SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
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                              AOL TIME WARNER INC.
 
          NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
                                  (unaudited)
   
(a) Reflects the historical financial position of America Online at December
    31, 1999.     
   
(b) Reflects the historical financial position of Time Warner at December 31,
    1999.     
   
(c) Pro forma adjustments to record the merger as of December 31, 1999 reflect:
           
  .  an increase in equity of $130.758 billion relating to the issuance of
     1.930 billion shares of AOL Time Warner common stock, including the
     issuance of 171.2 million shares relating to the conversion of 114.1
     million outstanding shares of Time Warner's series LMCN-V common stock
     into an identical class of AOL Time Warner series LMCN-V common stock,
     $0.01 par value per share, in exchange for approximately 1.287 billion
     outstanding shares of Time Warner common stock, based on an exchange
     ratio of 1.5 to 1. The AOL Time Warner common stock to be issued was
     valued based on a price per share of $67.75, which is the average market
     price of the America Online common stock for a few days before and after
     the date the merger was announced;     
 
  .  an increase in equity of $3.557 billion relating to the issuance of
     approximately 8.404 million shares of AOL Time Warner preferred stock,
     $0.10 par value per share, in exchange for all outstanding shares of
     Time Warner preferred stock. The shares of AOL Time Warner preferred
     stock to be issued, which will each be convertible into 6.24792 shares
     of AOL Time Warner common stock, were valued based on their common
     equivalent value of $423.30 per share;
     
  .  an increase in equity of $11.376 billion relating to the issuance of
     options to purchase 203.802 million shares of AOL Time Warner common
     stock in exchange for all of the 135.868 million outstanding options to
     purchase shares of Time Warner common stock, based on a weighted-average
     fair value of $55.82 for all options. The fair value of the options was
     determined using the Black-Scholes option-pricing model and was based on
     the following weighted-average assumptions: expected volatility--45.5%;
     expected lives--5 years; a risk-free interest rate--5.75%; and expected
     dividend yield--0%;     
 
  .  an increase in accrued expenses of approximately $300 million relating
     to the incurrence of transaction costs by America Online and Time
     Warner, including legal, investment banking and registration fees;
     
  .  the elimination of approximately $15.458 billion of Time Warner's pre-
     existing goodwill;     
     
  .  a reduction of $3.235 billion in deferred income tax liabilities and a
     corresponding increase in paid-in capital relating to the elimination of
     America Online's deferred tax valuation allowance against stock option-
     related tax benefits that will become realizable as a direct result of
     the merger;     
     
  .  a decrease in stockholders' equity of $9.713 billion relating to the
     elimination of Time Warner's historical shareholders' equity; and     
     
  .  the preliminary allocation of the excess of the $145.991 billion
     purchase price, including transaction costs, over the book value of the
     net assets acquired to:     
       
    .  goodwill in the amount of $94.736 billion;     
       
    .  other intangible assets in the amount of $95 billion; and     
       
    .  deferred income taxes in the amount of $38 billion.     
 
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