America Online 2011 Annual Report Download - page 39

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the acquired companies. We record amounts associated with these arrangements as retention compensation expense over the future service period
of the employees of the acquired companies. For the years ended December 31, 2011 and 2010, we recorded retention compensation expense of
$35.2 million and $6.2 million, respectively, related to incentive cash compensation arrangements made in connection with our 2010 and 2011
acquisitions. We expect to record retention compensation expense in 2012 associated with these acquisitions of $12.7 million. We expect the cash
outlay in 2012 related to these incentive arrangements to be $25.0 million. These amounts are subject to change based on actual forfeitures and
the impact of retention arrangements in connection with any new acquisitions completed in the future.
Recent Developments
2012 Acquisition
On February 9, 2012, AOL entered into a share-purchase agreement with Mitsui & Company Ltd. ("Mitsui") to purchase an additional 3% interest in a
joint venture between Mitsui and AOL for approximately $1.2 million. The joint venture, which operates a display advertising network business in Japan, was
formed in 2006. Prior to the execution of the share purchase agreement, AOL and Mitsui each owned 50% interest in the joint venture, and AOL accounted
for its 50% interest using the equity method of accounting. As part of this transaction, AOL obtained control of the board and of the day-to-day operations of
the joint venture. AOL will therefore account for the incremental 3% share purchase as a business combination achieved in stages ("step acquisition") in the
first quarter of 2012, and will consolidate the joint venture beginning on February 9, 2012.
Under the step acquisition accounting requirements, AOL is required to record both its controlling interest and Mitsui's non-controlling interests at fair
value, and recognize the entire goodwill of the acquired business. The step acquisition guidelines also require that AOL recognize any gains or losses on its
pre-existing investment. As a result of this step acquisition, AOL expects to record a noncash gain of approximately $10-$15 million in the first quarter of
2012.
Stock Repurchase Program
On August 10, 2011, our Board of Directors approved a stock repurchase program, which authorizes us to repurchase up to $250 million of our
outstanding shares of common stock from time to time through August 2012. Repurchases are subject to market conditions, share price and other factors.
Repurchases have been and will be made in accordance with applicable securities laws in the open market or in private transactions and may include
derivative transactions. As of February 1, 2012, we repurchased a total of 13.0 million shares at a weighted average price of $13.62 per share (approximately
$178 million) under this program.
Key Metrics
Audience Metrics
We utilize unique visitor numbers to evaluate the performance of AOL Properties. In addition, we utilize unique visitor numbers to evaluate the reach
of our total advertising network, which includes both AOL Properties and the Third Party Network. Unique visitor numbers provide an indication of our
consumer reach. Although our consumer reach does not correlate directly to advertising revenue, we believe that our ability to broadly reach diverse
demographic and geographic audiences is attractive to brand advertisers seeking to promote their brands to a variety of consumers without having to partner
with multiple content providers. AOL's
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