America Online 2011 Annual Report Download - page 52

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Adjusted OIBDA declined for the year ended December 31, 2011 as compared to the year ended December 31, 2010 due to the declines in revenues
and the increase in costs of revenues partially offset by declines in general and administrative costs discussed above.
Adjusted OIBDA declined for the year ended December 31, 2010 as compared to the year ended December 31, 2009 due to the declines in revenues,
partially offset by lower costs of revenues and general and administrative costs, discussed above.
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. Forecasts of future
cash flows are dependent on many factors, including future economic conditions and the execution of our strategy. We expect to fund our ongoing working
capital, investing and financing requirements, including future repurchases of common stock, through our existing cash balance and cash flows from
operations. Increases in cash flows from operations are achieved when growth from our online advertising services more than offsets the decline in domestic
AOL-brand access subscribers. In order for us to achieve an increase in earnings from advertising services, we believe it will be important to increase the
number and engagement of consumers who visit our properties, to enable us 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 may need to
reassess our cost structure and/or seek other financing alternatives to fund our business. We may also consider other financing alternatives, as a result of our
recent acquisition activities. If it is necessary to seek other financing alternatives, our ability to obtain future financing will depend on, among other things,
our financial condition and results of operations as well as the condition of the capital markets or other credit markets at the time we seek financing. Currently
we do not have a credit rating from the credit rating agencies, so our access to the capital markets may be limited. As part of our ongoing assessment of our
business and availability of capital and to enhance our liquidity position, we have divested of certain assets and product lines and may consider divesting of
additional assets or product lines.
At December 31, 2011, our cash and equivalents totaled $407.5 million, as compared to $801.8 million at December 31, 2010. The overall decline in
cash and equivalents was primarily due to the cash paid for our acquisitions of goviral and The Huffington Post and the cash paid for the repurchase of our
common stock, partially offset by cash provided by continuing operations in 2011. Approximately 23% of our cash and equivalents as of December 31, 2011
is held internationally and is intended to be utilized to fund our foreign operations. Cash held internationally would have to be repatriated in order to be used
to fund our domestic operations. If we were to repatriate funds, we would incur additional tax liabilities.
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. Capital
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