America Online 2009 Annual Report Download - page 54

Table of Contents
Amounts Related to Securities Litigation and Government Investigations, Net of Recoveries
Amounts related to securities litigation and government investigations, net of recoveries consist of legal settlement costs and legal and other
professional fees incurred by Time Warner prior to the spin-off related to the defense of various securities lawsuits involving us or our or Time Warner's
present or former officers and employees. While these amounts were historically incurred by Time Warner and reflected in Time Warner's financial results,
they have been reflected as an expense and a corresponding additional capital contribution by Time Warner in our consolidated financial statements for the
periods when we were a wholly-owned subsidiary of Time Warner because they involve us. We recognized $27.9 million, $20.8 million and $171.4 million of
expense related to these matters for the years ended December 31, 2009, 2008 and 2007, respectively. Following the spin-off, these costs continue to be
incurred by Time Warner to the extent that proceeds from a settlement with insurers are available to pay those costs, and thereafter AOL has an obligation to
indemnify Time Warner for such costs to the extent they are associated with present or former officers and employees of AOL. We do not view the remaining
potential obligations related to this matter to be material. See "Note 11: Commitments and Contingencies" in our accompanying consolidated financial
statements for more information.
Restructuring Costs
We undertook various restructuring activities in 2009 in an effort to better align our organizational structure and costs with our strategy. As a result, for
the three months and the year ended December 31, 2009, we incurred restructuring charges of $107.4 million and $190.3 million, respectively, related to
voluntary and involuntary employee terminations and facility closures. We are in the midst of a significant restructuring initiative which began late in 2009
and we expect to complete in the first half of 2010. We expect to reduce our total workforce by nearly one-third in connection with this restructuring
initiative, prior to hiring of new employees in areas of strategic focus. In addition, we plan to reduce our cost base in the United Kingdom and cease or reduce
operations in a number of other countries. Specifically, we plan to reduce our presence in Europe by significantly reducing our operations in France and
Germany and ceasing operations in a number of other countries. In certain of these countries, we are currently consulting with employees or employee
representatives in accordance with applicable legal requirements. In connection with the restructuring activities we plan to undertake in 2010, we expect to
incur additional restructuring charges of up to $50 million, substantially all of which are expected to be incurred through the first half of 2010. As a result of
ceasing operations in various international countries and shutting down legal entities in certain countries where we operate, we may incur a significant non-
cash loss related to the recognition in the income statement of our cumulative foreign currency translation adjustments accumulated in other comprehensive
income, a component of equity. In the fourth quarter of 2009, we reevaluated the useful lives of certain intangible assets which will result in accelerated
amortization expense of approximately $60 million in 2010, the majority of which will be incurred in the first quarter of 2010.
As a result of the strategic focus on advertising and continuing efforts to better position and optimize our business, we also undertook restructurings in
2008 and 2007. Our 2008 results included net restructuring charges of $16.6 million related to costs incurred associated with involuntary employee
terminations and facility closures. Our 2007 results included restructuring charges of $125.4 million, reflecting costs incurred associated with involuntary
employee terminations, asset write-offs and facility closures. The 2007 charges also included a reversal of $15 million of restructuring costs associated with a
change in estimate for 2006 and prior restructuring activity.
Goodwill Impairment Charge
Based on our goodwill impairment analysis, we have determined that the estimated fair value of AOL exceeds its book value as of December 31, 2009
and therefore no goodwill impairment charge was recorded for 2009. See "Note 3: Goodwill and Intangible Assets" in our accompanying consolidated
financial statements for more information.
The goodwill impairment charge in 2008 was incurred as a result of the annual goodwill impairment analysis performed during the fourth quarter of
2008. In that analysis, we determined that the carrying value of our goodwill was impaired and, accordingly, recorded a goodwill impairment charge of
$2,207.0 million to write
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