America Online 2009 Annual Report Download - page 55

Table of Contents
goodwill down to its implied fair value. See "Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies" and
"Note 3: Goodwill and Intangible Assets" in our accompanying consolidated financial statements for more information.
Gain on Disposal of Assets and Consolidated Businesses, Net
The gain on disposal of assets and consolidated businesses for the year ended December 31, 2007 consisted primarily of the $668.2 million gain on the
sale of our German access service business in 2007.
OPERATING INCOME (LOSS)
Operating income was $458.0 million for the year ended December 31, 2009, as compared to an operating loss of $1,167.7 million for the year ended
December 31, 2008. The operating loss in 2008 included a $2,207.0 million goodwill impairment charge. Excluding this charge, operating income declined in
2009 as compared to 2008 due to the decline in revenues and increase in restructuring costs, partially offset by decreases in costs of revenues and selling,
general and administrative expenses.
Our operating loss was $1,167.7 million for the year ended December 31, 2008, as compared to operating income of $1,853.8 million for the year ended
December 31, 2007. The decline was due primarily to the goodwill impairment charge in 2008, a significant decrease in revenues in 2008 and a gain on the
disposal of our German access service business in 2007, partially offset by decreases in costs of revenues, selling, general and administrative expenses and
restructuring costs.
OTHER INCOME STATEMENT AMOUNTS
The following table presents our other income statement amounts for the periods presented (in millions):
Years Ended December 31,
2009 2008
% Change
from 2008
to 2009 2007
% Change
from 2007
to 2008
Other income (loss), net $ (2.8) $ (3.8) (26)% $ 1.2 NM
Income tax provision 206.7 355.1 (42)% 641.7 (45)%
Discontinued operations, net of tax — — NM 182.1 (100)%
Income Tax Provision
Our effective tax rate was 45.4% for the year ended December 31, 2009, as compared to (30.3)% for the year ended December 31, 2008. The effective
tax rate for the year ended December 31, 2008 included the effect of the $2,207.0 million goodwill impairment charge, the majority of which was non-
deductible for income tax purposes. Excluding the effect of this charge, our effective tax rate for the year ended December 31, 2008 was 43.4%. The increase
in the effective tax rate (after excluding the effect of this charge) was primarily due to taxable distributions from foreign jurisdictions. The effective tax rate
for the year ended December 31, 2009 differs from the statutory U.S. federal income tax rate of 35.0% due principally to state income taxes and the impact of
uncertain tax positions.
Excluding the effect of the goodwill impairment charge, our effective tax rate for the year ended December 31, 2008 was 43.4%, as compared to 34.6%
for the year ended December 31, 2007. The increase in the effective tax rate (after excluding the effect of this charge) was due to tax benefits realized in 2007
associated with the utilization of tax loss carryforwards on the sale of our German access service business. The effective tax rate for the year ended
December 31, 2008 differs from the U.S. federal income tax rate due to state taxes and a goodwill impairment charge, the majority of which was non-
deductible for income tax purposes.
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