America Online 2010 Annual Report Download - page 86

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
entities to (i) require ongoing assessments of whether an entity is the primary beneficiary of a variable interest entity, (ii) eliminate the quantitative approach
for determining the primary beneficiary of a variable interest entity, (iii) amend certain guidance for determining whether an entity is a variable interest entity
and (iv) require enhanced disclosures. This guidance became effective for AOL on January 1, 2010 and as a result of applying this guidance, the Company
deconsolidated an international variable interest entity on January 1, 2010. This deconsolidation did not have a material impact on the Company's
consolidated financial statements.
NOTE 2—INCOME (LOSS) PER COMMON SHARE
Basic income per common share is calculated by dividing net income attributable to AOL common stockholders by the weighted average number of
shares of common stock issued and outstanding during the reporting period. Diluted income per common share is calculated to give effect to all potentially
dilutive common shares that were outstanding during the reporting period. The dilutive effect of outstanding equity-based compensation awards is reflected in
diluted income per common share by application of the treasury stock method, only in periods in which such effect would have been dilutive. For the year
ended December 31, 2010, the Company had 5.8 million of weighted-average potentially dilutive common shares that were not included in the computation of
diluted earnings per share because to do so would be anti-dilutive for that year. For the year ended December 31, 2009, the number of weighted-average
potentially dilutive common shares was not significant.
On November 2, 2009, the Company converted from AOL Holdings LLC, a limited liability company wholly owned by Time Warner, to AOL Inc., a
corporation wholly owned by Time Warner. On the distribution date of December 9, 2009, 105.8 million shares of $0.01 par value AOL common stock were
distributed to Time Warner shareholders of record as of 5 p.m. on November 27, 2009. This share amount is being utilized for the calculation of basic income
(loss) per common share for periods presented prior to 2009 as no common stock of the Company existed prior to November 2, 2009. For periods prior to
2009, the same number of shares is being used for diluted income (loss) per common share as for basic income (loss) per common share as no common stock
of the Company existed prior to November 2, 2009 and no dilutive securities of the Company were outstanding for any prior period.
For the year ended December 31, 2009, in determining the weighted average number of common shares outstanding for basic income (loss) per
common share, the Company assumed 105.8 million shares were outstanding for the period from January 1, 2009 through December 9, 2009. Certain stock
options and restricted stock units granted to employees in 2009 have a dilutive effect on income (loss) per share; however, the dilutive effect is not significant
to the total weighted-average shares outstanding for 2009 since dilutive shares were only outstanding from December 10, 2009 through December 31, 2009.
Accordingly, for the year ended December 31, 2009, AOL's weighted average number of common shares outstanding for diluted income (loss) per common
share was 105.8 million.
For the year ended December 31, 2010, the Company had 106.6 million weighted-average shares outstanding which were used to calculate basic
income (loss) per common share. The Company did not include any weighted-average potentially dilutive common shares in the computation of diluted
income (loss) per common share for the year ended December 31, 2010, because to do so would have been anti-dilutive for the period.
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