SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 
<PAGE>
 
                              AOL TIME WARNER INC.
 
    NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS--
                                  (Continued)
                                  (unaudited)
   
(i) Reflects the historical operating results of America Online for the year
    ended December 31, 1999. In order to conform America Online's fiscal year
    end of June 30 to a calendar-year basis, these operating results have been
    derived from the combination of America Online's quarterly historical
    operating results for these periods. In addition, outstanding share and per
    share information for America Online has 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.     
   
(j) Reflects the historical operating results of Time Warner for the year ended
    December 31, 1999, including various reclassifications that have been made
    to conform to AOL Time Warner's combined financial statement presentation.
           
(k) Pro forma adjustments to record the merger for the year ended December 31,
    1999 reflect:     
     
  .  an increase of $7.589 billion 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 amortized on a straight-line basis over a
     twenty-five year weighted-average period;     
     
  .  a decrease of $542 million in amortization of goodwill and other
     intangible assets relating to the elimination of Time Warner's
     amortization of pre-existing goodwill; and     
     
  .  an increase of $1.520 billion 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.
       
          
(l) 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 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>
                                                                     Year Ended
                                                                    December 31,
                                                                        1999
                                                                    ------------
      <S>                                                           <C>
      Pro forma EBITDA.............................................    $9,775
                                                                       ======
      Increase in pro forma EBITDA.................................    $2,300
                                                                       ======
      Adjusted EBITDA..............................................    $7,475
                                                                       ======
</TABLE>
    
   
   See Selected Historical Financial Data elsewhere in this joint proxy
statement-prospectus for further references.     
 
                                       91