America Online 2009 Annual Report Download - page 41

Table of Contents
On December 9, 2009, we entered into a 364-day $250.0 million senior secured revolving credit facility among us, as borrower, the lenders party
thereto (the "Lenders"), Bank of America, N.A., as administrative agent and the other financial institutions party thereto. See "Liquidity and Capital Resources
—Principal Debt Obligations" for additional information regarding the Revolving Credit Facility.
We completed a number of transactions with Time Warner in connection with the spin-off, which resulted in a net $36.2 million reduction to our equity
as of the separation date. The reduction to our equity included the reversal of our liability to Time Warner for certain tax positions and the reversal of our
equity-based compensation deferred tax assets which were retained by Time Warner following the spin-off. We began recording retained earnings subsequent
to November 2, 2009, when we converted from a limited liability company to a corporation. See "Item 1A—Business—The Spin-Off" for additional
information.
Prior to the spin-off, we were a subsidiary of Time Warner. The financial information included herein may not necessarily reflect our financial position,
results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an
independent, publicly-traded company during all of the periods presented. We expect to incur additional costs to be able to function as an independent,
publicly-traded company, including additional costs related to corporate finance, governance and public reporting.
In connection with the spin-off, we entered into transactions with Time Warner that either have not existed historically or that are on terms different
from the terms of arrangements or agreements that existed prior to the spin-off. See "Note 13: Related Party Transactions" in our accompanying consolidated
financial statements for more detail. Our historical financial information does not reflect changes that we expect to experience in the future as a result of our
separation from Time Warner, including changes in the financing, operations, cost structure and personnel needs of our business. Further, the historical
financial statements include allocations of certain Time Warner corporate expenses. We believe the assumptions and methodologies underlying the allocation
of general corporate expenses are reasonable. However, such expenses may not be indicative of the actual level of expense that would have been incurred by
us if we had operated as an independent, publicly-traded company or of the costs expected to be incurred in the future. These allocated expenses relate to
various services that have historically been provided to us by Time Warner, including cash management and other treasury services, administrative services
(such as government relations, tax, employee benefit administration, internal audit, accounting and human resources), equity-based compensation plan
administration, aviation services, insurance coverage and the licensing of certain third-party patents. During the years ended December 31, 2009, 2008 and
2007, we incurred $20.9 million, $23.3 million and $28.4 million, respectively, of expenses related to charges for services performed by Time Warner.
Our Business
As described further in the "Item 1A—Business" section, our business operations are focused on AOL Properties and the Third Party Network. We
market our offerings to advertisers on both AOL Properties and the Third Party Network under the brand "AOL Advertising."
IMPACT OF THE CURRENT ECONOMIC ENVIRONMENT
The global economic recession adversely impacted our advertising revenues in 2008 and 2009. During the year ended December 31, 2009, our
advertising revenues declined 17%, as compared to the year ended December 31, 2008. While our ability to forecast future advertising revenues is limited, we
expect the current economic conditions will continue to impact our advertising revenues in 2010. We do not believe that the global economic recession had a
material impact on our subscription revenues.
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