Time Magazine 2012 Annual Report Download - page 99

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The interest rate on borrowings under the Revolving Credit Facilities and the facility fee are based in part on
the Company’s credit ratings. Therefore, in the event that the Company’s credit ratings decrease, the cost of
maintaining the Revolving Credit Facilities and the cost of borrowing increase and, conversely, if the ratings
improve, such costs decrease. As of December 31, 2012, the Company’s investment grade debt ratings were as
follows: Fitch BBB, Moody’s Baa2, and S&P BBB.
As of December 31, 2012, the Company was in compliance with all covenants in the Credit Agreement and
its public debt indentures. The Company does not anticipate that it will have any difficulty in the foreseeable
future complying with the covenants in its Credit Agreement or public debt indentures.
Other Obligations
Other long-term debt obligations consist of capital lease and other obligations, including committed
financings by subsidiaries under local bank credit agreements. At December 31, 2012 and 2011, the weighted
average interest rate for other long-term debt obligations was 4.41% and 4.57%, respectively.
Capital Leases
The Company has entered into various leases primarily related to network equipment that qualify as capital
lease obligations. As a result, the present value of the remaining future minimum lease payments is recorded as a
capitalized lease asset and related capital lease obligation in the Consolidated Balance Sheet. Assets recorded
under capital lease obligations totaled $101 million and $150 million as of December 31, 2012 and 2011,
respectively. Related accumulated amortization totaled $49 million and $79 million as of December 31, 2012 and
2011, respectively.
Future minimum capital lease payments at December 31, 2012 are as follows (millions):
2013 ........................................................................ $ 13
2014 ........................................................................ 12
2015 ........................................................................ 11
2016 ........................................................................ 9
2017 ........................................................................ 9
Thereafter .................................................................... 20
Total ........................................................................ 74
Amount representing interest ..................................................... (14)
Present value of minimum lease payments .......................................... 60
Current portion ............................................................... (9)
Total long-term portion ......................................................... $ 51
Film Tax-Advantaged Arrangements
The Company’s film and TV entertainment business, on occasion, enters into tax-advantaged transactions
with foreign investors that are thought to generate tax benefits for such investors. The Company believes that its
tax profile is not affected by its participation in these arrangements in any jurisdiction. The foreign investors
provide consideration to the Company for entering into these arrangements.
Although these transactions often differ in form, they generally involve circumstances in which the Company
enters into a sale-leaseback arrangement involving its film product with third-party special purpose entities
(“SPEs”) owned by the foreign investors. The Company maintains its rights and control over the use of its film
83