrative
obligations
(d)
...................... 591 178 120 104 189
Total purchase obligations .............. $11,378 $3,657 $3,723 $2,472 $1,526
(a)
The Networks segment enters into contracts to license sports programming to carry on its television networks. The amounts in the table
represent minimum payment obligations to sports leagues (e.g., NBA, NASCAR, MLB) to air the programming over the contract period.
The Networks segment also enters into licensing agreements with certain movie studios to acquire the rights to air movies that the movie
studios release theatrically. The pricing structures in these contracts differ in that certain agreements can require a fixed amount per movie
while others will be based on a percentage of the movie’s box office receipts (with license fees generally capped at specified amounts), or a
combination of both. The amounts included in the table represent obligations for movies that have been released theatrically as of
December 31, 2009 and are calculated using the actual or estimated box office performance or fixed amounts, as applicable.
(b)
The Company’s commitments under creative talent and employment agreements include obligations to executives, actors, producers, authors,
and other talent under contractual arrangements, including union contracts and other organizations that represent such creative talent.
(c)
Advertising, marketing and sponsorship obligations include minimum guaranteed royalty and marketing payments to vendors and content
providers, primarily at the Networks and Filmed Entertainment segments.
(d)
Other includes obligations related to the Company’s postretirement and unfunded defined benefit pension plans, obligations to purchase
general and administrative items and services, construction commitments primarily for the Networks segment, outsourcing commitments
primarily for the Filmed Entertainment segment and payments due pursuant to certain interactive technology arrangements.
52
TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)