Time Magazine 2014 Annual Report Download - page 35

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Company’s anticipated cost savings from the workforce reductions may be less than initially expected. The Company has
also launched multi-year enterprise efficiency initiatives to deliver certain business support services (e.g., real estate and
certain information technology 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 separation of any of Time Inc., AOL Inc. (“AOL”) or Time Warner Cable Inc. (“TWC”) is determined to be
taxable for income tax purposes, Time Warner and/or Time Warner’s shareholders who received shares of Time Inc.,
AOL or TWC (as applicable) in connection with the respective spin-off of those companies could incur significant income
tax liabilities. In connection with the legal and structural separation from the Company of (i) Time Inc. in June 2014 and
(ii) AOL in December 2009, Time Warner received an opinion of counsel confirming that the applicable separation
transaction should not result in the recognition, for U.S. Federal income tax purposes, of gain or loss to Time Warner or its
shareholders, except to the extent of cash received in lieu of fractional shares in such transaction. In connection with the legal
and structural separation of TWC from the Company in March 2009, 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 shareholders, except to the extent of
cash received in lieu of fractional shares. The IRS ruling and the opinions of counsel in connection with these transactions
were based on, among other things, certain facts, assumptions, representations and undertakings that were made by Time
Warner and Time Inc., AOL or TWC, as applicable, in connection with the applicable separation transaction. If any of these
facts, assumptions, representations or undertakings is incorrect or not otherwise satisfied, Time Warner and its shareholders
may not be able to rely on the IRS ruling (in the case of the TWC separation transaction) or opinion and could be subject to
significant tax liabilities. Furthermore, opinions of counsel are not binding on the IRS or state or local tax authorities or the
courts, and a tax authority or court could determine that one or more of the separation transactions should be treated as a
taxable transaction. Under the tax matters agreement Time Warner entered into with each of Time Inc., AOL and TWC in
connection with the respective separation transactions, Time Warner is entitled to indemnification from the applicable former
subsidiary for taxes resulting from the failure of the applicable separation transaction to qualify as tax-free as a result of
(i) certain actions or failures to act by the former subsidiary or (ii) the failure of certain representations made by the former
subsidiary to be true. However, if transaction taxes are incurred for other reasons, Time Warner would not be entitled to
indemnification.
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