America Online 2010 Annual Report Download - page 57

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Adjusted OIBDA
We use Adjusted OIBDA as a supplemental measure of our performance. We define Adjusted OIBDA as operating income before depreciation and
amortization excluding the impact of gains and losses on all disposals of assets (including those recorded in costs of revenues) and non-cash asset
impairments. We consider Adjusted OIBDA to be a useful metric for management and investors to evaluate and compare the ongoing operating performance
of our business on a consistent basis across reporting periods, as it eliminates the effect of non-cash items such as depreciation of tangible assets, amortization
of intangible assets that were primarily recognized in business combinations and asset impairments, as well as the effect of gains and losses on asset sales,
which we do not believe are indicative of our core operating performance. A limitation of this measure, however, is that it does not reflect the periodic costs
of certain capitalized tangible and intangible assets used in generating revenues in our business. Moreover, the Adjusted OIBDA measures do not reflect gains
and losses on asset sales or impairment charges related to goodwill, intangible assets and fixed assets which impact our operating performance. We evaluate
the investments in such tangible and intangible assets through other financial measures, such as capital expenditure budgets, investment spending levels and
return on capital.
Adjusted OIBDA is a non-GAAP financial measure and 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).
The following table presents our reconciliation of Adjusted OIBDA to operating income (in millions):
Years Ended December 31,
2010 2009
% Change
from 2009
to 2010 2008
% Change
from 2008
to 2009
Operating income (loss) $ (982.6) $ 462.6 NM $ (1,163.5) NM
Add: Depreciation 196.3 261.1 (25)% 310.6 (16)%
Add: Amortization of intangible assets 145.3 137.9 5% 159.0 (13)%
Add: Asset impairments 1,426.5 23.1 NM% 2,240.0 (99)%
Add: Losses/(gains) on disposal of consolidated businesses, net (106.0) — NM (0.3) (100)%
Add: Losses/(gains) on asset sales (2.0) (2.5) (20)% (1.8) 39%
Adjusted OIBDA $ 677.5 $ 882.2 (23)% $ 1,544.0 (43)%
Adjusted OIBDA declined for the year ended December 31, 2010 as compared to year ended December 31, 2009 due to the declines in revenues
discussed above, partially offset by lower costs of revenues and restructuring costs and the gain on the sale of ICQ.
Adjusted OIBDA declined for the year ended December 31, 2009 as compared to year ended December 31, 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 costs discussed above.
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