According to a filing with the Securities and Exchange Commission, AOL Time Warner is paying nearly one billion dollars in post-merger reorganisation costs, much of which results from employee severance payments.
The filing reveals that the media mammoth entered a $965m restructuring liability on its balance sheet, most of which is classed as goodwill and amortised over several years. Around $71m of the cost was written off in Q1.
AOL revealed that $565m “related to work-force reductions and represented employee-termination benefits.” Rationalisation following the deal between America Online and Time Warner saw over 2000 layoffs in January “to avoid confusion and bureaucracy” [WAMN: 24-Jan-01].
A further $400m of the restructuring charge is going on “lease and contract-termination costs”, including closure of the Warner Bros stores chain.
The final cost could be even higher: the liability filed with the SEC is based on current plans by the group’s management – plans which “may be broadened to include additional restructuring initiatives as management continues to evaluate the integration of the combined companies.”
News source: Wall Street Journal