SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
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Warner businesses and calculated an implied value of the Time Warner businesses
utilizing those multiples. The multiple ranges for the selected transactions
that Salomon Smith Barney deemed relevant to this analysis are summarized
below.
 

<TABLE>   
<CAPTION>
                                                               Private Market
                                                                2001E EBITDA
                                                                  Multiples
                                                               ----------------
Business                                                         Low     High
--------                                                       -------  -------
<S>                                                            <C>      <C>
Cable systems.................................................    20.0x    22.0x
Cable networks................................................    22.0     24.0
Filmed entertainment..........................................    16.0     18.0
Publishing....................................................    14.0     16.0
Music.........................................................    14.0     16.0
</TABLE>
    
 
   No transaction used in the private market valuation analysis described above
is identical to the merger and none of the constituent companies are identical
to the respective Time Warner business being analyzed. Accordingly, any
analysis of the selected comparison transactions necessarily involved complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that would necessarily affect the value of
the given Time Warner business versus the values of the transactions to which
that business was being compared.
 
   WB Network. Salomon Smith Barney calculated the implied firm value of
approximately $1.0 billion for the WB Network using published analyst reports.
This implied firm value was included by Salomon Smith Barney in its public and
private market valuations which derived the aggregate implied firm value of
Time Warner.
 
   Discounted Cash Flow Analysis. Salomon Smith Barney performed a discounted
cash flow analysis of the various Time Warner consolidated businesses to
estimate ranges of intrinsic values for each of the Time Warner consolidated
businesses. Salomon Smith Barney applied a terminal value multiple ranges to
the forecasted EBITDA in calendar 2004 for each of the Time Warner consolidated
businesses. The ranges of terminal value multiples used for each of the Time
Warner consolidated businesses are set forth in the table below. The unlevered
free cash flows of each of the Time Warner consolidated businesses were then
discounted to present value using various discount rates. The ranges of
discount rates and multiples used for each of the Time Warner consolidated
businesses are set forth in the table below.
 

<TABLE>
<CAPTION>
Consolidated Business                             Discount Rates Terminal Values
---------------------                             -------------- ---------------
<S>                                               <C>            <C>
Cable systems....................................   10.0%-12.0%    16.0x-18.0x
Cable networks...................................  10.0  -12.0     19.0 -21.0
Filmed entertainment.............................  11.0  -13.0     16.5 -18.5
Publishing.......................................  10.0  -12.0     14.0 -16.0
Music............................................  11.0  -13.0     13.0 -15.0
WB television Network............................  10.0  -12.0     19.0 -21.0
</TABLE>

   
   Time Warner Non-Consolidated Assets. Salomon Smith Barney reviewed and
compared various actual and forecasted financial, operating and stock market
information, as applicable, with respect to Time Warner's non-consolidated
investments identified below. For Time Warner's investments in publicly traded
companies, such as Time Warner Telecom, Salomon Smith Barney derived the
implied firm value using the current market trading prices of those companies'
securities. With respect to other non-consolidated investments, including the
unconsolidated cable and Road Runner joint ventures, Salomon Smith Barney
performed applicable analyses using subscriber multiples and other subscriber
information to derive an implied firm value. For the remaining non-consolidated
investments, Salomon Smith Barney calculated the implied firm value using
forecasted EBITDA and published analyst reports.     
 
   The aggregate implied firm value for Time Warner's non-consolidated
investments was included by Salomon Smith Barney in its public and private
market valuations and its discounted cash flow analyses in order to derive the
aggregate implied firm value ranges for Time Warner.
 
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