Time Warner Cable 2006 Annual Report Download - page 145

14. COMMITMENTS AND CONTINGENCIES
Prior to the TWE Restructuring, TWE had various contingent commitments, including guarantees, related to
the TWE non-cable businesses. In connection with the restructuring of TWE, some of these commitments were not
transferred with their applicable non-cable business and they remain contingent commitments of TWE. Time
Warner and its subsidiary, WCI, have agreed, on a joint and several basis, to indemnify TWE from and against any
and all of these contingent liabilities, but TWE remains a party to these commitments.
TWC has cable franchise agreements containing provisions requiring the construction of cable plant and the
provision of services to customers within the franchise areas. In connection with these obligations under existing
franchise agreements, TWC obtains surety bonds or letters of credit guaranteeing performance to municipalities and
public utilities and payment of insurance premiums. Such surety bonds and letters of credit as of December 31, 2006
and 2005 totaled $328 million and $245 million, respectively. Payments under these arrangements are required only
in the event of nonperformance. TWC does not expect that these contingent commitments will result in any amounts
being paid in the foreseeable future.
Firm Commitments
The Company has commitments under various firm contractual arrangements to make future payments for
goods and services. These firm commitments secure future rights to various assets and services to be used in the
normal course of operations. For example, the Company is contractually committed to make some minimum lease
payments for the use of property under operating lease agreements. In accordance with current accounting rules, the
future rights and obligations pertaining to these contracts are not reflected as assets or liabilities on the accom-
panying consolidated balance sheet.
The following table summarizes the material firm commitments of the Company at December 31, 2006 and the
timing of and effect that these obligations are expected to have on the Company’s liquidity and cash flow in future
periods. This table excludes certain Adelphia and Comcast commitments, which TWC did not assume, and
excludes repayments on long-term debt (including capital leases) and commitments related to other entities,
including certain unconsolidated equity method investees. TWC expects to fund these firm commitments with cash
provided by operating activities generated in the ordinary course of business.
2007
2008-
2009
2010-
2011
2012 and
Thereafter Total
(in millions)
Programming purchases
(a)
................ $2,867 $4,203 $2,846 $1,843 $11,759
Facility leases
(b)
....................... 73 140 128 461 802
Data processing services ................. 40 79 79 36 234
High-speed data connectivity .............. 19 3 1 — 23
Digital Phone connectivity
(c)
.............. 193 401 196 — 790
Converter and modem purchases ........... 399 3 — — 402
Other ............................... 20 17 2 7 46
Total .............................. $3,611 $4,846 $3,252 $2,347 $14,056
(a)
The Company has purchase commitments with various programming vendors to provide video services to subscribers. Programming
fees represent a significant portion of its costs of revenues. Future fees under such contracts are based on numerous variables, including
number and type of customers. The amounts of the commitments reflected above are based on the number of subscribers at
December 31, 2006 applied to the per subscriber contractual rates contained in the contracts that were in effect as of December 31,
2006.
(b)
The Company has facility lease commitments under various operating leases including minimum lease obligations for real estate and
operating equipment.
(c)
Digital Phone connectivity commitments are based on the number of Digital Phone subscribers at December 31, 2006 and the per
subscriber contractual rates contained in the contracts that were in effect as of December 31, 2006.
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)