Time Magazine 2015 Annual Report Download - page 124

TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following is a description of the Company’s contingent commitments at December 31, 2015:
• Guarantees consist of guarantees the Company has provided on certain operating commitments entered into by an
entity formerly owned by the Company, as well as the Six Flags arrangement described below, and a guarantee of
certain debt issued by CME, an equity method investee.
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 Time Warner Cable Inc. 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 $905 million (for a net present value of $421 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, 2015. 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.
• Other contingent commitments primarily include contingent payments for post-production term advance
obligations on certain co-financing arrangements, as well as letters of credit, bank guarantees and surety bonds,
which generally support performance and payments for a wide range of global contingent and firm obligations,
including insurance, litigation appeals, real estate leases and other operational needs.
Programming Licensing Backlog
Programming licensing backlog represents the amount of future revenues not yet recorded from cash contracts for the
licensing of theatrical and television product for pay cable, basic cable, network and syndicated television and SVOD
exhibition. Because backlog generally relates to contracts for the licensing of theatrical and television product that have
already been produced, the recognition of revenue for such completed product is principally dependent on the
commencement of the availability period for telecast under the terms of the related licensing agreement. Cash licensing fees
are collected periodically over the term of the related licensing agreements. Backlog was approximately $6.3 billion and
$6.5 billion at December 31, 2015 and 2014, respectively. Included in these amounts is licensing of film product from the
Warner Bros. segment to the Home Box Office segment in the amount of $737 million and $788 million at December 31,
2015 and 2014, respectively, and to the Turner segment in the amount of $619 million and $700 million at December 31,
2015 and 2014, respectively. Certain filmed entertainment licensing contracts provide for additional revenues to be earned,
and cash collected, based on the delivery of advertising spots to third parties. Backlog excludes estimates of such amounts.
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