America Online 2009 Annual Report Download - page 97

Table of Contents
A summary of AOL's restructuring activity for the years ended December 31, 2009, 2008 and 2007 is as follows (in millions):
Employee
Terminations
Other Exit
Costs Total
Liability at December 31, 2006 $ 92.4 $ 31.1 $ 123.5
Net accruals (including adjustments to previous estimates) 119.7 10.4 130.1
Cash paid (147.9) (14.8) (162.7)
Liability at December 31, 2007 64.2 26.7 90.9
Net accruals (including adjustments to previous estimates) 13.8 4.4 18.2
Cash paid (67.6) (10.6) (78.2)
Liability at December 31, 2008 10.4 20.5 30.9
Net accruals (including adjustments to previous estimates) 163.3 29.7 193.0
Non-cash charges (11.5) (1.3) (12.8)
Cash paid (53.0) (20.6) (73.6)
Liability at December 31, 2009 $ 109.2 $ 28.3 $ 137.5
At December 31, 2009, of the remaining liability of $137.5 million, $109.2 million was classified as a current liability within accrued expenses and
other current liabilities, with the remaining $28.3 million classified as a long-term liability in the consolidated balance sheet. Amounts classified as long-term
are expected to be paid through 2014.
NOTE 10—DERIVATIVE INSTRUMENTS
Prior to the spin-off, AOL used derivative instruments (principally forward contracts), entered into on its behalf by Time Warner, to manage the risk
associated with movements in foreign currency exchange rates. Time Warner monitored its positions with, and the credit quality of, the financial institutions
that were a party to any of its financial transactions. Netting provisions were provided for in existing International Swap and Derivative Association Inc.
agreements in situations where Time Warner executed multiple contracts with the same counterparty. Prior to the spin-off, all outstanding derivative
instruments were settled. Subsequent to the spin-off and through December 31, 2009, AOL has not entered into any derivative instruments or hedges. The
following is a summary of AOL's foreign currency risk management strategies while AOL was a subsidiary of Time Warner and the effect of these strategies
on AOL's consolidated financial statements.
Foreign Currency Risk Management
Until consummation of the separation from Time Warner, Time Warner managed certain derivative contracts on AOL's behalf. Foreign exchange
derivative contracts were used by AOL primarily to manage the risk associated with the volatility of future cash flows denominated in foreign currencies and
changes in fair value resulting from changes in foreign currency exchange rates.
AOL used derivative instruments to hedge various foreign exchange exposures including the following: (i) variability in foreign-currency-denominated
cash flows (i.e., cash flow hedges) and (ii) currency risk associated with foreign-currency-denominated operating assets and liabilities (i.e., fair value hedges).
As part of its overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, AOL hedged a portion of its
foreign currency exposures anticipated over the calendar year. This process generally coincided with AOL's annual strategic planning period. Additionally, as
transactions arose (or were planned) during the year that were exposed to foreign currency risk and were unhedged at the time, AOL entered into derivative
instruments, primarily foreign currency forward contracts, to mitigate the exposure presented by such transactions. Time Warner reimbursed or was
reimbursed by AOL for contract gains and losses related to AOL's foreign currency exposure. To hedge this exposure, AOL used foreign exchange
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