Time Magazine 2014 Annual Report Download - page 61

TIME WARNER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION – (Continued)
The following table summarizes the Company’s aggregate contractual obligations at December 31, 2014, and the
estimated timing and effect that such obligations are expected to have on the Company’s liquidity and cash flows in future
periods (millions):
Contractual Obligations(a)(b)(c)
Total 2015 2016-2017 2018-2019 Thereafter
Purchase obligations:
Network programming obligations(d) ........... $ 24,982 $ 2,675 $ 5,054 $ 5,094 $ 12,159
Creative talent and employment agreements(e) . . . 1,874 1,211 626 31 6
Other purchase obligations(f) ................. 1,324 591 351 182 200
Total purchase obligations ..................... 28,180 4,477 6,031 5,307 12,365
Outstanding debt obligations (Note 8) ............ 22,553 1,108 1,689 1,625 18,131
Interest (Note 8) ............................. 18,756 1,270 2,426 2,228 12,832
Capital lease obligations (Note 8) ............... 62 13 20 17 12
Operating lease obligations (Note 16) ............ 1,480 317 593 384 186
Total contractual obligations ................... $ 71,031 $ 7,185 $ 10,759 $ 9,561 $ 43,526
(a) The table does not include the effects of arrangements that are contingent in nature such as guarantees and other contingent commitments (Note 16).
(b) The table does not include the Company’s reserve for uncertain tax positions and related accrued interest and penalties, which at December 31, 2014
totaled $1.663 billion, as the specific timing of any cash payments relating to this obligation cannot be projected with reasonable certainty.
(c) The references to Note 8 and Note 16 refer to the notes to the accompanying consolidated financial statements.
(d) The Turner segment enters into contracts to license sports programming to carry on its television networks. The amounts in the table include minimum
payment obligations to sports leagues and organizations (e.g., NBA, NCAA, MLB) to air the programming over the contract period. Included in the table
is $11.1 billion payable to the NBA over the 10 years remaining on its agreements, $7.9 billion payable to the NCAA over the 10 years remaining on the
agreement, which does not include amounts recoupable from CBS, and $2.3 billion payable to MLB over the 7 years remaining on the agreement. The
Turner and Home Box Office segments also enter into licensing agreements with certain production studios to acquire the rights to air motion pictures
and television series. The pricing structures in these contracts differ in that some agreements require a fixed amount per film or television series and
others are based on a percentage of the film’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 television series and films that had been released theatrically as of December 31, 2014 and are
calculated using the actual or estimated box office performance or fixed amounts, based on the applicable agreement.
(e) The Company’s commitments under creative talent and employment agreements include obligations to executives, actors, producers, writers, and other
talent under contractual arrangements, including union contracts and contracts with other organizations that represent such creative talent.
(f) Other purchase obligations principally include: (1) advertising, marketing, distribution and sponsorship obligations, including minimum guaranteed
royalty and marketing payments to vendors and content providers; (2) obligations related to the Company’s postretirement and unfunded defined benefit
pension plans; (3) purchases of DVD and Blu-ray Discs pursuant to a duplication and replication agreement; (4) obligations to purchase information
technology licenses and services; (5) obligations related to payments to the NCAA for Basketball Fan Festival rights at the Turner segment; and
(6) obligations to purchase general and administrative items and services.
The Company’s material contractual obligations at December 31, 2014 include:
• 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 purchase obligation
amounts do not represent all anticipated purchases, but represent only those purchases the Company is contractually
obligated to make. 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 indication of all of the Company’s expected
future cash outflows. For purposes of identifying and accumulating purchase obligations, all material contracts
meeting the definition of a purchase obligation have been included. 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 under the contracts as they existed at December 31, 2014, and has not assumed that the
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