America Online 2011 Annual Report Download - page 49

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Goodwill Impairment Analyses
Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in
circumstances that indicate goodwill is more likely than not impaired.
We experienced a significant decline in our stock price leading up to and subsequent to the announcement on August 9, 2011 of our financial results for
the three months ended June 30, 2011. We determined that the magnitude of this stock price decline along with the weakness in the overall equity markets
constituted a substantive change in circumstances in August that could potentially reduce the fair value of our single reporting unit below its carrying amount.
As such, an interim goodwill impairment test was performed during the third quarter of 2011. We also performed our annual goodwill impairment test during
the fourth quarter of 2011. In both of these analyses, we determined that the estimated fair value of our sole reporting unit exceeded its book value and
therefore no goodwill impairment charges were recorded in 2011. See "Note 3" for additional information on our goodwill impairment analysis.
We also performed a goodwill impairment analysis as a result of certain triggering events occurring during the second quarter of 2010. As a result, we
recorded an impairment charge of $1,414.4 million for the three months ended June 30, 2010. No further impairment charges were recorded during 2010 and
no goodwill impairment charges were recorded in 2009.
(Gain) Loss on Disposal of Assets and Consolidated Businesses, Net
The gain on disposal of assets and consolidated businesses, net for the year ended December 31, 2010 of $106.0 million was related to the sale of ICQ
in the third quarter of 2010. The year ended December 31, 2011 includes $1.6 million of professional fees incurred related to the regulatory review of the sale
of ICQ.
Operating Income (Loss)
Operating income was $45.8 million for the year ended December 31, 2011, as compared to operating loss of $982.6 million for the year ended
December 31, 2010. This increase was due primarily to the goodwill impairment charge recorded in the second quarter of 2010, the decreases in amortization
of intangible assets and decreases in general and administrative costs, partially offset by the decline in revenues, the increase in costs of revenues and the gain
on the sale of ICQ recorded in 2010.
Operating loss was $982.6 million for the year ended December 31, 2010, as compared to operating income of $462.6 million for the year ended
December 31, 2009. This decline was due to the goodwill impairment charge recorded in the second quarter of 2010 and the decline in revenues, partially
offset by decreases in costs of revenues and in restructuring costs and the gain on the sale of ICQ.
Other Income Statement Amounts
The following table presents our other income statement amounts for the periods presented (in millions):
Years Ended December 31,
2011 2010
% Change
from 2010
to 2011 2009
% Change
from 2009
to 2010
Other income (loss), net $ (3.5) $ 13.4 NM $ (2.5) NM
Income tax provision (benefit) 29.2 (178.5) NM 208.7 NM
Discontinued operations, net of tax — 8.2 (100) % (2.9) NM
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