America Online 2009 Annual Report Download - page 56

Table of Contents
Discontinued Operations, Net of Tax
Discontinued operations, net of tax for the year ended December 31, 2007 includes the financial data associated with the Tegic and Wildseed
businesses. See "Note 4: Business Acquisitions, Dispositions and Other Significant Transactions" in our accompanying consolidated financial statements for
more detail on these divestitures.
Liquidity and Capital Resources
Current Financial Condition
Historically, the cash we generate has been sufficient to fund our working capital, capital expenditure and financing requirements. While our ability to
forecast future cash flows is limited, we expect to fund our ongoing working capital, capital expenditure and financing requirements primarily through cash
flows from operations. In addition, we have available to us the revolving credit facility entered into in connection with the separation. While we expect to
continue to generate positive cash flows from operations, our cash flows from operations will decline over the next several years principally due to the
continued decline in the number of domestic AOL-brand access subscribers as well as a projected decline in search and contextual revenues. Growth in cash
flows from operations will only be achieved when, and if, the growth in earnings from our online advertising services more than offsets the continued decline
in domestic AOL-brand access subscribers. In order for us to achieve such increase in earnings from advertising services, we believe it will be important to
increase our overall volume of display advertising sold, including through our higher-priced channels, and to maintain or increase pricing for advertising.
Advertising revenues, however, are more unpredictable and variable than our subscription revenues, and are more likely to be adversely affected during
economic downturns, as spending by advertisers tends to be cyclical in line with general economic conditions. If we are unable to successfully implement our
strategic plan and grow the earnings generated by our online advertising services, we would reassess our cost structure or seek other financing alternatives to
fund our business. As part of our ongoing assessment of our business and availability of capital and to enhance our liquidity position, we may consider
divesting of certain assets or product lines.
At December 31, 2009, our cash and equivalents totaled $147.0 million, as compared to $134.7 million at December 31, 2008. Prior to the spin-off,
Time Warner provided cash management and other treasury services to us. As part of these services, we swept the majority of our domestic cash balances to
Time Warner on a daily basis and received funding from Time Warner for any domestic cash needs. Accordingly, our cash and equivalents balances presented
herein prior to the spin-off consist primarily of cash held at international locations for international cash needs. Our cash and equivalents balance as of the
date of the spin-off was $100.0 million.
In connection with the spin-off, we entered into a new revolving credit facility. We intend to use the proceeds of this facility, as necessary, for general
corporate purposes. We describe the anticipated terms of this facility in greater detail under "Principal Debt Obligations".
Summary Cash Flow Information
Our cash flows from operations are driven by net income adjusted for non-cash items such as depreciation, amortization, goodwill impairment, equity-
based compensation expense and other activities impacting net income such as the gains and losses on the sale of assets or operating subsidiaries. Cash flows
from investing activities consist primarily of the cash used in the acquisitions of various businesses as part of our strategy, proceeds received from the sale of
assets or operating subsidiaries and cash used for capital expenditures. Cash flows from financing activities relate primarily to our distributions of cash to
Time Warner as part of our historical cash management and treasury operations, as well as payments made on debt and capital lease obligations.
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