Time Warner Cable 2009 Annual Report Download - page 63

The following table summarizes the Company’s aggregate contractual obligations as of December 31, 2009, and the estimated
timing and effect that such obligations are expected to have on the Company’s liquidity and cash flows in future periods (in millions):
2010
2011-
2012
2013-
2014
2015-
thereafter Total
Programming purchases
(a)
................................. $ 3,339 $ 5,697 $ 4,235 $ 2,538 $ 15,809
Outstanding debt obligations and TW NY Cable Preferred
Membership Units
(b)
................................... — 3,370 3,551 15,751 22,672
Interest and dividends
(c)
.................................. 1,460 2,964 2,508 12,111 19,043
Digital Phone connectivity
(d)
............................... 536 631 151 — 1,318
Facility leases
(e)
........................................ 115 208 166 389 878
Data processing services .................................. 50 88 7 — 145
High-speed data connectivity
(f)
............................. 39 14 4 20 77
Other ................................................ 46 34 11 71 162
Total ................................................ $ 5,585 $ 13,006 $ 10,633 $ 30,880 $ 60,104
(a)
Programming purchases represent contracts that the Company has with cable television networks and broadcast stations to provide programming services to its
subscribers. There is generally no obligation to purchase these services if the Company is not providing video 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 as of December 31, 2009 applied to the per-subscriber contractual rates
contained in contracts 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 Cable Preferred Membership Units represent principal amounts due on outstanding debt obligations and the TW NY Cable
Preferred Membership Units as of December 31, 2009. Amounts do not include any fair value adjustments, bond premiums, discounts, interest rate derivatives,
interest payments or dividends.
(c)
Amounts are based on the outstanding debt or TW NY Cable Preferred Membership Units balances, respective interest or dividend rates (interest rates on
variable-rate debt were held constant through maturity at the December 31, 2009 rates) and maturity schedule of the respective instruments as of December 31, 2009.
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 7 to the accompanying consolidated financial statements for further details.
(d)
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 generally based on the number of Digital Phone subscribers as of December 31,
2009 and the per-subscriber contractual rates contained in the contracts that were in effect as of December 31, 2009.
(e)
The Company has facility lease obligations under various operating leases including minimum lease obligations for real estate and operating equipment.
(f)
High-speed data connectivity obligations are based on the contractual terms for bandwidth circuits that were in use as of December 31, 2009.
The Company’s total rent expense, which primarily includes facility rental expense and pole attachment rental fees, amounted to
$212 million in 2009, $190 million in 2008 and $182 million in 2007.
Minimum pension funding requirements have not been presented as such amounts have not been determined beyond 2009. The
Company did not have a required minimum pension contribution obligation for its funded defined benefit pension plans in 2009;
however, the Company made discretionary cash contributions of $160 million to these plans during 2009 and may make discretionary
cash contributions to these plans in 2010.
Contingent 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, 2009 and 2008 totaled $313 million and $288 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.
MARKET RISK MANAGEMENT
Market risk is the potential gain/loss arising from changes in market rates and prices, such as interest rates.
Interest Rate Risk
Fixed-rate Debt and TW NY Cable Preferred Membership Units
As of December 31, 2009, TWC had fixed-rate debt and TW NY Cable Preferred Membership Units with an outstanding balance of
$21.371 billion (excluding the estimated fair value of the interest rate derivative transactions discussed below) and an estimated fair value
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)