Time Warner Cable 2006 Annual Report Download - page 94

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expense obligations and EBITDAR of certain unconsolidated entities that it manages and/or in which it owns an
equity interest, in the calculation of the TW Leverage Ratio. The Shareholder Agreement defines EBITDAR, at any
time of measurement, as operating income plus depreciation, amortization and rental expense (for any lease that is
not accounted for as a capital lease) for the twelve months ending on the last day of TWC’s most recent fiscal
quarter, including certain adjustments to reflect the impact of significant transactions as if they had occurred at the
beginning of the period.
The following table sets forth the calculation of the TW Leverage Ratio for the year ended December 31, 2006
(in millions, except ratio):
Indebtedness .......................................................... $14,432
Preferred Membership Units ............................................... 300
Six times annual rental expense ............................................ 1,099
Total .............................................................. $15,831
EBITDAR ............................................................ $ 5,344
TW Leverage Ratio ..................................................... 2.96x
As indicated in the table above, as of December 31, 2006, the TW Leverage Ratio did not exceed 3:1.
Contractual and Other Obligations
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 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.
89
TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION — (Continued)