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 STATEMENTS
                           OF OPERATIONS (unaudited)
   
(d)  Reflects the historical operating results of America Online for the six
     months ended December 31, 1999 and the year ended June 30, 1999.
     Outstanding share and per share information for America Online have been
     restated to reflect a 2-for-1 common stock split which occurred in
     November 1999. Finally, various reclassifications have been made to
     conform to AOL Time Warner's combined financial statement presentation.
            
(e)  Reflects the historical operating results of Time Warner for the six
     months ended December 31, 1999, including various reclassifications that
     have been made to conform to AOL Time Warner's combined financial
     statement presentation.     
   
(f)  Pro forma adjustments to record the merger for the six months ended
     December 31, 1999 and the year ended June 30, 1999 reflect:     
     
  .  increases of $3.795 billion and $7.589 billion, respectively, in
     amortization of goodwill and other intangible assets relating to the
     amortization of the excess of the purchase price to acquire Time Warner
     over the book value of its net assets acquired, which has been allocated
     to goodwill and other intangible assets, and are each amortized on a
     straight-line basis over a twenty-five year weighted-average period;
            
  .  decreases of $276 million and $533 million, respectively, in
     amortization of goodwill and other intangible assets relating to the
     elimination of Time Warner's amortization of pre-existing goodwill; and
            
  .  increases of $760 million and $1.520 billion, respectively, in income
     tax benefits, provided at a 40% tax rate, on the aggregate pro forma
     reduction in pretax income before goodwill amortization.     
 
     In addition, pro forma net income (loss) per common share has been adjusted
     to reflect the issuance of additional shares of AOL Time Warner common
     stock in the merger, based on Time Warner's historical weighted average
     shares outstanding for the periods presented and an exchange ratio of 1.5
     to 1. Because the effect of stock options and other convertible securities
     would be antidilutive to AOL Time Warner, dilutive per share amounts on a
     pro forma basis are the same as basic per share amounts.
          
(g)  EBITDA consists of business segment operating income (loss) before
     depreciation and amortization. AOL Time Warner considers EBITDA an
     important indicator of the operational strength and performance of its
     businesses, including the ability to provide cash flows to service debt
     and fund capital expenditures. EBITDA, however, should not be considered
     an alternative to operating or net income as an indicator of the
     performance of AOL Time Warner, or as an alternative to cash flows from
     operating activities as a measure of liquidity, in each case determined in
     accordance with generally accepted accounting principles. This definition
     of EBITDA may not be comparable to similarly titled measures reported by
     other companies.     
     
  Pro forma EBITDA for AOL Time Warner includes a number of significant and
  nonrecurring items. Set forth below for each period is a reconciliation of
  pro forma EBITDA to a normalized measure of pro forma EBITDA that excludes
  the effect of the significant and nonrecurring items.     
 

<TABLE>   
<CAPTION>
                                                          Six Months
                                                            Ended     Year Ended
                                                         December 31,  June 30,
                                                             1999        1999
                                                         ------------ ----------
      <S>                                                <C>          <C>
      Pro forma EBITDA..................................    $5,462      $7,778
                                                            ======      ======
      Increase in pro forma EBITDA......................    $1,432      $  890
                                                            ======      ======
      Adjusted EBITDA...................................    $4,030      $6,888
                                                            ======      ======
</TABLE>
    
   
See Selected Historical Financial Data elsewhere in this joint proxy statement-
prospectus for further references.     
 
 
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