Time Warner Cable 2012 Annual Report Download - page 73

TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
The following table summarizes the Company’s aggregate contractual obligations outstanding as of December 31, 2012,
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):
2013 2014-2015 2016-2017 Thereafter Total
Programming and content purchases(a) ...........$ 4,598 $ 7,344 $ 5,215 $ 6,415 $ 23,572
Outstanding debt and mandatorily redeemable
preferred equity obligations(b) ................ 1,802 2,254 2,006 20,701 26,763
Interest and dividends(c) ...................... 1,733 3,012 2,858 16,056 23,659
Operating leases(d) ........................... 138 246 191 299 874
Voice connectivity(e) ......................... 230 2 — — 232
Data processing services ...................... 51 98 63 — 212
High-speed data connectivity(f) ................. 49 37 8 39 133
Other(g) ................................... 171 139 17 56 383
Total .....................................$ 8,772 $ 13,132 $ 10,358 $ 43,566 $ 75,828
(a) Programming purchases represent contracts that the Company has with cable television networks and broadcast stations to provide programming
services to its subscribers. The amounts included above represent estimates of the future programming costs for these contract requirements and
commitments based on subscriber numbers and tier placement as of December 31, 2012 applied to the per-subscriber rates contained in these contracts.
Actual amounts due under such contracts may differ from the amounts above based on the actual subscriber numbers and tier placements. These
amounts also include programming rights negotiated directly with content owners for distribution on TWC-owned channels or networks.
(b) Outstanding debt and mandatorily redeemable preferred equity obligations represent principal amounts due on outstanding debt obligations and the TW
NY Cable Preferred Membership Units as of December 31, 2012. 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 and 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, 2012 rates) and maturity schedule of the respective instruments as of
December 31, 2012. 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 Notes 8 and 9 to the accompanying consolidated financial statements for further details.
(d) The Company has lease obligations under various operating leases including minimum lease obligations for real estate and operating equipment.
(e) Voice connectivity obligations relate to transport, switching and interconnection services, primarily provided by Sprint, that allow for the origination
and termination of local and long-distance telephony traffic. These expenses also include related technical support services. As discussed in “Results of
Operations—2012 vs. 2011—Cost of Revenue,” the Company is in an ongoing process of replacing Sprint as the provider of transport, switching and
interconnection services. There is generally no obligation to purchase these services if the Company is not providing voice service. The amounts
included above are estimated based on the number of voice subscribers as of December 31, 2012 and the per-subscriber contractual rates contained in
the contracts that were in effect as of December 31, 2012 and also reflect the replacement of Sprint between the fourth quarter 2010 and the first quarter
of 2014.
(f) High-speed data connectivity obligations are based on the contractual terms for bandwidth circuits that were in use as of December 31, 2012.
(g) Other contractual obligations does not include the Company’s reserve for uncertain tax positions and related accrued interest and penalties, which as of
December 31, 2012 totaled $95 million, as the specific timing of any cash payments relating to this obligation cannot be projected with reasonable
certainty.
The Company’s total rent expense was $237 million, $202 million and $212 million in 2012, 2011 and 2010,
respectively. Included within these amounts are pole attachment rental fees of $77 million, $55 million and $71 million in
2012, 2011 and 2010, respectively.
Minimum pension funding requirements have not been presented in the table above as such amounts have not been
determined beyond 2012. The Company was not required to make any cash contributions to its qualified pension plans in
2012; however, the Company made discretionary cash contributions of $285 million to the qualified pension plans in 2012
and may make discretionary cash contributions to these plans in 2013. For the nonqualified pension plan, the Company
contributed $4 million during 2012 and will continue to make contributions in 2013 to the extent benefits are paid.
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
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