America Online 2010 Annual Report Download - page 63

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
$212.7 million of payments associated with the lease of our corporate headquarters in New York. We have leased our corporate headquarters for
a non-cancelable initial lease term that ends February 2023, and we have the option to extend the lease for an additional five years. Monthly
rental payments to the landlord under this lease escalate by approximately 7% after the end of the fifth year and tenth year of the lease term. In
2010 AOL entered into a new lease of a building in California, and included in the above table are approximately $46.8 million of payments
associated with this property. AOL has leased this space for a non-cancelable initial lease term that ends in June 2017 with no renewal options.
Rent is abated for the first nine months of the lease term with partial rent abatement for an additional three months. Only operating expenses are
to be paid during the rent abatement period. Also included in the above table are payments for ongoing leases associated with AOL's restructuring
activities. AOL has recorded a liability on the balance sheet of $18.0 million related to these payments. See "Note 11" in our accompanying
consolidated financial statements for more information.
• Purchase obligations, as used herein, refer to a purchase obligation representing an agreement to purchase goods or services that is enforceable
and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and the approximate timing of the transaction. We expect to receive consideration (i.e., products or services) for these
purchase obligations. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those
items for which we are contractually obligated. Examples of the types of obligations included within purchase obligations include narrowband
network agreements and guaranteed royalty payments. Additionally, we also purchase products and services as needed with no firm commitment.
For this reason, the amounts presented in the table above do not provide a reliable indicator of our expected future cash outflows. For purposes of
identifying and accumulating purchase obligations, we have included all material contracts meeting the definition of a purchase obligation (e.g.,
legally binding for a fixed or minimum amount or quantity). For those contracts involving a fixed or minimum quantity but with variable pricing
terms, we have estimated the contractual obligation based on our best estimate of the pricing that will be in effect at the time the obligation is
incurred. Additionally, we have included only the obligations represented by those contracts as they existed at December 31, 2010, and did not
assume renewal or replacement of the contracts at the end of their respective terms. See "Note 11" in our accompanying consolidated financial
statements.
The liability for uncertain tax positions of $2.3 million is not reflected in the above contractual obligations table as we are not able to reasonably
estimate the timing of payments in individual years due to uncertainties in the timing of audit outcomes.
Off-Balance Sheet Arrangements
As of December 31, 2010, we did not have any relationships with unconsolidated special purpose entities or financial partnerships for the purpose of
facilitating off-balance sheet arrangements.
Indemnification Obligations
Prior to the spin-off, we indemnified Time Warner for certain tax positions related to AOL taken by Time Warner from April 13, 2006 up to the date of
the spin-off in its consolidated tax return. At the date of the spin-off, Time Warner assumed the obligation for these tax positions, and accordingly, we
reversed the recorded liability to Time Warner related to these tax positions, with an offsetting adjustment to equity. As of December 31, 2009, we no longer
indemnify Time Warner for any tax positions taken by Time Warner in its consolidated tax return.
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