Corporate & Other
Corporate & Other Adjusted OIBDA improved significantly year-over-year primarily driven by declines in marketing and outside services costs as a result of our cost reduction efforts as well the reimbursement in Q2 2013 of legal expenses from prior periods related to an escrow settlement.
AOL had Q2 2013 pre-tax income of $51.2 million and income tax expense of $23.2 million, resulting in an effective tax rate of 45.3%. This compares to an effective tax rate of 8.3% for Q2 2012. The effective tax rate for Q2 2013 differed from the statutory U.S. federal income tax rate of 35.0% primarily due to the impact of foreign losses that did not produce a tax benefit. The effective tax rate for Q2 2012 differed from the statutory U.S. federal income tax rate due to the tax impact of the patent transaction with Microsoft in Q2 2012.Cash Flow Q2 2013 cash provided by operating activities was $89.4 million, while Free Cash Flow was $57.3 million, both down year-over-year due to the $96 million benefit to operating income in Q2 2012 related to the licensing of patents to Microsoft. Q2 2013 Free Cash Flow comparison to the prior year was also negatively impacted by the early receipt in Q1 2013 of a prepayment from a large partner. In the prior year, the prepayment from this partner was received in Q2. Subsequent Event On August 5, 2013, AOL entered an agreement to acquire Adap.tv for shares of AOL common stock with an aggregate value of approximately $83 million and estimated cash consideration of approximately $322 million, subject to adjustment for working capital and reduction for indebtedness and transaction expenses of Adap.tv that remain unpaid as of closing. Adap.tv is a leading and global unified programmatic video platform powering video advertising for brand advertisers, agencies, publishers and ad networks. Adap.tv’s platform allows buyers and sellers to make decisions together on a unified technology platform, leveraging comprehensive data intelligence, across all screens. The combination of AOL and Adap.tv is expected to create the only global company with a full end-to-end solution and video stack for publishers and advertisers.