Time Magazine 2012 Annual Report Download - page 36

events could have an adverse impact on the Company and its customers, including degradation or disruption of
service and damage to equipment and data. Significant incidents could result in a disruption of the Company’s
operations, customer or advertiser dissatisfaction, damage to the Company’s reputation or a loss of customers or
revenues.
The Company and its businesses also could be subject to risks caused by misappropriation, misuse, leakage,
falsification or intentional or accidental release or loss of information maintained in the information systems and
networks of the Company and its third party vendors, including personnel, customer and vendor confidential
data. The Company could be exposed to significant costs if such risks were to materialize. In addition, such
events could result in violations of data privacy laws and regulations. Such events could also damage the
reputation and credibility of the Company and its businesses and negatively impact its revenues and results of
operations. The Company could be required to expend significant amounts of money and other resources to
remedy any such security breach or to repair or replace information systems or networks. The Company also
could be subject to regulatory actions and claims made by consumers in private litigation involving privacy
issues related to consumer data collection and use practices, including claims for misuse or inappropriate
disclosure of data, as well as unfair or deceptive practices.
Although the Company develops and maintains systems to prevent these events from occurring, the
development and maintenance of these systems is costly and requires ongoing monitoring and updating as
technologies change and efforts to overcome security measures become more sophisticated. Moreover, despite
the Company’s efforts, the possibility of these events occurring cannot be eliminated entirely. As the Company
distributes more of its content digitally, engages in more electronic transactions with consumers, outsources more
of its information systems to third-party vendors and relies on more cloud-based information systems, the related
security risks will increase and the Company will need to expend additional resources to protect its technology
and information systems, which could have an adverse effect on the Company’s results of operations.
The Company’s businesses are subject to regulation in the U.S. and internationally, which could cause the
Company to incur additional costs or liabilities or disrupt its business practices. The Company’s businesses
are subject to a variety of U.S. and international laws and regulations. The Company could incur substantial costs
to comply with new laws or regulations or substantial penalties or other liabilities if it fails to comply with them.
Compliance with new laws or regulations also could cause the Company to change or limit its business practices
in a manner that is adverse to its businesses. In addition, if there are changes in laws or regulations that provide
protections that the Company relies on in conducting its business, they could subject the Company to greater risk
of liability and could increase compliance costs or limit the Company’s ability to operate certain lines of
business.
The Company’s enterprise efficiency initiatives present various risks, including that the Company may not
realize the financial and strategic goals relating to the initiatives. The Company has launched multi-year
enterprise efficiency initiatives to deliver certain business support services (e.g., real estate and certain
information technology and human resources functions) centrally to the Company’s divisions. In connection with
these initiatives, the Company may incur greater than anticipated expenses, fail to realize anticipated benefits,
experience business disruptions or have difficulty executing the initiatives.
If the AOL Separation or the TWC Separation is determined to be taxable for income tax purposes, Time
Warner and/or Time Warner’s stockholders who received shares of AOL or TWC in connection with the spin-
offs could incur significant income tax liabilities. In connection with the legal and structural separation of
AOL Inc. (“AOL”) from the Company in December 2009 (the “AOL Separation”), Time Warner received an
opinion of counsel confirming that the AOL Separation will not result in the recognition, for U.S. Federal income
tax purposes, of gain or loss to Time Warner or its stockholders, except to the extent of cash received in lieu of
fractional shares. In connection with the legal and structural separation of Time Warner Cable Inc. (“TWC”)
from the Company in March 2009 (the “TWC Separation”), Time Warner received a private letter ruling from
the Internal Revenue Service (“IRS”) and opinions of counsel confirming that the TWC Separation should not
result in the recognition, for U.S. Federal income tax purposes, of gain or loss to Time Warner or its
stockholders, except to the extent of cash received in lieu of fractional shares. The IRS ruling and the opinions
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