Time Warner Cable 2007 Annual Report Download - page 75

Contractual and Other Obligations
Contractual Obligations
The Company has obligations under certain contractual arrangements to make future payments for goods and
services. These contractual obligations secure the 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 certain minimum lease
payments for the use of property under operating lease agreements. In accordance with applicable accounting rules,
the future rights and obligations pertaining to firm commitments, such as operating lease obligations and certain
purchase obligations under contracts, are not reflected as assets or liabilities in the accompanying consolidated
balance sheet.
The following table summarizes the Company’s aggregate contractual obligations at December 31, 2007, and
the estimated timing and effect that such obligations are expected to have on the Company’s liquidity and cash flows
in future periods. TWC expects to fund these obligations with cash provided by operating activities generated in the
ordinary course of business.
2008
2009-
2010
2011-
2012
2013 and
thereafter Total
(in millions)
Programming purchases
(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,955 $4,574 $ 2,964 $ 812 $11,305
Outstanding debt obligations and TW NY Preferred Membership
Units
(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 — 7,370 5,801 13,771
Interest and dividends
(c)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862 1,665 1,073 5,488 9,088
Facility leases
(d)
.................................... 101 174 143 324 742
Data processing services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 93 83 6 229
High-speed data connectivity
(e)
.......................... 49 39 4 20 112
Digital Phone connectivity
(f)
............................ 314 616 232 — 1,162
Set-top box and modem purchases. . . . . . . . . . . . . . . . . . . . . . . . 71 — — — 71
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 60 4 8 146
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,073 $7,221 $11,873 $12,459 $36,626
(a)
Programming purchases represent contracts that the Company has with cable television networks to provide programming services to its
subscribers. Typically, these arrangements provide that the Company purchase cable television programming for a certain number of
subscribers as long as the Company is providing cable services to such number of subscribers. There is generally no obligation to purchase
these services if the Company is not providing cable services. 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 included above
represent estimates of future programming costs based on subscriber numbers at December 31, 2007 applied to the per-subscriber
contractual rates contained in the contracts that were in effect as of December 31, 2007, for which the Company does not have the right to
cancel the contract or for contracts with a guaranteed minimum commitment.
(b)
Outstanding debt obligations and TW NY Preferred Membership Units represent principal amounts due on outstanding debt obligations
and the TW NY Preferred Membership Units as of December 31, 2007. Amounts do not include any fair value adjustments, bond
premiums, discounts, interest payments or dividends.
(c)
With the exception of commercial paper issued under the Company’s commercial paper program, amounts are based on the outstanding
debt or TW NY Preferred Membership Units balances, respective interest or dividend rates (interest rates on variable-rate debt were held
constant through maturity at the December 31, 2007 rates) and maturity schedule of the respective instruments as of December 31, 2007.
With regard to commercial paper issued under the commercial paper program, amounts assume the outstanding commercial paper and
interest rates at December 31, 2007 will remain outstanding through the maturity of the respective underlying credit facility. Interest
ultimately paid on these obligations may differ based on changes in interest rates for variable-rate debt, as well as any potential future
refinancings entered into by the Company. See Note 8 to the accompanying consolidated financial statements for further details.
(d)
The Company has facility lease obligations under various operating leases including minimum lease obligations for real estate and
operating equipment.
(e)
High-speed data connectivity obligations are based on the contractual terms for bandwidth circuits that were in use at December 31, 2007.
(f)
Digital Phone connectivity obligations relate to transport, switching and interconnection services that allow for the origination and
termination of local and long-distance telephony traffic. These expenses also include related technical support services. There is generally
no obligation to purchase these services if the Company is not providing Digital Phone service. The amounts included above are based on
the number of Digital Phone subscribers at December 31, 2007 and the per-subscriber contractual rates contained in the contracts that
were in effect as of December 31, 2007.
70
TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)