SEC Filings

S-4
TIME WARNER INC. filed this Form S-4 on 02/11/2000
Entire Document
 
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fiscal 1998, America Online incurred special charges of $94 million for
acquired in-process research and development, $17 million related to
settlements and $75 million related to a merger and restructuring. In fiscal
1997, America Online incurred special charges of $385 million related to the
write-off of previously capitalized deferred subscriber acquisition costs, $49
million related to a restructuring, $24 million for contract terminations, $24
million for a legal settlement and $9 million related to acquired in-process
research and development. In fiscal 1996, America Online incurred special
charges of $17 million for acquired in-process research and development, $8
million in merger related costs and $8 million for the settlement of a class
action lawsuit. In fiscal 1995, America Online incurred special charges of $2
million for merger related costs and $50 million for acquired in-process
research and development.
 
   To assess meaningfully underlying operating trends from period to period,
America Online's management believes that the results of operations for each
period should be analyzed after excluding the effects of these significant
nonrecurring items. The following summary adjusts America Online's historical
operating results to exclude the impact of these unusual items. However,
unusual items may occur in any period. Accordingly, investors and other
financial statement users should consider the types of events and transactions
for which adjustments have been made.
 

<TABLE>
<CAPTION>
                                       Three Months
                                           Ended
                                       September 30,    Year Ended June 30,
                                       -------------  ------------------------
                                        1999   1998   1999 1998 1997 1996 1995
                                       -------------  ---- ---- ---- ---- ----
                                                   (in millions)
<S>                                    <C>    <C>     <C>  <C>  <C>  <C>  <C>
Business segment operating income..... $   286   $91  $649 $123 $45  $111 $18
Earnings before interest, taxes,
 depreciation and amortization
 (EBITDA) (1).........................     342   134   866  265  95   131  22
</TABLE>

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(1) EBITDA is defined as net income plus: (a) provision/(benefit) for income
    taxes, (b) interest, (c) depreciation and amortization and (d) special
    items. For the fiscal years ended on or before June 30, 1997, EBITDA does
    not add back the amortization of subscriber acquisition costs. America
    Online considers EBITDA to be an important indicator of the operational
    strength and performance of its business, including its ability to provide
    cash flows to service its debt and fund capital expenditures. EBITDA,
    however, should not be considered an alternative to operating or net income
    as an indicator of America Online's performance, 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. In addition, this definition of EBITDA may not be comparable to
    similarly titled measures reported by other companies.
 
      Ratio of Earnings to Combined Fixed Charges and Preferred Dividends
 
   The following table sets forth the ratio of earnings to combined fixed
charges and preferred dividends for the three months ended September 30, 1999
and for each of the last five fiscal years.
 

<TABLE>
<CAPTION>
                               Three Months Ended   Year Ended June 30,
                                 September 30,    ---------------------------
                                      1999        1999  1998  1997 1996  1995
                               ------------------ ----  ----  ---- ----  ----
<S>                            <C>                <C>   <C>   <C>  <C>   <C>
Ratio of earnings to combined
 fixed charges and
 preferred dividends..........        7.14x       7.72x 0.25x --   5.06x --
</TABLE>

 
   For purposes of computing the ratio of earnings to combined fixed charges
and preferred dividends, earnings represent earnings from continuing operations
before income taxes plus interest expense on indebtedness, amortization of debt
discount and the portion of rent expense deemed representative of an interest
factor. Fixed charges include interest on indebtedness (whether expensed or
capitalized), amortization of debt discount and the portion of rent expense
deemed representative of an interest factor. For the years ended June 30, 1997
and 1995, the deficiency of earnings to combined fixed charges and preferred
dividends totaled $420 million and $36 million, respectively.
 
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