SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
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   Pro forma adjustments for the merger include:     
     
  .  the issuance of approximately 1.9 billion shares of AOL Time Warner
     common stock and AOL Time Warner series LMCN-V common stock in exchange
     for all of the 1.3 billion outstanding shares of Time Warner common
     stock and series LMCN-V common stock;     
     
  .  the issuance of approximately 8.4 million shares of AOL Time Warner
     preferred stock in exchange for all of the 8.4 million outstanding
     shares of Time Warner preferred stock;     
     
  .  the issuance of options to purchase approximately 204 million shares of
     AOL Time Warner common stock in exchange for all of the outstanding
     options to purchase 136 million shares of Time Warner common stock; and
            
  .  the incurrence of approximately $300 million of transaction costs by
     America Online and Time Warner, including legal, investment banking and
     registration fees.     
   
   No pro forma adjustments are necessary to reflect the merger of America
Online into a separate wholly owned subsidiary of AOL Time Warner because
America Online's net assets will be recorded at their historical cost basis and
the exchange ratio for America Online common stock is one to one. America
Online agreed to acquire MapQuest.com, Inc., and Time Warner has agreed to form
a global music joint venture with EMI Group plc. Because these transactions are
not significant to the consolidated condensed balance sheet of AOL Time Warner
or to pro forma net income of AOL Time Warner for any of the periods presented
in this joint proxy statement-prospectus, they have not been reflected in these
pro forma financial statements.     
   
   Management expects that the strategic benefits of the merger will result in
incremental revenue opportunities for the combined company. Those opportunities
include, but are not limited to, the ability to cross-promote the combined
company's products and services and the ability to offer consumers expanded
broadband and online services. However, such incremental revenues have not been
reflected in the accompanying pro forma consolidated condensed statements of
operations of AOL Time Warner.     
   
   Under the purchase method of accounting, the estimated cost of approximately
$146 billion to acquire Time Warner, including transaction costs, will be
allocated to its underlying net assets in proportion to their respective fair
values. Any excess of the purchase price over the estimated fair value of the
net assets acquired will be recorded as goodwill. As more fully described in
the notes to the pro forma consolidated condensed financial statements, a
preliminary allocation of the excess of the purchase price, including
transaction costs, over the book value of the net assets to be acquired has
been made to goodwill and other intangible assets. Management expects that the
other intangible assets will include cable television franchises, subscriber
lists, brand names, trademarks, music copyrights and catalogue, and film
libraries. These items are expected to have amortization periods ranging from 3
to 40 years. At this time, the work needed to provide the basis for estimating
these fair values, and amortization periods, has not been completed. As a
result, the final allocation of the excess of purchase price over the book
value of the net assets acquired could differ materially. The pro forma
consolidated condensed financial statements reflect a preliminary allocation to
goodwill and other intangible assets assuming a weighted-average amortization
period of twenty-five years. The final purchase price allocation may result in
a different weighted-average amortization period for intangible assets than
that presented in these pro forma consolidated condensed financial statements.
Accordingly, a change in the amortization period would impact the amount of
annual amortization expense. The following table shows the effect on pro forma
loss applicable to common shares for a range of weighted-average useful lives:
    

<TABLE>   
<CAPTION>
                                       Six Months Ended Year Ended  Year Ended
                                         December 31,    June 30,  December 31,
      Weighted-average useful life           1999          1999        1999
      ----------------------------     ---------------- ---------- ------------
   <S>                                 <C>              <C>        <C>
   Twenty-five years
    (as disclosed in these pro forma
    financial statements).............     $(1,091)      $(4,330)    $(2,593)
   Twenty years.......................     $(1,850)      $(5,848)    $(4,111)
   Thirty years.......................     $  (585)      $(3,319)    $(1,582)
</TABLE>
    
 
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