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1198000000 0 1198000000 0 1198000000 0 0 0 0 0 1603000000 1603000000 0 7213000000 0 -391000000 6822000000 1167000000 7989000000 0 155000000 0 -164000000 -9000000 292000000 283000000 0 -310000000 0 0 -310000000 0 -310000000 16000000 158129000000 -27034000000 -97728000000 0 15000000 4387000000 240000000 -13402000000 -1246000000 2468000000 49000000 0 3480000000 0 -278000000 3202000000 0 3202000000 0 0 0 0 0 35000000 35000000 0 0 0 0 0 357000000 357000000 0 0 0 0 0 -27000000 -27000000 33383000000 343000000 42288000000 3382000000 <div style="font-size:12pt"><p>&#160;1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<br /><br />Description of Business<br /><br />Time Warner Inc. (&#8220;Time Warner&#8221; or the &#8220;Company&#8221;) is a leading media and entertainment company, whose businesses include television networks, filmed entertainment and publishing. Time Warner classifies its operations into three reportable segments: Networks: consisting principally of cable television networks that provide programming; Filmed Entertainment: consisting principally of feature film, television and home video production and distribution; and Publishing: consisting principally of magazine publishing. Financial information for Time Warner&#8217;s various reportable segments is presented in Note 14.<br /><br />Changes in Basis of Presentation<br /><br />The 2008 and 2007 financial information has been recast so that the basis of presentation is consistent with that of the 2009 financial information. This recast reflects (i) the financial condition and results of operations of Time Warner Cable Inc. (&#8220;TWC&#8221;) and AOL Inc. (&#8220;AOL&#8221;) as discontinued operations for all periods presented, (ii) the adoption of recent accounting guidance pertaining to noncontrolling interests, (iii) the adoption of recent accounting guidance pertaining to participating securities and (iv) the 1-for-3 reverse stock split of the Company&#8217;s common stock that became effective on March 27, 2009.<br /><br />AOL Separation from Time Warner<br /><br />On July 8, 2009, the Company repurchased Google Inc.&#8217;s (&#8220;Google&#8221;) 5% interest in AOL for $283 million in cash, which amount included a payment in respect of Google&#8217;s pro rata share of cash distributions to Time Warner by AOL attributable to the period of Google&#8217;s investment in AOL. After repurchasing this stake, Time Warner owned 100% of AOL.<br /><br />On December 9, 2009 (the &#8220;Distribution Date&#8221;), the Company disposed of all of its shares of AOL common stock. The disposition was made pursuant to a separation and distribution agreement entered into on November 16, 2009 by Time Warner and AOL for the purpose of legally and structurally separating AOL from Time Warner (the &#8220;AOL Separation&#8221;). The AOL Separation was effected as a pro rata dividend of all shares of AOL common stock held by Time Warner in a spin-off to Time Warner stockholders. <br /><br />With the completion of the AOL Separation, the Company disposed of its AOL segment in its entirety. Accordingly, the Company has presented the financial condition and results of operations of its former AOL segment as discontinued operations in the consolidated financial statements for all periods presented. For a summary of discontinued operations, see Note 3.<br /><br />TWC Separation from Time Warner <br /><br />On March 12, 2009 (the &#8220;Distribution Record Date&#8221;), the Company disposed of all of its shares of TWC common stock. The disposition was made pursuant to a separation agreement entered into on May 20, 2008, among Time Warner, TWC and certain of their subsidiaries (the &#8220;Separation Agreement&#8221;) for the purpose of legally and structurally separating TWC from Time Warner (the &#8220;TWC Separation&#8221;). The TWC Separation was effected as a pro rata dividend of all shares of TWC common stock held by Time Warner in a spin-off to Time Warner stockholders. <br /><br />Prior to the Distribution Record Date, on March 12, 2009, TWC, in accordance with the terms of the Separation Agreement, paid a special cash dividend of $10.27 per share to all holders of TWC Class A common stock and TWC Class B common stock as of the close of business on March 11, 2009 (aggregating $10.856 billion) (the &#8220;Special Dividend&#8221;), which resulted in the receipt by Time Warner of $9.253 billion.<br /><br />With the completion of the TWC Separation, the Company disposed of its Cable segment in its entirety. Accordingly, the Company has presented the financial condition and results of operations of its former Cable segment as discontinued operations in the consolidated financial statements for all periods presented. For a summary of discontinued operations, see Note 3.<br /><br />Noncontrolling Interests<br /><br />On January 1, 2009, the Company adopted accounting guidance for noncontrolling interests in a consolidated subsidiary, including the accounting treatment applicable upon the deconsolidation of a subsidiary. This guidance is being applied prospectively, except for the provisions related to the presentation of noncontrolling interests, which are being applied retrospectively. As of December 31, 2009 and December 31, 2008, noncontrolling interests of $343 million and $3.382 billion, respectively, have been classified as a component of equity in the consolidated balance sheet. For the years ended December 31, 2009, 2008, and 2007, net income (loss) attributable to noncontrolling interests of $49 million, $(1.246 billion) and $240 million, respectively, are included in net income (loss) in the consolidated statement of operations. The Company&#8217;s adoption of this guidance did not affect earnings per share amounts in prior periods.<br /><br />Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities<br /><br />On January 1, 2009, the Company adopted, on a retrospective basis, accounting guidance which requires that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents (such as restricted stock units granted by the Company) be considered participating securities. Because the awards are participating securities, the Company is required to apply the two-class method of computing basic and diluted earnings per share (the &#8220;Two-Class Method&#8221;). The Company&#8217;s adoption of this guidance did not affect earnings per share amounts in prior periods. <br /><br />Basis of Presentation<br /><br />Basis of Consolidation<br /><br />The consolidated financial statements include 100% of the assets, liabilities, revenues, expenses and cash flows of Time Warner and all voting interest entities in which Time Warner has a controlling voting interest (&#8220;subsidiaries&#8221;). Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation. In addition, an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties is referred to as a variable interest entity (&#8220;VIE&#8221;). The primary beneficiary of a VIE is the party that absorbs the majority of the entity&#8217;s expected losses, receives the majority of its expected residual returns, or both, as a result of holding variable interests. As such, the Company consolidates those VIEs of which it is the primary beneficiary.<br /><br />The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange during the period. Translation gains or losses of assets and liabilities are included in the consolidated statement of shareholders&#8217; equity as a component of accumulated other comprehensive income, net. <br /><br />Variable Interest Entities<br /><br />As of December 31, 2009, the Company&#8217;s investments in entities determined to be VIEs principally consisted of certain investments at its Networks segment, primarily HBO Asia, HBO South Asia and HBO Latin America Group (&#8220;HBO LAG&#8221;), which are multi-channel pay-television programming services. The Company provides programming as well as certain services, including distribution, licensing, technological and administrative support, to HBO Asia, HBO South Asia and HBO LAG. These investments are intended to enable the Company to more broadly leverage its programming and digital strategy in the territories served and to capitalize on the growing multi-channel television market in such territories.<br /><br />As of December 31, 2009, the Company held an 80% economic interest in HBO Asia, a 75% economic interest in HBO South Asia and an approximate 60% economic interest in HBO LAG, while sharing joint voting control with the remaining partners in each of the three entities. The Company determined that because of the difference between its economic and voting interests, these entities were VIEs, and, because it absorbs the majority of the entities&#8217; expected losses and receives a majority of the expected returns, the Company determined that it was the primary beneficiary of these entities. Accordingly, it consolidates the financial condition and results of operations of these entities. These entities are financed substantially through cash flows from their operations and the Company is not obligated to provide them with any additional financial support. In addition, the assets of these entities are not available to settle obligations of the Company. See &#8220;Recent Accounting Guidance Not Yet Adopted&#8221; for a description of amendments to the guidance on the accounting for VIEs, which became effective for Time Warner on January 1, 2010 and will be applied on a retrospective basis beginning in the first quarter of 2010. <br /><br />Reclassifications<br /><br />Certain reclassifications have been made to the prior year balance sheet information to conform to the December 31, 2009 presentation of the components of inventory and components of property, plant and equipment as presented on page 90 herein. <br /><br />Use of Estimates<br /><br />The preparation of financial statements in conformity with U.S. generally accepted accounting principles (&#8220;GAAP&#8221;) requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Actual results could differ from those estimates.<br /><br />Significant estimates inherent in the preparation of the consolidated financial statements include accounting for asset impairments, allowances for doubtful accounts, depreciation and amortization, film ultimate revenues, home video and magazine returns, business combinations, pension and other postretirement benefits, equity-based compensation, income taxes, contingencies, litigation matters and certain programming arrangements.<br /></p><p>Accounting Guidance Adopted in 2009 <br /><br />In addition to the adoption of accounting guidance as discussed in &#8220;Changes in Basis of Presentation,&#8221; the Company also adopted the following accounting guidance in 2009:<br /><br />Subsequent Events<br /><br />On April 1, 2009, the Company adopted, on a prospective basis, guidance related to the accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. This guidance requires the Company to disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. For the year ended December 31, 2009, the Company evaluated, for potential recognition and disclosure, events that occurred prior to the filing of the Company&#8217;s Annual Report on Form 10-K for the year ended December 31, 2009 on February 19, 2010.<br /><br />Fair Value Measurements<br /><br />On January 1, 2009, the Company adopted, on a prospective basis, guidance related to fair value measurements pertaining to nonfinancial assets and liabilities. This guidance establishes the authoritative definition of fair value, sets out a framework for measuring fair value and expands the required disclosures about fair value measurement. On January 1, 2008, the Company adopted this guidance as it pertains to the accounting for financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring basis. For more information, see Note 6.<br /><br />Business Combinations<br /><br />On January 1, 2009, the Company adopted guidance related to the accounting for business combinations and is applying such guidance prospectively to business combinations that have an acquisition date on or after January 1, 2009. This guidance establishes principles and requirements for how an acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures goodwill acquired in a business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In addition, changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after purchase accounting is completed will be recognized in earnings rather than as an adjustment to the cost of an acquisition. This accounting treatment for deferred tax asset valuation allowances and acquired income tax uncertainties is applicable to acquisitions that occur both prior and subsequent to the Company&#8217;s adoption of this guidance. <br /><br />Disclosures about Derivative Instruments and Hedging Activities<br /><br />On January 1, 2009, the Company adopted on a prospective basis guidance that expands the disclosure requirements for derivative instruments and hedging activities by requiring enhanced disclosures about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for and (iii) how derivative instruments and related hedged items affect an entity&#8217;s financial position, financial performance, and cash flows. For more information, see Note 13.<br /><br />Accounting for Collaborative Arrangements<br /><br />On January 1, 2009, the Company adopted guidance that defines collaborative arrangements and establishes accounting and reporting requirements for transactions between participants in the arrangement and third parties. The Company&#8217;s collaborative arrangements primarily relate to arrangements entered into with third parties to jointly finance and distribute theatrical productions. These arrangements, which are referred to as co-financing arrangements, take various forms. In most cases, the form of the arrangement is the sale of an economic interest in a film to an investor. The Filmed Entertainment segment generally records the amounts received for the sale of an economic interest as a reduction of the cost of the film, as the investor assumes full risk for that portion of the film asset acquired in these transactions. The substance of these arrangements is that the third-party investors own an interest in the film and, therefore, in each period the Company reflects in the consolidated statement of operations either a charge or benefit to costs of revenues to reflect the estimate of the third-party investor&#8217;s interest in the profits or losses incurred on the film. The estimate of the third-party investor&#8217;s interest in profits or losses incurred on the film is determined by reference to the ratio of actual revenue earned to date in relation to total estimated ultimate revenues. For the years ended December 31, 2009, 2008 and 2007, participation costs of $321 million, $584 million and $502 million, respectively, were recorded in costs of revenues and net amounts received from collaborators for which capitalized film costs were reduced was $269 million, $185 million and $284 million, respectively. As of December 31, 2009 and 2008, the net amount due to collaborators for their share of participations was $332 million and $276 million, respectively, and was recorded in participations payable in the consolidated balance sheet. <br /><br />Recent Accounting Guidance Not Yet Adopted<br /><br />Amendments to Accounting for Transfers of Financial Assets and VIEs<br /><br />In June 2009, guidance was issued that (i) eliminates the concept of a qualifying special-purpose entity (&#8220;QSPE&#8221;), (ii) eliminates the exception from applying existing accounting guidance related to VIEs that were previously considered QSPEs, (iii) changes the approach for determining the primary beneficiary of a VIE from a quantitative risk and reward model to a qualitative model based on control and (iv) requires the Company to assess each reporting period whether any of the Company&#8217;s variable interests give it a controlling financial interest in the applicable VIE. This guidance became effective for Time Warner on January 1, 2010 and will be applied on a retrospective basis beginning in the first quarter of 2010. <br /><br />As a result of this guidance, the Company will no longer be deemed the primary beneficiary of HBO Asia, HBO South Asia and HBO LAG. Beginning in the first quarter of 2010, the Company will account for its investments in these entities using the equity method and will no longer consolidate their financial condition and results of operations. The adoption of this guidance with respect to these entities will result in an increase (decrease) to revenues, operating income (loss) and net income (loss) attributable to Time Warner Inc. shareholders of ($397) million, ($75) million and $9 million, respectively, for the year ended December 31, 2009 and an increase (decrease) of ($82) million, ($16) million and $4 million, respectively, for the year ended December 31, 2008. As of and for the years ended December 31, 2009 and 2008, the impact to the consolidated balance sheet and statement of cash flows, respectively, will not be material.<br /><br />Also, as a result of this guidance, beginning in the first quarter of 2010, the Company will consolidate its two accounts receivable securitization facilities. The adoption of this guidance will result in an increase to accounts receivables and debt due within one year of $805 million as of December 31, 2009 and 2008. In addition, for the year ended December 31, 2008 and 2007, cash provided by operations will increase (decrease) by $231 million and ($113) million, respectively, with an offsetting (decrease) increase to cash used by financing activities. There will not be any change to cash provided by operations for the year ended December 31, 2009. The impact on the statement of operations will not be material. For more information, see Note 7. </p><p>Summary of Critical and Significant Accounting Policies<br /><br />The following is a discussion of each of the Company&#8217;s critical accounting policies, including information and analysis of estimates and assumptions involved in their application, and other significant accounting policies.<br /><br />The Securities and Exchange Commission (&#8220;SEC&#8221;) considers an accounting policy to be critical if it is important to the Company&#8217;s financial condition and results of operations and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by Time Warner&#8217;s management and the related disclosures have been reviewed with the Audit and Finance Committee of the Board of Directors. Due to the significant judgment involved in selecting certain of the assumptions used in these areas, it is possible that different parties could choose different assumptions and reach different conclusions. The Company considers the policies relating to the following matters to be critical accounting policies:<br /><br /></p><ul><li>Impairment of Goodwill and Identifiable Intangible Assets (see pages 91 to 92);<br /></li></ul><p><br /></p><ul><li>Multiple-Element Transactions (see page 97);<br /></li></ul><p><br /></p><ul><li>Income Taxes (see pages 98 to 99); <br /></li></ul><p><br /></p><ul><li>Film Cost Recognition and Impairments (see pages 96 to 97);<br /></li></ul><p><br /></p><ul><li>Gross versus Net Revenue Recognition (see pages 97 to 98); and<br /></li></ul><p><br /></p><ul><li>Sales Returns, Pricing Rebates and Uncollectible Accounts (see page 88).<br /></li></ul><p><br />Cash and Equivalents<br /><br />Cash equivalents consist of commercial paper and other investments that are readily convertible into cash and have original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value. The Company monitors concentrations of credit risk with respect to cash and equivalents by placing such balances with higher quality financial institutions or investing such amounts in liquid, short-term, highly-rated instruments or investment funds holding similar instruments. As of December 31, 2009, the majority of the Company&#8217;s cash and equivalents were invested in Rule 2a-7 money market mutual funds and with banks with a credit rating of at least A. At December 31, 2009, no single money market mutual fund or bank held more than $500 million, and the money market mutual fund investments were comprised primarily of U.S. government and agency securities.<br /><br />Sales Returns, Pricing Rebates and Uncollectible Accounts<br /><br />Management&#8217;s estimate of product sales that will be returned and the amount of receivables that will ultimately be collected is an area of judgment affecting reported revenues and net income. In estimating product sales that will be returned, management analyzes vendor sell-off of product, historical return trends, current economic conditions, and changes in customer demand. Based on this information, management reserves a percentage of any product sales that provide the customer with the right of return. The provision for such sales returns is reflected as a reduction in the revenues from the related sale. The Company&#8217;s products subject to return include home video product at the Filmed Entertainment and Networks segments and magazines and direct sales merchandise at the Publishing segment. In estimating the reserve for pricing rebates, management considers the terms of the Company&#8217;s agreements with its customers that contain purchasing targets which, if met, would entitle the customer to a rebate. In those instances, management evaluates the customer&#8217;s actual and forecasted purchases to determine the appropriate reserve. At December 31, 2009, total reserves for returns (which also reflects reserves for certain pricing allowances provided to customers) were $1.493 billion at the Filmed Entertainment and Networks segments primarily related to film products (e.g., DVD sales) and $387 million at the Publishing segment for magazines and direct sales merchandise.<br /><br />Similarly, management evaluates accounts receivable to determine if they will ultimately be fully collected. In performing this evaluation, significant judgments and estimates are involved, including management&#8217;s views on trends in the overall receivable agings at the different divisions, and for larger accounts, analyses of specific risks on a customer specific basis. Using this information, management reserves an amount that is expected to be uncollectible. At December 31, 2009 and 2008, total reserves for uncollectible accounts were approximately $373 million and $438 million, respectively. Bad debt expense recognized during the years ended December 31, 2009, 2008 and 2007 totaled $87 million, $122 million and $70 million, respectively.<br /><br />Based on management&#8217;s analyses of sales returns and allowances and uncollectible accounts, the Company had total reserves of $2.253 billion and $2.229 billion at December 31, 2009 and 2008, respectively. Total gross accounts receivable were $7.364 billion and $7.400 billion at December 31, 2009 and 2008, respectively. As of December 31, 2009, no single counterparty comprised greater than 5% of the Company&#8217;s total receivables balance. In general, the Company does not require collateral with respect to its trade receivable arrangements. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on payment histories, current credit ratings and other factors. <br /><br />Investments<br /><br />Investments in companies in which Time Warner has significant influence, but less than a controlling voting interest, are accounted for using the equity method. Significant influence is generally presumed to exist when Time Warner owns between 20% and 50% of the investee, holds substantial management rights or holds an interest of less than 20% where the investee is a limited liability partnership or limited liability corporation that is treated as a flow-through entity. <br /><br />Under the equity method of accounting, only Time Warner&#8217;s investment in and amounts due to and from the equity investee are included in the consolidated balance sheet; only Time Warner&#8217;s share of the investee&#8217;s earnings (losses) is included in the consolidated statement of operations; and only the dividends, cash distributions, loans or other cash received from the investee, additional cash investments, loan repayments or other cash paid to the investee are included in the consolidated statement of cash flows. Additionally, the carrying value of investments accounted for using the equity method of accounting is adjusted downward to reflect any other-than-temporary declines in value (see &#8220;Asset Impairments&#8221; below).<br /><br />Investments in companies in which Time Warner does not have a controlling interest or over which it is unable to exert significant influence are accounted for at market value if the investments are publicly traded (&#8220;available-for-sale investments&#8221;). If the investment is not publicly traded, the investment is accounted for at cost. Unrealized gains and losses on investments accounted for at market value are reported, net-of-tax, in the consolidated statement of shareholders&#8217; equity as a component of Accumulated other comprehensive income, net, until the investment is sold or considered impaired (see &#8220;Asset Impairments&#8221; below), at which time the realized gain or loss is included in Other income, net. Dividends and other distributions of earnings from both market-value investments and investments accounted for at cost are included in Other income, net, when declared. For more information, see Note 4.<br /><br />Consolidation<br /><br />Time Warner consolidates the results of operations of an entity that is not a VIE when it has a controlling voting interest in the entity. An entity is generally a VIE if it meets any of the following criteria: (i)&#160;the entity has insufficient equity to finance its activities without additional subordinated financial support from other parties, (ii)&#160;the equity investors cannot make significant decisions about the entity&#8217;s operations or (iii) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity or receive the expected returns of the entity and substantially all of the entity&#8217;s activities involve or are conducted on behalf of the investor with disproportionately few voting rights. A VIE is consolidated if the Company is deemed to be the primary beneficiary of the VIE, which is the party involved with the VIE that has a majority of the expected losses or a majority of the expected residual returns or both. Time Warner periodically makes judgments in determining whether entities in which it invests are VIEs, and, if so, whether the Company is the primary beneficiary and, thus, required to consolidate the entity. <br /><br />As previously noted in &#8220;Recent Accounting Guidance Not Yet Adopted,&#8221; in June 2009, guidance was issued that changes the approach for determining the primary beneficiary of a VIE from a quantitative risk and reward model to a qualitative model based on control and economics. That guidance became effective for Time Warner on January 1, 2010 and will be applied on a retrospective basis beginning in the first quarter of 2010. <br />&#160;<br />Accounts Receivable Securitization Facilities<br /><br />Time Warner has two active accounts receivable securitization facilities that provide for the accelerated receipt of cash on available accounts receivable. These securitization transactions are accounted for as sales, because the Company has relinquished control of the receivables. For more information, see Notes 7 and 17.<br /><br />As previously noted in &#8220;Recent Accounting Guidance Not Yet Adopted,&#8221; in June 2009, guidance was issued that eliminates the concept of a QSPE and eliminates the exception from applying existing accounting guidance related to VIEs that were previously considered QSPEs. That guidance became effective for Time Warner on January 1, 2010 and will be applied on a retrospective basis beginning in the first quarter of 2010. <br /><br />Derivative Instruments<br /><br />The Company recognizes all derivative instruments on the balance sheet at fair value. For those derivative instruments that qualify for hedge accounting, changes in the fair value will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in shareholders&#8217; equity as a component of Accumulated other comprehensive income, net, until the hedged item is recognized in earnings, depending on whether the derivative is being used to hedge changes in fair value or cash flows. The ineffective portion of a derivative&#8217;s change in fair value is immediately recognized in earnings. For those derivative instruments that do not qualify for hedge accounting, changes in the fair value are recognized immediately in earnings. The Company uses derivative instruments principally to manage the risk associated with movements in foreign currency exchange rates and the risk that changes in interest rates will affect the fair value or cash flows of its debt obligations. At December 31, 2009, there were no interest rate swaps or other similar derivative financial instruments outstanding. See Note&#160;13 for additional information regarding derivative instruments held by the Company and risk management strategies.<br /><br />Property, Plant and Equipment<br /><br />Property, plant and equipment are stated at cost. Additions to property, plant and equipment generally include material, labor and overhead. Time Warner also capitalizes certain costs associated with coding, software configuration, upgrades and enhancements incurred for the development of internal use software. Depreciation, which includes amortization of capital leases, is provided generally on a straight-line basis over estimated useful lives. Time Warner evaluates the depreciation periods of property, plant and equipment to determine whether events or circumstances warrant revised estimates of useful lives. Property, plant and equipment, including capital leases, consist of (millions):<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="366" align="left">&#160;</td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="180" align="center" colspan="5" style="border-bottom: 1px solid #000000;" height="14"><b>December 31,</b></td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" height="14" colspan="2"><b>Estimated</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="366" align="left">&#160;</td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14"><b>2009&#160;</b></td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14"><b>2008&#160;</b></td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"><b>Useful Lives</b></td></tr><tr><td height="1" width="14" align="left">&#160;</td><td height="1" width="366" align="left">&#160;</td><td height="1" width="10" align="left"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="75"><b>&#160;</b></td><td height="1" width="10" align="left"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="75"><b>&#160;</b></td><td height="1" width="10" align="left"><b>&#160;</b></td><td height="1" style="border-top: 1px solid 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align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="75" align="left">&#160;</td><td height="8" width="10" align="right">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="75" align="left">&#160;</td><td height="8" width="10" align="right">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="75" align="left">&#160;</td></tr><tr><td height="14" width="14" align="left">^(a)&#160;</td><td width="691" align="center" height="14" colspan="11">Land and buildings include $478 million and $477 million related to land as of December 31, 2009 and 2008, respectively, which is not depreciated.</td></tr></table><p>Intangible Assets<br /><br />As a creator and distributor of branded information and copyrighted entertainment products, Time Warner has a significant number of intangible assets, including acquired film and television libraries and other copyrighted products and trademarks. Time Warner does not recognize the fair value of internally generated intangible assets. Costs incurred to create and produce copyrighted product, such as feature films and television series, generally are either expensed as incurred or capitalized as tangible assets, as in the case of cash advances and inventoriable product costs. Intangible assets acquired in business combinations are recorded at fair value in the Company&#8217;s consolidated balance sheet. For more information, see Note 2.<br /><br />Asset Impairments<br /><br />Investments<br /><br />The Company&#8217;s investments consist of fair-value investments, including available-for-sale investments, investments accounted for using the cost method of accounting and investments accounted for using the equity method of accounting. The Company regularly reviews its investment securities for impairment, including when the carrying value of an investment exceeds its related market value. If it has been determined that an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to earnings. Such a determination is dependent on the facts and circumstances relating to the applicable investment. Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis, the financial condition of the investee and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.<br /><br />In evaluating the factors described above for available-for-sale securities, the Company presumes a decline in value to be other-than-temporary if the quoted market price of the security is 20% or more below the investment&#8217;s cost basis for a period of six months or more (the &#8220;20% criterion&#8221;) or the quoted market price of the security is 50% or more below the security&#8217;s cost basis at any quarter end (the &#8220;50% criterion&#8221;). However, the presumption of an other-than-temporary decline in these instances may be overcome if there is persuasive evidence indicating that the decline is temporary in nature (e.g., the investee&#8217;s operating performance is strong, the market price of the investee&#8217;s security is historically volatile, etc.). Additionally, there may be instances in which impairment losses are recognized even if the 20% and 50% criteria are not satisfied (e.g., there is a plan to sell the security in the near term and the fair value is below the Company&#8217;s cost basis).<br /><br />For investments accounted for using the cost or equity method of accounting, the Company evaluates information (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market prices, if any, in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults and subsequent rounds of financing at an amount below the cost basis of the Company&#8217;s investment. This list is not all-inclusive, and the Company weighs all known quantitative and qualitative factors in determining if an other-than-temporary decline in the value of an investment has occurred. For more information, see Note 4.<br /><br />Goodwill and Indefinite-Lived Intangible Assets<br /><br />Goodwill and indefinite-lived intangible assets, primarily tradenames, are tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. Goodwill is tested for impairment at a level referred to as a reporting unit. A reporting unit is either the &#8220;operating segment level&#8221; such as HBO, Turner, Time Inc. and Warner Bros. or one level below, which is referred to as a &#8220;component&#8221; (e.g., Sports Illustrated, People). The level at which the impairment test is performed requires judgment as to whether the operations below the operating segment constitute a self-sustaining business. If the operations below the operating segment level are determined to be a self-sustaining business, testing is generally required to be performed at this level; however, if multiple self-sustaining business units exist within an operating segment, an evaluation would be performed to determine if the multiple business units share resources that support the overall goodwill balance. For purposes of the goodwill impairment test, Time Warner has identified Warner Bros., HBO, Turner and Time Inc. as its reporting units.<br /><br />Goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, the Company determines the fair value of a reporting unit using a discounted cash flow (&#8220;DCF&#8221;) analysis and, in certain cases, a combination of a DCF analysis and a market-based approach. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, perpetual growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based approach. The cash flows employed in the DCF analyses are based on the Company&#8217;s most recent budgets and business plans and, when applicable, various growth rates have been assumed for years beyond the current business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. In addition, when a DCF analysis is used as the primary method for determining fair value, the Company assesses the reasonableness of its determined fair values by reference to other fair value indicators such as comparable company public trading values, research analyst estimates and, where available, values observed in private market transactions. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit&#8217;s goodwill with its goodwill carrying amount to measure the amount of impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit&#8217;s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.<br /><br />The performance of the Company&#8217;s 2009 annual impairment analyses did not result in any impairments of the Company&#8217;s goodwill. The discount rates utilized in the 2009 analysis ranged from 10.5% to 12% while the terminal growth rates used in the DCF analysis ranged from 2.5%-3.0%. To illustrate the magnitude of a potential impairment relative to future changes in estimated fair values, had the fair values of each of the Company&#8217;s reporting units been hypothetically lower by 10% as of December 31, 2009, no reporting unit&#8217;s book value would have exceeded its fair value. Had the fair values of each of the Company&#8217;s reporting units been hypothetically lower by 20% as of December 31, 2009, the Time Inc. reporting unit book value would have exceeded fair value by approximately $525 million, the Warner Bros. reporting unit book value would have exceeded fair value by approximately $85 million and the HBO reporting unit book value would have exceeded fair value by approximately $528 million. If this were to occur, the second step of the goodwill impairment test would be required to be performed to determine the ultimate amount of impairment loss to record.<br /><br />The impairment test for other intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of intangible assets not subject to amortization are determined using a DCF valuation analysis. Common among such approaches is the &#8220;relief from royalty&#8221; methodology, which is used in estimating the fair value of the Company&#8217;s brands and trademarks. Discount rate assumptions are based on an assessment of the risk inherent in the projected future cash flows generated by the respective intangible assets. Also subject to judgment are assumptions about royalty rates, which are based on the estimated rates at which similar brands and trademarks are being licensed in the marketplace. The discount rates utilized in the 2009 analysis of other intangible assets ranged from 11% to 12.5% while the terminal growth rates used in the DCF analysis ranged from 2.5%-3.0%. To illustrate the magnitude of potential impairment relative to future changes in estimated fair values, had the fair values of certain tradenames at Time Inc. with an aggregate carrying value of $639 million, been hypothetically lower by 10%, the book values of those tradenames would have exceeded fair values by $46 million. Had the fair values of those tradenames been hypothetically lower by 20% as of December 31, 2009, book values would have exceeded fair values by $111 million.<br /><br />Long-Lived Assets<br /><br />Long-lived assets, including finite-lived intangible assets (e.g., tradenames, customer lists, film libraries and property, plant and equipment), do not require that an annual impairment test be performed; instead, long-lived assets are tested for impairment upon the occurrence of a triggering event. Triggering events include the more likely than not disposal of a portion of such assets or the occurrence of an adverse change in the market involving the business employing the related assets. Once a triggering event has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of estimated undiscounted future cash flows generated by the asset group against the carrying value of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset would be deemed to be impaired. Impairment would then be measured as the difference between the estimated fair value of the asset and its carrying value. Fair value is generally determined by discounting the future cash flows associated with that asset. If the intent is to hold the asset for sale and certain other criteria are met (e.g., the asset can be disposed of currently, appropriate levels of authority have approved the sale, and there is an active program to locate a buyer), the impairment test involves comparing the asset&#8217;s carrying value to its estimated fair value. To the extent the carrying value is greater than the asset&#8217;s estimated fair value, an impairment loss is recognized for the difference. Significant judgments in this area involve determining whether a triggering event has occurred, determining the future cash flows for the assets involved and selecting the appropriate discount rate to be applied in determining estimated fair value. For more information, see Note 2.<br /><br />Accounting for Pension Plans<br /><br />Time Warner and certain of its subsidiaries have both funded and unfunded defined benefit pension plans, the substantial majority of which are noncontributory, covering a majority of domestic employees and, to a lesser extent, have various defined benefit plans, primarily noncontributory, covering international employees. Pension benefits are based on formulas that reflect the employees&#8217; years of service and compensation during their employment period. The pension expense recognized by the Company is determined using certain assumptions, including the expected long-term rate of return on plan assets, the interest factor implied by the discount rate and the rate of compensation increases. The determination of these assumptions is discussed in more detail in Note 11.<br /><br />Equity-Based Compensation<br /><br />The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized in the consolidated statement of operations, net of the cost of the awards expected to be forfeited over the period during which an employee is required to provide service in exchange for the award. Also, excess tax benefits realized from the exercise of stock options are reported as a financing cash inflow rather than as a reduction of taxes paid in cash flow from operations.<br /><br />The grant-date fair value of a stock option is estimated using the Black-Scholes option-pricing model. Because the Black-Scholes option-pricing model requires the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. The Company determines the volatility assumption for these stock options using implied volatilities data from its traded options. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on the historical exercise experience of Time Warner employees. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the market price of Time Warner common stock at the date of grant.<br /><br />For awards granted prior to January 1, 2006, the Company recognizes equity-based compensation expense for awards with graded vesting by treating each vesting tranche as a separate award and recognizing compensation expense ratably for each tranche. For equity awards granted subsequent to January 1, 2006, the Company treats such awards as a single award and recognizes equity-based compensation expense on a straight-line basis (net of estimated forfeitures) over the employee service period. Also, when recording compensation cost for equity awards, the Company is required to estimate the number of equity awards granted that are expected to be forfeited. Equity-based compensation expense is recorded in costs of revenues or selling, general and administrative expense depending on the job function of the grantee. For more information, see Note 10.<br /><br />Revenues and Costs<br /><br />Networks<br /><br />The Networks segment recognizes Subscription revenues as programming services are provided to cable system operators, satellite distribution services, telephone companies and other distributors (collectively, &#8220;affiliates&#8221;) based on the per subscriber negotiated contractual programming rate (or estimated programming rate if a new contract has not been negotiated) for each affiliate and the estimated number of subscribers for the respective affiliate. Management considers factors such as the previous contractual rates, inflation, current payments by the affiliate and the status of the negotiations in determining any estimates. When the new distribution contract terms are finalized, an adjustment to Subscription revenue is recorded, if necessary, to reflect the new terms. Such adjustments historically have not been significant. Television Advertising revenues are recognized, net of agency commissions, in the period that the advertisements are aired. If there is a guarantee to deliver a targeted audience rating, revenues are recognized for the actual audience rating delivered with revenue deferred for any shortfall until the guaranteed audience rating is met, typically through the provision of additional air time. Advertising revenues from websites are recognized as impressions are delivered or the services are performed.<br /><br />In the normal course of business, the Networks segment enters into agreements to license programming exhibition rights from distributors. A programming inventory asset related to these rights and a corresponding liability to the distributor are recorded (on a discounted basis if the license agreements are long-term) when (i) the cost of the programming is reasonably determined, (ii) the programming material has been accepted in accordance with the terms of the agreement, (iii) the programming (or any program in a package of programming) is available for its first showing or telecast, and (iv) the license period has commenced. As discussed below, there are variations in the amortization methods of these rights, depending on whether the network is advertising-supported (e.g., TNT and TBS) or not advertising-supported (e.g., HBO).<br /><br />For advertising-supported networks, the Company&#8217;s general policy is to amortize each program&#8217;s costs on a straight-line basis (or per-play basis, if greater) over its license period. There are, however, exceptions to this general policy. For example, for rights fees paid for sports programming arrangements (e.g., National Basketball Association and Major League Baseball), programming costs are amortized using an income-forecast model, in which the rights fees are amortized using the ratio of current period advertising revenue to total estimated remaining advertising revenue over the term of the arrangement. The income-forecast model approximates the pattern with which the network will use and benefit from providing the sports programming. In addition, based on historical advertising sales for certain types of programming, the initial airing has more value than subsequent airings. In these circumstances, the Company will use an accelerated method of amortization. Specifically, if the Company is licensing the right to air a movie multiple times over a certain period, the movie is being shown to the public for the first time on a Company network (a &#8220;Network Movie Premiere&#8221;) and the Network Movie Premiere advertising is sold at a premium rate, a larger portion of the movie&#8217;s programming inventory cost is amortized upon the initial airing of the movie, with the remaining cost amortized on a straight-line basis (or per-play basis, if greater) over the remaining license period. The amortization that accelerates upon the first airing versus subsequent airings is determined based on a study of historical and estimated future advertising sales for similar programming. Costs relating to licensed series agreements containing an advertising barter component are amortized in the same manner in which costs relating to licensed series agreements without an advertising barter component are amortized.<br /><br />For a pay cable network that is not advertising-supported (e.g., HBO), each program&#8217;s costs are amortized on a straight-line basis over its license period or estimated period of use of the related shows, beginning with the month of initial exhibition. When the Company has the right to exhibit feature theatrical programming in multiple windows over a number of years, the Company uses historical audience performance as its basis for determining the amount of a film&#8217;s programming amortization attributable to each window.<br /><br />The Company carries each of its network&#8217;s programming inventory at the lower of unamortized cost or estimated net realizable value. For cable networks that earn both Advertising and Subscription revenues (e.g., TBS and TNT), the Company generally evaluates the net realizable value of unamortized cost based on the entire package of programming provided to the affiliates by the network. In assessing whether the programming inventory for a particular network is impaired, the Company determines the net realizable value for all of the network&#8217;s programming inventory based on a projection of the network&#8217;s estimated combined subscription revenues and advertising revenues. Similarly, based on the premise that customers subscribe to a premium pay service (e.g., HBO) because of the overall quality of its programming, the Company performs its evaluation of the net realizable value of unamortized programming costs based on the package of programming provided to the subscribers by the network. Specifically, the Company determines the net realizable value for all of its premium pay service programming arrangements based on projections of estimated Subscription revenues and, where applicable, home video and other licensing revenues. In addition, changes in management&#8217;s intended usage of a program, such as a decision to no longer air a particular program and forego the rights associated with the program license, would result in a reassessment of that program&#8217;s net realizable value, which could result in an impairment.<br /><br />Filmed Entertainment<br /><br />Feature films typically are produced or acquired for initial exhibition in theaters, followed by distribution in the home video, video-on-demand, pay cable, basic cable and broadcast network markets. Generally, distribution to the home video, pay cable, basic cable and broadcast network markets each commence within three years of initial theatrical release. Theatrical revenues are recognized as the films are exhibited. Revenues from home video sales are recognized at the later of the delivery date or the date that video units are made widely available for sale or rental by retailers based on gross sales less a provision for estimated returns. Revenues from the distribution of theatrical product to television markets are recognized when the films are available to telecast. <br /><br />Television films and series are initially produced for broadcast networks, cable networks or first-run television syndication and may be subsequently licensed to foreign or domestic cable and syndicated television markets, as well as sold on home video. Revenues from the distribution of television product are recognized when the films or series are available to telecast, except for barter agreements where the revenue is valued and recognized when the related advertisements are exhibited. Similar to theatrical home video sales, revenue from home video sales of television films and series is recognized at the later of the delivery date or the date that video units are made widely available for sale or rental by retailers less a provision for estimated returns.<br /><br />Upfront or guaranteed payments for the licensing of intellectual property are recognized as revenue when (i) an arrangement has been signed with a customer, (ii) the customer&#8217;s right to use or otherwise exploit the intellectual property has commenced and there is no requirement for significant continued performance by the Company, (iii) licensing fees are either fixed or determinable and (iv) collectability of the fees is reasonably assured. In the event any significant continued performance is required in these arrangements, revenue is recognized when the related services are performed.<br /><br />Film costs include the unamortized cost of completed theatrical films and television episodes, theatrical films and television series in production and film rights in preparation of development. Film costs are stated at the lower of cost, less accumulated amortization, or fair value. The amount of capitalized film costs recognized as cost of revenues for a given film as it is exhibited in various markets, throughout its life cycle, is determined using the film forecast method. Under this method, the amortization of capitalized costs and the accrual of participations and residuals is based on the proportion of the film&#8217;s revenues recognized for such period to the film&#8217;s estimated remaining ultimate revenues. The process of estimating a film&#8217;s ultimate revenues (i.e., the total revenue to be received throughout a film&#8217;s life cycle) is discussed further under &#8220;Film Cost Recognition and Impairments.&#8221; <br /><br />Inventories of theatrical and television product consist primarily of DVDs and are stated at the lower of cost or net realizable value. Cost is determined using the average cost method. Returned goods included in inventory are valued at estimated realizable value, but not in excess of cost. For more information, see Note 5.<br /><br />The Company enters into arrangements with third parties to jointly finance and distribute many of its theatrical productions. These arrangements, which are referred to as co-financing arrangements, take various forms. In most cases, the form of the arrangement is the sale of an economic interest in a film to an investor. The Filmed Entertainment segment generally records the amounts received for the sale of an economic interest as a reduction of the cost of the film, as the investor assumes full risk for that portion of the film asset acquired in these transactions. The substance of these arrangements is that the third-party investors own an interest in the film and, therefore, in each period the Company reflects in the consolidated statement of operations either a charge or benefit to costs of revenues to reflect the estimate of the third-party investor&#8217;s interest in the profits or losses incurred on the film. The estimate of the third-party investor&#8217;s interest in profits or losses incurred on the film is determined by reference to the ratio of actual revenue earned to date in relation to total estimated ultimate revenues.<br /><br />Acquired film libraries (i.e., program rights and product that are acquired after a film has been exhibited at least once in all markets) are amortized using the film forecast method. For more information, see Note 2.<br /><br />Publishing<br /><br />Magazine Subscription and Advertising revenues are recognized at the magazine cover date. The unearned portion of magazine subscriptions is deferred until the magazine cover date, at which time a proportionate share of the gross subscription price is included in revenues, net of any commissions paid to subscription agents. Also included in Subscription revenues are revenues generated from single-copy sales of magazines through retail outlets such as newsstands, supermarkets, convenience stores and drugstores, which may or may not result in future subscription sales. Advertising revenues from websites are recognized as the services are performed.<br /><br />Certain products, such as magazines sold at newsstands and other merchandise, are sold to customers with the right to return unsold items. Revenues from such sales are recognized when the products are shipped, based on gross sales less a provision for future estimated returns based on historical experience.<br /><br />Inventories of merchandise are stated at the lower of cost or estimated realizable value. Cost is determined using primarily the first-in, first-out method or, alternatively, the average cost method. Returned merchandise included in inventory is valued at estimated realizable value, but not in excess of cost. For more information, see Note&#160;5.<br /><br />Film Cost Recognition and Impairments<br /><br />One aspect of the accounting for film and television production costs, as well as related revenues (&#8220;film accounting&#8221;), that impacts the Filmed Entertainment segment (and the Networks segment, to a lesser degree) and requires the exercise of judgment relates to the process of estimating a film&#8217;s ultimate revenues and is important for two reasons. First, while a film is being produced and the related costs are being capitalized, as well as at the time the film is released, it is necessary for management to estimate the ultimate revenues, less additional costs to be incurred (including exploitation and participation costs), in order to determine whether the value of a film has been impaired and, thus, requires an immediate write-off of unrecoverable film costs. The second area where ultimate revenues judgments play an important role is in the determination of the amount of capitalized film costs recognized as costs of revenues for a given film in a particular period. This cost recognition is based on the proportion of the film&#8217;s revenues recognized for each period as compared to the film&#8217;s estimated ultimate revenues. Similarly, the recognition of participation and residuals is based on the proportion of the film&#8217;s revenues recognized for such period to the film&#8217;s estimated ultimate total revenues. To the extent that ultimate revenues are adjusted, the resulting gross margin reported on the exploitation of that film in a period is also adjusted.<br /><br />Prior to release, management bases its estimates of ultimate revenues for each film on factors such as the historical performance of similar films, the star power of the lead actors and actresses, the rating and genre of the film, pre-release market research (including test market screenings) and the expected number of theaters in which the film will be released. Management updates such estimates based on information available on the progress of the film&#8217;s production and, upon release, the actual results of each film. Changes in estimates of ultimate revenues from period to period affect the amount of film costs amortized in a given period and, therefore, could have an impact on the segment&#8217;s financial results for that period. For example, prior to a film&#8217;s release, the Company often will test market the film to the film&#8217;s targeted demographic. If the film is not received favorably, the Company may (i) reduce the film&#8217;s estimated ultimate revenues, (ii) revise the film, which could cause the production costs to increase or (iii) perform a combination of both. Similarly, a film that generates lower-than-expected theatrical revenues in its initial weeks of release would have its theatrical, home video and television distribution ultimate revenues adjusted downward. A failure to adjust for a downward change in ultimate revenues estimates could result in the understatement of capitalized film costs amortization for the period. The Company recorded film cost amortization of $3.187 billion, $2.796 billion and $3.293 billion in 2009, 2008 and 2007, respectively. Included in film cost amortization are film impairments primarily related to pre-release theatrical films of $85 million, $84 million and $240 million in 2009, 2008 and 2007, respectively.<br /><br />Barter Transactions<br /><br />Time Warner occasionally enters into transactions that involve the exchange of advertising, in part, for other products and services. Such transactions are recognized by the programming licensee (e.g., a television network) as programming inventory and deferred advertising revenue at the estimated fair value when the product is available for telecast. Barter programming inventory is amortized in the same manner as the non-barter component of the licensed programming, and advertising revenue is recognized when delivered. From the perspective of the programming licensor (e.g., a film studio), incremental licensing revenue is recognized when the barter advertising spots received are either used or sold to third parties. <br /><br />Multiple-Element Transactions<br /><br />In the normal course of business, the Company enters into transactions, referred to as multiple-element transactions. While the more common type of multiple-element transactions encountered by the Company involve the licensing (both as licensor and as licensee) of programming (e.g., multiple titles in a single arrangement), multiple element transactions could also involve elements such as investing in an investee while at the same time entering in to an operating agreement or settling a dispute or legal matter with that investee. Multiple-element transactions involve situations where judgment must be exercised in determining the fair value of the different elements. The judgments made in determining fair value in such arrangements impact the amount of revenues, expenses and net income recognized over the term of the contract, as well as the period in which they are recognized.<br /><br />If the Company has evidence of fair value for each deliverable in the transaction, then it accounts for each deliverable in the transaction separately, based on the relevant accounting policies. However, if the Company is unable to determine fair value for one or more elements of the transaction, the transaction is accounted for as one unit of accounting which would generally result in revenue, or costs as the case may be, being recognized on a straight-line basis over the term of the agreement.<br /><br />In determining the fair value of the respective elements, the Company refers to quoted market prices (where available), independent appraisals (where available), historical transactions or comparable cash transactions. Other indicators of fair value include the existence of price protection in the form of &#8220;most-favored-nation&#8221; clauses or similar contractual provisions and individual elements whose values are dependent on future performance (and based on independent factors). Further, in such transactions, evidence of fair value for one element of a transaction may provide support that value was not transferred from one element in a transaction to another element in a transaction. <br /><br />Gross versus Net Revenue Recognition<br /><br />In the normal course of business, the Company acts as or uses an intermediary or agent in executing transactions with third parties. In connection with these arrangements, the Company must determine whether to report revenue based on the gross amount billed to the ultimate customer or on the net amount received from the customer after commissions and other payments to third parties. To the extent revenues are recorded on a gross basis, any commissions or other payments to third parties are recorded as expense so that the net amount (gross revenues less expense) is reflected in Operating Income. Accordingly, the impact on Operating Income is the same whether the Company records revenue on a gross or net basis. For example, if the Company&#8217;s Filmed Entertainment segment distributes a film to a theater for $15 and remits $10 to the independent production company, representing its share of proceeds, the Company must determine whether the Filmed Entertainment segment should record gross revenue from the theater of $15 and $10 of expenses or record as revenue the net amount retained of $5. In either case, the impact on Operating Income is $5.<br /><br />The determination of whether revenue should be reported gross or net is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as a principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. The determination of whether the Company is acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of an arrangement. The Company serves as the principal in transactions in which it has substantial risks and rewards of ownership.<br /><br />Specifically, the following are examples of arrangements where the Company is an intermediary or uses an intermediary:<br /><br /></p><ul><li>The Filmed Entertainment segment provides distribution services to third-party companies. &#160;&#160;The Filmed Entertainment segment may provide distribution services for an independent third-party company in the worldwide theatrical, home video, television and/or videogame markets. The independent third-party company may retain final approval over the distribution, marketing, advertising and publicity for each film or videogame in all media, including the timing and extent of the releases, the pricing and packaging of packaged goods units and approval of all television licenses. The Filmed Entertainment segment records revenue generated in these distribution arrangements on a gross basis when it (i) is the merchant of record for the licensing arrangements, (ii) is the licensor/contracting party, (iii) provides the materials to licensees, (iv) handles the billing and collection of all amounts due under such arrangements and (v) bears the risk of loss related to distribution advances and/or the packaged goods inventory. If the Filmed Entertainment segment does not bear the risk of loss as described in the previous sentence, the arrangements are accounted for on a net basis.<br /></li></ul><p><br /></p><ul><li>The Publishing segment utilizes subscription agents to generate magazine subscribers. &#160;&#160;As a way to generate magazine subscribers, the Publishing segment sometimes uses third-party subscription agents to secure subscribers and, in exchange, the agents receive a percentage of the Subscription revenues generated. The Publishing segment records revenues from subscriptions generated by the agent, net of the fees paid to the agent, primarily because the subscription agent (i) has the primary contact with the customer, (ii) performs all of the billing and collection activities, and (iii) passes the proceeds from the subscription to the Publishing segment after deducting the agent&#8217;s commission.<br /></li></ul><p><br />Advertising Costs<br /><br />Time Warner expenses advertising costs as they are incurred, which generally is when the advertising is exhibited or aired. Advertising expense to third parties was $2.635 billion in 2009, $2.908 billion in 2008 and $3.365 billion in 2007. In addition, the Company had advertising costs of $7 million and $8 million at December 31, 2009 and 2008, respectively, recorded in Prepaid expenses and other current assets on its consolidated balance sheet, which primarily related to prepaid advertising.<br /><br />Income Taxes<br /><br />Income taxes are provided using the asset and liability method, such that income taxes (i.e., deferred tax assets, deferred tax liabilities, taxes currently payable/refunds receivable and tax expense) are recorded based on amounts refundable or payable in the current year and include the results of any difference between GAAP and tax reporting. Deferred income taxes reflect the tax effect of net operating losses, capital losses and general business credit carryforwards and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. Valuation allowances are established when management determines that it is more likely than not that some portion or all of the deferred tax asset will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment. The subsequent realization of net operating loss and general business credit carryforwards acquired in acquisitions accounted for using the purchase method of accounting is recognized in the statement of operations. Research and development credits are recorded based on the amount of benefit the Company believes is &#8220;more likely than not&#8221; of being earned. The majority of such research and development benefits have been recorded to shareholders&#8217; equity as they resulted from stock option deductions for which such amounts are recorded as an increase to additional paid-in-capital. Certain other tax credits earned are offset against the cost of inventory or property acquired or produced. Additionally, the Company is required to recognize in the consolidated financial statements those tax positions determined to be &#8220;more likely than not&#8221; of being sustained upon examination, based on the technical merits of the positions.<br /><br />From time to time, the Company engages in transactions in which the tax consequences may be subject to uncertainty. Examples of such transactions include business acquisitions and dispositions, including dispositions designed to be tax free, issues related to consideration paid or received, and certain financing transactions. Significant judgment is required in assessing and estimating the tax consequences of these transactions. The Company prepares and files tax returns based on its interpretation of tax laws and regulations. In the normal course of business, the Company&#8217;s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. In determining the Company&#8217;s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless such positions are determined to be &#8220;more likely than not&#8221; of being sustained upon examination, based on their technical merits. That is, for financial reporting purposes, the Company only recognizes tax benefits taken on the tax return that it believes are &#8220;more likely than not&#8221; of being sustained. There is considerable judgment involved in determining whether positions taken on the tax return are &#8220;more likely than not&#8221; of being sustained.<br /><br />The Company adjusts its tax reserve estimates periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The consolidated tax provision of any given year includes adjustments to prior year income tax accruals that are considered appropriate and any related estimated interest. The Company&#8217;s policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense. For further information, see Note 8.<br /><br />Discontinued Operations<br /><br />In determining whether a group of assets disposed (or to be disposed) of should be presented as a discontinued operation, the Company makes a determination of whether the group of assets being disposed of comprises a component of the entity; that is, whether it has historic operations and cash flows that can be clearly distinguished (both operationally and for financial reporting purposes). The Company also determines whether the cash flows associated with the group of assets have been significantly (or will be significantly) eliminated from the ongoing operations of the Company as a result of the disposal transaction and whether the Company has no significant continuing involvement in the operations of the group of assets after the disposal transaction. If these determinations can be made affirmatively, the results of operations of the group of assets being disposed of (as well as any gain or loss on the disposal transaction) are aggregated for separate presentation apart from continuing operating results of the Company in the consolidated financial statements. See Note 3 for a summary of discontinued operations.<br /><br />Comprehensive Income (Loss)<br /><br />Comprehensive income (loss) is reported in the consolidated statement of shareholders&#8217; equity as a component of retained earnings (accumulated deficit) and consists of net income (loss) and other gains and losses affecting shareholders&#8217; equity that, under GAAP, are excluded from net income (loss). For Time Warner, such items consist primarily of unrealized gains and losses on marketable equity securities, gains and losses on certain derivative financial instruments, foreign currency translation gains (losses) and changes in unfunded and underfunded benefit plan obligations.<br /><br />The following summary sets forth the components of other comprehensive income (loss), net of tax, for Time Warner shareholders accumulated in equity (millions):</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="176" align="left"><b>&#160;</b></td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"><b>Foreign Currency Translation Gains (Losses)</b></td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"><b>Net Unrealized Gains (Losses) on Securities</b></td><td height="14" width="10" align="center"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"><b>Net Derivative Financial Instrument Gains (Losses)</b></td><td height="14" width="10" align="center"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"><b>Net Unfunded/ Underfunded Benefit Obligation</b></td><td height="14" width="10" align="center"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"><b>Net Accumulated Other Comprehensive Income (Loss)</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="176" align="left">Balance at December 31, 2006</td><td height="14" width="10" align="left"><b>&#160;</b></td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">$</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;306&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">$</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;39&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">$</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;(2)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">$</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;(479)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">$</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;(136)</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="176" align="left">2007 activity</td><td height="14" width="10" align="left"><b>&#160;</b></td><td height="14" style="border-bottom: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;290&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;-&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;(7)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;2&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;285&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="176" align="left">Balance at December 31, 2007</td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;596&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;39&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;(9)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;(477)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;149&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="176" align="left">2008 activity</td><td height="14" width="10" align="left"><b>&#160;</b></td><td height="14" style="border-bottom: 1px 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The Company evaluates the useful lives of its finite-lived intangible assets each reporting period to determine whether events or circumstances warrant revised estimates of useful lives.</td></tr><tr><td height="14" width="14" align="left">^(b)&#160;</td><td width="729" align="left" height="14" colspan="22">The decrease in 2009 is primarily related to an adjustment of $226 million representing a change in cumulative participations payable with respect to film library titles at Warner Bros., which is required to be recognized as a reduction to the related film cost asset.</td></tr><tr><td height="14" width="14" align="left">^(c)&#160;</td><td width="729" align="left" height="14" colspan="22">The increase in 2009 is primarily related to intangible assets recognized for HBO LAG.</td></tr></table><p>The Company recorded amortization expense of $319 million in 2009 compared to $356 million in 2008 and $306 million in 2007. Based on the amount of intangible assets subject to amortization at December 31, 2009, the estimated amortization expense for each of the succeeding five years ended December 31 is as follows: 2010 &#8211; $301 million; 2011 &#8211; $298 million; 2012 &#8211; $284 million; 2013 &#8211; $255 million; and 2014 &#8211; $248 million. These amounts may vary as acquisitions and dispositions occur in the future and as purchase price allocations are finalized. </p></div> <div style="font-size:12pt"><p>3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;BUSINESS ACQUISITIONS, DISPOSITIONS AND RELATED TRANSACTIONS<br /><br />Separations of TWC and AOL from Time Warner <br /><br />As discussed in Note 1, on March 12, 2009, the Company completed the legal and structural separation of TWC from the Company. In addition, on December 9, 2009, the Company completed the legal and structural separation of AOL from the Company. With the completion of these separations, the Company disposed of its Cable and AOL segments in their entirety and ceased to consolidate their financial condition and results of operations in its consolidated financial statements. Accordingly, the Company has presented the financial condition and results of operations of its former Cable and AOL segments as discontinued operations in the consolidated financial statements for all periods presented. <br /><br />HBO Central Europe Acquisition<br /><br />On January 27, 2010, HBO purchased the remainder of its partners&#8217; interests in the HBO Central Europe (&#8220;HBO CE&#8221;) joint venture for approximately $155 million in cash. HBO CE operates the HBO and Cinemax premium pay television programming services serving 11 territories in Central Europe. This transaction resulted in HBO owning 100% of the interests of HBO CE. Prior to this transaction, HBO owned 33% of the interests in HBO CE and accounted for this investment under the equity method of accounting.<br /><br />CME Investment<br />&#160;<br />On May 18, 2009, the Company completed an investment in Central European Media Enterprises Ltd. (&#8220;CME&#8221;), in which the Company received a 31% economic interest for $246 million in cash. As of December 31, 2009, the Company was deemed to beneficially hold an approximate 36% voting interest. CME is a publicly-traded broadcasting company operating leading networks in seven Central and Eastern European countries. In connection with its investment, Time Warner agreed to allow CME founder and Non-Executive Chairman Ronald S. Lauder to vote Time Warner&#8217;s shares of CME for at least four years, subject to certain exceptions. The Company&#8217;s investment in CME is being accounted for under the cost method of accounting.<br /><br />HBO Acquisitions<br /><br />On December 27, 2007 and January 2, 2008, the Company, through its Networks segment, purchased additional interests in HBO Asia and HBO South Asia and on December 19, 2008 purchased an additional interest in HBO LAG. The additional interests purchased in each of these three multi-channel pay-television programming services ranged in size from approximately 20% to 30%, and the aggregate purchase price was approximately $275 million, net of cash acquired. As a result of purchasing the additional interests, the Company became the primary beneficiary of each of these variable interest entities and began consolidating the results of HBO Asia, HBO South Asia and HBO LAG as of the approximate dates the respective transactions occurred. See &#8220;Description of Business, Basis of Presentation and Summary of Significant Accounting Policies &#8211; Recent Accounting Guidance Not Yet Adopted&#8221; in Note 1 for a description of amendments to the guidance to accounting for VIEs, which became effective for Time Warner on January 1, 2010 and will be applied on a retrospective basis beginning in the first quarter of 2010. </p><p>Summary of Discontinued Operations<br /><br />Discontinued operations in 2009, 2008 and 2007 reflect the financial condition and results of operations of TWC and AOL. In addition, discontinued operations in 2007 reflect certain businesses sold, which included the Parenting Group, most of the Time4 Media magazine titles, The Progressive Farmer magazine, Leisure Arts, Inc. (&#8220;Leisure Arts&#8221;) and the Atlanta Braves baseball franchise (the &#8220;Braves&#8221;). 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No single investment individually or in the aggregate is considered significant for the periods presented.<br /><br />Fair-Value and Other Investments, Including Available-for-Sale Securities<br /><br />Fair-value and other investments include deferred compensation-related investments, available-for-sale securities and equity derivative instruments of $544&#160;million, $33&#160;million and $1&#160;million, respectively, as of December&#160;31, 2009 and $527&#160;million, $80&#160;million and $1&#160;million, respectively, as of December&#160;31, 2008. <br /><br />Deferred compensation-related investments included $238 million and $230 million at December 31, 2009 and 2008, respectively, which were recorded at fair value, and $306 million and $297 million at December 31, 2009 and 2008, respectively, of Corporate Owned Life Insurance investments, which were recorded at cash surrender value. The deferred compensation program is an elective unfunded program whereby eligible employees may defer receipt of a portion of their annual compensation. The amount deferred increases or decreases based on the valuations of the various hypothetical investment options chosen by the employee. The Company acquires assets in order to economically hedge the Company&#8217;s liability under the deferred compensation program, which varies based on the performance of the various hypothetical investment options. The corresponding liability for the deferred compensation program is included within Current or Noncurrent other liabilities as appropriate.<br /><br />Equity derivatives instruments and available-for-sale securities are recorded at fair value in the consolidated balance sheet, and the realized gains and losses are included as a component of Other income, net. 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The Company&#8217;s other cost-method investments typically include investments in start-up companies and investment funds. The Company uses available qualitative and quantitative information to evaluate all cost-method investments for impairment at least quarterly. <br /><br />Gain on Sale of Investments<br /><br />For the year ended December 31, 2009, the Company recognized net gains of $52 million related to the sale of investments, primarily consisting of a $28 million gain on the sale of the Company&#8217;s investment in TiVo Inc. and a $17 million gain on the sale of the Company&#8217;s investment in Eidos, plc (formerly SCi Entertainment Group plc) (&#8220;Eidos&#8221;).<br />&#160;&#160;&#160;&#160;&#160;&#160;&#160;<br />For the year ended December 31, 2008, the Company recognized net gains of $32 million related to the sale of investments, primarily consisting of a $16 million gain on the sale of the Company&#8217;s investment in Adify Corporation and a $6 million gain on the sale of the Company&#8217;s investment in BigBand Networks, Inc.<br /><br />For the year ended December 31, 2007, the Company recognized net gains of $214 million related to the sale of investments, primarily consisting of a $56 million gain on the sale of the Company&#8217;s investment in Oxygen Media Corporation and a $100 million gain on the Company&#8217;s sale of its 50% interest in Bookspan.<br /><br />Investment Writedowns<br /><br />For the years ended December 31, 2009, 2008 and 2007 the Company incurred writedowns to reduce the carrying value of certain investments that experienced other-than-temporary impairments. For the year ended December 31, 2009, the writedowns were $73 million, including $41 million related to equity-method investments, primarily Networks investments, and $15 million of available-for-sale securities. For the year ended December 31, 2008, the writedowns were $83 million including $56 million of available-for-sale securities, primarily the writedown of the Company&#8217;s investment in Eidos (which was sold in 2009), and $2 million related to equity-method investments. For the year ended December 31, 2007, the writedowns were $142 million, including $59 million of available-for-sale securities, primarily the writedown of Eidos, and $74 million related to equity-method investments, primarily the writedown of the investment in The CW.<br /><br />The years ended December&#160;31, 2008 and 2007 also included $10 million of losses and $2 million of gains, respectively, to reflect market fluctuations in equity derivative instruments.<br /><br />While Time Warner has recognized all declines that are believed to be other-than-temporary as of December 31, 2009, it is reasonably possible that individual investments in the Company&#8217;s portfolio may experience an other-than-temporary decline in value in the future if the underlying investee experiences poor operating results or the U.S.&#160;or certain foreign equity markets experience further declines in value.</p></div> <div style="font-size:12pt"><p>5. 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align="left" width="75">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="75">&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="461" align="left">Programming costs, less amortization </td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">$</td><td height="14" width="75" align="right">&#160;3,241&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">$</td><td height="14" width="75" align="right">&#160;3,206&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="461" align="left">DVDs, books, paper and other merchandise </td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;332&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;408&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="461" align="left">Total inventories^(a)</td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;3,573&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="75">&#160;3,614&#160;</td></tr><tr><td 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sheet.</td></tr></table><p>Approximately 90% of unamortized film costs for released theatrical and television product are expected to be amortized within three years from December 31, 2009. 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Based on the interest rates prevailing at December 31, 2009, the fair value of Time Warner&#8217;s debt exceeds its carrying value by approximately $1.749 billion and at December 31, 2008, the carrying value of Time Warner&#8217;s debt exceeded its fair value by approximately $400 million. Unrealized gains or losses on debt do not result in the realization or expenditure of cash and generally are not recognized for financial reporting purposes unless the debt is retired prior to its maturity. The carrying value for the majority of the Company&#8217;s other financial instruments approximates fair value due to the short-term nature of such instruments. For the remainder of the Company&#8217;s other financial instruments, differences between the carrying value and fair value are not significant at December&#160;31, 2009. The fair value of financial instruments is generally determined by reference to the market value of the instrument as quoted on a national securities exchange or in an over-the-counter market. In cases where quoted market value is not available, fair value is based on an estimate using present value or other valuation techniques. <br /><br />Non-Financial Instruments<br /><br />The majority of the Company&#8217;s non-financial instruments, which include goodwill, intangible assets, inventories and property, plant and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur (or at least annually for goodwill and indefinite-lived intangible assets) such that a non-financial instrument is required to be evaluated for impairment, a resulting asset impairment would require that the non-financial instrument be recorded at the lower of cost or its fair value. <br /><br />In the case of film production costs, upon the occurrence of an event or change in circumstance that may indicate that the fair value of a film is less than its unamortized costs, the Company determines the fair value of the film and writes off to the consolidated statement of operations the amount by which the unamortized capitalized costs exceed the film&#8217;s fair value. Some of these events or changes in circumstance include: (i) an adverse change in the expected performance of a film prior to its release, (ii) actual costs substantially in excess of budgeted costs, (iii) substantial delays in completion or release schedules, (iv) changes in release plans, (v) insufficient funding or resources to complete the film and to market it effectively and (vi) the failure of actual performance subsequent to release to meet that which had been expected prior to release. In determining the fair value of its films, the Company employs a discounted cash flow methodology with assumptions for cash flows for periods not exceeding 10 years. The discount rate utilized in the discounted cash flow analysis is based on the weighted average cost of capital of the respective business (e.g., Warner Bros.) plus a risk premium representing the risk associated with producing a particular film. 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The maturity profile of the Company's outstanding debt and other financing arrangements is relatively long-term, with a weighted average maturity of 12.3 years as of December 31, 2009.</td></tr><tr><td height="14" width="14" align="left">^(b)&#160;</td><td width="752" align="left" height="14" colspan="23">Represents the portion of committed capacity reserved for outstanding and undrawn letters of credit.</td></tr><tr><td height="14" width="14" align="left">^(c)&#160;</td><td width="752" align="left" height="14" colspan="23">Represents principal amounts adjusted for premiums and discounts. The weighted-average interest rate on Time Warner&#8217;s total debt was 7.14% at December 31, 2009 and 5.50% at December 31, 2008. The Company&#8217;s public debt matures as follows: $0 in 2010, $2.000 billion in 2011, $2.000 billion in 2012, $1.300 billion in 2013, $0 in 2014 and $10.031 billion thereafter.</td></tr><tr><td height="14" width="14" align="left">^(d)&#160;</td><td width="752" align="left" height="14" colspan="23">Amount consists of capital lease and other obligations, including committed financings by subsidiaries under local bank credit agreements.</td></tr></table><p>Credit Agreements and Commercial Paper Program <br /><br />Revolving Bank Credit Agreement<br /><br />At December 31, 2009, Time Warner has a $6.9 billion senior unsecured five-year revolving credit facility that matures February 17, 2011 (the &#8220;Revolving Facility&#8221;). The permitted borrowers under the Revolving Facility are Time Warner and Time Warner International Finance Limited (the &#8220;Borrowers&#8221;). <br /><br />On March 11, 2009, the Company entered into the first and second amendments to the amended and restated credit agreement (the &#8220;Revolving Credit Agreement&#8221;) for its Revolving Facility. The first amendment terminated the $100 million commitment of Lehman Commercial Paper Inc. (&#8220;LCPI&#8221;), a subsidiary of Lehman Brothers Holdings Inc., which filed a petition for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in September 2008, reducing the committed amount of the Revolving Facility from $7.0 billion to $6.9 billion. The second amendment, among other things, amended the Revolving Credit Agreement to (i) expand the circumstances under which any other lender under the Revolving Facility would become a Defaulting Lender (as defined in the Revolving Credit Agreement, as amended) and (ii) permit Time Warner to terminate the commitment of any such lender on terms substantially similar to those applicable to LCPI under the first amendment to the Revolving Credit Agreement.<br /><br />Borrowings under the Revolving Facility bear interest at a rate determined by the credit rating of Time Warner, which rate was LIBOR plus 0.35% per annum as of December 31, 2009. In addition, the Borrowers are required to pay a facility fee on the aggregate commitments under the Revolving Facility at a rate determined by the credit rating of Time Warner, which rate was 0.10% per annum as of December 31, 2009. The Borrowers will also incur an additional usage fee of 0.10% per annum on the outstanding loans and other extensions of credit (including letters of credit) under the Revolving Facility if and when such amounts exceed 50% of the aggregate commitments thereunder. <br /><br />The Revolving Facility provides same-day funding and multi-currency capability, and a portion of the commitment, not to exceed $500 million at any time, may be used for the issuance of letters of credit. The Revolving Facility contains a maximum leverage ratio covenant of 4.5 times the consolidated EBITDA of Time Warner. The terms and related financial metrics associated with the leverage ratio are defined in the Revolving Credit Agreement. At December 31, 2009, the Company was in compliance with the leverage covenant, with a leverage ratio, calculated in accordance with the agreement, of approximately 1.90 times. The Revolving Facility does not contain any credit ratings-based defaults or covenants or any ongoing covenant or representations specifically relating to a material adverse change in Time Warner&#8217;s financial condition or results of operations. Borrowings under the Revolving Facility may be used for general corporate purposes, and unused credit is available to support borrowings by Time Warner under its commercial paper program. The Revolving Facility also contains certain events of default customary for credit facilities of this type (with customary grace periods, as applicable).<br /><br />At December 31, 2009, there were no borrowings outstanding under the Revolving Facility, $82 million in outstanding face amount of letters of credit were issued under the Revolving Facility and no commercial paper was outstanding under the CP Program (as defined below). The Company&#8217;s unused committed capacity as of December 31, 2009 was $11.731 billion, including $4.800 billion of cash and equivalents.<br /><br />The funding commitments under the Company&#8217;s Revolving Credit Agreement are provided by a geographically diverse group of over 20 major financial institutions based in countries including the United States, Canada, France, Germany, Japan and the United Kingdom. No institution accounts for more than 9% of the aggregate undrawn loan commitments under this agreement as of December 31, 2009. <br /><br />Repayment and Termination of $2.0 Billion Term Facility<br /><br />On March 17, 2009, the Company used a portion of the proceeds it received from the payment of the Special Dividend to repay in full the $2.0 billion outstanding (plus accrued interest) under its unsecured term loan facility with a maturity date of January 8, 2011 (the &#8220;Term Facility&#8221;) and terminated the Term Facility. Time Warner did not incur any early termination or prepayment penalties in connection with the termination of the Term Facility.<br /><br />Commercial Paper Program<br /><br />At December 31, 2009, Time Warner has a $6.9 billion unsecured commercial paper program (the &#8220;CP Program&#8221;). The obligations of Time Warner under the CP Program are guaranteed by TW AOL Holdings LLC and Historic TW Inc. (&#8220;Historic TW&#8221;). In addition, the obligations of Historic TW are guaranteed by Turner. Proceeds from the CP Program may be used for general corporate purposes, including investments, repayment of debt and acquisitions. Commercial paper issued by Time Warner is supported by unused committed capacity under the Revolving Facility. <br /><br />Public Debt<br /><br />Time Warner and certain of its subsidiaries have various public debt issuances outstanding. At issuance, the maturities of these outstanding series of debt ranged from five to 40 years and the interest rates on debt with fixed interest rates ranged from 5.50% to 9.15%. At December 31, 2009 and 2008, respectively, the total amount of the Company&#8217;s outstanding fixed and floating rate public debt was $15.227 billion and $17.227 billion, respectively. <br /><br />Consent Solicitation<br /><br />On April 15, 2009, the Company completed a solicitation of consents (the &#8220;Consent Solicitation&#8221;) from the holders of the debt securities (the &#8220;Securities&#8221;) issued by Time Warner Inc. and its subsidiaries under all of the indentures governing the publicly traded debt securities of the Company and its subsidiaries other than the indenture entered into in November 2006 (other than the 2006 Indenture, collectively, the &#8220;Indentures&#8221;). Completion of the Consent Solicitation resulted in the adoption on April 16, 2009 of certain amendments to each Indenture that provide that certain restrictive covenants will not apply (subject to the concurrent or prior issuance of the guarantee by HBO discussed below) to a conveyance or transfer by Historic AOL LLC of its properties and assets substantially as an entirety, unless such conveyance or transfer constitutes a conveyance or transfer of the properties and assets of the issuer and the guarantors under the relevant Indenture and their respective subsidiaries, taken as a whole, substantially as an entirety. In connection with the AOL Separation, on December 3, 2009, HBO issued a guarantee of the obligations of Historic TW (including in its capacity as successor to Time Warner Companies, Inc.), whether as issuer or guarantor, under the Indentures and the Securities. <br /><br />Capital Leases<br /><br />The Company has entered into various leases primarily related to network equipment that qualify as capital lease obligations. As a result, the present value of the remaining future minimum lease payments is recorded as a capitalized lease asset and related capital lease obligation in the consolidated balance sheet. Assets recorded under capital lease obligations totaled $183 million and $165 million as of December 31, 2009 and 2008, respectively. 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At December 31, 2009, these facilities were fully utilized. In connection with each of these securitization facilities, subsidiaries of the Company (each a &#8220;transferor&#8221;) sell, on a revolving and nonrecourse basis, their accounts receivable meeting specific criteria (&#8220;Pooled Receivables&#8221;) to a wholly owned special purpose entity (&#8220;SPE&#8221;). This sale is designed such that the possibility that the transferor or its creditors could reclaim the assets is remote, even in bankruptcy. The SPE then transfers a percentage interest in these receivables to third-party financial institutions or commercial paper conduits sponsored by financial institutions. These securitization transactions are accounted for as sales because the Company has relinquished control of the securitized receivables. Accordingly, accounts receivable sold to the SPEs under these facilities are excluded from receivables in the consolidated balance sheet. The Company is not the primary beneficiary with regard to these financial institutions or commercial paper conduits and, accordingly, does not consolidate their operations. <br /><br />See &#8220;Description of Business, Basis of Presentation and Summary of Significant Accounting Policies &#8211; Recent Accounting Guidance Not Yet Adopted&#8221; for a description of amendments to the guidance to accounting for transfers of financial assets, which became effective for Time Warner on January 1, 2010 and will be applied on a retrospective basis beginning in the first quarter of 2010. <br /><br />In consideration for the sale of the accounts receivable to the applicable SPE, Time Warner receives cash, which there is no obligation to repay, and an interest-bearing retained interest, which is included in receivables in the consolidated balance sheet. Time Warner&#8217;s continuing involvement is solely comprised of servicing the Pooled Receivables on behalf of the applicable SPE. Income received by Time Warner in exchange for this service is equal to the prevailing market rate for such services, and, accordingly, no servicing asset or liability has been recorded on the consolidated balance sheet at December 31, 2009. Servicing income has not been material in any period. The retained interest, which has been adjusted to reflect the portion that is not expected to be collectible, bears an interest rate that varies with the prevailing market interest rates. The retained interest may become uncollectible to the extent that the applicable SPE has credit losses and operating expenses. If the financial quality of the receivables subject to the facilities deteriorate to a certain degree, it is possible that the third-party financial institutions or commercial paper conduits could cease purchasing new receivables, thus limiting the Company&#8217;s access to future funds under these facilities. Because the sold accounts receivable underlying the retained ownership interest are generally short-term in nature, the fair value of the retained interest approximated its carrying value at both December 31, 2009 and December 31, 2008. There were no net proceeds received and repaid under Time Warner&#8217;s accounts receivable securitization program in both 2009 and 2008. For more information refer to Note 17.<br /><br />Covenants and Rating Triggers<br /><br />Each of the Company&#8217;s Revolving Credit Agreement, public debt indentures and financing arrangements with SPEs contain customary covenants. A breach of such covenants in the bank credit agreement that continues beyond any grace period constitutes a default, which can limit the Company&#8217;s ability to borrow and can give rise to a right of the lenders to terminate the Revolving Facility and/or require immediate payment of any outstanding debt. A breach of such covenants in the public debt indentures beyond any grace period constitutes a default which can require immediate payment of the outstanding debt. A breach of such covenants in the financing arrangements with SPEs that continues beyond any grace period can constitute a termination event, which can limit the facility as a future source of liquidity; however, there would be no claims on the Company for the receivables previously sold to the SPEs. There are no rating-based defaults or covenants in the Revolving Credit Agreement, public debt indentures or financing arrangements with SPEs.<br /><br />Additionally, in the event that the Company&#8217;s credit ratings decrease, the cost of maintaining the Revolving Credit Agreement and Revolving Facility and the cost of borrowing increase and, conversely, if the ratings improve, such costs decrease. 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The foreign investors provide consideration to the Company for entering into these arrangements.<br /><br />Although these transactions often differ in form, they generally involve circumstances in which the Company enters into a sale-leaseback arrangement involving its film product with third-party SPEs owned by the foreign investors. The Company maintains its rights and control over the use of its film product. The Company does not have a controlling financial interest and accordingly does not consolidate these SPEs. In addition, the Company does not guarantee and is not otherwise responsible for the equity and debt in these SPEs and does not participate in the profits or losses of these SPEs. The Company accounts for these arrangements based on their substance. That is, the Company records the costs of producing the films as an asset and records the net benefit received from the investors as a reduction of film costs resulting in lower film cost amortization for the films involved in the arrangement. At December 31, 2009, such SPEs were capitalized with approximately $3.3 billion of debt and equity from the third-party investors. 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The utilization of the U.S. federal carryforwards to offset future taxable income is subject to limitations under U.S. federal income tax laws. Capital losses expire beginning in 2013 and can only be utilized against capital gains. Foreign tax credits expire in 2013. The state and local tax loss carryforwards and credits expire in varying amounts from 2010 through 2029. <br /><br />For accounting purposes, the Company records equity-based compensation expense and a related deferred tax asset for the future tax deductions it may receive. For income tax purposes, the Company receives a tax deduction equal to the stock price on the date that a restricted stock unit (or performance share unit) vests or the excess of the stock price over the exercise price of an option upon exercise. As of December 31, 2009, the deferred tax asset recognized for equity-based compensation awards is substantially greater than the tax benefit the Company may ultimately receive (assuming no increase in the Company&#8217;s stock price). The applicable accounting rules require that the deferred tax asset related to an equity-based compensation award be reduced only at the time the award vests (for a restricted stock unit or performance share unit), is exercised (for a stock option) or otherwise expires or is cancelled. This reduction is recorded as an adjustment to additional paid-in capital (&#8220;APIC&#8221;), to the extent that the realization of excess tax deductions on prior equity-based compensation awards were recorded directly to APIC. The cumulative amount of such excess tax deductions is referred to as the Company&#8217;s &#8220;APIC Pool&#8221; and was approximately $1.0 billion at December 31, 2009. Any shortfall balance recognized in excess of the Company&#8217;s APIC Pool is charged to income tax expense in the consolidated statement of operations. <br /><br />Accounting for Uncertainty in Income Taxes<br /><br />On January 1, 2007, the Company adopted guidance relating to the recognition of income tax benefits for those tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the positions. Upon adoption of the guidance on January 1, 2007, the Company recognized $445&#160;million of tax benefits for positions that were previously unrecognized, of which $433&#160;million was accounted for as a reduction to the accumulated deficit balance and $12&#160;million was accounted for as an increase to the paid-in-capital balance as of January&#160;1, 2007. 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Should the Company&#8217;s position with respect to the majority of these uncertain tax positions be upheld, the effect would be recorded in the statement of operations as part of the income tax provision.<br /><br />The impact of temporary differences and tax attributes are considered when calculating interest and penalty accruals associated with the tax reserve. The amount accrued for interest and penalties as of December&#160;31, 2009 and December&#160;31, 2008 was $273&#160;million and $196&#160;million, respectively. 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During the year ended December&#160;31, 2008, the Company recorded interest reserves through the statement of operations of approximately $54&#160;million and made interest payments in connection with settlements reached during 2008 of approximately $14&#160;million.<br /><br />&#160;&#160;&#160;&#160;&#160;During 2009, the Internal Revenue Service (&#8220;IRS&#8221;) substantially concluded its examination of the Company&#8217;s federal income tax returns for the 2002 &#8211; 2004 tax years, which did not result in the Company being required to make any material payments. One matter relating to the character of certain warrants received from a third party has been referred to the IRS Appeals Division. The Company believes its position with regard to this matter is more likely than not to be sustained. However, should the IRS prevail, the additional tax payable by the Company would be approximately $70 million.<br /><br />The Company and its subsidiaries file income tax returns in the U.S.&#160;and various state and local and foreign jurisdictions. The IRS is currently conducting an examination of the Company&#8217;s U.S.&#160;income tax returns for the 2005 through 2007 period. 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In connection with the AOL Separation, the Company recognized a reduction of $3.202 billion to shareholders&#8217; equity.<br /><br />Common Stock Repurchase Program<br /><br />On July 26, 2007, Time Warner&#8217;s Board of Directors authorized a common stock repurchase program that allows the Company to purchase up to an aggregate of $5 billion of common stock. Purchases under this stock repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including price and business and market conditions. From the program&#8217;s inception through December 31, 2009, the Company repurchased approximately 93 million shares of common stock for approximately $4.0 billion pursuant to trading programs under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. This number included approximately 43 million shares of common stock purchased for approximately $1.2 billion during the year ended December 31, 2009. As of December 31, 2009, the Company had approximately $1.0 billion remaining on its stock repurchase program. On January 28, 2010, Time Warner&#8217;s Board of Directors increased this amount to $3.0 billion.<br /><br />Shares Authorized and Outstanding<br /><br />At December 31, 2009, shareholders&#8217; equity of Time Warner included 1.157 billion shares of common stock (net of approximately 477 million shares of common stock held in treasury). As of December 31, 2009, Time Warner is authorized to issue up to 750 million shares of preferred stock, up to 8.333 billion shares of common stock and up to 600 million shares of additional classes of common stock. At December 31, 2008, shareholders&#8217; equity of Time Warner included 1.196 billion of common stock (net of approximately 434 million shares of common stock held in treasury).</p></div> <div style="font-size:12pt"><p>10.&#160;&#160;EQUITY-BASED COMPENSATION<br /><br />Equity Plans<br /><br />The Company has one active equity plan under which it is authorized to grant equity awards to employees and non-employee directors, covering an aggregate of 72&#160;million shares of common stock. Options have been granted to employees and non-employee directors of Time Warner with exercise prices equal to, or in excess of, the fair market value at the date of grant. Generally, the stock options vest ratably over a four-year vesting period and expire ten years from the date of grant. Certain stock option awards provide for accelerated vesting upon an election to retire pursuant to the Company&#8217;s defined benefit retirement plans or after reaching a specified age and years of service, as well as certain additional circumstances for non-employee directors.<br /><br />Pursuant to this equity plan, Time Warner may also grant shares of common stock or restricted stock units (&#8220;RSUs&#8221;), which generally vest between three to five years from the date of grant, to its employees and non-employee directors. Certain RSU awards provide for accelerated vesting upon an election to retire pursuant to the Company&#8217;s defined benefit retirement plans or after reaching a specified age and years of service, as well as certain additional circumstances for non-employee directors. Holders of restricted stock and RSU awards are generally entitled to receive cash dividends or dividend equivalents, respectively, paid by the Company during the period of time that the restricted stock or RSU awards are unvested.<br /><br />Time Warner also has a performance stock unit program for senior level executives. Under this program, recipients of performance stock units (&#8220;PSUs&#8221;) are awarded a target number of PSUs that represent the contingent (unfunded and unsecured) right to receive shares of Company stock at the end of a performance period (generally three years) based on the actual performance level achieved by the Company. For PSUs granted prior to 2009, the recipient of a PSU may receive, depending on the Company&#8217;s total shareholder return (&#8220;TSR&#8221;) relative to the other companies in the S&amp;P 500 Index, 0% to 200% of the target PSUs granted based on a sliding scale where a relative ranking of less than the 25th&#160;percentile will pay 0% and a ranking at the 100th&#160;percentile will pay 200% of the target number of shares. <br /><br />For PSUs granted in 2009, the recipient of a PSU may receive a percentage of target PSUs determined in the same manner as PSUs granted prior to 2009, except if the Company&#8217;s TSR ranking is below the 50th percentile and its growth in adjusted earnings per share (&#8220;adjusted EPS&#8221;) relative to the growth in adjusted EPS of the other companies in the S&amp;P 500 Index is at or above the 50th percentile. In such situations, the percentage of a participant&#8217;s target PSUs that will vest will be the average of (i) the percentage of target PSUs that would vest based on the Company&#8217;s TSR ranking during the performance period and (ii) 100%. <br /><br />For accounting purposes, PSUs granted prior to 2009 are considered to have a market condition and PSUs granted in 2009 are considered to have a market condition and a performance condition. The effect of a market condition is reflected in the grant date fair value of the award, which is estimated using a Monte Carlo analysis to estimate the total return ranking of Time Warner among the S&amp;P 500 Index companies over the performance period. In the case of PSUs granted in 2009, the performance condition is assumed to have been met. As a result, compensation expense is recognized on these awards provided that the requisite service is rendered (regardless of the actual TSR ranking achieved). Based on market data as of December 31, 2009, the PSUs granted in 2009 and 2008 are tracking at a level that, if maintained, would result in the award of 137% and 121%, respectively, of target PSUs granted. For PSUs granted in 2007, the actual performance level achieved by the Company over the performance period, which ended on December 31, 2009, was 69%. Participants who are terminated by the Company other than for cause or who terminate their own employment for good reason or due to retirement or disability are generally entitled to a pro rata portion of the PSUs that would otherwise vest at the end of the performance period.<br /><br />Holders of PSUs granted prior to 2010 do not receive payments or accruals of dividends or dividend equivalents for regular quarterly cash dividends paid by the Company while the PSU is outstanding. Holders of PSUs granted beginning in 2010 will be entitled to receive dividend equivalents based on the regular quarterly cash dividends declared and paid by the Company during the period that the PSUs are outstanding. The dividend equivalent payment will be made in cash following the vesting of the PSUs (generally following the end of the respective performance period) and will be based on the number of shares paid out. <br /><br />Upon the (i)&#160;exercise of a stock option award, (ii)&#160;the vesting of a RSU, (iii)&#160;the vesting of a PSU or (iv)&#160;the grant of restricted stock, shares of Time Warner common stock may be issued either from authorized but unissued shares or from treasury stock. <br /><br />In connection with the AOL Separation and the TWC Separation (collectively, the &#8220;Separations&#8221;), and as provided for in the Company&#8217;s equity plans, the number of stock options, RSUs and target PSUs outstanding at each of the Distribution Date and Distribution Record Date, respectively, and the exercise prices of such stock options were adjusted to maintain the fair value of those awards (collectively, the &#8220;Adjustments&#8221;). The Adjustments were determined by comparing the fair value of such awards immediately prior to each of the Separations (&#8220;pre-Separation&#8221;) to the fair value of such awards immediately after each of the Separations. In performing these analyses, the only assumptions that changed were related to the Time Warner stock price and the stock option&#8217;s exercise price. Accordingly, each equity award outstanding as of the Distribution Date relating to the AOL Separation was increased by multiplying the size of such award by 1.07, while the per share exercise price of each stock option was decreased by dividing by 1.07. Each equity award outstanding as of the Distribution Record Date relating to the TWC Separation was increased by multiplying the size of such award by 1.35, while the per share exercise price of each stock option was decreased by dividing by 1.35. The Adjustments resulted in an aggregate increase of approximately 65 million equity awards (comprised of 60 million stock options and 5 million RSUs and Target PSUs) and are included in the line item &#8220;Adjustment due to the Separations&#8221; in the tables that follow. The modifications to the outstanding equity awards were made pursuant to existing antidilution provisions in the Company&#8217;s equity plans and did not result in any additional compensation expense. <br /><br />Under the terms of Time Warner&#8217;s equity plans and related award agreements, and as a result of the Separations, AOL and TWC employees who held Time Warner equity awards were treated as if their employment with Time Warner was terminated without cause at the time of each of the Separations. This treatment resulted in the forfeiture of unvested stock options, shortened exercise periods for vested stock options and pro rata vesting of the next installment of (and forfeiture of the remainder of) the RSU awards for those AOL and TWC employees who did not satisfy retirement-treatment eligibility provisions in the Time Warner equity plans and related award agreements. <br /><br />Upon the exercise of Time Warner stock options and the vesting of Time Warner RSUs held by TWC employees, TWC is obligated to reimburse Time Warner for the intrinsic value of the applicable award. As a result of the TWC Separation, TWC is no longer considered a related party. Accordingly, on the Distribution Record Date, the Company established an asset of $16 million for the estimated fair value (determined using the Black-Scholes option pricing model) of outstanding equity awards held by TWC employees, with an offsetting adjustment to Time Warner Inc. shareholders&#8217; equity in the consolidated balance sheet. The estimated receivable from TWC fluctuates with the fair value and number of outstanding equity awards and the resulting change is recorded in other income (loss), net, in the consolidated statement of operations. As of December 31, 2009, the estimated receivable was $32 million. No such similar arrangement exists with AOL.<br /><br />In addition, in connection with the 1-for-3 reverse stock split the Company implemented on March 27, 2009, the number of outstanding equity awards was proportionately adjusted to reflect the reverse stock split. As a result, and after giving effect to the adjustment for the TWC Separation, the number of outstanding equity awards was determined by dividing the number of outstanding equity awards by three. The per share exercise price of stock options, after giving effect to the adjustment for the TWC Separation, was determined by multiplying the exercise price by three.<br /><br />Other information pertaining to each category of equity-based compensation appears below.<br /><br />Stock Options<br /><br />The assumptions presented in the table below represent the weighted-average value of the applicable assumption used to value stock options at their grant date.</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="370" align="left"><b>&#160;</b></td><td height="14" width="20" align="left"><b>&#160;</b></td><td width="265" align="center" colspan="5" style="border-bottom: 1px solid #000000;" height="14"><b>Years Ended December 31,</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="370" align="left"><b>&#160;</b></td><td height="14" width="20" 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width="75">&#160;73&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 3px double #000000;" align="left" width="10">$</td><td height="14" style="border-bottom: 3px double #000000;" align="right" width="75">&#160;74&#160;</td></tr></table></div> <div style="font-size:12pt"><p>11.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;BENEFIT PLANS<br /><br />Time Warner and certain of its subsidiaries have both funded and unfunded defined benefit pension plans, the substantial majority of which are noncontributory, covering certain domestic employees and, to a lesser extent covering international employees. Pension benefits are determined based on formulas that reflect the employees&#8217; years of service and compensation during their employment period and participation in the plans. Time Warner uses a December 31 measurement date for its plans. 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height="17"><b>December 31,</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="179" align="center" colspan="5" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>December 31,</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="272" align="left"><b>&#160;</b>^<b></b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>2009</b></td><td height="17" style="border-top: 1px solid #000000;" align="left" width="10"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>2008</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>2009</b></td><td height="17" style="border-top: 1px solid #000000;" align="left" width="10"><b>&#160;</b></td><td width="84" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>2008</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="272" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="center"><b>&#160;</b></td><td height="17" width="75" align="center"><b>&#160;</b></td><td height="17" width="10" align="center"><b>&#160;</b></td><td width="85" align="center" height="17" colspan="2"><b>(recast)</b></td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="center"><b>&#160;</b></td><td height="17" width="75" align="center"><b>&#160;</b></td><td height="17" width="10" align="center"><b>&#160;</b></td><td width="84" align="center" height="17" colspan="2"><b>&#160;</b></td></tr><tr><td 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width="10" align="left">$</td><td height="17" width="75" align="right">&#160;2,347&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">$</td><td height="17" width="75" align="right">&#160;2,324&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">$</td><td height="17" width="75" align="right">&#160;623&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">$</td><td height="17" width="74" align="right">&#160;945&#160;</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="272" align="left">Service cost</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;65&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;80&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;13&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="74" align="right">&#160;24&#160;</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="272" align="left">Interest cost</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;142&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;141&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;37&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="74" align="right">&#160;51&#160;</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="272" align="left">Plan participants contribution</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;3&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;2&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;4&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="74" align="right">&#160;6&#160;</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" 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align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;(115)</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;(24)</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="74" align="right">&#160;(24)</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="272" align="left">Plan amendments^(a)</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;-&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;(34)</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td 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align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="75" align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="75" align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="75" align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="10" align="left">&#160;</td><td height="8" width="74" align="left">&#160;</td></tr><tr><td height="17" width="14" align="left">^(a)&#160;</td><td width="688" align="left" height="17" colspan="14">Effective July 1, 2008, the Time Warner Pension Plan was amended to change the plan&#8217;s benefit payment formula from a monthly annuity based payment formula to a fixed lump-sum payment formula.</td></tr></table><p>Plan Assets &#8211; Defined Benefit 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style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>December 31,</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="272" align="left"><b>&#160;</b>^<b></b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>2009</b></td><td height="17" style="border-top: 1px solid #000000;" align="left" width="10"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>2008</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>2009</b></td><td height="17" style="border-top: 1px solid #000000;" align="left" width="10"><b>&#160;</b></td><td width="84" align="center" 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style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;(16)</td><td height="17" width="10" align="left">&#160;</td><td height="17" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="17" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;-&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="17" style="border-bottom: 1px solid #000000;" align="right" width="75">&#160;-&#160;</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="271" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="left" width="10">$</td><td height="17" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="right" width="75">&#160;866&#160;</td><td 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style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>December 31,</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="180" align="center" colspan="5" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>December 31,</b></td></tr><tr><td height="16" width="14" align="left">&#160;</td><td height="16" width="271" align="left"><b>&#160;</b>^<b></b></td><td height="16" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="16"><b>2009</b></td><td height="16" style="border-top: 1px solid #000000;" align="left" width="10"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="16"><b>2008</b></td><td height="16" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="16"><b>2009</b></td><td height="16" style="border-top: 1px solid #000000;" align="left" width="10"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="16"><b>2008</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="271" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="center"><b>&#160;</b></td><td height="17" width="75" align="center"><b>&#160;</b></td><td height="17" width="10" align="center"><b>&#160;</b></td><td width="85" align="center" height="17" colspan="2"><b>(recast)</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td height="17" width="10" align="center"><b>&#160;</b></td><td height="17" width="75" align="center"><b>&#160;</b></td><td height="17" width="10" align="center"><b>&#160;</b></td><td 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width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;1,982&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;1,838&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;334&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;339&#160;</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="271" align="left">Fair value of plan assets</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="right">&#160;2,092&#160;</td><td height="17" width="10" align="right">&#160;</td><td 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align="left">&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="75" align="left">&#160;</td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="271" align="left"><b>&#160;</b>^<b></b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="180" align="center" colspan="5" style="border-bottom: 1px solid #000000;" height="17"><b>International Funded Plans</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="180" align="center" colspan="5" style="border-bottom: 1px solid #000000;" height="17"><b>International Unfunded Plans</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="271" align="left"><b>&#160;</b>^<b></b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="180" align="center" colspan="5" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>December 31,</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="180" align="center" colspan="5" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="17"><b>December 31,</b></td></tr><tr><td height="16" width="14" align="left">&#160;</td><td height="16" width="271" align="left"><b>&#160;</b>^<b></b></td><td height="16" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="16"><b>2009</b></td><td height="16" style="border-top: 1px solid #000000;" align="left" width="10"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="16"><b>2008</b></td><td height="16" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" 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align="left"><b>&#160;</b></td><td width="71" align="center" height="17" colspan="2"><b>(recast)</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td height="17" width="61" align="left"><b>&#160;</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="71" align="center" height="17" colspan="2"><b>&#160;</b></td><td height="17" width="10" align="left"><b>&#160;</b></td><td width="71" align="center" height="17" colspan="2"><b>&#160;</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="165" align="left">Service cost</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">$</td><td height="17" width="61" align="right">&#160;65&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">$</td><td height="17" width="61" align="right">&#160;80&#160;</td><td height="17" width="10" 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width="61">&#160;13&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="left" width="10">$</td><td height="17" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="right" width="61">&#160;4&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="left" width="10">$</td><td height="17" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="right" width="61">&#160;9&#160;</td></tr></table><p>The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2010 are as follows (millions):</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="16" width="14" align="left">&#160;</td><td height="16" width="421" align="left"><b>&#160;</b></td><td height="16" width="10" align="left"><b>&#160;</b></td><td width="105" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="16"><b>Domestic</b></td><td height="16" width="10" align="left"><b>&#160;</b></td><td width="105" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="16"><b>International</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="421" align="left">Actuarial loss</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">$</td><td height="17" width="95" align="right">&#160;70&#160;</td><td height="17" width="10" align="right">&#160;</td><td height="17" width="10" align="left">$</td><td height="17" width="95" align="right">&#160;14&#160;</td></tr></table><p>In addition, certain domestic employees of the Company participate in multi-employer pension plans, not included in the net periodic costs above, for which the expense was $38 million in 2009, $35 million in 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align="center" width="10"><b>&#160;</b></td><td height="17" style="border-top: 1px solid #000000;" align="center" width="61"><b>&#160;</b></td><td height="17" width="10" align="center"><b>&#160;</b></td><td height="17" style="border-top: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="17" style="border-top: 1px solid #000000;" align="center" width="61"><b>&#160;</b></td><td height="17" width="10" align="center"><b>&#160;</b></td><td height="17" style="border-top: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="17" style="border-top: 1px solid #000000;" align="center" width="61"><b>&#160;</b></td></tr><tr><td height="17" width="14" align="left">&#160;</td><td height="17" width="165" align="left">Discount rate</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="10" align="left">&#160;</td><td height="17" width="61" align="right">5.79%&#160;</td><td height="17" width="10" align="left">&#160;</td><td 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The Company continuously monitors the performance of the overall pension assets portfolio, asset allocation policies, and the performance of individual pension asset managers and makes adjustments and changes, as required. The Company does not manage any assets internally, does not have any passive investments in index funds, and does not directly utilize futures, options, or other derivative instruments or hedging strategies with regard to the pension plans; however, the investment mandate of some pension asset managers allows the use of the foregoing as components of their portfolio management strategies.<br /><br />As a result of the most recent review of asset allocations, the Company will transition its asset allocation from its current target of 75% equity investments and 25% fixed income investments toward a target of 50% equity investments and 50% fixed income investments to better match the assets&#8217; characteristics with those of the Company&#8217;s pension liabilities. The changes are consistent with the Company&#8217;s investment policy and will be implemented as market conditions permit.<br /><br />The Time Warner Pension Plan&#8217;s assets included no shares of Time Warner common stock and 913,700 shares of Time Warner common stock in the amount of $28 million (2% of total plan assets) at December 31, 2009 and December 31, 2008, respectively. <br /><br />Expected cash flows <br /><br />After considering the funded status of the Company&#8217;s defined benefit pension plans, movements in the discount rate, investment performance and related tax consequences, the Company may choose to make contributions to its pension plans in any given year. At December 31, 2009, there were no minimum required contributions for domestic funded plans. The Company did not make any discretionary cash contributions to its funded domestic defined benefit pension plans during the year ended December 31, 2009. For domestic unfunded plans, contributions will continue to be made to the extent benefits are paid. Expected benefit payments for domestic unfunded plans for 2010 are approximately $35 million. 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As of December 31, 2009, $6 million of the remaining liability was classified as a current liability in the consolidated balance sheet, with the remaining $17 million classified as a long-term liability. Amounts classified as long-term, primarily related to lease exit costs, are expected to be paid through 2014.<br /><br />Restructuring Costs Expensed<br /><br />The Company&#8217;s restructuring costs primarily related to employee termination costs and ranged from senior executives to line personnel. 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Amounts classified as long-term are expected to be paid through 2017.</p></div> <div style="font-size:12pt"><p>13.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;DERIVATIVE INSTRUMENTS<br /><br />Time Warner uses derivative instruments, principally forward contracts, 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. The Company uses derivative instruments that generally have maturities of three to eighteen months to hedge various foreign exchange exposures, including the following: (i) variability in foreign currency-denominated cash flows, such as the hedges of unremitted or forecasted royalty and license fees to be received from the sale or anticipated sale of U.S. copyrighted products abroad or cash flows for certain film costs denominated in a foreign currency (i.e., cash flow hedges) and (ii) currency risk associated with foreign currency-denominated operating assets and liabilities (i.e., fair value hedges). The Company also enters into derivative contracts that economically hedge certain of its foreign currency risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. These economic hedges are used primarily to offset the change in certain foreign currency-denominated, long-term receivables and certain foreign currency-denominated debt due to changes in the underlying foreign exchange rates. Gains and losses from hedging activities are largely offset by corresponding economic gains or losses from the respective transactions that were hedged. The Company monitors its positions with, and the credit quality of, the financial institutions that are party to any of its financial transactions. <br /><br />The following is a summary of amounts pertaining to Time Warner&#8217;s use of foreign currency derivatives at December&#160;31, 2009 (millions):</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="75" align="center"><b>December 31,</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left"><b>&#160;</b></td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="center" width="75"><b>2009&#160;</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left"><b>Qualifying Hedges</b></td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="75">&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left">Assets</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">$</td><td height="14" width="75" align="right">&#160;90&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left">Liabilities</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="75" align="right">&#160;(137)</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="75" align="left">&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left"><b>Economic Hedges</b></td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="75" align="left">&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left">Assets</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">$</td><td height="14" width="75" align="right">&#160;7&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="558" align="left">Liabilities</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="75" align="right">&#160;(43)</td></tr></table><p>Netting provisions are provided for in existing International Swap and Derivative Association Inc. agreements in situations where the Company executes multiple contracts with the same counterparty. As a result, net assets or liabilities resulting from foreign exchange derivatives subject to these netting agreements are classified within prepaid expenses and other current assets or accounts payable and accrued expenses in the Company&#8217;s consolidated balance sheet. At December&#160;31, 2009, $61 million of losses related to cash flow hedges are recorded in accumulated other comprehensive income in the Company&#8217;s consolidated balance sheet and are expected to be recognized in earnings at the same time hedged items affect earnings. Included in this amount are deferred net losses of $17 million related to hedges of cash flows associated with films that are not expected to be released within the next twelve months. <br /><br />The following is a summary of amounts pertaining to Time Warner&#8217;s use of foreign currency derivatives for the year ended December&#160;31, 2009 (millions):</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="556" align="left"><b>&#160;</b></td><td height="14" width="10" align="center"><b>&#160;</b></td><td width="85" align="center" height="14" colspan="2"><b>December 31,</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="556" align="left">&#160;</td><td height="14" width="10" align="center"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-bottom: 1px solid #000000;" height="14"><b>2009&#160;</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="556" align="left"><b>Fair Value Hedges</b></td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="75">&#160;</td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="556" align="left">Gain (loss) &#8212; 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SEGMENT INFORMATION<br /><br />Time Warner classifies its operations into three reportable segments: Networks, consisting principally of cable television networks that provide programming; Filmed Entertainment, consisting principally of feature film, television and home video production and distribution; Publishing, consisting principally of magazine publishing.<br /><br />Information as to the operations of Time Warner in each of its reportable segments is set forth below based on the nature of the products and services offered. Time Warner evaluates the performance of its businesses based on several factors, of which the primary financial measure is operating income (loss) before depreciation of tangible assets and amortization of intangible assets (&#8220;Operating Income (Loss) before Depreciation and Amortization&#8221;). 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Additionally, transactions between divisions within the same reporting segment (e.g., a transaction between HBO and Turner within the Networks segment) are eliminated in arriving at segment performance and, therefore, do not affect segment results. 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height="14"><b>2008&#160;</b></td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="85" align="center" colspan="2" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" height="14"><b>2007&#160;</b></td></tr><tr><td height="1" width="14" align="left">&#160;</td><td height="1" width="366" align="left"><b>&#160;</b></td><td height="1" width="10" align="left"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="75"><b>&#160;</b></td><td height="1" width="10" align="left"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="10"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" width="75"><b>&#160;</b></td><td height="1" width="10" align="left"><b>&#160;</b></td><td height="1" style="border-top: 1px solid #000000;" align="center" 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guarantees the Company has provided on certain lease and operating commitments entered into by (a) entities formerly owned by the Company including the arrangements described below and (b) ventures in which the Company is or was a venture partner.<br /></li></ul><p><br />Six Flags<br /><br />In connection with the Company&#8217;s former investment in the Six Flags theme parks located in Georgia and Texas (&#8220;Six Flags Georgia&#8221; and &#8220;Six Flags Texas,&#8221; respectively, and, collectively, the &#8220;Parks&#8221;), in 1997, certain subsidiaries of the Company (including Historic TW) agreed to guarantee (the &#8220;Six Flags Guarantee&#8221;) certain obligations of the partnerships that hold the Parks (the &#8220;Partnerships&#8221;) for the benefit of the limited partners in such Partnerships, including the following (the &#8220;Guaranteed Obligations&#8221;): (a) making a minimum annual distribution to the limited partners of the Partnerships (the minimum was approximately $60.7 million in 2009 and is subject to annual cost of living adjustments); (b) making a minimum amount of capital expenditures each year (an amount approximating 6% of the Parks&#8217; annual revenues); (c) offering each year to purchase 5% of the limited partnership units of the Partnerships (plus any such units not purchased pursuant to such offer in any prior year) based on an aggregate price for all limited partnership units at the higher of (i) $250 million in the case of Six Flags Georgia and $374.8 million in the case of Six Flags Texas (the &#8220;Base Valuations&#8221;) and (ii) a weighted average multiple of EBITDA for the respective Park over the previous four-year period (the &#8220;Cumulative LP Unit Purchase Obligation&#8221;); (d) making annual ground lease payments; and (e) either (i) purchasing all of the outstanding limited partnership units through the exercise of a call option upon the earlier of the occurrence of certain specified events and the end of the term of each of the Partnerships in 2027 (Six Flags Georgia) and 2028 (Six Flags Texas) (the &#8220;End of Term Purchase&#8221;) or (ii) causing each of the Partnerships to have no indebtedness and to meet certain other financial tests as of the end of the term of the Partnership. The aggregate amount payable in connection with an End of Term Purchase option on either Park will be the Base Valuation applicable to such Park, adjusted for changes in the consumer price index from December 1996, in the case of Six Flags Georgia, and December 1997, in the case of Six Flags Texas, through December of the year immediately preceding the year in which the End of Term Purchase occurs, in each case, reduced ratably to reflect limited partnership units previously purchased.<br /><br />In connection with the Company&#8217;s 1998 sale of Six Flags Entertainment Corporation (which held the controlling interests in the Parks) to Six Flags, Inc. (formerly Premier Parks Inc.) (&#8220;Six Flags&#8221;), Six Flags and Historic TW entered into a Subordinated Indemnity Agreement pursuant to which Six Flags agreed to guarantee the performance of the Guaranteed Obligations when due and to indemnify Historic TW, among others, in the event that the Guaranteed Obligations are not performed and the Six Flags Guarantee is called upon. In the event of a default of Six Flags&#8217; obligations under the Subordinated Indemnity Agreement, the Subordinated Indemnity Agreement and related agreements provide, among other things, that Historic TW has the right to acquire control of the managing partner of the Parks. Six Flags&#8217; obligations to Historic TW are further secured by its interest in all limited partnership units that are held by Six Flags. To date, no payments have been made by the Company pursuant to the Six Flags Guarantee.<br /><br />In connection with the TWC Separation, guarantees previously made by Time Warner Entertainment Company, L.P. (&#8220;TWE&#8221;), a subsidiary of TWC, were terminated and, pursuant to and as required under the original terms of the Six Flags Guarantee, Warner Bros. Entertainment Inc. (&#8220;WBEI&#8221;) became a guarantor. In addition, TWE&#8217;s rights and obligations under the Subordinated Indemnity Agreement have been assigned to WBEI. The Company continues to indemnify TWE in connection with any residual exposure of TWE under the Guaranteed Obligations. <br /><br />In April 2009, Six Flags received notices from limited partners of the Partnerships to sell limited partnership units with an aggregate price of approximately $66 million. The general partner of the Georgia limited partnership exercised its right to purchase Six Flags Georgia units having a total purchase price of $7 million. The remaining purchase price for limited partnership units in the Parks that were put was funded through $6 million of cash that had been held in escrow to support the Six Flags Guarantee and a loan from a wholly-owned Time Warner subsidiary (TW-SF LLC) of approximately $53 million (the &#8220;TW Loan&#8221;). The TW Loan was made to SFOG Acquisition A, Inc., a Delaware corporation, SFOG Acquisition B, L.L.C., a Delaware limited liability company, SFOT Acquisition I, Inc., a Delaware corporation and SFOT Acquisition II, Inc., a Delaware corporation (collectively, the &#8220;Acquisition Companies&#8221;). The TW Loan accrues interest at 14% per annum with a final maturity date of March 15, 2011. Up to $10 million of the TW Loan has been guaranteed by Six Flags. The outstanding principal amount of the TW Loan at December 31, 2009 was approximately $27 million, reflecting payments by the Acquisition Companies during 2009. <br /><br />Taking into account the limited partnership units purchased in 2009, the estimated maximum Cumulative LP Unit Purchase Obligation for 2010 is approximately $300 million. In addition, the aggregate undiscounted estimated future cash flow requirements covered by the Six Flags Guarantee over the remaining term (through 2028) of the agreements are approximately $1.15 billion (for a net present value of approximately $415 million). <br /><br />On June 13, 2009, Six Flags and certain of its subsidiaries filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court in Delaware. Six Flags&#8217; fourth amended joint plan of reorganization and disclosure statement has been filed with the Bankruptcy Court and voting on the plan is expected to occur in February 2010. A confirmation hearing on the plan of reorganization is scheduled in March 2010. The plan of reorganization that ultimately becomes effective is expected to result in a significant reduction in debt for Six Flags. The Partnerships holding the Parks and the Acquisition Companies were not included in the debtors reorganization proceedings.<br /><br />In connection with the proposed plan of reorganization of Six Flags, in October 2009, TW-SF LLC agreed to provide the Acquisition Companies a new 5-year multiple draw credit facility of up to $150 million, which the Acquisition Companies would be able to use only to fund their obligations to purchase certain limited partnership units of the Partnerships. The new credit facility, which is subject to a number of conditions precedent, including a final order confirming the plan of reorganization, would be in addition to the existing TW Loan. New loans drawn under the facility would mature 5 years from their respective funding date. Interest will accrue at a rate at least equal to a LIBOR floor of 250 basis points plus a spread of 100 basis points over the applicable margin for a new Six Flags&#8217; senior term credit facility, which will close simultaneously with the closing of this facility.<br /><br />Because the Six Flags Guarantee existed prior to December 31, 2002 and no modifications to the arrangements have been made since the date the guarantee came into existence, the Company is required to continue to account for the Guaranteed Obligations as a contingent liability. Based on its evaluation of the current facts and circumstances surrounding the Guaranteed Obligations and the Subordinated Indemnity Agreement, the Company is unable to predict the loss, if any, that may be incurred under these Guaranteed Obligations and no liability for the arrangements has been recognized at December 31, 2009. Because of the specific circumstances surrounding the arrangements and the fact that no active or observable market exists for this type of financial guarantee, the Company is unable to determine a current fair value for the Guaranteed Obligations and related Subordinated Indemnity Agreement.<br /><br />AOL Revolving Facility<br /><br />In connection with the AOL Separation, AOL entered into a $250 million 364-day senior secured revolving credit facility (the &#8220;AOL Revolving Facility&#8221;) on December 9, 2009. Time Warner has guaranteed AOL&#8217;s obligations under the AOL Revolving Facility in exchange for which AOL is paying Time Warner an ongoing fee, subject to periodic increases, a portion of which varies with the amount of undrawn commitments and the principal amount of AOL&#8217;s obligations outstanding under the facility and changes in Time Warner&#8217;s senior unsecured long-term debt credit ratings. Also in connection with the AOL Separation, Time Warner agreed to continue to provide credit support for certain AOL lease and trade obligations of approximately $108 million ending on the earlier of December 9, 2011 and 30 days after AOL obtains the right to borrow funds under a permanent credit facility, in exchange for a fee equal to a rate per annum of 4.375% of the outstanding principal amount of such obligations, subject to periodic increases. Since the AOL Separation, AOL has replaced or released Time Warner as the source of the credit support for certain AOL lease and trade obligations or otherwise reduced Time Warner&#8217;s credit support obligations. As of February 17, 2010, the amount of credit support provided by Time Warner for AOL lease and trade obligations was $28 million.<br /><br /></p><ul><li>Generally, letters of credit and surety bonds support performance and payments for a wide range of global contingent and firm obligations including insurance, litigation appeals, import of finished goods, real estate leases and other operational needs. Other contingent commitments primarily include amounts payable representing contingent consideration on certain acquisitions, which if earned would require the Company to pay a portion or all of the contingent amount, and contingent payments for certain put/call arrangements, whereby payments could be made by the Company to acquire assets, such as a venture partner&#8217;s interest or a co-financing partner&#8217;s interest in one of the Company&#8217;s films.<br /></li></ul><p><br /></p><ul><li>On March 12, 2009, TWC borrowed the full committed amount of $1.932 billion under its unsecured term loan credit facility entered into on June 30, 2008 (the &#8220;TWC Bridge Facility&#8221;), all of which was used by TWC to pay a portion of the Special Dividend. On March 26, 2009, TWC completed an offering of $3.0 billion in aggregate principal amount of debt securities and used a portion of the net proceeds from the offering to prepay in full the outstanding loans and all other amounts due under the TWC Bridge Facility, and the TWC Bridge Facility was terminated in accordance with its terms. Concurrently with the termination of the TWC Bridge Facility and pursuant to the terms of the $1.535 billion credit agreement (the &#8220;Supplemental Credit Agreement&#8221;) between the Company (as lender) and TWC (as borrower) for a two-year senior unsecured supplemental term loan facility (the &#8220;Supplemental Credit Facility&#8221;), on March 26, 2009, TWC terminated the commitments of Time Warner under the Supplemental Credit Facility, and the Supplemental Credit Agreement was terminated in accordance with its terms.<br /></li></ul><p><br />Except as otherwise discussed above or below, Time Warner does not guarantee the debt of any of its investments accounted for using the equity method of accounting.</p><p>Programming Licensing Backlog<br /><br />Programming licensing backlog represents the amount of future revenues not yet recorded from cash contracts for the licensing of theatrical and television product for pay cable, basic cable, network and syndicated television exhibition. Because backlog generally relates to contracts for the licensing of theatrical and television product that have already been produced, the recognition of revenue for such completed product is principally dependent on the commencement of the availability period for telecast under the terms of the related licensing agreement. Cash licensing fees are collected periodically over the term of the related licensing agreements. Backlog was approximately $4.5 billion and $4.1 billion at December 31, 2009 and December 31, 2008, respectively. Included in these amounts is licensing of film product from the Filmed Entertainment segment to the Networks segment in the amount of $1.1 billion and $967 million at December 31, 2009 and December 31, 2008, respectively. Backlog excludes filmed entertainment advertising barter contracts, which are also expected to result in the future realization of revenues and cash through the sale of the advertising spots received under such contracts to third parties.<br /><br />Contingencies<br /><br />Warner Bros. (South) Inc. (&#8220;WBS&#8221;), a wholly owned subsidiary of the Company, is litigating various tax cases in Brazil. WBS currently is the theatrical distribution licensee for Warner Bros. Entertainment Nederlands (&#8220;Warner Bros. Nederlands&#8221;) in Brazil and acts as a service provider to the Warner Bros. Nederlands home video licensee. All of the ongoing tax litigation involves WBS&#8217; distribution activities prior to January 2004, when WBS conducted both theatrical and home video distribution. Much of the tax litigation stems from WBS&#8217; position that in distributing videos to rental retailers, it was conducting a distribution service, subject to a municipal service tax, and not the &#8220;industrialization&#8221; or sale of videos, subject to Brazilian federal and state VAT-like taxes. Both the federal tax authorities and the State of S&#227;o Paulo, where WBS is based, have challenged this position. The matters relating to state taxes were settled in September 2007 pursuant to a state government-sponsored amnesty program. In November 2009, WBS elected to participate in a federal tax amnesty program, called &#8220;REFIS&#8221;, which offers substantial reductions in interest and penalties for lump sum and installment payments of contested federal taxes.&#160; For the federal taxes included in REFIS, the application of prior judicial deposits to certain of the debts, the return of any excess judicial deposits, the return of a bank guarantee, and the dismissal of the underlying tax cases remain pending. In addition to the federal tax matters being resolved through REFIS, WBS continues to litigate certain other federal tax matters involving the imposition of taxes on royalties remitted outside of Brazil and the appropriate tax rate to be applied. The Company intends to defend against these remaining tax cases vigorously.<br /><br />On October 8, 2004, certain heirs of Jerome Siegel, one of the creators of the &#8220;Superman&#8221; character, filed suit against the Company, DC Comics and Warner Bros. Entertainment Inc. in the U.S. District Court for the Central District of California. Plaintiffs&#8217; complaint seeks an accounting and demands up to one-half of the profits made on Superman since the alleged April 16, 1999 termination by plaintiffs of Siegel&#8217;s grants of one-half of the rights to the Superman character to DC Comics&#8217; predecessor-in-interest. Plaintiffs have also asserted various Lanham Act and unfair competition claims, alleging &#8220;wasting&#8221; of the Superman property by DC Comics and failure to accord credit to Siegel, and the Company has filed counterclaims. On April 30, 2007, the Company filed motions for partial summary judgment on various issues, including the unavailability of accounting for pre-termination and foreign works. On March 26, 2008, the court entered an order of summary judgment finding, among other things, that plaintiffs&#8217; notices of termination were valid and that plaintiffs had thereby recaptured, as of April 16, 1999, their rights to a one-half interest in the Superman story material, as first published, but that the accounting for profits would not include profits attributable to foreign exploitation, republication of pre-termination works and trademark exploitation. On October 6, 2008, the court dismissed plaintiffs&#8217; Lanham Act and &#8220;wasting&#8221; claims with prejudice. In orders issued on October 14, 2008, the court determined that the remaining claims in the case will be subject to phased non-jury trials. The first phase trial concluded on May 21, 2009, and on July 8, 2009, the court issued a decision in favor of the defendants on the issue of whether the terms of various license agreements between DC Comics and Warner Bros. Entertainment Inc. were at fair market value or constituted &#8220;sweetheart deals.&#8221; The second phase trial was previously scheduled to commence on December 1, 2009, and the parties are awaiting a new date for the commencement of this trial. The Company intends to defend against this lawsuit vigorously.<br /><br />On October 22, 2004, the same Siegel heirs filed a second lawsuit against the same defendants, as well as Warner Communications Inc. and Warner Bros. Television Production Inc. in the U.S. District Court for the Central District of California. Plaintiffs claim that Jerome Siegel was the sole creator of the character Superboy and, as such, DC Comics has had no right to create new Superboy works since the alleged October 17, 2004 termination by plaintiffs of Siegel&#8217;s grants of rights to the Superboy character to DC Comics&#8217; predecessor-in-interest. This lawsuit seeks a declaration regarding the validity of the alleged termination and an injunction against future use of the Superboy character. On March 23, 2006, the court granted plaintiffs&#8217; motion for partial summary judgment on termination, denied the Company&#8217;s motion for summary judgment and held that further proceedings are necessary to determine whether the Company&#8217;s Smallville television series may infringe on plaintiffs&#8217; rights to the Superboy character. On July 27, 2007, upon the Company&#8217;s motion for reconsideration, the court reversed the bulk of its March 23, 2006 ruling, and requested additional briefing on certain issues. On March 31, 2008, the court, among other things, denied a motion for partial summary judgment that the Company had filed in April 2007 as moot in view of the court&#8217;s July 27, 2007 reconsideration ruling. The Company intends to defend against this lawsuit vigorously.<br /><br />On February 11, 2008, trustees of the Tolkien Trust and the J.R.R. Tolkien 1967 Discretionary Settlement Trust, as well as HarperCollins Publishers, Ltd. and two related publishing entities, sued New Line Cinema Corporation (&#8220;NLC Corp.&#8221;), a wholly owned subsidiary of the Company, and Katja Motion Picture Corp. (&#8220;Katja&#8221;), a wholly owned subsidiary of NLC Corp., and other unnamed defendants in Los Angeles Superior Court. The complaint alleged that defendants breached contracts relating to three motion pictures: The Lord of the Rings: The Fellowship of the Ring; The Lord of the Rings: The Two Towers; and The Lord of the Rings: The Return of the King (collectively, the &#8220;Trilogy&#8221;) by, among other things, failing to make full payment to plaintiffs for their participation in the Trilogy&#8217;s gross receipts. The suit also sought declarations as to the meaning of several provisions of the relevant agreements, including a declaration that would terminate defendants&#8217; future rights to other motion pictures based on J.R.R. Tolkien&#8217;s works, including The Hobbit. In addition, the complaint set forth related claims of breach of fiduciary duty, fraud and for reformation, an accounting and imposition of a constructive trust. Plaintiffs sought compensatory damages in excess of $150 million, unspecified punitive damages, and other relief. In September 2009, the parties agreed to a binding term sheet, subject to definitive documentation, to resolve this matter.&#160;In accounting for the settlement, the Company allocated amounts based on its best estimate of the fair value of the rights and the claims that are the subject of the binding term sheet.&#160;The Company allocated the majority of the settlement costs to the Trilogy, and these amounts were largely accrued, as participation expense, in prior periods in the Company&#8217;s consolidated statement of operations. The remaining costs were allocated to the Company&#8217;s contractual film rights to The Hobbit and were capitalized as part of film costs in the Company&#8217;s consolidated balance sheet. <br /><br />On August 18, 2009, Redbox Automated Retail, LLC (&#8220;Redbox&#8221;) filed suit against Warner Home Video (&#8220;WHV&#8221;), a division of Warner Bros. Home Entertainment Inc., in the U.S. District Court for the District of Delaware. The complaint alleges violations of Section 1 of the Sherman Antitrust Act, copyright misuse, and a claim for tortious interference with contractual relations, all in connection with WHV&#8217;s unilateral announcement of a planned change to the terms of distribution of its DVDs. WHV filed motions to dismiss the original and amended complaints in October and December of 2009, respectively. On February 16, 2010, WHV and Redbox announced a new distribution agreement that will make Warner Bros. new release DVD and Blu-ray Disc titles available to Redbox after a 28-day window. The new agreement will run through January 31, 2012. Also on February 16, 2010, Redbox dismissed, with prejudice, its lawsuit against WHV.<br /><br />On September 9, 2009, several music labels filed a complaint, and on October 9, 2009 filed an amended complaint, in the U.S. District Court for the Middle District of Tennessee against the Company and its wholly-owned subsidiaries, Warner Bros. Entertainment Inc., Telepictures Productions Inc., and WAD Productions Inc., among other named defendants. Plaintiffs allege that defendants made unauthorized use of certain sound recordings on The Ellen DeGeneres Show, in violation of the federal Copyright Act and the Tennessee Consumer Protection Act. Plaintiffs seek unspecified monetary damages. On November 25, 2009, defendants filed motions to transfer the case to the U.S. District Court for the Central District of California. In January 2010, the Company and its subsidiaries reached an agreement with Sony Music Entertainment (&#8220;Sony&#8221;) to resolve Sony&#8217;s asserted claims on terms that are not material to the Company. The Company intends to defend against the claims by the remaining plaintiffs in the lawsuit vigorously.<br /><br />On September 20, 2007, Brantley, et al. v. NBC Universal, Inc., et al. was filed in the U.S. District Court for the Central District of California against the Company. The complaint, which also named as defendants several other programming content providers (collectively, the &#8220;programmer defendants&#8221;) as well as cable and satellite providers (collectively, the &#8220;distributor defendants&#8221;), alleged violations of Sections 1 and 2 of the Sherman Antitrust Act. Among other things, the complaint alleged coordination between and among the programmer defendants to sell and/or license programming on a &#8220;bundled&#8221; basis to the distributor defendants, who in turn purportedly offer that programming to subscribers in packaged tiers, rather than on a per channel (or &#8220;&#224; la carte&#8221;) basis. Plaintiffs, who seek to represent a purported nationwide class of cable and satellite subscribers, demand, among other things, unspecified treble monetary damages and an injunction to compel the offering of channels to subscribers on an &#8220;&#224; la carte&#8221; basis. On December 3, 2007, plaintiffs filed an amended complaint in this action (the &#8220;First Amended Complaint&#8221;) that, among other things, dropped the Section 2 claims and all allegations of horizontal coordination. The defendants, including the Company, filed motions to dismiss the First Amended Complaint and these motions were granted, with leave to amend. On March 20, 2008, plaintiffs filed a second amended complaint (the &#8220;Second Amended Complaint&#8221;) that modified certain aspects of the First Amended Complaint. On April 22, 2008, the defendants, including the Company, filed motions to dismiss the Second Amended Complaint, which motions were denied. On July 14, 2008, the defendants filed motions requesting the court to certify its order for interlocutory appeal to the U.S. Court of Appeals for the Ninth Circuit, which motions were denied. On November 14, 2008, the Company was dismissed as a programmer defendant, and Turner Broadcasting System, Inc. was substituted in its place. On May 1, 2009, by stipulation of the parties, plaintiffs filed a third amended complaint (the &#8220;Third Amended Complaint&#8221;) and a related motion to adjudicate an element of plaintiffs&#8217; claim. On June 12, 2009, all defendants opposed that motion and moved to dismiss the Third Amended Complaint. On the same date, the distributor defendants also filed a motion to dismiss for lack of standing. In an order dated October 15, 2009, the court denied plaintiffs&#8217; motion and granted defendants&#8217; motion, dismissing the Third Amended Complaint with prejudice. On October 30, 2009, plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit. The Company intends to defend against this lawsuit vigorously.<br /><br />On April 4, 2007, the National Labor Relations Board (&#8220;NLRB&#8221;) issued a complaint against CNN America Inc. (&#8220;CNN America&#8221;) and Team Video Services, LLC (&#8220;Team Video&#8221;). This administrative proceeding relates to CNN America&#8217;s December 2003 and January 2004 terminations of its contractual relationships with Team Video, under which Team Video had provided electronic newsgathering services in Washington, DC and New York, NY. The National Association of Broadcast Employees and Technicians, under which Team Video&#8217;s employees were unionized, initially filed charges of unfair labor practices with the NLRB in February 2004, alleging that CNN America and Team Video were joint employers, that CNN America was a successor employer to Team Video, and/or that CNN America discriminated in its hiring practices to avoid becoming a successor employer or due to specific individuals&#8217; union affiliation or activities. The NLRB investigated the charges and issued the above-noted complaint. The complaint seeks, among other things, the reinstatement of certain union members and monetary damages. A hearing in the matter before an NLRB Administrative Law Judge began on December 3, 2007 and ended on July 21, 2008. On November 19, 2008, the Administrative Law Judge issued a non-binding recommended decision finding CNN America liable. On February 17, 2009, CNN America filed exceptions to this decision with the NLRB. The Company intends to defend against this matter vigorously.<br /><br />On June 6, 2005, David McDavid and certain related entities (collectively, &#8220;McDavid&#8221;) filed a complaint against Turner Broadcasting System, Inc. (&#8220;Turner&#8221;) and the Company in Georgia state court. The complaint asserted, among other things, claims for breach of contract, breach of fiduciary duty, promissory estoppel and fraud relating to an alleged oral agreement between plaintiffs and Turner for the sale of the Atlanta Hawks and Thrashers sports franchises and certain operating rights to the Philips Arena. On August 20, 2008, the court issued an order dismissing all claims against the Company. The court also dismissed certain claims against Turner for breach of an alleged oral exclusivity agreement, for promissory estoppel based on the alleged exclusivity agreement and for breach of fiduciary duty. A trial as to the remaining claims against Turner commenced on October 8, 2008 and concluded on December 2, 2008. On December 9, 2008, the jury announced its verdict in favor of McDavid on the breach of contract and promissory estoppel claims, awarding damages on those claims of $281 million and $35 million, respectively. Pursuant to the court&#8217;s direction that McDavid choose one of the two claim awards, McDavid elected the $281 million award. The jury found in favor of Turner on the two remaining claims of fraud and breach of confidential information. On January 12, 2009, Turner filed a motion to overturn the jury verdict or, in the alternative, for a new trial, and, on April 22, 2009, the court denied the motion. On April 23, 2009, Turner filed a notice of appeal to the Georgia Court of Appeals and on June 15, 2009 posted a $25 million letter of credit as security pending appeal. Oral argument was held before the court on November 17, 2009. The Company has a reserve established for this matter at December 31, 2009 of approximately $302 million (including interest accrued through such date), although it intends to defend against this lawsuit vigorously.<br /><br />On March 10, 2009, Anderson News L.L.C. and Anderson Services L.L.C. (collectively, &#8220;Anderson News&#8221;) filed an antitrust lawsuit in the U.S. District Court for the Southern District of New York against several magazine publishers, distributors and wholesalers, including Time Inc. and one of its subsidiaries, Time/Warner Retail Sales &amp; Marketing, Inc. Plaintiffs allege that defendants violated Section 1 of the Sherman Antitrust Act by engaging in an antitrust conspiracy against Anderson News, as well as other related state law claims. Plaintiffs are seeking unspecified monetary damages. On December 14, 2009, defendants filed motions to dismiss the complaint. The Company intends to defend against this lawsuit vigorously.<br /><br />On January 17, 2002,&#160;former AOL Community Leader volunteers filed a class action lawsuit in the U.S. District Court for the Southern District of New York against the Company, AOL and AOL Community, Inc. under the Employee Retirement Income Security Act of 1974.&#160; The complaint was later amended to name the Administrative Committees of the Company and AOL.&#160; While the Company has reported on this case in its notes to financial statements and still intends to defend against this lawsuit vigorously, following the separation of&#160;AOL from the Company in December 2009, the Company does not view the remaining claims brought&#160;against the&#160;Company&#160;or its Administrative Committee to be material. As a result, the Company does not intend to include disclosure regarding this matter in its future notes to financial statements. <br /><br />From time to time, the Company receives notices from third parties claiming that it infringes their intellectual property rights. Claims of intellectual property infringement could require Time Warner to enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary liability or be enjoined preliminarily or permanently from further use of the intellectual property in question. In addition, certain agreements entered into by the Company may require the Company to indemnify the other party for certain third-party intellectual property infringement claims, which could increase the Company&#8217;s damages and its costs of defending against such claims. Even if the claims are without merit, defending against the claims can be time-consuming and costly.<br /><br />The costs and other effects of pending or future litigation, governmental investigations, legal and administrative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in those matters (including those matters described above), and developments or assertions by or against the Company relating to intellectual property rights and intellectual property licenses, could have a material adverse effect on the Company&#8217;s business, financial condition and operating results.</p></div> <div style="font-size:12pt"><p>16.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;RELATED PARTY TRANSACTIONS<br /><br />The Company has entered into certain transactions in the ordinary course of business with unconsolidated investees accounted for under the equity method of accounting. These transactions have been executed on terms comparable to those of transactions with unrelated third parties and primarily include the licensing of broadcast rights to The CW for film and television product by the Filmed Entertainment segment and the licensing of rights to carry cable television programming provided by the Networks segment.<br /><br />Income (expense) resulting from transactions with related parties consists of (millions):<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="366" align="left"><b>&#160;</b></td><td height="14" width="10" align="left"><b>&#160;</b></td><td width="275" align="center" colspan="8" style="border-bottom: 1px solid #000000;" height="14"><b>Years Ended December 31,</b></td></tr><tr><td height="14" width="14" align="left">&#160;</td><td height="14" width="366" align="left"><b>&#160;</b></td><td height="14" width="10" 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width="95">&#160;6,154&#160;</td></tr></table><p>Revenues (and related receivables) from the distribution of television product are recognized when the film or series is made available to customers for exploitation. In certain circumstances, the availability dates granted to the customers may precede the date the Company, pursuant to the terms of the applicable contractual arrangements, may bill the customers for these sales. Unbilled accounts receivable, which primarily relate to the aforementioned distribution of television product, totaled $2.105 billion and $2.283 billion at December 31, 2009 and December 31, 2008, respectively. Included in the unbilled accounts receivable at December 31, 2009 was $1.455 billion to be billed in the next twelve months.</p></div> <div style="font-size:12pt"><p>Overview<br /><br />Set forth below are recast condensed consolidating financial statements presenting the financial position, results of operations and cash flows of (i) Time Warner Inc. (the &#8220;Parent Company&#8221;), (ii) Historic TW Inc. (in its own capacity and as successor to Time Warner Companies, Inc.), Home Box Office, Inc., and Turner Broadcasting System, Inc., each a wholly owned subsidiary of the Parent Company, on a combined basis (collectively, the &#8220;Guarantor Subsidiaries&#8221;), (iii) the direct and indirect non-guarantor subsidiaries of the Parent Company (the &#8220;Non-Guarantor Subsidiaries&#8221;) on a combined basis and (iv) the eliminations necessary to arrive at the information for Time Warner Inc. on a consolidated basis. The Guarantor Subsidiaries, fully and unconditionally, jointly and severally, guarantee the securities issued under the Indentures on an unsecured basis.<br /><br />The 2008 and 2007 financial information has been recast so that the basis of presentation is consistent with that of the 2009 financial information. These condensed consolidating financial statements have been recast to reflect (i) the financial condition and results of operations of Time Warner Cable Inc. and AOL Inc. as discontinued operations for all periods presented, (ii) the adoption of accounting guidance pertaining to noncontrolling interests, (iii) the adoption of accounting guidance pertaining to participating securities, and (iv) the 1-for-3 reverse stock split of the Parent Company&#8217;s common stock that became effective on March 27, 2009.<br /><br />There are no legal or regulatory restrictions on the Parent Company&#8217;s ability to obtain funds from any of its wholly owned subsidiaries through dividends, loans or advances.<br /><br />Basis of Presentation<br /><br />In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) the Parent Company&#8217;s interests in the Guarantor Subsidiaries and (ii) the Guarantor Subsidiaries&#8217; interests in the Non-Guarantor Subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under U.S. generally accepted accounting principles. 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style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;23&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;-&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="65">&#160;-&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;-&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" 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style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;(67,591)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="65">&#160;33,726&#160;</td></tr><tr><td height="14" width="255" align="left">Total liabilities and equity</td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="left" width="10">$</td><td height="14" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="right" width="60">&#160;46,930&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" style="border-top: 1px solid #000000;border-bottom: 3px double #000000;" align="left" width="10">$</td><td 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align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;-&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="65" align="right">&#160;3,195&#160;</td></tr><tr><td height="14" width="255" align="left">Intangible assets not subject to amortization</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;-&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;2,009&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="65" align="right">&#160;5,719&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" 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style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;58,487&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="65">&#160;89,927&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;(148,414)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="65">&#160;42,288&#160;</td></tr><tr><td height="14" width="255" align="left">Total Time Warner 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style="border-top: 1px solid #000000;" align="right" width="60">&#160;(5)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-top: 1px solid #000000;" align="right" width="65">&#160;4,545&#160;</td></tr><tr><td height="14" width="255" align="left">Equity in pretax income of consolidated subsidiaries</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;4,377&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;3,065&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="65" align="right">&#160;1,226&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;(8,668)</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="65" align="right">&#160;-&#160;</td></tr><tr><td height="14" width="255" align="left">Interest income (expense), net</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;(738)</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;(427)</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="65" align="right">&#160;4&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="60" align="right">&#160;6&#160;</td><td height="14" width="10" align="right">&#160;</td><td height="14" width="10" align="left">&#160;</td><td height="14" width="65" align="right">&#160;(1,155)</td></tr><tr><td height="14" width="255" align="left">Other loss, net</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;(11)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;(8)</td><td height="14" width="10" align="right">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="14" style="border-bottom: 1px solid #000000;" align="right" width="65">&#160;(1)</td><td height="14" width="10" align="right">&#160;</td><td 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width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(10,051)</td></tr><tr><td height="12" width="275" align="left">Proceeds from exercise of stock options</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;56&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td 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width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(897)</td></tr><tr><td height="12" width="275" align="left">Other financing activities</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(57)</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(57)</td></tr><tr><td height="12" width="275" align="left">Change in due to/from parent and investment in segment</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(4,020)</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(741)</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;4,761&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td></tr><tr><td height="12" width="275" align="left">Cash used by financing activities from continuing </td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-bottom: 1px solid 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style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;35&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;(345)</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;3,084&#160;</td></tr><tr><td height="12" width="275" align="left">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td></tr><tr><td height="12" width="275" align="left">Cash provided by operations from discontinued operations</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;1,324&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" 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align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;13&#160;</td></tr><tr><td height="12" width="275" align="left">Advances to parent and consolidated subsidiaries</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;3,072&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;2,988&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;1,256&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(7,316)</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" 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width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(332)</td></tr><tr><td height="12" width="275" align="left">Dividends paid</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(901)</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(901)</td></tr><tr><td height="12" width="275" align="left">Other financing activities</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(3)</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" 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style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;195&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;128&#160;</td></tr><tr><td height="12" width="275" align="left">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td></tr><tr><td height="12" width="275" align="left">Cash provided by operations from discontinued operations</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;6,268&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" 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style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;(4,737)</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;9,750&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="right" width="60">&#160;(3,500)</td></tr><tr><td height="12" width="275" align="left">Cash provided (used) by continuing operations</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" align="left" 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style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-top: 1px solid #000000;" align="left" width="60">&#160;</td></tr><tr><td height="12" width="275" align="left">Cash used by operations from discontinued operations</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;5,077&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;5,077&#160;</td></tr><tr><td height="12" width="275" align="left">Cash used by investing activities from discontinued operations</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" 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height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td></tr><tr><td height="12" width="275" align="left">&#160;&#160;operations</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(988)</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="right">&#160;(988)</td></tr><tr><td height="12" width="275" align="left">Effect of change in cash and equivalents of discontinued </td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" width="10" align="left">&#160;</td><td height="12" width="60" align="left">&#160;</td></tr><tr><td height="12" width="275" align="left">&#160;&#160;operations</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;-&#160;</td><td height="12" width="10" align="right">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="left" width="10">&#160;</td><td height="12" style="border-bottom: 1px solid #000000;" align="right" width="60">&#160;79&#160;</td><td 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investigations. The effect of foreign currency exchange rate changes on cash flows for any period has not been significant, and, as a result, is not separately disclosed. Includes $440 million of common stock repurchased from Liberty Media Corporation, indirectly attributable to the exchange of the Atlanta Braves baseball franchise (the &quot;Braves&quot;) and Leisure Arts, Inc. (&quot;Leisure Arts&quot;). Specifically, the $440 million represents the fair value at the time of the exchange of the Braves and Leisure Arts of $473 million, less a $33 million net working capital adjustment. For the year ended December 31, 2008, reflects the impact of adopting accounting guidance related to the accounting for collateral assignment and endorsement split-dollar life insurance arrangements. For the year ended December 31, 2007, reflects the impact of adopting recent accounting guidance related to the accounting for uncertainty in income taxes of $445 million, partially offset by the impact of adopting accounting guidance related to the accounting for sabbatical leave and other similar benefits of $59 million.