America Online 2010 Annual Report Download - page 111

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RSUs and PSUs held by AOL employees upon vesting and for the intrinsic value of stock options held by AOL employees upon the exercise of those options.
For the years ended December 31, 2009 and 2008, AOL remitted cash totaling $2.4 million and $43.8 million, respectively, to Time Warner for stock options
exercised by AOL employees and the vesting of RSUs held by AOL employees.
In connection with the separation, AOL employees no longer participate in Time Warner's equity-based compensation plans and AOL is no longer
obligated to reimburse Time Warner for the intrinsic value of Time Warner equity-based compensation awards held by AOL employees.
Other
In the normal course of business, AOL historically entered into commercial transactions with other subsidiaries of Time Warner. AOL recognized $3.7
million and $10.5 million in revenue and $22.0 million and $33.7 million in operating expenses from transactions with other Time Warner subsidiaries for the
years ended December 31, 2009 and 2008, respectively.
Prior to AOL's separation from Time Warner, AOL was a party to a Memorandum of Understanding with Telepictures Productions Inc., an indirect
wholly-owned subsidiary of Time Warner, governing the operations of TMZ.com. Under the Memorandum of Understanding, AOL's contribution to TMZ
included the provision of certain technology and the design, development and maintenance of TMZ's website. Subject to certain performance adjustments and
the reimbursement of expenses, revenues were split evenly between the parties. Under this arrangement, Telepictures received payments from AOL of $8.7
million and $12.7 million in the years ended December 31, 2009 and 2008, respectively.
As part of AOL's separation from Time Warner, the TMZ Memorandum of Understanding between AOL and Telepictures was amended such that
Telepictures assumed responsibility for all of TMZ's ongoing operations. Under the terms of the amended Memorandum of Understanding, AOL provides
online distribution to TMZ for a fee. In addition, AOL provides hosting services to TMZ under the Master Services Agreement for ATDN and Hosting
Services between Time Warner and AOL. This amended Memorandum of Understanding terminated on December 9, 2010. The financial results related to
TMZ are not material to AOL's business.
In 2007, Time Warner purchased a perpetual right to use a series of patents from a third party on behalf of AOL and other divisions of Time
Warner. Based on AOL's usage of the technology related to these patents relative to other divisions, approximately $21 million of the consideration paid by
Time Warner for this right has been allocated to AOL and included within intangible assets, net in the consolidated balance sheet. Subsequent to the
separation, AOL maintains the perpetual right to use this series of patents with no additional consideration due to the third party. This intangible asset is being
amortized by AOL on a straight-line basis over a five-year period that began January 1, 2007.
NOTE 14—SEGMENT INFORMATION
An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses
and that has discrete financial information that is regularly reviewed by the chief operating decision-maker in deciding how to allocate resources and in
assessing performance.
The Company's chief operating decision maker, its Chief Executive Officer, evaluates performance and makes operating decisions about allocating
resources based on financial data presented on a consolidated basis.
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