Time Magazine 2013 Annual Report Download - page 126

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TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table summarizes the Company’s contingent commitments at December 31, 2013. For put
options where payment obligations are outside the Company’s control, the timing of amounts presented in the
table represents the earliest period in which the payment could be requested. For other contingent commitments,
the timing of amounts presented in the table represents when the maximum contingent commitment will expire,
but does not mean that the Company expects to incur an obligation to make any payments within that time
period. In addition, amounts presented do not reflect the effects of any indemnification rights the Company might
possess (millions).
Nature of Contingent Commitments Total 2014 2015-2016 2017-2018 Thereafter
Guarantees ............................ $ 962 $ 38 $ 79 $ 83 $ 762
Letters of credit and other contingent
commitments ........................ 871 50 195 466 160
Total contingent commitments ............. $ 1,833 $ 88 $ 274 $ 549 $ 922
The following is a description of the Company’s contingent commitments at December 31, 2013:
• Guarantees consist of guarantees the Company has provided on certain operating commitments entered
into by entities formerly owned by the Company, including the arrangement described below.
Six Flags
In connection with the Company’s former investment in the Six Flags theme parks located in
Georgia and Texas (collectively, the “Parks”), in 1997, certain subsidiaries of the Company (including
Historic TW and, in connection with the separation of TWC in 2009, Warner Bros. Entertainment Inc.)
agreed to guarantee (the “Six Flags Guarantee”) certain obligations of the partnerships that hold the
Parks (the “Partnerships”) for the benefit of the limited partners in such Partnerships, including: annual
payments made at the Parks or to the limited partners and additional obligations at the end of the
respective terms for the Partnerships in 2027 and 2028 (the “Guaranteed Obligations”). The aggregate
undiscounted estimated future cash flow requirements covered by the Six Flags Guarantee over the
remaining term (through 2028) are $962 million (for a net present value of $411 million). To date, no
payments have been made by the Company pursuant to the Six Flags Guarantee.
Six Flags Entertainment Corporation (formerly known as Six Flags, Inc. and Premier Parks Inc.)
(“Six Flags”), which has the controlling interest in the Parks, has agreed, pursuant to a subordinated
indemnity agreement (the “Subordinated Indemnity Agreement”), to guarantee the performance of the
Guaranteed Obligations when due and to indemnify Historic TW, among others, if the Six Flags
Guarantee is called upon. If Six Flags defaults in its indemnification obligations, Historic TW has the
right to acquire control of the managing partner of the Parks. Six Flags’ obligations to Historic TW are
further secured by its interest in all limited partnership units held by Six Flags.
Because the Six Flags Guarantee existed prior to December 31, 2002 and no modifications to the
arrangements have been made since the date the guarantee came into existence, the Company is
required to continue to account for the Guaranteed Obligations as a contingent liability. Based on its
evaluation of the current facts and circumstances surrounding the Guaranteed Obligations and the
Subordinated Indemnity Agreement, the Company is unable to predict the loss, if any, that may be
incurred under the Guaranteed Obligations, and no liability for the arrangements has been recognized at
December 31, 2013. Because of the specific circumstances surrounding the arrangements and the fact
that no active or observable market exists for this type of financial guarantee, the Company is unable to
determine a current fair value for the Guaranteed Obligations and related Subordinated Indemnity
Agreement.
• Generally, letters of credit, bank guarantees and surety bonds support performance and payments for a
wide range of global contingent and firm obligations, including insurance, litigation appeals, import of
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