America Online 2014 Annual Report Download - page 71

AOL INC.
PART II—ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
services to be used in the normal course of operations. For example, we are 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 on the
accompanying consolidated balance sheets.
The following table presents certain payments due under contractual obligations with minimum firm
commitments as of December 31, 2014 (in millions):
Total 2015 2016-2017 2018-2019 Thereafter
Convertible senior notes ........................... $ 379.5 $ — $ — $ 379.5 $ —
Capital lease obligations ........................... 155.0 59.3 83.3 12.4 —
Operating lease obligations, net of sublease income ..... 221.3 38.6 66.5 54.2 62.0
Purchase obligations .............................. 70.5 37.2 32.9 0.3 0.1
Total contractual obligations ....................... $ 826.3 $ 135.1 $ 182.7 $ 446.4 $ 62.1
The following is a description of our material contractual obligations at December 31, 2014:
• Convertible senior notes represent the outstanding principal borrowing of $379.5 million of convertible
senior notes due September 1, 2019. See “Note 5” in our accompanying consolidated financial
statements for more information.
• Capital lease obligations represent the minimum lease payments under non-cancelable capital leases,
primarily for network equipment financed under capital leases. See “Note 5” in our accompanying
consolidated financial statements for more information.
• Net operating lease obligations represent the minimum lease payments under operating leases, net of
contractually committed sublease income, primarily for our real estate in various locations around the
world. Included in the above table are approximately $146.9 million of payments associated with the
lease of our corporate headquarters in New York. We have leased our corporate headquarters for an
initial lease term that ends February 2023, and we have the option to extend the lease for an additional
five years. Monthly rental payments to the landlord under this lease escalate by approximately 7% after
the end of the fifth year and tenth year of the lease term. Included in the above table are approximately
$20.9 million of payments associated with a leased building in California. We have leased this space
for an initial lease term that ends in June 2017 with no renewal options. Rent was abated for the first
nine months of the lease term with partial rent abatement for an additional three months. Only
operating expenses were paid during the rent abatement period. See “Note 10” in our accompanying
consolidated financial statements for more information.
• Purchase obligations, as used herein, refer to a purchase obligation representing an agreement to
purchase goods or services that is enforceable and legally binding on us and that specifies all
significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable
price provisions; and the approximate timing of the transaction. We expect to receive consideration
(i.e., products or services) for these purchase obligations. See “Note 10” in our accompanying
consolidated financial statements.
Our liabilities for unrecognized tax benefits of $59.8 million are not reflected in the above contractual
obligations table as we are not able to reasonably estimate the timing of payments in individual years due to
uncertainties in the timing of audit outcomes.
55