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AOL Delivers Strongest Revenue Growth In A Decade

Stocks in this article: AOL

Items impacting comparability: The following table represents certain items that impacted the comparability of net income attributable to AOL Inc. for the three months and years ended December 31, 2013 and 2012 (In millions, except per share amounts):

   

Three Months Ended December 31,

 

Year Ended December 31,

2013   2012 2013   2012
 
Restructuring costs $ (13.2 ) $ (2.4 ) $ (41.3 ) $ (10.1 )
Equity-based compensation expense (15.6 ) (11.2 ) (47.0 ) (39.5 )
Asset impairments and write-offs (0.2 ) (3.1 ) (30.6 ) (6.1 )
Gain (loss) on disposal of assets, net (1) 0.4 17.6 2.5 964.2
Costs related to proxy contest (0.1 ) (8.9 )
Costs related to patent sale and return of proceeds to shareholders (7.1 ) (15.7 )
Income from licensing of intellectual property 96.0
Tax, legal and other settlements (1.0 ) (8.6 )
Acquisition-related costs (2) (5.1 ) (5.1 )
Gain on consolidation of Ad.com Japan (3)               10.8  
Pre-tax impact   (28.6 )   (12.4 )   (116.4 )   977.0  
 
Income tax impact (4)   11.3     2.1     38.1     (48.2 )
After-tax impact of items impacting comparability of net income $ (17.3 ) $ (10.3 ) $ (78.3 ) $ 928.8  
 
Impact per basic common share $ (0.22 ) $ (0.12 ) $ (1.01 ) $ 10.20  
 
Impact per diluted common share $ (0.21 ) $ (0.12 ) $ (0.95 ) $ 9.93  
 
Effective tax rate (5) 39.4 % 39.2 % 39.4 % 39.2 %
(1)   Gain on disposal of assets for the three months ended December 31, 2012 relates primarily to the release of a VAT indemnification liability reserve associated with the sales of our German and UK access businesses in 2006 and 2007. The statute of limitations on this indemnification expired on December 31, 2012. For the year ended December 31, 2012, gain on disposal of assets also includes the gain on the sale of the patents of $946.1 million in the second quarter of 2012.
(2) Acquisition-related costs for the three months and year ended December 31, 2012 includes approximately $4.7 million related to a bonus paid to employees of an acquired company and accounted for as compensation expense.
(3) During the three months ended March 31, 2012, AOL purchased an additional interest in a joint venture, Ad.com Japan, and gained control of the board and day-to-day operations of the joint venture. As a result, beginning in February 2012, AOL consolidated the results of Ad.com Japan and upon closing of the transaction, AOL recorded a noncash gain of approximately $10.8 million related to our pre-existing investment in Ad.com Japan.
(4) Income tax impact is calculated by applying the normalized effective tax rate to deductible items. The income tax impacts for certain items such as gain (loss) on disposal of assets and gain on consolidation of Ad.com Japan are calculated by using the actual tax expense for the transactions. The goodwill impairment charge of $17.5 million recorded in the third quarter of 2013 is not deductible for income tax purposes.
(5) For the three months and year ended December 31, 2013, the effective tax rate was calculated based on AOL's 2013 normalized annual effective tax rate. The effective tax rate for the three months and year ended December 31, 2012 was calculated based upon AOL's 2012 normalized annual effective tax rate.
 
 

AOL Inc.

Reconciliation of Adjusted OIBDA to Operating Income and Free Cash Flow to Cash Provided by Operating Activities
(In millions)
       
Three Months Ended December 31, Years Ended December 31,
2013 2012 2013 2012
 
Operating income $ 71.8 $ 68.2 $ 190.3 $ 1,201.9
 
Add: Depreciation 31.5 33.1 128.9 138.7
 
Add: Amortization of intangible assets 15.4 9.6 45.1 38.2
 
Add: Restructuring costs 13.2 2.4 41.3 10.1
 
Add: Equity-based compensation 15.6 11.2 47.0 39.5
 
Add: Asset impairments and write-offs 0.2 3.1 30.6 6.1
 
Add: Losses/(gains) on disposal of assets, net (0.4 ) (17.6 ) (2.5 ) (964.2 )
 
Add: Special items (1) - 13.3 - (57.7 )
               
Adjusted OIBDA $ 147.3   $ 123.3   $ 480.7   $ 412.6  
 
 
Cash provided by operating activities $ 90.0 $ 76.7 $ 318.9 $ 365.6
 
Less: Capital expenditures and product development costs 13.0 15.9 65.7 64.9
 
Less: Principal payments on capital leases 16.6 14.5 61.1 55.6
               
Free Cash Flow $ 60.4   $ 46.3   $ 192.1   $ 245.1  
(1)   Special items for the three months ended December 31, 2012 include costs related to the patent sale of $7.1 million (including a year-end employee bonus as a result of the patent transaction) and acquisition-related costs of $5.1 million. Special items for the year ended December 31, 2012 also include patent licensing income of $96.0 million and additional costs related to the patent sale of $8.6 million, as well as proxy contest costs of $8.9 million and the Virginia tax settlement of $7.6 million.
 

Note Regarding Non-GAAP Financial Measures

This press release and its attachments include the financial measures Adjusted OIBDA and Free Cash Flow, both of which are defined as non-GAAP financial measures by the Securities and Exchange Commission (SEC). These measures may be different than similarly-titled non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). Explanations of our non-GAAP financial measures are as follows:

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